**Exhibit 10.3**

 

**SECURITIES PURCHASE AGREEMENT**

 

THIS SECURITIES PURCHASE AGREEMENT is made asof the 14th day ofMay, 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.*                                       Purchaseand Sale of Note and Preferred Stock.

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1.1.        Issuanceof Convertible Promissory Note.

 

### (a)           TheBoard of Directors has duly approved the issuance of the Convertible PromissoryNote (the “**Note**”), in the originalprincipal amount of $1,100,000, made by the Company in favor of the Purchaserin the form annexed hereto as Exhibit A.

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### (b)           Subjectto the terms and conditions of this Agreement, the Purchaser agrees to purchasethe Note immediately upon execution of this Agreement, and the Company agreesto execute and deliver the Note to the Purchaser immediately upon receipt fromthe Purchaser of $1,000,000.

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1.2.        Saleand Issuance of Series B Preferred Stock.

 

### (a)           TheBoard of Directors has duly adopted and approved and submitted to theshareholders of the Company for their adoption and approval, the Second Amendedand Restated Certificate of Incorporation attached to this Agreement as Exhibit B(the “**Certificate**”).  Upon due approval of the Certificate by theshareholders of the Company, the Company shall file the Certificate with theSecretary of State of the State of Delaware

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

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1.3.            Closing; Delivery.

 

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

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

 

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

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### (c)           Ateach Closing, the Company shall deliver to the Purchaser a certificaterepresenting the Shares being purchased by the Purchaser at such Closingagainst payment of the purchase price therefor by wire transfer to a bankaccount designated by the Company, by cancellation or conversion ofindebtedness of the Company to Purchaser, or by any combination of suchmethods.  Without limiting the generalityof the foregoing, at the Initial Closing, the Purchaser shall deliver theoriginal Note as consideration for the Shares issued at the Initial Closing.

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

 

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

 

“**Affiliate**”means, with respect to any specified Person, any Person, directly orindirectly, through one or more intermediaries controlling, controlled by orunder 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.

 

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

 

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

 

“**MaterialAdverse Effect**” means any occurrence, state of facts, change, event,effect or circumstance that, individually or in the aggregate, has, or wouldreasonably be expected to have, a material adverse effect on the assets,liabilities, business, results of operations or financial condition of theCompany, including, without limitation, the Company’s insolvency or a forcemajeure event, other than any occurrence, state of facts, change, event, effector circumstance to the extent resulting from: (i) the announcement of theexecution of this Agreement, or (ii) any change in United States generallyaccepted accounting principles (“**GAAP**”)or interpretation thereof after the date hereof or (iii) the execution andperformance of or compliance with this Agreement.

 

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

 

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

 

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

 

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2.                                       Representationsand Warranties of the Company.  The Company hereby represents and warrants toeach Purchaser that, except as set forth on the Disclosure Schedule attached asExhibit F to this Agreement, which exceptions shall be deemed to bepart of the representations and warranties made hereunder, the followingrepresentations are true and complete as of the date hereof, except asotherwise indicated.  The DisclosureSchedule shall be arranged in sections corresponding to the numbered andlettered sections and subsections contained in this Section 2, andthe disclosures in any section or subsection of the Disclosure Schedule shallqualify other sections and subsections in this Section 2 only tothe extent it is readily apparent from a reading of the disclosure that suchdisclosure is applicable to such other sections and subsections.

 

2.1.          Organization, Good Standing, Corporate Powerand Qualification.  Each of the Company, the ETFs, and theCompany Subsidiaries is a corporation or limited liability company dulyorganized, validly existing and in good standing under the laws of thejurisdiction of its organization and has all requisite corporate power andauthority to own, lease and operate its properties and to carry on its businessas now being conducted.  As set forth in Schedule2.1, each of the Company, the ETFs, and the Company Subsidiaries is dulyqualified or licensed and in good standing to do business in each jurisdictionin which the character of the property owned, leased or operated by it or thenature of the business conducted by it makes such qualification or licensingnecessary, except where the failure to be so duly qualified or licensed and ingood standing would not reasonably be expected to have a Material AdverseEffect.  The Company has heretofore madeavailable to Purchaser accurate and complete copies of the Company’s, eachETFs, and each Company Subsidiaries’ certificate of incorporation, by-laws,operating agreements and the equivalent organizational documents of each of theCompany Subsidiaries, each as currently in effect.  None of the Company, any ETF or any Company Subsidiaryis in violation of any provision of its respective certificate ofincorporation, by-laws or equivalent organizational documents as the case maybe.

 

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

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

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

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

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### (c)           Otherthan (X) the Note and (Y) as otherwise set forth in the DisclosureSchedule or on the capitalization table attached hereto as Exhibit D,there are no (i) outstanding options, warrants, puts, calls, convertiblesecurities, preemptive or similar rights, (ii)  bonds, debentures, notesor other indebtedness having general voting rights or that are convertible orexchangeable into securities having such rights, or (iii) subscriptions orother rights, agreements, arrangements, contracts or commitments of anycharacter, relating to the issued or unissued securities of the Company or anyof the 

 

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### Company Subsidiaries or obligating the Company orany of the Company Subsidiaries to issue, transfer, deliver or sell or cause tobe issued, transferred, delivered, sold or repurchased any options , or otherequity interest in, the Company or any of the Company Subsidiaries orsecurities convertible into or exchangeable for such shares or equityinterests, or obligating the Company or any of the Company Subsidiaries togrant, extend or enter into any such option, warrant, call, subscription orother right, agreement, arrangement or commitment for such equityinterest.  There are no outstandingobligations 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 anyinvestment (in the form of a loan, capital contribution or otherwise) in anyother entity.

