**Exhibit10.14**

 

THIS CONVERTIBLEPROMISSORY NOTE AND THE SECURITIES THAT MAY BE ACQUIRED PURSUANT TO THISCONVERTIBLE PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANYSTATE OR OTHER JURISDICTION.  THISCONVERTIBLE PROMISSORY NOTE AND SUCH OTHER SECURITIES MAY NOT BE SOLD, OFFEREDFOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AREGISTRATION STATEMENT AND LISTING APPLICATION IN EFFECT WITH RESPECT TO THISCONVERTIBLE PROMISSORY NOTE OR SUCH OTHER SECURITIES UNDER THE SECURITIES ACTAND ANY OTHER APPLICABLE SECURITIES LAW, OR AN OPINION OF COUNSEL SATISFACTORYTO THE COMPANY THAT SUCH REGISTRATION AND LISTING NOT REQUIRED PURSUANT TO A VALIDEXEMPTION THEREFROM UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LAWOF ANY STATE OR OTHER JURISDICTION.

 

**CONVERTIBLE PROMISSORY NOTE**

 
| US $6,000,000 | As of March 18, 2003 |
|---------------|----------------------|

 

 

FOR VALUE RECEIVED, **E-centives, Inc.**, a Delawarecorporation (the “Company”), having an address of 6901 Rockledge Drive, 6thFloor, Bethseda, Maryland 20817, hereby promises to pay to the order of **FriedliCorporate Finance, Inc. and/or InVenture Inc.** (the “Holder”), at theoffices of Holder at c/o Friedli Corporate Finance AG, Friegutstrasse 5,Zurich, Switzerland 8002, or such other place as may be designated by Holder tothe Company in writing, as directed by Friedli Corporate Finance, the aggregateprincipal amount of up to  SixMillion Dollars  ($6,000,0000),together with interest on the unpaid principal amount hereof, upon the termsand conditions hereinafter set forth.

 

1.             DrawDown.  The Company may, in its solediscretion, draw upon up to  SixMillion Dollars  ($6,000,0000),which shall be made available by the Holder for a period of 24 months, for useas operating capital and for general corporate purposes (the drawn down portionreferred herein as “Principal”).  Theterms and conditions set forth herein shall only apply to the Principal.

 

2.             Payment Terms.  The Company promises to pay to Holder thebalance of Principal, together with accrued and unpaid interest, on March 18, 2006, unless this Note is earlier prepaid as hereinprovided or earlier converted into Common Stock (as hereinafter defined) of theCompany pursuant to Section 3 hereof.  All payments hereunder shall be made in lawful money of theUnited States of America.  Payment shallbe credited first to the accrued interest then due and payable and the remainderto Principal.

 

3.             Interest.  Interest on the outstanding portion ofPrincipal of this Note shall accrue at a rate of eight percent (8%) perannum.  All computations of interestshall be made on the basis of a 365-day year for actual days elapsed.  Such interest shall be paid in arrears onthe last business day of each successive one year anniversary of the date ofthis Note.

 

4.             Conversion of this Note.

 

(a)           Automatic Conversion.  This Note shall automatically be convertedinto shares of the Company’s common stock (“Common Stock”) at the NoteConversion Rate (hereinafter defined) as hereinafter provided on the date whenthe average trading price on the SWX New Market of the SWX Swiss Exchange ofthe Common Stock for 30 consecutive trading days has been equal to or greaterthan

 

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CHF 2.75 (“Conversion Date”). The conversion price will be 2 CHF, (asconverted to U. S. dollars pursuant to a then recent exchange rate, ascalculated by the Company)  (“NoteConversion Rate”).

 

(b)           Note Conversion Rate;Conversion Price.  The number ofshares of Common Stock to which Holder shall be entitled upon such conversionspecified in Section 3(a) above shall be equal to the product of: thePrincipal amount outstanding under this Note on the Conversion Date, dividedby the average trading price on the SWX New Market of the SWX SwissExchange of the Common Stock for the 5 previous trading days, but in no eventhigher than CHF 2, (as converted to U. S. dollars pursuant to a then recentexchange rate, as calculated by the Company) (“Note Conversion Rate”).  Theconversion price payable by Holder upon any such conversion hereunder shall bezero (0).

