Unassociated Document


    


     

     

    FORBEARANCE
AGREEMENT

     

    FORBEARANCE AGREEMENT (this
“Agreement”),
dated of as January 15, 2009, by and between TXP CORPORATION, a Nevada
corporation (the “Company”), and YA GLOBAL INVESTMENTS, L.P.
(formerly, CORNELL CAPITAL PARTNERS, LP) (“YA
Global”).  All capitalized terms used herein shall have the
respective meanings assigned thereto in the Transaction Documents (as defined
below) unless otherwise defined herein.

     

     

    


     

     

    W I T N E S S E T
H:

     

     

    WHEREAS, on March 30, 2007,
the parties hereto entered into a Securities Purchase Agreement (the “2007 Securities Purchase
Agreement”);

     

     

    WHEREAS, pursuant to the 2007
Securities Purchase Agreement, YA Global purchased from the Company, among other
things, (i) Secured Convertible Note No. TXP-2-1 which was issued on March 30,
2007 in the original principal amount of $4,000,000, as amended, and (ii)
Secured Convertible Note No. TXP-2-2 which was issued on December 11, 2007 in
the original principal amount of $1,000,000, as amended (collectively, the
“2007
Debentures”);

     

     

    WHEREAS, on May 29, 2008, the
parties hereto entered into a Securities Purchase Agreement (the “2008 Securities Purchase
Agreement” and collectively with the 2007 Securities Purchase Agreement,
the “Securities
Purchase Agreements”);

     

     

    WHEREAS, pursuant to the 2008
Securities Purchase Agreement, YA Global purchased from the Company (i) Secured
Convertible Debenture No. TXPO 3-1 which was issued on May 29, 2008 in the
original principal amount of $3,000,000 and (ii) Secured Convertible Debenture
No. TXPO 3-2 which was issued on August 31, 2008 in the original principal
amount of $1,500,000 (collectively, the “Debentures,” and
along with the 2007 Debentures, the “Debentures”);

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


     

    WHEREAS, pursuant to the
Securities Purchase Agreements,  the Company has issued to YA Global
the following warrants (collectively, the “Existing Warrants”)
(i) Warrant issued on March 30, 2007 for 3,850,000 shares (Warrant No:
CCP-1-2/A), (ii) Warrant issued on June 5, 2006 for 3,700,000 shares (Warrant
No: CCP-2-2/A), (iii) Warrant issued on May 29, 2008 for 8,870,000 shares
(Warrant No: TXPO-3-1), and (iv) Warrant issued on August 13, 2008 for 4,430,000
shares (Warrant No: TXPO-3-2);

     

    WHEREAS, the Securities
Purchase Agreements, the Debentures, the Warrants, and all documents and
instruments entered into in connection therewith shall be referred to herein as
the “Transaction
Documents”) and capitalized terms which are used but not defined herein
have the meaning given thereto in the Transaction Documents;

     


    WHEREAS, the outstanding
principal and accrued and unpaid interest on the Debentures is as
follows:

     

    
      
        	
                Debenture
      Description

              	
                Principal
      Outstanding

              	
                Accrued
      and Unpaid Interest (as of December 17, 2008)

              
	
                Secured
      Convertible Debenture due issued on March 30, 2007 in the original
      principal amount of $4,000,000 (TXP-2-1)

              	
                $4,000,000

              	
                $347,027

              
	
                Secured
      Convertible Debenture issued on December 11, 2007 in the original
      principal amount of US $1,000,000 (TXP-2-2)

              	
                $1,000,000

              	
                $103,671

              
	
                Secured
      Convertible Debenture issued on May 29, 2008 in the original amount of
      US$3,000,000 (TXPO 3-1)

              	
                $3,000,000

              	
                $199,232

              
	
                Secured
      Convertible Debenture issued on August 13, 2008 in the original amount of
      US$1,500,000 (TXPO 3-2)

              	
                $1,500,000

              	
                $62,137

              


      

    

    


     

    WHEREAS, the Company has
failed to make payments pursuant to the Debentures that were due on December 15,
2008 (the “Payment
Defaults”);

     

    WHEREAS, the Company has
failed to meet certain Milestones by December 15, 2008, the deadline to meet
such Milestones (the “Milestone
Defaults”);

     

    WHEREAS, in addition, the
Company has breached the terms of the Transaction Documents as set forth in the
notice of default dated December 11, 2008 (such breaches collectively along with
the Payment Defaults and the Milestone Defaults shall be referred to herein as
the “Existing
Defaults”);

     

    WHEREAS, YA Global is willing
to agree to forbear from exercising certain of its rights and remedies on the
terms and conditions specified herein;

     


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    NOW, THEREFORE, in
consideration of the foregoing, and the respective agreements, warranties and
covenants contained herein, the parties hereto agree, covenant and warrant as
follows:

     

    
      	
               
      

            	
              1.

