Mr. Michael C Shores Chief Executive Officer TXP Corporation Richardson, TX 75081 August 20, 2008 Mr. Mark Angelo Yorkville Advisors, LLC Jersey City, NJ 07302 Dear Mark:
Xx.
Xxxxxxx X Xxxxxx
Chief
Executive Officer
TXP
Corporation
0000
Xxxxxxxx Xxxxx
Richardson,
TX 75081
August
20, 2008
Xx.
Xxxx
Xxxxxx
Yorkville
Advisors, LLC
000
Xxxxxx Xxxxxx, Xxxxx 0000
Jersey
City, NJ 07302
Dear
Xxxx:
This
letter agreement (“Agreement”) confirms the understanding and agreement between
TXP Corporation (“TXP”), a Nevada Corporation, Yorkville Advisors, LLC and YA
Global Investments, LP (collectively, “Yorkville”).
Pursuant
to our discussions at your offices on July 23, 2008, TXP is in advanced
negotiations to consummate a merger with Cambridge Industries Group (“CIG”), a
Cayman Islands and Hong Kong private concern with primary operations in
Shanghai, China. As discussed, a merger with CIG may allow TXP to realize
operational cost savings sufficient to take its loss-making ONT business to
break-even, and potentially achieve long-term profitability. As a precondition
to any merger, CIG has made it clear that TXP’s balance sheet must be
“cleaned-up” and has specifically required that TXP redeem its outstanding
convertible notes and debentures which have been issued by TXP to Yorkville
and
other term loans which have been issued by Yorkville to TXP (collectively,
the
“Debt”) and remove some or all of the dilutive overhang on its shares from
Yorkville’s warrant position in TXP.
Upon
the
terms and conditions of this Agreement, TXP desires to repay a significant
portion of the Debt and amend Yorkville’s warrants and Yorkville desires to
accept such repayment and amendments to its warrants. TXP has negotiated an
agreement to raise $15,000,000 in equity capital at a fixed valuation of not
less than $0.10 per share, with a one-time reset based on an EBITDA milestone
in
the 4rth quarter of 2009 (the “Financing”), subject to consummation of the
agreements with Yorkville set forth in this Agreement. Yorkville hereby consents
to TXP’s consummating the Financing on terms substantially the same as described
above provided that such Financing is closed within 100 days from the date
hereof. Simultaneously upon the consummation of the Financing in accordance
with
the terms and time frame set forth above, the parties shall agree as follows:
1.
The
Transaction shall consist of six parts:
a.
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TXP
will redeem all outstanding Debt issued by Yorkville to TXP at par
plus
accrued interest as of the date of redemption, without a redemption
premium, in two traunches as described
below:
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i.
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TXP
shall pay to Yorkville $7.5 million upon the closing of the Financing
(the
“Partial Redemption”).
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ii.
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The
remaining principal plus accrued interest shall be exchange for a
non-convertible 2-year term note with a 10% coupon; which shall be
subordinate to the working capital financing describe in iv
below.
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iii.
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Xxxxxxxxx
agrees to relinquish all warrant issuance rights tied to the redemption
or
retirement of any of its Debt
instruments.
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iv.
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Yorkville
agrees to accept the company’s continued use of its senior, secured
working capital finance (A/R, A/P and Inventory).
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b.
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Yorkville
will retain its existing 9,616,681 shares of TXP common stock (the
“Existing Shares”) and accepts restriction on the future sale of the
Existing Shares, effective upon receipt by Yorkville of the Partial
Redemption, as follows:
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i.
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Yorkville
agrees to limit its sales of the Existing Shares on a daily basis
to no
more than the number of shares equal to the trailing 60 day average
daily
volume of TXP’s common stock.
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ii.
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Notwithstanding
the forgoing, Yorkville may sell portions of the Existing Shares
in block
trades of 500,000 shares or larger.
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c.
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Effective
upon receipt by Yorkville of the Partial Redemption, Yorkville will
relinquish 10,850,000 of its 20,850,000 warrants to purchase shares
of TXP
common stock for $0.20, which forfeited warrants will be cancelled
by TXP
upon their return. TXP will re-price the remaining 10,000,000 warrants
to
the lower of (i) $0.10 or (ii) same price as the lowest conversion
price,
conversion ratio, or exercise price of the securities issued in the
Financing. Yorkville will permanently waive all remaining anti-dilution
provisions on the remaining warrants, except that it shall be entitled
to
anti-dilution and reset provisions consistent with those contained
in the
securities issued in the Financing (such as a reset based on a
4th
quarter 2009 EBITDA milestone) pursuant to which the exercise price
of the
warrants shall be reduced if the effective conversion price of such
securities is reduced.
