swyv8k20090602ex10-1c.htm


    
      

      

    

    Execution
Version

    


    


     

    WARRANT

     

    THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT 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 FORM
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.

     

     

    SEAWAY
VALLEY CAPITAL CORPORATION

     

     

    Warrant
To Purchase Common Stock

     

    
      	
              Warrant
      No.: SWVL-01

            	
              Number
      of Shares:

            	
              10,000,000

            
	 
      	
              Warrant
      Exercise Price:

            	
              $.01

            
	 
      	
              Expiration
      Date:

            	
              May
      20, 2014

            


    

    


    Date of
Issuance: May 20, 2009

    


    Seaway
Valley Capital Corporation, a Delaware corporation (the “Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, SC PARTNERS, LLC (the “Holder”), the
registered holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined herein) up to
10,000,000 fully paid and nonassessable shares of Common Stock (as defined
herein) of the Company (the “Warrant Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Holder (but only as
to itself and not to any other holder) upon not less than 65 days prior notice
to the Company).  For purposes of the foregoing proviso, the aggregate
number of shares of Common Stock beneficially owned by the holder and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein.  Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended.  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock a holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company’s most recent Form 10-QSB or Form 10-KSB,
as the case may be, (2) a more recent public announcement by the Company or (3)
any other notice by the Company or its transfer agent setting forth the number
of shares of Common Stock outstanding.  Upon the written request of
any holder, the Company shall promptly, but in no event later than one (1)
Business Day following the receipt of such notice, confirm in writing to any
such holder the number of shares of Common Stock then outstanding.  In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the exercise of Warrants (as defined below) by such
holder and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    Section
1.

     

    (a)           This
Warrant is issued pursuant to the Exchange Agreement (“Exchange Agreement”)
dated the date hereof between the Company and the Holder thereto or issued in
exchange or substitution thereafter or replacement thereof.  Each
Capitalized term used, and not otherwise defined herein, shall have the meaning
ascribed thereto in the Exchange Agreement.

     

    (b)           Definitions.  The
following words and terms as used in this Warrant shall have the following
meanings:

     

    (i)           “Approved Stock Plan”
means a stock option plan that has been approved by the Board of Directors of
the Company prior to the date of the Exchange Agreement, pursuant to which the
Company’s securities may be issued only to any employee, officer or director for
services provided to the Company.

     

    (ii)           
“Business Day”
means any day other than Saturday, Sunday or other day on which commercial banks
in the City of New York are authorized or required by law to remain
closed.

     

    (iii)           “Closing Bid Price”
means the closing bid price of Common Stock as quoted on the Principal Market
(as reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).

     

    (iv)           “Common Stock” means
(i) the Company’s common stock, par value $0.0001 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.

     

    (v)           
“Excluded
Securities” means, (a) shares issued or deemed to have been issued by the
Company pursuant to an Approved Stock Plan, (b) shares of Common Stock issued or
deemed to be issued by the Company upon the conversion, exchange or exercise of
any right, option, obligation or security outstanding on the date prior to date
of the Exchange Agreement, provided that the terms of such right, option,
obligation or security are not amended or otherwise modified on or after the
date of the Exchange Agreement, and provided that the conversion price, exchange
price, exercise price or other purchase price is not reduced, adjusted or
otherwise modified and the number of shares of Common Stock issued or issuable
is not increased (whether by operation of, or in accordance with, the relevant
governing documents or otherwise) on or after the date of the Exchange
Agreement,  and (c) the shares of Common Stock issued or deemed
to be issued by the Company upon conversion of the Convertible Debenture issued
pursuant to the Exchange Agreement or exercise of the Warrant.

    


    
      
        
           


        

        
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    (vi)           “Expiration Date”
means May 20, 2014.

     

    (vii)          “Issuance Date” means
the date hereof.

     

    (viii)         “Options” means any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.

     

    (ix)           
“Person” means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.

     

    (x)           
“Primary
Market” means on any of (a) the American Stock Exchange, (b) New York
Stock Exchange, (c) the Nasdaq Global Select Market, (d) the Nasdaq Global
Market, (e) the Nasdaq Capital Market, or (e) the Over-the-Counter Bulletin
Board (“OTCBB”)

     

    (xi)           “Securities Act” means
the Securities Act of 1933, as amended.

