*** Execution Version
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement"), dated as of March 4, 2008, by
and among SEAWAY VALLEY CAPITAL CORPORATION, a Delaware corporation (the
"Company"), and YA GLOBAL INVESTMENTS, L.P. (the "Buyer").
WITNESSETH
WHEREAS, pursuant to that certain Assignment Agreements (the "Assignment
Agreement") dated the date hereof the Buyer purchased from Community Bank, N.A.
(the "Bank") the following loans (i) Mortgage, dated February 14, 2006, between
Xxxxxxx Xxxxxxx Hardware Company ("Xxxxxxx") and the Bank in the original amount
of $380,000, and the promissory note and assignment of rents entered in
connection therewith (the "Ogdenberg Mortgage"), (ii) Mortgage, dated November
6, 2001, between Xxxxxxx and the Bank in the original amount of $150,000 and the
promissory note and assignment of rents entered in connection therewith (the
"Canton Mortgage"), (iii) the Commercial Promissory Note (No. C-06-03-008249),
dated April 5, 2006, between Xxxxxxx and the Bank in the original amount of
$250,000 (the "April Note"), (iv) the Commercial Promissory Note (No.
C-06-09-017697), dated September 1, 2006, between Xxxxxxx and the Bank in the
original amount of $1,000,000 (the "September Note"), and (v) the Commercial
Line of Credit Agreement and Note (No. C-06-03-008243), dated April 5, 2006,
between Xxxxxxx and the Bank in the amount of $950,000 (the "April Line of
Credit" and together with the Ogdenberg Mortgage, the Canton Mortgage, the April
Note and the September Note, the "Loans" and each a "Loan);
WHEREAS, total aggregate balance of the Loans (including principal,
interest, and costs) is $2,249,073.08;
WHEREAS, pursuant to the terms hereof, the parties desire to exchange the
Loans for a secured convertible debenture in the form of Exhibit A attached
hereto in the aggregate principal amount equal to $2,249,073.08 (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");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "Irrevocable Transfer Agent Instructions");
WHEREAS, the Company was formerly known as Directview, Inc.;
WHEREAS, the Buyer was formerly known as Cornell Capital Partners, LP;
WHEREAS, pursuant to the Securities Purchased Agreement, dated as of March
23, 2006, by and among the Company, the Buyer and Highgate House Funds, Ltd.,
the Buyer purchased Secured Convertible Debenture (No. CCP-1) in the original
principal amount of One Hundred Fifty Thousand Dollars ($150,000) ("Debenture
CCP-1");
WHEREAS, pursuant to the Securities Purchase Agreement (the "2007 SPA"),
dated as of November 30, 2007, by and among the Company and the Buyer, the Buyer
purchased Secured Convertible Debenture (No. SWVC-5-1) in the Original Principal
Amount of Three Hundred Seventy Five Thousand Dollars ($375,000) which was
subsequently amended and restated as Amended and Restated Secured Convertible
Debenture (No. SWVC-5-1/A) ("Debenture 5-1/A");
WHEREAS, pursuant to the 2007 SPA, the Buyer purchased Secured Convertible
Debenture (No. SWVC-5-2) in the original principal amount of One Hundred Seventy
Five Thousand Dollars ($175,000) ("Debenture 5-2" and together with Debenture
5-1/A, and Debenture CCP-1, the "Amended Debentures"); and
WHEREAS, the parties hereto desire to amend the terms of the Amended
Debentures.
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.
(a) Exchange of Loans. 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
Loans for the Debenture for no consideration. Upon surrender, the
instruments evidence the Loans shall be retired by the Company and the
outstanding balances shall hereinafter be evidenced by the Debenture.
(b) Warrants. Pursuant to the terms and conditions of this Agreement,
contemporaneously with the execution and delivery of this Agreement,
the Company shall issue to the Buyer a warrant in the form attached
hereto as Exhibit B (the "Warrant") exercisable to purchase additional
shares of Common Stock (the "Warrants Shares") on a cashless basis.
(c) Fees and Expenses.
(i) Pursuant to the terms and conditions of this Agreement, within 3
business days of the execution and delivery of this Agreement,
the Company shall place into escrow $185,000 (collectively, the
"Monitoring Fees," and as deposited into escrow, the "Escrow
Funds") which shall be used to compensate Yorkville Advisors LLC
("Investment Manager") for monitoring and managing the investment
made by Buyer described herein, pursuant to the Investment
Manager's existing advisory obligations to Buyer. The Company,
Investment Manager, and Buyer shall enter into an Escrow
Agreement of even date herewith in the form attached hereto as
Exhibit D (the "Escrow Agreement") appointing an escrow agent
(the "Escrow Agent") to hold the Escrow Funds and to periodically
disburse portions of such Escrow Funds to the Investment Manager
from escrow in accordance with the terms of the Escrow Agreement.