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

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### (e)           TheCompany has agreed to reserve 19,000,000 shares of Common Stock for issuance toofficers, directors, employees and consultants of the Company pursuant to a2008 Stock Option Plan, as amended (the “**StockPlan**”). Of such reserved shares of Common Stock, no shares have beenissued pursuant to restricted stock purchase agreements, and no options topurchase shares have been granted to officers, directors, employees andconsultants pursuant to the Stock Plan.  The Company has furnished to the Purchasercomplete and accurate copies of the proposed Stock Plan and forms of agreementsused thereunder.

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### (f)            Atrue, complete and correct copy of the Company’s capitalization table as of thedate hereof is attached hereto as Exhibit D.

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

 

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

 

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

 

2.5.        Governmental Consents and Filings.  Assuming the accuracy of therepresentations made by the Purchaser in Section 3 of thisAgreement, no consent, approval, waiver, authorization or permit of, or noticeto or declaration or filing with (each, a “**Consent**”),any nation or government, any state or other political subdivision thereof, anyentity, 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 orarbitrator or any self-regulatory organization (each, a “**Governmental Authority**”), on the part ofthe Company, ETF or any of the Company Subsidiaries is required to be obtainedor made in connection with the execution, delivery or performance by theCompany of this Agreement or the consummation by the Company of the transactionscontemplated hereby, other than (i) the filing of the Certificate, whichwill have been filed as of the Initial Closing, and (ii) filings pursuantto 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 DisclosureSchedule, there is no claim, action, suit, proceeding, arbitration, complaint,charge or, investigation pending or to the knowledge of the Company, threatenedagainst the Company.  The Company is nota party nor is named as subject to the provisions of any order, writ,injunction, judgment or decree of any court or government agency orinstrumentality.  There is no action,suit, proceeding or investigation by the Company pending or which the Companyintends to initiate.  The foregoingincludes, without limitation, actions, suits, proceedings or investigationspending or threatened (or any basis therefor known to the Company) involvingthe current or prior employment of or engagement of any of the Company’semployees or consultants, their services provided in connection with theCompany’s business, or any information or techniques allegedly proprietary toany of their former employers, or their obligations under any agreements withprior employers.

 

2.7.        Compliance with Other Instruments.  The Company is not inviolation or default (i) of any provisions of its Certificate or Bylaws, (ii) ofany instrument, judgment, order, writ or decree, (iii) under any note,indenture or mortgage, or (iv) under any lease, agreement, contract orpurchase order to which it is a party or by which it is bound or, of anyprovision of federal or state statute, rule or regulation applicable tothe Company, the violation of which would have a Material Adverse Effect.  The execution, delivery and performance ofthis Agreement and the consummation of the transactions contemplated herebywill 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) adefault under any such provision, instrument, judgment, order, writ, decree,note, indenture, mortgage, lease, agreement, contract or purchase order or (ii) anevent which results in the creation of any lien, charge or encumbrance upon anyassets of the Company or the suspension, revocation, forfeiture, or nonrenewalof any permit or license applicable to the Company.

 

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### 2.8.            Agreements; Actions. Except for the Convertible Note and thisAgreement, there are no agreements, understandings, instruments, contracts orproposed transactions to which the Company is a party or by which it is boundthat 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 theCompany, (iii) the grant of rights to license, market, or sell itsproducts to any other Person that limit the Company’s exclusive right todevelop, market or sell its products, or (iv) indemnification by theCompany with respect to infringements of proprietary rights.

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### (b)           TheCompany has not (i) declared or paid any dividends, or authorized or madeany distribution upon or with respect to any class or series of its capitalstock, (ii)  incurred any indebtedness for money borrowed or incurred anyother liabilities individually in excess of $50,000 or in excess of $100,000 inthe aggregate, (iii) except as listed on Schedule 2.8(b)(iii), madeany loans or advances to any Person, other than ordinary advances for travelexpenses, or (iv) sold, exchanged or otherwise disposed of any of itsassets or rights.

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### (c)           TheCompany is not a guarantor or indemnitor of any indebtedness of any otherPerson.

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

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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 totheir respective spouses or children or to any Affiliate of any of theforegoing, other than in connection with expenses or advances of expensesincurred in the ordinary course of business or employee relocation expenses andfor other customary employee benefits made generally available to allemployees.  None of the Company’sdirectors, officers or employees, or any members of their immediate families,or any Affiliate of the foregoing are, directly or indirectly, indebted to theCompany.

 

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

 

2.11.          Financial Statements.  TheCompany 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 thethree-month period ended March 31, 2009 (collectively, the “**Financial Statements**”).  The Financial Statements have been preparedin accordance with generally accepted accounting principles applied on aconsistent basis throughout the periods indicated, except that the unauditedFinancial Statements may not contain all footnotes required by generallyaccepted accounting principles.  TheFinancial Statements fairly present in all material respects the financialcondition and operating results of the Company as of the dates, and for theperiods, indicated therein, subject in the case of the unaudited FinancialStatements to normal year-end audit adjustments, which are not material. Exceptas set forth in the Financial Statements, the Company has no liabilities orobligations, contingent or otherwise, other than (i) liabilities incurredin the 

 

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

 

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

 

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

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### (b)           anydamage, destruction or loss, whether or not covered by insurance, that wouldhave a Material Adverse Effect;

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

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

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

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

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### (g)           anyresignation or termination of employment of any officer, employee, orconsultant of the Company;

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### (h)           anymortgage, pledge, transfer of a security interest in, or lien, created by theCompany, 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 inthe ordinary course of business and do not impair the Company’s ownership oruse of such property or assets;

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### (i)            anyloans 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,;

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

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### (k)           anysale, assignment or transfer of any Company Intellectual Property that couldreasonably be expected to result in a Material Adverse Effect;

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### (l)            receiptof notice that there has been a loss of, or material order cancellation by, anymajor customer of the Company;

 

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### (m)          anyother event or condition of any character, other than events affecting theeconomy or the Company’s industry generally,****** that could reasonably be expected to result ina Material Adverse Effect; or

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### (n)           anyarrangement or commitment by the Company to do any of the things described inthis Section 2.12.