 

(c)           Mechanics of AutomaticConversion.  Upon the occurrence ofthe event specified in Section 3(a) above, this Note shall be convertedinto Common Stock automatically without any further action by Holder; provided,however, that the Company shall not be obligated to issue a certificate orcertificates evidencing the shares of Common Stock issuable upon suchconversion of this Note (“Conversion Shares”) unless the original of this Noteis delivered to the Company, or Holder notifies the Company in writing thatsuch original of this Note has been lost, stolen or destroyed, and Holderexecutes an agreement satisfactory to the Company to, among other things,indemnify the Company from any loss incurred by the Company in connection withsuch original of this Note.  Uponsurrender by Holder to the Company of the original of this Note at the office ofthe Company, there shall be issued and delivered to Holder promptly at suchoffice and in Holder’s name as shown on the original of this Note, acertificate or certificates for the applicable number of Conversion Shares onthe date on which such automatic conversion is deemed to have occurred.

 

(d)           Conversion Calculations: NoFractional Shares. Conversion calculations pursuant to this Section 3shall be rounded to the nearest whole share of Common Stock, and no fractionalshares shall be issuable by the Company upon conversion of this Note. Conversionof this Note shall be deemed payment in full of this Note and this Note shallthereupon be cancelled.

 

5.             Subordination.  The indebtedness evidenced hereby issubordinate in right of payment to all existing and future bank indebtedness,including lease and equipment finance obligations.  The indebtedness represented hereby is senior in right of paymentto all classes and series of the Company’s capital stock.  The indebtedness represented hereby is paripassu with any and all convertible debt securities issued by the Company.

 

6.             Redemption.  This Note may be redeemed by the Company bypayment of the entire Principal and interest outstanding under this Note, plusthe applicable Final Payment Amount (hereinafter defined), in cash toHolder.  The Company must provide noticeto Holder not less than thirty (30) days prior to effecting suchredemption.  During the period fromproviding of such notice to Holder and the Company effecting the redemption,the Company may cancel such redemption by providing notice of such cancellationto Holder.

 

(a)           “Final Payment Amount” meansan amount equal to: (i) during the first full year of this Note, 10% of theunpaid Principal amount under this Note, (ii) during the second full year ofthis Note, 20% of the unpaid Principal amount under this Note or (iii) from andafter the first business day of the third full year of this Note, 30% of theunpaid Principal amount under this Note.

 

7.             Representations andWarranties of the Company. The Company represents and warrants to Holder asfollows:

 

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(a)           The execution and delivery bythe Company of this Note (i) are within the Company’s corporate power andauthority, and (ii) have been duly authorized by all necessary corporate action.

 

(b)           This Note is a legally bindingobligation of the Company, enforceable against the Company in accordance withthe terms hereof, except to the extent that (i) such enforceability is limitedby bankruptcy, insolvency, reorganization, moratorium or other laws relating toor affecting generally the enforcement of creditors’ rights and (ii) theavailability of the remedy of specific performance or in injunctive or otherequitable relief is subject to the discretion of the court before which anyproceeding therefore may be brought.

 

8.             Representations,Warranties and Covenants of Holder. Holder represents and warrants to theCompany, and agrees, as follows:

 

(a)           This Note and any ConversionShares issuable upon conversion of this Note are being acquired by Holder forits own account for investment and not with a view to, or for sale inconnection with, any distribution thereof.

 

(b)           Holder is an “accreditedinvestor” within the meaning of Rule 501 under the Securities Act.

 

(c)           Holder has sufficient knowledgeand experience in financial and business matters and is capable of evaluatingthe risks and merits of Holder’s investment in the Company; Holder believesthat Holder has received or had access to all information Holder considersnecessary or appropriate to make an informed investment decision with respectto this Note; and Holder is able financially to bear the risk of losingHolder’s full investment in this Note.

