EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of ________,
2015, by and between ____________ (the “Purchaser”) and Cybergy Holdings, Inc.
(the “Company”).

 

The Purchaser desires to buy, $__________ (the “Purchase Price”) of the
Company’s 5% Senior Secured Convertible Debentures (the “Debenture”) and
____________ shares of the Company’s Common Stock (the “Shares” and, together
with the Debenture, the “Securities”) on the terms and conditions set forth in
this Agreement.

 

The Company and the Purchaser are executing and delivering this Agreement in
reliance upon the provisions of Section 4(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated by
the Commission under the Securities Act, and upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder;

 

In consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

PURCHASE AND SALE OF THE SECURITIES

 

Section 1.1 Purchase and Sale of Securities. Subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, the
Purchaser hereby agrees to purchase the Securities in exchange for the Purchase
Price.

 

Section 1.2 Closing Conditions. The following conditions must be met prior to
closing:

 

(a) the Purchaser has delivered $_________ to the Escrow Agent;

 

(b) the Company has prepared a warrant, in the form of Exhibit A, with a 5-year
term exercisable at any time, for $0.10, subject to adjustment (the “Warrant
Price”), in cash provided a registration statement for the common shares
underlying the warrant is effective and current) or on a cashless basis if and
only if a registration statement for the common shares underlying the warrant is
not effective and current (the “Warrant”); and

 

(c) the Company has amended the certificate of designation for the Company’s
Series C Preferred Stock.

 

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Section 1.3 The Closing. The closing of the purchase and sale of the Securities
under this Agreement (the “Closing Date”) shall take place on a Business Day
when the conditions in Section 1.2 have been satisfied or waived.

 

On the Closing Date, the Escrow Agent shall deliver to:

 

(a) the Purchaser a Debenture for $__________, in the form of Exhibit B, and a
stock certificate representing the Shares either (i) endorsed for transfer to
the Purchaser or (ii) accompanied by an executed stock power sufficient to
transfer such Shares to the Purchaser;

 

(b) the Purchaser a warrant for _________ shares of the Company’s Common Stock;
and

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF COMPANY

 

The Company hereby represents and warrants to the Purchaser and Company as
follows:

 

Section 2.1 Authority and Approvals. The Company has the power and authority to
enter into and perform his obligations under this Agreement, and all action
necessary to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has been duly and
validly taken. The Agreement has been duly and validly executed and delivered by
the Company. Assuming this Agreement constitutes a valid and binding agreement
of the Purchaser, this Agreement constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.

 

Section 2.2 The Securities. Upon transfer of the Securities to the Purchaser at
the Closing against payment of the Purchase Price, the Purchaser will acquire
ownership of the Securities, free and clear of all liens, claims, options,
proxies, voting agreements, charges or encumbrances of any kind affecting the
Securities.

 

Section 2.3 Conflicts. The execution, delivery and performance of this Agreement
will not (i) violate, conflict with, or result in the breach, acceleration,
default or termination of, or otherwise give any other contracting party the
right to terminate, accelerate, modify or cancel any of the terms, provisions,
or conditions of any material agreements or instrument to which the Company is a
party or by which his assets may be bound, or (ii) constitute a violation of any
material applicable law, rule or regulation, or of any judgment, order,
injunctive, award or decree of any court, administrative agency or other
governmental authority applicable to the Company.

 

Section 2.4 Broker’s Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement other than the fees to the Placement
Agent.

 

Section 2.5 Cash Flow. With the proceeds from the Debenture issued pursuant to
this Agreement and other Debentures permitted by Section 5.5, the Company, shall
not be cash flow negative after September 30, 2015 and shall not require any
debt or equity financings prior to the Underwritten Offering.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants to the Company as follows:

 

Section 3.1 Authorization of Agreement. The Purchaser has the power and
authority to enter into and perform its obligations under this Agreement, and
all action necessary on the part of the Purchaser to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby has been duly and validly taken. This Agreement
has been duly and validly executed and delivered by the Purchaser. This
Agreement constitutes a valid and binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms.

 

Section 3.2 Experience; Purchase for Investment; Transfer. The Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Securities and is able financially to bear the risks thereof. The Purchaser
is acquiring the Securities for its own account, for investment only, and not
with a view to, or for sale in connection with, any distribution thereof, nor
with any present intention of distributing or selling the Securities in
violation of applicable law, and the Purchaser has no present or contemplated
agreement, undertaking, arrangement obligation, indebtedness, or commitment
providing for the distribution or sale thereof. The Purchaser acknowledges and
agrees that the Securities have not been registered under the Securities Act and
may not be sold, pledged or otherwise transferred by the Purchaser without
compliance with the registration provisions of the Securities Act or an
exemption therefrom.

 

Section 3.3 Conflicts. The execution, delivery and performance of this Agreement
will not (i) violate, conflict with, or result in the breach, acceleration,
default or termination of, or otherwise give any other contracting party the
right to terminate, accelerate, modify or cancel any of the terms, provisions,
or conditions of the organizational documents of the Purchaser or any material
agreements or instrument to which the Purchaser is a party or by which it or its
assets may be bound, or (ii) constitute a violation of any material applicable
law, rule or regulation, or of any judgment, order, injunctive, award or decree
of any court, administrative agency or other governmental authority applicable
to the Purchaser.

 

Section 3.4 Broker’s Fees. The Purchaser has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.

 

Section 3.5 Information.

 

(a) The Purchaser represents, warrants and acknowledges that it: (a) is a
sophisticated purchaser with respect to the Securities, (b) has adequate
information concerning the Securities, (c) has conducted, to the extent he
deemed necessary, an independent investigation of such matters as, in his
judgment, is necessary for him to make an informed investment decision with
respect to the purchase of the Securities from the Company and (d) has not
relied upon the Company for any investigation into, assessment of, or evaluation
with respect to the purchase of the Securities from the Company.

 

(b) The Purchaser acknowledges that it has been afforded (i) the opportunity to
receive information about the Company and its financial condition, results of
operations, business, properties, management and prospects, and (ii) the
opportunity to ask such questions of, and to receive answers from,
representatives of the Company concerning such information, in each case
sufficient to enable him to evaluate a decision to purchaser the Securities from
the Company.

 

(c) The Purchaser hereby agrees that the Company nor their directors, officers,
partners, stockholders, members, investors, employees, attorneys, agents or
representatives shall have any liability to the Purchaser or its affiliates with
respect to the existence, possession or non-disclosure of any information;

 

(d) The Purchaser hereby represents that it has had the opportunity to consult
with, counsel with respect to the execution and delivery of this Agreement and
has been fully apprised of the consequences of the waivers and releases set
forth in this Section 3.5.

 

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ARTICLE IV

[RESERVED]

 

ARTICLE V

COVENANTS

 

Section 5.1 Lock-Up. The holders of the Company’s Series C Preferred Stock or
securities convertible into the Company’s Series C Preferred Stock shall agree
to a 12-month lock-up and leak-out share sale plan (the “Plan”) administered by
Chardan Capital Markets LLC (the “Placement Agent”). In the absence of
instructions from the majority of the holders of the Series C Preferred Stock,
on an as-converted basis, the share of the Company’s Common Stock to be sold
under the Plan shall not exceed 50% of the Common Stock equivalent of the Series
C Preferred Stock or securities convertible into the Company’s Series C
Preferred Stock administered under the Plan. Further, the Plan shall be subject
to a daily limit of 20% of daily VWAP, except in the event VWAP exceeds 300% of
90-day average VWAP, in which case share sale plan volume shall not exceed 50%
on such day(s). "VWAP" shall mean volume weighted average price per share of the
Company’s Common Stock, as calculated by Bloomberg Financial LP under the
function “VWAP”.

 

Section 5.2 Milestones. The Company shall meet the following milestones:

 

 

1.

The Company shall enter into the Plan with the holders of the Company’s Series C
Preferred Stock or securities convertible into the Company’s Series C Preferred
Stock;

 

 

 

 

2.

On the Closing Date, the Company shall cancel the offering of Series C Shares
and issue a press release announcing cancellation of the sales of Series C
Shares;

 

 

 

 

3.

On the Closing Date, the Company shall issue a press release announcing its
partnership with FireEye;

 

 

 

4.

Within 7 days of the Closing Date, the Company shall issue a press release
announcing SmartFile commercial progress;

 

 

 

 

5.

Within 21 days of the Closing Date, the Company shall issue an additional press
release announcing further SmartFile commercial progress;

 

 

 

 

6.

Within 45 days of the Closing Date, the Company shall issue a press release
announcing that the Company is cash flow positive on a twelve month run rate
basis as of October 1; and

 

 

 

 

7.

