Exhibit 10.1

 

Execution Copy

 

 

 

 

 

 

 

CONTRIBUTION AND SALE AGREEMENT

 

 

by and among

 

J&S GAMING, INC.

 

MGT CAPITAL INVESTMENTS, INC.

 

and

 

MGT GAMING, INC.

 

 

May 9, 2012

 

 

 

 

 

 

 

 

 

 

 
 

execution Copy 

 

 

Table of Contents

 

Page

 

1. DEFINITIONS; INTERPRETATION 1         1.1 Definitions 1   1.2 Interpretation
4         2. PRE-CLOSING AGREEMENTS 5         2.1 Initial Deposit 5   2.2
Exclusivity 5         3. CONTRIBUTION AND SALE 5         3.1 Contribution of
Patent Rights 5   3.2 Issuance of Common Stock to J&S 5   3.3 Sale of Common
Stock and grant of Option to MGT 5   3.4 MGT Option 6   3.5 Repurchase Right 7  
3.6 Stockholder Agreement 7   3.7 Investment Representations 7         4.
CLOSING 8           4.1 Closing 8   4.2 Conditions to Closing 8   4.3 Closing
Deliverables and Actions 10   4.4 Effect of Closing 10   4.5 Termination 11  
4.6 Effect of Termination 11         5. REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANY 11         5.1 Incorporation; Authority 11   5.2 Execution; Validity
of Agreement; Due Authorization 12   5.3 Consents and Approvals; No Violations
12   5.4 Ownership 12         6. REPRESENTATIONS AND WARRANTIES REGARDING J&S
AND THE PATENT RIGHTS 12         6.1 Incorporation; Authority 12   6.2
Execution; Validity of Agreement; Due Authorization 12   6.3 Consents and
Approvals; No Violations 13

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  6.4 Title to Shares 13   6.5 Patent Rights 13   6.6 Litigation 15   6.7
Bankruptcy 15   6.8 Consents and Approvals 15   6.9 Broker’s Fee 15   6.10
Material Disclosure; No Omission 15         7. REPRESENTATIONS AND WARRANTIES OF
MGT 16         7.1 Organization 16   7.2 No Conflicts 16   7.3 Due Authorization
and Binding Effect 16   7.4 Warrants and Warrant Shares 16         8. SURVIVAL
OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION 16         8.1
Survival of Representations, Warranties and Covenants 16   8.2 Indemnification
Obligations of J&S 16   8.3 Indemnification Obligations of MGT 17   8.4
Notification of Claims 17   8.5 Investigation 17   8.6 Third-Party Claims 17    
    9. MISCELLANEOUS 18         9.1 Consulting Agreement 18   9.2 Costs and
Attorney’s Fees 18   9.3 Notices 18   9.4 Entire Agreement 19   9.5 Further
Assurances 19   9.6 Governing law; Consent to Jurisdiction 19   9.7 Binding
effect 20   9.8 Waivers and Amendments 20   9.9 Recitals, Exhibits and Schedules
20   9.10 Headings 20   9.11 Severability 20   9.12 Specific Performance 20  
9.13 Fees and Expenses 20   9.14 Legal Representation of the Parties 21   9.15
Payment of Transfer Costs and Expenses 21   9.16 Public Announcements 21   9.17
Confidentiality 21   9.18 No Third Party Beneficiaries 21   9.19 Counterparts;
Signatures 21

ii

 

 

 

Exhibits:

 

A: MGT Warrant

 

B: Stockholder Agreement

 

C: Consulting Agreement Terms

 

D: Patent Assignment

 

E: Patents

 

F: MGT Option Warrant

 

iii

 

 

 

CONTRIBUTION AND SALE AGREEMENT

 

CONTRIBUTION AND SALE AGREEMENT (this “Agreement”) is dated as of May 9, 2012
(the “Agreement Date”), by and among J&S Gaming, Inc., a New York corporation
(“J&S”), MGT Capital Investments, Inc., a Delaware corporation (“MGT”) and MGT
Gaming, Inc., a Delaware corporation (the “Company”, and together with J&S and
MGT, the “Parties”).

 

RECITALS

 

WHEREAS, J&S is the owner of the Patent Rights (as defined below) and is willing
to contribute the Patent Rights to the Company (the “Contribution”) in exchange
for 1,000 shares of Common Stock, $0.001 par value, in the Company (the “Common
Stock”);

 

WHEREAS, MGT desires to purchase (i) a 55% ownership interest in the Company
represented by 550 shares of Common Stock and (ii) an option to purchase an
additional 25% ownership interest in the Company represented by 250 shares of
Common Stock, both from J&S (the “Sale”) in exchange for a cash payment by MGT
to J&S of $200,000 and the grant of a warrant from MGT to J&S to purchase
350,000 shares of common stock of MGT (such warrant being in the form attached
hereto as Exhibit A (the “MGT Warrant”);

 

WHEREAS, contemporaneously with the execution of this Agreement, the Parties are
executing and delivering the Stockholder Agreement, in the form attached hereto
as Exhibit B (the “Stockholder Agreement”) to set forth certain rights and
obligations of each of them as stockholders of the Company;

 

WHEREAS, in connection with the Contribution and the Sale, the Company is
negotiating in good faith a consulting agreement (the “Consulting Agreement”)
between the Company and Steven Brandstetter, an individual residing at 12 May
Hill Lane, Dix Hills, NY 11746 (“Brandstetter”), whereby Brandstetter will
provide consulting services to the Company which shall include the terms set
forth on Exhibit C hereto.

 

NOW, THEREFORE, in consideration of the promises, covenants and other agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:

 

1.        DEFINITIONS; INTERPRETATION.

 

1.1       Definitions. For purposes of this Agreement, the following terms are
defined as follows:

 

“Action” means any action (including declaratory judgment actions), suit,
litigation, controversy, mediation, hearing, claim, charge, complaint,
arbitration, reexamination, interference, reissue, investigation, pending
inquiry, audit or other proceeding at law or in equity or of, in, by or before
any Governmental Authority, mediator or arbitrator.

 

“Affiliate” means, with respect to any Person, a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person; and “control” (including the terms
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

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“Applicable Law” means, with respect to any Person, any federal, state, local,
municipal, foreign or other Law, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect, in each case as of
the date of this Agreement, by any Governmental Authority that applies to such
Person, its business and its properties.

 

“Consents” means the consents of any third parties or any Governmental
Authorities necessary to transfer the Patent Rights to the Company or to
otherwise consummate the transactions contemplated by this Agreement.

 

“Governmental Authority” means any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or similar governing entity.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Knowledge” or words of similar import (e.g. “knowledge,” “known,” or “aware”)
with respect to: (i) any individual, shall mean the actual knowledge of such
individual; and (ii) J&S, shall mean the actual knowledge of Brandstetter as
well as the knowledge that Brandstetter should have after reasonable inquiry.

 

“Laws” means all laws, statutes, rules, regulations, ordinances and orders of
any Governmental Authority.

 

“Lien” means any mortgage, lien, claim, pledge, charge, security interest,
preemptive right, right of first refusal, option, judgment, restriction or
encumbrance of any kind, or any exceptions, reservations, restrictions,
rights-of-way, easements or other matters affecting title, whether arising by
contract, law or otherwise.

