Document:

SECURITIES
      PURCHASE AGREEMENT

    

    THIS SECURITIES
      PURCHASE AGREEMENT
      (this
“Agreement”),
      dated
      as of March 30, 2007, by and among TXP
      CORPORATION,
      a Nevada
      corporation (the “Company”),
      and
      the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
      collectively “Buyers”).

     

    WITNESSETH

    

    WHEREAS,
      the
      Company and the Buyer(s) are executing and delivering this Agreement in reliance
      upon an exemption from securities registration pursuant to Section 4(2) and/or
      Rule 506 of Regulation D (“Regulation
      D”)
      as
      promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
      under
      the Securities Act of 1933, as amended (the “Securities
      Act”);

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Buyer(s), as provided herein,
      and the Buyer(s) shall purchase (i) up to Five Million Dollars ($5,000,000)
      of
      secured convertible notes in the form attached hereto as “Exhibit
      A”
(the
      “Convertible
      Notes”),
      which
      shall be convertible into shares of the Company’s common stock, par value $0.001
      (the “Common
      Stock”)
      (as
      converted, the “Conversion
      Shares”),
      and
      (ii) warrants substantially in the form attached hereto as “Exhibit
      B”
(the
      “Warrants”),
      to
      acquire up to that number of additional shares of Common Stock set forth
      opposite such Buyer’s name in column (5) of the Schedule I (as exercised, the
“Warrant
      Shares”)
      of
      which Four Million Dollars ($4,000,000) shall be funded within five (5) business
      days following the date hereof (the “First
      Closing”)
      and
      One Million Dollars ($1,000,000) shall be funded on the date the registration
      statement (the “Registration
      Statement”)
      is
      filed, pursuant to the Registration Rights Agreement dated the date hereof,
      with
      the SEC (the “Second
      Closing”)
      (individually referred to as a “Closing”
      collectively referred to as the “Closings”),
      for a
      total purchase price of up to Five Million Dollars ($5,000,000), (the
“Purchase
      Price”)
      in the
      respective amounts set forth opposite each Buyer(s) name on Schedule I (the
      “Subscription
      Amount”);
      

     

    WHEREAS,
      contemporaneously with the execution and delivery of this Agreement, the parties
      hereto are executing and delivering a Registration Rights Agreement (the
“Registration
      Rights Agreement”)
      pursuant to which the Company has agreed to provide certain registration rights
      under the Securities Act and the rules and regulations promulgated there under,
      and applicable state securities laws; 

     

    WHEREAS,
      the
      Convertible Notes are secured by a security interest in certain assets of the
      Company and of each of the Company's subsidiaries, including certain
      intellectual property and rights to certain intellectual property as evidenced
      by the security agreement of even date herewith (the “Security
      Agreement”);
      

     

    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”);
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    WHEREAS,
      the
      Convertible Notes, the Conversion Shares, the Warrants, and the Warrant Shares
      collectively are referred to herein as the “Securities”).
      

     

    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. PURCHASE
      AND SALE OF CONVERTIBLE NOTES.

     

    (a) Purchase
      of Convertible Notes.
      Subject
      to the satisfaction (or waiver) of the terms and conditions of this Agreement,
      each Buyer agrees, severally and not jointly, to purchase at each Closing and
      the Company agrees to sell and issue to each Buyer, severally and not jointly,
      at each Closing, Convertible Notes in amounts corresponding with the
      Subscription Amount set forth opposite each Buyer’s name on Schedule I hereto
      and the Warrants to acquire up that number of Warrant Shares as set forth
      opposite such Buyer’s name in column (5) on Schedule I . 

     

    (b) Closing
      Dates.
      The
      First Closing of the purchase and sale of the Convertible Notes and Warrants
      shall take place at 10:00 a.m. Eastern Standard Time on the fifth (5th)
      business day following the date hereof, subject to notification of satisfaction
      of the conditions to the First Closing set forth herein and in Sections 6 and
      7
      below (or such later date as is mutually agreed to by the Company and the
      Buyer(s)) (the “First
      Closing Date”)
      and
      the Second Closing of the purchase and sale of the Convertible Notes shall
      take
      place at 4:00 p.m. Eastern Standard Time on the date the Registration Statement
      is filed with the SEC, subject to notification of satisfaction of the conditions
      to the Second Closing set forth herein and in Sections 6 and 7 below (or such
      later date as is mutually agreed to by the Company and the Buyer(s)) (the
“Second
      Closing Date”)
      (collectively referred to a the “Closing
      Dates”).
      The
      Closings shall occur on the respective Closing Dates at the offices of Yorkville
      Advisors, LLC, 3700 Hudson Street, Suite 3700, Jersey City, New Jersey 07302
      (or
      such other place as is mutually agreed to by the Company and the Buyer(s)).
      

     

    (c) Form
      of Payment.
      Subject
      to the satisfaction of the terms and conditions of this Agreement, on each
      Closing Date, (i) the Buyers shall deliver to the Company such aggregate
      proceeds for the Convertible Notes and Warrants to be issued and sold to such
      Buyer at such Closing, minus the fees to be paid directly from the proceeds
      of
      such Closing as set forth herein, and (ii) the Company shall deliver to
      each Buyer, Convertible Notes and Warrants which such Buyer is purchasing at
      such Closing in amounts indicated opposite such Buyer’s name on Schedule I, duly
      executed on behalf of the Company.

     

    2. BUYER’S
      REPRESENTATIONS AND WARRANTIES.

     

    Each
      Buyer represents and warrants, severally and not jointly, that:

     

    (a) Investment
      Purpose.
      Each
      Buyer is acquiring 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,
      such 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. Such Buyer does
      not presently have any agreement or understanding, directly or indirectly,
      with
      any Person to distribute any of the Securities. 

     

    
      
        
        

      

      
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    (b) Accredited
      Investor Status.
      Each
      Buyer is an “Accredited
      Investor”
as
      that
      term is defined in Rule 501(a)(3) of Regulation D.

     

    (c) Reliance
      on Exemptions.
      Each
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (d) Information.
      Each
      Buyer and its advisors (and his or, its counsel), if any, have been furnished
      with all materials relating to the business, finances and operations of the
      Company and information he deemed material to making an informed investment
      decision regarding his purchase of the Securities, which have been requested
      by
      such Buyer. Each Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company and its management. Neither such
      inquiries nor any other due diligence investigations conducted by such Buyer
      or
      its advisors, if any, or its representatives shall modify, amend or affect
      such
      Buyer’s right to rely on the Company’s representations and warranties contained
      in Section 3 below. Each Buyer understands that its investment in the Securities
      involves a high degree of risk. Each Buyer is in a position regarding the
      Company, which, based upon employment, family relationship or economic
      bargaining power, enabled and enables such Buyer to obtain information from
      the
      Company in order to evaluate the merits and risks of this investment. Each
      Buyer
      has sought such accounting, legal and tax advice, as it has considered necessary
      to make an informed investment decision with respect to its acquisition of
      the
      Securities.

     

    (e) No
      Governmental Review.
      Each
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities, or the fairness or suitability of the investment
      in the Securities, nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (f) Transfer
      or Resale.
      Each
      Buyer understands that except as provided in the Registration Rights Agreement:
      (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,
      or
      (B) such 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 made in reliance on Rule 144,
      Rule
      144(k) or Rule 144A, promulgated under the Securities Act (or a successor rule
      thereto) (“Rule
      144”),
      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. 

     

    
      
        
        

      

      
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    (g) Legends.
      Each
      Buyer agrees to the imprinting, so long as is required by this Section 2(g),
      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
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, (ii) following any sale of such Conversion
      Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares
      or Warrant Shares are eligible for sale under Rule 144(k), 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 Company shall cause its counsel to issue a legal opinion to the
      Company’s transfer agent promptly after the effective date (the “Effective
      Date”)
      of a
      Registration Statement if required by the Company’s transfer agent to effect the
      removal of the legend hereunder. If all or any portion of the Convertible Notes
      or Warrants are exercised by a Buyer that is not an Affiliate of the Company
      (a
“Non-Affiliated
      Buyer”)
      at a
      time when there is an effective registration statement to cover the resale
      of
      the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant
      Shares shall be issued free of all legends. The Company agrees that following
      the Effective Date or at such time as such legend is no longer required under
      this Section 2(g), it will, no later than five (5) Trading Days following the
      delivery by a Non-Affiliated Buyer to the Company or the Company’s transfer
      agent of a certificate representing Conversion Shares or Warrant Shares, as
      the
      case may be, issued with a restrictive legend (such third Trading Day, the
      “Legend
      Removal Date”),
      deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
      representing such shares that is free from all restrictive and other legends.
      The Company may not make any notation on its records or give instructions to
      any
      transfer agent of the Company that enlarge the restrictions on transfer set
      forth in this Section. Each Buyer acknowledges that the Company’s agreement
      hereunder to remove all legends from Conversion Shares or Warrant Shares is
      not
      an affirmative statement or representation that such Conversion Shares or
      Warrant Shares are freely tradable. Each Buyer, severally and not jointly with
      the other Buyers, agrees that the removal of the restrictive legend from
      certificates representing Securities as set forth in this Section 3(g) 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.

     

    
      
        
        

      

      
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    (h) Authorization,
      Enforcement.
      This
      Agreement has been duly and validly authorized, executed and delivered on behalf
      of such Buyer and is a valid and binding agreement of such 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.

     

    (i) Receipt
      of Documents.
      Each
      Buyer and his or its counsel has received and read in their entirety: (i) this
      Agreement and each representation, warranty and covenant set forth herein and
      the Transaction Documents (as defined herein); (ii) all due diligence and other
      information necessary to verify the accuracy and completeness of such
      representations, warranties and covenants; (iii) the Company’s Form 8-K/A filed
      with the SEC on May 4, 2006; (iv) the Company’s Form 10-QSB for the fiscal
      quarter ended September 30, 2006 and (v) answers to all questions each Buyer
      submitted to the Company regarding an investment in the Company; and each Buyer
      has relied on the information contained therein and has not been furnished
      any
      other documents, literature, memorandum or prospectus.

     

    (j) Due
      Formation of Corporate and Other Buyers.
      If the
      Buyer(s) is a corporation, trust, partnership or other entity that is not an
      individual person, it has been formed and validly exists and has not been
      organized for the specific purpose of purchasing the Securities and is not
      prohibited from doing so.

