Exhibit 99.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO RETURN ON INVESTMENT CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED REVOLVING NOTE
FOR VALUE RECEIVED, each of RETURN ON INVESTMENT CORPORATION a Delaware
corporation ("ROIE"), GO SOFTWARE, INC., a Georgia corporation ("GO SOFTWARE")
and TECTONIC SOLUTIONS, INC., a Georgia corporation ("TECTONIC SOLUTIONS" and
together with ROIE and GO Software, each a "BORROWER" and collectively the
"BORROWERS") jointly and severally promises to pay to LAURUS MASTER FUND, LTD.,
c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House,
South Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"Holder") or its registered assigns, on order, the sum of One Million Five
Hundred Thousand Dollars ($1,500,000) or, if different, the aggregate principal
amount of all "REVOLVING LOANS" (as such term is defined in the Security
Agreement referred to below), together with any accrued and unpaid interest
hereon, on January 9, 2008 (the "MATURITY DATE")
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement among the Borrowers
and the Holder dated as of the date hereof (as amended, modified and
supplemented from time to time, the "SECURITY AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
CONTRACT RATE & PREPAYMENTS
1.1. Interest Rate. Subject to Article IV and Section 5.7, interest
payable on this Note shall accrue at a rate per annum equal to the "prime rate"
published in The Wall Street Journal from time to time (the "PRIME Rate"), plus
three percent (3%) (the "CONTRACT RATE"). The Prime Rate shall be increased or
decreased as the case may be for each increase or decrease in the Prime Rate in
an amount equal to such increase or decrease in the Prime Rate; each change to
be effective as of the day of the change in such rate in accordance with the
terms of the Security Agreement. Subject to Section 1.2, the Contract Rate shall
not be less than seven percent (7%).
1.2. Contract Rate Adjustments and Payments. The Contract Rate shall be
calculated on the last business day of each month hereafter until the Maturity
Date (each a "DETERMINATION DATE") and shall be subject to adjustment as set
forth herein. If (i) ROIE shall have registered the resale of the shares of
ROIE's common stock underlying each of the conversion of the Minimum Borrowing
Notes, the Secured Convertible Term Note and that certain warrant issued to
Holder on a registration statement declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii) the market price (the "MARKET PRICE")
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Contract Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2.0%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. If (i) ROIE shall
not have registered the resale of the shares of ROIE's common stock underlying
the conversion of the Minimum Borrowing Notes, the Secured Convertible Term Note
and that certain warrant issued to Holder on a registration statement declared
effective by the SEC and which remains effective, and (ii) the Market Price of
the Common Stock as reported by Bloomberg, L.P. on the principal market for the
five (5) trading days immediately preceding a Determination Date exceeds the
then applicable Fixed Conversion Price by at least twenty five percent (25%),
the Contract Rate for the succeeding calendar month shall automatically be
decreased by 100 basis points (100 b.p.) (1.0%) for each incremental twenty five
percent (25%) increase in the Market Price of the Common Stock above the then
applicable Fixed Conversion Price. Notwithstanding the foregoing (and anything
to the contrary contained in herein), in no event shall the Contract Rate be
less than zero percent (0%). Interest shall be (i) calculated on the basis of a
360 day year, and (ii) payable monthly, in arrears, commencing on February 1,
2005 and on the first business day of each consecutive calendar month thereafter
until the Maturity Date (and on the Maturity Date), whether by acceleration or
otherwise (each, a "CONTRACT RATE PAYMENT DATE").
1.3. Allocation of Principal to Minimum Borrowing Note. In the event
that the amount due and payable hereunder should equal or exceed $500,000, to
the extent that the outstanding balance on the Minimum Borrowing Note shall be
less than $500,000 (the difference of $500,000 less the actual balance of the
Minimum Borrowing Note, the "AVAILABLE MINIMUM BORROWING"), such portion of the
balance hereof as shall equal the Available Minimum Borrowing shall be deemed to
be simultaneously extinguished on this Note and transferred to, and evidenced
by, a Minimum Borrowing Note.
