Exhibit 10.8

 

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

 

$1,000,000.00

 

August 7, 2009

 

 

New York, New York

 

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 Dollars
($1,000,000.00). 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 second 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 December 31, 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 second 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.

 

(b)                                 Conversion prior to Second Closing.  If at
any time prior to the second Closing, there shall be (a) an acquisition of the
Company by another entity other than Holder or its affiliates by means of a
merger, consolidation, or other transaction or series of related transactions
resulting in the exchange of the outstanding shares of the Company’s capital
stock such that shareholders of the Company prior to such transaction own,
directly or indirectly, less than 50% of the voting power of the surviving
entity, or (b) a sale or transfer of all or substantially all of the Company’s
assets to any other person other than Holder or its affiliates, then, at the
Holder’s option, the entire

 

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unpaid principal sum of this Note, and interest thereon, shall be immediately
paid to the Holder or converted into shares of the Company’s Series B Preferred
Stock at a price of $0.0284 per share.

 

(c)                                  Mechanics and Effect of Conversion.  No
fractional shares of the Company’s capital stock will be issued upon conversion
of this Note.  In lieu of any fractional share to which the Holder would
otherwise be entitled, the Company will pay to the Holder in cash the amount of
the unconverted principal and interest balance of this Note that would otherwise
be converted into such fractional share.  Upon conversion of this Note pursuant
to this Section 2, the Holder shall surrender this Note, duly endorsed, at the
principal offices of the Company or any transfer agent of the Company.  At its
expense, the Company will, as soon as practicable thereafter, issue and deliver
to such Holder, at such principal office, a certificate or certificates for the
number of shares to which such Holder is entitled upon such conversion, together
with any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the Holder
for any cash amounts payable as described herein.  Upon conversion of this Note,
the Company will be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to pay such
portion of the principal amount and accrued interest.

 

3.                                       Payment.  All payments shall be made in
lawful money of the United States of America at such place as the Holder hereof
may from time to time designate in writing to the Company.  Payment shall be
credited first to the accrued interest then due and payable and the remainder
applied to principal.

 

4.                                       Transfer; Successors and Assigns.  The
terms and conditions of this Note shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties.  Notwithstanding the
foregoing, the Holder may not assign, pledge, or otherwise transfer this Note,
except for transfers to affiliates.  Subject to the preceding sentence, this
Note may be transferred only upon surrender of the original Note for
registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to the Company.  Thereupon,
a new note for the same principal amount and interest will be issued to, and
registered in the name of, the transferee.  Interest and principal are payable
only to the registered holder of this Note.

 

5.                                       Governing Law.  This Note and any
controversy arising out of or relating to this Note 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.

 

6.                                       Notices.  All notices and other
communications given or made pursuant to this Note 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 6.

 

7.                                       Amendments and Waivers.  Any term of
this Note may be amended only with the written consent of the Company and the
Holder.  Any amendment or waiver effected in accordance with this Section 7
shall be binding upon the Company, the Holder and each transferee of the Note.

 

8.                                       Shareholders, Officers and Directors
Not Liable.  In no event shall any shareholder, officer or director of the
Company be liable for any amounts due or payable pursuant to this Note.

 

9.                                       Failure or Indulgence Not Waiver.  No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege,

 

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nor shall any waiver by the Holder of any such right or rights on any one
occasion be deemed a waiver of the same right or rights on any future occasion.

 

10.                                 Action to Collect on Note.  If action is
instituted to collect on this Note, the Company promises to pay all costs and
expenses, including reasonable attorney’s fees, incurred in connection with such
action.

 

 

XSHARES GROUP, INC.

 

 

 

 

 

 

 

By:

/s/ Jeffrey Feldman

 

Its:

Chief Executive Officer

 

 

 

 

Address:

XShares Group, Inc.

 

 

420 Lexington Avenue, Suite 2550

 

 

New York, NY 10170

 

ACKNOWLEDGED AND ACCEPTED:

this 7th day of August 2009

By: MGT CAPITAL INVESTMENTS, INC.,

 

By:

/s/ Tim Paterson Brown

 

Its:

Chief Executive Officer

 

 

Address:                                               MGT Capital
Investments, Inc.

Kensington Centre

66 Hammersmith Road

London W14 8UD

United Kingdom

 

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