     

    (k) No
      Legal Advice From the Company.
      Each
      Buyer acknowledges, that it had the opportunity to review this Agreement and
      the
      transactions contemplated by this Agreement with his or its own legal counsel
      and investment and tax advisors. Each Buyer is relying solely on such counsel
      and advisors and not on any statements or representations of the Company or
      any
      of its representatives or agents for legal, tax or investment advice with
      respect to this investment, the transactions contemplated by this Agreement
      or
      the securities laws of any jurisdiction. 

     

    3. 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 each Buyer: 

     

    (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.

     

    
      
        
        

      

      
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    (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 Convertible Notes,
      the Warrants, the Security Agreement, the Registration Rights Agreement, the
      Irrevocable Transfer Agent Instructions, 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 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. The authorized officer of the Company executing the
      Transaction Documents knows of no reason why the Company cannot file the
      Registration Statement as required under the Registration Rights Agreement
      or
      perform any of the Company’s other obligations under the Transaction Documents.

     

    
      
        
        

      

      
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    (d) Capitalization.
      The
      authorized capital stock of the Company consists of 300,000,000 shares of Common
      Stock, par value $.001, of which 104,080,623 shares of Common Stock are issued
      and outstanding. All of the outstanding shares of capital stock of the Company
      are validly issued, fully paid and nonassessable, have been issued in compliance
      with all federal and state securities laws, and none of such outstanding shares
      was issued in violation of any preemptive rights or similar rights to subscribe
      for or purchase securities. Except as disclosed in Schedule 3(d): (i) none
      of
      the Company's capital stock is subject to preemptive rights or any other similar
      rights or any liens or encumbrances suffered or permitted by the Company; (ii)
      there are no outstanding options, warrants, scrip, rights to subscribe to,
      calls
      or commitments of any character whatsoever relating to, or securities or rights
      convertible into, or exercisable or exchangeable for, any capital stock of
      the
      Company or any of its subsidiaries, or contracts, commitments, understandings
      or
      arrangements by which the Company or any of its subsidiaries is or may become
      bound to issue additional capital stock of the Company or any of its
      subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities or rights
      convertible into, or exercisable or exchangeable for, any capital stock of
      the
      Company or any of its subsidiaries; (iii) there are no outstanding debt
      securities, notes, credit agreements, credit facilities or other agreements,
      documents or instruments evidencing indebtedness of the Company or any of its
      subsidiaries or by which the Company or any of its subsidiaries is or may become
      bound; (iv) there are no financing statements securing obligations in any
      material amounts, either singly or in the aggregate, filed in connection with
      the Company or any of its subsidiaries; (v) there are no outstanding securities
      or instruments of the Company or any of its subsidiaries which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      subsidiaries; (vi) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; (vii) the Company does not have any stock appreciation rights
      or
      "phantom stock" plans or agreements or any similar plan or agreement; and (viii)
      the Company and its subsidiaries have no liabilities or obligations required
      to
      be disclosed in the SEC Documents but not so disclosed in the SEC Documents,
      other than those incurred in the ordinary course of the Company's or its
      subsidiaries' respective businesses and which, individually or in the aggregate,
      do not or would not have a Material Adverse Effect. The Company has furnished
      to
      the Buyers true, correct and complete copies of the Company's Certificate of
      Incorporation, as amended and as in effect on the date hereof (the “Certificate
      of Incorporation”),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto. No further approval or authorization of any stockholder, the
      Board of Directors of the Company or others is required for the issuance and
      sale of the Securities. There are no stockholders agreements, voting agreements
      or other similar agreements with respect to the Company’s capital stock to which
      the Company is a party or, to the knowledge of the Company, between or among
      any
      of the Company’s stockholders. 

     

    (e) Issuance
      of Securities.
      The
      issuance of the Convertible Notes and the Warrants is duly authorized and free
      from all taxes, liens and charges with respect to the issue thereof. Upon
      conversion in accordance with the terms of the Convertible Notes 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 and charges with respect to the issue
      thereof. The Company has reserved from its duly authorized capital stock the
      appropriate number of shares of Common Stock as set forth in this Agreement.
      

     

    
      
        
        

      

      
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    (f) 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 Convertible Notes
      and the Warrants, 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 or the Registration Rights 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.

     

    (g) 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 http://www.sec.gov., 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. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (h) 10(b)-5.
      The SEC
      Documents do not include any untrue statements of material fact, nor do they
      omit to state any material fact required to be stated therein necessary to
      make
      the statements made, in light of the circumstances under which they were made,
      not misleading.

     

    (i) 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 (i)
      have
      a Material Adverse Effect.

     

    (j) Acknowledgment
      Regarding Buyer’s Purchase of the Convertible Notes.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of an arm’s length purchaser with respect to this Agreement and the transactions
      contemplated hereby. The Company further acknowledges that each Buyer is not
      acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any advice given by each Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to such Buyer’s purchase of the
      Securities. The Company further represents to each Buyer that the Company’s
      decision to enter into this Agreement has been based solely on the independent
      evaluation by the Company and its representatives.

     

    (k) No
      General Solicitation.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D under the Securities Act) in connection
      with
      the offer or sale of the Securities.

     

    (l) 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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (m) Employee
      Relations.
      To
      the
      best of the Company’s knowledge, neither
      the Company nor any of its subsidiaries is involved in any labor dispute or,
      to
      the knowledge of the Company or any of its subsidiaries, is any such dispute
      threatened. None of the Company’s or its subsidiaries’ employees is a member of
      a union and the Company and its subsidiaries believe that their relations with
      their employees are good.

     

    (n) Intellectual
      Property Rights.
      The
      Company and its subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, trade names, service marks, service mark registrations, service
      names, patents, patent rights, copyrights, inventions, licenses, approvals,
      governmental authorizations, trade secrets and rights necessary to conduct
      their
      respective businesses as now conducted. The Company and its subsidiaries do
      not
      have any knowledge of any infringement by the Company or its subsidiaries of
      trademark, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade secret
      or other similar rights of others, and, to the knowledge of the Company there
      is
      no claim, action or proceeding being made or brought against, or to the
      Company’s knowledge, being threatened against, the Company or its subsidiaries
      regarding trademark, trade name, patents, patent rights, invention, copyright,
      license, service names, service marks, service mark registrations, trade secret
      or other infringement; and the Company and its subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the
      foregoing.

     

    (o) Environmental
      Laws.
      The
      Company and its subsidiaries are (i) in compliance with any and all applicable
      foreign, federal, state and local laws and regulations relating to the
      protection of human health and safety, the environment or hazardous or toxic
      substances or wastes, pollutants or contaminants (“Environmental
      Laws”),
      (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective businesses and (iii)
      are in compliance with all terms and conditions of any such permit, license
      or
      approval.

     

    (p) Title.
      All
      real property and facilities held under lease by the Company and its
      subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as are not material and do not interfere with the use
      made
      and proposed to be made of such property and buildings by the Company and its
      subsidiaries.

     

    (q) Insurance.
      The
      Company and each of its subsidiaries is insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its subsidiaries are engaged. Neither the Company
      nor
      any such subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not materially and
      adversely affect the condition, financial or otherwise, or the earnings,
      business or operations of the Company and its subsidiaries, taken as a
      whole.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (r) Regulatory
      Permits.
      The
      Company and its subsidiaries possess all material certificates, authorizations
      and permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses, and neither the
      Company nor any such subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such certificate, authorization or
      permit.

     

    (s) Internal
      Accounting Controls.
      The
      Company and each of its subsidiaries maintains a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, and (iii) the recorded amounts for assets are
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences.

     

    (t) No
      Material Adverse Breaches, etc.
      Neither
      the Company nor any of its subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company’s officers has or is expected in the future
      to have a Material Adverse Effect on the business, properties, operations,
      financial condition, results of operations or prospects of the Company or its
      subsidiaries. Neither the Company nor any of its subsidiaries is in breach
      of
      any contract or agreement which breach, in the judgment of the Company’s
      officers, has or is expected to have a Material Adverse Effect on the business,
      properties, operations, financial condition, results of operations or prospects
      of the Company or its subsidiaries.

     

    (u) Tax
      Status.
      The
      Company and each of its subsidiaries has made and filed all federal and state
      income and all other tax returns, reports and declarations required by any
      jurisdiction to which it is subject and (unless and only to the extent that
      the
      Company and each of its subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) has
      paid
      all taxes and other governmental assessments and charges that are material
      in
      amount, shown or determined to be due on such returns, reports and declarations,
      except those being contested in good faith and has set aside on its books
      provision reasonably adequate for the payment of all taxes for periods
      subsequent to the periods to which such returns, reports or declarations apply.
      There are no unpaid taxes in any material amount claimed to be due by the taxing
      authority of any jurisdiction, and the officers of the Company know of no basis
      for any such claim.

     

    (v) Certain
      Transactions.
      Except
      for arm’s length transactions pursuant to which the Company makes payments in
      the ordinary course of business upon terms no less favorable than the Company
      could obtain from third parties and other than the grant of stock options
      disclosed in the SEC Documents, none of the officers, directors, or employees
      of
      the Company is presently a party to any transaction with the Company (other
      than
      for services as employees, officers and directors), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or, to
      the
      knowledge of the Company, any corporation, partnership, trust or other entity
      in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (w) Fees
      and Rights of First Refusal.
      The
      Company is not obligated to offer the securities offered hereunder on a right
      of
      first refusal basis or otherwise to any third parties including, but not limited
      to, current or former shareholders of the Company, underwriters, brokers, agents
      or other third parties.

     

    (x) Investment
      Company.
      The
      Company is not, and is not an affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as amended.
      The Company shall conduct its business in a manner so that it will not become
      subject to the Investment Company Act.

     

    (y) Registration
      Rights.
      Except
      as set forth on Schedule
      3(y),
      other
      than each of the Buyers, no Person has any right to cause the Company to effect
      the registration under the Securities Act of any securities of the Company.
      Except as set forth on Schedule
      3(y),
      there
      are no outstanding registration statements not yet declared effective and there
      are no outstanding comment letters from the SEC or any other regulatory
      agency.

