SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of December
15, 2017 between MGT Capital Investments, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

 

ARTICLE I.
DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
capitalized terms that are not otherwise defined herein have following terms
have the meanings set forth in this Section 1.1:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(g).

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except Saturday, Sunday, any day which is a federal
legal holiday in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

 

“Closing Date” means the Business Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

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

 

“Company Counsel” means Sichenzia Ross Ference Kesner LLP, 1185 Avenue of the
Americas, New York, New York 10036.

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section
2.1.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

   

 

 

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(a).

 

“Material Permits” shall have the meaning ascribed to such term in Section
3.1(j).

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(d).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

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

 

“SEC Reports” means the reports, forms, statements and other documents required
to be filed by the Company under the Exchange Act.

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Securities purchased hereunder as specified below such Purchaser’s name
on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company and shall, where applicable,
include any direct or indirect subsidiary of the Company formed or acquired
after the date hereof.

 

“Transaction Documents” means this Agreement all exhibits and schedules thereto
and hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

 

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ARTICLE II. PURCHASE AND SALE

 

2.1 Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and delivery of
this Agreement by the parties hereto, the Company agrees to sell, and the
Purchasers, severally and not jointly, agree to purchase, up to an aggregate of
$____ (the “Purchase Price”) in principal amount of the Company’s Common Stock,
at a purchase price of Four dollars ($4.00) per share (the “Per Share Purchase
Price”). In addition, for each share of Common Stock purchased by a Purchaser
(each, a “Share”), the Purchaser shall receive a detachable Warrant to purchase
shares of Common Stock substantially in the form attached hereto as Exhibit A
(the “Warrant”) exercisable into the same number of shares of Common Stock at a
price of $4.50, subject to terms and conditions specified in the Warrant. Each
Purchaser shall deliver to the Company, in accordance with the terms set forth
in the Subscription Agreement, via wire transfer or a certified check,
immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser and the Company
shall deliver to each Purchaser its respective Securities pursuant to Section
2.2(a) and Section 2.2(c). The Company and each Purchaser shall deliver the
other items set forth in Section 2.2, deliverable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.3 hereof, the Closing
shall occur at the offices of Company Counsel or such other location as the
parties shall mutually agree.

 

2.2 Deliverables.

 

(a) On the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

 

(i) this Agreement duly executed by the Company; and

 

(ii) the Warrant duly executed by the Company.

 

(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:

 

(i) this Agreement duly executed by such Purchaser; and

 

(ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.

 

(c) Notwithstanding the foregoing or anything to the contrary herein, the
Company will not issue or otherwise put in the Purchaser’s name any Shares until
the satisfaction of each of the following conditions (the “Share Delivery
Conditions”): (i) no Shares shall be delivered prior to the date that is six (6)
months from the date hereof; (ii) the Purchaser shall have delivered to the
Company written notice specifying the number of Shares to be delivered (a “Share
Delivery Notice”); and (iii) such delivery of Shares will not result in the
Purchaser owning Common Stock in excess of the Maximum Percentage (as defined
below). Upon satisfaction of the Share Delivery Conditions, the Company will
deliver the number of Shares specified in the applicable Share Delivery Notice
within four (4) Business Days of the Purchaser’s delivery of the applicable
Share Delivery Notice.

 

(d) In the event the Company fails to deliver Shares within four (4) Business
Days of the Purchaser’s delivery of a Share Delivery Notice to the Company, then
in such event a late fee equal to 2% of the aggregate Purchase Price (but in any
event the cumulative amount of such late fees for each delivery failure shall
not exceed 200% of the aggregate Purchase Price) will be assessed for each day
beginning on the date that is five (5) Business Days from the date the Purchaser
delivered the applicable Share Delivery Notice to the Company until the
applicable Shares are delivered to the Purchaser.

 

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2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;

 

(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the Subscription Amount as set forth in
Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein;

 

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement; and

 

(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as may set forth in
any various schedules to this Agreement (the “Disclosure Schedules”), which
Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each Purchaser:

 

(a) Organization and Qualification. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation nor default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and except as set forth under Schedule 3.1(a), no
Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.

 

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(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Board of Directors
or the Company’s stockholders in connection therewith other than in connection
with the Required Approvals. Each Transaction Document to which it is a party
has been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(c) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents and the consummation by it to which it is a party of the
other transactions contemplated hereby and thereby do not and will not: (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result in
the creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.

 

(d) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than: (i) the filings required
pursuant to Section 4.7 and (ii) such consents, waivers, or authorizations as
have been obtained before the Closing (collectively, the “Required Approvals”).

 

(e) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.

 

(f) Capitalization. The capitalization of the Company prior to Closing is as set
forth in the Company’s SEC Reports. Other than as set forth in the SEC Reports,
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents except for such, if any, as will have
been validly waived before the Closing. The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale of the Securities.

 

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(g) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
(ii) could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.

 

(h) Compliance. To the Company’s knowledge, neither the Company nor any
Subsidiary: (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other material agreement or instrument to which it is a party or by which it or
any of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business, except in
each of the foregoing cases as could not have or reasonably be expected to
result in a Material Adverse Effect.