Within 60 days of the Closing Date, the Company shall issue a press release
announcing SmartFile commercial progress;

 

 

 

 

8.

Within 75 days of the Closing Date, the Company shall issue an additional press
release announcing further FireEye commercial progress; and

 

 

 

 

9.

Within 75 days, the Company will have its Registration Statement on Form S-1,
filed with the U.S. Securities and Exchange Commission on May 14, 2015, declared
effective

 

 

 

 

10.

Within 90 days of the Closing Date, the Company shall sell shares of its common
stock in an underwritten offering (the “Underwritten Offering”) in an aggregate
amount equal to or greater than $2,500,000 at a price per share equal to the
higher of $0.25 and 30% discount to the 30-day VWAP on the date of the
Underwritten Offering (in conjunction with this milestone #9, the company agrees
that no financings are required or will be pursued prior to completion of the
underwritten offering).

 

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For each milestone that the Company does not achieve, the Company shall issue
_________ shares of the Common Stock to the Purchaser on the date that the
Company misses such milestone; provided, however, if the Company does not
achieve the eighth and tenth milestone listed above, the Company shall issue
__________ shares of the Common Stock to the Purchaser on the date that the
Company misses such milestone. Further, if the Company fails to meet any of the
milestones, the Warrant Price shall be adjusted to the quotient equal to the (i)
original principal amount of the Debenture, divided by (ii) (a) the shares of
Common Stock issuable pursuant to the terms of the Debenture plus (b) the shares
of Common Stock issued for milestones not achieved by the Company.

 

Section 5.3 Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, for each pro-rata
portion of Additional Shares, registered in the name of the Purchaser, upon any
Milestone not achieved by or on the associated Milestone dates.

 

Section 5.4 Placement Agent Fee. The Company shall pay the Placement Agent an
amount, in cash, equal to 4% of the Purchase Price on the Closing Date. The
Company shall issue the Placement Agent _______ shares of the Company’s Common
Stock and a Warrant convertible into ___________ shares of the Company’s Common
Stock.

 

Section 5.5 No Subsequent Financing. The Company shall not issue any new debt
securities or equity securities after the date hereof, other than as a result of
the conversion or exercise of securities existing as of the date hereof or other
Debentures with similar terms on or before September 4, 2015 to investors
arranged by the Placement Agent, prior to the closing of the Underwritten
Offering. If the Company issues any new debt or equity securities, the Debenture
shall be immediately due and payable and the Lead Investor (as defined in the
Voting Agreement) shall acquire the rights under the Voting Agreement, attached
hereto as Exhibit C, shall vest.

 

Section 5.6 Use of Proceeds. The Purchase Price shall be used by the Company for
working capital and shall not be used to repay liabilities other than those
occurring in the ordinary course of business; provided, however, the Purchase
Price may be paid to Neal Goldman for the payment of accrued interest unpaid on
debentures issued by the Company.

 

ARTICLE VI

MISCELLANEOUS

 

Section 6.1 Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement.

 

Section 6.2 Severability. If any provision of this Agreement shall be held
invalid or unenforceable, each other provision hereof shall be given effect to
the extent possible without such invalid or unenforceable provision and to that
extent, the provisions of this Agreement shall be severable.

 

Section 6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) one Business Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto prior
to 5:30 p.m. (New York City time) on a Business Day, with written confirmation
of successful transmission, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the second Business Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

 

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Section 6.4 Modifications, Consents and Waivers. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by each of the parties hereto. Any
party hereto may waive compliance, with respect to any obligations owed to such
party, with any provision of this Agreement. Any waiver hereunder shall be
effective only if made in a writing signed by the party to be charged therewith
and only in the specific instance and for the purpose for which given. No
failure or delay on the part of any party in exercising any right, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any further exercise thereof or the exercise of any other right, power or
privilege.

 

Section 6.5 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of this Agreement), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

Section 6.6 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

 

Section 6.7 Headings. Article and section headings used in this Agreement are
for convenience only and shall not affect the interpretation or construction of
any provision of this Agreement.

 

Section 6.8 Entire Agreement. This Agreement and the Exhibits hereto contain the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter.

 

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IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be
executed as of the date first above written.

 

PURCHASER:  

 

 

 

Name:

 

Title:

 

Address:

 

 

 

 

COMPANY:  

 

 

 

 

 

Name:

Mark Gray

 

Title:

Chief Executive Officer

 

Address:

 

 

 

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EXHIBIT A

 

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CYBERGY
HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

CYBERGY HOLDINGS, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1. Issuance. In consideration of good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Cybergy Holdings, Inc., a
Nevada corporation (“Company”); _________________, its successors and/or
registered assigns (“Holder”), is hereby granted the right to purchase at any
time on or after the Issue Date (as defined below) until the date which is the
fifth anniversary of the Issue Date occurs (the “Expiration Date”), a number of
fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common
stock, par value $0.0001 per share (the “Common Stock”), equal to ____________
shares, as such number may be adjusted from time to time pursuant to the terms
and conditions of Section 4 of this warrant (this “Warrant”). This Warrant is
being issued pursuant to the terms of that certain Securities Purchase Agreement
dated August 27, 2015, to which Company is a party (the “Agreement”). Unless
otherwise indicated herein, capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Agreement. This Warrant was issued to
Holder on August 27, 2015 (the “Issue Date”).

 

1. Exercise of Warrant.

 

1.1. General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to
time commencing on the Issue Date and ending on the Expiration Date. Such
exercise shall be effectuated by submitting to Company (either by delivery to
Company or by email or facsimile transmission) a completed and duly executed
Notice of Exercise substantially in the form attached to this Warrant as Exhibit
A (the “Notice of Exercise”). The date a Notice of Exercise is either faxed,
emailed or delivered to Company shall be the “Exercise Date,” provided that, if
such exercise represents the full exercise of the outstanding balance of this
Warrant, Holder shall tender this Warrant to Company within five (5) Trading
Days thereafter, but only if the Warrant Shares to be delivered pursuant to the
Notice of Exercise have been delivered to Holder as of such date. The Notice of
Exercise shall be executed by Holder and shall indicate (i) the number of
Warrant Shares (as defined below) to be issued pursuant to such exercise, (ii)
the Exercise Price (as defined below) payable for such Warrant Shares, and (iii)
if applicable (as provided below), whether the exercise is a cashless exercise.
At any time the Market Conditions exist, the Company can require the Holder to
submit a Notice of Exercise with an Exercise Date within five (5) Trading Days
of such Notice of Exercise.

 

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(b) At any time prior to the Expiration Date, if a registration statement for
the Warrant Shares is not effective and current, Holder may elect a “cashless”
exercise of this Warrant whereby Holder shall be entitled to receive a number of
Warrant Shares equal to the following formula:

 

 

X =

Y (A-B)

 

 

A

 

 

 

Where:

X = the number of Warrant Shares to be issued to Holder

 

Y = the number of Warrants that the Holder elects to exercise

 

 

A = the Closing Price (at the date of such calculation)

 

 

B = the Exercise Price

 

For the purposes of this Warrant, the following terms shall have the following
meanings:

 

“Bloomberg” shall mean Bloomberg L.P. (or if that service is not then reporting
the relevant information regarding the Common Stock, a comparable reporting
service of national reputation selected by Holder and reasonably acceptable to
Company).

 

“Closing Price” shall mean the 4:00 P.M. last sale price of the Common Stock on
the Principal Market on the relevant Issue Date or Exercise Date, as reported by
Bloomberg for the relevant date.

 

“Exercise Price” shall mean (a) $0.10 per share of Common Stock or (b) if the
Company fails to achieve a milestone described in Section 5.2 of the Securities
Purchase Agreement, the quotient equal to the (i) original principal amount of
the Debenture, divided by (ii) (a) the shares of Common Stock issuable pursuant
to the terms of the Debenture plus (b) the shares of Common Stock issued for
milestones not achieved by the Company, as either (a) or (b) may be adjusted
from time to time pursuant to the terms and conditions of this Warrant.

 

“Market Conditions”shall mean (1) a registration statement for the common shares
underlying the Warrant Shares is effective and current and (2) the Company’s
Common Shares trade above $0.50, as such number may be adjusted from time to
time pursuant to the terms and conditions of Section 4 of this Warrant, for any
20 out of a 30 day trading period.

 

“Principal Market” shall mean the principal market on which the Common Stock is
traded.

 

“Trading Day” means any day during which the Principal Market shall be open for
business.

 

(c) If the Notice of Exercise elects a “cash” exercise, the Exercise Price per
share of Common Stock for the Warrant Shares shall be payable, at the election
of Holder, in cash or by certified or official bank check or by wire transfer in
accordance with instructions provided by Company at the request of Holder.