     

    (z) Private
      Placement.
      Assuming the accuracy of the Buyers’ representations and warranties set forth in
      Section 2, no registration under the Securities Act is required for the offer
      and sale of the Securities by the Company to the Buyers as contemplated hereby.
      The issuance and sale of the Securities hereunder does not contravene the rules
      and regulations of the Primary Market.

     

    (aa) 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.

     

    (bb) Manipulation
      of Price. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any Person any compensation for
      soliciting another to purchase any other securities of the Company, other than,
      in the case of clauses (ii) and (iii), compensation paid to the Company’s
      placement agent in connection with the placement of the Securities.

     

    (cc) Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Convertible Notes 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 Convertible Notes in accordance with this Agreement
      and
      the Convertible Notes 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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    4. COVENANTS.

     

    (a) Best
      Efforts.
      Each
      party shall use its best efforts to timely satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement.

     

    (b) Form
      D.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary to qualify the Securities,
      or obtain an exemption for the Securities for sale to the Buyers at the Closing
      pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of any such action
      so
      taken to the Buyers on or prior to the Closing Date.

     

    (c) Reporting
      Status.
      Until
      the earlier of (i) the date as of which the Buyer(s) may sell all of the
      Securities without restriction pursuant to Rule 144(k) promulgated under the
      Securities Act (or successor thereto), or (ii) the date on which (A) the Buyers
      shall have sold all the Securities and (B) none of the Convertible Notes or
      Warrants are outstanding (the “Registration
      Period”),
      the
      Company shall file in a timely manner all reports required to be filed with
      the
      SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
      and
      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.

     

    (d) Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Convertible Notes for general
      corporate and working capital purposes.

     

    (e) Reservation
      of Shares.
      On the
      date hereof, the Company shall reserve for issuance to the Buyers 12,195,122
      shares for issuance upon conversions of the Convertible Notes and 3,850,000
      shares for issuance upon 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 Notes and
      the full exercise of the Warrants. If at any time the Share Reserve is
      insufficient to effect the full conversion of the Convertible Notes 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 sixty (60)
      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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (f) 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. 

     

    (g) Fees
      and Expenses.
      

     

    (i) Each
      of
      the Company and the Buyer(s) shall pay all costs and expenses incurred by such
      party in connection with the negotiation, investigation, preparation, execution
      and delivery of the Transaction Documents. The Company shall pay Yorkville
      Advisors LLC (“Yorkville”) an original issue discount equal to ten percent (10%)
      of the Purchase Price. Eight percent (8%) of this fee shall be payable in cash,
      pro rata directly from the gross proceeds of each Closing; and two percent
      (2%)
      shall be payable to Cornell Capital Partners, L.P. in shares of the company’s
      Common Stock valued at the Fixed Conversion Price as that term is used in the
      Convertible Notes (the “Compensation
      Shares”),
      pro
      rata at the date of each Closing. 

     

    (ii) The
      Company shall pay a structuring fee to Yorkville Advisors LLC of Thirty Thousand
      Dollars ($30,000), which shall be paid directly from the proceeds of the First
      Closing. 

     

    (h) Corporate
      Existence.
      So long
      as any of the Convertible Notes remain outstanding, 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 4(h) will thereafter be applicable
      to
      the Convertible Notes.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (i) Transactions
      With Affiliates.
      So long
      as any Convertible Notes are outstanding, the Company shall not, and shall
      cause
      each of its subsidiaries not to, enter into, amend, modify or supplement, or
      permit any subsidiary to enter into, amend, modify or supplement any agreement,
      transaction, commitment, or arrangement with any of its or any subsidiary’s
      officers, directors, person who were officers or directors at any time during
      the previous two (2) years, stockholders who beneficially own five percent
      (5%)
      or more of the Common Stock, or Affiliates (as defined below) or with any
      individual related by blood, marriage, or adoption to any such individual or
      with any entity in which any such entity or individual owns a five percent
      (5%)
      or more beneficial interest (each a “Related
      Party”),
      except for (a) customary employment arrangements and benefit programs on
      reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
      agreement, transaction, commitment, or arrangement on an arms-length basis
      on
      terms no less favorable than terms which would have been obtainable from a
      person other than such Related Party, (d) any agreement, transaction,
      commitment, or arrangement which is approved by a majority of the disinterested
      directors of the Company; for purposes hereof, any director who is also an
      officer of the Company or any subsidiary of the Company shall not be a
      disinterested director with respect to any such agreement, transaction,
      commitment, or arrangement. “Affiliate”
for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
      interest in that person or entity, (ii) has ten percent (10%) or more common
      ownership with that person or entity, (iii) controls that person or entity,
      or
      (iv) shares common control with that person or entity. “Control”
or
      “controls”
for
      purposes hereof means that a person or entity has the power, direct or indirect,
      to conduct or govern the policies of another person or entity.

     

    (j) 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).

     

    (k) Restriction
      on Issuance of the Capital Stock.
      Other
      than Excluded Securities, so long as any Convertible Notes are outstanding,
      the
      Company shall not, without the prior written consent of the Buyer(s), (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 it’s issuance, (iii) enter into any security instrument granting the
      holder a security interest in any and all assets of the Company, or (iv) file
      any registration statement on Form S-8, except
      in
      connection with the registration of Common Stock issued pursuant to a bona
      fide
      Approved Stock Plan up to a maximum of 10,000,000 shares of Common
      Stock.

     

    (l) Neither
      the Buyer(s) nor any of its affiliates have an open short position in the Common
      Stock of the Company, and the Buyer(s) 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 Notes
      shall remain outstanding. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (m) Rights
      of First Refusal.
      From
      the date of the First Closing until twenty-four (24) months thereafter,
if
      the
      Company intends to raise additional capital by the issuance or sale of capital
      stock of the Company, including without limitation shares of any class of common
      stock, any class of preferred stock, options, warrants or any other securities
      convertible or exercisable into shares of common stock (whether the offering
      is
      conducted by the Company, underwriter, placement agent or any third party)
      the
      Company shall be obligated to offer to the Buyers such issuance or sale of
      capital stock, by providing in writing the principal amount of capital it
      intends to raise and outline of the material terms of such capital raise, prior
      to the offering such issuance or sale of capital stock  to any third
      parties including, but not limited to, current or former officers or directors,
      current or former shareholders and/or investors of the obligor, underwriters,
      brokers, agents or other third parties.  The Buyers shall have ten (10)
      business days from receipt of such notice of the sale or issuance of capital
      stock to accept or reject all or a portion of such capital raising offer.

     

    (n) Additional
      Registration Statements.
      Until
      the effective date of the initial Registration Statement, the Company will
      not
      file a registration statement under the Securities Act relating to securities
      that are not the Securities, other than on Form S-8, with the consent of the
      Buyer(s) which shall not be unreasonably withheld.

     

    (o) Review
      of Public Disclosures.
      All SEC
      filings (including, without limitation, all filings required under the Exchange
      Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
      public disclosures made by the Company, including, without limitation, all
      press
      releases, investor relations materials, and scripts of analysts meetings and
      calls, shall be reviewed and approved for release by the Company’s attorneys
      and, if containing financial information, the Company’s independent certified
      public accountants.

     

    (p) Disclosure
      of Transaction.
      Within
      four business days following the date of this Agreement, the Company shall
      file
      a Current Report on SEC 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 (including, without
      limitation, this Agreement, the form of the Convertible Debenture, the form
      of
      Warrant and the form of the Registration Rights Agreement) as exhibits to such
      filing.

     

    5. TRANSFER
      AGENT INSTRUCTIONS.

     

    (a) The
      Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
      agent, and any subsequent transfer agent, irrevocably appointing David Gonzalez,
      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 Deposity
      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
      Convertible Notes or exercise of the Warrants as specified from time to time
      by
      each Buyer to the Company upon conversion of the Convertible Notes 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 5, and
      stop
      transfer instructions to give effect to Section 2(g) hereof (in the case of
      the
      Conversion Shares or Warrant Shares prior to registration of such shares under
      the Securities Act) 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 2(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 transfer agent shall issue such Securities to the
      Buyer, assignee or transferee, as the case may be, without any restrictive
      legend. Nothing in this Section 5 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 5 will be inadequate and agrees, in the event of a breach
      or
      threatened breach by the Company of the provisions of this Section 5, that
      the Buyer(s) 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.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    6. CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.

     

    The
      obligation of the Company hereunder to issue and sell the Convertible Notes
      to
      the Buyer(s) at the Closings is subject to the satisfaction, at or before the
      Closing Dates, of each of the following conditions, provided that these
      conditions are for the Company’s sole benefit and may be waived by the Company
      at any time in its sole discretion:

     

    (a) Each
      Buyer shall have executed the Transaction Documents and delivered them to the
      Company.

     

    (b) The
      Buyer(s) shall have delivered to the Company the Purchase Price for the
      Convertible Notes and Warrants in the respective amounts as set forth next
      to
      each Buyer as set forth on Schedule I attached hereto, minus any fees to be
      paid
      directly from the proceeds the Closings as set forth herein, by wire transfer
      of
      immediately available U.S. funds pursuant to the wire instructions provided
      by
      the Company.

     

    (c) The
      representations and warranties of the Buyer(s) shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Dates as though
      made at that time (except for representations and warranties that speak as
      of a
      specific date), and the Buyer(s) shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Buyer(s)
      at or
      prior to the Closing Dates. 

     

    7. CONDITIONS
      TO THE BUYER’S OBLIGATION TO PURCHASE.

     

    (a) The
      obligation of the Buyer(s) hereunder to purchase the Convertible Notes at the
      First Closing is subject to the satisfaction, at or before the First Closing
      Date, of each of the following conditions:

     

    (i) The
      Company shall have executed the Transaction Documents and delivered the same
      to
      the Buyers.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (ii) The
      Common Stock shall be authorized for quotation or trading on the Primary Market,
      trading in the Common Stock shall not have been suspended for any reason, and
      all the Conversion Shares issuable upon the conversion of the Convertible Notes
      shall be approved for listing or trading on the Primary Market. 

     

    (iii) The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except to the extent that any of such representations and
      warranties is already qualified as to materiality in Section 3 above, in which
      case, such representations and warranties shall be true and correct without
      further qualification) as of the date when made and as of the First Closing
      Date
      as though made at that time (except for representations and warranties that
      speak as of a specific date) and the Company shall have performed, satisfied
      and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Company at or prior to the First Closing Date

     

    (iv) The
      Company shall have executed and delivered to the Buyer(s) the Convertible Notes
      and Warrants in the respective amounts set forth opposite each Buyer’s name on
      Schedule I attached hereto.