            	
              ACKNOWLEDGMENTS.

            


    

     

    
      	
               
      

            	
              a.

            	
              Acknowledgement of
      Obligations.  The Company hereby acknowledges, confirms
      and agrees that as of the date hereof, the Company is indebted to YA
      Global under the Debentures and the Transaction Documents in the
      outstanding principal amount plus accrued and unpaid interest thereon set
      forth in the first Whereas clause above.  In addition to the
      principal and interest set forth herein, all interest accrued and accruing
      hereafter and all liquidated damages, fees, costs, expenses and other
      charges now or hereafter payable by the Company to YA Global under the
      Transaction Documents (collectively, the “Obligations”),
      are unconditionally owing by the Company to YA Global, without offset,
      defense or counterclaim of any kind, nature or description
      whatsoever.

            


    

     

    
      	
               
      

            	
              b.

            	
              Acknowledgement of
      Security Interests.  The Company hereby acknowledges,
      confirms and agrees that YA Global has and shall continue to have valid,
      enforceable and perfected first-priority liens upon and security interests
      in the Pledged Property heretofore granted to YA Global pursuant to (i)
      the Security Agreement between the Company and YA Global dated March 29,
      2008, (ii) the intellectual property security agreement between the
      Company and YA Global dated March 29, 2008, (iii) the Security Agreement
      between the Company and YA Global dated March 30, 2007, or otherwise
      granted to or held by YA Global.

            


    

     

    
      	
               
      

            	
              c.

            	
              Binding Effect of
      Documents.  The Company hereto acknowledges, confirms and
      agrees that:  (a) each of the Transaction Documents 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 (c) YA Global is and shall be entitled to
      the rights, remedies and benefits provided for in the Transaction
      Documents and applicable law.

            


    

     

    
      	
               
      

            	
              2.

            	
              FORBEARANCE IN RESPECT
      OF CERTAIN EVENTS OF
DEFAULT.

            


    

     

    
      	
               
      

            	
              a.

            	
              Acknowledgement of
      Default.  The Company hereby acknowledges and agrees that
      the Existing Defaults have occurred and are continuing, and each
      constitutes an Event of Default and entitles YA Global to exercise its
      rights and remedies under the Transaction Documents, applicable law or
      otherwise.  The Company further represents and warrants that as
      of the date hereof no other Event of Default under the Transaction
      Documents exists.  YA Global has not waived, presently do not
      intend to waive and may never waive such Existing Defaults and nothing
      contained herein or the transactions contemplated hereby shall be deemed
      to constitute any such waiver.  The Company hereby acknowledges
      and agrees that YA Global has the presently exercisable right to declare
      the Obligations to be immediately due and payable under the terms of the
      Transaction Documents.

            


    

     


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              b.

            	
              Forbearance.

            


    

     

    
      	
               
      

            	
              i.

            	
              In
      reliance upon the representations, warranties and covenants of the Company
      contained in this Agreement, and subject to the terms and conditions of
      this Agreement and any documents or instruments executed in connection
      herewith, YA  Global agrees to forbear from exercising its
      rights and remedies under the Transaction Documents or applicable law in
      respect of or arising out of the Existing Defaults, subject to the
      conditions, amendments and modifications contained herein for the period
      (the “Forbearance
      Period”) commencing on the date hereof and ending upon the
      occurrence of any of the following events: (i) the Company fails to comply
      with any term, condition, or agreement set forth in this Agreement, or
      (ii) any occurrence or existence of any Event of Default, other than the
      Existing Defaults.

            


    

     

    
      	
               
      

            	
              ii.