 

“Material Adverse Effect” means any change, event, violation, inaccuracy,
circumstance or effect that, individually or taken together with all other
effects, is, or is reasonably likely to, be or become materially adverse in
relation to the value, validity, effectiveness or enjoyment of the Patent
Rights.

 

“Patent Assignment” means the assignment by J&S of all right, title and interest
in the Patent Rights to the Company in the form attached hereto as Exhibit D.

 

“Patent Rights” means (a) the Patents; (b) any and all other rights, priorities
and privileges of J&S provided under United States, state, foreign or
multinational law with respect to the Patents; (c) any and all rights to obtain
renewals, extensions, re-issues, continuations, continuations-in-part,
re-examinations, divisions, certificates of correction, maintenance fees or
other legal protections or foreign equivalents thereof that may be obtained
pertaining to the Patents; and (d) any and all past, present and future rights
to sue at law or in equity, whether currently pending, filed or otherwise, for
any infringement, misappropriation, impairment or other alleged unauthorized use
or conduct in connection with the Patents occurring prior to or after the
Closing Date, including the rights to pursue damages and injunctive relief and
receive all past, present, and future proceeds, royalties or damages therefrom.

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“Patents” means those specific patents listed on Exhibit E and any registrations
thereof, patents granted thereon or patents issuing therefrom (including all
reissues, divisionals, continuations, continuations-in-part, extensions and
re-examinations thereof), patents issuing from parent applications thereof, and
any foreign counterparts or equivalents to any of the foregoing, in each case,
regardless of whether or not any of the foregoing are pending applications or
issued patents as of the Closing Date, the same to be held by and enjoyed by
Company to the full end of the term for which said patents are granted, as fully
and entirely as the same could have been held and enjoyed by J&S if this sale
had not been made.

 

“Person” means and includes any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or any Governmental Authority or any department,
agency or political subdivision thereof.

 

“Prosecution History Files” means all documents in J&S’s custody that are in
J&S’s files or the files of its agent(s) that relate to the prosecution of
patent applications relating to the Patents and that were filed with or received
from any patent office

 

“Transaction Agreements” shall mean and include this Agreement, the Stockholder
Agreement, the Patent Assignment and the MGT Warrant.

 

The following terms are defined in the following sections of this Agreement:

 

Term Section Agreement Date Preamble Alternate Transaction 2.2(b) Brandstetter
Recitals Closing 4.1 Closing Date 4.1 Common Stock Recitals Company Preamble
Consulting Agreement Recitals Contribution Recitals Exclusivity Period 2.2(b)
Exercise Period 3.4(b) Initial Deposit 2.1 J&S Preamble J&S Indemnitees 8.3 J&S
Shares 3.2 Indemnification Notice 8.4 Indemnifying Party 8.4 Indemnitees 8.3
Losses 8.2 MGT Preamble

 

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MGT Common Stock 3.4(a) MGT Company Shares 3.3 MGT Indemnitees 8.2 MGT Option
3.3 MGT Option Warrant 3.4(a) MGT Warrant Recitals Option Cash Payment 3.4(a)
Option Shares 3.3 Parties Preamble R&D Sponsor 6.4(e) Repurchase Period 3.5(a)
Repurchase Price 3.5(a) Repurchase Right 3.5(a) Qualified Action 3.5(b)
Qualified Financing 3.4(b) Securities Act 3.7(b) Standards Body 6.4(e)
Stockholder Agreement Recitals Termination Date 4.5(b) Third Party Claim 8.6

 

1.2       Interpretation. Unless the context otherwise requires, the terms
defined in Section 1.1 shall have the meanings herein specified for all purposes
of this Agreement, applicable to both the singular and plural forms of any of
the terms defined herein. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” The use of the neuter gender herein shall be
deemed to include the masculine and feminine genders wherever necessary or
appropriate, the use of the masculine gender herein shall be deemed to include
the neuter and feminine gender wherever necessary or appropriate and the use of
the feminine gender herein shall be deemed to include the neuter and masculine
genders wherever necessary or appropriate.

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2.       PRE-CLOSING AGREEMENTS.

 

2.1       Initial Deposit. On the Agreement Date, MGT shall advance to J&S an
intial non-refundable deposit of $5,000 (the “Initial Deposit”). At the Closing,
the Initial Deposit shall be applied towards the cash payment described in
Section 3.3(i) below. In the event that this Agreement is terminated in
accordance with Section 4.5, J&S shall not be obligated to repay the Initial
Deposit to MGT.

 

2.2       Exclusivity.

 

(a)       J&S agrees not to, and agrees to cause its Affiliates not to, take any
action to directly or indirectly encourage, initiate, solicit, continue or
engage in discussions or negotiations with, or provide any information to, or
accept any offer from, any Person other than MGT (or its officers or agents),
concerning any Alternate Transaction (as defined below). J&S will promptly
inform MGT of any inquiries or contacts by third parties during the Exclusivity
Period (as defined below) relating to any Alternate Transaction.

 

(b)       For purposes of this Section 2.2:

 

(i)       “Alternate Transaction” means (A) any sale or license by J&S of the
Patent Rights to any Person other than the Company or (B) any transaction in
respect of J&S which results, directly or indirectly, in a change of control of
J&S.

 

(ii)       “Exclusivity Period” means the period from and after the Agreement
Date until the earlier of (i) the Closing Date and (ii) the termination of this
Agreement in accordance with Section 4.5.

 

3.       CONTRIBUTION AND SALE.

 

3.1       Contribution of Patent Rights. Upon the terms and subject to the
conditions set forth herein, effective as of the Closing, J&S hereby irrevocably
sells, assigns, grants, transfers and delivers to the Company and its successors
and assigns, and the Company hereby accepts, free and clear of all Liens
whatsoever, (i) all of the right, title and interest of J&S in and to the Patent
Rights and (ii) all causes of action and enforcement rights whether currently
pending, filed or otherwise for the Patents, including all rights to pursue
damages, injunctive relief and all other remedies for past, current and future
infringement of the Patents. Concurrent with its execution of this Agreement,
J&S shall execute and deliver to the Company the Patent Assignment attached as
Exhibit D.

 

3.2       Issuance of Common Stock to J&S. At the Closing, in connection with
the Contribution described in Section 3.1 above, the Company shall issue to J&S
1,000 shares of Common Stock in the Company (the “J&S Shares”) constituting all
of the issued and outstanding shares of Common Stock of the Company.

 

3.3       Sale of Common Stock and grant of Option to MGT. At the Closing,
immediately following the Contribution, J&S shall (a) sell and transfer to MGT
550 shares of Common Stock in the Company (the “MGT Company Shares”) and (b)
grant to MGT the option to purchase 250 shares of Common Stock (the “Option
Shares”), exercisable and on such terms and conditions as set forth in Section
3.4 hereof (the “MGT Option”), in each case free and clear of any Liens, in
exchange for (i) a cash payment by MGT to J&S of $200,000, and (ii) the grant by
MGT to J&S of the MGT Warrant, exercisable and on such terms and conditions as
set forth in the form attached as Exhibit A hereto.

