Exhibit 10.3


 


SECURITIES PURCHASE AGREEMENT


 


THIS SECURITIES PURCHASE AGREEMENT is made as
of the 14th day of
May, 2009 by and between XShares Group, Inc., a Delaware corporation (the “Company”), and MGT Capital Investments, Inc.,
a Delaware corporation, (the “Purchaser”).


 


The parties hereby agree as follows:


 


1.                                       Purchase
and Sale of Note and Preferred Stock.


 


1.1.        Issuance
of Convertible Promissory Note.


 


(a)           The
Board of Directors has duly approved the issuance of the Convertible Promissory
Note (the “Note”), in the original
principal amount of $1,100,000, made by the Company in favor of the Purchaser
in the form annexed hereto as Exhibit A.


 


(b)           Subject
to the terms and conditions of this Agreement, the Purchaser agrees to purchase
the Note immediately upon execution of this Agreement, and the Company agrees
to execute and deliver the Note to the Purchaser immediately upon receipt from
the Purchaser of $1,000,000.


 


1.2.        Sale
and Issuance of Series B Preferred Stock.


 


(a)           The
Board of Directors has duly adopted and approved and submitted to the
shareholders of the Company for their adoption and approval, the Second Amended
and Restated Certificate of Incorporation attached to this Agreement as Exhibit B
(the “Certificate”).  Upon due approval of the Certificate by the
shareholders of the Company, the Company shall file the Certificate with the
Secretary of State of the State of Delaware


 


(b)           Subject
to the terms and conditions of this Agreement, the Purchaser agrees to purchase
at the Closings (as defined below) and the Company agrees to sell and issue to
the Purchaser at the Closings that number of shares of Series B Preferred
Stock, $.0001 par value per share (the “Series B
Preferred Stock”), set forth in Section 1.3(a) below, at a
purchase price of $0.0284 per share.  The
shares of Series B Preferred Stock issued to the Purchaser pursuant to
this Agreement shall be referred to in this Agreement as the “Shares” (and together with the Note, the “Purchased  Securities”).


 


1.3.            Closing; Delivery.


 


(a)           Subject
to the compliance with the conditions set forth in Section 4 and 5, the  initial purchase and sale of 38,732,394
Shares shall take place immediately upon filing of the Certificate with the
Secretary of State of the State of Delaware (the “Initial Closing”).


 


(b)           Subject
to the compliance with the conditions set forth in Section 4 and 5, the
second purchase and sale of 35,211,268 Shares shall take place at the offices
of Gersten Savage LLP, 600 Lexington Avenue, New York, New York via the
exchange of documents and signatures, at 11:00 a.m, New York time, on the later
of (i) July 16, 2009 or (ii) five days following the filing of
the Certificate with the Secretary of State of the State of Delaware, or at
such other time and place as the Company and the Purchaser mutually agree upon,
in writing (the “Subsequent Closing”); provided, however, that the
Purchaser, in addition to any other rights of Purchaser set forth herein, shall
have no obligation to purchases the Shares pursuant to this Section 1.3(b) unless
the Purchaser has determined, in its sole discretion, prior to such investment,
that the Company has been operating the Company’s business in accordance with
the budget attached hereto as Exhibit C (the “Budget”), which Budget has been 


 

















 


approved by the Company and the Purchaser as of the
date of this Agreement  (the Initial
Closing and the Subsequent Closing shall be collectively referred to herein as
the “Closings.”)


 


(c)           At
each Closing, the Company shall deliver to the Purchaser a certificate
representing the Shares being purchased by the Purchaser at such Closing
against payment of the purchase price therefor by wire transfer to a bank
account designated by the Company, by cancellation or conversion of
indebtedness of the Company to Purchaser, or by any combination of such
methods.  Without limiting the generality
of the foregoing, at the Initial Closing, the Purchaser shall deliver the
original Note as consideration for the Shares issued at the Initial Closing.


 


1.4           Use
of Proceeds.  In accordance with the
directions of the Company’s Board of Directors, the Company will use the
proceeds from the sale of the Shares as set forth in the Budget.


 


1.5           Defined Terms Used in this Agreement.  In
addition to the terms defined above, the following terms used in this Agreement
shall be construed to have the meanings set forth or referenced below.


 


“Affiliate”
means, with respect to any specified Person, any Person, directly or
indirectly, through one or more intermediaries controlling, controlled by or
under common control with such Person.


 


“Bylaws”
means the Bylaws of the Company in the form provided to the Purchaser.


 


“Code”
means the Internal Revenue Code of 1986, as amended.


 


“Company
Intellectual Property” means all patents, patent applications,
trademarks, trademark applications, service marks, tradenames, copyrights,
trade secrets, domain names, mask works, information and proprietary rights and
processes, licenses in to and under any of the foregoing, that are owned by the
Company or used by the Company in the conduct of the Company’s business as now
conducted and as presently proposed to be conducted.


 


“ETF”
means any of the Company’s exchange-traded funds.


 


“Material
Adverse Effect” means any occurrence, state of facts, change, event,
effect or circumstance that, individually or in the aggregate, has, or would
reasonably be expected to have, a material adverse effect on the assets,
liabilities, business, results of operations or financial condition of the
Company, including, without limitation, the Company’s insolvency or a force
majeure event, other than any occurrence, state of facts, change, event, effect
or circumstance to the extent resulting from: (i) the announcement of the
execution of this Agreement, or (ii) any change in United States generally
accepted accounting principles (“GAAP”)
or interpretation thereof after the date hereof or (iii) the execution and
performance of or compliance with this Agreement.


 


“Person” means an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association,
an unincorporated organization, Governmental Authority and any other entity.


 


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


 


“Shares”
means the shares of Series B Preferred Stock issued at the Initial Closing
and at the Subsequent Closing, if any.


 


2

















 


2.                                       Representations
and Warranties of the Company.  The Company hereby represents and warrants to
each Purchaser that, except as set forth on the Disclosure Schedule attached as
Exhibit F to this Agreement, which exceptions shall be deemed to be
part of the representations and warranties made hereunder, the following
representations are true and complete as of the date hereof, except as
otherwise indicated.  The Disclosure
Schedule shall be arranged in sections corresponding to the numbered and
lettered sections and subsections contained in this Section 2, and
the disclosures in any section or subsection of the Disclosure Schedule shall
qualify other sections and subsections in this Section 2 only to
the extent it is readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections.


 


2.1.          Organization, Good Standing, Corporate Power
and Qualification.  Each of the Company, the ETFs, and the
Company Subsidiaries is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.  As set forth in Schedule
2.1, each of the Company, the ETFs, and the Company Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not reasonably be expected to have a Material Adverse
Effect.  The Company has heretofore made
available to Purchaser accurate and complete copies of the Company’s, each
ETFs, and each Company Subsidiaries’ certificate of incorporation, by-laws,
operating agreements and the equivalent organizational documents of each of the
Company Subsidiaries, each as currently in effect.  None of the Company, any ETF or any Company Subsidiary
is in violation of any provision of its respective certificate of
incorporation, by-laws or equivalent organizational documents as the case may
be.