            	
              Upon
      the termination or expiration of the Forbearance Period, the agreement of
      YA Global to forbear shall automatically and without further action
      terminate and be of no force and effect, it being expressly agreed that
      the effect of such termination will be to permit YA Global to exercise
      such rights and remedies immediately, including, but not limited to, the
      acceleration of all of the Obligations without any further notice, passage
      of time or forbearance of any kind.  This Agreement shall be
      deemed to satisfy any and all requirements by YA Global to notify the
      Company of the occurrence of the Existing Defaults and satisfies any
      obligation by YA Global to give the Company an opportunity to cure the
      Existing Defaults.

            


    

     

    
      	
               
      

            	
              c.

            	
              No Other Waivers;
      Reservation of Rights.

            


    

     

    
      	
               
      

            	
              i.

            	
              YA
      Global has not waived, is not by this Agreement waiving, and has no
      intentions of waiving, any Events of Default which may be continuing on
      the date hereof or any Events of Default which may occur after the date
      hereof (whether the same or similar to the Existing Defaults or
      otherwise), and YA Global has not agreed to forbear with respect to any of
      its rights or remedies concerning any Events of Default (other than,
      during the Forbearance Period, the Existing Defaults to the extent
      expressly set forth herein), which may have occurred or are continuing as
      of the date hereof or which may occur after the date
    hereof.

            


    

     

    
      	
               
      

            	
              ii.

            	
              Subject
      to Section 2(b) above (solely with respect to the Existing Defaults),
      YA Global reserves the right, in its discretion, to exercise any or all of
      its rights and remedies under the Transaction Documents as a result of any
      Events of Default which may be continuing on the date hereof or any Event
      of Default which may occur after the date hereof, and YA Global has not
      waived any of such rights or remedies, and nothing in this Agreement, and
      no delay on its part in exercising any such rights or remedies, should be
      construed as a waiver of any such rights or
  remedies.

            


    

     

    
      	
               
      

            	
              3.

            	
              In
      consideration of the agreements set forth herein, the Company shall amend,
      as of the date hereof, the Exercise Price of all the Existing Warrants to
      $0.01 per share.

            


    

     


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              4.

            	
              PAYMENTS
      UNDER THE DEBENTURES.

            


    

     

    
      	
               
      

            	
              a.

            	
              The Company shall make payment
      under the Debentures in the aggregate amount of $250,000 per month
      beginning on March 20, 2009, and continuing on the 20th day (or next business day, if
      such date is not a business day) of each successive calendar month
      thereafter (each, a “Payment
      Due Date”).  All such payment
      shall be made in accordance with the procedures for Installment Payments
      set forth in 2008 Debentures (i.e., such payments may be made in cash
      pursuant to a Company Redemption, or in Common Stock pursuant to a Company
      Conversion).   YA Global shall apply all such payments to
      principal and accrued interest owed under the Debentures in its sole
      discretion.

            


    

     

    
      	
               
      

            	
              b.

            	
              YA Global agrees to defer all
      payments required to be made under the Debentures prior to March 20, 2009,
      until the earlier of (i) the expiration of the Forbearance Period, or (ii)
      March 30, 2010 (the maturity date of the first
      Debenture).

            


    

     

    
      	
               
      

            	
              c.

            	
              In
      addition to the payments set forth above, the Company shall make (i) a
      balloon payment in the amount of $250,000 which shall be due and payable
      on June 30, 2009, and (ii) a balloon payment due and payable on February
      15 of each year beginning in 2010 in the amount equal to one third of the
      Company’s gross profit for the full year immediately preceding the year in
      which such payment is due.  These payments shall be made in the
      same manner, and applied by YA Global in the same manner as described in
      Section 4.a. above.

            


    

     

    
      	
               
      

            	
              d.

            	
              In
      addition to the payments to be made to YA Global in accordance with this
      Agreement, all amounts outstanding under each of Debenture shall be due
      and payable on such Debenture’s maturity
date.

            


    

     

    
      	
               
      

            	
              5.

            	
              COVENANTS

            


    

     

    
      	
               
      

            	
              a.

            	
              Milestones.   The
      Company covenants and agrees to meet each of the following corporate
      milestones (each a “Corporate
      Milestone”):

            


    

     

    
      	
               
      

            	
              i.

            	
              The
      Company shall achieve positive cash flow from operations for the month
      ending on August 30, 2009, and cash flow from operations shall remain
      positive for each quarter
thereafter.