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3.4       MGT Option.

 

(a)       The MGT Option is exercisable in whole or in part at any time during
the Exercise Period by notice in writing delivered to J&S in exchange for (i) a
cash payment by MGT to J&S of $1,000,000 (the “Option Cash Payment”) and (ii)
the grant by MGT to J&S of a four year warrant commencing on the date of grant
thereof (the “MGT Option Warrant”) to purchase 250,000 shares of common stock of
MGT (the “MGT Common Stock”) at a purchase price equal to the lower of six
dollars ($6.00) or 110% of the closing price of the MGT Common Stock on the day
prior to the exercise of the MGT Option.1 Upon the grant thereof, the MGT Option
Warrant shall be exercisable and on such terms and conditions as set forth in
the form attached as Exhibit F hereto. Notwithstanding the foregoing, to the
extent that the exercise of the MGT Warrant and the MGT Option Warrant will
result in the issuance of shares of MGT Common Stock to J&S representing more
than the applicable percentage under the rules of the NYSE Amex, the issuance of
shares of MGT Common Stock in excess of the applicable percentage shall be
subject to the approval of the stockholders of MGT.2

 

(b)       The MGT Option shall expire upon the earlier of (i) December 31, 2012
and (ii) 90 days following the completion of a Qualified Financing by MGT (the
“Exercise Period”). A “Qualified Financing” means an equity or debt financing or
series of related equity or debt financings of MGT consummated after the Closing
Date in which the aggregate gross proceeds received by MGT is greater than $2.5
million.

 

(c)       Upon exercise of the MGT Option, (i) MGT shall deliver to J&S the
Option Cash Payment, (ii) J&S shall deliver the certificate representing the
Option Shares to the Company for cancellation, together with any instruments of
transfer associated with the transfer of the Option Shares, (iii) MGT shall
issue and deliver to J&S the MGT Option Warrant, and (iv) the Company shall
prepare and deliver to J&S and MGT new stock certificates reflecting the
transfer of the Option Shares from J&S to MGT.

 

(d)       If the Company shall at any time after the Closing Date and while the
MGT Option remains outstanding and unexpired in whole or in part, effect a
subdivision (by any stock split or otherwise) of the outstanding shares of
Common Stock into a greater number of shares, the number of Option Shares
obtainable upon exercise of this Option shall be proportionately increased.
Conversely, if the Company shall at any time or from time to time after the
Closing Date combine (by reverse stock split or otherwise) the outstanding
shares of Common Stock into a smaller number of shares, the number of shares of
Common Stock obtainable upon exercise of the MGT Option shall be proportionately
decreased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.

 

 

 

1 As a result of the adjustment provisions in the MGT Warrant and the MGT Option
Warrant, the number of shares issuable pursuant to such warrants is not certain.

 

2 The number of shares of MGT Common Stock outstanding as of May 9, 2012 was
2,105,187, and as such, MGT shall be required to obtain shareholder approval
prior to J&S acquiring more than 421,016 shares (i.e. 19.999%) of MGT Common
Stock pursuant to the MGT Warrant and the MGT Option Warrant.

 

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(e)       If at any time after the Closing Date and while the MGT Option remains
outstanding and unexpired in whole or in part, the Option Shares are changed
into the same or a different number of shares of any class or classes of stock,
the MGT Option will thereafter represent the right to acquire such number and
kind of securities into which the Option Shares are changed.

 

3.5       Repurchase Right.

 

(a)       In the event that the Company has not commenced a Qualified Action (as
hereinafter defined) within one year of the Closing Date, J&S shall have the
right (the “Repurchase Right”) for a period of 30 days after the first
anniversary of the Closing Date (the “Repurchase Period”) to repurchase the MGT
Company Shares from MGT for an aggregate purchase price of (i) $25,000 and (ii)
surrender of the MGT Warrant (the “Repurchase Price”).

 

(b)       The Repurchase Right may be exercised at any time during the
Repurchase Period by J&S’s notice in writing delivered to MGT. Upon exercise of
the Repurchase Right, (i) J&S shall deliver to MGT the Repurchase Price, (ii)
MGT shall deliver the certificate representing the MGT Company Shares to the
Company for cancellation, together with any instruments of transfer associated
with the transfer of the MGT Company Shares and (iii) the Company shall prepare
and deliver to J&S a stock certificate representing the transfer of the MGT
Company Shares from MGT to J&S. A “Qualified Action” means any of the following:
(x) initiation of patent litigation in a U.S. federal court against a party
alleged to have infringed the Patent; (y) a settlement agreement with a party
alleged to have infringed the Patent; or (z) exercise by MGT, in whole or in
part, of the MGT Option.

 

(c)       Upon the transfer of the MGT Company Shares to J&S in connection with
the exercise of the Repurchase Right, MGT shall return the Prosecution History
Files to J&S.

 

3.6       Stockholder Agreement. At the Closing and in connection with the
issuance and transfer of the shares of Common Stock set forth in Sections 3.2
and 3.3 above, MGT, J&S and the Company shall execute and deliver the
Stockholder Agreement in accordance with Section 4.3(g). Each Party acknowledges
that the shares of Common Stock to be issued by the Company pursuant to this
Article 3 are subject to the terms and conditions set forth in the Stockholder
Agreement in all respects. Each Party acknowledges that it has received, has
read and understands the Stockholder Agreement.

 

3.7       Investment Representations. J&S represents and warrants to the Company
and MGT that:

 

(a)       it is acquiring the shares of Common Stock and the MGT Warrant for
investment purposes and not with a view to, or for resale in connection with,
any distribution in violation of applicable securities laws;

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(b)       it is an “accredited investor” as such term is defined in Rule 501(a)
under the Securities Act of 1933, as amended (the “Securities Act”), and by
reason of its business or financial experience, it is capable of evaluating the
risks and merits of both an investment in the Company and an investment in MGT
and of protecting its own interest in connection with each such investment;

 

(c)       it understands that the issuance of the Common Stock and the MGT
Warrant hereunder are not being registered under the Securities Act or any state
securities laws by reason of specific exemptions under the provisions thereof,
the availability of which depend in part on the accuracy of its representations
in this Section 3.7; and

 

(d)       it understands that (i) the shares of Common Stock and the MGT Warrant
are “restricted securities” under applicable securities laws which provide, in
substance, that the shares of Common Stock and the MGT Warrant may only be
disposed of pursuant to an effective registration statement under the Securities
Act and applicable state securities laws or an exemption from such registration,
(ii) the Company has no obligation or intention to effect any registration of
the shares of Common Stock, (iii) MGT has no obligation or intention to effect
any registration of the MGT Warrant or the MGT Option Warrant, (iv) the Company
may endorse any certificates representing the shares of Common Stock with a
legend describing the restrictions referenced in clause (i) of this Section
3.7(d) and (v) MGT may endorse the MGT Warrant, the MGT Option Warrant and any
certificates representing shares of common stock of MGT issuable upon exercise
thereof with a legend describing the restrictions referenced in clause (i) of
this Section 3.7(d).