The Investment Manager shall periodically receive portions of the
Escrow Funds in accordance with the Escrow Agreement until
either: (1) the Escrow Funds shall have been fully disbursed
pursuant the Escrow Agreement or (2) the Securities (as defined
below) shall have been Fully Retired. "Fully Retired" shall mean
that the Buyer shall have fully disposed of all the Securities
(as defined below) issued or issuable hereunder, shall no longer
have any investment in, or ownership of, any of the Securities
(as defined below), all amounts owed to Buyer under the
Transaction Documents shall have been paid, and the Transaction
Documents shall have been terminated. When the Securities (as
defined below) are Fully Retired, the remaining Escrow Funds
shall be returned to the Company or otherwise disbursed in
accordance with the Escrow Agreement.
(ii) Pursuant to the terms and conditions of this Agreement, within 3
business days of the execution and delivery of this Agreement,
the Company shall pay a structuring and due diligence fee (the
"Structuring and Due Diligence Fee") to the Investment Manager of
Seventy Five Thousand Dollars ($75,000).
2. AMENDMENT OF AMENDED DEBENTURES. Pursuant to the terms and conditions of
this Agreement, contemporaneously with the execution and delivery of this
Agreement, the Company will amend each of the Amended Debentures by
executing an amendment (the "Amendments") in substantially the form
attached hereto as Exhibit C for each such Amended Debenture.
3. 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 Loans from November 7, 2007, the date that the
Company guarantied the obligations under the Loans. The Company agrees not
to take a position contrary to this Section 3. 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 Loans will include the holding
period for such surrendered Loans from November 7, 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.
4. 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.
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.
5. 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.
(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 xxxx://xxx.xxx.xxx., 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.
(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.
(k) Purchase of Xxxxxxx. On November 7, 2007, the Company completed the
purchase of Xxxxxxx, and in connection with such purchase, guarantied
and assumed Xxxxxxx'x obligations under the Loans. The Loans are also
guaranties by WiseBuys Stores, Inc.
(l) The Company represents and warrants that the Loans are enforceable
against the Company and that the Company presently has no claims or
defenses of any nature whatsoever with respect to the Loans.
(m) As of the date hereof, the total obligations of the Company under the
Loans, including principal, interest, cost, and fees, equals
$2,249,073.08, as set forth in more detail on Schedule 5(m).
(n) The Credit and Security Agreement by and among Xxxxxxx, WiseBuyers
Stores, Inc. and Xxxxx Fargo Bank, N.A. (the "Credit Agreement") has
been fully executed and the Borrower (as defined therein) has received
or has access to receive Revolving Advances (as defined therein) under
the Credit Agreement in an amount greater than or equal to $2,200,000.
The Company is not in default under the Credit Agreement.
6. 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 800,000,000 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.
(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) Transfer Agent. The Company covenants and agrees that, in the event
that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new
transfer agent and shall require that the new transfer agent execute
and agree to be bound by the terms of the Irrevocable Transfer Agent
Instructions (as defined herein).
(h) Restriction on Issuance of the Capital Stock. So long as the Debenture
remains outstanding, the Company shall not, without the prior written
consent of the Buyer, (i) issue or sell shares of Common Stock or
Preferred Stock without consideration or for a consideration per share
less than the bid price of the Common Stock determined immediately
prior to its issuance, (ii) issue any preferred stock, warrant,
option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock's Bid
Price determined immediately prior to its issuance, or (iii) file any
registration statements on Form S-8 valued at more than $500,000 in
the aggregate.
(i) 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.
(j) 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.
(k) Acknowledgement of Obligations. The Company hereby acknowledges,
confirms and agrees that the obligations of the Company to the Buyer
under the Amended Debentures, the Loans, and immediately after the
exchange of the Loans for the Debenture as contemplated hereunder,
under the Debenture, are unconditionally owing by the Company to YA
Global, without offset, defense or counterclaim of any kind, nature or
description whatsoever.
(l) Acknowledgement of Security Interests. The Company hereby
acknowledges, confirms and agrees that YA Global has and shall
continue to have valid, enforceable and perfected liens upon and
security interests in the collateral heretofore granted to YA Global
pursuant to the security agreements entered into in connection with
the Loans, the Debenture, the Amended Debentures, or otherwise granted
to or held by YA Global. Such liens shall be subject to the
Subordination Agreement between YA Global and Xxxxx Fargo Bank N.A.
dated on or about the date hereof.
(m) 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 Loans, the Debenture, and the Amended Debenture
to which it is a party has been duly executed and delivered to YA
Global 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) YA Global 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.
(n) The Company and Xxxxxxx authorizes 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 Xxxxxxx as debtor,
which are in favor of the Bank as secured party, in relation to the
security assigned in accordance with the Assignment Agreement.
