strombacksecuriesagreement.htm

WHEREAS, the Company desires to sell to Purchaser, and the Purchaser desires to purchase from the Company up to three thousand (3,000) five (5.0%) percent Cumulative Convertible Preferred Shares of the Company at a price per share of One Thousand and 00/100 dollars ($1,000/00) (the “Convertible Preferred Stock”) containing the terms set forth in the Certificate of Designation attached as Exhibit “A” hereto (the “Certificate of Designation”). The amounts in excess of $240,000.00 invested by Stromback Acquisition Corporation to Company under this agreement is not guaranteed and will be subject to Stromback Acquisition Corporation’s sole and absolute discretion.

1. Sale of Convertible Preferred Stock. Subject to the terms and conditions of this Agreement, Company hereby agrees to sell to Purchaser and Purchaser hereby agrees to purchase from Company up to three thousand (3,000) shares of the Convertible Preferred Stock at a price of One Thousand and 00/100 dollars ($1,000/00) per share. Upon the execution of this Agreement (the "First Closing"):

The Company shall deliver or cause to be delivered to Purchaser the following: (i) this Agreement duly executed by the Company; (ii) a certificate evidencing that number of shares of Convertible Preferred Stock being purchased by Purchaser, registered in the name of Purchaser; (iii) the Registration Rights Agreement [attached] duly executed by the Company and (iv) and Warrant (the "Warrant") [attached], registered in the name of Purchaser and giving Purchaser the right to acquire the number of shares of the Company’s common stock (the “Common Stock”) upon the exercise of the Warrant; and

3. Conversion. The Convertible Preferred Stock can be converted at Purchaser’s option at any time into shares of the Company’s Common Stock at a conversion price equal to seventy-seven (77%) percent of the average closing price of the Company’s common stock as quoted on the Over the Counter Bulletin Board, or, where applicable, other national exchange, for the five (5) business days preceding the First Closing or, as applicable, any Additional Closing (the “Conversion Price”).

4. Warrants. Upon the First Closing, and each Additional Closing(s) thereafter, the Company shall issue Purchaser a warrant to purchase that number of shares of the Company’s Common Stock which is equal to six (6%) percent of the total dollar amount invested by Purchaser at the respective Closing (the “Warrant”). Thus, for the avoidance of doubt, should Purchaser invest One Million and 00/100 dollars ($1,000,000/00) (e.g., purchases 1,000 shares of the Convertible Preferred Stock), the Company shall issue Purchase a warrant to purchase sixty thousand (60,000/00) shares of the Company’s Common Stock. The exercise price of a Warrant shall be equal to the Conversion Price.

5. Budgetary Authority. Purchaser shall have approval authority over fifty (50%) percent of the proceeds of the First Closing, or, as applicable, any Additional Closing up to a maximum of Five hundred thousand dollars ($500,000.00) in total (the "Discretionary Investment"). Purchaser will advise and make recommendations to the Company as to the use of such Discretionary Investment, which shall include recommendations as to the Company’s investor relations and shareholder communications programs as well as other company debts and payables per its existing agreements. The Company shall not employ nor withhold the Discretionary Investment without the prior approval of the Purchaser. Upon approval or recommendation of the Discretionary Investment from the Purchaser, the Company shall make the approved payments within three (3) business days of the request of the Purchaser. The Company's failure to abide by the terms and conditions of this paragraph five (5) or paragraph nine (9) shall constitute a material breach of this Securities Purchase Agreement and result in liquidated damages for Purchaser equal to four times the amount of Discretionary Investment funds. In the event the Company fails to abide by the terms and conditions of this paragraph five (5) or paragraph nine (9) it is understood and agreed that Purchaser has the unequivocal right to obtain timely injunctive relief to protect the rights of Purchaser. Notwithstanding the foregoing, Purchaser shall not have authority pursuant to this paragraph five (5) to bind or obligate the Company with respect to any material agreement.

6. Representations and Warranties of Company. Company hereby represents and warrants to Purchaser in the First Closing that the statements contained in the following paragraphs of this Section 6 are all true and correct as of the date of this Agreement and the Closing Date, and to Purchaser in an Additional Closing that the statements contained in the following paragraphs of this Section 6 are all true and correct as of the date of the Additional Closing:

Corporate Power. Company has all requisite legal and corporate power to enter into, execute, deliver and perform this Agreement and the Registration Rights Agreement (the "Registration Rights Agreement") of even date herewith between Company and Purchaser. This Agreement and the Registration Rights Agreement (the "Transaction Documents") have been duly executed by the Company and constitute the legal, valid and binding obligations of Company, enforceable in accordance with their terms, except as the same may be limited by (i) bankruptcy, insolvency, moratorium, and other laws of general application affecting the enforcement of creditors' rights and (ii) limitations on the enforceability of the indemnification provisions of the Registration Rights Agreement as limited by applicable securities laws.

ii.

Valid Issuance. The Convertible Preferred Stock and Common Stock, when issued in compliance with the provisions of this Agreement and the Warrant, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens and encumbrances; provided, however, that the Convertible Preferred Stock, the Common Stock and Warrants may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein, and as may be required by future changes in such laws.