     

    (xii)           “Warrant” means this
Warrant and all Warrants issued in exchange, transfer or replacement
thereof.

     

    (xiii)          “Warrant Exercise
Price” shall be $0.01 or as subsequently
adjusted as provided in Section 8 hereof.

     

    (c)           Other
Definitional Provisions.

     

    (i)           
Except as otherwise specified herein, all references herein (A) to the
Company shall be deemed to include the Company’s successors and (B) to any
applicable law defined or referred to herein shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.

     

    (ii)           When
used in this Warrant, the words “herein”, “hereof”, and “hereunder” and words of similar import,
shall refer to this Warrant as a whole and not to any provision of this Warrant,
and the words “Section”, “Schedule”, and “Exhibit” shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.

     

    (iii)           Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.

    


    
      
        
           


        

        
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    Section
2.               Exercise of
Warrant.


     

    (a)           Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date solely on a
cashless basis (i) by delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the
“Exercise
Notice”), of such holder’s election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased, payment
(on a cashless basis as detailed below) to the Company of an amount equal to the
Warrant Exercise Price(s) applicable to the Warrant Shares being purchased,
multiplied by the number of Warrant Shares (at the applicable Warrant
Exercise Price) as to which this Warrant is being exercised (plus any
applicable issue or transfer taxes) (the “Aggregate Exercise
Price”) and the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company as soon
as practicable following such date.  In lieu of making payment of the
Aggregate Exercise Price in cash or wire transfer, this Warrant shall be
exercised on a cashless basis and the Holder shall \receive upon such exercise
the “Net Number” of shares of Common Stock determined according to the following
formula (the “Cashless
Exercise”):

     

    
      	 	
              Net
      Number =

            	
               (A x B) – (A x
      C)  

            	 
	 	 
      	
                            
      B

            	 


    

    


    For purposes of the foregoing
formula:

    


    A = the
total number of Warrant Shares with respect to which this Warrant is then being
exercised.

    


    B = the
Closing Bid Price of the Common Stock on the date of exercise of the
Warrant.

    


    C = the
Warrant Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

    


    In the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the fifth (5th)
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the holder specified in Section 6 hereof, if requested
by the Company (the “Exercise Delivery
Documents”), and if the Common Stock is DTC eligible, credit such
aggregate number of shares of Common Stock to which the holder shall be entitled
to the holder’s or its designee’s balance account with The Depository Trust
Company; provided, however, if the holder who submitted the Exercise Notice
requested physical delivery of any or all of the Warrant Shares, or, if the
Common Stock is not DTC eligible  then the Company shall, on or before
the fifth (5th)
Business Day following receipt of the Exercise Delivery Documents, issue and
surrender to a common carrier for overnight delivery to the address specified in
the Exercise Notice, a certificate, registered in the name of the holder, for
the number of shares of Common Stock to which the holder shall be entitled
pursuant to such request.  Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (i) or (ii) above the holder
of this Warrant shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised.  In the case of a dispute as to the determination of
the Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation
of the Warrant Shares, the Company shall promptly issue to the holder the number
of Warrant Shares that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.

    


    
      
        
           


        

        
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    (b)           If
the holder and the Company are unable to agree upon the determination of the
Warrant Exercise Price or arithmetic calculation of the Warrant Shares within
one (1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing Bid
Price to an independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant.  The Company shall cause the investment banking firm or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
forty-eight (48) hours from the time it receives the disputed determinations or
calculations.  Such investment banking firm’s or accountant’s
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.

     

    (c)           Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event later
than five (5) Business Days after any exercise and at its own expense, issue a
new Warrant identical in all respects to this Warrant exercised except it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.

     

    (d)           No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise of
this Warrant shall be rounded up or down to the nearest whole
number.

     

    (e)           If
the Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or otherwise available to such holder, pay
as additional damages in cash to such holder on each day the issuance of such
certificate for Warrant Shares is not timely effected an amount equal to 0.025%
of the product of (A) the sum of the number of Warrant Shares not issued to the
holder on a timely basis and to which the holder is entitled, and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Common Stock to
the holder without violating this Section 2.