 

(d) Upon the appropriate payment to Company of the Exercise Price for the
Warrant Shares, Company shall promptly, but in no case later than the date that
is three (3) Trading Days following the date the Exercise Price is paid to
Company (or with respect to a “cashless exercise,” the date that is three (3)
Trading Days following the Exercise Date) (the “Delivery Date”), deliver or
cause Company’s Transfer Agent to deliver the applicable Warrant Shares
electronically via the Deposit/Withdrawal at Custodian system (“DWAC”) to the
account designated by Holder on the Notice of Exercise. If for any reason
Company is not able to so deliver the Warrant Shares via the DWAC system,
Company shall instead, on or before the applicable date set forth above in this
subsection, issue and deliver to Holder or its broker (as designated in the
Notice of Exercise), via reputable overnight courier, a certificate, registered
in the name of Holder or its designee, representing the applicable number of
Warrant Shares. For the avoidance of doubt, Company has not met its obligation
to deliver Warrant Shares within the required timeframe set forth above unless
Holder or its broker, as applicable, has actually received the Warrant Shares
(whether electronically or in certificated form) no later than the close of
business on the latest possible delivery date pursuant to the terms set forth
above.

 

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(e) If Warrant Shares are delivered later than as required under subsection (b)
immediately above, Company agrees to pay, in addition to all other remedies
available to Holder in the Transaction Documents, a late fee equal to the
greater of (i) $200.00 and (ii) 1% of the product of (1) the sum of the number
of shares of Common Stock not issued to Holder on a timely basis and to which
Holder is entitled multiplied by (2) the Closing Price on the Trading Day
immediately preceding the last possible date which Company could have issued
such shares of Common Stock to Holder without violating this Warrant rounded to
the nearest multiple of $100.00 (such resulting amount, the “Warrant Share
Value”) (but in any event the cumulative amount of such late fees for each
exercise shall not exceed 200% of the Warrant Share Value), per Trading Day
until such Warrant Shares are delivered (the “Late Fees”). Company shall pay any
Late Fees incurred under this subsection in immediately available funds upon
demand. Furthermore, in addition to any other remedies which may be available to
Holder, in the event that Company fails for any reason to effect delivery of the
Warrant Shares as required under subsection (b) immediately above, Holder may
revoke all or part of the relevant Warrant exercise by delivery of a notice to
such effect to Company, whereupon Company and Holder shall each be restored to
their respective positions immediately prior to the exercise of the relevant
portion of this Warrant, except that the Late Fees described above shall be
payable through the date notice of revocation or rescission is given to Company.
Finally, as liquidated damages in the event Company fails to deliver any Warrant
Shares to Holder for a period of ninety (90) days from the Delivery Date, Holder
may elect, in its sole discretion, to stop the accumulation of the Late Fees as
of such date and require Company to pay to Holder a cash amount equal to (i) the
total amount of all Late Fees that have accumulated prior to the date of
Holder’s election, plus (ii) the product of the number of Warrant Shares
deliverable to Holder on such date if it were to exercise this Warrant with
respect to the remaining number of Warrant Shares as of such date multiplied by
the Closing Price of the Common Stock on the Delivery Date (the “Cash Settlement
Amount”). At such time that Holder makes an election to require Company to pay
to it the Cash Settlement Amount, such obligation of Company shall be a valid
and binding obligation of Company and shall for all purposes be deemed to be a
debt obligation of Company owed to Holder as of the date it makes such election.
Upon Company’s payment of the Cash Settlement Amount to Holder, the Warrant
shall be deemed to have been satisfied and Holder shall return the original
Warrant to Company for cancellation. In addition, and for the avoidance of
doubt, even if Company could not deliver the number of Warrant Shares
deliverable to Holder if it were to exercise this Warrant with respect to the
remaining number of Warrant Shares on the date of repayment due to the
provisions of Section 1.2, the provisions of Section 1.2 will not apply with
respect to Company’s payment of the Cash Settlement Amount.

 

(f) Holder shall be deemed to be the holder of the Warrant Shares issuable to it
in accordance with the provisions of this Section 2.1 on the Exercise Date.

 

1.2. Ownership Limitation. Notwithstanding anything to the contrary contained in
this Warrant or the other Transaction Documents, if at any time Holder shall or
would be issued shares of Common Stock under any of the Transaction Documents,
but such issuance would cause Holder (together with its affiliates) to own a
number of shares exceeding 9.99% of the number of shares of Common Stock
outstanding on such date (the “Maximum Percentage”), Company must not issue to
Holder shares of Common Stock which would exceed the Maximum Percentage. The
shares of Common Stock issuable to Holder that would cause the Maximum
Percentage to be exceeded are referred to herein as the “Ownership Limitation
Shares”. Company will reserve the Ownership Limitation Shares for the exclusive
benefit of Holder. From time to time, Holder may notify Company in writing of
the number of the Ownership Limitation Shares that may be issued to Holder
without causing Holder to exceed the Maximum Percentage. Upon receipt of such
notice, Company shall be unconditionally obligated to immediately issue such
designated shares to Holder, with a corresponding reduction in the number of the
Ownership Limitation Shares. By written notice to Company, Holder may increase,
decrease or waive the Maximum Percentage as to itself but any such waiver will
not be effective until the 61st day after delivery thereof. The foregoing 61-day
notice requirement is enforceable, unconditional and non-waivable and shall
apply to all affiliates and assigns of Holder.

 

2. Mutilation or Loss of Warrant. Upon receipt by Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, Company will execute and deliver to Holder a new
Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated
Warrant shall thereupon become void.

 

3. Rights of Holder. Holder shall not, by virtue of this Warrant alone, be
entitled to any rights of a stockholder in Company, either at law or in equity,
and the rights of Holder with respect to or arising under this Warrant are
limited to those expressed in this Warrant and are not enforceable against
Company except to the extent set forth herein.

 

  10

 

  

4. Protection Against Dilution and Other Adjustments.

 

4.1. Capital Adjustments. If Company shall at any time prior to the expiration
of this Warrant subdivide the Common Stock, by split-up or stock split, or
otherwise, or combine its Common Stock, or issue additional shares of its Common
Stock as a dividend, the number of Warrant Shares issuable upon the exercise of
this Warrant shall forthwith be automatically increased proportionately in the
case of a subdivision, split or stock dividend, or proportionately decreased in
the case of a combination. Appropriate adjustments shall also be made to the
Exercise Price and other applicable amounts, but the aggregate purchase price
payable for the total number of Warrant Shares purchasable under this Warrant
(as adjusted) shall remain the same. Any adjustment under this Section 5.1 shall
become effective automatically at the close of business on the date the
subdivision or combination becomes effective, or as of the record date of such
dividend, or in the event that no record date is fixed, upon the making of such
dividend.

 

4.2. Reclassification, Reorganization and Consolidation. In case of any
reclassification, capital reorganization, or change in the capital stock of
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 5.1 above), then Company shall make appropriate
provision so that Holder shall have the right at any time prior to the
expiration of this Warrant to purchase, at a total price equal to that payable
upon the exercise of this Warrant, the kind and amount of shares of stock and
other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares of Common Stock as were purchasable by Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of Holder so
that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the purchase price per
Warrant Share payable hereunder, provided the aggregate purchase price shall
remain the same.

 

4.3. Notice of Adjustment. Without limiting any other provision contained
herein, when any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of this Warrant, or in the Exercise Price,
pursuant to the terms hereof, Company shall promptly notify Holder of such event
and of the number of Warrant Shares or other securities or property thereafter
purchasable upon exercise of this Warrant.

 

5. Certificate as to Adjustments. In each case of any adjustment or readjustment
in the shares of Common Stock issuable on the exercise of this Warrant, Company
at its expense will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Exercise Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such adjustment or
readjustment and as adjusted or readjusted as provided in this Warrant. Company
will forthwith mail a copy of each such certificate to Holder and any Warrant
Agent (as defined below) appointed pursuant to Section 8 hereof. Nothing in this
Section 6 shall be deemed to limit any other provision contained herein.