Government Consent, Etc. No consent, approval, order or authorization of, or designation, registration, declaration or filing with, any federal, state, local or other governmental authority on the part of Company is required in connection with the valid execution and delivery of this Agreement, the Registration Rights Agreement or the offer, sale or issuance of the Convertible Preferred Stock, the Common Stock and the Warrant other than, if required, filings or qualifications under the Nevada Securities Act, as amended (the "Nevada Law"), or other applicable blue sky laws, which filings or qualifications, if required, will be timely filed or obtained by Company. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement filed (or incorporated by reference) as an exhibit to the SEC Reports (as defined below).

SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended ("1934 Act"), including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials being collectively referred to herein as the "SEC Reports") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "1933 Act") and the 1934 Act and the rules and regulations of the Securities and Exchange Commission ("Commission") promulgated thereunder, and none of the SEC Reports, when filed, 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 light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments.

Investment Intent: Authority. This Agreement is made with Purchaser in reliance upon Purchaser's representation to Company, evidenced by Purchaser's execution of this Agreement, that Purchaser is acquiring the Convertible Preferred Stock, the Warrants and the Common Stock for investment for Purchaser's own account, not as nominee or agent, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the 1933 Act; provided, however, that by making the representations herein, Purchaser does not agree to hold any of the Convertible Preferred Stock, the Warrants and the Common Stock for any minimum or other specific term and reserves the right to dispose of the Convertible Preferred Stock, the Warrants and the Warrant. Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Purchaser has the requisite right, power, authority and capacity to enter into and perform this Agreement and the Agreement will constitute a valid and binding obligation upon Purchaser, except as the same may be limited by bankruptcy, insolvency, moratorium, and other laws of general application affecting the enforcement of creditors' rights.

Knowledge and Experience. Purchaser (i) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser's prospective investment in the Convertible Preferred Stock, the Warrants and the Common Stock; (ii) has the ability to bear the economic risks of Purchaser's prospective investment; (iii) has had all questions which have been asked by Purchaser satisfactorily answered by Company; and (iv) has not been offered the Convertible Preferred Stock, the Warrants and the Common Stock by any form of advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any such media. Purchaser represents and warrants that it is an "accredited investor" within the meaning of Rule 501 of Regulation D of the Securities Act.

Transfer Restrictions. Purchaser covenants that in no event will it sell, transfer or otherwise dispose of any of the Convertible Preferred Stock, the Warrants and the Common Stock other than in conjunction with an effective registration statement for the same under the Securities Act or pursuant to an exemption there from, or in compliance with Rule 144 promulgated under the Securities Act or to a person related to or an entity affiliated with said Purchaser and other than in compliance with the applicable securities regulation laws of any state.

9. Stromback Family. Company will continue to use the services of RJS Consulting. Company will upon the maturity date of the promissory note Company made to Richard Stromback offer the option to either extend the terms of the note for an additional one year period on identical terms or convert the outstanding principal and interest owed under the note into the Company’s common stock at a conversion price equal to the close of the Company’s common stock on the OTC Bulletin Board on the maturity date. Company agrees to extend an offer to Doug Stromback and Deanna Stromback that will allow them upon the maturity dates of the Company’s promissory notes held by them to either extend the terms of the notes for an additional one year period on identical terms or convert the outstanding principal and interest owed under the notes into the Company’s common stock at a conversion price equal to the close of the Company’s common stock on the OTC Bulletin Board on the maturity dates. Upon completion of the first closing and immediately after dispersments are made per the Discretionary Investment of the initial $240,000.00 of investment, Richard Stromback agrees to resign as a member of the Company’s Board of Directors by executing a resignation letter substantially in the form of Exhibit B. Subsequently, as long as there are no material breaches of this agreement Richard Stromback also agrees not to seek directly or indirectly to become a Company director, be nominated to become a Company director and/or accept the appointment as a Company director for a period of five years after the effective date of this Agreement.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS ("BLUE SKY LAWS"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT OR AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT OR BLUE SKY LAWS.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Shares and Warrant Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) such Shares and Warrant Shares are registered for resale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Shares and Common Stock may be made without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurances that the Shares and Common Stock can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. The Purchaser acknowledges, covenants and agrees to sell Shares and Warrant Shares represented by a certificate from which the legend has been removed only pursuant to (i) a registration statement effective under the 1933 Act or (ii) advice of counsel that such sale is exempt from the registration requirements of Section 5 of the 1993 Act, including, without limitation, a transaction pursuant to Rule 144.

11. Indemnification of Purchasers. The Company will indemnify and hold Purchaser and its directors, officers, shareholders, partners, employees and agents (each, a "Purchaser Party") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "Losses") that a Purchaser Party may suffer or incur as a result of or relating to the failure of the representations and warranties of the Company to be true and correct.

Governing Law. This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to the conflicts of law provisions thereof. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

Notices, etc. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given (i) upon receipt if personally delivered, (ii) three (3) days after being mailed by registered or certified mail, postage prepaid, or (iii) one day after being sent by recognized overnight courier or by facsimile, if to Purchaser, 1050 Northover Drive, Bloomfield Hills, Michigan, or at such other address or number as Purchaser shall have furnished to Company in writing, or if to Company, at 2701 Cambridge Court, Suite 100, Auburn Hills, Michigan, or at such other address or number as the Company shall have furnished to Purchaser in writing.

Assignment. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

Remedies. The Purchaser shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.