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

 

2.14.          Insurance.  The Company, each ETF, andeach Company Subsidiary is covered by valid and currently effective insurancepolicies issued in favor of the Company or one or more of the ETFs or CompanySubsidiaries that are customary for companies of similar size in the industryand 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 theCompany, any ETF, or any Company Subsidiary, or pursuant to which the Company,any ETF, or any Company Subsidiary is a named insured or otherwise abeneficiary, as well as any historic incurrence-based policies still inforce.  With respect to each suchinsurance policy, (i) the policy is in full force and effect and allpremiums 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 defaultunder, and neither the Company or any ETF, nor any Company Subsidiary havetaken any action or failed to take any action which, with notice or the lapseof time or both, would constitute such a breach or default, or permittermination or modification of, any such policy, (iii) to the knowledge ofthe Company, no insurer on any such policy has been declared insolvent or placedin receivership, conservatorship or liquidation, and no notice of cancellationor termination has been received with respect to any such policy,  and (iv) the Company knows of no reasonany such insurance policy would be cancelled or modified in any materialrespect as a result of the transactions contemplated hereby.

 

2.15.          Regulatory Agreements; Permits.

 

(a)           Thereare no (A) written agreements, consent agreements, memoranda ofunderstanding, commitment letters, cease and desist orders, or similar undertakingsto which the Company, any ETF, or any Company Subsidiary is a party, on the onehand, and any Governmental Authority is a party or addressee, on the otherhand, (B ) Orders or directives of or supervisory letters from a GovernmentalAuthority specifically with respect to the Company, any ETF, or any CompanySubsidiary, or (C) resolutions or policies or procedures adopted by theCompany, any ETF, or any Company Subsidiary at the request of a GovernmentalAuthority, that (1) limit in any respect the ability of the Company, any ETF, or any of the CompanySubsidiaries to conduct its business as currently being conducted or (2) inany manner relate to the ability of the Company, any ETF,  or any of the Company Subsidiaries to paydividends or otherwise restrict the conduct of business of the Company, anyETF, or any of the Company Subsidiaries in any respect.

 

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(b)           TheCompany, 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 aspresently conducted and contemplated to be conducted, and to own, lease andoperate their assets and properties (collectively, the “**Company Permits**”), all of which are infull force and effect, and no suspension or cancellation of any of the CompanyPermits is pending or, to the knowledge of the Company, threatened,.  Schedule 2.15(a) sets forth eachCompany Permit.  Each of the Company, theETFs, and the Company Subsidiaries are not in violation in any material respectof the terms of any Company Permit.

 

(c)           Noinvestigation, review or market conduct examination by any GovernmentalAuthority with respect to the Company, any ETF, or any Company Subsidiary ispending or, to the knowledge of the Company, threatened, nor does the Companyhave knowledge of any Governmental Authority’s intention to conduct any suchinvestigation or review.

 

(d)           Eachof the Company, each ETF, and each Company Subsidiary and each of theirrespective officers and employees who are required to be registered, licensedor qualified as (A) an investment company, broker-dealer, investmentadviser, futures commission merchant or (B) a registered principal,registered representative, investment adviser representative, insurance agentor salesperson with the SEC or any securities or insurance commission or otherGovernmental Authority are duly registered as such and such registrations arein full force and effect, or are in the process of being registered as suchwithin the time periods required by applicable law, except in each case for anyfailures to be so registered, licensed or qualified that would not reasonablybe expected, individually or in the aggregate, to have a Material AdverseEffect. Each of the Company, each ETF, and each Company Subsidiary and each oftheir respective officers and employees are in compliance with all applicablefederal, state and foreign laws requiring any such registration, licensing orqualification, and are not subject to any liability or disability by reason ofthe failure to be so registered, licensed or qualified, except as would notreasonably be expected, individually or in the aggregate, to have a MaterialAdverse Effect.

 

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

 

(f)            Eachof 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 byapplicable Law) required to be filed or furnished by the Company with the SECunder the Securities Exchange Act of 1934, as amended (the “**Exchange Act**”), the Securities Act, theInvestment Advisers Act of 1940 (the “**AdvisersAct**”) and the Investment Company Act of 1940 (the “**Investment Company Act**”) together withany amendments, restatements or supplements thereto, and will file all suchforms, reports, schedules, statements and other documents required to be filedsubsequent to the date of this Agreement. Schedule 2.15(f) lists and the Company has delivered to theMGT copies in the form filed with the SEC of all of the foregoing forms,requests for exemptive orders, reports, schedules, statements and otherdocuments (inclusive of any certifications mandated by applicable Law) and allcommunications in connection therewith, except to the extent available in fullwithout redaction on any publicly available database (including, withoutlimitation, FINRA or the SEC’s website through EDGAR) for at least two (2) daysprior to the date of this Agreement (collectively, the “**Company SEC Reports**”).