 

6. Transfer to Comply with the Securities Act. This Warrant, and the Warrant
Shares, have not been registered under the 1933 Act. None of the Warrant Shares
may be sold, transferred, pledged or hypothecated without (a) an effective
registration statement under the 1933 Act relating to such security or (b) an
opinion of counsel reasonably satisfactory to Company that registration is not
required under the 1933 Act; provided, however, that the foregoing restrictions
on transfer shall not apply to the transfer of any security to an affiliate of
Holder. Until such time as registration has occurred under the 1933 Act, each
certificate for this Warrant and any Warrant Shares shall contain a legend, in
form and substance satisfactory to counsel for Company, setting forth the
restrictions on transfer contained in this Section 7. Any such transfer shall be
accompanied by a transferor assignment substantially in the form attached to
this Warrant as Exhibit B (the “Transferor Assignment”), executed by the
transferor and the transferee and submitted to Company. Upon receipt of the duly
executed Transferor Assignment, Company shall register the transferee thereon as
the new holder on the books and records of Company and such transferee shall be
deemed a “registered holder” or “registered assign” for all purposes hereunder,
and shall have all the rights of Holder.

 

  11

 

  

7. Warrant Agent. Company may, by written notice to Holder, appoint an agent (a
“Warrant Agent”) for the purpose of issuing shares of Common Stock on the
exercise of this Warrant pursuant hereto, exchanging this Warrant pursuant
hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such Warrant Agent.

 

8. Transfer on Company’s Books. Until this Warrant is transferred on the books
of Company, Company may treat Holder as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.

 

9. Notices. Any notice required or permitted hereunder shall be given in the
manner provided in the subsection titled “Notices” in the Purchase Agreement,
the terms of which are incorporated herein by reference.

 

10. Supplements and Amendments; Whole Agreement. This Warrant may be amended or
supplemented only by an instrument in writing signed by the parties hereto. This
Warrant, together with the Purchase Agreement and all the other Transaction
Documents, taken together, contain the full understanding of the parties hereto
with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings with respect to the
subject matter hereof and thereof other than as expressly contained herein and
therein.

 

11. Purchase Agreement; Arbitration of Disputes; Calculation Disputes. This
Warrant is subject to the terms, conditions and general provisions of the
Purchase Agreement and the other Transaction Documents, including without
limitation the Arbitration Provisions set forth as an exhibit to the Purchase
Agreement. In addition, notwithstanding the Arbitration Provisions, in the case
of a dispute as to any Calculation, such dispute will be resolved in the manner
set forth in the Purchase Agreement.

 

12. Governing Law. This Warrant shall be governed by and interpreted in
accordance with the laws of the State of New York, without giving effect to the
principles thereof regarding the conflict of laws.

 

13. Waiver of Jury Trial.COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY
HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE
TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY
JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR
REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY
WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

 

14. Remedies. The remedies at law of Holder under this Warrant in the event of
any default or threatened default by Company in the performance of or compliance
with any of the terms of this Warrant are not and will not be adequate and,
without limiting any other remedies available to Holder in the Transaction
Documents, at law or equity, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.

 

  12

 

  

15. Counterparts. This Warrant may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument. Signatures delivered via facsimile or email shall be considered
original signatures for all purposes hereof.

 

16. Attorneys’ Fees. In the event of any arbitration, litigation or dispute
arising from this Warrant, the parties agree that the party who is awarded the
most money shall be deemed the prevailing party for all purposes and shall
therefore be entitled to an additional award of the full amount of the
attorneys’ fees and expenses paid by said prevailing party in connection with
arbitration or litigation without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses. Nothing
herein shall restrict or impair an arbitrator’s or a court’s power to award fees
and expenses for frivolous or bad faith pleading.

 

17. Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be invalid or unenforceable in any
jurisdiction, such provision shall be modified to achieve the objective of the
parties to the fullest extent permitted and such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this Warrant
or the validity or enforceability of this Warrant in any other jurisdiction.

 

18. Time is of the Essence. Time is expressly made of the essence with respect
to each and every provision of this Warrant.

 

19. Descriptive Headings. Descriptive headings of the sections of this Warrant
are inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.

 

[Remainder of page intentionally left blank; signature page follows]

 

  13

 

  

IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed by an
officer thereunto duly authorized as of the Issue Date.

 

 

COMPANY:   

 

 

 

 

Cybergy Holdings, Inc.  

 

 

 

 

 

 

By:

 

 

 

Printed Name:

Mark Gray

 

 

Title:

Chief Executive Officer

 

 

  14

 

 

EXHIBIT A

 

NOTICE OF EXERCISE OF WARRANT

 

TO:

CYBERGY HOLDINGS, INC.

ATTN: _____________________

VIA FAX TO: ( )______________

EMAIL: ____________________

 

The undersigned hereby irrevocably elects to exercise the right, represented by
the Warrant to Purchase Shares of Common Stock dated as of April 28, 2015 (the
“Warrant”), to purchase shares of the common stock, $0.0001 par value (“Common
Stock”), of CYBERGY HOLDINGS, INC., and tenders herewith payment in accordance
with Section 2 of the Warrant, as follows:

 

___________    Warrant Shares: _____________________

 

If the Holder decides to make a cashless exercise, the number of shares of
Common Stock the Holder shall receive shall be equal to:

 

 

 

 

 

 

X =

Y (A-B)

 

 

A

 

 

Where:

X = the number of Warrant Shares to be issued to Holder

 

Y = the number of Warrants that the Holder elects to exercise

 

 

A = the Closing Price (at the date of such calculation)

 

 

B = the Exercise Price

  

________

Exercise Amount: $____________________ = (Exercise Price x Warrant Shares)

 

 

________

Payment is being made by:

 

 

_______

enclosed check

 

_______

wire transfer

 

_______

other

 

Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Warrant.

 

It is the intention of Holder to comply with the provisions of Section 2.2 of
the Warrant regarding certain limits on Holder’s right to receive shares
thereunder. Holder believes this exercise complies with the provisions of such
Section 2.2. Nonetheless, to the extent that, pursuant to the exercise effected
hereby, Holder would receive more shares of Common Stock than permitted under
Section 2.2, Company shall not be obligated and shall not issue to Holder such
excess shares until such time, if ever, that Holder could receive such excess
shares without violating, and in full compliance with, Section 2.2 of the
Warrant.

 

  15

 

  

If this Notice of Exercise represents the full exercise of the outstanding
balance of the Warrant, Holder will surrender (or cause to be surrendered) the
Warrant to Company at the address indicated above by express courier within five
(5) Trading Days after the Warrant Shares to be delivered pursuant to this
Notice of Exercise have been delivered to Holder.

  

 

To the extent the Warrant Shares are not able to be delivered to Holder via the
DWAC system, please deliver certificates representing the Warrant Shares to
Holder via reputable overnight courier after receipt of this Notice of Exercise
(by facsimile transmission or otherwise) to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated: _________________

 

 

___________________________________________________

[Name of Holder]

 

By:__________________________

 

  16

 

 

EXHIBIT B

 

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of the Warrant)

 

For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading “Transferees” the right represented
by the Warrant to Purchase Shares of Common Stock dated as of April 28, 2015
(the “Warrant”) to purchase the percentage and number of shares of common stock,
$0.0001 par value (“Common Stock”), of CYBERGY HOLDINGS, INC. specified under
the headings “Percentage Transferred” and “Number Transferred,” respectively,
opposite the name(s) of such person(s), and appoints each such person
attorney-in-fact to transfer the undersigned’s respective right on the books of
CYBERGY HOLDINGS, INC. with full power of substitution.

 

Transferees

 

Percentage Transferred

 

Number Transferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated:___________, ______

 

 

 

 

[Transferor Name must conform to the name of Holder as specified on the face of
the Warrant]

 

        By

 

 

Name:

 

 

 

 

 

Signed in the presence of:

 

 

 

 

 

 

 

(Name)

 

 

 

 

 

 

ACCEPTED AND AGREED:

 

 

 

 

 

 

 

 

[TRANSFEREE]

      By:

 

Name:

 

 

  17

 

 

 

EXHIBIT B

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: _______________

 

Issue Date: __________

 

 

 

 

5% SENIOR SECURED CONVERTIBLE DEBENTURE

 

FOR VALUE RECEIVED, CYBERGY HOLDINGS, INC., a Delaware corporation (hereinafter
called the “Borrower”), hereby promises to pay to the order of
______________(the “Holder”) the sum of $_________ together with interest as set
forth herein, on April 2, 2016 (the “Maturity Date”), and to pay interest on the
initial principal balance hereof at the rate of five percent (5%) per annum (the
“Interest Rate”), on the Maturity Date. The interest shall be payable regardless
of how long this Debenture remains outstanding. Debenture may not be prepaid in
whole or in part except upon written consent of the Holder. Any amount of
principal or interest on this Debenture which is not paid when due shall bear
interest at the rate of eighteen percent (18%) per annum from the due date
thereof until the same is paid (“Default Interest”). Interest shall commence
accruing on the date that the Debenture is fully paid and shall be computed on
the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.0001 par value
per share (the “Common Stock”) in accordance with the terms hereof) shall be
made in lawful money of the United States of America. All payments shall be made
at such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Debenture. Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a business day, the same shall instead be due on the next
succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Debenture is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this
Debenture, the term “business day” shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of New York, New York are
authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement dated the date
hereof, pursuant to which this Debenture was originally issued (the “Purchase
Agreement”).