            


    

     

    
      	
               
      

            	
              ii.

            	
              Implement
      an acceptable cost cutting/growth plan approved by YA Global no later than
      January 30, 2009.

            


    

     


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              iii.

            	
              Enter
      into an acceptable agreement to YA Global with Cambridge Industries Group
      (“CIG”)
      by January 30, 2009 pursuant to which products representing at least
      $2,000,000 of the Company’s current and future orders will be manufactured
      and supplied at prices which result in average profit margins to the
      Company of at least 25%.

            


    

     

    
      	
               
      

            	
              iv.

            	
              Enter
      into an acceptable agreement to YA Global with CIG by January 30, 2009
      pursuant to which CIG agrees to fund the Company’s iPhotonics ONT
      operations per the agreed upon cost cutting/growth plan as referenced in
      Section 5(a)(ii) above through March 31, 2009 by paying the production
      margin proceeds from described in Section 5(a)(iii) above in
      advance.

            


    

     

    
      	
               
      

            	
              i.

            	
              Retain
      a restructuring officer acceptable to YA Global by January 23, 2009, which
      restructuring officer shall have full discretion to approve all Company
      expenditures and execute the business plan as referenced in Section
      5(a)(ii) above.

            


    

     

    Failure
to timely satisfy any Corporate Milestone shall be an Event of
Default.

     

    
      	
               
      

            	
              b.

            	
              Budgets.  The
      Company shall enter into payment arrangements and/or standstill agreements
      to satisfy all of its accounts payable and provide to YA Global a budget
      (the “Budget”)
      detailing such payments and arrangements on terms that are acceptable to
      YA Global by February 10, 2009.

            


    

     

    
      	
               
      

            	
              c.

            	
              Deposit Control
      Account.  Reference is made to the Control
      Account Agreement (the “Control Account
      Agreement”) dated August 6, 2008, among Comerica Bank, a national
      banking association (“Bank”), the
      Company and YA Global.  On December 11, 2008, YA Global
      exercised its rights pursuant to the Control Account Agreement to direct
      the disposition of the Deposits (as defined in the Control Account
      Agreement) in the Control Account (as defined in the Control Account
      Agreement).  Upon delivery of an acceptable Budget as set forth
      in Section 5(b) above, YA Global shall notify the Bank that it is
      releasing its notice of exclusive control and the Company may use the
      Control Account solely to pay expenses in accordance with such approved
      Budget.  The Company hereby agrees that it will not open or cause to
      be opened any cash accounts whether with the Bank or any other bank
      without YA Global’s prior written
consent.

            


    

     

    
      	
               
      

            	
              d.

            	
              Increase of Authorized
      Common Stock.  The Company shall obtain the requisite approval
      of its shareholders via shareholder consent and file an information
      statement with the Securities and Exchange Commission by March 31, 2009
      for the sole purpose of increasing the number of authorized shares of
      Common Stock to at least 700,000,000.  Management shall vote all of
      its shares in favor of increasing the number of authorized shares of
      Common Stock.

            


    

     


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              e.

            	
              Further
      Assurances. The Company shall, from and after the execution of this
      Agreement, execute and deliver to YA Global whatever additional documents,
      instruments, and agreements YA Global may require in order to correct any
      document deficiencies, or to vest or perfect the Transaction Documents and
      the collateral granted therein more securely in YA Global and/or to
      otherwise give effect to the terms and conditions of this Agreement, and
      hereby authorize YA Global to file any financing statements (including
      financing statements with a generic description of the collateral such as
      “all assets”), and take any other normal and customary steps, YA Global
      deems necessary to perfect or evidence YA Global’s security interests and
      liens in any such collateral.

            


    

     

    
      	
               
      

            	
              f.

            	
              Non-Interference. 
      From and after the termination of the Forbearance Period, the Company
      agrees not to interfere with the exercise by YA Global of any of its
      rights and remedies.  The Company further agrees that it shall not
      seek to restrain or otherwise hinder, delay, or impair YA Global’s efforts
      to realize upon any collateral granted to YA Global, or otherwise to
      enforce its rights and remedies pursuant to the Transaction
      Documents.  The provisions of this Paragraph shall be specifically
      enforceable by YA Global.