 

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

 

(h)           Noevent or circumstance has occurred or exists with respect to the Company, anyETF, or any Company Subsidiary or their respective businesses, properties,prospects, operations or financial condition, which, under applicable law, rule orregulation, requires public disclosure or announcement by the Company but whichhas not been so publicly announced or disclosed.

 

2.16.          Corporate Documents.  The Certificate and Bylaws of the Company arein the forms attached hereto or previously provided to the Purchaser or itscounsel.  The copy of the minute books ofthe Company provided to the Purchaser contains minutes of all meetings ofdirectors and stockholders and all actions by written consent without a meetingby the directors and stockholders since the date of incorporation andaccurately reflects in all material respects all actions by the directors (andany committee of directors) and stockholders with respect to all transactionsreferred 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 andany applicable regulations promulgated thereunder.  The Company has filed with the InternalRevenue Service all statements, if any, with its United States income taxreturns which are required under such regulations.

 

2.18           Investment Company Act.  The Company is not an “investment company” ora person directly or indirectly “controlled” by or acting on behalf of an “investmentcompany,” in each case within the meaning of the Investment Company Act of1940, as amended. Each ETF has obtained all required exemptive orders under theInvestment Company Act to carry on its business as currently conducted and asproposed to be conducted.

 

2.19           Disclosure. The Company has delivered the Budget to the Purchaser certain. There isa reasonable basis for each of the assumptions set forth in the Budget. Norepresentation or warranty of the Company contained in this Agreement, and documentdelivered to the Purchaser, and no certificate furnished or to be furnished toPurchasers at the Closings contains any untrue statement of a material fact oromits to state a material fact necessary in order to make the statementscontained herein or therein not misleading in light of the circumstances underwhich they were made.  The Budget wasprepared in good faith; however, the Company does not warrant that it willachieve any results projected in the Budget. It is understood that this representation is qualified by the fact thatthe Company has not delivered to the Purchaser, and has not been requested todeliver, a private placement or similar memorandum or any written disclosure ofthe types of information customarily furnished to purchasers of securitiesother than as specifically set forth in this Agreement.

 

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2.20                           EmployeeMatters.

 

(a)                                  There are noActions pending or, to the knowledge of the Company, threatened involving theCompany 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 unionorganizing or attempting to organize any employee of the Company or any of theCompany Subsidiaries into one or more collective bargaining units; and (B) nolabor dispute, strike, work slowdown, work stoppage or lock out or othercollective labor action by or with respect to any employees, managers orconsultants of the Company or any of the Company Subsidiaries pending or, tothe Company’s knowledge, threatened against the Company or any of the CompanySubsidiaries.  Neither the Company norany of the Company Subsidiaries is a party to, or bound by, any collectivebargaining agreement or other agreement with any labor organization applicableto the employees, managers or consultants of the Company or any of the CompanySubsidiaries and no such agreement is currently being negotiated.

 

(b)                                 The Company andthe Company Subsidiaries (A) are in compliance in all respects with allapplicable Laws respecting employment and employment practices, terms andconditions of employment, health and safety and wages and hours, including Lawsrelating to discrimination, disability, labor relations, hours of work, paymentof wages and overtime wages, pay equity, immigration, workers compensation,working conditions, employee scheduling, occupational safety and health, familyand medical leave, and employee terminations, and have not received writtennotice, or to the knowledge of the Company any other form of notice, there isany unfair labor practice charge or complaint against the Company or any of theCompany Subsidiaries pending, (B) are not liable for any arrears of wagesor any material penalty for failure to comply with any of the foregoing and (C) arenot liable for any  payment to any trustor other fund or to any Governmental Authority, with respect to unemploymentcompensation benefits, social security or other benefits or obligations foremployees (other than routine payments to be made in the ordinary course ofbusiness and consistent with past practice). there are no complaints, lawsuits, arbitrations, administrativeproceedings, or other Actions pending or, to the knowledge of the Company,threatened against the Company or any Company Subsidiary brought by or onbehalf of any applicant for employment, any current or former employee, anyperson alleging to be a current or former employee, any class of the foregoing,or any Governmental Authority, relating to any such Law or regulation, oralleging breach of any express or implied contract of employment, wrongfultermination of employment, or alleging any other discriminatory, wrongful ortortious conduct in connection with the employment relationship.

 

2.21                           EnvironmentalMatters.

 

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

 

(b)                           To theknowledge of the Company, the Company and the Company Subsidiaries are incompliance with all applicable Environmental Laws;

 

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

 

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

 

(e)                            Neither theCompany, any Company Subsidiary nor any of their respective properties aresubject to any Order, judgment or written claim asserted or arising under anyEnvironmental Law.

 

“**Environmental Laws**” means any Law relatingto (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 naturalresource) 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 ineffect at the date hereof.

