Exhibit 4.1
THIS CONVERTIBLE PROMISSORY NOTE AND
THE SECURITIES THAT MAY BE ACQUIRED PURSUANT TO THIS CONVERTIBLE
PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER
THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THIS
CONVERTIBLE PROMISSORY NOTE AND SUCH OTHER SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF A REGISTRATION STATEMENT AND LISTING
APPLICATION IN EFFECT WITH RESPECT TO THIS CONVERTIBLE PROMISSORY
NOTE OR SUCH OTHER SECURITIES UNDER THE SECURITIES ACT AND ANY
OTHER APPLICABLE SECURITIES LAW, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND LISTING ARE
NOT REQUIRED PURSUANT TO A VALID EXEMPTION THEREFROM UNDER THE
SECURITIES ACT AND THE APPLICABLE SECURITIES LAW OF ANY STATE OR
OTHER JURISDICTION.
CONVERTIBLE PROMISSORY
NOTE
US $ 1,000,000 As of
October 13, 2006
FOR VALUE RECEIVED, E-centives,
Inc. , a Delaware corporation (the “Company”),
having an address of 6901 Rockledge Drive, 6
th
Floor, Bethesda,
Maryland 20817, hereby promises to pay to the order of US
Venture 05, Inc. (the “Holder”), at the offices of
Holder at c/o Friedli Corporate Finance, Freigutstrasse 5, 8002
Zürich , or such other place as may be designated by
Holder to the Company in writing, the aggregate principal amount of
One Million U.S. Dollars (US $1,000,000) together with
accrued unpaid interest on the unpaid principal amount hereof, upon
the terms and conditions hereinafter set forth.
1. Payment Terms . The
Company promises to pay to Holder the balance of Principal,
together with accrued unpaid interest, on September 30,
2007 , unless this Note is earlier prepaid as herein provided
or earlier converted into Series C preferred stock, par value US
$0.01 per share, of the Company (the “ Series C Preferred
Stock ”) pursuant to Section 3 hereof. All
payments hereunder shall be made in lawful money of the United
States of America. Payment shall be credited first to the accrued
interest then due and payable and the remainder to
Principal.
2. Interest . Interest on the
outstanding portion of Principal of this Note shall accrue at a
rate of four percent (4%) per annum . All computations
of interest shall be made on the basis of a 365-day year for actual
days elapsed. Such interest shall be paid in arrears on the last
business day of each successive one year anniversary of the date of
this Note.
3. Conversion of this Note
.
(a) Conversion . This Note
shall be convertible into shares of Series C Preferred Stock at any
time by the Holder at the Note Conversion Rate (hereinafter
defined) as hereinafter provided. The conversion price will be US
$4.00 per share of Series C Preferred Stock (the “Note
Conversion Rate”). The number of shares of Series C Preferred
Stock to which the Holder shall be entitled upon such conversion
shall be equal to the product of: the aggregate principal amount
outstanding under this Note at the time of such conversion,
together with accrued unpaid interest, divided by the Note
Conversion Rate.
(b) Conversion Calculations: No
Fractional Shares . Conversion calculations pursuant to this
Section 3 shall be rounded to the nearest whole share
of Series C Preferred Stock, and no fractional shares shall be
issuable by the Company upon conversion of this Note. Conversion of
this Note shall be deemed payment in full of this Note and this
Note shall thereupon be cancelled.
4. Subordination. The
indebtedness evidenced hereby is subordinate in right of payment to
all existing and future bank indebtedness, including lease and
equipment finance obligations, as well as all other indebtedness
designated as superior to that contemplated herein. The
indebtedness represented hereby is senior in right of payment to
all classes and series of the Company’s capital stock. The
indebtedness represented hereby is pari passu with any and all
convertible debt securities issued by the Company.
5. Redemption . This Note may
be redeemed by the Company at any time by payment of the entire
principal and interest outstanding under this Note in cash to
Holder.
6. Representations and Warranties
of the Company . The Company represents and warrants to Holder
as follows:
(a) The execution and delivery by
the Company of this Note (i) are within the Company’s
corporate power and authority, and (ii) have been duly
authorized by all necessary corporate action.
(b) This Note is a legally binding
obligation of the Company, enforceable against the Company in
accordance with the terms hereof, except to the extent that
(i) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors’ rights and
(ii) the availability of the remedy of specific performance or
in injunctive or other equitable relief is subject to the
discretion of the court before which any proceeding therefore may
be brought.
7. Representations, Warranties
and Covenants of Holder . Holder represents and warrants to the
Company, and agrees, as follows:
(a) This Note and any Series C
Preferred Stock issuable upon conversion of this Note and any
shares of Common Stock, par value $0.01 per share, of the Company
issued upon conversion of the Series C Preferred Stock (the
“Common Stock” and, together with this Note and the
Series C Preferred Stock, the “Securities”) are being
acquired by Holder for its own account for investment and not with
a view to, or for sale in connection with, any distribution
thereof.
(b) Holder is an “accredited
investor” within the meaning of Rule 501 under the Securities
Act.
(c) Holder has sufficient knowledge
and experience in fin