 

4.       CLOSING.

 

4.1       Closing. Unless this agreement is earlier terminated in accordance
with Section 4.5, the closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place on May 19, 2012, or on such earlier date when
each of the conditions set forth in this Article IV have been satisfied or
waived (other than those conditions that by their nature are to be satisfied at
the Closing, but subject to the fulfillment or waiver of those conditions), or
at such other time as the Parties may agree (the “Closing Date”). The Closing
shall take place at the offices of Dickstein Shapiro LLP located at 1633
Broadway, New York, NY or at such other location as the Parties hereto agree.

 

4.2       Conditions to Closing.

 

(a)       Conditions to Obligations of Each Party to Effect the Contribution and
Sale. The respective obligations of each Party hereto to consummate the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions:

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(i)       MGT and J&S shall have mutually consented to the proposed legal
counsel and initial financial terms of the legal fee arrangement for any Action
involving infringement of the Patent Rights (or waived such consent in writing).

 

(ii)       No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
Contribution and Sale shall be in effect, nor shall any action have been taken
by any Governmental Authority seeking any of the foregoing, and no statute,
rule, regulation or order shall have been enacted, entered, enforced or deemed
applicable to the Contribution and Sale, which makes the consummation of the
Contribution and Sale illegal.

 

(iii)       MGT and J&S shall have timely obtained from each Governmental
Authority, including NYSE Amex, all approvals, waivers and consents, if any,
necessary for consummation of, or in connection with, the Contribution and Sale
and the other transactions contemplated hereby.

 

(b)       Additional Conditions to Obligations of J&S. The obligations of the
J&S to consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions (it
being understood that each such condition is solely for the benefit of J&S and
may be waived by J&S in writing in its sole discretion without notice, liability
or obligation to any Person):

 

(i)       The representations and warranties of MGT in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true and correct
in all respects) on and as of the Agreement Date and on and as of the Closing
Date as though such representations and warranties were made on and as of such
date (except for representations and warranties which address matters only as to
a specified date, which representations and warranties shall be true and correct
with respect to such specified date). MGT shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it at or prior to the
Closing.

 

(ii)       J&S shall have received each of the deliveries required to by made by
MGT and the Company to J&S pursuant to Section 4.3.

 

(c)       Additional Conditions to Obligations of MGT. The obligations of the
MGT to consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions (it
being understood that each such condition is solely for the benefit of MGT and
may be waived by MGT in writing in its sole discretion without notice, liability
or obligation to any Person):

 

(i)       The representations and warranties of J&S in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true and correct
in all respects) on and as of the Agreement Date and on and as of the Closing
Date as though such representations and warranties were made on and as of such
date (except for representations and warranties which address matters only as to
a specified date, which representations and warranties shall be true and correct
with respect to such specified date). J&S shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it at or prior to the
Closing.

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(ii)       MGT shall have received each of the deliveries required to be made by
J&S and the Company to MGT pursuant to Section 4.3.

 

(iii)       There shall not have occurred a Material Adverse Effect with respect
to the Patent Rights since the Agreement Date.

 

4.3       Closing Deliverables and Actions. At the Closing:

 

(a)       J&S shall execute and deliver to MGT a certificate dated as of the
Closing Date, executed on behalf of J&S by its President, to the effect that (i)
the representations and warranties of J&S provided in Article 6 are true and
correct as of the Closing Date, and (ii) there shall not have occurred a
Material Adverse Effect with respect to the Patent Rights since the Agreement
Date.

 

(b)       J&S shall execute and deliver to the Company the Patent Assignment and
evidence that all required Consents, if any, have been obtained.

 

(c)       MGT shall (i) pay the Cash Payment to J&S by wire transfer of
immediately available funds to an account designated in writing by J&S to MGT
and (ii) issue the MGT Warrant to J&S.

 

(d)       The Company shall issue to J&S and MGT certificates of Common Stock
representing the J&S Shares and the MGT Company Shares, respectively.

 

(e)       MGT shall deliver to J&S a certificate of incorporation from the
Secretary of State of the State of Delaware evidencing the legal existence of
the Company.

 

(f)       J&S shall deliver, cause to be delivered, or make available in a
manner satisfactory to the Company, the Prosecution History Files to the
Company.

 

(g)       The Company, J&S and MGT shall execute and deliver the Stockholder
Agreement.

 

4.4       Effect of Closing. All transactions contemplated herein and by the
other Transaction Agreements to occur on and as of the Closing Date shall be
deemed to have occurred simultaneously and to be effective as of the close of
business on the Closing Date; provided, however, that none of such transactions
shall be deemed to have occurred unless and until all of the conditions to
closing described in Section 4.2 and each of the deliverables and actions
referenced in Section 4.3 shall have been delivered and taken in accordance
therewith.

 

10

 

 

4.5       Termination. At any time prior to the Closing, this Agreement may be
terminated and the transactions contemplated hereby abandoned by authorized
action taken by the terminating Party:

 

(a)       by mutual written consent duly authorized by MGT and J&S;

 

(b)       by either MGT or J&S, if the Closing shall not have occurred on or
before May 19, 2012 or such other date that Purchaser and the Company may agree
upon in writing (the “Termination Date”); provided, however, that the right to
terminate this Agreement under this Section 4.5(b) shall not be available to any
Party whose breach of this Agreement has resulted in the failure of the Closing
to occur on or before the Termination Date;

 

(c)       by either MGT or J&S, if any permanent injunction or other order of a
Governmental Authority preventing the consummation of the transactions
contemplated hereby shall have become final and nonappealable;

 

(d)       by MGT, if J&S shall have breached any representation, warranty,
covenant or agreement contained herein and such breach shall not have been cured
within five business days after receipt by J&S of written notice of such breach
(provided, however, that no such cure period shall be available or applicable to
any such breach which by its nature cannot be cured) and if not cured within the
timeframe above and at or prior to the Closing, such breach would result in the
failure of any of the conditions set forth in Section 4.3 to be satisfied; or

 

(e)       by J&S, if MGT shall have breached any representation, warranty,
covenant or agreement contained herein and such breach shall not have been cured
within five business days after receipt by MGT of written notice of such breach
(provided, however, that no such cure period shall be available or applicable to
any such breach which by its nature cannot be cured) and if not cured within the
timeframe above and at or prior to the Closing, such breach would result in the
failure of any of the conditions set forth in Section 4.3 to be satisfied.

 

4.6       Effect of Termination. In the event of termination of this Agreement
as provided in Section 4.5, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of MGT, the Company, J&S, or
their respective officers, directors, stockholders or Affiliates; provided,
however, that (a) the provisions of Section 2.1 (Initial Deposit), this
Section 4.6 (Effect of Termination) and Article 9 (Miscellaneous) shall remain
in full force and effect and survive any termination of this Agreement and
(b) nothing herein shall relieve any Party hereto from liability in connection
with any breach of such Party’s representations, warranties or covenants
contained herein.

 

5.       REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY. MGT hereby
represents and warrants to J&S as follows:

 

5.1       Incorporation; Authority. The Company (i) is a duly incorporated and
validly existing corporation in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in any other
jurisdiction in which it does business; and (ii) has all requisite power and
authority to own, lease and operate the Patent Rights and to carry on its
business as presently conducted and to execute, deliver and perform its
obligations under this Agreement and each other Transaction Agreement to which
the Company is a party.