(o) The Company represents that it has formed an entity named Seaway Real
Estate Holdco, which is a wholly owned subsidiary of the Company. The
Company agrees that it shall not transfer any assets (whether personal
property, real property, or otherwise) into Seaway Real Estate Holdco
without the written consent of YA Global.
(p) Within 30 days of the date hereof, the Company shall change its
transfer agent to one acceptable to YA Global.
7. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer Agent Instructions to
its transfer agent, and any subsequent transfer agent, irrevocably
appointing Xxxxx Xxxxxxxx, Esq. as the Company's agent for purpose
instructing its transfer agent to issue certificates or credit shares
to the applicable balance accounts at The Depository Trust Company
("DTC"), registered in the name of each Buyer or its respective
nominee(s), for the Conversion Shares and the Warrant Shares issued
upon conversion of the Debenture or exercise of the Warrants as
specified from time to time by each Buyer to the Company upon
conversion of the Debenture or exercise of the Warrants. The Company
shall not change its transfer agent without the express written
consent of the Buyers, which may be withheld by the Buyers in their
sole discretion. The Company warrants that no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this
Section 7 will be given by the Company to its transfer agent, and that
the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section
4(f), the Company shall promptly instruct its transfer agent to issue
one or more certificates or credit shares to the applicable balance
accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment and, with
respect to any transfer, shall permit the transfer. In the event that
such sale, assignment or transfer involves Conversion Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the Company shall
instruct the transfer agent to issue such Securities to the Buyer,
assignee or transferee, as the case may be, without any restrictive
legend. Nothing in this Section 7 shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm
to the Buyer by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 7
will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 7, that the
Buyer shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
8. CLOSING DATE; DELIVERIES. The transactions contemplated hereby shall occur
at the offices of Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, Xxx Xxxxxx 00000 (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 Loans to the Company;
(b) the Company shall issue the Debenture and the Warrants to the Buyer;
(c) the Company shall deliver executed Amendment to the Buyer, thereby
amending the Amended Debentures;
(d) the Company, the Buyer and the Investment Manager shall execute and
deliver the Escrow Agreement;
(e) the Company shall deposit the Monitoring Fee into the Escrow Account;
(f) the Company shall wire the Structuring and Due Diligence Fee to the
Investment Manger in readily available funds and in accordance with
the wire instructions provided by the Investment Manager; and
(g) the Company shall issue the Irrevocable Transfer Agent Instructions to
its transfer agent.
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to
the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court
of New Jersey, sitting in Xxxxxx County and the United States District
Court for the District of New Jersey sitting in Newark, New Jersey for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(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.
(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
00-00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Law Office of Xxxxxxx X. Xxx
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer, to: YA Global Investments, L.P.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxx Xxxxx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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
(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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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: Xxxxxx X. Xxxxxxxxxx
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.
BUYERS:
YA GLOBAL INVESTMENTS, L.P.
By: Yorkville Advisors, LLC
Its: Investment Manager
By: ____________________________
Name: Xxxx Xxxxxx
Its: Portfolio Manager
Agreed and Acknowledged:
Xxxxxxx Xxxxxxx Hardware Company
By: _____________________________
Name:
Title
Seaway Valley Capital Corporation
By: _____________________________
Name:
Title
-------------------------------
Xxxxxxx Xxxxxxx, Xx.
-------------------------------
Xxxxxxx Xxxxx
Date: February ___, 2008
LIST OF EXHIBITS:
Disclosure Schedule
Exhibit A - Form Debenture
Exhibit B - Form Warrant
Exhibit C - Form of Amendment for Amended Debentures
Schedule 5(m) - Obligations under the Loans
DISCLOSURE SCHEDULE
Schedule 5(n)
Loan No. 0283686-9001
Principal Balance $ 105,610.83
Interest through 3/4/08 $ 593.41
Total for Payoff $ 106,204.24
Loan No. 0283686-9003
Principal Balance $ 350,006.54
Interest through 3/4/08 $ 1,224.29
Total for Payoff $ 351,230.83
Loan No. 0283696-0101
Principal Balance $ 925,000.00
Interest through 3/4/08 $ 4,541.49
Total for Payoff $ 929,541.49
Loan No. 0283686-9004
Principal Balance $ 104,166.76
Interest through 3/4/08 $ 547.75
Total for Payoff $ 104,714.51
Loan No. 0283686-9005
Principal Balance $ 749,995.00
Interest through 3/4/08 $ 3,887.01
Total for Payoff $ 753,882.01
Subtotal $ 2,245,573.08
Atty and Document Fee $ 2,750.00
Document Fee $ 750.00
TOTAL from YA Global Investments, L.P. $ 2,249,073.08