 


2.2.            Capitalization. The authorized capital of the Company shall
consist, immediately prior to the Initial Closing, of:


 


(i)            1,400,000,000 shares of common stock, $0.0001
par value per share (the “Common Stock”),
293,994 shares of which are issued and outstanding.


 


(ii)           672,000,000 shares of preferred stock, $0.0001 par value per share (the
“Preferred Stock”) (the Common
Stock and the Preferred Stock are collectively referred to as the “Securities”): (i) 172,000,000 of which
have been designated Series A Preferred Stock, 162,257,593 shares of which
are issued and outstanding; and (ii) 500,000,000 of which have been designated
Series B Preferred Stock, none of which is issued or outstanding.  The rights, privileges and preferences of the
Preferred Stock are as stated in the Certificate and as provided by the general
corporation law of the jurisdiction of the Company’s incorporation.


 


(b)           All
of the outstanding securities issued by the Company have been duly authorized,
are fully paid and nonassessable and were issued in compliance with all
applicable federal and state securities laws. 
The Company holds no treasury stock.


 


(c)           Other
than (X) the Note and (Y) as otherwise set forth in the Disclosure
Schedule or on the capitalization table attached hereto as Exhibit D,
there are no (i) outstanding options, warrants, puts, calls, convertible
securities, preemptive or similar rights, (ii)  bonds, debentures, notes
or other indebtedness having general voting rights or that are convertible or
exchangeable into securities having such rights, or (iii) subscriptions or
other rights, agreements, arrangements, contracts or commitments of any
character, relating to the issued or unissued securities of the Company or any
of the 


 


3

















 


Company Subsidiaries or obligating the Company or
any of the Company Subsidiaries to issue, transfer, deliver or sell or cause to
be issued, transferred, delivered, sold or repurchased any options , or other
equity interest in, the Company or any of the Company Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests, or obligating the Company or any of the Company Subsidiaries to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment for such equity
interest.  There are no outstanding
obligations of the Company or any of the Company Subsidiaries to repurchase,
redeem or otherwise acquire any capital stock of, or other equity interests in,
the Company or any of the Company Subsidiaries or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
other entity.


 


(d)           To
the Company’s knowledge, there are no stockholders or members agreements,
voting trusts or other agreements or understandings with respect to the voting
of the Securities or the capital stock or equity interests of any Company
Subsidiary.


 


(e)           The
Company has agreed to reserve 19,000,000 shares of Common Stock for issuance to
officers, directors, employees and consultants of the Company pursuant to a
2008 Stock Option Plan, as amended (the “Stock
Plan”). Of such reserved shares of Common Stock, no shares have been
issued pursuant to restricted stock purchase agreements, and no options to
purchase shares have been granted to officers, directors, employees and
consultants pursuant to the Stock Plan.  The Company has furnished to the Purchaser
complete and accurate copies of the proposed Stock Plan and forms of agreements
used thereunder.


 


(f)            A
true, complete and correct copy of the Company’s capitalization table as of the
date hereof is attached hereto as Exhibit D.


 


2.3.        Authorization.  All corporate action required to be taken by
the Company’s Board of Directors and stockholders in order to authorize the
Company to enter into this Agreement, and to issue the Shares at the Closing
and the Common Stock issuable upon conversion of the Shares, has been taken or
will be taken prior to the Initial Closing. 
All action on the part of the officers of the Company necessary for the
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder to be performed as of the Initial Closing, and the
issuance and delivery of the Shares has been taken or will be taken prior to
the Initial Closing.  This Agreement,
when executed and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of
general application relating to or affecting the enforcement of creditors’
rights generally, and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies.


 


2.4.        Valid Issuance of Purchased Securities.  The
Purchased Securities, when issued, sold and delivered in accordance with the
terms and for the consideration set forth in this Agreement, will be validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under applicable state and federal securities
laws and liens or encumbrances created by or imposed by the Purchaser.  Assuming the accuracy of the representations
of the Purchaser in Section 3 of this Agreement and subject to the
filings described in Section 2.5(ii) below, the Shares will be
issued in compliance with all applicable federal and state securities
laws.  The Common Stock issuable upon
conversion of the Shares has been duly reserved for issuance, and upon issuance
in accordance with the terms of the Certificate, will be validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under applicable federal and state securities laws and
liens or encumbrances created by or imposed by the Purchaser.  Based in part upon the representations of the
Purchaser in Section 3 of this Agreement, and subject to Section 2.5
below, the Common Stock issuable 


 


4

















 


upon conversion of the Shares will be issued
in compliance with all applicable federal and state securities laws.


 


2.5.        Governmental Consents and Filings.  Assuming the accuracy of the
representations made by the Purchaser in Section 3 of this
Agreement, no consent, approval, waiver, authorization or permit of, or notice
to or declaration or filing with (each, a “Consent”),
any nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including any governmental or regulatory authority, agency, department, board,
commission, administration or instrumentality, any court, tribunal or
arbitrator or any self-regulatory organization (each, a “Governmental Authority”), on the part of
the Company, ETF or any of the Company Subsidiaries is required to be obtained
or made in connection with the execution, delivery or performance by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, other than (i) the filing of the Certificate, which
will have been filed as of the Initial Closing, and (ii) filings pursuant
to Regulation D of the Securities Act, and applicable state securities laws,
which have been made or will be made in a timely manner.


 


2.6.        Litigation.  Except as set forth in the Disclosure
Schedule, there is no claim, action, suit, proceeding, arbitration, complaint,
charge or, investigation pending or to the knowledge of the Company, threatened
against the Company.  The Company is not
a party nor is named as subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.  There is no action,
suit, proceeding or investigation by the Company pending or which the Company
intends to initiate.  The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened (or any basis therefor known to the Company) involving
the current or prior employment of or engagement of any of the Company’s
employees or consultants, their services provided in connection with the
Company’s business, or any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers.


 


2.7.        Compliance with Other Instruments.  The Company is not in
violation or default (i) of any provisions of its Certificate or Bylaws, (ii) of
any instrument, judgment, order, writ or decree, (iii) under any note,
indenture or mortgage, or (iv) under any lease, agreement, contract or
purchase order to which it is a party or by which it is bound or, of any
provision of federal or state statute, rule or regulation applicable to
the Company, the violation of which would have a Material Adverse Effect.  The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not result in any such violation or be in conflict with or constitute,
with or without the passage of time and giving of notice, either (i) a
default under any such provision, instrument, judgment, order, writ, decree,
note, indenture, mortgage, lease, agreement, contract or purchase order or (ii) an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, forfeiture, or nonrenewal
of any permit or license applicable to the Company.