 

11

 

 

5.2       Execution; Validity of Agreement; Due Authorization. This Agreement
and each other Transaction Agreement to which the Company is a party has been
duly executed and delivered by the Company and this Agreement and each other
Transaction Agreement to which the Company is a party constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms. The execution and delivery of this
Agreement by the Company and the performance by the Company of its obligations
hereunder have been duly authorized by all necessary corporate action on the
part of the Company.

 

5.3       Consents and Approvals; No Violations. Except as set forth in Schedule
5.3, none of the execution, delivery or performance of this Agreement or any
other Transaction Agreement by the Company, the consummation by the Company of
the transactions contemplated hereby or thereby, or the compliance by the
Company with any of the provisions hereof or thereof will (a) require (i) any
filing with or notice to any Governmental Authority or other Person, (ii) the
obtaining of any Permit or (iii) the expiration or termination of any statutory
or regulatory waiting period, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or require any payment) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company is a party or by which the
Company or any of the Company’s properties or assets is bound, (c) violate any
Applicable Laws, or (d) result in the creation of any Lien upon any of the
Patent Rights.

 

5.4       Ownership. No shares of Common Stock or other equity or profits
interests in the Company have been issued to any Person, other than the issuance
of the shares of Common Stock contemplated herein.

 

6.       REPRESENTATIONS AND WARRANTIES REGARDING J&S AND THE PATENT RIGHTS. J&S
hereby represents and warrants to the Company and MGT as follows, and the
Company and MGT, in agreeing to consummate the transactions contemplated by this
Agreement, have relied upon such representations and warranties:

 

6.1       Incorporation; Authority. J&S (i) is a duly incorporated and validly
existing corporation in good standing under the laws of the State of New York
and is duly qualified as a foreign corporation in any other jurisdiction in
which it does business; and (ii) has all requisite power and authority to own,
lease and operate its property and to carry on its business as presently
conducted and to execute, deliver and perform its obligations under this
Agreement and each other Transaction Agreement to which J&S is a party. A true
and correct copy of the Certificate of Incorporation of J&S, as amended to date,
has been delivered to MGT and is in full force and effect as of the date hereof.

 

6.2       Execution; Validity of Agreement; Due Authorization . This Agreement
and each other Transaction Agreement to which J&S is a party has been duly
executed and delivered by J&S and this Agreement and each other Transaction
Agreement to which J&S is a party constitutes a legal, valid and binding
obligation of J&S, enforceable against J&S in accordance with their respective
terms. The execution and delivery of this Agreement by J&S and the performance
by J&S of its obligations hereunder have been duly authorized by all necessary
corporate action on the part of J&S.

12

 

 

 

6.3       Consents and Approvals; No Violations. None of the execution, delivery
or performance of this Agreement or any other Transaction Agreement by J&S, the
consummation by J&S of the transactions contemplated hereby or thereby, or the
compliance by J&S with any of the provisions hereof or thereof will (a) require
(i) any filing with or notice to any Governmental Authority or other Person,
(ii) the obtaining of any Permit or (iii) the expiration or termination of any
statutory or regulatory waiting period, (b) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or require any payment) under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which J&S is a party or
by which J&S or any of J&S’s properties or assets is bound, (c) violate any
Applicable Laws, or (d) result in the creation of any Lien upon any of the
Patent Rights.

 

6.4       Title to Shares. As of the Closing Date, after giving effect to the
Contribution, J&S is the holder and beneficial owner of the J&S Shares. J&S has
good and valid title to the J&S Shares, free and clear of all Liens, and the J&S
Shares constitute the entire issued and outstanding capital stock of the
Company. At the Closing, J&S will transfer legal and beneficial, good and valid
title to the MGT Company Shares, free and clear of all Liens. Upon exercise of
the MGT Option, J&S will transfer legal and beneficial, good and valid title to
the Option Shares, free and clear of all Liens. J&S is not bound by any
contract, agreement, arrangement, commitment or understanding (written or oral)
with, and has not granted any option or right currently in effect or which would
arise after the date hereof to, any Person other than MGT with respect to the
acquisition of the MGT Company Shares and the option to purchase the Option
Shares.

 

6.5       Patent Rights. Prior to giving effect to the transactions contemplated
herein:

 

(a)       J&S is the exclusive, true and lawful owner of all right, title, and
interest in and to the Patent Rights, including all right, title and interest to
sue for infringement thereof and to grant the assignments provided for under
this Agreement, and J&S has good and valid title to the Patent Rights. The
Patent Rights are free and clear of any Liens, licenses or other encumbrances
and no rights, licenses, covenants not to sue or similar rights have been
granted under the Patents. Other than the transfer of the Patent Rights to J&S,
neither J&S nor the inventors have transferred or attempted to transfer any of
the Patent Rights to any Person.

 

(b)       The Patents are (i) to the Knowledge of J&S, valid, subsisting and
enforceable, (iii) currently in compliance with any and all formal legal
requirements necessary to maintain the validity and enforceability thereof, (iv)
not subject to any outstanding Governmental Order adversely affecting J&S’s use
thereof or rights thereto, or that would impair the validity or enforceability
thereof, and (v) currently in compliance with any and all formal legal
requirements necessary to record and perfect J&S’s interest therein and the
chain of title thereof. None of the Patents is abandoned and all annuities,
application fees, maintenance fees and all and any other applicable fees for the
Patents have been timely paid and any Actions have been responded to in a manner
so as to prevent abandonment or lapse. J&S has complied with its duty of candor
and disclosure to the United States Patent and Trademark Office and any other
applicable Governmental Authority with respect to all applications for
registration included in the Patents and neither J&S nor the inventors have made
any material misrepresentations in any such applications. For the avoidance of
doubt, the Parties acknowledge that J&S makes no representation or warranty that
the Patents will remain valid, subsisting or enforceable after the date of this
Agreement.

13

 

 

 

(c)       The Patents have not been the subject of any Action and there is no
Action pending, asserted or threatened (i) by or against J&S concerning the
ownership, validity, registerability, enforceability or use of,
misappropriation, infringement or licensed right to use, any of the Patents, or
(ii) contesting or challenging the ownership, validity, registerability,
enforceability or use of, misappropriation, infringement or J&S’s or any of its
customers’ or licensees’ right to use, any of the Patents, and J&S has received
no notice asserting that the Patents are invalid or unenforceable. J&S has
received no notice asserting infringement of any of the Patents by third
parties, and has not notified any third party of actual or potential
infringement of any of the Patents.

 

(d)       No inventor of the Patents is in default or breach of any term of any
employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement relating to the protection, ownership,
development, use or transfer of the Patents. To the extent that any Patent has
been conceived, developed or created for J&S by any other Person, J&S has
executed valid and enforceable written agreements with such Person with respect
thereto transferring to J&S the entire right, title and interest therein and
thereto by operation of law or by valid written assignment.