 

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

 

2.22                           IntellectualProperty

 

(a)                                  Schedule 2.2 contains alist of (A) all registered Intellectual Property, Intellectual Propertythat is the subject of a pending application for registration, and materialunregistered Intellectual Property, in each case that is owned by the Company,any ETF, or any of the Company Subsidiaries and (B) all materialIntellectual Property, other than Off-the-Shelf Software Agreements, licensed,used or held for use by the Company, any ETF, or any of the CompanySubsidiaries in the conduct of its business (“**Licensed Intellectual Property**”).  Except where failure to own, license orotherwise possess such rights has not had and would not reasonably be expectedto result in a Company Material Adverse Effect, each of the Company, theETFs,  and the Company Subsidiaries has (A) allright, title and interest in and to all Company Intellectual Property, free andclear of all Encumbrances, other than Permitted Encumbrances and (B) allnecessary proprietary rights in and to all of its Licensed IntellectualProperty, free and clear of all Encumbrances, other than PermittedEncumbrances.  Neither the Company or anyETF, nor any of the Company Subsidiaries has received any notice alleging ithas infringed, diluted or misappropriated, or, by conducting its business asproposed, would infringe, dilute or misappropriate, the Intellectual Propertyrights of any person, and to the knowledge of the Company there is no validbasis for any such allegation.  Neitherthe execution and delivery of this Agreement nor the consummation of thetransactions contemplated hereby will impair or materially alter the Company’s,any ETF’s, or any Company Subsidiary’s rights to any Company IntellectualProperty or Licensed Intellectual Property. To the knowledge of the Company, there is no unauthorized use,infringement or misappropriation of the Company Intellectual Property or LicensedIntellectual Property by any third party. All of the rights within the Company Intellectual Property and LicensedIntellectual Property are valid, enforceable and subsisting, and there is noAction pending or, to the Company’s knowledge, threatened which challenges therights of the Company, any ETF, or any of the Company Subsidiaries in respectof any Company Intellectual Property or Licensed Intellectual Property or thevalidity, enforceability or effectiveness thereof.  The Company Intellectual Property and theLicensed Intellectual Property constitute all material Intellectual Propertyused in or necessary for the operation by the

 

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Company, the ETFs, and theCompany Subsidiaries of their respective businesses as currentlyconducted.  Neither the Company or ETF,nor any of the Company Subsidiaries is in breach or default in any materialrespect (or would with the giving of notice or lapse of time or both be in suchbreach or default) under any license to use any of the Licensed IntellectualProperty.

 

(b)                                 For purposes ofthis Agreement, “**Intellectual Property**”means (A) United States, international and foreign patents and patentapplications, including divisionals, continuations, continuations-in-part,reissues, reexaminations and extensions thereof and counterparts claimingpriority therefrom; utility models; invention disclosures; and statutoryinvention registrations and certificates; (B) United States and foreignregistered, 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 forregistration for any of the foregoing, together with all of the goodwillassociated therewith; (C) United States and foreign registered andunregistered copyrights, and registrations and applications for registrationthereof; rights of publicity; and copyrightable works; (D) all inventionsand design rights (whether patentable or unpatentable) and all categories oftrade secrets as defined in the Uniform Trade Secrets Act, including business,technical and financial information; and (E) confidential and proprietaryinformation, including know-how. Add rep that IP does not infringe on therights of any third party.

 

2.23                           Books andRecords.  All of the books and recordsof the Company, the ETFs, and the Company Subsidiaries are complete andaccurate in all material respects and have been maintained in the ordinarycourse and in accordance with applicable Laws and standard industry practiceswith regard to the maintenance of such books and records.  The records, systems, controls, data andinformation 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 underthe 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.  ThePurchaser hereby represents and warrants to the Company, severally and notjointly, that:

# * *

3.1                                 Authorization. All corporate action required to be taken by the Purchaser’s board ofdirectors in order to authorize the Purchaser to enter into this Agreement havebeen duly taken, and the Purchaser has full power and authority to enter intothe this Agreement and consummate the transactions contemplated hereby.  This Agreement, when executed and deliveredby the Purchaser, will constitute a valid and legally binding obligation of thePurchaser, enforceable in accordance with its terms, except as limited byapplicable bankruptcy, insolvency, reorganization, moratorium, fraudulentconveyance, and any other laws of general application affecting enforcement ofcreditors’ rights generally, and as limited by laws relating to theavailability of specific performance, injunctive relief, or other equitableremedies.

##  

3.2           Purchase Entirely for Own Account.  This Agreement is made with the Purchaser inreliance upon the Purchaser’s representation to the Company, which by thePurchaser’s execution of this Agreement, the Purchaser hereby confirms, thatthe Shares to be acquired by the Purchaser will be acquired for investment forthe Purchaser’s own account, not as a nominee or agent, and not with a view tothe resale or distribution of any part thereof, and that the Purchaser has nopresent intention of selling, granting any participation in, or otherwisedistributing the same.  By executing thisAgreement, the Purchaser further represents that the Purchaser does notpresently have any contract, undertaking, agreement or arrangement with anyPerson to sell, transfer or grant participations to such Person or to any

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## third Person, with respect to any ofthe Shares. The Purchaser has not been formed for the specific purpose ofacquiring the Shares.

##  

3.3           Disclosure of Information.   The Purchaser has been engaged indiscussions 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 Shareswith the Company’s management and has had an opportunity to review theCompany’s operations.  In addition, thePurchaser has had extensive involvement in the development of the Budget.  The foregoing, however, does not limit ormodify the representations and warranties of the Company in Section 2 of thisAgreement or the right of the Purchaser to rely thereon.

 

3.4           Restricted Securities.  The Purchaser understands that the Shareshave not been, and will not be, registered under the Securities Act, by reasonof a specific exemption from the registration provisions of the Securities Actwhich depends upon, among other things, the bona fide nature of the investmentintent and the accuracy of the Purchaser’s representations as expressedherein.  The Purchaser understands thatthe Shares are “restricted securities” under applicable U.S. federal and statesecurities laws and that, pursuant to these laws, the Purchaser must hold theShares indefinitely unless they are registered with the Securities and ExchangeCommission and qualified by state authorities, or an exemption from suchregistration and qualification requirements is available.  The Purchaser acknowledges that the Companyhas no obligation to register or qualify the Shares, or the Common Stock intowhich it may be converted, for resale. The Purchaser further acknowledges that if an exemption fromregistration or qualification is available, it may be conditioned on variousrequirements including, but not limited to, the time and manner of sale, theholding period for the Shares, and on requirements relating to the Companywhich are outside of the Purchaser’s control, and which the Company is under noobligation and may not be able to satisfy.