            


    

     

    
      	
               
      

            	
              g.

            	
              Cross
      Default.  The Company hereby acknowledges and agrees that any
      default or Event of Default under this Agreement or under any Transaction
      Document shall constitute an Event of Default under each other Transaction
      Document.

            


    

     

    
      	
               
      

            	
              6.

            	
              RELEASE.  In
      exchange for the accommodations made by YA Global herein, the Company does
      hereby, on behalf of itself and its agents, representatives, attorneys,
      assigns, heirs, subsidiaries, executors and administrators (collectively,
      “Company
      Parties”) RELEASE AND FOREVER DISCHARGE YA Global and its
      subsidiaries and its respective affiliates, parents, joint ventures,
      officers, directors, shareholders, interest holders, members, managers,
      employees, consultants, representatives, successors and assigns, heirs,
      executors and administrators (collectively, “Buyer Parties”)
      from all causes of action, suits, debts, claims and demands whatsoever
      known or unknown, at law, in equity or otherwise, which the Company
      Parties ever had, now has, or hereafter may have on or prior to the date
      hereof, and any claims for reasonable attorneys’ fees and costs, and
      including, without limitation, any claims relating to fees, penalties,
      liquidated damages, and indemnification for losses, liabilities and
      expenses.  The release contained in this Section is effective
      without regard to the legal nature of the claims raised and without regard
      to whether any such claims are based upon tort, equity, or implied or
      express contract.  It is expressly understood and agreed that
      this release shall operate as a clear and unequivocal waiver by the
      Company Parties of any such claim
whatsoever.

            


    

     

    
      	
               
      

            	
              7.

            	
              PROVISIONS OF GENERAL
      APPLICATION

            


    

     

    
      	
               
      

            	
              a.

            	
              Effect of this
      Agreement.  Except as modified pursuant hereto, no other
      changes or modifications to the Transaction Documents are intended or
      implied and in all other respects the Transaction Documents are hereby
      specifically ratified, restated and confirmed by all parties hereto as of
      the effective date hereof.  To the extent of conflict between
      the terms of this Agreement and the other Transaction Documents, the terms
      of this Agreement shall control.  The Transaction Documents and
      this Agreement shall be read and construed as one
    agreement.

            


    

     


    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              b.

            	
              Governing
      Law.  This Agreement shall be interpreted according to
      the laws of the State of New Jersey and shall inure to the benefit of and
      be binding upon the parties hereto and their respective successors and
      assigns.  Any notices, demands, consents, other writings or
      communications permitted or required by this Agreement shall be given in
      the manner and to the address as set forth in the Transaction
      Documents.

            


    

     

    
      	
               
      

            	
              c.

            	
              Mutual Waiver of Jury
      Trial.  BECAUSE DISPUTES ARISING IN CONNECTION WITH
      COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
      BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE
      AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
      DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
      LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
      BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
      WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING
      BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT OR
      OTHERWISE BETWEEN FACTOR AND CLIENT ARISING OUT OF, CONNECTED WITH,
      RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
      CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FACTORING DOCUMENTS OR
      THE TRANSACTIONS RELATED THERETO.

            


    

     

    [SIGNATURE
PAGE IMMEDIATELY TO FOLLOW]

     


    
      
         


      

      
        8

        
          

        

      

      
         


      

    


    


     

    IN WITNESS WHEREOF, this
Agreement is executed and delivered as of the day and year first above
written.

     

    
      
        	 
      	
                TXP
      Corporation

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:
      /s/ Michael C.
      Shores

              
	 
      	
                Name:
      Michael C. Shores

              
	 
      	
                Title:  
      Chief Executive Officer

              
	 
      	 
      
	 
      	
                YA
      Global Investments, L.P.

              
	 
      	 
      
	 
      	
                By:           Yorkville
      Advisors, LLC

              
	 
      	
                Its:           Investment
      Manager

              
	 
      	 
      
	 
      	
                By:
      /s/ Troy
      Rillo                                                             

              
	 
      	
                Name: Troy
      Rillo               

              
	 
      	
                Title:  
      Senior Managing Director

              


      

    


    
      
         


      

      
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    SCHEDULE
A

    


    TRANSACTION
DOCUMENTS

    


    


    


    


    


    
      
      

    

    



    
      
         


      

      
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