     

    (f)           If
within ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section 2
hereof, then, in addition to any other available remedies under this Warrant, or
otherwise available to such holder, the Company shall pay as additional damages
in cash to such holder on each day after such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to the
holder without violating this Section 2.

    


    
      
        
           


        

        
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    Section
3.               Covenants as to Common
Stock.  The Company hereby covenants and agrees as
follows:

     

    (a)           This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.

     

    (b)           All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

     

    (c)           During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.  If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within sixty (60)
days of that time for the sole purpose of increasing the number of authorized
shares of Common Stock.

     

    (d)           If
at any time after the date hereof the Company shall file a registration
statement, the Company shall include the Warrant Shares issuable to the holder,
pursuant to the terms of this Warrant and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Warrant Shares
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.

     

    (e)           The
Company will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant.  The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant.

    


    
      
        
           


        

        
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    (f) 
          This Warrant will be
binding upon any entity succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company’s assets.

     

    Section
4.               Taxes.  The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

     

    Section
5.               Warrant Holder Not Deemed a
Stockholder.  Except as otherwise specifically provided herein,
no holder, as such, of this Warrant shall be entitled to vote or receive
dividends or be deemed the holder of shares of capital stock of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.  In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this Section 5, the Company will provide the
holder of this Warrant with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.

     

    Section
6.               Representations of
Holder.  The holder of this Warrant, by the acceptance hereof,
represents that it is acquiring this Warrant and the Warrant Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities
Act; provided, however, that by making the representations herein, the holder
does not agree to hold this Warrant or any of the Warrant Shares for any minimum
or other specific term and reserves the right to dispose of this Warrant and the
Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.  The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an “accredited investor” as such term is defined in
Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an “Accredited
Investor”).  Upon exercise of this Warrant  the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder’s own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale and
that such holder is an Accredited Investor.  If such holder cannot
make such representations because they would be factually incorrect, it shall be
a condition to such holder’s exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities
laws.

    


    
      
        
           


        

        
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    Section
7.               Ownership and
Transfer.

     

    (a)           The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof), a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee.  The Company may treat the person
in whose name any Warrant is registered on the register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.

     

    Section
8.               Adjustment of Warrant
Exercise Price and Number of Shares.  The Warrant Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted from time to time as follows:

     

    (a)           Adjustment of Warrant
Exercise Price and Number of Shares upon Issuance of Common
Stock.  If and whenever on or after the Issuance Date of this
Warrant, the Company issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than Excluded Securities) for a consideration
per share less than a price (the “Applicable Price”)
equal to the Warrant Exercise Price in effect immediately prior to such issuance
or sale, then immediately after such issue or sale the Warrant Exercise Price
then in effect shall be reduced to an amount equal to such consideration per
share.  Upon each such adjustment of the Warrant Exercise Price
hereunder, the number of Warrant Shares issuable upon exercise of this Warrant
shall be adjusted to the number of shares determined by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.

     

    (b)           Effect on Warrant Exercise
Price of Certain Events.  For purposes of determining the
adjusted Warrant Exercise Price under Section 8(a) above, the following shall be
applicable:

     

    (i)           Issuance of
Options.  If after the date hereof, the Company in any manner
grants any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange of any convertible securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share.  For purposes of this Section 8(b)(i), the lowest price per
share for which one share of Common Stock is issuable upon exercise of such
Options or upon conversion or exchange of such Convertible Securities shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option or upon conversion
or exchange of any convertible security issuable upon exercise of such
Option.  No further adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such convertible
securities upon the exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such convertible
securities.

    


    
      
        
           


        

        
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    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
convertible securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion or exchange thereof is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such convertible securities for such price per
share.  For the purposes of this Section 8(b)(ii), the lowest
price per share for which one share of Common Stock is issuable upon such
conversion or exchange shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the convertible security and
upon conversion or exchange of such convertible security.  No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such convertible securities,
and if any such issue or sale of such convertible securities is made upon
exercise of any Options for which adjustment of the Warrant Exercise Price had
been or are to be made pursuant to other provisions of this Section 8(b), no
further adjustment of the Warrant Exercise Price shall be made by reason of such
issue or sale.