 

(i) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such permits could
not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

 

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(j) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title in all
personal property owned by it that, in each case, is material to the business of
the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties in any material respect. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.

 

(k) Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by the
Transaction Documents.

 

(l) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby.

 

(m) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.

 

(n) No General Solicitation. Neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under Regulation D promulgated under the Securities Act.

 

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(o) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself
and for no other Purchaser, hereby represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

 

(a) Organization; Authority. The Purchaser, (i) if a natural person, represents
that the Purchaser has reached the age of 21 and has full power and authority to
execute and deliver this Securities Purchase Agreement and all other related
agreements or certificates and to carry out the provisions hereof and thereof;
(ii) if a corporation, partnership, or limited liability company, or
association, joint stock company, trust, unincorporated organization or other
entity, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(b) Own Account. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

 

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it
was, and as of the date hereof it is, an “accredited investor” within the
meaning of Regulation D, Rule 501(a), promulgated by the Commission under the
Securities Act and will submit to the Company such further assurances of such
status as may be reasonably requested by the Company.

 

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment. The Purchaser and its advisers, if
any, have had a reasonable opportunity to ask questions of and receive answers
from a person or persons acting on behalf of the Company concerning the offering
and the business, financial condition and results of operations of the Company,
and all such questions have been answered to the full satisfaction of the
Purchaser and its advisers, if any;

 

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(e) Non-Reliance. In evaluating the suitability of an investment in the Company,
the Purchaser has not relied upon any representation or information (oral or
written) other than as stated in this Agreement;

 

(f) Risk Factors.

 

(i) The Purchaser understands and agrees that purchase of the Securities is a
high-risk investment and the Purchaser is able to afford an investment in a
speculative venture having the risks and objectives of the Company. The Purchase
has carefully read and considered the matters set forth this Agreement and, the
matters contained in the Company’s SEC Reports, including those matters set
forth under the caption “Risk Factors” contained in Company’s various SEC
Reports. Purchaser understands that any of such risk may materially adversely
affect the Company’s operations and future prospects.

 

(ii) The Purchase is aware that a number of law firms have announced that they
are investigating claims on behalf of shareholders of the Company regarding
potential violations of the Exchange Act. In addition, the Company and its Board
of Directors have been served with a Summons and Complaint alleging that the
members of the Board of Directors have breached their fiduciary duties. While
the Company and the Board of Directors believe that there are no merits to the
alleged claims, the results of any investigation, or the outcome of any claims
that may brought against the Company or its Board of Directors cannot be
predicted with certainty. Moreover, regardless of the outcome, investigations
can have an adverse impact on us because it may entail a significant amount of
costs to defend the Company against any claims, such claims may negatively
affect morale of employees and may divert the attention of management.

 

(iii) The Purchaser is aware that it must bear the substantial economic risks of
the investment in the Securities indefinitely because none of the Securities may
be publicly sold, hypothecated or otherwise disposed of unless subsequently
registered under the Securities Act and applicable state securities laws or an
exemption from such registration is available. Legends will be placed on the
certificates representing the Securities to the effect that such securities have
not been registered under the Securities Act or applicable state securities laws
and appropriate notations thereof will be made in the Company’s books.

 

(g) Public Filings. The Purchaser is aware that an investment in the Securities
involves a number of very significant risks and has carefully read and
considered the disclosure in the Company’s Form 10-K for the year ended December
31, 2016, its Form 10-Q for the quarter ended September 30, 2017, and all other
disclosure filings made by the Company which are available on the Edgar System
at SEC.gov and understands that certain risks may materially adversely affect
the Company’s operations and future prospects

 

(h) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(i) Acknowledgment of Restricted Securities. The Purchaser has read and
understands the following:

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT,
OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN
RECOMMENDED, APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION,
ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING
OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM OR THIS SECURITIES PURCHASE
AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL

 

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, or in connection
with a pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Common
Stock under the Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:

 

[NEITHER THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISEABLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

(c) Certificates evidencing the shares of Securities shall be eligible for
removal of the restrictive legend, (a) following any sale of such shares of
Securities pursuant to Rule 144, or (b) if such Securities are eligible for sale
under Rule 144, without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such Securities and
without volume or manner- of-sale restrictions, (c) following any sale of such
shares of Securities, pursuant to the plan of distribution in an effective
registration statement (in compliance with any prospectus delivery
requirements), or (d) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) (the “Removal Date”). The
Company shall cause its counsel to issue a legal opinion to its transfer agent
promptly after the Removal Date if required by the transfer agent to effect the
removal of the legend hereunder as permitted by applicable law then in effect.
The Company agrees that following the Removal Date, it will, no later than five
(5) trading days following the delivery by a Purchaser to the Company or the
transfer agent of a certificate representing the Securities, as the case may be,
issued with a restrictive legend, together with any reasonable certifications
requested by the Company, the Company’s counsel or the transfer agent (such
fifth (5th) trading day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends. The Company may not make any notation on
its records or give instructions to the transfer agent that enlarge the
restrictions on transfer set forth herein. Certificates for Securities subject
to legend removal hereunder shall be transmitted by the transfer agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser if the transfer
agent is then a participant in such system and the Company is eligible to use
such system and as directed by such Purchaser if either (i) there is an
effective registration statement permitting the resale of such Securities by the
Purchaser (and the Purchaser provides the Company or the Company’s counsel with
any requested certifications with respect to future sales of such shares) or
(ii) the shares are eligible for resale by the Purchaser under Rule 144, without
the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Securities and without volume or
manner-of-sale restrictions.