 

This Debenture is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof.

 

  18

 

  

The following terms shall apply to this Debenture:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right from time to time, and at
any time commencing on the Issue Date and ending on the later of: (i) the
Maturity Date and (ii) such later date as this Debenture has been paid in full,
each in respect of the remaining outstanding principal amount of this Debenture
to convert all or any part of the outstanding and unpaid principal amount of
this Debenture into 34,176 fully paid and non- assessable Class C shares of
Mount Knowledge Inc., or any shares of capital stock or other securities of the
Borrower into which such Common Stock shall hereafter be changed or reclassified
at the Conversion Price (as defined herein) determined as provided herein (a
“Conversion”); provided, however, that in no event shall the Holder be entitled
to convert any portion of this Debenture in excess of that portion of this
Debenture upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debentures or the unexercised or unconverted portion
of any other security of the Borrower subject to a limitation on conversion or
exercise analogous to the limitations contained herein) and (2) the number of
shares of Common Stock issuable upon the conversion of the portion of this
Debenture with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 9.99% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such proviso, provided, further, however,
that the limitations on conversion may be waived by the Holder upon, at the
election of the Holder, not less than 61 days’ prior notice to the Borrower, and
the provisions of the conversion limitation shall continue to apply until such
61st day (or such later date, as determined by the Holder, as may be specified
in such notice of waiver). The number of shares of Common Stock to be issued
upon each conversion of this Debenture shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion Price then in
effect on the date specified in the notice of conversion, in the form attached
hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by
the Holder in accordance with Section 1.5 below; provided that the Notice of
Conversion is submitted by facsimile or e-mail (or by other means resulting in,
or reasonably expected to result in, notice) to the Borrower before 6:00 p.m.,
New York, New York time on such conversion date (the “Conversion Date”). The
term “Conversion Amount” means, with respect to any conversion of this
Debenture, the sum of (1) the principal amount of this Debenture to be converted
in such conversion plus (2) accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Debenture to the
Conversion Date, plus (3)Default Interest, if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) plus (3) at the Holder’s
option, any amounts owed to the Holder pursuant to Sections 1.4 and 1.5(g)
hereof.

 

1.2 Mandatory Conversion. The Debenture shall be converted by the Company at the
Conversion Price at any time that (a) the Company has filed a registration
statement with the SEC and such registration statement has been declared
effective, (b) the market capitalization of the Company is greater than
$20,000,000 for ten consecutive trading days based on the daily variable
weighted average price (c) the average daily trading volume for the ten
consecutive trading days is greater than 200,000 shares of Common Stock and (d)
the Company has consummated a subsequent financing resulting in gross proceeds
of at least $5,000,000.

 

1.3 Conversion Price. The conversion price (the “Conversion Price”) in effect on
any Conversion Date shall be equal to $0.4389 per share of Cybergy Holdings,
Inc.,(subject to equitable adjustments for stock splits, stock dividends,
mergers or consolidations). In addition, if and whenever on or after issuance
while this Debenture is outstanding, the Company issues or sells any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, (the “Additional Shares”) for a
consideration per share (the “New Issuance Price”) less than a price (the
“Applicable Price”) equal to the Conversion Price in effect immediately prior to
such issue or sale or deemed issuance of sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Conversion Price
then in effect shall be reduced to a price determined as follows:

 

 

Adjusted Conversion Price =

(AxB) + D

 

 

A+C

 

 

 

“A”

equals the number of shares of Common Stock outstanding, including the
Additional Shares deemed to be issued hereunder, immediately preceding the
Dilutive Issuance;

 

 

“B”

equals the Conversion Price in effect immediately preceding such Dilutive
Issuance;

 

 

“C”

equals the number of Additional Shares issued or deemed issued hereunder as a
result of the Dilutive Issuance; and

 

 

“D”

equals the aggregate consideration, if any, received or deemed to be received by
the Company upon such Dilutive Issuance.

  

  19

 

 

1.4 Authorized Shares. The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Debenture issued pursuant to the Purchase Agreement. The Borrower is
required at all times to have authorized and reserved the number of shares that
is actually issuable upon full conversion of the Debenture (based on the
Conversion Price of the Debentures in effect from time to time) (the “Reserved
Amount”). The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. In addition, if the Borrower
shall issue any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the Debentures
shall be convertible at the then current Conversion Price, the Borrower shall at
the same time make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Debentures. The Borrower
agrees that its issuance of this Debenture shall constitute full authority to
its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Debenture.

 

If at any time the Borrower does not maintain the Reserved Amount, it will be
considered an Event of Default under Section 3.2 herein.

 

1.5 Method of Conversion.

 

(a) Mechanics of Conversion. Subject to Section 1.1, this Debenture may be
converted by the Holder in whole or in part at any time from time to time after
the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to
Section 1.5(b), surrendering this Debenture at the principal office of the
Borrower.

 

(b) Surrender of Debenture Upon Conversion. Notwithstanding anything to the
contrary set forth herein, upon conversion of this Debenture in accordance with
the terms hereof, the Holder shall not be required to physically surrender this
Debenture to the Borrower unless the entire unpaid principal amount of this
Debenture is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Debenture upon each
such conversion. In the event of any dispute or discrepancy, such records of the
Borrower shall, prima facie, be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if any portion of this Debenture
is converted as aforesaid, the Holder may not transfer this Debenture unless the
Holder first physically surrenders this Debenture to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Holder a new
Debenture of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Debenture. The Holder and any
assignee, by acceptance of this Debenture, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture
represented by this Debenture may be less than the amount stated on the face
hereof.

 

(c) Payment of Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that, the Borrower 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 this Debenture so converted and the
Borrower 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 Borrower the amount of such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid. The Borrower shall pay
all transfer agent fees required for same-day processing of any Notice of
Conversion.

 

  20

 

  

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from
the Holder of a facsimile transmission or e-mail (or other reasonable means of
communication) of a Notice of Conversion, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock (or, if the Borrower issues and maintains
shares in uncertificated form, comparable notice of share ownership) issuable
upon such conversion within three (3) business days after such receipt (the
“Deadline”) (and, solely in the case of conversion of the entire unpaid
principal amount hereof, surrender of this Debenture) in accordance with the
terms hereof and the Purchase Agreement.

 

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower
of a Notice of Conversion, the Holder shall be deemed to be the holder of record
of the Common Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Debenture shall be
reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the portion of this
Debenture being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a Notice of
Conversion as provided herein, the Borrower’s obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion is received by the Borrower before 6:00
p.m., New York, New York time, on such date.

 

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion,
provided the Borrower is participating in the Depository Trust Borrower (“DTC”)
Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder
and its compliance with the provisions contained in Section 1.1 and in this
Section 1.5, the Borrower shall use its best efforts to cause its transfer agent
to electronically transmit the Common Stock issuable upon conversion to the
Holder by crediting the account of Holder’s Prime Broker with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system, provided the stock
underlying the Debenture is eligible for an exemption from registration under
the Securities Act of 1933.

 

(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way
limiting the Holder’s right to pursue other remedies, including actual damages
and/or equitable relief, the parties agree that if delivery of the Common Stock
issuable upon conversion of this Debenture is not delivered by the Deadline, the
Borrower shall pay to the Holder, in cash, as partial liquidated damages and not
as a penalty, $500 per day in cash, for each day beyond the Deadline that the
Borrower fails to deliver such common stock. Such cash amount shall be paid to
Holder by the fifth day of the month following the month in which it has accrued
or, at the option of the Holder (by written notice to the Borrower by the first
day of the month following the month in which it has accrued), shall be added to
the principal amount of this Debenture, in which event interest shall accrue
thereon in accordance with the terms of this Debenture and such additional
principal amount shall be convertible into Common Stock in accordance with the
terms of this Debenture. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to
frustrate, and interference with such conversion right are difficult if not
impossible to qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.5(g) are justified.

 

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1.6 Concerning the Shares. The shares of Common Stock issuable upon conversion
of this Debenture may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act or (ii) the
Borrower or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (iii) such shares are sold or transferred pursuant to Rule
144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are
transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
agrees to sell or otherwise transfer the shares only in accordance with this
Section 1.6 and who is an accredited investor. Except as otherwise provided in
the Purchase Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon conversion of this
Debenture have been registered under the Act or otherwise may be sold pursuant
to Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold and without any requirement
that current public information concerning Borrower be available, each
certificate for shares of Common Stock issuable upon conversion of this
Debenture that has not been so included in an effective registration statement
or that has not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend substantially
in the following form, as appropriate:

 

 “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES, IN COMPLIANCE WITH THE PROVISIONS OF THE AGREEMENTS RELATING TO THE
SECURITIES REPRESENTED HEREBY.”