 

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

 

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

##  

### (a)                                  “THE SHARESREPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIESACT OF 1933 AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH AVIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUTAN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL INA FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION ISNOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AS AMENDED.”

###  

### (b)                                 Any legendrequired by the securities laws of any state to the extent such laws areapplicable to the Shares represented by the certificate so legended.

###  

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

 

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# *4.*                                       Conditions to the Purchaser’s Obligations atClosing.  The obligations of the Purchaser to purchaseShares at the Initial Closing or any subsequent Closing are subject to thefulfillment, on or before such Closing, of each of the following conditions,unless otherwise waived:

# * *

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

 

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

 

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

 

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

 

4.5.                              Transfer Agent Instructions.  *Intentionally omitted.*

##  

4.6.                              Board ofDirectors.  As of theInitial Closing, the authorized size of the Board shall be seven, and the Boardshall 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 BDirector**”).

 

4.7.                              Certificate. The Company shall have filed the Certificate with the Secretary of Stateof Delaware on or prior to the Initial Closing, which shall continue to be infull 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 transactionscontemplated at the Closing and all documents incident thereto shall besatisfactory in form and substance to the Purchaser, and the Purchaser (or itscounsel) shall have received all such counterpart original and certified orother copies of such documents as reasonably requested.  Such documents may include good standingcertificates.

##  

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

 

5.1                                 Representationsand Warranties.  The representations and warranties of thePurchaser contained in Section 3 shall be true and correct in allrespects as of such Closing.

 

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

 

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

 

# *5.4*                                 Officer’s Certificate.  TheChief Executive Officer of the Purchaser shall deliver to the Company at theInitial Closing a certificate certifying the resolutions of the Board ofDirectors of the Purchaser approving this Agreement and the transactionscontemplated hereunder.

# * *

# *6.*                                       Indemnification.

# * *

### (a)                                  GeneralIndemnity. The Company agrees to indemnify and hold harmlessthe 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, withoutlimitation, reasonable attorneys’ fees, charges and disbursements) incurred bythe Purchaser as a result of any inaccuracy in or breach of therepresentations, warranties or covenants made by the Company herein.  The Purchaser agrees to indemnify and holdharmless the Company (and its directors, officers, managers, shareholders,affiliates, agents, successors and assigns) from and against any and alllosses, 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 therepresentations, warranties or covenants made by the Purchaser herein.

###  

### (b)                                 IndemnificationProcedure. Any Party entitled to indemnification under this Section 6(an “**Indemnified Party**”) will givewritten notice to the indemnifying party of any matters giving rise to a claimfor indemnification; *provided*that the failure of any Party entitled to indemnification hereunder to givenotice as provided herein shall not relieve the indemnifying party of itsobligations under this Section 6 except to the extent that the indemnifyingparty is actually prejudiced by such failure to give notice. In case anyaction, proceeding or claim is brought against an Indemnified Party in respectof which indemnification is sought hereunder, the indemnifying party shall beentitled to participate in and, unless in the reasonable judgment of theIndemnified Party a conflict of interest between it and the indemnifying partymay exist with respect of such action, proceeding or claim, to assume thedefense thereof with counsel reasonably satisfactory to the Indemnified Party.In the event that the indemnifying party advises an Indemnified Party that itwill contest such a claim for indemnification hereunder, or fails, withintwenty (20) days of receipt of any indemnification notice to notify, inwriting, such person of its election to defend, settle or compromise, at itssole cost and expense, any action, proceeding or claim (or discontinues itsdefense at any time after it commences such defense), then the IndemnifiedParty may, at its option, defend, settle or otherwise compromise or pay suchaction or claim. In any event, unless and until the indemnifying party electsin 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 ofthe defense, settlement or compromise of any such action, claim or proceedingshall be losses subject to indemnification hereunder. The Indemnified Partyshall cooperate fully with the indemnifying party in connection with any negotiationor defense of any such action or claim by the indemnifying party and shallfurnish to the indemnifying party all information reasonably available to theIndemnified Party which relates to such action or claim. The indemnifying partyshall keep the Indemnified Party fully apprised at all times as to the statusof the defense or any settlement negotiations with respect thereto. If theindemnifying party elects to defend any such action or claim, then theIndemnified Party shall be entitled to participate in such defense with counselof its choice at its sole cost and expense. The indemnifying party shall not beliable for any settlement of any action, claim or proceeding affected withoutits prior written consent. Notwithstanding anything in this Section 6to the contrary, the indemnifying party shall not, without the IndemnifiedParty’s prior written consent, settle or compromise

 

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### anyclaim or consent to entry of any judgment in respect thereof which imposes anyfuture obligation on the Indemnified Party or which does not include, as anunconditional term thereof, the giving by the claimant or the plaintiff to theIndemnified Party of a release from all liability in respect of such claim. Theindemnification required by this Section 6 shall be made byperiodic payments of the amount thereof during the course of investigation ordefense, as and when bills are received or expense, loss, damage or liabilityis incurred, so long as the Indemnified Party irrevocably agrees to refund suchmoneys if it is ultimately determined by a court of competent jurisdiction thatsuch party was not entitled to indemnification. The indemnity agreementscontained herein shall be in addition to (a) any cause of action or similarrights of the Indemnified Party against the indemnifying party or others, and (b) anyliabilities the indemnifying party may be subject to pursuant to the law.