 


5

















 


2.8.            Agreements; Actions. Except for the Convertible Note and this
Agreement, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to,
the Company in excess of $50,000, (ii) the license of any patent,
copyright, trademark, trade secret or other proprietary right to or from the
Company, (iii) the grant of rights to license, market, or sell its
products to any other Person that limit the Company’s exclusive right to
develop, market or sell its products, or (iv) indemnification by the
Company with respect to infringements of proprietary rights.


 


(b)           The
Company has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii)  incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of $50,000 or in excess of $100,000 in
the aggregate, (iii) except as listed on Schedule 2.8(b)(iii), made
any loans or advances to any Person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights.


 


(c)           The
Company is not a guarantor or indemnitor of any indebtedness of any other
Person.


 


(d)           The
Company has not engaged in the past twelve (12) months in any discussion with
any representative of any Person (other than the Purchaser) regarding (i) a
sale or exclusive license of all or substantially all of the Company’s assets,
or (ii) any merger, consolidation or other business combination
transaction of the Company with or into another Person.


 


2.9.            Certain Transactions. 
Except as listed on Schedule 2.9, the Company is not indebted,
directly or indirectly, to any of its directors, officers or employees or to
their respective spouses or children or to any Affiliate of any of the
foregoing, other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or employee relocation expenses and
for other customary employee benefits made generally available to all
employees.  None of the Company’s
directors, officers or employees, or any members of their immediate families,
or any Affiliate of the foregoing are, directly or indirectly, indebted to the
Company.


 


2.10.          Absence of Liens.  The
property and assets that the Company owns are free and clear of all mortgages,
deeds of trust, liens, loans and encumbrances, except for statutory liens for
the payment of current taxes that are not yet delinquent.  With respect to the property and assets it
leases, the Company is in compliance with such leases and, to its knowledge,
except as listed on Schedule 2.10, holds a valid leasehold interest free
of any liens, claims or encumbrances other than those of the lessors of such
property or assets. With respect to each such Company lease, no lessor, lien,
claim, or encumbrance interferes with the Company’s use and quiet enjoyment of
such leased property or asset.


 


2.11.          Financial Statements.  The
Company has delivered to the Purchaser its audited financial statements
(including balance sheet, income statement and statement of cash flows) as of December 31,
2007 and December 31, 2008 and unaudited financial statements for the
three-month period ended March 31, 2009 (collectively, the “Financial Statements”).  The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except that the unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles.  The
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year-end audit adjustments, which are not material. Except
as set forth in the Financial Statements, the Company has no liabilities or
obligations, contingent or otherwise, other than (i) liabilities incurred
in the 


 


6

















 


ordinary course of business subsequent to March 31,
2009 and which have been disclosed to the Company in writing (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
which have been disclosed to the Company in writing and (iii) liabilities
and obligations of a type or nature not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
all such cases, individually and in the aggregate would not have a Material
Adverse Effect.  The Company maintains
and will continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.


 


2.12.          Changes.  Since the date of the most
recent Financial Statements, other than the Convertible Note,  there has not been:


 


(a)           any
change in the assets, liabilities, financial condition or operating results of
the Company from that reflected in the Financial Statements, except changes in
the ordinary course of business that have not caused, in the aggregate, a
Material Adverse Effect;


 


(b)           any
damage, destruction or loss, whether or not covered by insurance, that would
have a Material Adverse Effect;


 


(c)           any
waiver or compromise by the Company of a valuable right or of a material debt
(in excess of $10,000) owed to it;


 


(d)           any
satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and the
satisfaction or discharge of which would not have a Material Adverse Effect;


 


(e)           any
material change to a material contract or agreement (in excess of $10,000) by
which the Company or any of its assets is bound or subject;


 


(f)            any
change in any compensation arrangement or agreement with any employee, officer,
director or stockholder;


 


(g)           any
resignation or termination of employment of any officer, employee, or
consultant of the Company;


 


(h)           any
mortgage, pledge, transfer of a security interest in, or lien, created by the
Company, with respect to any of its material properties or assets (in excess of
$10,000), except liens for taxes not yet due or payable and liens that arise in
the ordinary course of business and do not impair the Company’s ownership or
use of such property or assets;


 


(i)            any
loans or guarantees made by the Company to or for the benefit of its employees,
officers directors or consultants, or any members of their immediate families,;


 


(j)            any
declaration, setting aside or payment or other distribution in respect of any
of the Company’s capital stock, or any direct or indirect redemption, purchase,
or other acquisition of any of such stock by the Company;


 


(k)           any
sale, assignment or transfer of any Company Intellectual Property that could
reasonably be expected to result in a Material Adverse Effect;


 


(l)            receipt
of notice that there has been a loss of, or material order cancellation by, any
major customer of the Company;


 


7

















 


(m)          any
other event or condition of any character, other than events affecting the
economy or the Company’s industry generally,   that could reasonably be expected to result in
a Material Adverse Effect; or


 


(n)           any
arrangement or commitment by the Company to do any of the things described in
this Section 2.12.


 


2.13.          Tax Returns and Payments.  The
Company has timely paid all federal, state, county, local or foreign taxes due
and payable.  There are no accrued and
unpaid federal, state, county, local or foreign taxes of the Company which are
due, whether or not assessed or disputed. 
There have been no examinations or audits of any tax returns or reports
by any applicable federal, state, local or foreign governmental agency.  The Company has duly and timely filed all
federal, state, county, local and foreign tax returns required to have been
filed by it and there are in effect no waivers of applicable statutes of
limitations with respect to taxes for any year. 
The Company has properly withheld and paid all taxes required to have
been withheld and paid in connection with any amounts paid or credited to any
employee, independent contractor, creditor, stockholder or other third party.


 


2.14.          Insurance.  The Company, each ETF, and
each Company Subsidiary is covered by valid and currently effective insurance
policies issued in favor of the Company or one or more of the ETFs or Company
Subsidiaries that are customary for companies of similar size in the industry
and locales in which the Company and the Company Subsidiaries operate.  Schedule 2.14 sets forth a true,
correct and complete list of all insurance policies issued in favor of the
Company, any ETF, or any Company Subsidiary, or pursuant to which the Company,
any ETF, or any Company Subsidiary is a named insured or otherwise a
beneficiary, as well as any historic incurrence-based policies still in
force.  With respect to each such
insurance policy, (i) the policy is in full force and effect and all
premiums due thereon have been paid, (ii) neither the Company or any ETF,
nor any Company Subsidiary is in any material respect, in breach of or default
under, and neither the Company or any ETF, nor any Company Subsidiary have
taken any action or failed to take any action which, with notice or the lapse
of time or both, would constitute such a breach or default, or permit
termination or modification of, any such policy, (iii) to the knowledge of
the Company, no insurer on any such policy has been declared insolvent or placed
in receivership, conservatorship or liquidation, and no notice of cancellation
or termination has been received with respect to any such policy,  and (iv) the Company knows of no reason
any such insurance policy would be cancelled or modified in any material
respect as a result of the transactions contemplated hereby.