     

    (v) The
      Buyers shall have received an opinion of counsel from counsel to the Company
      in
      a form satisfactory to the Buyers.

     

    (vi) The
      Company shall have provided to the Buyers a true copy of a certificate of good
      standing evidencing the formation and good standing of the Company from the
      secretary of state (or comparable office) from the jurisdiction in which the
      Company is incorporated, as of a date within 10 days of the First Closing
      Date.

     

    (vii) The
      Company shall have delivered to the Buyers a certificate, executed by the
      Secretary of the Company and dated as of the First Closing Date, as to (i)
      the
      resolutions consistent with Section 3(c) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the First
      Closing.

     

    (viii) The
      Company shall have filed a form UCC-1 or such other forms as may be required
      to
      perfect the Buyer’s interest in the Pledged Property as detailed in the Security
      Agreement dated the date hereof and provided proof of such filing to the
      Buyer(s).

     

    (ix) The
      Company shall have provided to the Buyer an acknowledgement, to the satisfaction
      of the Buyer, from the Company’s independent certified public accountants as to
      its ability to provide all consents required in order to file a registration
      statement in connection with this transaction.

     

    (x) The
      Company shall have created the Share Reserve. 

     

    (xi) The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to
      the Buyer, shall have been delivered to and acknowledged in writing by the
      Company’s transfer agent.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (b) The
      obligation of the Buyer(s) hereunder to accept the Convertible Notes at the
      Second Closing is subject to the satisfaction, at or before the Second Closing
      Date, of each of the following conditions:

     

    (i) The
      Common Stock shall be authorized for quotation or trading on the Primary Market,
      trading in the Common Stock shall not have been suspended for any reason, and
      all the Conversion Shares issuable upon the conversion of the Convertible Notes
      shall be approved for listing or trading on the Primary Market. 

     

    (ii) The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except to the extent that any of such representations and
      warranties is already qualified as to materiality in Section 3 above, in which
      case, such representations and warranties shall be true and correct without
      further qualification) as of the date when made and as of the Second Closing
      Date as though made at that time (except for representations and warranties
      that
      speak as of a specific date) and the Company shall have performed, satisfied
      and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Company at or prior to the Second Closing Date. 

     

    (iii) The
      Company shall have executed and delivered to the Buyers the Convertible Notes
      in
      the respective amounts set forth opposite each Buyers name on Schedule I
      attached hereto.

     

    (iv) The
      Company shall have filed, or certify that it will file on the Second Closing
      Date, the Registration Statement with the SEC materially in compliance with
      the
      rules and regulations promulgated by the SEC for filing thereof.

     

    (v) The
      Company shall have certified, in a certificate executed by two officers of
      the
      Company and dated as of the Second Closing Date, that all conditions to the
      Second Closing have been satisfied.

     

    8. INDEMNIFICATION.

     

    (a) In
      consideration of the Buyer’s execution and delivery of this Agreement and
      acquiring the Convertible Notes and the Conversion Shares hereunder, and in
      addition to all of the Company’s other obligations under this Agreement, the
      Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
      each
      other holder of the Convertible Notes and the Conversion Shares, and all of
      their officers, directors, employees and agents (including, without
      limitation, those retained in connection with the transactions contemplated
      by
      this Agreement) (collectively, the “Buyer
      Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Buyer Indemnitee is a party to the action
      for
      which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
      Liabilities”),
      incurred by the Buyer Indemnitees or any of them as a result of, or arising
      out
      of, or relating to (a) any misrepresentation or breach of any representation
      or
      warranty made by the Company in this Agreement, the Convertible Notes or the
      other Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, (b) any breach of any covenant, agreement or
      obligation of the Company contained in this Agreement, or the other Transaction
      Documents or any other certificate, instrument or document contemplated hereby
      or thereby, or (c) any cause of action, suit or claim brought or made against
      such Buyer Indemnitee and arising out of or resulting from the execution,
      delivery, performance or enforcement of this Agreement or any other instrument,
      document or agreement executed pursuant hereto by any of the parties hereto,
      any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Convertible Notes or the
      status of the Buyer or holder of the Convertible Notes the Conversion Shares,
      as
      a Buyer of Convertible Notes in the Company. To the extent that the foregoing
      undertaking by the Company may be unenforceable for any reason, the Company
      shall make the maximum contribution to the payment and satisfaction of each
      of
      the Indemnified Liabilities, which is permissible under applicable
      law.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b) In
      consideration of the Company’s execution and delivery of this Agreement, and in
      addition to all of the Buyer’s other obligations under this Agreement, the Buyer
      shall defend, protect, indemnify and hold harmless the Company and all of its
      officers, directors, employees and agents (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the “Company
      Indemnitees”)
      from
      and against any and all Indemnified Liabilities incurred by the Indemnitees
      or
      any of them as a result of, or arising out of, or relating to (a) any
      misrepresentation or breach of any representation or warranty made by the
      Buyer(s) in this Agreement, instrument or document contemplated hereby or
      thereby executed by the Buyer, (b) any breach of any covenant, agreement or
      obligation of the Buyer(s) contained in this Agreement, the Transaction
      Documents or any other certificate, instrument or document contemplated hereby
      or thereby executed by the Buyer, or (c) any cause of action, suit or claim
      brought or made against such Company Indemnitee based on material
      misrepresentations or due to a material breach and arising out of or resulting
      from the execution, delivery, performance or enforcement of this Agreement,
      the
      Transaction Documents or any other instrument, document or agreement executed
      pursuant hereto by any of the parties hereto. To the extent that the foregoing
      undertaking by each Buyer may be unenforceable for any reason, each Buyer shall
      make the maximum contribution to the payment and satisfaction of each of the
      Indemnified Liabilities, which is permissible under applicable law.

     

    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 Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson 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.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (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:

            	
              TXP
                Corporation 

            
	 	
              1299
                Commerce Drive

            
	 	
              Richardson,
                Texas 75081

            
	 	
              Attention:
                Michael Shores

            
	 	
              Telephone:
                (214) 575-9300

            
	 	
              Facsimile:
                (214) 575-9314

            
	 	 
	
              With
                a copy to:

            	
              Sichenzia
                Ross Friedman Ference LLP

            
	 	
              61
                Broadway, 32nd
                Floor

            
	 	
              New
                York, New York 10006

            
	 	
              Attention:
                Gregory Sichenzia, Esq.

            
	 	
              Telephone:
                (212) 930-9700

            
	 	
              Facsimile:
                (212) 930-9725

            

    

     

    If
      to the
      Buyer(s), 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.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (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
      provision hereof be enforced by, any other person.

     

    (i) Survival.
      Unless
      this Agreement is terminated under Section 9(l), the representations and
      warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
      agreements and covenants set forth in Sections 4, 5 and 9, and the
      indemnification provisions set forth in Section 8, shall survive the Closing
      for
      a period of two (2) years following the date on which the Convertible Notes
      are
      converted in full. The Buyer(s) shall be responsible only for its own
      representations, warranties, agreements and covenants hereunder.

     

    (j) Publicity.
      The
      Company and the Buyer(s) shall have the right to approve, before issuance any
      press release or any other public statement with respect to the transactions
      contemplated hereby made by any party; provided, however, that the Company
      shall
      be entitled, without the prior approval of the Buyer(s), to issue any press
      release or other public disclosure with respect to such transactions required
      under applicable securities or other laws or regulations (the Company shall
      use
      its best efforts to consult the Buyer(s) in connection with any such press
      release or other public disclosure prior to its release and Buyer(s) shall
      be
      provided with a copy thereof upon release thereof).

     

    (k) 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.

     

    (l) Termination.
      In the
      event that the First Closing shall not have occurred with respect to the Buyers
      on or before five (5) business days from the date hereof due to the Company’s or
      the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
      above (and the non-breaching party’s failure to waive such unsatisfied
      condition(s)), the non-breaching party shall have the option to terminate this
      Agreement with respect to such breaching party at the close of business on
      such
      date without liability of any party to any other party; provided, however,
      that
      if this Agreement is terminated by the Company pursuant to this Section 9(l),
      the Company shall remain obligated to reimburse the Buyer(s) for the fees and
      expenses of Yorkville Advisors LLC described in Section 4(g) above.

     

    (m) Brokerage.
      The
      Company represents that no broker, agent, finder or other party has been
      retained by it in connection with the transactions contemplated hereby and
      that
      no other fee or commission has been agreed by the Company to be paid for or
      on
      account of the transactions contemplated hereby. 

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    (n) No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    [REMAINDER
      PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

    
      	 	 	 
	 	
              COMPANY:

            
	 	
              TXP
                CORPORATION  

            
	 
 	 
 	 
 
	
            	By:  	/s/ Michael
              C. Shores
	 	
              

              Name: Michael
                C. Shores

            
	 	
              Title: Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

    
      	 	 	 
	 	
              BUYERS:

            
	 	
              CORNELL
                CAPITAL PARTNERS, L.P.  

            
	 	 
	 	
              By:
                Yorkville
                Advisors, LLC

            
	 	
              Its: Investment
                Manager 

            
	 
 	 
 	 
 
	
            	By:  	/s/ 
Mark
              Angelo
	 	
              

              Name: Mark
                Angelo

            
	 	
              Its: Portfolio
                Manager

            

    

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

     

    SCHEDULE
      OF BUYERS

     

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            	 	
              (6)

            	 	
              (7)

            	 	
              (8)

            	 
	
              Buyer
                

            	
               

            	
              Subscription
                Amount

            	
               

            	
              Number
                of Warrant Shares

            	
               

            	
               

            	
               

            	
               

            	
               

            	
              Legal
                Representative’s Address and Facsimile Number

            	
               

            
	
               

            	
               

            	
              First
                Closing

            	
               

            	
              Second
                Closing

            	
               

            	
              (RESERVED)

            	
               

            	
              First
                Closing

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Cornell
                Capital Partners, L.P.

