EXECUTION COPY
SECURITIES PURCHASE, LOAN AND SECURITY AGREEMENT
SECURITIES
PURCHASE, LOAN AND SECURITY AGREEMENT (this
“Agreement”), dated as of May 19, 2008, by and
among Java Detour, Inc. a Delaware corporation (the
“
Company ”),
on the one hand, and Java Finance, LLC, and Clydesdale Partners,
LLC (“Clydesdale”), on the other hand (each a
“
Secured Party ”
and together the “
Secured Parties ”).
W I T N E S S E T H :
WHEREAS,
Secured Parties have agreed to make loans to the Company in
the aggregate amount of $733,333.32, which loans are evidenced
by secured promissory notes payable to the Secured Parties of
even date herewith, and, in connection therewith, the Company
will issue to each Secured Party an aggregate of One Million
(1,000,000) shares of common stock, $.0001 par value per
share, of the Company (the “
Shares ”)
for each Loan advanced hereunder;
WHEREAS,
the Company has agreed to grant a security interest in certain
collateral to Secured Parties in order to secure its
obligation to repay the loans; and
WHEREAS,
capitalized terms used herein and not otherwise defined shall
have the meanings ascribed by the Uniform Commercial Code (the
“
Code ”)
as in effect from time to time in the State of California;
provided, however, if by mandatory provision of law the attachment,
perfection, or priority of Secured Parties’ security interest
in the Collateral (as hereinafter defined) is governed by the Code
of another state such capitalized terms shall be defined as in
effect in such other jurisdiction for purposes of provisions
thereof relating to such attachment, perfection, or
priority.
NOW,
THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the Company hereby agrees with Secured
Parties as follows:
SECTION
1.
The Loan; Funding Date; Disbursement .
Secured Parties shall severally lend to the Company an aggregate
principal amount of Seven Hundred Thirty-three Thousand Three
Hundred Thirty-three and Thirty-two Cents ($733,333.32). Each
Secured Party shall lend $366,666.66 (each is a “
Loan ”
and together the “
Loans ”),
it being acknowledged that Clydesdale has already advanced to the
Company $200,000 of its Loan. Each Loan shall be evidenced by a
secured promissory note in the form annexed hereto as
Exhibit A (each
is a “
Note ”
and together the “
Notes ”).
All principal and accrued interest on the Notes shall be payable on
January 15, 2009. On the date of this Agreement, each Secured Party
shall send by wire transfer the aggregate amount of such Secured
Party’s Loan to TroyGould and distributions will be made from
the account of TroyGould against directions signed by both Hunter
World Markets, Inc. (“
Hunter ”)
and the Company, subject to Section 4(g). It is understood and
agreed that the Company will accept a Loan of an additional
$366,666.66 from a third party (the “
Additional Lender ”)
arranged by Hunter on the same terms as set forth herein which Loan
to be made within ten (10) business days of the Closing if so made.
Upon making the Loan, the Additional Lender shall be deemed to be a
Secured Party for purposes of this Agreement, and the Additional
Lender shall receive its allocable portion of the Shares and Hunter
shall receive a placement fee of $36,667. The Additional Lender
shall execute a counterpart copy of this Agreement.
SECTION
2.
Benefit of Agreement .
This Agreement is for the benefit of Secured Parties to secure (a)
the full and punctual payment when and as due, whether at maturity,
by acceleration, upon the dates set for payment, or otherwise of
the principal and interest of the Loans; and (b) the full and
punctual payment of any costs and expenses incurred by Secured
Parties in connection with the preservation or enforcement
(including, without limitation, with respect to any action, suit,
or proceeding which may be instituted by Secured Parties in
connection with the enforcement) of any of the Secured
Parties’ rights under the Notes evidencing the Loans
(including without limitation the reasonable fees and disbursements
of Secured Parties’ attorneys and other experts) (all such
obligations, collectively, the “
Obligations ”).
SECTION
3.
Grant of Security Interest .