 

(e)       No university, military, educational institution or Governmental
Authority (each, a “R&D Sponsor”) has funded or sponsored any research and
development conducted in connection with the Patents, or has any claim of right
to, ownership of or other lien on any of the foregoing. No research and
development conducted in connection with the Patents was performed by a student
or employee of any R&D Sponsor such that any such R&D Sponsor has any claim of
right to, ownership of or other Lien on any of the foregoing. J&S has not
participated in any standards-setting activities or joined any standards
setting, intellectual property sharing, or similar organization (a “Standards
Body”) that would affect the proprietary nature of any of the Patents, or
restrict the ability of J&S to enforce, license or exclude others from using any
of the Patents, and there is no obligation imposed by a Standards Body to
license any of the Patents on particular terms or conditions.

 

(f)       There are no inventors of the Patent Rights other than the named
inventors of the Patent Rights. There are no asserted or unasserted claims of
ownership of the Patent Rights by any Person other than the named owners of the
Patent Rights.

 

(g)       J&S, its Affiliates, employees, assignors, licensors, or legal counsel
did not fail to disclose or mischaracterize any known prior art or commit any
other conduct , that constitutes inequitable conduct or renders the Patents
unenforceable. There is no prior art or any conduct of J&S relevant to
patentability that has not been or was not considered during the examination of
the Patents.

14

 

 

 

(h)       J&S has marked in accordance with 35 U.S.C. 287(a) all of its products
and services covered by the claims of the Patents by listing the relevant patent
numbers within its general online terms of service.

 

(i)       All documents, agreements, prototypes, models, product samples, books,
notebooks, certificates, licenses, files and any other diligence materials that
J&S has provided to the Company in connection with the Company’s evaluation of
the Patents are true, correct and complete originals (if originals were provided
by J&S) or copies of such materials.

 

(j)       J&S has delivered to the Company true and complete copies of (i) the
names and addresses of counsel who prosecuted the Patents and who are handling
the Patents; (ii) the Prosecution History Files, and (iii) copies of executed
originals of all agreements assigning ownership of the Patent Rights from J&S
and/or prior owners to J&S as filed with the United States Patent and Trademark
Office.

 

6.6       Litigation. Except as set forth on Schedule 6.6 hereto, there are no
actions, lawsuits, judgments, claims, investigations or legal or administrative
proceedings, pending or threatened against J&S. There is no judgment, order,
injunction, decree or award (whether rendered by a court, administrative agency
or by arbitration) to which J&S is a party.

 

6.7       Bankruptcy. None of J&S or any Affiliate of J&S has committed or
currently intends to commit any act of bankruptcy, is insolvent, has proposed or
currently intends to propose a compromise or arrangement to its creditors
generally, has had or currently intends to have any petition for a receiving
order in bankruptcy filed against it, has made or currently intends to make a
voluntary assignment in bankruptcy, has initiated or currently intends to
initiate any proceeding with respect to a compromise or arrangement, has
initiated or intends to initiate any proceeding to have itself declared bankrupt
or wound-up, has initiated or intends to initiate any proceeding to have a
receiver appointed to any part of its assets, has had any creditor take or
currently anticipates that any creditor will take possession of any of its
property, or has had any of the foregoing become enforceable or currently
anticipates that any of the foregoing will become enforceable upon any of its
property or the Patent Rights.

 

6.8       Consents and Approvals. No Consents or notices to, or filings,
registrations, or qualifications with any Person or Governmental Authority and
no Consents or waivers from, or notices to, any other party are required for the
consummation by J&S of the transactions contemplated by this Agreement and the
other Transaction Agreements.

 

6.9       Broker’s Fee. No agent, broker, investment banker, firm, or other
Person, acting on behalf of J&S or any of its Affiliates, or under the authority
of J&S or any of its Affiliates, is or will be entitled to any broker’s or
finder’s fee or any other commission or similar fee or expense, directly or
indirectly, in connection with any of the transactions contemplated by this
Agreement or any of the other Transaction Agreements.

 

6.10       Material Disclosure; No Omission. No representation or warranty of
J&S contained in this Agreement or in any other Transaction Agreement and no
statement by or on behalf of J&S contained in any exhibit, certificate,
schedule, attachment or other instrument specified in this Agreement or in any
other Transaction Agreement contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements contained
herein or therein not misleading.

15

 

 

 

7.       REPRESENTATIONS AND WARRANTIES OF MGT. MGT hereby represents and
warrants to J&S as follows:

 

7.1       Organization. MGT is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware.

 

7.2       No Conflicts. Neither the execution and delivery of this Agreement and
each other Transaction Agreement to which MGT is a party, nor the performance by
MGT of its obligations hereunder and thereunder will: (i) constitute a violation
of any Applicable Law; (ii) violate or breach MGT’s certificate of incorporation
or bylaws, in each case as amended to date; or (iii) violate any order, writ,
injunction or decree applicable to MGT.

 

7.3       Due Authorization and Binding Effect. The execution and delivery of
this Agreement by MGT and the performance by MGT of its obligations hereunder
have been duly authorized by all necessary corporate action on the part of MGT.
This Agreement and each other Transaction Agreement to which MGT is a party has
been duly executed and delivered by MGT and constitutes the legal and binding
obligation of MGT enforceable against it in accordance with their respective
terms.

 

7.4       Warrants and Warrant Shares. The MGT Warrant, the MGT Option Warrant
and the shares of common stock of MGT issuable upon exercise of the MGT Warrant
and the MGT Option Warrant, when issued and paid for in accordance with the
terms of this Agreement, the MGT Warrant and the MGT Option Warrant, as
applicable, will be duly authorized, validly issued, fully paid and
nonassessable securities of MGT.

 

8.       SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION.

 

8.1       Survival of Representations, Warranties and Covenants. Each statement
contained in any exhibit, schedule, or certificate delivered pursuant to this
Agreement constitutes a representation and warranty by the Person who delivered
it or on whose behalf it was delivered. All representations and warranties set
forth or made in this Agreement and any other Transaction Agreement shall
survive the Closing indefinitely. All covenants and agreements of the Parties
set forth in this Agreement and the other Transaction Agreements to be performed
after the Closing shall survive the Closing in accordance with their respective
terms. Any claim pending on the expiration date of any applicable survival
period for which a notification of claim has been made pursuant to Section
8.4 below on or before such expiration date may continue to be asserted and
indemnified against until finally resolved.

 

8.2       Indemnification Obligations of J&S. J&S agrees to indemnify, defend
and hold harmless MGT and its shareholders, officers, directors, managers,
representatives, agents, employees and Affiliates (collectively, the “MGT
Indemnitees”) from and against any claim, suit, action, liability, loss, damage,
deficiency, fee, cost or expense of any nature whatsoever (including, without
limitation, any diminution in value of any shares of Common Stock and any
interest, penalties, investigation expenses and fees through trial and appeals,
and disbursements of counsel and accountants, but excluding incidental,
consequential, special, or punitive and treble damages) (collectively, “Losses”)
arising out of, based upon or resulting from: (i) the breach of any
representation or warranty of J&S which is contained in this Agreement, any
other Transaction Agreement or any exhibits or schedules hereto or thereto; (ii)
any breach or failure to perform any of the covenants, agreements or
undertakings of J&S contained in this Agreement, any other Transaction Agreement
or any exhibit or schedule hereto or thereto; (iii) the matters set forth on any
Schedules delivered pursuant to Article 6 hereof; (iv) any and all costs and
expenses (including reasonable legal and accounting fees) incident to the
enforcement of the indemnification rights of the MGT Indemnitees under this
Section 8.2

.