ARTICLE II
HOLDER'S CONVERSION RIGHTS
2.1. Optional Conversion. Subject to the terms of this Article II, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or during an Event of Default (as defined in Article IV), and,
subject to the limitations set forth in Section 2.2 hereof, to convert all or
any portion of the outstanding Principal Amount and/or accrued interest and fees
due and payable into fully paid and nonassessable restricted shares of the
Common Stock at the Fixed Conversion Price (defined below). For purposes hereof,
subject to Section 2.5 hereof, the "FIXED CONVERSION PRICE" means, $2.11 (which
has been determined on the date of this Note as an amount equal to 103% of the
average closing price of the Common Stock for the thirty (30) trading days
immediately prior to the date of this Note, but not greater than 110% of the
closing price on the trading day immediately prior to the date of this Note).
The shares of Common Stock to be issued upon such conversion are herein referred
to as the "CONVERSION SHARES."
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2.2. Conversion Limitation. Notwithstanding anything contained herein
to the contrary, the Holder shall not be entitled to convert pursuant to the
terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between the number of shares
of Common Stock beneficially owned by such Holder or issuable upon exercise of
warrants held by such Holder and 4.99% of the outstanding shares of Common Stock
of ROIE. Further, until the consummation of the GO Software Sale as defined in
the Security Agreement of even date herewith, the Holder shall not be entitled
to convert pursuant to the terms of this Note an amount that when aggregated
with shares of Common Stock received by Holder upon exercise of warrants held by
Holder and upon the conversion of other convertible notes held by Xxxxxx would
equal in the aggregate more than 5% of the outstanding shares of Common Stock of
ROIE. For the purposes of this Section 2.2, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and Regulation
13d-3 thereunder. The Conversion Shares limitation described in the first
sentence of this Section 2.2 shall automatically become null and void without
any notice to any Borrower upon the occurrence and during the continuance beyond
any applicable grace period of an Event of Default, or upon 75 days prior notice
to ROIE.
2.3. Mechanics of Xxxxxx's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion
("NOTICE OF CONVERSION") to ROIE and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to ROIE within
two (2) business days after the Conversion Date. Each date on which a Notice of
Conversion is delivered or telecopied to ROIE in accordance with the provisions
hereof shall be deemed a Conversion Date (the "CONVERSION DATE"). A form of
Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit
A. Pursuant to the terms of the Notice of Conversion, ROIE will issue
instructions to the transfer agent accompanied by an opinion of counsel within
two (2) business days of the date of the delivery to ROIE of the Notice of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by ROIE of the Notice of Conversion (the "DELIVERY
DATE"). In the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by ROIE of the Notice of Conversion. The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides ROIE written instructions to the contrary.
2.4. Late Payments. Each Borrower understands that a delay in the
delivery of the shares of Common Stock in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, each Borrower agrees to jointly and
severally pay late payments to the Holder for late issuance of such shares in
the form required pursuant to this Article III upon conversion of the Note, in
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the amount equal to $500 per business day after the Delivery Date. Each Borrower
shall pay any payments incurred under this Section in immediately available
funds upon demand.
2.5. Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 2.1 shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains outstanding,
as follows:
A. Reclassification. If ROIE at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock outstanding immediately prior to such
reclassification or other change.
B. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock or any
preferred stock issued by ROIE in shares of Common Stock, the Fixed Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
C. Share Issuances. Subject to the provisions of this Section
2.5, if ROIE shall at any time (after the date hereof) prior to the conversion
or repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the Holder
(except (i) pursuant to Subsections A or B above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as
disclosed to Holder in writing; or (iii) pursuant to options that may be issued
under any employee incentive stock option and/or any qualified stock option plan
adopted by ROIE) for a consideration per share (the "OFFER PRICE") less than the
Fixed Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset pursuant to the formula below. For
purposes hereof, the issuance of any security of ROIE convertible into or
exercisable or exchangeable for Common Stock for a consideration per share less
than the then applicable Fixed Conversion Price shall result in an adjustment to
the Fixed Conversion Price as set forth below.