As collateral security for the prompt and complete payment and
performance when due of all the Obligations, and in order to induce
Secured Parties to make the Loans, the Company grants to Secured
Parties a first priority and continuing security interest, which
will be perfected by an effective UCC filing (made by Secured
Parties or their counsel) until the Loan, as it relates to a
specific Secured Party, is satisfied, in all of the Company’s
right, title, and interest in all of the following property now
owned, or at any time hereafter acquired, by the Company or in
which the Company now has or at any time in the future may acquire
any right, title, or interest (all of which being hereinafter
collectively called the “
Collateral ”):
(a)
all assets of the Company, including, but not limited to, real
estate, tangible assets and intangible assets including all
intellectual property rights located at or used in connection with
the operations of the Company at the addresses listed on Schedule
3(a) (the “
Secured Locations ”);
(b)
all existing and future contracts between the Company and another
party related to the Secured Locations;
(c)
all existing and future Accounts and General Intangibles now or
hereafter owned by the Company including, without limitation, (1)
all money due and to become due under any contract, (2) any damages
arising out of or for breach or default in respect of any contract
or Account, (3) all other amounts from time to time paid or payable
under or in connection with any contract or Account, and (4) the
right of the Company to terminate any contract or to perform or
exercise all remedies thereunder;
(d)
all existing and future equipment, machinery, furniture, fixtures
and accessories located at or used in connection with the Secured
Locations (the “
Equipment ”);
(e)
all existing and future inventory located at or used in connection
with the Secured Locations; and
(f)
to the extent not otherwise included, all proceeds and products of
any or all of the foregoing.
SECTION
4.
Representations, Warranties and Covenants of the
Company .
The
Company hereby represents, warrants and covenants as
follows:
(a)
The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Delaware. The
Company is qualified or licensed to do business, and is in good
standing as a foreign corporation in all jurisdictions in which
such qualification or licensing is required or in which the failure
to so qualify or to be so licensed could have a material adverse
effect on the Company.
(b)
This Agreement and the Notes have been duly authorized by all
corporate action, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Company, enforceable in
accordance with their respective terms. The issuance of the Shares
has been duly authorized by all corporate action.
(c)
The execution, delivery, and performance by Company of this
Agreement and the Notes and the issuance of the Shares do not and
will not conflict with the terms of the Certificate of
Incorporation or Bylaws of Company, violate any provision of any
judgment, decree or order of any court or governmental authority by
which Company is bound, or any provision of any law or regulation
applicable to Company, or result in a breach of or constitute a
default under any contract, obligation, indenture, or other
instrument to which Company is a party or by which Company may be
bound.
(d)
The execution, delivery, and performance by Company of this
Agreement and the Notes and the issuance of the Shares do not and
will not require any authorization, approval, or other action by,
or notice to or filing with, any governmental authority, regulatory
body, or any other person or entity.
(e)
None of the filings of the Company required to be filed by it under
the Securities Exchange Act of 1934, as amended (the “
SEC Reports ”)
nor the financial statements (and notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they
were made not misleading.
(f)
Except as disclosed on Schedule 4(f), the Company owns the
Collateral free and clear of any lien, security interest, charge,
or encumbrance. Without limitation to the foregoing, the Company
has clear and unencumbered title to all real property, free and
clear of any mortgage, or any liability, or rights of third parties
whatsoever, if any.
(g)
The Company shall use the proceeds of the Loans as follows: (1)
payment at Closing of Secured Parties’ counsel’s fees
in the amount of $7,500 (the “
Counsel Fee ”);
(2) payment at Closing of a placement fee of $73,333 to Hunter (the
“
Placement Fee ”);
(3) reimbursement for a tombstone ad (not to exceed $2,500), and
(4) the remaining proceeds as funds for Company
operations.
(h)
This Agreement creates a valid security interest in the Collateral
securing the payment of the Obligations which is prior to all on
the Collateral created by the Company and will be enforceable under
the Code or similar laws as such as against all other creditors of
and purchasers from the Company.
SECTION
5.
Representations and Warranties of each Secured Party
.
Each Secured Party hereby represents and warrants, severally and
not jointly, to the Company that:
(a)
Securities Not Registered .
Secured Party is acquiring its Shares (as defined herein) for its
own account, not as an agent or nominee, and not with a view to, or
for sale in connection with, any distribution thereof in violation
of applicable securities laws. By executing this Agreement, Secured
Party further represents that Secured Party does not have any
present contract, undertaking, understanding or arrangement with
any person to sell, transfer or grant participations to such
persons or any third person, with respect to its
Shares.
(b)
Access to Information .
The Company has made available to Secured Party the opportunity to
ask questions of and to receive answers from the Company’s
officers, directors and other authorized representatives concerning
the Company and its business and prospects, and Secured Party has
been permitted to have access to all information which it has
requested in order to evaluate the merits and risks of the purchase
of its Shares pursuant to this Agreement.
(c)
Investment Experience .
Secured Party is an investor in securities of companies in the
development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the purchase of
the Shares.
(d)
No Brokers or Finders .
Secured Party has incurred no liability for commissions or other
fees to any finder or broker in connection with the transactions
contemplated by this Agreement, the cost of which is in any part
the liability of or payable by the Company.
(e)
Regulation D .
Secured Party is an “accredited investor” as defined in
Rule 501 under the Securities Act. In the normal course of
business, Secured Party invests in or purchases securities similar
to the Shares and has such knowledge and experience in financial
and business matters as to be capable of evaluating the
merit
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