 

The legend set forth above shall be removed and the Borrower shall issue to the
Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel
reasonably satisfactory to Borrower, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Common Stock may be made without registration under the Act,
which opinion shall be accepted by the Borrower so that the sale or transfer is
effected or (ii) in the case of the Common Stock issuable upon conversion of
this Debenture, such security is registered for sale by the Holder under an
effective registration statement filed under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold. In the event that the
Borrower does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be
considered an Event of Default pursuant to Section 3.2 of the Debenture,
providing that the Company counsel does not reasonably object to the legal
opinion conclusion that an exemption is available.

 

1.7 Effect of Certain Events.

 

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale,
conveyance or disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person (as defined below) or Persons when the
Borrower is not the survivor shall be treated pursuant to Section 1.7(b) hereof.
“Person” shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or organization.

 

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(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this
Debenture is issued and outstanding and prior to conversion of all of the
Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof. The Borrower shall not effect any transaction described
in this Section 1.7(b) unless (a) it first gives the Holder, to the extent
reasonably practicable, thirty (30) days prior written notice (but in any event
at least fifteen (15) days prior written notice) of the record date of the
special meeting of shareholders to approve, or if there is no such record date,
the consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the Holder shall be entitled to convert this Debenture)
(provided, that if such disclosure and written notice to Holder is subject to
Section 4.8 of the Purchase Agreement concerning non-public information, Holder
shall have first executed a confidentiality agreement as described in that
Section) and (b) in the case of the consolidation, merger or other business
combination of the Borrower with or into any other Person when the Borrower is
not the survivor, the resulting successor or acquiring entity (if not the
Borrower) assumes by written instrument the obligations of this Section 1.7(b).
The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.

 

(d) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.7, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon
the written request at any time of the Holder, furnish to such Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of the Debenture.

 

1.8 Trading Market Limitations. Unless permitted by the applicable rules and
regulations of the principal securities market on which the Common Stock is then
listed or traded, in no event shall the Borrower issue upon conversion of or
otherwise pursuant to this Debenture and the other Debentures issued pursuant to
the Purchase Agreement more than the maximum number of shares of Common Stock
that the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the “Maximum Share
Amount”), which shall be 19.99% of the total shares outstanding on the Closing
Date (as defined in the Purchase Agreement), subject to equitable adjustment
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the date hereof.

 

1.9 Status as Shareholder. Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder’s allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder’s rights as a Holder
of such converted portion of this Debenture shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Borrower to comply with the terms of this
Debenture. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Debenture for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this Debenture with
respect to such unconverted portions of this Debenture and the Borrower shall,
as soon as practicable, return such unconverted Debenture to the Holder or, if
the Debenture has not been surrendered, adjust its records to reflect that such
portion of this Debenture has not been converted.

 

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ARTICLE II. CERTAIN COVENANTS

 

2.1 Negative Covenants As long as any portion of this Debenture remains
outstanding, unless the holders of all of the outstanding Debentures shall have
otherwise given prior written consent, the Borrower shall not, and shall not
permit any of its subsidiaries (whether or not a subsidiary on the Issue Date)
to, directly or indirectly:

 

(a) other than indebtedness (a) existing as of the date hereof, (b) indebtedness
collateralized by accounts receivable to a lender to New West Technologies, LLC,
or (c) incurred in the ordinary course of business for trade expenses (not
borrowed money), enter into, create, incur, assume, guarantee or suffer to exist
any indebtedness for borrowed money of any kind, including, but not limited to,
a guarantee, 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 therefrom;

 

(b) amend its charter documents, including, without limitation, its certificate
of incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;

 

(b) issue any New Securities.

 

(c) amend its organizational documents;

 

(d) enter into any transaction or series of related transactions resulting in a
merger or a sale of all or substantially all of the assets of the Company

 

(e) pledge the Company’s assets or provide a security interest on the Company’s
assets or guarantee any debt other than the debt of the Company or its
Subsidiaries; or

 

(f) enter into any agreement with respect to any of the foregoing.

 

ARTICLE III. EVENTS OF DEFAULT

 

Events of default (each, an “Event of Default”) shall include any of the
following events:

 

3.1 Failure to Pay Principal or Interest. Any default in the payment of the
principal of, interest on or other charges in respect of this Debenture, free of
any claim of subordination, as and when the same shall become due and payable
whether upon the Maturity Date or by acceleration or otherwise, if Borrower does
not pay in full the amount that is due and payable within three (3) business
days after delivery of a notice of demand therefor from Holder.

 

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common
Stock to the Holder (or announces or threatens in writing that it will not honor
its obligation to do so) upon exercise by the Holder of the conversion rights of
the Holder in accordance with the terms of this Debenture, fails to transfer or
cause its transfer agent to transfer (issue) (electronically or in certificated
form) any certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Debenture as and when required by
this Debenture, the Borrower directs its transfer agent not to transfer or
delays, impairs, and/or hinders its transfer agent in transferring (or issuing)
(electronically or in certificated form) any certificate for shares of Common
Stock to be issued to the Holder upon conversion of or otherwise pursuant to
this Debenture as and when required by this Debenture, or fails to remove (or
directs its transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Debenture as and when required by this Debenture (or makes any written
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for three (3) business days after
the Holder shall have delivered a Notice of Conversion. It is an obligation of
the Borrower to remain current in its obligations to its transfer agent. It
shall be an event of default of this Debenture, if a conversion of this
Debenture is delayed, hindered or frustrated beyond the periods of time provided
for in this Debenture, due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any funds to the
Borrower’s transfer agent in order to process a conversion, such advanced funds
shall be paid by the Borrower to the Holder within two Business Days of a demand
from the Holder.

 

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3.3 Breach of Covenants. The Borrower breaches any covenant or term or condition
contained in this Debenture or the Purchase Agreement (together, the “Collateral
Documents”) and such breach has a Material Adverse Effect and continues for a
period of ten (10) days after written notice thereof to the Borrower from the
Holder.

 

3.4 Breach of Representations and Warranties. Any representation or warranty of
the Borrower made herein or in the Collateral Documents shall be false or
misleading in any material respect when made and the breach of which has (or
with the passage of time will have) a Material Adverse Effect.

 

3.5 Bankruptcy, Receiver or Trustee. The Borrower or any subsidiary of the
Borrower shall commence, or there shall be commenced against the Borrower or any
subsidiary of the Borrower under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Borrower or any
subsidiary of the Borrower 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 Borrower or any subsidiary of the Borrower
or there is commenced against the Borrower or any subsidiary of the Borrower any
such bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 90 days; or the Borrower or any subsidiary of the Borrower is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower or any
subsidiary of the Borrower 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 90 days; or
the Borrower or any subsidiary of the Borrower makes a general assignment for
the benefit of creditors; or the Borrower or any subsidiary of the Borrower
shall call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Borrower or any subsidiary of
the Borrower 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 Borrower or any subsidiary of the Borrower for the
purpose of effecting any of the foregoing (other than actions to dismiss,
terminate or resolve any bankruptcy or similar proceeding).

 

3.6 Indebtedness Default. The Borrower or any subsidiary of the Borrower 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 Borrower or any subsidiary of
the Borrower 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, in each of the above instances
where such default would have a Material Adverse Effect on the Company’s ability
to pay the Debentures on the Maturity Date.

 

3.7 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.

 

3.8 Failure to Comply with the Exchange Act. If at any time it is so required,
the Borrower shall fail in any material respect to comply with the reporting
requirements of the Exchange Act with regards to the filing of Form 10-Q's and
10-K's; and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act.

 

3.9 Cessation of Operations. Any cessation by Borrower of substantially all of
its operations, provided, however, that any disclosure of the Borrower’s ability
to continue as a “going concern” shall not be an admission that the Borrower
cannot pay its debts as they become due or of a cessation of operations.

 

3.10 Maintenance of Assets. The failure by Borrower to maintain any material
assets which would have a material adverse effect on Borrower’s ability conduct
its overall business (whether now or in the future).

 

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3.11 Cross-Default. Notwithstanding anything to the contrary contained in this
Debenture or the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained in any of the
Collateral Documents, after the passage of all applicable notice and cure or
grace periods, shall, at the option of the Holder, be considered a default under
this Debenture and the Collateral Documents, in which event the Holder shall be
entitled (but in no event required) to apply all rights and remedies of the
Holder under the terms of this Debenture and the Collateral Documents by reason
of a default under said Collateral Documents or hereunder.