If ROIE issues any additional shares of Common Stock for a
consideration per share less than the then-applicable Fixed Conversion Price
pursuant to this Section 3.5 then, and thereafter successively upon each such
issue, the Fixed Conversion Price shall be adjusted by multiplying the then
applicable Fixed Conversion Price by the following fraction:
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A + B
--------------------------------------
(A + B) + [((C - D) x B) / C]
--------------------------------------
A = Total amount of shares convertible pursuant to the Notes.
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
Such adjustment shall become effective immediately upon the earlier to occur of
the date of issuance of such shares of Common Stock or the record date for the
determination of stockholders entitled to receive the convertible securities, as
the case may be. If all of the shares of Common Stock subject to such
convertible securities have not been issued when such convertible securities
expire, then the Fixed Conversion Price shall promptly be readjusted to the
Fixed Conversion Price that would then be in effect had the adjustment upon the
issuance of such convertible securities been made on the basis of the actual
number of shares of Common Stock issued upon the exercise of such convertible
securities. For the purpose of this paragraph (C), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of ROIE. ROIE will not issue any shares of Common Stock or rights,
warrants, convertible or exchangeable securities in respect of shares of Common
Stock held in the treasury of ROIE.
D. Computation of Consideration. For purposes of any
computation respecting consideration received pursuant to Subsection C above,
the following shall apply:
(a) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by XXXX for any underwriting of the issue or otherwise
in connection therewith;
(b) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of ROIE (irrespective of the
accounting treatment thereof); and
(c) Upon any such exercise, the aggregate
consideration received for such securities shall be deemed to be the
consideration received by ROIE for the issuance of such securities plus the
additional minimum consideration, if any, to be received by ROIE upon the
conversion or exchange thereof (the consideration in each case to be determined
in the same manner as provided in clauses (a) and (b) of this Subsection (D)).
2.6. Reservation of Shares. During the period the conversion right
exists, ROIE will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
full conversion of this Note. XXXX represents that upon issuance, such shares
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will be duly and validly issued, fully paid and non-assessable. XXXX agrees that
its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note.
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the events set forth in Sections 3.1 through
3.9, inclusive, shall be an Event of Default ("EVENT OF DEFAULT"):
3.1. Failure to Pay Principal, Interest or other Fees. Any Borrower
fails to pay when due any installment of principal, interest or other fees
hereon or on any other Note issued pursuant to the Security Agreement.
3.2. Breach of Covenant. Any Borrower breaches any covenant or other
term or condition of this Note, the Security Agreement or any Ancillary
Agreement in any material respect and such breach, if subject to cure, continues
for a period of twenty (20) days after the occurrence thereof.
3.3. Breach of Representations and Warranties. Any representation or
warranty of any Borrower or any of its Subsidiaries made herein, or the Security
Agreement, or in any Ancillary Agreement shall be false or misleading in any
material respect.
3.4. Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for 5 consecutive days or 5
days during a period of 10 consecutive days, excluding in all cases a suspension
of all trading on a Principal Market, provided that ROIE shall not have been
able to cure such trading suspension within 30 days of the notice thereof or
list the Common Stock on another Principal Market within 60 days of such notice.
The "Principal Market" for the Common Stock shall include the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, or New York Stock Exchange (whichever of the foregoing is at the time
the principal trading exchange or market for the Common Stock), or any
securities exchange or other securities market on which the Common Stock is then
being listed or traded.
3.5. Receiver or Trustee. Any Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
3.6. Judgments. Any money judgment, writ or similar final process shall
be entered or filed against any Borrower or any of its Subsidiaries or any of
their respective property or other assets for more than $100,000, and shall
remain unvacated, unbonded or unstayed for a period of forty (40) days.