16

 

 

8.3       Indemnification Obligations of MGT

 

(a)       . MGT agrees to indemnify, defend and hold harmless J&S and its
shareholders, officers, directors, managers, representatives, agents, employees
and Affiliates (collectively, the “J&S Indemnitees”, and, together with the MGT
Indemnitees, the “Indemnitees”) from and against any Losses arising out of,
based upon or resulting from: (v) the breach of any representation or warranty
of MGT which is contained in this Agreement, any other Transaction Agreement or
any exhibits or schedules hereto or thereto; (vi) any breach or failure to
perform any of the covenants, agreements or undertakings of MGT contained in
this Agreement, any other Transaction Agreement or any exhibits or schedules
hereto or thereto; and (iii) any and all costs and expenses (including
reasonable legal and accounting fees) incident to the enforcement of the
indemnification rights of the J&S Indemnitees under this Section 8.3

.

 

8.4       Notification of Claims

 

. In the event that any Party asserts a claim for indemnification hereunder,
such Party shall (a) provide the indemnifying Party (“Indemnifying Party”) with
prompt written notice of the nature of such claim (an “Indemnification Notice”),
(b) make available to the Indemnifying Party all relevant information which is
material to the claim and which is in the possession of the Indemnitee and (c)
otherwise reasonably cooperate with the Indemnifying Party with respect to such
claim; provided, however, that the failure of an Indemnitee to deliver an
Indemnification Notice under this Section 8.4 shall not relieve the Indemnifying
Party of its indemnification obligations under this Article 8 unless and only to
the extent that such Indemnifying Party is materially prejudiced by such
failure.

 

8.5       Investigation. The right to indemnification, payment of Losses or any
other remedy based on the representations, warranties and the covenants
hereunder will not be affected by any investigation conducted with respect to,
or any knowledge acquired, or capable of being acquired at any time, whether
before or after the Closing Date, with respect to the accuracy or inaccuracy of,
or compliance with, any such representation, warranty or covenant. Furthermore,
no information or knowledge obtained in any investigation pursuant this
Agreement or any other Transaction Agreement shall affect or be deemed to modify
any representation, warranty or covenant contained herein or therein.

 

8.6       Third-Party Claims.       The obligations and liabilities of an
Indemnifying Party under this Article 8, with respect to Losses resulting from a
claim brought by any third party (a “Third-Party Claim”) shall be subject to the
following terms and conditions:

 

(a)       Promptly after delivery of an Indemnification Notice in respect of a
Third-Party Claim, the Indemnifying Party may elect, by written notice to the
Indemnitee within ten (10) days of an Indemnification Notice, to undertake the
investigation and defense thereof with counsel reasonably satisfactory to the
Indemnitee, at the sole cost and expense of the Indemnifying Party. If the
Indemnifying Party chooses to defend any Third-Party Claim, the Indemnitee shall
cooperate with all reasonable requests of the Indemnifying Party and shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.

17

 

 

 

(b)       In the event that the Indemnifying Party, within ten (10) days after
receipt of an Indemnification Notice, does not so elect to defend such
Third-Party Claim, the Indemnitee will have the right to undertake the
investigation and defense of such Third-Party Claim for the account of the
Indemnifying Party. The Indemnitee shall not settle or compromise any
Third-Party Claim, or consent to the entry of a judgment, whether or not the
Indemnifying Party shall elect to defend such Third-Party Claim, without the
written consent of the Indemnifying Party (which consent may not be unreasonably
withheld).

 

9.       MISCELLANEOUS.

 

9.1       Consulting Agreement. After the Closing, the Company and J&S agree to
negotiate in good faith the terms of the Consulting Agreement which shall
include the terms set forth on Exhibit C hereto.

 

9.2       Costs and Attorney’s Fees. The Parties agree that in the event it
becomes necessary for any Party to institute litigation or obtain the services
of an attorney in order to enforce its rights under the provisions of this
Agreement, then, in that event, the prevailing Party as determined by a court of
competent jurisdiction, may be awarded reasonable attorney’s fees and costs
expended in pursuit of such litigation, including appellate litigation.

 

9.3       Notices. All notices, requests, claims, demands, waivers,
instructions, documents and other communications to be given pursuant to this
Agreement shall be in writing and shall be delivered personally, faxed, or sent
by nationally-recognized overnight courier to a Party at the address set forth
below for such Party or to such other address as the Party to whom notice is to
be given may have furnished to the other Parties hereto in writing in accordance
herewith. Any such notice or communication shall be deemed to have been
delivered and received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of faxing, on the date sent (or on the first Business
Day following the date sent if the date sent is not a Business Day) if
confirmation of successful transmission is received, and (c) in the case of a
nationally-recognized overnight courier, on the first Business Day after the
date when sent for overnight delivery:

 

If to MGT, to:

 

MGT Capital Investments, Inc.

500 Mamaroneck Avenue – Suite 204

Harrison, NY 10528

Attention: Robert B. Ladd CFA

Fax: (914) 630-7532

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with a copy (which will not constitute notice) to:

 

Dickstein Shapiro LLP

1633 Broadway

New York, NY 10019

Attention: Barry Seidel

Fax: (917) 677-8183

 

If to J&S, to:

 

J&S Gaming, Inc.

12 May Hill Lane

Dix Hills, NY 11746

Attention: Steven Brandstetter

Fax: [_________]

 

 

9.4       Entire Agreement. This Agreement (including the exhibits and schedules
hereto), and the other Transaction Agreements constitute the entire agreement
among the Parties with respect to the subject matter hereto and supersede all
prior agreements and understandings, both oral and written, among the Parties
with respect to the subject matter of this Agreement.

 

9.5       Further Assurances. The Company, J&S and MGT shall, at any time and
from time to time after the date hereof, do or to cause to be done all such
further acts, and to execute, acknowledge, deliver and file, or cause to be
executed, acknowledged, delivered or filed, all such deeds, transfers,
conveyances, assignments or assurances as may be reasonably requested by another
Party for: (i) transferring, conveying and assigning the Patent Rights to the
Company; and (ii) otherwise effectuating the transactions contemplated by this
Agreement. In any Action involving the infringement or validity of any of the
Patents, J&S shall, and shall cause its Affiliates to, reasonably coordinate and
cooperate with the Company’s counsel with respect to all aspects of the Action.

 

9.6       Governing law; Consent to Jurisdiction.

 

(a)       This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without regard to the conflict of laws rules
thereof.