 

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(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees
that such Purchaser will sell any Securities only pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a registration statement, they will be sold in
compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.

 

4.2 Integration. The Company shall not sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities to the Purchasers in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.

 

4.3 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for general working capital purposes.

 

4.4 Equal Treatment of Purchasers. No consideration (including any modification
of any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all parties to the
Transaction Documents. For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

 

4.5 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

 

4.6 Share Reserve. In order to allow for, as of the relevant date of
determination, the purchase of all of the Shares to be purchased hereunder, the
Company shall take all action necessary from time to time to reserve for the
benefit of the Purchaser a number of authorized but unissued shares of Common
Stock equal to the number of Shares being purchased by Purchaser hereunder (such
amount is referred to as the “Share Reserve”). If at any time the Share Reserve
is less than required herein, the Company shall immediately increase the Share
Reserve in an amount equal to no less than the deficiency. If the Company does
not have sufficient authorized and unissued shares of Common Stock available to
increase the Share Reserve, the Company shall call a special meeting of the
stockholders as soon as practicable after such occurrence, but in no event later
than thirty (30) calendar days after such occurrence, and hold such meeting as
soon as practicable thereafter, but in no event later than sixty (60) calendar
days after such occurrence, for the sole purpose of increasing the number of
authorized shares of Common Stock. The Company’s management shall recommend to
the Company’s stockholders to vote in favor of increasing the number of
authorized shares of Common Stock. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common Stock. The
Company shall use its best efforts to cause such additional shares of Common
Stock to be authorized so as to comply with the requirements of this subsection.

 

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4.7 Ownership Limitation. Notwithstanding anything to the contrary contained in
this Agreement, if at any time the Purchaser shall or would be issued shares of
Common Stock hereunder, but such issuance would cause the Purchaser (together
with its affiliates) to own a number of shares exceeding 4.99% of the number of
shares of Common Stock outstanding on such date (the “Maximum Percentage”), the
Company must not issue to the Purchaser shares of the Common Stock which would
exceed the Maximum Percentage. The shares of Common Stock issuable to the
Purchaser that would cause the Maximum Percentage to be exceeded are referred to
herein as the “Ownership Limitation Shares”. The Company will reserve the
Ownership Limitation Shares for the exclusive benefit of the Purchaser. From
time to time, the Purchaser may notify the Company in writing of the number of
the Ownership Limitation Shares that may be issued to the Purchaser without
causing the Purchaser to exceed the Maximum Percentage. Upon receipt of such
notice, the Company shall be unconditionally obligated to immediately issue such
designated shares to the Purchaser, with a corresponding reduction in the number
of the Ownership Limitation Shares. For purposes of this Section, beneficial
ownership of Common Stock will be determined under Section 13(d) of the Exchange
Act. By written notice to the Company, the Purchaser 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 the Purchaser.

 

ARTICLE V.
MISCELLANEOUS

 

5.1 Termination. This Agreement may be terminated by any party hereto without
any effect whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before December 31, 2017; provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties). Notwithstanding the foregoing, once the Purchaser has
delivered the Purchase Price to the Company, the Company may not terminate this
Agreement for any reason and shall be obligated to deliver the Shares and the
Warrant to the Purchaser in accordance with the terms of this Agreement.

 

5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

 

5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 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.

 

5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchasers, in the case of a waiver, by the
party against whom enforcement of any such waived provision is sought. No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.

 

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5.6 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

5.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided that such
transfer complies with all applicable federal and state securities laws and that
such transferee agrees in writing with the Company to be bound, with respect to
the transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”

 

5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

 

5.9 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.

 

5.10 Survival. The representations and warranties shall survive the Closing and
the delivery of the Securities until, with respect to each Purchaser, the
Securities held by such Purchaser has been exercised in full at which time they
shall expire such respect to Purchaser and shall no longer be of any force or
effect.

 

5.11 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.

 

5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

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5.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.

 

5.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

 

5.15 Independent Nature of Purchasers’ Obligations and Rights . The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

 

5.16 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken, or such right may be
exercised on the next succeeding Business Day.

 

5.17 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

 

5.18 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

                              [SIGNATURE PAGES FOLLOW]

 

 14 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

MGT Capital Investments, Inc.,

 

  Address for Notice:             512 S. Mangum St. Suite 408, Durham, NC 27701
            By: Robert Ladd             Name: Robert Ladd             Title:
President and Chief Executive Officer  

 

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

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

[SIGNATURE PAGE FOR PURCHASER FOLLOWS]