     

    (iii)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion or exchange of any convertible securities, or the rate at which any
convertible securities are convertible into or exchangeable for Common Stock
changes at any time, the Warrant Exercise Price in effect at the time of such
change shall be adjusted to the Warrant Exercise Price which would have been in
effect at such time had such Options or convertible securities provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the number of
Warrant Shares issuable upon exercise of this Warrant shall be correspondingly
readjusted.  For purposes of this Section 8(b)(iii), if the terms of
any Option or convertible security that was outstanding as of the Issuance Date
of this Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or convertible security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change.  No adjustment pursuant to
this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

     

    (iv)           Calculation of Consideration
Received.  If any Common Stock, Options or convertible
securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefore will be deemed to be the net amount
received by the Company therefore.  If any Common Stock, Options or
convertible securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities.  If any Common Stock, Options or convertible securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of consideration
therefore will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or convertible securities, as the case may be.  The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation (the
“Valuation
Event”), the fair value of such consideration will be determined within
five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  The determination of such appraiser shall be final and
binding upon all parties and the fees and expenses of such appraiser shall be
borne jointly by the Company and the holders of Warrants.

    


    
      
        
           


        

        
          9

          
            

          

        

        
           


        

      

    

     

    (v)           Integrated
Transactions.  In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $.01.

     

    (vi)           Treasury
Shares.  The number of shares of Common Stock outstanding at
any given time does not include shares owned or held by or for the account of
the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.

     

    (vii)           Record
Date.  If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in convertible securities or
(2) to subscribe for or purchase Common Stock, Options or convertible
securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

     

    (c)           Adjustment of Warrant
Exercise Price upon Subdivision or Combination of Common
Stock.  If the Company at any time after the date of issuance
of this Warrant subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, any Warrant Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant will be
proportionately increased.  If the Company at any time after the date
of issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares issuable upon exercise of this Warrant will be proportionately
decreased.  Any adjustment under this Section 8(c) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

     

    (d)           Distribution of
Assets.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”), at
any time after the issuance of this Warrant, then, in each such
case:

    


    
      
        
           


        

        
          10

          
            

          

        

        
           


        

      

    

     

    (i)         
  any Warrant Exercise Price in effect immediately prior to the close
of business on the record date fixed for the determination of holders of Common
Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Warrant Exercise Price by
a fraction of which (A) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company’s Board of
Directors) applicable to one share of Common Stock, and (B) the denominator
shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date; and

     

    (ii)           either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant shall
be increased to a number of shares equal to the number of shares of Common Stock
obtainable immediately prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution is
of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder of
this Warrant shall receive an additional warrant to purchase Common Stock, the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).

     

    (e)           Certain
Events.  If any event occurs of the type contemplated by the
provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided, except as set forth in section 8(c),that no such adjustment pursuant
to this Section 8(e) will increase the Warrant Exercise Price or decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Section 8.

     

    (f)           Voluntary Adjustments By
Company.  The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    (g)          Notices.

     

    (i)
           Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.

    


    
      
        
           


        

        
          11

          
            

          

        

        
           


        

      

    

     

    (ii)           The
Company will give written notice to the holder of this Warrant at least ten (10)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Organic
Change (as defined below), dissolution or liquidation, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.

     

    (iii)           The
Company will also give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.

     

    Section
9.              Purchase Rights;
Reorganization, Reclassification, Consolidation, Merger or
Sale.

     

    (a)           In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase Rights”),
then the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.

     

    (b)           Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic
Change.”  Prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of Warrants
in exchange for such Warrants, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
and satisfactory to the holders of the Warrants (including an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of the
Warrants without regard to any limitations on exercise, if the value so
reflected is less than any Applicable Warrant Exercise Price immediately prior
to such consolidation, merger or sale).  Prior to the consummation of
any other Organic Change, the Company shall make appropriate provision (in form
and substance satisfactory to the holders of Warrants representing a
majority of the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
Warrant Shares immediately theretofore issuable and receivable upon the exercise
of such holder’s Warrants (without regard to any limitations on exercise),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
Warrant Shares which would have been issuable and receivable upon the exercise
of such holder’s Warrant as of the date of such Organic Change (without taking
into account any limitations or restrictions on the exercisability of this
Warrant).