 


2.15.          Regulatory Agreements; Permits.


 


(a)           There
are no (A) written agreements, consent agreements, memoranda of
understanding, commitment letters, cease and desist orders, or similar undertakings
to which the Company, any ETF, or any Company Subsidiary is a party, on the one
hand, and any Governmental Authority is a party or addressee, on the other
hand, (B ) Orders or directives of or supervisory letters from a Governmental
Authority specifically with respect to the Company, any ETF, or any Company
Subsidiary, or (C) resolutions or policies or procedures adopted by the
Company, any ETF, or any Company Subsidiary at the request of a Governmental
Authority, that (1) limit in any 
respect the ability of the Company, any ETF, or any of the Company
Subsidiaries to conduct its business as currently being conducted or (2) in
any manner relate to the ability of the Company, any ETF,  or any of the Company Subsidiaries to pay
dividends or otherwise restrict the conduct of business of the Company, any
ETF, or any of the Company Subsidiaries in any respect.


 


8

















 


(b)           The
Company, the ETFs, and the Company Subsidiaries hold all permits, licenses,
franchises, grants, authorizations, consents, exceptions, variances,
exemptions, orders and other governmental authorizations, certificates,
consents and approvals necessary to lawfully conduct their businesses as
presently conducted and contemplated to be conducted, and to own, lease and
operate their assets and properties (collectively, the “Company Permits”), all of which are in
full force and effect, and no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened,.  Schedule 2.15(a) sets forth each
Company Permit.  Each of the Company, the
ETFs, and the Company Subsidiaries are not in violation in any material respect
of the terms of any Company Permit.


 


(c)           No
investigation, review or market conduct examination by any Governmental
Authority with respect to the Company, any ETF, or any Company Subsidiary is
pending or, to the knowledge of the Company, threatened, nor does the Company
have knowledge of any Governmental Authority’s intention to conduct any such
investigation or review.


 


(d)           Each
of the Company, each ETF, and each Company Subsidiary and each of their
respective officers and employees who are required to be registered, licensed
or qualified as (A) an investment company, broker-dealer, investment
adviser, futures commission merchant or (B) a registered principal,
registered representative, investment adviser representative, insurance agent
or salesperson with the SEC or any securities or insurance commission or other
Governmental Authority are duly registered as such and such registrations are
in full force and effect, or are in the process of being registered as such
within the time periods required by applicable law, except in each case for any
failures to be so registered, licensed or qualified that would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect. Each of the Company, each ETF, and each Company Subsidiary and each of
their respective officers and employees are in compliance with all applicable
federal, state and foreign laws requiring any such registration, licensing or
qualification, and are not subject to any liability or disability by reason of
the failure to be so registered, licensed or qualified, except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.


 


(e)           Each
of the Company, each ETF, and each Company Subsidiary, and, to the knowledge of
the Company, its solicitors, third party administrators, managers, brokers and
distributors, have marketed, sold and issued investment products and securities
in compliance with all applicable laws governing sales processes and practices,
except in each case as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.


 


(f)            Each
of the Company, each ETF, and each Company Subsidiary, if and as applicable,
has filed all forms, requests for exemptive orders, reports, schedules,
statements and other documents (inclusive of any certifications mandated by
applicable Law) required to be filed or furnished by the Company with the SEC
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act, the
Investment Advisers Act of 1940 (the “Advisers
Act”) and the Investment Company Act of 1940 (the “Investment Company Act”) together with
any amendments, restatements or supplements thereto, and will file all such
forms, reports, schedules, statements and other documents required to be filed
subsequent to the date of this Agreement. 
Schedule 2.15(f) lists and the Company has delivered to the
MGT copies in the form filed with the SEC of all of the foregoing forms,
requests for exemptive orders, reports, schedules, statements and other
documents (inclusive of any certifications mandated by applicable Law) and all
communications in connection therewith, except to the extent available in full
without redaction on any publicly available database (including, without
limitation, FINRA or the SEC’s website through EDGAR) for at least two (2) days
prior to the date of this Agreement (collectively, the “Company SEC Reports”).


 


9

















 


(g)           The
Company SEC Reports (A) were prepared in all material respects in
accordance with the requirements of the Securities Act, the Exchange Act, the
Investment Advisers Act and the Investment Company Act, as the case may be, and
the rules and regulations thereunder and (B) did not at the time they
were filed with the SEC (except to the extent that information contained in any
Company SEC Report has been revised or superseded by a later filed Company SEC
Report) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.  Each director
and executive officer of the Company, each ETF, and each Company Subsidiary, if
and as applicable, has filed with the SEC on a timely basis all statements
required by the applicable Law since the date of the applicable entity’s
formation. As used in this Section 2.15(g), the term “file” shall be broadly construed to
include any manner in which a document or information is furnished, supplied or
otherwise made available to FINRA or the SEC.


 


(h)           No
event or circumstance has occurred or exists with respect to the Company, any
ETF, or any Company Subsidiary or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.


 


2.16.          Corporate Documents.  The Certificate and Bylaws of the Company are
in the forms attached hereto or previously provided to the Purchaser or its
counsel.  The copy of the minute books of
the Company provided to the Purchaser contains minutes of all meetings of
directors and stockholders and all actions by written consent without a meeting
by the directors and stockholders since the date of incorporation and
accurately reflects in all material respects all actions by the directors (and
any committee of directors) and stockholders with respect to all transactions
referred to in such minutes.


 


2.17           Real Property Holding Corporation.  The Company is not now and has never been a
“United States real property holding corporation” as defined in the Code and
any applicable regulations promulgated thereunder.  The Company has filed with the Internal
Revenue Service all statements, if any, with its United States income tax
returns which are required under such regulations.


 


2.18           Investment Company Act.  The Company is not an “investment company” or
a person directly or indirectly “controlled” by or acting on behalf of an “investment
company,” in each case within the meaning of the Investment Company Act of
1940, as amended. Each ETF has obtained all required exemptive orders under the
Investment Company Act to carry on its business as currently conducted and as
proposed to be conducted.


 


2.19           Disclosure. 
The Company has delivered the Budget to the Purchaser certain. There is
a reasonable basis for each of the assumptions set forth in the Budget. No
representation or warranty of the Company contained in this Agreement, and document
delivered to the Purchaser, and no certificate furnished or to be furnished to
Purchasers at the Closings contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.  The Budget was
prepared in good faith; however, the Company does not warrant that it will
achieve any results projected in the Budget. 
It is understood that this representation is qualified by the fact that
the Company has not delivered to the Purchaser, and has not been requested to
deliver, a private placement or similar memorandum or any written disclosure of
the types of information customarily furnished to purchasers of securities
other than as specifically set forth in this Agreement.