               

              101
                Hudson Street, Suite 3700

              Jersey
                City, NJ 07303

              Attention:
                Mark Angelo

              Telephone:
                (201) 985-8300

              Facsimile:
                (201) 985-8266

              Residence:
                Cayman Islands

            	 	
              $

            	
              4,000,000

            	 	
              $

            	
              1,000,000

            	 	 	 	 	 	
              1,500,000
                @$0.60

              1,000,000
                @$0.75

              750,000
                @$0.85

              600,000
                @$1.00

              
              

               

              (all
                warrants to have a term of five (5) years)

            	
              
              

               

            	 	 	 	 	 	 	 	
              Troy
                Rillo or David Gonzalez, Esq.

              101
                Hudson Street, Suite 3700

              Jersey
                City, New Jersey 07302 

              Telephone:
                (201) 985-8300 

              Facsimile:
                (201) 985-8266Dated:
      March 30, 2007

     

    NEITHER
      THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
      REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS.

    

      
        	
                No.
                  TXP-2-1

              	
                $4,000,000

              

      

    

     

    TXP
      CORPORATION

     

    Secured
      Convertible Note

     

    Due:
      March 30, 2010

     

    This
      Secured Convertible Note (the “Note”)
      is
      issued by TXP
      CORPORATION, a
      Nevada
      corporation (the “Company”),
      to
CORNELL
      CAPITAL PARTNERS, LP
      (the
“Holder”),
      pursuant to that certain Securities Purchase Agreement (the “Securities
      Purchase Agreement”)
      dated
      March 30, 2007. 

     

    FOR
      VALUE RECEIVED,
      the
      Company hereby promises to pay to the Holder or its successors and assigns
      the
      principal sum of Four Million Dollars ($4,000,000) together with accrued but
      unpaid interest on or before March 30, 2010 (the “Maturity
      Date”)
      in
      accordance with the following terms:

     

    Section
      1. General
      Terms

     

    (a) Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to six percent (6%). Interest shall be calculated on the basis of
      a
      365-day year and the actual number of days elapsed, to the extent permitted
      by
      applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner
      as provided herein) to the Holder or its assignee in whose name this Note is
      registered on the records of the Company regarding registration and transfers
      of
      Notes in cash or in Common Stock (valued at the Closing Bid Price on the Trading
      Day immediately prior to the date paid) at the option of the Company.

     

    (b)  Security.
      The
      Note
is
      secured by a security interest in certain assets of the Company, including
      intellectual property and rights to intellectual property, as evidenced by
      the
      Security Agreement of even date herewith (the “Security
      Agreement”).
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Monthly
      Payments.
      Beginning on the date that is the twelve (12) month anniversary of the date
      hereof, the Company shall make monthly payments of interest, and beginning
      on
      the date that is the eighteen (18) month anniversary of the date hereof, the
      Company shall make monthly payments of interest plus principal payments in
      the
      amount of One Hundred Thousand Dollars ($100,000) (such payments shall be
      referred to as “Scheduled
      Payments”).
      After
      the first Scheduled Payment, each subsequent Scheduled Payment shall be due
      and
      payable on the same day of each subsequent calendar month until the Maturity
      Date. All payments in respect of the indebtedness evidenced hereby shall be
      made
      in collected funds, and shall be applied to principal, accrued interest and
      charges and expenses owing under or in connection with this Note in such order
      as the Holder elects, except that payments shall be applied to accrued interest
      before principal. Notwithstanding the foregoing, this Note shall become due
      and
      immediately payable, including all accrued but unpaid interest, upon an Event
      of
      Default (as defined in Section
      2
      hereof).
      Notwithstanding any provision of this Section 1(c) to the contrary, the Holder
      may, at its option and in its sole discretion, deliver a written notice to
      the
      Company at least two (2) days prior to any Scheduled Payment due date electing
      to have the payment of all or any portion of Scheduled Payment payable on the
      next Scheduled Payment due date deferred to the Maturity Date. Any amount
      deferred to the Maturity Date pursuant to this Section shall continue to accrue
      interest through the Maturity Date. In the event that the Company redeems a
      portion of the principal amount outstanding under this Note, the Company shall
      be entitled to an off-set to the amount of principal due pursuant to the next
      Schedule Payment equal to the amount of principal redeemed or converted (the
      “Off-Set
      Amount”).
      In
      such event the Company shall be obligated to make the next Scheduled Payment
      reduced by any Off-Set Amount as contemplated hereunder. 

     

    Section
      2. Events
      of Default.

     

    (a) An
      “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

     

    (i) Any
      default in the payment of the principal of, interest on or other charges in
      respect of this Note, free of any claim of subordination, as and when the same
      shall become due and payable whether upon an Optional Redemption (as defined
      in
Section
      3(a)),
      the
      Maturity Date, by acceleration, or otherwise;

     

    (ii) The
      Company or any subsidiary of the Company shall commence, or there shall be
      commenced against the Company or any subsidiary of the Company under any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Company or any subsidiary of the Company commences
      any
      other proceeding under any reorganization, arrangement, adjustment of debt,
      relief of debtors, dissolution, insolvency or liquidation or similar law of
      any
      jurisdiction whether now or hereafter in effect relating to the Company or
      any
      subsidiary of the Company or there is commenced against the Company or any
      subsidiary of the Company any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 61 days; or the Company or any
      subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
      of
      relief or other order approving any such case or proceeding is entered; or
      the
      Company or any subsidiary of the Company suffers any appointment of any
      custodian, private or court appointed receiver or the like for it or any
      substantial part of its property which continues undischarged or unstayed for
      a
      period of sixty one (61) days; or the Company or any subsidiary of the Company
      makes a general assignment for the benefit of creditors; or the Company or
      any
      subsidiary of the Company shall fail to pay, or shall state that it is unable
      to
      pay, or shall be unable to pay, its debts generally as they become due; or
      the
      Company or any subsidiary of the Company shall call a meeting of its creditors
      with a view to arranging a composition, adjustment or restructuring of its
      debts; or the Company or any subsidiary of the Company shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Company
      or any subsidiary of the Company for the purpose of effecting any of the
      foregoing;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (iii) The
      Company or any subsidiary of the Company shall default in any of its obligations
      under any other debenture or any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which there
      may be issued, or by which there may be secured or evidenced any indebtedness
      for borrowed money or money due under any long term leasing or factoring
      arrangement of the Company or any subsidiary of the Company in an amount
      exceeding $100,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable;

     

    (iv) The
      Common Stock shall cease to be quoted for trading or listing for trading on
      any
      of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq
      National Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin
      Board (“OTC”)
      (each,
      a “Primary
      Market”)
      and
      shall not again be quoted or listed for trading on any Primary Market within
      five (5) Trading Days of such delisting;

     

    (v) The
      Company or any subsidiary of the Company shall be a party to any Change of
      Control Transaction (as defined in Section
      6);
      

     

    (vi) The
      Company shall fail to file the Underlying Shares Registration Statement (as
      defined in Section
      6)
      with
      the Commission (as defined in Section
      6),
      or the
      Underlying Shares Registration Statement shall not have been declared effective
      by the Commission, in each case within the time periods set forth in the
      Investor Registration Rights Agreement (“Registration
      Rights Agreement”)
      of
      even date herewith, between the Company and the Holder;

     

    (vii) If
      the
      effectiveness of the Underlying Shares Registration Statement lapses for any
      reason or the Holder shall not be permitted to resell the shares of Common
      Stock
      underlying this Note under the Underlying Shares Registration Statement, in
      either case, for more than five (5) consecutive Trading Days or an aggregate
      of
      eight Trading Days (which need not be consecutive Trading Days);

     

    (viii) The
      Company shall fail for any reason to deliver Common Stock certificates to a
      Holder prior to the fifth (5th)
      Trading
      Day after a Conversion Date, or the Company shall provide notice to the Holder,
      including by way of public announcement, at any time, of its intention not
      to
      comply with requests for conversions in accordance with the terms hereof;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (ix) The
      Company shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within three (3) days after notice is claimed
      delivered hereunder; 

     

    (x) The
      Company shall fail to observe or perform any other covenant, agreement or
      warranty contained in, or otherwise commit any breach or default of any
      provision of this Note (except as may be covered by Section
      2(a)(i) through 2(a)(ix)
      hereof)
      or any Transaction Document (as defined in Section
      6)
      which
      is not cured with in the time prescribed, or an Event of Default under any
      other
      debenture issued to the Holder in connection with the Securities Purchase
      Agreement shall occur;

     

    (b) During
      the time that any portion of this Note is outstanding, if any Event of Default
      has occurred and
      shall
      continue for a period of ten (10) days after a notice of such default has been
      delivered by the Holder to the Obligor (the “Notice
      Period”),
      the
      full principal amount of this Note, together with interest and other amounts
      owing in respect thereof, to the date of acceleration shall become at the
      Holder's election, immediately due and payable in cash, provided
      however,
      the
      Holder may request (but shall have no obligation to request) payment of such
      amounts in Common Stock of the Company. If an Event of Default shall occur
      the
      Conversion Price shall be reduced to twenty percent (20%) of the lowest Volume
      Weighted Average Price, as quoted by Bloomberg, LP, of the Common Stock during
      the thirty (30) trading days immediately preceding the date upon which the
      Event
      of Default occurred (the “Default
      Conversion Price”),
      provided however, that the Default Conversion Price may not be lower than $0.10,
      as adjusted pursuant to this Note. Furthermore, in addition to any other
      remedies, the Holder shall have the right (but not the obligation) to convert
      this Note at any time after (x) an Event of Default or (y) the Maturity Date
      at
      the Conversion Price then in-effect. The Holder need not provide and the Company
      hereby waives any presentment, demand, protest or other notice of any kind,
      and
      the Holder may immediately and without expiration of any grace period enforce
      any and all of its rights and remedies hereunder and all other remedies
      available to it under applicable law. Such declaration may be rescinded and
      annulled by Holder at any time prior to payment hereunder. No such rescission
      or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon. Except with respect to the limitation set forth in Section
      4(b)(i) hereof upon an Event of Default, notwithstanding any other provision
      of
      this Note or any Transaction Document, the Holder shall have no obligation
      to
      comply with or adhere to any limitations, if any, on the conversion of this
      Note
      or the sale of the Underlying Shares. 

     

    Section
      3. Redemptions.

