Exhibit 10.1
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this
“Agreement”), dated as of March 31, 2005, is entered
into by and among E-centives, Inc., a Delaware corporation (the
“Company”), and the Person (as defined below) named on
Schedule I (the “Noteholder”).
WHEREAS, the Noteholder holds the
convertible promissory notes of the Company identified on Schedule
I (each a “Note,” and collectively, the
“Notes”) and the Company owes payments of principal and
interest on the Notes as set forth on Schedule I;
WHEREAS, the Company and the
Noteholder desire to exchange the Notes and all outstanding
indebtedness of the Company pursuant to the terms thereof,
including accrued but unpaid interest for shares of a newly created
class of preferred stock of the Company; and
NOW, THEREFORE, in consideration of
the mutual premises and covenants contained herein and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto covenant and
agree as follows:
1. Certificate of Designations of
Series C Preferred Stock . Prior to the Closing (as defined
below) the Company shall file a certificate of designations with
the Delaware Secretary of State to create a new class of preferred
stock of the Company designated Series C Preferred Stock (the
“Preferred Stock”). The Preferred Stock shall have the
rights, restrictions, privileges and preferences set forth in the
form of Certificate of Designations (the “Certificate of
Designations”) attached hereto as Exhibit A
.
2. Note Exchange .
2.1 Outstanding Balance . As
of March 31, 2005, the Company owes the Noteholder the amount of
outstanding principal and accrued interest on the Note set forth on
Schedule I.
2.2 Exchange . At the Closing
and promptly after the filing and acceptance of the Certificate of
Designations with the Delaware Secretary of State, subject to the
terms hereof and based upon the representation and warranties made
herein, in exchange for the Notes and all outstanding indebtedness
of the Company pursuant to the terms thereof as of the Closing Date
(as defined in Section 2.5 below), including accrued but
unpaid interest, and in lieu of any Final Payment Amounts (as
defined in the Notes) that may otherwise become due, the Company
shall issue such number of shares of Preferred Stock to each
Noteholder set forth on Schedule I (the
“Exchange”).
2.3 Warrants. If the
Preferred Stock has not been converted to Common Stock pursuant to
its terms prior to February 2, 2009, then, as additional
consideration, the Company shall issue to the Noteholder, a Common
Stock purchase warrant in substantially the form attached as
Exhibit B (each a “Warrant” and collectively,
the “Warrants”) for the number of shares of Common
Stock set forth on Schedule I. The exercise price for each Warrant
shall equal twenty percent below the average of the Market Prices
(as determined in accordance with the Certificate of Designations)
for the five trading days prior to but not including February 2,
2009.
2.3 Registration Rights . As
promptly as practicable after the Closing Date, the Company shall
file with the Securities and Exchange Commission a registration
statement on an appropriate form to register for resale under the
Securities Act of 1933, as amended (the “Securities
Act”) all of the shares of Common Stock issuable upon
conversion thereof. The Company shall use its commercially
reasonable efforts to cause such registration statement to be
declared effective as promptly
as practicable following the date of
its filing. The Company further agrees to use its commercially
reasonable efforts to keep such registration statement effective
until September 30, 2005.
2.4 Termination of Security
Interest . As of the Closing Date, the Noteholder hereby
irrevocably terminates and releases the security interest created
in the assets of the Company in favor of the Noteholder by the
terms of the Notes and agrees to take any further action reasonably
requested by the Company in connection with the
foregoing.
2.5 Closing . The closing
(the “Closing”) of the Exchange transactions
contemplated in this Article 2 will be held at the offices
of the Company on the date of filing of the Certificate of
Designations or at such other date as may be agreed to by the
Noteholder and the Company. The date on which the Closing occurs is
referred to in this Agreement as the “Closing Date.” At
the Closing, (i) the Noteholder shall deliver to the Company the
Note in original form held by each Noteholder, marked
“canceled” or an affidavit of lost note and indemnity
agreement in a form acceptable to the Company in its sole
discretion; and (ii) the Company shall deliver to each Noteholder a
certificate representing the number of shares of Preferred Stock
set forth next on Schedule I.
3. Representations and Warranties
of the Company . The Company hereby represents and warrants to
the Noteholder as follows:
3.1 Organization . The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
3.2 Authorization . The
execution, delivery and performance by the Company of this
Agreement, the issuance of the Preferred Stock and the Warrants, if
any, to the Noteholder as provided herein, and the consummation of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the
Company.
3.3 Enforceability . Assuming
due execution and delivery by the Noteholder of this Agreement,
this Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with
its respective terms, subject as to enforcement only to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors’ rights generally and to the general principles of
equity.
3.4 Valid Issuance of Stock;
Reservation of Common Stock . The Preferred Stock, when issued
and delivered to the Noteholder in accordance with the terms and
conditions set forth in this Agreement, will be validly issued,
fully paid and nonassessable. The Company has all necessary
corporate power to at all times reserve and keep available out of
its authorized by unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Preferred
Stock in accordance with the Certificate of Designations, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of
the Preferred Stock.
3.5 No Violation . The
execution, delivery or performance of this Agreement by the
Company, and the consummation by the Company of the transactions
contemplated hereby do not and will not conflict with, or
constitute a breach of, or a default under, the certificate of
incorporation or bylaws of the Company or any material agreement,
contract or other instrument to which the Company is a party or is
bound. The Company is not, and the execution, delivery or
performance of this Agreement by the Company will not result, in
violation of its certificate of incorporation or bylaws, or in
violation in any material respect of any laws applicable to it or
of any decree of any court or governmental agency or body having
jurisdiction over it. There are no legal or governmental
proceedings pending or, to the knowledge of the Company, explicitly
threatened, against the Company or any officer thereof, on
to
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which the Company or any of its
properties is subject, that questions the validity of this
Agreement on the right of the Company to enter into this
Agreement.