###  

# *7.*                                       Post-ClosingCovenants. So long as the Shares are outstanding and held by the Purchaser, theCompany covenants that:

# * *

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

 

(b)                                 It will not give pay raisesto Company officers, nor pay bonuses, nor issue any stock options nor similarinstruments, unless agreed to by the Series B Director, which approvalshall not be unreasonably withheld;

 

(c)                                  It will distribute monthlymanagement accounts no later than the 15th workingfollowing the end of the month to which they relate, and such furtherinformation and documents as the Purchaser may from time-to-time reasonablyrequest, and shall permit, during normal business hours and upon reasonablerequest and reasonable notice, the Purchaser or any employees, agents orrepresentatives thereof, for purposes reasonably related to the Purchaser’sinterests as a stockholder, to examine and make reasonable copies of andextracts from the records and books of account of, and visit and inspect theproperties, assets, operations and business of the Company, any ETF, and anyCompany Subsidiary, and to discuss the affairs, finances and accounts of theCompany, any ETF, and any Company Subsidiary with any of its officers,consultants, directors, and key employees; provided, the Purchaser andits representatives shall keep such information confidential, provided suchinformation may be disclosed (i) to the extent required by applicable law,regulation or legal process, subpoena, civil investigative demand or othersimilar process, (ii) to the extent reasonably necessary in connectionwith the enforcement of rights under this Agreement, (iii) to anygovernmental, judicial or regulatory authority requiring or requesting suchinformation, and (iv) to Purchaser’s directors, officers, employees,agents, managers, consultants, accountants, financial advisers, legal counseland other professional advisers to the extent necessary;

 

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

 

(e)                                  It will promptly notify thePurchaser in writing (a “**Rights Notice**”)(in no event later than two (2) business days after making or receiving anapplicable 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 theCompany intends to effect (a “**SubsequentFinancing**”), of Common Stock or any debt or equity securitiesconvertible, exercisable

 

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or exchangeable into Common Stock. The Rights Noticeshall describe, in reasonable detail, the proposed Subsequent Financing, thenames and investment amounts of all investors participating in the SubsequentFinancing (if known), the proposed closing date of the Subsequent Financing,which shall be no earlier than ten (10) business days from the date of theRights Notice, and all of the terms and conditions thereof and proposeddefinitive documentation to be entered into in connection therewith. The RightsNotice shall provide the Purchaser an option (the “**Rights Option**”) during the ten (10) business daysfollowing delivery of the Rights Notice (the “**OptionPeriod**”) to inform the Company whether the Purchaser will purchaseup to up to $5,500,000 of its *pro rata*portion of all or a portion of the securities being offered in such SubsequentFinancing on the same, absolute terms and conditions as contemplated by suchSubsequent Financing.  Delivery of any RightsNotice constitutes a representation and warranty by the Company that there areno other material terms and conditions, arrangements, agreements or otherwiseexcept for those disclosed in the Rights Notice, to provide additionalcompensation to any party participating in any proposed Subsequent Financing,including, but not limited to, any type of reset or adjustment of a purchase orconversion price or to issue additional securities at any time after theclosing date of a Subsequent Financing. If the Company does not receive noticeof exercise of the Rights Option from the Purchaser within the Option Period,the Company shall have the right to close the Subsequent Financing on thescheduled closing date with a third party; *provided*that all of the material terms and conditions of the closing are the same asthose provided to the Purchaser in the Rights Notice. If the closing of theproposed Subsequent Financing does not occur that date, any closing of thecontemplated Subsequent Financing or any other Subsequent Financing shall besubject 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 BDirector with each of the following documents as and when they are distributedto the Board of Directors:

 

(a)                                  unaudited quarterlyfinancial statements within fifteen (15) days after the end of the applicablequarter of the first three quarters of the Company’s and the applicable ETF’sfiscal years;

 

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

 

(c)                                  a monthly operating and cashflow 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 anthe proceeds from the issuance of the Shares as set forth in the Budget.

 

# *8.*                                       Miscellaneous.

# * *

8.1.                              Survival ofWarranties.  Unlessotherwise set forth in this Agreement, the representations and warranties ofthe Company and the Purchaser contained in or made pursuant to this Agreementshall survive until the running of the applicable statute of limitations andshall in no way be affected by any investigation or knowledge of the subjectmatter thereof made by or on behalf of the Purchaser or the Company.

 

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

 

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

 

8.4.                              Counterparts;Facsimile.  This Agreementmay be executed and delivered by facsimile signature and in two or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

8.5.                              Titles andSubtitles.  The titlesand subtitles used in this Agreement are used for convenience only and are notto be considered in construing or interpreting this Agreement.

 

8.6.                              Notices.  All notices and other communications given ormade pursuant to this Agreement shall be in writing and shall be deemedeffectively given upon the earlier of actual receipt or:  (a) personal delivery to the party to benotified, (b), five (5) days after having been sent by registered orcertified mail, return receipt requested, postage prepaid, or (c) one (1) businessday after deposit with a nationally recognized overnight courier, freightprepaid, specifying next business day delivery, with written verification ofreceipt.  All communications shall besent to the respective parties at their address as set forth on the signaturepage, or to such e-mail address, facsimile number or address as subsequentlymodified by written notice given in accordance with this Section 8.6.