     

    (a) Company’s
      Optional Cash Redemption.
      The
      Company at its option shall have the right to redeem (“Optional
      Redemption”)
      a
      portion or all amounts outstanding under this Note prior to the Maturity Date
      provided
      that
      as of
      the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i)
      the Closing Bid Price of the of the Common Stock, as reported by Bloomberg,
      LP,
      is less than the Conversion Price, (ii) the Underlying Share Registration
      Statement is effective, and (iii) no Event of Default has occurred. The Company
      shall pay an amount equal to the principal amount being redeemed plus a
      redemption premium (“Redemption
      Premium”)
      equal
      to twenty percent (20%) of the principal amount being redeemed, and accrued
      interest, (collectively referred to as the “Redemption
      Amount”).
      In
      order to make a redemption, the Company shall first provide written notice
      to
      the Holder of its intention to make a redemption (the “Redemption
      Notice”)
      setting forth the amount of principal it desires to redeem. After receipt of
      the
      Redemption Notice the Holder shall have three (3) business days to elect to
      convert all or any portion of this Note, subject to the limitations set forth
      in
Section
      4(b).
      On the
      fourth (4th)
      business day after the Redemption Notice, the Company shall deliver to the
      Holder the Redemption Amount with respect to the principal amount redeemed
      after
      giving effect to conversions effected during the three (3) business day period.
      

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      4. Conversion.

     

    (a) Conversion
      at Option of Holder.

     

    (i) This
      Note
      shall be convertible into shares of Common Stock at the option of the Holder,
      in
      whole or in part at any time and from time to time, after the Original Issue
      Date (as defined in Section
      6)
      (subject to the limitations on conversion set forth in Section
      4(b)
      hereof).
      The number of shares of Common Stock issuable upon a conversion hereunder equals
      the quotient obtained by dividing (x) the outstanding amount of this Note to
      be
      converted by (y) the Conversion Price (as defined in Section
      4(c)(i)).
      The
      Company shall deliver Common Stock certificates to the Holder prior to the
      Fifth
      (5th)
      Trading
      Day after a Conversion Date.

     

    (ii) Notwithstanding
      anything to the contrary contained herein, if on any Conversion Date: (1) the
      number of shares of Common Stock at the time authorized, unissued and unreserved
      for all purposes, or held as treasury stock, is insufficient to pay principal
      and interest hereunder in shares of Common Stock; (2) the Common Stock is not
      listed or quoted for trading on the a Primary Market; or (3) the Company has
      failed to timely satisfy a conversion; then, at the option of the Holder, the
      Company, in lieu of delivering shares of Common Stock pursuant to Section
      4(a)(i),
      shall
      deliver, within three (3) Trading Days of each applicable Conversion Date,
      an
      amount in cash equal to the product of the outstanding principal amount to
      be
      converted divided by the applicable Conversion Price, and multiplied by the
      highest Closing Bid Price of the stock from date of the conversion notice till
      the date that such cash payment is made.

     

    Further,
      if the Company shall not have delivered any cash due in respect of conversion
      of
      this Note by the fifth (5th)
      Trading
      Day after the Conversion Date, the Holder may, by notice to the Company, require
      the Company to issue shares of Common Stock pursuant to Section
      4(c),
      except
      that for such purpose the Conversion Price applicable thereto shall be the
      lesser of the Conversion Price on the Conversion Date and the Conversion Price
      on the date of such Holder demand. Any such shares will be subject to the
      provisions of this Section.

     

    (iii) The
      Holder shall effect conversions by delivering to the Company a completed notice
      in the form attached hereto as Exhibit A (a “Conversion
      Notice”).
      The
      date on which a Conversion Notice is delivered is the “Conversion
      Date.”
Unless
      the Holder is converting the entire principal amount outstanding under this
      Note, the Holder is not required to physically surrender this Note to the
      Company in order to effect conversions. Conversions hereunder shall have the
      effect of lowering the outstanding principal amount of this Note plus all
      accrued and unpaid interest thereon in an amount equal to the applicable
      conversion. The Holder and the Company shall maintain records showing the
      principal amount converted and the date of such conversions. In the event of
      any
      dispute or discrepancy, the records of the Holder shall be controlling and
      determinative in the absence of manifest error.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b) Certain
      Conversion Restrictions.

     

    (i) The
      Company shall not effect any conversions of this Note and the Holder shall
      not
      have the right to convert any portion of this Note or receive shares of Common
      Stock as payment of interest hereunder to the extent that after giving effect
      to
      such such conversion or receipt of such interest payment, the Holder, together
      with any affiliate thereof, would beneficially own (as determined in accordance
      with Section 13(d) of the Exchange Act and the rules promulgated thereunder)
      in
      excess of 4.99% of the number of shares of Common Stock outstanding immediately
      after giving effect to such conversion or receipt of shares as payment of
      interest. Since the Holder will not be obligated to report to the Company the
      number of shares of Common Stock it may hold at the time of a conversion
      hereunder, unless the conversion at issue would result in the issuance of shares
      of Common Stock in excess of 4.99% of the then outstanding shares of Common
      Stock without regard to any other shares which may be beneficially owned by
      the
      Holder or an affiliate thereof, the Holder shall have the authority and
      obligation to determine whether the restriction contained in this Section will
      limit any particular conversion hereunder and to the extent that the Holder
      determines that the limitation contained in this Section applies, the
      determination of which portion of the principal amount of this Note is
      convertible shall be the responsibility and obligation of the Holder. If the
      Holder has delivered a Conversion Notice for a principal amount of this Note
      that, without regard to any other shares that the Holder or its affiliates
      may
      beneficially own, would result in the issuance in excess of the permitted amount
      hereunder, the Company shall notify the Holder of this fact and shall honor
      the
      conversion for the maximum principal amount permitted to be converted on such
      Conversion Date in accordance with the periods described in Section
      4(a)(i)
      and, any
      principal amount tendered for conversion in excess of the permitted amount
      hereunder shall remain outstanding under this Note. The provisions of this
      Section may be waived by a Holder (but only as to itself and not to any other
      Holder) upon not less than 65 days prior notice to the Company. Other Holders
      shall be unaffected by any such waiver.

     

    (ii)
      (RESERVED) 

     

    (c) Conversion
      Price and Adjustments to Conversion Price.

     

    (i) The
      conversion price in effect on any Conversion Date shall be equal to $0.41 per
      share (the “Conversion
      Price”).
      In
      the event that the Company has not raised at least One Million Dollars
      ($1,000,000) in additional equity capital between the date of the First Closing
      and the date that is one hundred twenty (120) days after the date of the First
      Closing (the “Equity Requirement Date”), the Conversion Price shall
      automatically become $0.25 per share, effective the first Business Day after
      the
      Equity Requirement Date. The Conversion Price may be adjusted pursuant to the
      terms of this Note.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (ii) If
      the
      Company, at any time while this Note is outstanding, shall (a) pay a stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
      a
      larger number of shares, (c) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (d)
      issue
      by reclassification of shares of the Common Stock any shares of capital stock
      of
      the Company, then the Conversion Price shall be multiplied by a fraction of
      which the numerator shall be the number of shares of Common Stock (excluding
      treasury shares, if any) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding after
      such
      event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification.

     

    (iii) If
      the
      Company, at any time while this Note is outstanding, shall issue rights, options
      or warrants to all holders of Common Stock (and not to the Holder) entitling
      them to subscribe for or purchase shares of Common Stock at a price per share
      less than the Conversion Price, then the Conversion Price shall be multiplied
      by
      a fraction, of which the denominator shall be the number of shares of the Common
      Stock (excluding treasury shares, if any) outstanding on the date of issuance
      of
      such rights or warrants (plus the number of additional shares of Common Stock
      offered for subscription or purchase), and of which the numerator shall be
      the
      number of shares of the Common Stock (excluding treasury shares, if any)
      outstanding on the date of issuance of such rights or warrants, plus the number
      of shares which the aggregate offering price of the total number of shares
      so
      offered would purchase at the Conversion Price. Such adjustment shall be made
      whenever such rights or warrants are issued, and shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such rights, options or warrants. However, upon the expiration of
      any
      such right, option or warrant to purchase shares of the Common Stock the
      issuance of which resulted in an adjustment in the Conversion Price pursuant
      to
      this Section, if any such right, option or warrant shall expire and shall not
      have been exercised, the Conversion Price shall immediately upon such expiration
      be recomputed and effective immediately upon such expiration be increased to
      the
      price which it would have been (but reflecting any other adjustments in the
      Conversion Price made pursuant to the provisions of this Section after the
      issuance of such rights or warrants) had the adjustment of the Conversion Price
      made upon the issuance of such rights, options or warrants been made on the
      basis of offering for subscription or purchase only that number of shares of
      the
      Common Stock actually purchased upon the exercise of such rights, options or
      warrants actually exercised.

     

    (iv) If
      the
      Company or any subsidiary thereof, as applicable, at any time while this Note
      is
      outstanding, shall issue shares of Common Stock or rights, warrants, options
      or
      other securities or debt that are convertible into or exchangeable for shares
      of
      Common Stock (“Common
      Stock Equivalents”)
      entitling any Person to acquire shares of Common Stock, at a price per share
      less than the Conversion Price (if the holder of the Common Stock or Common
      Stock Equivalent so issued shall at any time, whether by operation of purchase
      price adjustments, reset provisions, floating conversion, exercise or exchange
      prices or otherwise, or due to warrants, options or rights per share which
      is
      issued in connection with such issuance, be entitled to receive shares of Common
      Stock at a price per share which is less than the Conversion Price, such
      issuance shall be deemed to have occurred for less than the Conversion Price),
      then, at the sole option of the Holder, the Conversion Price shall be adjusted
      to mirror the conversion, exchange or purchase price for such Common Stock
      or
      Common Stock Equivalents (including any reset provisions thereof) at issue.
      Such
      adjustment shall be made whenever such Common Stock or Common Stock Equivalents
      are issued. The Company shall notify the Holder in writing, no later than one
      (1) business day following the issuance of any Common Stock or Common Stock
      Equivalent subject to this Section, indicating therein the applicable issuance
      price, or of applicable reset price, exchange price, conversion price and other
      pricing terms. No adjustment under this Section shall be made as a result of
      issuances of Excluded Securities.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (v) If
      the
      Company, at any time while this Note is outstanding, shall distribute to all
      holders of Common Stock (and not to the Holder) evidences of its indebtedness
      or
      assets or rights or warrants to subscribe for or purchase any security, then
      in
      each such case the Conversion Price at which this Note shall thereafter be
      convertible shall be determined by multiplying the Conversion Price in effect
      immediately prior to the record date fixed for determination of stockholders
      entitled to receive such distribution by a fraction of which the denominator
      shall be the Closing Bid Price determined as of the record date mentioned above,
      and of which the numerator shall be such Closing Bid Price on such record date
      less the then fair market value at such record date of the portion of such
      assets or evidence of indebtedness so distributed applicable to one outstanding
      share of the Common Stock as determined by the Board of Directors in good faith.
      In either case the adjustments shall be described in a statement provided to
      the
      Holder of the portion of assets or evidences of indebtedness so distributed
      or
      such subscription rights applicable to one share of Common Stock. Such
      adjustment shall be made whenever any such distribution is made and shall become
      effective immediately after the record date mentioned above.