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3.7. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against any Borrower or any
of its Subsidiaries.
3.8. Default Under Other Agreements. The occurrence of an Event of
Default under and as defined in the Security Agreement or any Ancillary
Agreement or any event of default (or similar term) under any other
indebtedness.
3.9. Failure to Deliver Common Stock or Replacement Note. XXXX's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and the Security Agreement, if such failure to timely
deliver Common Stock shall not be cured within two (2) days. If any Borrower is
required to issue a replacement Note to Holder and such Borrower shall fail to
deliver such replacement Note within seven (7) Business Days. The occurrence of
a change in the controlling ownership of the Company.
ARTICLE IV
DEFAULT RELATED PROVISIONS
4.1. Following the occurrence and during the continuance of an Event of
Default, interest on this Note shall automatically be increased by two percent
(2%) per month, and all outstanding Obligations, including unpaid interest,
shall continue to accrue interest from the date of such Event of Default at such
interest rate applicable to such Obligations until such Event of Default is
cured or waived.
4.2. Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
4.3. Cumulative Remedies. The remedies under this Note shall be
cumulative.
4.4. Default Payment. If an Event of Default occurs and is continuing
beyond any applicable grace period, the Holder, at its option, may elect, in
addition to all rights and remedies of Holder under the Security Agreement and
the Ancillary Agreements and all obligations of each Borrower under the Security
Agreement and the Ancillary Agreements, to require the Borrowers to make a
Default Payment ("DEFAULT PAYMENT"). The Default Payment shall be 120% of the
outstanding principal amount of the Note, plus accrued but unpaid interest, all
other fees then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be applied first to any fees due and payable to Holder
pursuant to the Notes or the Ancillary Agreements, then to accrued and unpaid
interest due on the Notes and then to outstanding principal balance of the
Notes.
4.5. Default Payment Date. The Default Payment shall be due and payable
immediately on the date that the Holder has exercised its rights pursuant to
Section 4.4 ("DEFAULT PAYMENT DATE").
4.6. Cumulative Remedies. The remedies under this Note shall be
cumulative.
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ARTICLE V
MISCELLANEOUS
5.1. Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder hereof 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. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2. Notices. Any notice herein required or permitted to be given shall
be in writing and provided in accordance with the terms of the Security
Agreement.
5.3. Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as it may be amended or supplemented.
5.4. Assignability. This Note shall be binding upon each Borrower and
its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Security Agreement.
5.5. Cost of Collection. If default is made in the payment of this
Note, each Borrower shall jointly and severally pay the Holder hereof reasonable
costs of collection, including reasonable attorneys' fees.
5.6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Each party hereto and the individual signing this Note on behalf of
each Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against any Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of Xxxxxx.
5.7. Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
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permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by Borrowers to the Holder and thus refunded to the
Borrowers.
5.8. Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrowers as more fully described
in the Security Agreement and (ii) pursuant to the Stock Pledge Agreement dated
as of the date hereof.
5.9. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Secured
Revolving Note to be signed in its name effective as of this 10th day of
January, 2005.
RETURN ON INVESTMENT CORPORATION
By:
--------------------------
Name:
Title:
WITNESS:
---------------------------
GO SOFTWARE, INC.
By:
--------------------------
Name:
Title:
WITNESS:
---------------------------
TECTONIC SOLUTIONS, INC.
By:
--------------------------
Name:
Title:
WITNESS:
---------------------------
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NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Secured Revolving Note issued by
Return on Investment Corporation and the other Borrowers named and as defined
therein on January __, 2005 into Shares of Common Stock of Return on Investment
Corporation according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion: ___________________________________________________
Conversion Price: ___________________________________________________
Shares To Be Delivered: ___________________________________________________
Signature: ___________________________________________________
Print Name: ___________________________________________________
Address: ___________________________________________________
Holder DWAC
instructions ___________________________________________________