 


10
















 


2.20                           Employee
Matters.


 


(a)                                  There are no
Actions pending or, to the knowledge of the Company, threatened involving the
Company or any of the Company Subsidiaries and any of their employees,
managers, consultants or former employees, including any harassment,
discrimination, retaliatory act or similar claim.  There has been: (A) no labor union
organizing or attempting to organize any employee of the Company or any of the
Company Subsidiaries into one or more collective bargaining units; and (B) no
labor dispute, strike, work slowdown, work stoppage or lock out or other
collective labor action by or with respect to any employees, managers or
consultants of the Company or any of the Company Subsidiaries pending or, to
the Company’s knowledge, threatened against the Company or any of the Company
Subsidiaries.  Neither the Company nor
any of the Company Subsidiaries is a party to, or bound by, any collective
bargaining agreement or other agreement with any labor organization applicable
to the employees, managers or consultants of the Company or any of the Company
Subsidiaries and no such agreement is currently being negotiated.


 


(b)                                 The Company and
the Company Subsidiaries (A) are in compliance in all respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, health and safety and wages and hours, including Laws
relating to discrimination, disability, labor relations, hours of work, payment
of wages and overtime wages, pay equity, immigration, workers compensation,
working conditions, employee scheduling, occupational safety and health, family
and medical leave, and employee terminations, and have not received written
notice, or to the knowledge of the Company any other form of notice, there is
any unfair labor practice charge or complaint against the Company or any of the
Company Subsidiaries pending, (B) are not liable for any arrears of wages
or any material penalty for failure to comply with any of the foregoing and (C) are
not liable for any  payment to any trust
or other fund or to any Governmental Authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the ordinary course of
business and consistent with past practice). 
there are no complaints, lawsuits, arbitrations, administrative
proceedings, or other Actions pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary brought by or on
behalf of any applicant for employment, any current or former employee, any
person alleging to be a current or former employee, any class of the foregoing,
or any Governmental Authority, relating to any such Law or regulation, or
alleging breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.


 


2.21                           Environmental
Matters.


 


(a)                            Neither the
Company nor any of the Company Subsidiaries is the subject of any federal,
state, local or foreign Order, judgment or claim, and neither the Company nor
any of the Company Subsidiaries has received any notice or claim, or entered
into any negotiations or agreements with any person, that would impose a
liability or obligation under any Environmental Law;


 


(b)                           To the
knowledge of the Company, the Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws;


 


(c)                            Neither the
Company nor any of the Company Subsidiaries has manufactured, treated, stored,
disposed of, arranged for or permitted the disposal of, generated, handled or
released any Hazardous Substance, or owned or operated any property or
facility, in a manner that has given or would reasonably be expected to give
rise to any liability under all applicable Environmental Laws;


 


11

















 


(d)                           Each of the
Company and the Company Subsidiaries holds and is in compliance with all
Company Permits required to conduct its business and operations under all
applicable Environmental Laws; and


 


(e)                            Neither the
Company, any Company Subsidiary nor any of their respective properties are
subject to any Order, judgment or written claim asserted or arising under any
Environmental Law.


 


“Environmental Laws” means any Law relating
to (a) the protection, preservation or restoration of the environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource) or (b) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as in
effect at the date hereof.


 


“Hazardous Substance” means any substance
listed, defined, designated or classified as hazardous, toxic, radioactive or
dangerous or as a pollutant or contaminant under any Environmental Law.  Hazardous Substances include any substance to
which exposure is regulated by any Governmental Authority or any Environmental
Law, including (a) petroleum or any derivative or byproduct thereof, toxic
mold, asbestos or asbestos containing material or polychlorinated biphenyls and
(b) all substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National and Hazardous Substances Contingency Plan, 40
C.F.R. Section 300.5.


 


2.22                           Intellectual
Property


 


(a)                                  Schedule 2.2 contains a
list of (A) all registered Intellectual Property, Intellectual Property
that is the subject of a pending application for registration, and material
unregistered Intellectual Property, in each case that is owned by the Company,
any ETF, or any of the Company Subsidiaries and (B) all material
Intellectual Property, other than Off-the-Shelf Software Agreements, licensed,
used or held for use by the Company, any ETF, or any of the Company
Subsidiaries in the conduct of its business (“Licensed Intellectual Property”).  Except where failure to own, license or
otherwise possess such rights has not had and would not reasonably be expected
to result in a Company Material Adverse Effect, each of the Company, the
ETFs,  and the Company Subsidiaries has (A) all
right, title and interest in and to all Company Intellectual Property, free and
clear of all Encumbrances, other than Permitted Encumbrances and (B) all
necessary proprietary rights in and to all of its Licensed Intellectual
Property, free and clear of all Encumbrances, other than Permitted
Encumbrances.  Neither the Company or any
ETF, nor any of the Company Subsidiaries has received any notice alleging it
has infringed, diluted or misappropriated, or, by conducting its business as
proposed, would infringe, dilute or misappropriate, the Intellectual Property
rights of any person, and to the knowledge of the Company there is no valid
basis for any such allegation.  Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will impair or materially alter the Company’s,
any ETF’s, or any Company Subsidiary’s rights to any Company Intellectual
Property or Licensed Intellectual Property. 
To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation of the Company Intellectual Property or Licensed
Intellectual Property by any third party. 
All of the rights within the Company Intellectual Property and Licensed
Intellectual Property are valid, enforceable and subsisting, and there is no
Action pending or, to the Company’s knowledge, threatened which challenges the
rights of the Company, any ETF, or any of the Company Subsidiaries in respect
of any Company Intellectual Property or Licensed Intellectual Property or the
validity, enforceability or effectiveness thereof.  The Company Intellectual Property and the
Licensed Intellectual Property constitute all material Intellectual Property
used in or necessary for the operation by the


 


12

















 


Company, the ETFs, and the
Company Subsidiaries of their respective businesses as currently
conducted.  Neither the Company or ETF,
nor any of the Company Subsidiaries is in breach or default in any material
respect (or would with the giving of notice or lapse of time or both be in such
breach or default) under any license to use any of the Licensed Intellectual
Property.


 


(b)                                 For purposes of
this Agreement, “Intellectual Property”
means (A) United States, international and foreign patents and patent
applications, including divisionals, continuations, continuations-in-part,
reissues, reexaminations and extensions thereof and counterparts claiming
priority therefrom; utility models; invention disclosures; and statutory
invention registrations and certificates; (B) United States and foreign
registered, pending and unregistered trademarks, service marks, trade dress,
logos, trade names, corporate names and other source identifiers, domain names,
Internet sites and web pages; and registrations and applications for
registration for any of the foregoing, together with all of the goodwill
associated therewith; (C) United States and foreign registered and
unregistered copyrights, and registrations and applications for registration
thereof; rights of publicity; and copyrightable works; (D) all inventions
and design rights (whether patentable or unpatentable) and all categories of
trade secrets as defined in the Uniform Trade Secrets Act, including business,
technical and financial information; and (E) confidential and proprietary
information, including know-how. Add rep that IP does not infringe on the
rights of any third party.