 

(d)           Holder understands that thisNote and any Conversion Shares have not been registered under the SecuritiesAct or registered or qualified under any the securities laws of any state orother jurisdiction, are “restricted securities,” and cannot be resold orotherwise transferred unless they are registered under the Securities Act, andregistered or qualified under any other applicable securities laws, or anexemption from such registration and qualification is available. Prior to anyproposed transfer of this Note or any Conversion Shares, Holder shall, amongother things, give written notice to the Company of its intention to effectsuch transfer, identifying the transferee and describing the manner of theproposed transfer and, if requested by the Company, accompanied by (i)investment representations by the transferee similar to those made by Holder inthis Section 7 and (ii) an opinion of counsel satisfactory to theCompany to the effect that the proposed transfer may be effected withoutregistration under the Securities Act and without registration or qualificationunder applicable state or other securities laws. Each certificate for anyConversion Shares shall bear a legend to the foregoing effect.

 

9.             Use of Proceeds.  The proceeds received by the Company fromthe sale of this Note shall be used by the Company for working capital or othergeneral corporate purposes.

 

10.           No Waiver in CertainCircumstances.  No course of dealingof Holder nor any failure or delay by Holder to exercise any right, power orprivilege under this Note shall operate as a waiver hereunder and any single orpartial exercise of any such right, power or privilege shall not preclude anylater exercise thereof or any exercise of any other right, power or privilegehereunder.

 

11.           Certain Waivers by theCompany.  Except as expresslyprovided otherwise in this Note, the Company and every endorser or guarantor,if any, of this Note waive presentment, demand, notice, protest and all otherdemands and notices in connection with the delivery, acceptance, performance,default or enforcement of this Note, and assent to any extension orpostponement of the time of payment or any

 

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other indulgence, to anysubstitution, exchange or release of collateral available to Holder, if any,and to the addition or release of any other party or person primarily orsecondarily liable.

 

12.           No Unlawful Interest.  Notwithstanding anything herein to thecontrary, payment of any interest or other amount hereunder shall not berequired if such payment would be unlawful. In any such event, this Note shallautomatically be deemed amended so that interest charges and all other paymentsrequired hereunder, individually and in the aggregate, shall be equal to butnot greater than the maximum permitted by law.

 

13.           Security Agreement.  The Company’s obligations under this Notehave been secured by a grant of a security interest to Holder in certaincollateral, as more particularly described in that certain Security Agreementbetween the Company and Holder dated as of the date of this Note.

 

14.           Miscellaneous.  No modification, rescission, waiver,forbearance, release or amendment of any provision of this Note shall be made,except by a written agreement duly executed by the Company and Holder.  This Note may not be assigned by Holderwithout the prior written consent of the Company.  The Company and Holder each hereby submits to personaljurisdiction in the State of Maryland, consents to the jurisdiction of anycompetent state or federal district court sitting in the City or County ofMontgomery County, Maryland, and waives any and all rights to raise lack ofpersonal jurisdiction as a defense in any action, suit or proceeding inconnection with this Note or any related matter.  This Note shall be governed by, and construed and interpreted inaccordance with, the laws of the State of Maryland, without reference toconflicts of law provisions of such state.

 

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IN WITNESS WHEREOF, the undersigned have caused thisConvertible Promissory Note to be executed and delivered by a duly authorizedofficer as of the date first above written.

 
|                                | **E-centives,  Inc.**                 |
|-------------------------------------|---------------------------------------|
|                                |                                  |   |
|                                |                                  |   |
|                                | By:                                   | /s/ Kamran  Amjadi |   |
|                                | Name:  Kamran  Amjadi            |
|                                | Title:  Chief  Executive Officer |
|                                |                                  |   |
| ACCEPTED AND AGREED:                |                                  |   |
|                                |                                  |   |
| **Friedli Corporate Finance, Inc.** |                                  |   |
|                                |                                  |   |
|                                |                                  |   |
| By:                                 | /s/  Peter Friedli                    |   |
| Name:  Peter Friedli           |                                  |   |
| Title:  Authorized Signatory   |                                  |   |
|                                     |                                       |  |  |  |  |  |

 

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