 

3.12 Change of Control. A Change of Control shall occur if (i) a third party
acquires greater than 50% in voting rights of the Borrower in one or a series of
related transactions, (ii) the shares of the Borrower’s Common Stock shall be
changed into securities of another entity, (iii) the Borrower sells or transfers
more than 40% in aggregate of the properties or assets of the Borrower to
another Person or Persons in any rolling 12 month period (an “Asset Sale”), or
(iv) a purchase, tender or exchange offer made to and accepted by the holders of
more than the 50% of the outstanding shares of the Borrower’s Common Stock

 

Upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the principal
hereof or interest thereon when due at the Maturity Date, giving effect to any
applicable cure period), the Debenture shall become immediately due and payable
and the Borrower, at the option of the Holder in its sole discretion, shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount
equal to the Default Sum (as defined herein). Upon the occurrence and during the
continuation of any Event of Default specified in Sections 3.3, exercisable
through the delivery of written notice to the Borrower by such Holders (the
“Default Notice”), and upon the occurrence of an Event of Default specified in
the remaining sections of Article III(other than failure to pay the principal
hereof or interest thereon at the Maturity Date specified in Section 3.1
hereof), the Debenture shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an
amount equal to the sum of (x) the then outstanding principal amount of this
Debenture (or, in the case of an Event of Default under Section 3.12, 125% of
the outstanding principal amount of this Debenture) plus (y) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the date of payment
(the “Mandatory Prepayment Date”) plus (z) Default Interest (the amounts
referred to in clauses (x), (y) and (z) shall collectively be known as the
“Default Sum”) and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in equity. 

 

If the Borrower fails to pay the Default Sum within five (5) business days of
written notice that such amount is due and payable, then the Holder shall have
the right at any time, so long as the Borrower remains in default (and so long
and to the extent that there are sufficient authorized shares), to liquidate any
collateral pursuant to the terms of the Security Agreement.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2 Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) when delivered if delivered by
hand delivery during a normal business day (or if not on a business day then the
next business day), (b) one business day after delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below or (c) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be the addresses indicated on the
signature page hereto.

 

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4.3 Amendments. This Debenture and any provision hereof may only be amended by
an instrument in writing signed by the Borrower and the Holder. The term
“Debenture” and all reference thereto, as used throughout this instrument, shall
mean this instrument (and the other Debentures issued pursuant to the Purchase
Agreement) as originally executed, or if later amended or supplemented, then as
so amended or supplemented.

 

4.4 Assignability. This Debenture shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Debenture must be an “accredited
investor” (as defined in Rule 501(a) of the 1933 Act). Holder may transfer this
Debenture provided that the transferee agrees in writing with Borrower to be
bound by the provisions of this Debenture and the Purchase Agreement, and that
such transfer complies with any applicable federal and state securities laws.
Notwithstanding anything in this Debenture to the contrary, this Debenture may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement, provided that the pledgee agrees in writing with Borrower
to be bound by the provisions of this Debenture and the Purchase Agreement (as
applicable to the pledgee), and that such pledge complies with any applicable
federal and state securities laws.

 

4.5 Cost of Collection. If default is made in the payment of this Debenture, the
Borrower shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.

 

4.6 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

4.7 Certain Amounts. Whenever pursuant to this Debenture the Borrower is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest, the Borrower and the Holder agree that the
actual damages to the Holder from the receipt of cash payment on this Debenture
may be difficult to determine and the amount to be so paid by the Borrower
represents liquidated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Debenture and to
earn a return from the sale of shares of Common Stock acquired upon conversion
of this Debenture at a price in excess of the price paid for such shares
pursuant to this Debenture. The Borrower and the Holder hereby agree that such
amount of stipulated damages is not plainly disproportionate to the possible
loss to the Holder from the receipt of a cash payment without the opportunity to
convert this Debenture into shares of Common Stock.

 

4.8 Purchase Agreement. By its acceptance of this Debenture, each party agrees
to be bound by the applicable terms of the Purchase Agreement.

 

  27

 

  

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder
of this Debenture shall have no rights as a Holder of Common Stock unless and
only to the extent that it converts this Debenture into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least ten (10) days
prior to the record date specified therein (or ten (10) days prior to the
consummation of the transaction or event, whichever is earlier), of the date on
which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time.

 

4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Borrower
acknowledges that the remedy at law for a breach of its obligations under this
Debenture will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Debenture, that the Holder
shall be entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Debenture and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

 

4.11 Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture 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 Borrower 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 Borrower from paying all or any portion of the
principal of or interest on this Debenture 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 Borrower (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.

 

(Signature Pages Follow)

 

  28

 

  

IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in its name
by its duly authorized officer this August 27, 2015.

 

 

CYBERGY HOLDINGS, INC.

 

      By:

 

Name:

 

Title:

 

 

 

 

 

 

Notice to Holder:

 

 

 

 

 

With a copy by fax only to (which copy shall not constitute notice):

 

  29

 

  

EXHIBIT A

 

CONVERSION NOTICE

 

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

 

TO: _________________________

 

The undersigned hereby irrevocably elects to convert $___________ of the
principal amount of Debenture No. ___________ into Shares of Common Stock of
Cybergy Holdings, Inc.., 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:

 

 

 

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EXHIBIT C

 

VOTING AGREEMENT

 

THIS VOTING AGREEMENT (this “Agreement”), dated as of August 27, 2015, is made
by and among MMCAP Asset Management (the “Purchaser” or “Lead Investor”) and
Cybergy Holdings, Inc. (the “Company”) and the undersigned holder
(“Stockholder”) of shares of capital stock of the Company (the shares owned
beneficially or of record by Stockholder, the “Shares”).

 

WHEREAS, the Company and the Purchaser have entered into a Securities Purchase
Agreement dated of even date herewith (the “Purchase Agreement”), providing for
the purchase of Securities;

 

WHEREAS, as of the date hereof after the completion of the transactions
contemplated by the Purchase Agreement, Stockholder beneficially owns and has
sole or shared voting power with respect to the number of Shares, and holds
stock options or other rights to acquire the number of Shares indicated opposite
Stockholder’s name on Schedule 1 attached hereto;

 

WHEREAS, as an inducement to the Purchaser, the Stockholder, who shall benefit
from the purchase of Securities by the Purchaser, has agreed to enter into and
perform this Agreement; and

 

WHEREAS, all capitalized terms used in this Agreement without definition herein
shall have the meanings ascribed to them in the Purchase Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the Company, the
Stockholder and the Purchaser hereby agree as follows:

 

1. Agreement to Vote Shares. Subject to the terms and conditions hereof,
Stockholder agrees that, from and after the date of any violation of any
covenant in Section 5.5 of the Purchaser Agreement until the Expiration Date (as
defined in Section 2 below), at any meeting of the stockholders of the Company,
or any adjournment or postponement thereof, or in connection with any written
consent of the stockholders of Company, the Stockholder shall:

 

(a) appear at such meeting or otherwise cause the Shares and any New Shares (as
defined in Section 3 below) to be counted as present thereat for purposes of
calculating a quorum;

 

(b) vote (or cause to be voted), or deliver a written consent (or cause a
written consent to be delivered) covering all of the Shares and any New Shares
in the manner recommended by the Purchaser.

 

2. Expiration Date. As used in this Agreement, the term “Expiration Date” shall
mean the earlier to occur of (a) the completion of an Underwritten Offering, (b)
repayment of all Debentures owned by the Purchaser, as long as the Purchaser
beneficially owns, including any convertible securities, less than 1% of the
Company’s fully-diluted capital stock, (c) the second anniversary of this
Agreement or (d) upon mutual written agreement of the Purchaser and the
Stockholder to terminate this Agreement. Upon termination or expiration of this
Agreement, no party shall have any further obligations or liabilities under this
Agreement; provided, however, such termination or expiration shall not relieve
any party from liability for any willful breach of this Agreement or acts of bad
faith prior to termination hereof.

 

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3. Additional Purchases. Stockholder agrees that any shares of capital stock or
other equity securities of the Company that Stockholder purchases or with
respect to which Stockholder otherwise acquires sole or shared voting power
after the execution of this Agreement and prior to the record date for any
meeting of the stockholders of the Company, or any adjournment or postponement
thereof, or in connection with any written consent of the stockholders of
Company, whether by the exercise of any stock options or otherwise
(collectively, “New Shares”), shall be subject to the terms and conditions of
this Agreement to the same extent as if they constituted the Shares hereunder.