 


2.23                           Books and
Records.  All of the books and records
of the Company, the ETFs, and the Company Subsidiaries are complete and
accurate in all material respects and have been maintained in the ordinary
course and in accordance with applicable Laws and standard industry practices
with regard to the maintenance of such books and records.  The records, systems, controls, data and
information of Company, the ETFs, and the Company Subsidiaries are recorded,
stored, maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not) that are under
the exclusive ownership and direct control of the Company or its accountants
(including all means of access thereto and therefrom).


 


3.                                       Representations and Warranties of the Purchaser.  The
Purchaser hereby represents and warrants to the Company, severally and not
jointly, that:


 


3.1                                 Authorization. 
All corporate action required to be taken by the Purchaser’s board of
directors in order to authorize the Purchaser to enter into this Agreement have
been duly taken, and the Purchaser has full power and authority to enter into
the this Agreement and consummate the transactions contemplated hereby.  This Agreement, when executed and delivered
by the Purchaser, will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.


 


3.2           Purchase Entirely for Own Account.  This Agreement is made with the Purchaser in
reliance upon the Purchaser’s representation to the Company, which by the
Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that
the Shares to be acquired by the Purchaser will be acquired for investment for
the Purchaser’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same.  By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participations to such Person or to any


13

















 


third Person, with respect to any of
the Shares. The Purchaser has not been formed for the specific purpose of
acquiring the Shares.


 


3.3           Disclosure of Information.   The Purchaser has been engaged in
discussions with the management of the Company since at least January 1, 2009,
and has had an opportunity to discuss the Company’s business, management,
financial affairs and the terms and conditions of the offering of the Shares
with the Company’s management and has had an opportunity to review the
Company’s operations.  In addition, the
Purchaser has had extensive involvement in the development of the Budget.  The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Purchaser to rely thereon.


 


3.4           Restricted Securities.  The Purchaser understands that the Shares
have not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser’s representations as expressed
herein.  The Purchaser understands that
the Shares are “restricted securities” under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Purchaser must hold the
Shares indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available.  The Purchaser acknowledges that the Company
has no obligation to register or qualify the Shares, or the Common Stock into
which it may be converted, for resale. 
The Purchaser further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Shares, and on requirements relating to the Company
which are outside of the Purchaser’s control, and which the Company is under no
obligation and may not be able to satisfy.


 


3.5           No Public Market. The
Purchaser understands that no public market now exists for the Shares, and that
the Company has made no assurances that a public market will ever exist for the
Shares.


 


3.6           Legends.  The Purchaser understands that the Shares and
any securities issued in respect of or exchange for the Shares, may bear one or
all of the following legends:


 


(a)                                  “THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN
A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AS AMENDED.”


 


(b)                                 Any legend
required by the securities laws of any state to the extent such laws are
applicable to the Shares represented by the certificate so legended.


 


3.7           Accredited Investor.  The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.


 


14

















 


4.                                       Conditions to the Purchaser’s Obligations at
Closing.  The obligations of the Purchaser to purchase
Shares at the Initial Closing or any subsequent Closing are subject to the
fulfillment, on or before such Closing, of each of the following conditions,
unless otherwise waived:


 


4.1.                         Representations
and Warranties.  The
representations and warranties of the Company contained in Section 2
shall be true and correct in all respects as of such Closing.


 


4.2.                         Performance.  The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Company on
or before such Closing.


 


4.3.                         Officer’s
Certificate.  The Chief
Executive Officer of the Company shall deliver to the Purchaser at such Closing
a certificate (i) certifying resolutions of the Board of Directors of the
Company approving this Agreement and the transactions contemplated hereunder, (ii) certifying
resolutions of the Company’s stockholders approving the Certificate, (iii) confirming
the accuracy of the Company’s representations, warranties and covenants as of
the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4 as of the Closing
Date.


 


4.4.                         Qualifications.  All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Shares pursuant to this Agreement shall be obtained and effective as of
such Closing.


 


4.5.                              Transfer Agent Instructions.  Intentionally omitted.


 


4.6.                              Board of
Directors.  As of the
Initial Closing, the authorized size of the Board shall be seven, and the Board
shall be comprised of Joseph L. Schocken, Jeffrey L. Feldman, Robert Ponzetti,
Paul Clegg, Gustavo Montero, Governor Tommy Thompson, and Tim Paterson-Brown,
as the representative of the Purchaser (the “Series B
Director”).


 


4.7.                              Certificate. 
The Company shall have filed the Certificate with the Secretary of State
of Delaware on or prior to the Initial Closing, which shall continue to be in
full force and effect as of the Initial Closing and each subsequent Closing.


 


4.8.                              Proceedings and Documents. 
All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
satisfactory in form and substance to the Purchaser, and the Purchaser (or its
counsel) shall have received all such counterpart original and certified or
other copies of such documents as reasonably requested.  Such documents may include good standing
certificates.


 


5.                                       Conditions of the Company’s Obligations at Closing.  The obligations of the Company to sell Shares
to the Purchaser at the Initial Closing or any subsequent Closing are subject
to the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:


 


5.1                                 Representations
and Warranties.  The representations and warranties of the
Purchaser contained in Section 3 shall be true and correct in all
respects as of such Closing.


 


5.2                                 Performance.  The Purchaser shall have performed and
complied with all covenants, agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by them on
or before such Closing.


 


15

















 


5.3                                 Qualifications.  All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Share pursuant to this Agreement shall be obtained and effective as of
the Closing.


 


5.4                                 Officer’s Certificate.  The
Chief Executive Officer of the Purchaser shall deliver to the Company at the
Initial Closing a certificate certifying the resolutions of the Board of
Directors of the Purchaser approving this Agreement and the transactions
contemplated hereunder.


 


6.                                       Indemnification.


 


(a)                                  General
Indemnity. The Company agrees to indemnify and hold harmless
the Purchaser (and its directors, officers, managers, shareholders, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchaser as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein.  The Purchaser agrees to indemnify and hold
harmless the Company (and its directors, officers, managers, shareholders,
affiliates, agents, successors and assigns) from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys’ fees, charges and disbursements)
incurred by the Company as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Purchaser herein.


 


(b)                                 Indemnification
Procedure. Any Party entitled to indemnification under this Section 6
(an “Indemnified Party”) will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided
that the failure of any Party entitled to indemnification hereunder to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 6 except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any
action, proceeding or claim is brought against an Indemnified Party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
Indemnified Party a conflict of interest between it and the indemnifying party
may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party.
In the event that the indemnifying party advises an Indemnified Party that it
will contest such a claim for indemnification hereunder, or fails, within
twenty (20) days of receipt of any indemnification notice to notify, in
writing, such person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the Indemnified
Party may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the indemnifying party elects
in writing to assume and does so assume the defense of any such claim,
proceeding or action, the Indemnified Party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The Indemnified Party
shall cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party which relates to such action or claim. The indemnifying party
shall keep the Indemnified Party fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
Indemnified Party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding affected without
its prior written consent. Notwithstanding anything in this Section 6
to the contrary, the indemnifying party shall not, without the Indemnified
Party’s prior written consent, settle or compromise


 


16

















 


any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability
is incurred, so long as the Indemnified Party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the Indemnified Party against the indemnifying party or others, and (b) any
liabilities the indemnifying party may be subject to pursuant to the law.


