**Exhibit10.8**

 

THESESECURITIES ARE NOT REGISTERED UNDER STATE OR FEDERAL SECURITIES LAWS, ANDMAY NOT BE OFFERED, OR SOLD, PLEDGED (EXCEPT A PLEDGE PURSUANT TO THETERMS OF WHICH ANY OFFER OR SALE UPON FORECLOSURE WOULD BE MADE IN A MANNERTHAT WOULD NOT VIOLATE THE REGISTRATION PROVISIONS OF FEDERAL OR STATESECURITIES LAWS) OR OTHERWISE DISTRIBUTED FOR VALUE, NOR MAY THESESECURITIES BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT OPINION OFCOUNSEL, CONCURRED IN BY COUNSEL FOR THE COMPANY, THAT NO VIOLATION OF SAIDREGISTRATION PROVISIONS WOULD RESULT THEREFROM.

 

**CONVERTIBLE PROMISSORY NOTE**

 
| $1,000,000.00 |   | August 7,  2009 |
|---------------|--------|----------------------|
|          |   | New York, New  York  |

 

For value received of OneMillion 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 amountat a rate equal to ten percent (10%) per annum, compounded annually. ** **ThisNote is being made in conjunction with the execution of that certain SecuritiesPurchase Agreement of even date herewith (the “Purchase Agreement”) inorder to provide the Company with access to amounts funded hereunder prior tothe second Closing (as defined in the Purchase Agreement).  This Note is subject to the following termsand 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****butshall not be due and payable until the Maturity Date  .

 

(b)                                 Notwithstanding the foregoing, the entireunpaid principal sum of this Note, together with accrued and unpaid interestthereon and interest at the rate of eighteen (18%) percent per annum goingforward, shall become immediately due and payable upon the insolvency of theCompany, the commission of any act of bankruptcy by the Company, the executionby the Company of a general assignment for the benefit of creditors, the filingby or against the Company of a petition in bankruptcy or any petition forrelief under the federal bankruptcy act or the continuation of such petitionwithout dismissal for a period of ninety (90) days or more, the appointment ofa receiver or trustee to take possession of the property or assets of theCompany, the breach of any representations, warranties or covenants under thePurchase Agreement or this Note, or the failure to pay this Note on theMaturity Date.

 

(c)                                  This Note may be prepaid in full at anytime prior to conversion pursuant to Section 2( below), with or withoutnotice, without penalty or premium.

 

2.                                       **Conversion****.**

 

(a)                                  **Conversion into Series BPreferred Stock****.**  The entireprincipal amount of this Note shall be converted into shares of the Company’s Series BPreferred 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 ofIncorporation attached to the Purchase Agreement (the “Certificate”))from the date hereof.

 

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

 

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

 

(c)                                  **Mechanics and Effect ofConversion****.**  No fractional shares of the Company’s capitalstock will be issued upon conversion of this Note.  In lieu of any fractional share to which theHolder would otherwise be entitled, the Company will pay to the Holder in cashthe amount of the unconverted principal and interest balance of this Note thatwould otherwise be converted into such fractional share.  Upon conversion of this Note pursuant to thisSection 2, the Holder shall surrender this Note, duly endorsed, at theprincipal offices of the Company or any transfer agent of the Company.  At its expense, the Company will, as soon aspracticable thereafter, issue and deliver to such Holder, at such principaloffice, a certificate or certificates for the number of shares to which suchHolder is entitled upon such conversion, together with any other securities andproperty to which the Holder is entitled upon such conversion under the termsof this Note, including a check payable to the Holder for any cash amountspayable as described herein.  Uponconversion of this Note, the Company will be forever released from all of itsobligations and liabilities under this Note with regard to that portion of theprincipal amount and accrued interest being converted including withoutlimitation the obligation to pay such portion of the principal amount andaccrued interest.

 

3.                                       **Payment****.** All payments shall be made in lawful money of the United States ofAmerica at such place as the Holder hereof may from time to time designate inwriting to the Company.  Payment shall becredited first to the accrued interest then due and payable and the remainderapplied to principal.

 

4.                                       **Transfer; Successors andAssigns****.**  The terms and conditions of this Note shallinure to the benefit of and be binding upon the respective successors andassigns of the parties.  Notwithstandingthe foregoing, the Holder may not assign, pledge, or otherwise transfer thisNote, except for transfers to affiliates. Subject to the preceding sentence, this Note may be transferred onlyupon surrender of the original Note for registration of transfer, dulyendorsed, or accompanied by a duly executed written instrument of transfer inform satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will beissued to, and registered in the name of, the transferee.  Interest and principal are payable only tothe registered holder of this Note.

 

5.                                       **Governing Law****.** This Note and any controversy arising out of or relating to this Noteshall be governed by and construed in accordance with the General CorporationLaw of the State of Delaware as to matters within the scope thereof, and as toall other matters shall be governed by and construed in accordance with theinternal laws of the State New York, without regard to conflict of lawprinciples that would result in the application of any law other than the lawof the State of New York.

 

6.                                       **Notices****.** All notices and other communications given or made pursuant to this Noteshall be in writing and shall be deemed effectively given upon the earlier ofactual receipt or:  (a) personaldelivery to the party to be notified, (b) five (5) days after havingbeen sent by registered or certified mail, return receipt requested, postageprepaid, or (c) one (1) business day after deposit with a nationallyrecognized overnight courier, freight prepaid, specifying next business daydelivery, with written verification of receipt. All communications shall be sent to the respective parties at theiraddress as set forth on the signature page, or to such e-mail address,facsimile number or address as subsequently modified by written notice given inaccordance with this Section 6.

 

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

 

8.                                       **Shareholders, Officersand Directors Not Liable****.**  In no eventshall any shareholder, officer or director of the Company be liable for anyamounts due or payable pursuant to this Note.

 

9.                                       **Failure or IndulgenceNot Waiver**.  No failure or delay on the part of the Holderin the exercise of any power, right or privilege hereunder shall operate as awaiver thereof, nor shall any single or partial exercise of any such power,right or privilege preclude other or further exercise thereof or of any otherright, power or privilege, 

 

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

 

10.                                 **Action to Collect onNote****.**  If action is instituted to collect on thisNote, the Company promises to pay all costs and expenses, including reasonableattorney’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 7********th******** 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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