     

    (vi) In
      case
      of any reclassification of the Common Stock or any compulsory share exchange
      pursuant to which the Common Stock is converted into other securities, cash
      or
      property, the Holder shall have the right thereafter to, at its option, (A)
      convert the then outstanding principal amount, together with all accrued but
      unpaid interest and any other amounts then owing hereunder in respect of this
      Note into the shares of stock and other securities, cash and property receivable
      upon or deemed to be held by holders of the Common Stock following such
      reclassification or share exchange, and the Holder of this Note shall be
      entitled upon such event to receive such amount of securities, cash or property
      as the shares of the Common Stock of the Company into which the then outstanding
      principal amount, together with all accrued but unpaid interest and any other
      amounts then owing hereunder in respect of this Note could have been converted
      immediately prior to such reclassification or share exchange would have been
      entitled, or (B) require the Company to prepay the outstanding principal amount
      of this Note, plus all interest and other amounts due and payable thereon.
      The
      entire prepayment price shall be paid in cash. This provision shall similarly
      apply to successive reclassifications or share exchanges.

     

    (vii) Whenever
      the Conversion Price is adjusted pursuant to Section
      4
      hereof,
      the Company shall promptly mail to the Holder a notice setting forth the
      Conversion Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (viii) If
      (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Company is a party, any sale or transfer of all or substantially all of
      the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; or (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company; then, in each case, the Company shall cause to
      be
      filed at each office or agency maintained for the purpose of conversion of
      this
      Note, and shall cause to be mailed to the Holder at its last address as it
      shall
      appear upon the stock books of the Company, at least twenty (20) calendar days
      prior to the applicable record or effective date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution, redemption, rights or warrants, or if a record is not
      to
      be taken, the date as of which the holders of the Common Stock of record to
      be
      entitled to such dividend, distributions, redemption, rights or warrants are
      to
      be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange, provided, that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to convert this Note during the 20-day
      calendar period commencing the date of such notice to the effective date of
      the
      event triggering such notice.

     

    (ix) In
      case
      of any (1) merger or consolidation of the Company or any subsidiary of the
      Company with or into another Person, or (2) sale by the Company or any
      subsidiary of the Company of more than one-half of the assets of the Company
      in
      one or a series of related transactions, a Holder shall have the right to (A)
      exercise any rights under Section
      2(b),
      (B)
      convert the aggregate amount of this Note then outstanding into the shares
      of
      stock and other securities, cash and property receivable upon or deemed to
      be
      held by holders of Common Stock following such merger, consolidation or sale,
      and such Holder shall be entitled upon such event or series of related events
      to
      receive such amount of securities, cash and property as the shares of Common
      Stock into which such aggregate principal amount of this Note could have been
      converted immediately prior to such merger, consolidation or sales would have
      been entitled, or (C) in the case of a merger or consolidation, require the
      surviving entity to issue to the Holder a convertible note with a principal
      amount equal to the aggregate principal amount of this Note then held by such
      Holder, plus all accrued and unpaid interest and other amounts owing thereon,
      which such newly issued convertible Note shall have terms identical (including
      with respect to conversion) to the terms of this Note, and shall be entitled
      to
      all of the rights and privileges of the Holder of this Note set forth herein
      and
      the agreements pursuant to which this Notes were issued. In the case of clause
      (C), the conversion price applicable for the newly issued shares of convertible
      preferred stock or convertible Notes shall be based upon the amount of
      securities, cash and property that each share of Common Stock would receive
      in
      such transaction and the Conversion Price in effect immediately prior to the
      effectiveness or closing date for such transaction. The terms of any such
      merger, sale or consolidation shall include such terms so as to continue to
      give
      the Holder the right to receive the securities, cash and property set forth
      in
      this Section upon any conversion or redemption following such event. This
      provision shall similarly apply to successive such events.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (d) Other
      Provisions.

     

    (i) The
      Company shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under this Note; and within three (3) Business Days
      following the receipt by the Company of a Holder's notice that such minimum
      number of Underlying Shares is not so reserved, the Company shall promptly
      reserve a sufficient number of shares of Common Stock to comply with such
      requirement.

     

    (ii) All
      calculations under this Section
      4
      shall be
      rounded up to the nearest $0.0001 or whole share.

     

    (iiii) The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of this Note and payment of interest on this Note,
      each
      as herein provided, free from preemptive rights or any other actual contingent
      purchase rights of persons other than the Holder, not less than such number
      of
      shares of the Common Stock as shall (subject to any additional requirements
      of
      the Company as to reservation of such shares set forth in this Note or in the
      Transaction Documents) be issuable (taking into account the adjustments and
      restrictions set forth herein) upon the conversion of the outstanding principal
      amount of this Note and payment of interest hereunder. The Company covenants
      that all shares of Common Stock that shall be so issuable shall, upon issue,
      be
      duly and validly authorized, issued and fully paid, nonassessable and, if the
      Underlying Shares Registration Statement has been declared effective under
      the
      Securities Act, registered for public sale in accordance with such Underlying
      Shares Registration Statement.

     

    (iv) Upon
      a
      conversion hereunder the Company shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock, but may
      if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the Closing Bid Price at such time. If the Company elects not,
      or
      is unable, to make such a cash payment, the Holder shall be entitled to receive,
      in lieu of the final fraction of a share, one whole share of Common
      Stock.

     

    (v) The
      issuance of certificates for shares of the Common Stock on conversion of this
      Note shall be made without charge to the Holder thereof for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificate, provided that the Company shall not be required to pay
      any
      tax that may be payable in respect of any transfer involved in the issuance
      and
      delivery of any such certificate upon conversion in a name other than that
      of
      the Holder of such Note so converted and the Company shall not be required
      to
      issue or deliver such certificates unless or until the person or persons
      requesting the issuance thereof shall have paid to the Company the amount of
      such tax or shall have established to the satisfaction of the Company that
      such
      tax has been paid.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (vi) Nothing
      herein shall limit a Holder's right to pursue actual damages or declare an
      Event
      of Default pursuant to Section
      2
      herein
      for the Company 's failure to deliver certificates representing shares of Common
      Stock upon conversion within the period specified herein and such Holder shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief, in each case without the need to post a bond or provide
      other
      security. The exercise of any such rights shall not prohibit the Holder from
      seeking to enforce damages pursuant to any other Section hereof or under
      applicable law. 

     

    (vii) In
      addition to any other rights available to the Holder, if the Company fails
      to
      deliver to the Holder such certificate or certificates pursuant to Section
      4(a)(i) by
      the
      fifth (5th)
      Trading
      Day after the Conversion Date, and if after such fifth (5th)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by such Holder of the Underlying
      Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
      then
      the Company shall (A) pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (x) the Holder's
      total purchase price (including brokerage commissions, if any) for the Common
      Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
      of Common Stock that such Holder anticipated receiving from the conversion
      at
      issue multiplied by (2) the market price of the Common Stock at the time of
      the
      sale giving rise to such purchase obligation and (B) at the option of the
      Holder, either reissue a Note in the principal amount equal to the principal
      amount of the attempted conversion or deliver to the Holder the number of shares
      of Common Stock that would have been issued had the Company timely complied
      with
      its delivery requirements under Section
      4(a)(i).
      For
      example, if the Holder purchases Common Stock having a total purchase price
      of
      $11,000 to cover a Buy-In with respect to an attempted conversion of Notes
      with
      respect to which the market price of the Underlying Shares on the date of
      conversion was a total of $10,000 under clause (A) of the immediately preceding
      sentence, the Company shall be required to pay the Holder $1,000. The Holder
      shall provide the Company written notice indicating the amounts payable to
      the
      Holder in respect of the Buy-In.

     

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

            	 	
              TXP
                Corporation 

            
	 	 	
              1299
                Commerce Drive

            
	 	 	
              Richardson,
                Texas 75081

            
	 	 	
              Attention:
                Michael Shores

            
	 	 	
              Telephone:
                (214) 575-9300

            
	 	 	
              Facsimile:
                (214) 575-9314

            
	 	 	 
	
              With
                a copy to: 

            	 	
              Sichenzia
                Ross Friedman Ference LLP

            
	 	 	
              61
                Broadway, 32nd
                Floor

            
	 	 	
              New
                York, New York 10006

            
	 	 	
              Attention:
                Gregory Sichenzia, Esq.

            
	 	 	
              Telephone:
                (212) 930-9700

            
	 	 	
              Facsimile:
                (212) 930-9725

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Holder:

            	 	
              Cornell
                Capital Partners, LP

            
	 	 	
              101
                Hudson Street, Suite 3700

            
	 	 	
              Jersey
                City, NJ 07303

            
	 	 	
              Attention: Mark
                Angelo

            
	 	 	
              Telephone: (201)
                985-8300

            
	 	 	 
	
              With
                a copy to:

            	 	
              Troy
                Rillo, Esq. or David Gonzalez, Esq.. 

            
	 	 	
              101
                Hudson Street - Suite 3700

            
	 	 	
              Jersey
                City, NJ 07302

            
	 	 	
              Telephone: (201)
                985-8300

            
	 	 	
              Facsimile: (201)
                985-8266

            
	 	 	 

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) business days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    Section
      6. Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

     

    “Approved
      Stock Plan”
means
      a
      stock or stock option plan that has been or will be approved by the Board of
      Directors of the Company pursuant to which the Company’s securities may be
      issued to any employee, officer, director or consultant for services provided
      to
      the Company.

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions are
      authorized or required by law or other government action to close.