 

4. Agreement to Retain Shares.

 

(a) From and after the date hereof until the Expiration Date, Stockholder shall
not, directly or indirectly, (i) cause or permit the Transfer (as defined below)
of any of the Shares of which Stockholder is the beneficial owner (A) unless
each person to which any of such Shares, or any interest in any of such Shares,
is or may be transferred shall have (1) executed a counterpart of this Agreement
and (2) agreed in writing to hold such Shares (or interest in such Shares)
subject to all of the terms and provisions of this Agreement, (B) except by will
or operation of law, in which case this Agreement shall bind the transferee,
(ii) grant any proxies or powers of attorney, other than consistently with the
terms of Section 1 of this Agreement, or deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares, or (iii) take any
action that would make any representation or warranty of Stockholder contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling Stockholder from performing Stockholder’s material
obligations under this Agreement.

 

(b)A person shall be deemed to have effected a “Transfer” of a Share if such
person directly or indirectly (i) sells, pledges, encumbers, assigns, grants an
option with respect to, transfers or disposes of such Share or any interest in
such Share, or (ii) enters into an agreement or commitment providing for the
sale of, pledge of, encumbrance of, assignment of, grant of an option with
respect to, transfer of or disposition of such Share or any interest therein.

 

5. Representations and Warranties of Stockholder. Stockholder hereby represents
and warrants to the Purchaser as follows:

 

(a) Stockholder has the full power and authority to execute and deliver this
Agreement and to perform Stockholder’s obligations hereunder;

 

(b) this Agreement has been duly executed and delivered by or on behalf of
Stockholder and, assuming this Agreement constitutes a valid and binding
agreement of the Purchaser, constitutes a valid and binding agreement with
respect to Stockholder, enforceable against Stockholder in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors’ rights and remedies generally;

 

(c) except as otherwise set forth on Schedule 1 attached hereto, as of the date
hereof, Stockholder beneficially owns the number of Shares indicated opposite
such Stockholder’s name on Schedule 1 attached hereto, and will own any New
Shares, free and clear of any liens, claims, security interests, pledges or
other encumbrances or restrictions of any kind or nature whatsoever (“Liens”)
except for any restrictions under applicable securities laws, and has sole or
shared, and otherwise unrestricted, voting power with respect to such Shares or
New Shares and none of the Shares or New Shares is or will be subject to any
voting trust or other agreement, arrangement or restriction with respect to the
voting of the Shares or the New Shares, except as contemplated by this
Agreement;

 

  32

 

  

(d) the execution and delivery of this Agreement by Stockholder does not, and
the performance by Stockholder of his, her or its obligations hereunder and the
compliance by Stockholder with any provisions hereof will not: (i) violate or
conflict with, result in a material breach of or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Liens on any
Shares or New Shares pursuant to, any agreement, instrument, note, bond,
mortgage, contract, lease, license, permit or other obligation or any order,
arbitration award, judgment or decree to which Stockholder is a party or by
which Stockholder is bound, or any law, statute, rule or regulation to which
Stockholder is subject, except for such violations, conflicts, breaches,
defaults, rights, Liens or other occurrences as would not materially impair the
ability of Stockholder to perform its obligations under this Agreement or
prevent or materially delay the consummation of any of the actions contemplated
hereby, or (ii) in the event that Stockholder is a corporation, partnership,
trust or other entity, any bylaw or other organizational document of
Stockholder;

 

(e) the execution and delivery of this Agreement by Stockholder does not, and
the performance of this Agreement by Stockholder does not and will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority by Stockholder except
for applicable requirements, if any, of the Exchange Act, and except where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay the performance
by Stockholder of his, her or its obligations under this Agreement in any
material respect;

 

(f) as of the date hereof, there is no action pending or, to the knowledge of
the Stockholder, threatened against or affecting the Stockholder before or by
any governmental entity that would reasonably be expected to impair in any
material respect the ability of the Stockholder to perform its obligations
hereunder or to consummate the transactions contemplated hereby on a timely
basis; and

 

(g) the Stockholder understands and acknowledges that the Purchaser is entering
into the Purchase Agreement in reliance upon the Stockholder’s execution and
delivery of this Agreement and the representations and warranties of the
Stockholder contained herein.

 

6. Irrevocable Proxy. Subject to the penultimate sentence of this Section 6, by
execution of this Agreement, Stockholder does hereby appoint the Purchaser with
full power of substitution and resubstitution, as Stockholder’s true and lawful
attorney and irrevocable proxy, to the fullest extent of the undersigned’s
rights with respect to the Shares, to vote, if the Stockholder is unable to
perform his, her or its obligations under this Agreement, each of such Shares
solely with respect to the matters set forth in Section 1 hereof. Stockholder
intends this proxy to be irrevocable and coupled with an interest hereunder
until the Expiration Date. Notwithstanding anything contained herein to the
contrary, this irrevocable proxy shall automatically terminate upon the
Expiration Date of this Agreement. The Stockholder hereby revokes any proxy
previously granted by Stockholder with respect to the Shares and/or the New
Shares and represents that none of such previously granted proxies are
irrevocable.

 

7. Stockholder Capacity. Stockholder is entering into this Agreement solely in
its capacity as a record holder and/or beneficial owner of Shares and nothing in
this Agreement shall be deemed to impose any obligation, restriction, limitation
or liability on Stockholder in any other manner or capacity, including in his
capacity as an officer, director, employee, agent or representative of the
Company.

 

8. Specific Enforcement. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to seek specific relief hereunder,
including, without limitation, an injunction or injunctions to prevent and
enjoin breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, in any state or federal court in any competent
jurisdiction, in addition to any other remedy to which they may be entitled at
law or in equity. Any requirements for the securing or posting of any bond with
respect to any such remedy are hereby waived.

 

  33

 

  

9. Further Assurances. Stockholder shall, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as the Purchaser may reasonably
request for the purpose of carrying out the transactions contemplated by this
Agreement and the Purchase Agreement.

 

10. Disclosure. Stockholder hereby agrees that the Company may publish and
disclose in any document filed with the SEC such Stockholder’s identity and
ownership of Shares and the nature of such Stockholder’s commitments,
arrangements and understandings under this Agreement.

 

11. Notice. All notices and other communications hereunder shall be in writing
and shall be deemed given as prescribed in the Purchase Agreement.

 

12. Severability. If any term or other provision of this Agreement is determined
to be invalid, illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon a final determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible and the
parties agree that the court making such determination shall have the power to
reduce the scope, duration, area or applicability of the term or provision, to
delete specific words or phrases, or to replace any invalid, void or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.

 

13. Binding Effect and Assignment. All of the covenants and agreements contained
in this Agreement shall be binding upon, and inure to the benefit of, the
respective parties and their permitted successors, assigns, heirs, executors,
administrators and other legal representatives, as the case may be. This
Agreement may not be assigned by any party hereto without the prior written
consent of the other parties hereto.

 

14. No Third Party Beneficiaries. This Agreement is not intended, and shall not
be deemed, to confer any rights or remedies upon any person other than the
parties hereto and their respective successors and permitted assigns, to create
any agreement of employment with any person or to otherwise create any
third-party beneficiary hereto.

 

15. No Waivers. No waivers of any breach of this Agreement extended by the
Purchaser to Stockholder shall be construed as a waiver of any rights or
remedies of the Purchaser, as applicable. No waiver of any provisions hereof by
any party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party.

 

16. Governing Law; Jurisdiction and Venue. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of this Agreement), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

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17. Waiver of Jury Trial. The parties hereto hereby waive any right to trial by
jury with respect to any action or proceeding related to or arising out of this
Agreement, any document executed in connection herewith and the matters
contemplated hereby and thereby.

 

18. Entire Agreement; Amendment. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto.

 

19. Counterparts. This Agreement may be executed in counterparts, all of which
when taken together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.

 

{Signature Page to Follow}

 

  35

 

  

IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be
executed as of the date first above written.

 

PURCHASER:

 

 

 

 

MMCAP

 

 

 

Name:

 

Title:

 

Address:

 

 

 

 

COMPANY:

 

 

 

 

 

 

 

Name:

Mark Gray

 

Title:

Chief Executive Officer

 

Address:

 

 

 

 

 

 

 

 

STOCKHOLDER:

 

 

 

 

 

 

Name:

Mark Gray

 

Address:

 

 

 

  36

 

  

Schedule 1

 

Name

 

Shares Owned:

 

 

 

Mark Gray

 

1,000 Series B Shares

 

 

 

Mark Gray

 

6,670,480 Series C Shares

 

 

37

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