 


7.                                       Post-Closing
Covenants. 
So long as the Shares are outstanding and held by the Purchaser, the
Company covenants that:


 


(a)                                  It will hold monthly
management meetings, which the Series B Director shall be entitled to
attend, either in person or by teleconference, and vote.


 


(b)                                 It will not give pay raises
to Company officers, nor pay bonuses, nor issue any stock options nor similar
instruments, unless agreed to by the Series B Director, which approval
shall not be unreasonably withheld;


 


(c)                                  It will distribute monthly
management accounts no later than the 15th working
following the end of the month to which they relate, and such further
information and documents as the Purchaser may from time-to-time reasonably
request, and shall permit, during normal business hours and upon reasonable
request and reasonable notice, the Purchaser or any employees, agents or
representatives thereof, for purposes reasonably related to the Purchaser’s
interests as a stockholder, to examine and make reasonable copies of and
extracts from the records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company, any ETF, and any
Company Subsidiary, and to discuss the affairs, finances and accounts of the
Company, any ETF, and any Company Subsidiary with any of its officers,
consultants, directors, and key employees; provided, the Purchaser and
its representatives shall keep such information confidential, provided such
information may be disclosed (i) to the extent required by applicable law,
regulation or legal process, subpoena, civil investigative demand or other
similar process, (ii) to the extent reasonably necessary in connection
with the enforcement of rights under this Agreement, (iii) to any
governmental, judicial or regulatory authority requiring or requesting such
information, and (iv) to Purchaser’s directors, officers, employees,
agents, managers, consultants, accountants, financial advisers, legal counsel
and other professional advisers to the extent necessary;


 


(d)                                 It will not incur expenses
outside of the Budget, unless such expenses are each separately approved by the
Series B Director, which approval shall not be unreasonably withheld;


 


(e)                                  It will promptly notify the
Purchaser in writing (a “Rights Notice”)
(in no event later than two (2) business days after making or receiving an
applicable offer) of the terms and conditions of any proposed offer or sale to,
or exchange with (or other type of distribution to) any third party, which the
Company intends to effect (a “Subsequent
Financing”), of Common Stock or any debt or equity securities
convertible, exercisable


 


17

















 


or exchangeable into Common Stock. The Rights Notice
shall describe, in reasonable detail, the proposed Subsequent Financing, the
names and investment amounts of all investors participating in the Subsequent
Financing (if known), the proposed closing date of the Subsequent Financing,
which shall be no earlier than ten (10) business days from the date of the
Rights Notice, and all of the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith. The Rights
Notice shall provide the Purchaser an option (the “Rights Option”) during the ten (10) business days
following delivery of the Rights Notice (the “Option
Period”) to inform the Company whether the Purchaser will purchase
up to up to $5,500,000 of its pro rata
portion of all or a portion of the securities being offered in such Subsequent
Financing on the same, absolute terms and conditions as contemplated by such
Subsequent Financing.  Delivery of any Rights
Notice constitutes a representation and warranty by the Company that there are
no other material terms and conditions, arrangements, agreements or otherwise
except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, any type of reset or adjustment of a purchase or
conversion price or to issue additional securities at any time after the
closing date of a Subsequent Financing. If the Company does not receive notice
of exercise of the Rights Option from the Purchaser within the Option Period,
the Company shall have the right to close the Subsequent Financing on the
scheduled closing date with a third party; provided
that all of the material terms and conditions of the closing are the same as
those provided to the Purchaser in the Rights Notice. If the closing of the
proposed Subsequent Financing does not occur that date, any closing of the
contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section 7(f), including,
without limitation, the delivery of a new Rights Notice; and


 


(f)                                    Will provide the Series B
Director with each of the following documents as and when they are distributed
to the Board of Directors:


 


(a)                                  unaudited quarterly
financial statements within fifteen (15) days after the end of the applicable
quarter of the first three quarters of the Company’s and the applicable ETF’s
fiscal years;


 


(b)                                 audited financial statements
within sixty (60) days after the end of the Company’s and applicable ETF’s
fiscal years; and


 


(c)                                  a monthly operating and cash
flow budget within fifteen (15) days after the end of the applicable month
(commencing from April 1, 2009) through the later of December 31,
2009, including but not exceeding the use of the current cash balance and an
the proceeds from the issuance of the Shares as set forth in the Budget.


 


8.                                       Miscellaneous.


 


8.1.                              Survival of
Warranties.  Unless
otherwise set forth in this Agreement, the representations and warranties of
the Company and the Purchaser contained in or made pursuant to this Agreement
shall survive until the running of the applicable statute of limitations and
shall in no way be affected by any investigation or knowledge of the subject
matter thereof made by or on behalf of the Purchaser or the Company.


 


18
















 


8.2.                              Successors and
Assigns.  The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. 
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.


 


8.3.                              Governing Law.  This Agreement and any controversy arising
out of or relating to this Agreement shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware as to
matters within the scope thereof, and as to all other matters shall be governed
by and construed in accordance with the internal laws of the State New York,
without regard to conflict of law principles that would result in the
application of any law other than the law of the State of New York.


 


8.4.                              Counterparts;
Facsimile.  This Agreement
may be executed and delivered by facsimile signature and in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


8.5.                              Titles and
Subtitles.  The titles
and subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.


 


8.6.                              Notices.  All notices and other communications given or
made pursuant to this Agreement shall be in writing and shall be deemed
effectively given upon the earlier of actual receipt or:  (a) personal delivery to the party to be
notified, (b), five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (c) one (1) business
day after deposit with a nationally recognized overnight courier, freight
prepaid, specifying next business day delivery, with written verification of
receipt.  All communications shall be
sent to the respective parties at their address as set forth on the signature
page, or to such e-mail address, facsimile number or address as subsequently
modified by written notice given in accordance with this Section 8.6.


 


8.7.                              No Finder’s
Fees.  Each party represents that it
neither is nor will be obligated for any finder’s fee or commission in
connection with this transaction other than as set forth in the Disclosure
Schedule.  The Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder’s or broker’s fee arising
out of this transaction (and the costs and expenses of defending against such
liability or asserted liability) for which the Purchaser or any of its
officers, employees, or representatives is responsible.  The Company agrees to indemnify and hold
harmless the Purchaser from any liability for any commission or compensation in
the nature of a finder’s or broker’s fee arising out of this transaction (and
the costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.


 


8.8.                              Fees and
Expenses.  The Company
shall pay a fee to the Purchaser in an amount equal to $100,000, which amount
shall be included within the principal amount of the Note as payment in full of
this Company’s obligation under this Section 8.8.


 


8.9.                              Attorneys’ Fees.  If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement
or the Certificate, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.