 

8.7.                              No Finder’sFees.  Each party represents that itneither is nor will be obligated for any finder’s fee or commission inconnection with this transaction other than as set forth in the DisclosureSchedule.  The Purchaser agrees toindemnify and to hold harmless the Company from any liability for anycommission or compensation in the nature of a finder’s or broker’s fee arisingout of this transaction (and the costs and expenses of defending against suchliability or asserted liability) for which the Purchaser or any of itsofficers, employees, or representatives is responsible.  The Company agrees to indemnify and holdharmless the Purchaser from any liability for any commission or compensation inthe nature of a finder’s or broker’s fee arising out of this transaction (andthe costs and expenses of defending against such liability or asserted liability)for which the Company or any of its officers, employees or representatives isresponsible.

 

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

 

8.9.                              Attorneys’ Fees.  If any action at law or in equity (includingarbitration) is necessary to enforce or interpret the terms of this Agreementor the Certificate, the prevailing party shall be entitled to reasonableattorneys’ fees, costs and necessary disbursements in addition to any otherrelief to which such party may be entitled.

 

8.10.                        Amendments andWaivers.  Any term of this Agreement maybe amended, terminated or waived only with the written consent of the Companyand the Purchaser.  Any amendment

 

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or waiver effected inaccordance with this Section 8.10 shall be binding upon thePurchaser and each transferee of the Shares (or the Common Stock issuable uponconversion thereof), each future holder of all such securities, and theCompany.

 

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

 

8.12.                        Delays orOmissions.  No delay oromission to exercise any right, power or remedy accruing to any party underthis Agreement, upon any breach or default of any other party under thisAgreement, shall impair any such right, power or remedy of such non-breachingor non-defaulting party nor shall it be construed to be a waiver of any suchbreach or default, or an acquiescence therein, or of or in any similar breachor default thereafter occurring; nor shall any waiver of any single breach ordefault be deemed a waiver of any other breach or default theretofore orthereafter occurring.  Any waiver,permit, consent or approval of any kind or character on the part of any party ofany breach or default under this Agreement, or any waiver on the part of anyparty of any provisions or conditions of this Agreement, must be in writing andshall be effective only to the extent specifically set forth in suchwriting.  All remedies, either under thisAgreement or by law or otherwise afforded to any party, shall be cumulative andnot alternative.

 

8.13.                        EntireAgreement.  ThisAgreement (including the Exhibits hereto) and the Certificate constitute thefull and entire understanding and agreement between the parties with respect tothe subject matter hereof, and any other written or oral agreement relating tothe subject matter hereof existing between the parties are expressly canceled.

 

8.14.                        Remedies forBreach of this Agreement.  Ifthe Company is in material breach of its obligations under this Agreement afterthe 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) businessdays following written notice thereof, then, upon demand by the Purchaser, theCompany shall:

 

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

 

(b)                                 Shall, subject to thePurchaser (or its Affiliate) entering into compensatory agreements with theaffected Company personnel, covenants to use its best efforts to (i) makeavailable the services of its then-current officers, management, staff and anycontactors to provide assistance with the exploitation of the Company’sproposed business and (ii) provide that such officers, management andemployees of the Company not attempt to exploit the Company’s proposed businessother than for the benefit of the Company or the Purchaser.

 

8.15.                        DisputeResolution.  The parties(a) hereby irrevocably and unconditionally submit to the jurisdiction ofthe federal and state courts located within the geographic boundaries of theUnited States District Court for the Southern District of New York for thepurpose of any suit, action or other proceeding arising out of or based uponthis Agreement, (b) agree not to commence any suit, action or otherproceeding arising out of or based upon this Agreement except in the federaland state courts located within the geographic boundaries of the United StatesDistrict 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

 

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any such suit, action orproceeding, any claim that it is not subject personally to the jurisdiction ofthe above-named courts, that its property is exempt or immune from attachmentor execution, that the suit, action or proceeding is brought in an inconvenientforum, that the venue of the suit, action or proceeding is improper or thatthis Agreement or the subject matter hereof may not be enforced in or by suchcourt.  Each party will bear its owncosts in respect of any disputes arising under this Agreement.  Each of the parties to this Agreement consentsto personal jurisdiction for any equitable action sought in the U.S. DistrictCourt for the Southern District of New York or any court of the State of NewYork having subject matter jurisdiction.

 

8.16.                   No Commitmentfor Additional Financing.  TheCompany acknowledges and agrees that the Purchaser has not made any representation,undertaking, commitment or agreement to provide or assist the Company inobtaining any financing, investment or other assistance, other than thepurchase of the Shares as set forth herein and subject to the conditions setforth herein.  In addition, the Companyacknowledges and agrees that (i) no statements, whether written or oral,made by any Purchaser or its representatives on or after the date of thisAgreement shall create an obligation, commitment or agreement to provide orassist the Company in obtaining any financing or investment, (ii) theCompany shall not rely on any such statement by any Purchaser or itsrepresentatives and (iii) an obligation, commitment or agreement toprovide or assist the Company in obtaining any financing or investment may onlybe created by a written agreement, signed by the Purchaser and the Company,setting forth the terms and conditions of such financing or investment andstating that the parties intend for such writing to be a binding obligation oragreement.  The Purchaser shall have theright, in its sole and absolute discretion, to refuse or decline to participatein any other financing of or investment in the Company, and shall have noobligation to assist or cooperate with the Company in obtaining any financing,investment or other assistance.

 

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

 

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**SIGNATURE PAGE TO PURCHASE AGREEMENT**

 

IN WITNESS WHEREOF, theparties have executed this Series B Preferred Stock Purchase Agreement asof 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: |   |                                      |

 

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