Exhibit 10.5
THESE SECURITIES ARE NOT REGISTERED
UNDER STATE OR FEDERAL SECURITIES LAWS, AND MAY NOT BE
OFFERED, OR SOLD, PLEDGED (EXCEPT A PLEDGE PURSUANT TO THE TERMS OF
WHICH ANY OFFER OR SALE UPON FORECLOSURE WOULD BE MADE IN A MANNER
THAT WOULD NOT VIOLATE THE REGISTRATION PROVISIONS OF FEDERAL OR
STATE SECURITIES LAWS) OR OTHERWISE DISTRIBUTED FOR VALUE, NOR
MAY THESE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
COMPANY, WITHOUT OPINION OF COUNSEL, CONCURRED IN BY COUNSEL FOR
THE COMPANY, THAT NO VIOLATION OF SAID REGISTRATION PROVISIONS
WOULD RESULT THEREFROM.
CONVERTIBLE PROMISSORY
NOTE
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$1,100,000.00
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May 14, 2009
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New York, New York
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For value received of One Million
Dollars ($1,000,000), XShares Group, Inc., a Delaware
corporation (the “ Company ”), promises to pay
to MGT Capital Investments, Inc. (the “ Holder
”), the principal sum of One Million One Hundred Thousand
Dollars ($1,100,000.00). Interest shall accrue from the date of
this Note on the unpaid principal amount at a rate equal to ten
percent (10%) per annum, compounded annually. This
Note is being made in conjunction with the execution of that
certain Securities Purchase Agreement of even date herewith (the
“ Purchase Agreement ”) in order to provide the
Company with access to amounts funded hereunder prior to the
Initial Closing (as defined in the Purchase
Agreement). This Note is subject to the following terms and
conditions.
1.
Maturity .
(a)
Unless converted as provided in Section 2, this Note will
automatically mature and be due and payable on August 1, 2009
(the “ Maturity Date ”). Subject to
Sections 1(b) and 2 below, interest shall accrue on this Note
but shall not be due and payable until the Maturity Date
.
(b)
Notwithstanding the foregoing, the entire unpaid principal sum of
this Note, together with accrued and unpaid interest thereon and
interest at the rate of eighteen (18%) percent per annum going
forward, shall become immediately due and payable upon the
insolvency of the Company, the commission of any act of bankruptcy
by the Company, the execution by the Company of a general
assignment for the benefit of creditors, the filing by or against
the Company of a petition in bankruptcy or any petition for relief
under the federal bankruptcy act or the continuation of such
petition without dismissal for a period of ninety (90) days or
more, the appointment of a receiver or trustee to take possession
of the property or assets of the Company, the breach of any
representations, warranties or covenants under the Purchase
Agreement or this Note, or the failure to pay this Note on the
Maturity Date.
(c)
This Note may be prepaid in full at any time prior to conversion
pursuant to Section 2( below), with or without notice, without
penalty or premium.
2.
Conversion .
(a)
Conversion into Series B Preferred Stock .
The entire principal amount of this Note shall be converted
into shares of the Company’s Series B Preferred Stock at
the Initial Closing. Accrued interest on this Note shall be
converted into Accruing Dividends (as defined in the
Company’s Second Amended and Restated Articles of
Incorporation attached to the Purchase Agreement (the “
Certificate ”)) from the date hereof.