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d.
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Yorkville
will relinquish all of its rights of first refusal on future financing
transactions of TXP for any transactions or borrowing needs of TXP.
Yorkville will retain a right of participation proportionate with
its
equity position in TXP on future financing rounds but will waive
this
right in the current round.
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e.
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Yorkville
will relinquish all of its registration rights and rights to liquidated
damages.
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f.
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Yorkville
will vote any residual equity position in TXP following this agreement
in
support of the merger with CIG if recommended by management, unless
Yorkville determines that voting in accordance with management’s
recommendation would adversely affect the investment merits of owning
the
stock.
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2.
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In
connection with that certain Common Stock Purchase Option (the “Option”)
granted by Xxxxxxx Xxxxxx to Yorkville, Yorkville agrees that, provided
no
event of default has occurred under the financing arrangements provided
by
Yorkville to TXP, Yorkville will refrain from exercising any shares
underlying the Option for a period of 100 days from the date hereof
(the
“Expiration Date”). Provided that TXP completes the Financing on the terms
set forth herein on or before the Expiration Date and repays at least
$7,500,000 of its obligations owed to Yorkville, Yorkville shall
return
the Option to Xx. Xxxxxx, which Option will be cancelled, and
simultaneously TXP shall issue to Yorkville 11,000,000 restricted
shares
of its common stock.
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3.
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Each
party will pay its own costs and expenses incurred in carrying out
the
agreements set forth herein and Yorkville will not assess any fees
on any
of the individual elements of the agreements described in Paragraph
1(a)
through 1(f).
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4.
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Effective
upon the payment in full of all the Debt, the parties will release
and
hold harmless each other and all of their respective officers, directors
and stockholders, from all claims, causes of action, demands, costs,
expenses or other obligations (collectively, “Claims”)
that any they may individually or collectively have as of the date
hereof
against each other and/or their respective officers, directors or
stockholders.
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5.
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Yorkville
and TXP agree to keep confidential all information whether oral or
written
pertaining to the agreements contemplated herein except for such
information (a) that is already or becomes public through no breach
of
this provision, (b) that either company is required to disclose by
applicable law, regulation, or legal process, or (c) that TXP and
Yorkville mutually agree may be disclosed, provided however, TXP
agrees
that nothing herein shall limit the ability of Yorkville managed
investment vehicles to engage in purchases and sales of TXP so long
as the
portfolio managers making the investment decisions for such investment
vehicles have not received or been privy to the confidential information
and Yorkville
complies with its internal policies and procedures regarding the
handling
of confidential information in the normal course of its
business.
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6.
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Yorkville
has not waived, and except as set forth herein, is not by this Agreement
waiving, any of its rights under the Debt and related documents and
all
agreements and obligations contained in such documents constitute
binding
obligations of TXP and are enforceable in accordance with their terms.
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7.
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The
invalidity or unenforceability of any provision of this Agreement
shall
not invalidate this entire
agreement.
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8.
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This
Agreement may not be amended or modified except in writing signed
by each
of the parties.
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9.
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This
agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New Jersey without giving effect to
principles of conflicts of law. TXP and Yorkville hereby irrevocably
and
unconditionally consent to submit to the exclusive jurisdiction of
the
courts of the State of New Jersey and of the United States District
Courts
located within the boarders of the State of New Jersey for any lawsuits,
claims or other proceedings arising out of or relating to this agreement
and agree not to commence any such lawsuit, claim or other proceeding
arising out of or relating to this agreement except in such courts.
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TXP
and
Yorkville hereby irrevocably and unconditionally waive any objection to the
laying of venue of any lawsuit, claim or other proceeding arising out of or
relating to this agreement in the courts of the State of New Jersey or the
United States District Courts located within the boarders of the State of New
Jersey, and hereby further irrevocably and unconditionally waive and agree
not
to plead or claim in any such court that any such lawsuit, claim or other
proceeding brought in any such court has been brought in an inconvenient forum.
[Remainder
of this page intentionally left blank]
Please
confirm that the foregoing is in accordance with our understanding by signing
and returning to us the enclosed duplicate of this letter.
AGREED
AND ACCEPTED:
TXP CORPORATION | ||
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By: | /s/ Xxxxxxx X. Xxxxxx | |
Xxxxxxx X. Xxxxxx, CEO |
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Date: August 20,
2008
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YORKVILLE
ADVISORS, LLC
On
behalf of itself and as Investment Manager
for
YA Global Investments, L.P.
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/s/ Xxxx Xxxxxx | |||
Xxxx Xxxxxx, Portfolio Manager |
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Date:
August 20, 2008
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