     

    “Change
      of Control Transaction”
means
      the occurrence of (a) an acquisition after the date hereof by an individual
      or
      legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
      Exchange Act) of effective control (whether through legal or beneficial
      ownership of capital stock of the Company, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Company (except
      that the acquisition of voting securities by the Holder shall not constitute
      a
      Change of Control Transaction for purposes hereof), (b) a replacement at one
      time or over time of more than one-half of the members of the board of directors
      of the Company which is not approved by a majority of those individuals who
      are
      members of the board of directors on the date hereof (or by those individuals
      who are serving as members of the board of directors on any date whose
      nomination to the board of directors was approved by a majority of the members
      of the board of directors who are members on the date hereof), (c) the merger,
      consolidation or sale of fifty percent (50%) or more of the assets of the
      Company or any subsidiary of the Company in one or a series of related
      transactions with or into another entity, or (d) the execution by the Company
      of
      an agreement to which the Company is a party or by which it is bound, providing
      for any of the events set forth above in (a), (b) or (c).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    “Closing
      Bid Price”
means
      the price per share in the last reported trade of the Common Stock on a Primary
      Market or on the exchange which the Common Stock is then listed as quoted by
      Bloomberg, LP.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock, par value $.001, of the Company and stock of any other class
      into which such shares may hereafter be changed or reclassified.

     

    “Conversion
      Date”
shall
      mean the date upon which the Holder gives the Company notice of their intention
      to effectuate a conversion of this Note into shares of the Company’s Common
      Stock as outlined herein.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Excluded
      Securities”
means,
      (a) shares issued or deemed to have been issued by the Company pursuant to
      an
      Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued
      by
      the Company upon the conversion, exchange or exercise of any right, option,
      obligation or security outstanding on the date prior to date of the Securities
      Purchase Agreement, provided that the terms of such right, option, obligation
      or
      security are not amended or otherwise modified on or after the date of the
      Securities Purchase Agreement, and provided that the conversion price, exchange
      price, exercise price or other purchase price is not reduced, adjusted or
      otherwise modified and the number of shares of Common Stock issued or issuable
      is not increased (whether by operation of, or in accordance with, the relevant
      governing documents or otherwise) on or after the date of the Securities
      Purchase Agreement, (c) the shares of Common Stock issued or deemed to be
      issued by the Company upon conversion of this Note, (d) any
      issuance by the Company of securities in connection with a strategic partnership
      or a joint venture (the primary purpose of which is not to raise equity
      capital), (e) any issuance by the Company of securities as consideration for
      a
      merger or consolidation or the acquisition of a business, product, license,
      or
      other assets of another person or entity, (f)
      securities which may be issued by the Company for aggregate gross proceeds
      not
      to exceed Two Million Dollars ($2,000,000) from sources other than the Buyer(s)
      in the next six (6) months from the date hereof.

     

    “Original
      Issue Date”
shall
      mean the date of the first issuance of this Note regardless of the number of
      transfers and regardless of the number of instruments, which may be issued
      to
      evidence such Note.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Trading
      Day”
means
      a
      day on which the shares of Common Stock are quoted on the OTC or quoted or
      traded on such Primary Market on which the shares of Common Stock are then
      quoted or listed; provided, that in the event that the shares of Common Stock
      are not listed or quoted, then Trading Day shall mean a Business
      Day.

     

    “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Security Agreement, the Irrevocable Transfer Agent Instructions, and the
      Registration Rights Agreement.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of this Note or as payment
      of interest in accordance with the terms hereof.

     

    “Underlying
      Shares Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement, covering among other things the resale of the Underlying
      Shares and naming the Holder as a “selling stockholder” thereunder.

     

    Section
      7. Except
      as
      expressly provided herein, no provision of this Note shall alter or impair
      the
      obligations of the Company, which are absolute and unconditional, to pay the
      principal of, interest and other charges (if any) on, this Note at the time,
      place, and rate, and in the coin or currency, herein prescribed. This Note
      is a
      direct obligation of the Company. This Note ranks pari passu with all other
      Notes now or hereafter issued under the terms set forth herein. As long as
      this
      Note is outstanding, the Company shall not and shall cause their subsidiaries
      not to, without the consent of the Holder, (i) amend its certificate of
      incorporation, bylaws or other charter documents so as to adversely affect
      any
      rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase
      or
      otherwise acquire shares of its Common Stock or other equity securities other
      than as to the Underlying Shares to the extent permitted or required under
      the
      Transaction Documents; or (iii) enter into any agreement with respect to any
      of
      the foregoing. 

     

    Section
      8. This
      Note
      shall not entitle the Holder to any of the rights of a stockholder of the
      Company, including without limitation, the right to vote, to receive dividends
      and other distributions, or to receive any notice of, or to attend, meetings
      of
      stockholders or any other proceedings of the Company, unless and to the extent
      converted into shares of Common Stock in accordance with the terms
      hereof.

     

    Section
      9. If
      this
      Note is mutilated, lost, stolen or destroyed, the Company shall execute and
      deliver, in exchange and substitution for and upon cancellation of the mutilated
      Note, or in lieu of or in substitution for a lost, stolen or destroyed Note,
      a
      new Note for the principal amount of this Note so mutilated, lost, stolen or
      destroyed but only upon receipt of evidence of such loss, theft or destruction
      of such Note, and of the ownership hereof, and indemnity, if requested, all
      reasonably satisfactory to the Company.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
      10. No
      indebtedness of the Company is senior to this Note in right of payment, whether
      with respect to interest, damages or upon liquidation or dissolution or
      otherwise. Without the Holder’s consent, the Company will not and will not
      permit any of their subsidiaries to, directly or indirectly, enter into, create,
      incur, assume or suffer to exist any indebtedness of any kind, on or with
      respect to any of its property or assets now owned or hereafter acquired or
      any
      interest therein or any income or profits there from that is senior in any
      respect to the obligations of the Company under this Note.

     

    Section
      11. This
      Note
      shall be governed by and construed in accordance with the laws of the State
      of
      New Jersey, without giving effect to conflicts of laws thereof. Each of the
      parties consents to the jurisdiction of the Superior Courts of the State of
      New
      Jersey sitting in Hudson County, New Jersey and the U.S. District Court for
      the District of New Jersey sitting in Newark, New Jersey in connection with
      any
      dispute arising under this Note and hereby waives, to the maximum extent
      permitted by law, any objection, including any objection based on forum non conveniens
      to the
      bringing of any such proceeding in such jurisdictions. 

     

    Section
      12. If
      the
      Company fails to strictly comply with the terms of this Note, then the Company
      shall reimburse the Holder promptly for all fees, costs and expenses, including,
      without limitation, attorneys’ fees and expenses incurred by the Holder in any
      action in connection with this Note, including, without limitation, those
      incurred: (i) during any workout, attempted workout, and/or in connection with
      the rendering of legal advice as to the Holder’s rights, remedies and
      obligations, (ii) collecting any sums which become due to the Holder, (iii)
      defending or prosecuting any proceeding or any counterclaim to any proceeding
      or
      appeal; or (iv) the protection, preservation or enforcement of any rights or
      remedies of the Holder.

     

    Section
      13. Any
      waiver by the Holder of a breach of any provision of this Note shall not operate
      as or be construed to be a waiver of any other breach of such provision or
      of
      any breach of any other provision of this Note. The failure of the Holder to
      insist upon strict adherence to any term of this Note on one or more occasions
      shall not be considered a waiver or deprive that party of the right thereafter
      to insist upon strict adherence to that term or any other term of this Note.
      Any
      waiver must be in writing.

     

    Section
      14. If
      any
      provision of this Note is invalid, illegal or unenforceable, the balance of
      this
      Note shall remain in effect, and if any provision is inapplicable to any person
      or circumstance, it shall nevertheless remain applicable to all other persons
      and circumstances. If it shall be found that any interest or other amount deemed
      interest due hereunder shall violate applicable laws governing usury, the
      applicable rate of interest due hereunder shall automatically be lowered to
      equal the maximum permitted rate of interest. The Company covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist upon,
      plead, or in any manner whatsoever claim or take the benefit or advantage of,
      any stay, extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on
      this Note as contemplated herein, wherever enacted, now or at any time hereafter
      in force, or which may affect the covenants or the performance of this
      indenture, and the Company (to the extent it may lawfully do so) hereby
      expressly waives all benefits or advantage of any such law, and covenants that
      it will not, by resort to any such law, hinder, delay or impeded the execution
      of any power herein granted to the Holder, but will suffer and permit the
      execution of every such as though no such law has been enacted.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Section
      15. Whenever
      any payment or other obligation hereunder shall be due on a day other than
      a
      Business Day, such payment shall be made on the next succeeding Business
      Day.

     

    Section
      16. This
      Note
      is exchangeable for an equal aggregate principal amount of Notes of different
      authorized denominations, as requested by the Holder surrendering the same.
      No
      service charge will be made for such registration of transfer or
      exchange.

     

    Section
      17. THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    [REMAINDER
      OF PAGE INTENTIONLLY LEFT BLANK]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Secured Convertible Note to be duly executed by a duly
      authorized officer as of the date set forth above.

    
      	 	 	 
	 	
              COMPANY:

              
                TXP
                  CORPORATION 

              

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Michael C.
              Shores
	 	
              

              Name: Michael
                C. Shores

            
	 	
              Title: Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    CONVERSION
      NOTICE

     

    (To
      be executed by the Holder in order to Convert the Note)

     

    
      	
              TO:
                

            

    

    

    The
      undersigned hereby irrevocably elects to convert $     
      of the
      principal amount of Note No. TXP-2-1 into Shares of Common Stock of TXP
      CORPORATION,
      according to the conditions stated therein, as of the Conversion Date written
      below.

     

    
      	
              Conversion
                Date:

            	 	 	         

	
              Amount
                to be converted:

            	 	$	        

	
              Conversion
                Price:

            	 	$	        

	
              Number
                of shares of Common Stock to be issued:

            	 	 	          
              
	
              Amount
                of Note Unconverted:

            	 	$	              
              
	 	 	 	 
	
              Please
                issue the shares of Common Stock in the following name and to the
                following address:

            
	
              Issue
                to:

            	 	 	 
	 	 	 	 
	
              Authorized
                Signature:

            	 	 	      

	
              Name:

            	 	 	        

	
              Title:

            	 	 	          
              
	
              Broker
                DTC Participant Code:

            	 	 	 
	
              Account
                Number:

            	 	 	 

    

    

    
      
        
        

      

      
        18

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