    


    
      
        
           


        

        
          12

          
            

          

        

        
           


        

      

    

     

    Section
10.            Lost, Stolen, Mutilated or
Destroyed Warrant.  If this Warrant is lost, stolen, mutilated
or destroyed, the Company shall promptly, on receipt of an indemnification
undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed.

     

    Section
11.            Notice.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Warrant must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business 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 Holder:

            	
              SC
      Partners, LLC

            
	 
      	
              22
      Park Street, 1st
      Floor

            
	 
      	
              Gouverneur,
      NY  13642

            
	 
      	
              Attention:   President

            
	 
      	 
      
	
              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 a
holder of this Warrant, to it at the address and facsimile number set forth in
this Section 11, or at such other address and facsimile as shall be delivered to
the Company upon the issuance or transfer of this Warrant.  Each party
shall provide five days’ prior written notice to the other party of any change
in address or facsimile number.  Written confirmation of receipt
(A) given by the recipient of such notice, consent, facsimile, waiver or
other communication, (or (B) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

    


    
      
        
           


        

        
          13

          
            

          

        

        
           


        

      

    

     

    Section
12.            Date.  The
date of this Warrant is set forth on page 1 hereof.  This Warrant,
in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full
force and effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.

     

    Section
13.            Amendment and
Waiver.  Except as otherwise provided herein, the provisions of
the Warrants may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the holders of Warrants
representing at least two-thirds of the Warrant Shares issuable upon exercise of
the Warrants then outstanding; provided that, except for Section 8(d), no such
action may increase the Warrant Exercise Price or decrease the number of shares
or class of stock obtainable upon exercise of any Warrant without the written
consent of the holder of such Warrant.

     

    Section
14.            Descriptive Headings;
Governing Law.  The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.  The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders.  All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New Jersey, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New
Jersey.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Hudson County and the
United States District Court for the District of New Jersey, for the
adjudication of any dispute hereunder or in connection herewith or therewith, or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.

     

    Section
15.           Waiver of Jury
Trial.  AS A
MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.

     

    


    REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

     

     

    


    
      
        
           


        

        
          14

          
            

          

        

        
           


        

      

    

    


    IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed as of the date first set forth
above.

     

    
      	 
      	
              SEAWAY
      VALLEY CAPITAL CORPORATION

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:                                                                

            
	 
      	
              Name:   Thomas
      W. Scozzafava

            
	 
      	
              Title:  
        Chief Executive Officer

            


    

     

     

    


    
      
        
           


        

        
          15

          
            

          

        

        
           


        

      

    

    


    Execution
Version

     

    


     

     

    EXHIBIT A TO
WARRANT

     

    EXERCISE
NOTICE

     

    TO
BE EXECUTED

    BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

     

    SEAWAY
VALLEY CAPITAL CORPORATION

     

    The
undersigned holder hereby exercises the right to purchase ______________ of the
shares of Common Stock (“Warrant Shares”) of
Seaway Valley Capital Corporation (the “Company”), evidenced
by the attached Warrant (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

    ___           Cashless
Exercise

     

    (a) Payment of Warrant Exercise
Price.  In lieu of making payment of the Aggregate Exercise
Price, the holder elects to receive upon such exercise the Net Number of shares
of Common Stock determined in accordance with the terms of the
Warrant.

     

    (b) Delivery of Warrant
Shares.  The Company shall deliver to the holder                      
   Warrant Shares in accordance with the terms of the
Warrant.

     

    


    Date:
_______________ __, _____

     

    Name of
Registered Holder

    


    By:                                                        
  

    Name:                                                      

    Title:                                                        

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    Execution
Version

    


     

    EXHIBIT B TO
WARRANT

     

    FORM OF WARRANT
POWER

     

    FOR VALUE RECEIVED, the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Seaway Valley Capital Corporation represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation.  The undersigned does hereby irrevocably
constitute and appoint ______________, attorney to transfer the warrants of said
corporation, with full power of substitution in the premises.

     

    
      	
              Dated:                                                                     
      

            	                                                                       
      
	 
      	 
      
	 
      	
              By:                                                                

            
	 
      	
              Name:                                                         
        

            
	 
      	
              Title:  
                                                                
      

            
	 
      	 
      


    

    


     

    
 

    
      B-1