 

(b)       The Parties hereto irrevocably: (a) agree that any suit, action or
other legal proceeding arising out of this Agreement shall be brought in the
United States District Court for the Southern District of New York or in the
Borough of Manhattan, New York Supreme Court, (b) consent to the jurisdiction of
each such court in any suit, action or proceeding, (c) waive any objection which
they, or any of them, may have to the laying of venue of any such suit, action
or proceeding in any of such courts, and (d) agree that service of process by
overnight courier or registered or certified mail, at the addresses listed in
Section 9.3 shall be good and sufficient service of process. EACH OF THE PARTIES
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

19

 

 

 

9.7       Binding effect. This Agreement shall be binding upon and shall inure
to the benefit of the Parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. This Agreement may not be
assigned by any Party hereto without the prior written consent of the other
Parties, which consent may be withheld at the discretion of each Party whose
consent is requested and any purported assignment, unless so consented to, shall
be void and without effect.

 

9.8       Waivers and Amendments. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the Parties hereto or, in the case of a waiver, by
the Party waiving compliance. Any Party may waive any misrepresentation by any
other Party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement by any other Party, provided that mere inaction or
failure to exercise any right, remedy or option under this Agreement, or any
delay in exercising the same, will not operate as nor shall be construed as a
waiver, and no waiver will be effective unless set forth in writing and only to
the extent specifically stated therein, and no single or partial exercise of any
such right, power or privilege will preclude any further exercise thereof or the
exercise of any such right, power or privilege will preclude any further
exercise thereof or the exercise of any other such right, power or privilege.

 

9.9       Recitals, Exhibits and Schedules. The recitals to this Agreement and
all exhibits and schedules attached hereto are hereby incorporated by reference
into, and made a part of, this Agreement.

 

9.10       Headings. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.

 

9.11       Severability. If any provision of this Agreement is determined to be
illegal or unenforceable, such provision will be deemed amended to the extent
necessary to conform to Applicable Law, or, if it cannot be so amended without
materially altering the intention of the Parties, it will be deemed stricken and
the remainder of this Agreement will remain in full force and effect.

 

9.12       Specific Performance. Each of the Parties hereto acknowledges and
agrees that the other Parties hereto would be irreparably damaged in the event
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached and that there would be no
adequate remedy at law or in monetary damages to compensate for any such breach.
Accordingly, each Party hereto agrees that, in addition to any remedy to which
such Party may be entitled at law or in equity, they each shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof, in each
case without being required to post a bond or other security.

 

9.13       Fees and Expenses. Subject to Section 9.2, J&S and MGT shall each pay
their own expenses incidental to the preparation and negotiation of this
Agreement and the consummation of the transactions contemplated hereby.

20

 

 

 

9.14       Legal Representation of the Parties. Each of the Parties hereto has
had the opportunity to have its own legal counsel independently advise such
Party with respect to the transactions contemplated by this Agreement and the
other Transaction Agreements. The Parties expressly agree that the language used
in this Agreement shall be deemed to be the language chosen by the Parties
hereto to express their mutual intent, and no provision of this Agreement should
be construed against or interpreted to the advantage of any Party hereto by
reason of such Party or its legal counsel having drafted or participated in the
drafting thereof.

 

9.15       Payment of Transfer Costs and Expenses. All stamp, transfer,
documentary, sales, use, bulk, registration and other such Taxes and fees
(including penalties and interest) which may be imposed in any jurisdiction in
connection with, or arising from any of the transactions set forth herein shall
be paid by the Company.

 

9.16       Public Announcements. J&S shall not issue any press release or other
public statement with respect to this Agreement or the transactions contemplated
hereby without the prior approval of MGT. MGT shall use commercially reasonable
efforts to consult with J&S before issuing any press release or other public
statement with respect to this Agreement or the transactions, except as may be
required by Applicable Law.

 

9.17       Confidentiality. Except for any press release or public announcement
previously issued or issued in accordance with Section 9.16, all terms of this
Agreement, the other Transaction Agreements and the transactions contemplated
hereby and thereby shall remain confidential. No Party hereto shall disclose to
anyone the negotiations, any information concerning the contemplated
transactions, or anything contained herein, except to their accountants,
employees, bankers and attorneys in connection with the transactions
contemplated by this Agreement, without the approval of the other Parties.

 

9.18       No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Parties hereto and their successors and permitted assigns and,
except with respect to the rights of the MGT Indemnitees and J&S Indemnitees
under Article 8, this Agreement shall not be deemed to confer upon any third
party any remedy, claim, reimbursement or other right in addition to those which
may exist without regard to this Agreement.

 

9.19       Counterparts; Signatures

 

. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together will constitute one and
the same instrument. This Agreement and any amendments hereto, to the extent
executed and delivered by means of a facsimile machine or e-mail of a PDF file
containing a copy of an executed agreement (or signature page thereto), shall be
treated in all respects and for all purposes as an original agreement or
instrument and shall have the same binding legal effect as if it were the
original signed version thereof.

 

[Remainder of Page Intentionally Blank–Signature Page Follows]

 

21

 

 

 

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

 

 

MGT GAMING, INC.

                By: /s/ Robert B. Ladd         Name: Robert B. Ladd      

Title: President and CEO

                   

J&S GAMING, INC.

                By: /s/ Steven Brandstetter       Name: Steven Brandstetter    
 

Title: President 

                    MGT CAPITAL INVESTMENTS, INC.                

By:

/s/ Robert B. Ladd

      Name: Robert B. Ladd      

Title: President and CEO

 

 

 

 

 

 

 

 

 

[Signature Page to Contribution and Sale Agreement]

 

 

 

 

Exhibit C

 

Consulting Agreement Terms

 

oHours; Services: Steven Brandstetter (the “Consultant”) shall provide 20 hours
per month of consulting services to the Company (including providing services
and documents related to any litigation matters involving the Patent Rights), or
such additional hours as shall be required by the Company in connection with the
provision of the consulting services to the Company. Consultant shall not be
obligated to provide to the Company any records of his time worked providing
services to the Company. Consultant shall make himself available to perform such
consulting services as requested from time to time by the President of the
Company. Consultant shall use his best efforts to perform the services.

 

oCommencement Date: Subject to the Closing of the Contribution and Sale
contemplated herein, the commencement date of the consulting agreement shall be
the Agreement Date.

 

oCompensation: The Company shall pay Consultant $5,000 per month, payable in
arrears on the last business day of the month.

 

oTerm: the earlier of (i) 1 year, renewable at the option of the Company, or
(ii) exercise of the Repurchase Right.

 

oNoncompete: during the Term and for a period of 1 year thereafter.
Notwithstanding the foregoing, no non-compete shall be enforced in the event of
exercise of the Repurchase Right. The terms of the Noncompete shall specify the
business of the Company in such a manner as to make it clear that the business
of the Company does not relate to J&S’s trademarks on the lottery ball
characters .

 

oTermination: by Company upon 60 days notice, or immediately in the event of
Cause.

 

oExpenses: the Company shall provide Consultant customary reimbursement of
ordinary and necessary business-related expenses (including any travel expenses
approved by the Company in advance).

 

oRight of First Refusal. Consultant agrees to provide MGT with a right of first
refusal for any inventions made by Consultant during the term of this Agreement.

 

 

 

 

Exhibit E

 

Patents

 

Title Application Serial Number Patent Number Gaming device having a second
separate bonusing event 09/982,437

US 7,892,088

 

Gaming device having a second separate bonusing event 12/930,712 20110111848