4. Representations and Warranties
of the Noteholder . The Noteholder hereby represents and
warrants to the Company as follows:
4.1 Organization . The
Noteholder is a natural person or a corporation or other entity
duly organized, validly existing and in good standing under the
laws of its jurisdiction or organization.
4.1 Authorization . The
execution, delivery and performance by the Noteholder of this
Agreement, the exchange of the Notes to the Company as provided
herein, and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate or
similar action on the part of the Noteholder (if
applicable).
4.2 Enforceability . Assuming
due execution and delivery by the Company, this Agreement
constitutes the legal, valid and binding obligation of the
Noteholder, enforceable against the Noteholder in accordance with
its respective terms, subject as to enforcement only to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors’ rights generally and to the general principles of
equity.
4.3 No Violation . The
execution, delivery and performance of this Agreement will not
violate any material agreement, contract or other instrument to
which the Noteholder is a party or is bound.
4.4 No Encumbrances . The
Noteholder has good and valid legal and beneficial title to the
Note, free and clear of any Encumbrances. For purposes hereof, the
term “Encumbrances” means any security interest,
pledge, mortgage, lien (including tax liens), charge, encumbrance,
adverse claim, preferential arrangement or material restriction of
any kind, including any material restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of
ownership.
4.5 Securities Laws; Investment
Representations .
(a) The Noteholder is acquiring the
Preferred Stock, the Common Stock issuable on conversion thereof,
and the Warrants (if they are issued) (collectively, the
“Securities”) for its own account, for investment and
not with a view to the distribution thereof within the meaning of
the Securities Act of 1933, as amended (the “Securities
Act”). The Noteholder understands that (a) the Securities
have not and will not have been (except as provided in the
registration statement to be filed pursuant to Section 2.3)
registered under the Securities Act or any state securities laws,
by reason of its issuance by the Company in a transaction exempt
from the registration requirements under Section 3(a)(9) of the
Securities Act for the exchange of securities and (b) the
Securities may not be sold unless such disposition is registered
under the Securities Act and applicable state securities laws or is
exempt from registration thereunder.
(b) The Noteholder is an
“accredited investor” (as defined in Rule 501(a) under
the Securities Act). The Noteholder has had an opportunity to
discuss the business, management and financial affairs of the
Company with directors and officers the Company. The Noteholder has
also had the opportunity to ask questions of, and receive answers
from, the Company and its directors and officers regarding the
terms and conditions of the Exchange. The Noteholder acknowledges
and agrees that it is not relying on any representations,
warranties or information as to the Company other than the
representations and warranties made to it in Section 3
hereof.
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5. Power of Attorney . The
Noteholder hereby irrevocably constitutes and appoints Mehrdad
Akhavan as the true and lawful agent and attorney-in-fact of the
Noteholder with respect to the UCC-3 termination statements and any
other documents related to the release of the security interest in
the Company’s assets which were created by the Notes and
which were terminated as provided herein, to execute or effect the
termination of any other agreements or instruments on behalf of the
Noteholder in connection with the this Agreement.
6. Miscellaneous .
6.1 Restrictive Legends . The
new certificates evidencing the Preferred Stock and Common Stock
issuable upon conversion will bear appropriate corporate and
securities law legends as determined by the Company and its legal
counsel in its sole discretion.
6.2 Notices . All notices and
other communications provided for herein shall be in writing and
shall be either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested,
postage prepaid, or by facsimile and confirmed by facsimile
confirmed receipt, to the address or facsimile number specified as
follows:
(i) if to the Noteholder, as set
forth on Schedule I ; and
(ii) if to the Company, as set forth
below:
6901 Rockledge Drive
6 th Floor
Bethesda, MD 20817
Facsimile: +1
240-333-6240
All notices and other communications
of any party in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier service or sent by facsimile
in each case delivered or sent (properly addressed to the best
knowledge of the sender) to such party as provided in this
Section 6.2 or in accordance with the latest unrevised
direction from such party given in accordance with this Section
6.2 .
6.3 Survival of Agreement .
All covenants, representations and warranties made by the parties
herein shall survive the execution and delivery of this
Agreement.
6.4 Third-Party Beneficiaries
. This Agreement is intended to benefit the Noteholder, the parties
hereto and their respective successors and permitted assigns and
nothing herein expressed or implied shall give or be construed to
give to any Person (as defined below), other than the Noteholder
and the parties hereto and such successors and assigns, any legal
or equitable rights hereunder. For purposes hereof, the term
“Person” means any individual, firm, corporation,
partnership, limited liability company, trust, joint venture, or
other entity, and shall include any successor (by merger or
otherwise) of such entity.
6.5 Waivers; Amendment .
Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements
in writing entered into between the Company and the
Noteholder.
6.6 Entire Agreement . This
Agreement constitutes the entire agreement between the parties
relative to the subject matter hereof and thereof. Any previous
agreement among the parties with respect to the subject matter
hereof is superseded by this Agreement.
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6.7 Severability . In the
event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall
not be in any way impaired, unless the provisions held invalid,
illegal or unenforceable shall substantially impair the benefits of
the remaining provisions hereof.
6.8 Counterparts . This
Agreement may be executed in multiple counterparts, each of which
shall constitute an original but all of which when taken together
shall constitute but one agreement, and shall become effective when
such counterparts have been signed by each of the parties and
delivered to the other party. Each party to this Agreement agrees
that it will be bound by its own telecopied signature and that it
accepts the telecopied signature of each other par