 


8.10.                        Amendments and
Waivers.  Any term of this Agreement may
be amended, terminated or waived only with the written consent of the Company
and the Purchaser.  Any amendment


 


19

















 


or waiver effected in
accordance with this Section 8.10 shall be binding upon the
Purchaser and each transferee of the Shares (or the Common Stock issuable upon
conversion thereof), each future holder of all such securities, and the
Company.


 


8.11.                        Severability.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.


 


8.12.                        Delays or
Omissions.  No delay or
omission to exercise any right, power or remedy accruing to any party under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such non-breaching
or non-defaulting party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring.  Any waiver,
permit, consent or approval of any kind or character on the part of any party of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such
writing.  All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.


 


8.13.                        Entire
Agreement.  This
Agreement (including the Exhibits hereto) and the Certificate constitute the
full and entire understanding and agreement between the parties with respect to
the subject matter hereof, and any other written or oral agreement relating to
the subject matter hereof existing between the parties are expressly canceled.


 


8.14.                        Remedies for
Breach of this Agreement.  If
the Company is in material breach of its obligations under this Agreement after
the Initial Closing, including, without limitation, Section 7, above, or,
if the Company is in material breach of any of its obligations under the Note,
and such breach or breaches remain(s) uncured for fifteen (15) business
days following written notice thereof, then, upon demand by the Purchaser, the
Company shall:


 


(a)                                  Deliver to the Purchaser
(free from all and any encumbrances) sufficient shares of Common Stock to
provide that the Purchaser holds a majority of the outstanding Common Stock of
the Company (exclusive of its current equity holdings of the Common Stock); and


 


(b)                                 Shall, subject to the
Purchaser (or its Affiliate) entering into compensatory agreements with the
affected Company personnel, covenants to use its best efforts to (i) make
available the services of its then-current officers, management, staff and any
contactors to provide assistance with the exploitation of the Company’s
proposed business and (ii) provide that such officers, management and
employees of the Company not attempt to exploit the Company’s proposed business
other than for the benefit of the Company or the Purchaser.


 


8.15.                        Dispute
Resolution.  The parties
(a) hereby irrevocably and unconditionally submit to the jurisdiction of
the federal and state courts located within the geographic boundaries of the
United States District Court for the Southern District of New York for the
purpose of any suit, action or other proceeding arising out of or based upon
this Agreement, (b) agree not to commence any suit, action or other
proceeding arising out of or based upon this Agreement except in the federal
and state courts located within the geographic boundaries of the United States
District Court for the Southern District of New York, and (c) hereby waive,
and agree not to assert, by way of motion, as a defense, or otherwise, in


 


20

















 


any such suit, action or
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that
this Agreement or the subject matter hereof may not be enforced in or by such
court.  Each party will bear its own
costs in respect of any disputes arising under this Agreement.  Each of the parties to this Agreement consents
to personal jurisdiction for any equitable action sought in the U.S. District
Court for the Southern District of New York or any court of the State of New
York having subject matter jurisdiction.


 


8.16.                   No Commitment
for Additional Financing.  The
Company acknowledges and agrees that the Purchaser has not made any representation,
undertaking, commitment or agreement to provide or assist the Company in
obtaining any financing, investment or other assistance, other than the
purchase of the Shares as set forth herein and subject to the conditions set
forth herein.  In addition, the Company
acknowledges and agrees that (i) no statements, whether written or oral,
made by any Purchaser or its representatives on or after the date of this
Agreement shall create an obligation, commitment or agreement to provide or
assist the Company in obtaining any financing or investment, (ii) the
Company shall not rely on any such statement by any Purchaser or its
representatives and (iii) an obligation, commitment or agreement to
provide or assist the Company in obtaining any financing or investment may only
be created by a written agreement, signed by the Purchaser and the Company,
setting forth the terms and conditions of such financing or investment and
stating that the parties intend for such writing to be a binding obligation or
agreement.  The Purchaser shall have the
right, in its sole and absolute discretion, to refuse or decline to participate
in any other financing of or investment in the Company, and shall have no
obligation to assist or cooperate with the Company in obtaining any financing,
investment or other assistance.


 


8.17.                   Waiver of
Conflicts.  Each party
to this Agreement acknowledges that Vandeberg Johnson & Gandara, LLP,
counsel for the Company, has in the past performed and may continue to perform
legal services for Broadmark Capital, LLC (an Affiliate of Joseph L. Schocken)
as well as certain of the Company’s existing stockholders in matters unrelated
to the transactions described in this Agreement, including the representation
of Broadmark Capital, LLC in connection with the management agreement between
the Company and Broadmark Capital, LLC. 
Accordingly, each party to this Agreement hereby (a) acknowledges
that it has had an opportunity to ask for information relevant to this
disclosure; and (b) gives its informed consent to Vandeberg Johnson &
Gandara, LLP’s representation of Broadmark Capital, LLC and the Company’s
stockholders in such unrelated matters. 
The Purchaser acknowledges and agrees that (a) Vandeberg Johnson &
Gandara, LLP representation of the Company is limited to the specific matters
with respect to which it has been retained and consulted by the Company, (b) Vandeberg
Johnson & Gandara, LLP has not been retained to represent the EFTs or any
Company Subsidiary, (c) there may exist other matters which could have a
bearing on the Company and/or its Affiliates as to which Vandeberg Johnson &
Gandara, LLP has been neither retained nor consulted, (d) Vandeberg
Johnson & Gandara, LLP does not undertake to monitor the compliance of
the Company or its Affiliates with their respective covenants under this
Agreement, nor does Vandeberg Johnson & Gandara, LLP monitor
compliance by the Company and/or its Affiliates with applicable laws, unless in
each case Vandeberg Johnson & Gandara, LLP has been specifically
retained to do so, (e) Vandeberg Johnson & Gandara, LLP does not
investigate or verify the accuracy and completeness of information set forth in
this Agreement, the Budget, and (f) except for any opinions specifically
set forth in a signed opinion letter issued by Vandeberg Johnson &
Gandara, LLP, Vandeberg Johnson & Gandara, LLP is not providing any
advice, opinion, representation, warranty or other assurance of any kind as to
any matter.


 


21

















 


SIGNATURE PAGE TO PURCHASE AGREEMENT


 


IN WITNESS WHEREOF, the
parties have executed this Series B Preferred Stock Purchase Agreement as
of the date first written above.


 


 


	
   

  	
   

  	
   

  	
  XSHARES GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Jeffrey Feldman

  
	
   

  	
  Name:

  	
   

  	
  Jeffrey Feldman, Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  XShares Group, Inc.

  
	
   

  	
   

  	
   

  	
  420 Lexington Avenue,
  Suite 2550

  
	
   

  	
   

  	
   

  	
  New York, NY 10170

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  MGT CAPITAL INVESTMENTS,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Tim Paterson-Brown

  
	
   

  	
  Name:

  	
   

  	
  Tim Paterson-Brown

  
	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
  Address: