FORM OF EXCHANGE AGREEMENT
EXCHANGE AGREEMENT made as of July 19, 2002, by and among STONEPATH
GROUP, INC., a Delaware corporation (the "Company") and the shareholder whose
name appears at the end of this agreement (the "Holder").
RECITALS:
WHEREAS, the Holder is the record holder of that number of shares of
the Company's class of Series C Convertible Participating Preferred Stock as
appears at the end of this Agreement (the "Series C Shares");
WHEREAS, pursuant to an election made upon a Notice of Conversion and
Designation of Exchange Alternatives (the "Notice of Conversion"), the Holder
has elected to exchange: (i) the shares of the Company's common stock issuable
upon conversion of the Series C Shares; and (ii) the "Additional Warrants" and
the "Amended Warrants", each as referenced in the Company's correspondence to
the Holder dated June 28, 2002 (respectively, the "Additional Warrants" and
"Amended Warrants"), in return for that number of shares of a newly designated
class of Series D Convertible Preferred Stock as are set forth at the end of
this Agreement (the "Series D Shares").
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein, the parties hereto agree as follows:
1. The Series D Exchange Transaction.
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Subject to the terms and conditions hereof, at the "Closing"
(as hereafter defined), the Company agrees to issue and sell, and the Holder
agrees to purchase, the Series D Shares, in return for which the Holder agrees
to surrender to the Company for cancellation: (i) the shares of the Company's
common stock issuable on the date hereof upon conversion of the Series C Shares
(the "Series C Conversion Shares"); and (ii) the Additional Warrants and the
Amended Warrants; (such transactions, collectively referred to hereafter as the
"Series D Exchange").
2. The Series D Shares.
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(a) At the Closing the Company shall issue to the Holder the
Series D Shares. The terms and conditions of the Series D Shares are identified
within the Certificate of Designation of Powers, Preferences and Rights of the
Series D Convertible Preferred Stock attached hereto as Exhibit "A."
(b) The Series D Shares, as well as the shares of common stock
issuable upon conversion thereof constitute "restricted securities" under Rule
144 promulgated under the Securities Act of 1933, as amended (the "Act"). As
such, the resale of such securities are subject to restrictions upon resale. In
addition, the shares of common stock issuable upon conversion of the Series D
Shares (the "Series D Conversion Shares") are subject to additional restrictions
upon resale as identified in Section 6 hereafter.
(c) The Company has agreed, at its sole cost and expense, to
register the public resale of the Series D Conversion Shares on the terms set
forth at Section 7 hereafter.
3. The Closing.
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(a) A closing of the transactions described within this
Agreement (the "Closing") shall take place on or before July 19, 2002, at the
offices of the Company at Xxx Xxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxxx, XX
00000, or at such other time, date or place as the parties may mutually agree.
(b) At the Closing the following transactions will occur:
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(i) The Holder shall have delivered to the Company a
fully executed Notice of Conversion appropriately marked to indicate an election
to accept the Series D Exchange identified therein;
(ii) The Holder shall deliver the Series C Shares to
the Company for conversion;
(iii) The Company will be deemed to have issued to
Holder the Conversion Shares, Additional Warrants and Amended Warrants, and
Holder will be deemed to have concurrently surrendered to the Company for
cancellation the Series C Conversion Shares;
(iv) The Company will issue and deliver the Series D
Shares to the Holder, free and clear of all liens, levies and encumbrances
(except as otherwise referenced in this Agreement); and
(v) The Company will have filed with the Secretary
of State of the State of Delaware and delivered to Holder a Certificate of
Designation covering the Series D Shares, in the form attached hereto as Exhibit
A.
(c) Notwithstanding anything to the contrary contained herein,
the Company shall be under no obligation to complete the transactions described
in this Agreement unless:
(i) those shareholders owning at least ninety (90%)
percent of the Company's outstanding shares of Series C Convertible Preferred
Stock, have completed the Notice of Conversion and have elected to accept either
of the alternatives under "Designation of Exchange Alternatives"; and
(ii) the Company has secured the consent of its
principal lender to the Series D Exchange transactions.
4. Representations and Warranties of the Company.
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In order to induce the Holder to enter into this Agreement and
complete the transactions described herein, the Company makes the following
representations and warranties to the Holder as of the Closing:
(a) Organization and Standing of the Company. The Company is a
duly organized and validly existing corporation in good standing under the laws
of the State of Delaware with adequate power and authority to conduct the
business in which it is now engaged and has the corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, and is duly qualified and licensed to do business as a foreign
corporation in such other states or jurisdictions as is necessary to enable it
to carry on its business, except where failure to do so would not have a
material adverse effect on its business;
(b) Corporate Power and Authority. The execution and delivery
of this Agreement and consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Company. No other
corporate act or proceeding on the part of the Company is necessary to authorize
this Agreement or any of the transactions contemplated hereby. When duly
executed and delivered by the parties hereto, this Agreement will constitute a
valid and legally binding obligation of the Company enforceable against it in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or other similar laws and
legal and equitable principles limiting or affecting the rights of creditors
generally; and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law. The signature on this Agreement
on behalf of the Company is genuine, and the signatory has been duly authorized
to execute the same;
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(c) Noncontravention. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) permit the termination or acceleration of the maturity of any material
indebtedness or material obligation of the Company; (ii) permit the termination
of any material note, mortgage, indenture, license, agreement, contract, or
other instrument to which the Company is a party or by which it is bound or
violate the Certificate of Incorporation or By-Laws of the Company; (iii) except
as expressly provided in this Agreement and except for state "blue sky"
approvals that may be required and those consents and waivers which already have
been obtained by the Company, require the consent, approval, waiver or
authorization from or registration or filing with any party, including but not
limited to any party to a material agreement to which the Company is a party or
by which it is bound, or any regulatory or governmental agency, body or entity
except where failure to obtain such consent, approval, waiver or authorization
would not have a material adverse effect on the Company's business; (iv) result
in the creation or imposition of any lien, claim or encumbrance of any kind or
nature on any material properties or assets of the Company; (v) result in the
creation or imposition of any lien, claim or encumbrance of any kind or nature
on the Series D Shares to be issued to the Holder, except as may otherwise be
identified in this Agreement; or (vi) violate in any material aspect any
statute, law, rule, regulation or ordinance, or any judgment, decree, order,
regulation or rule of any court, tribunal, administrative or governmental
agency, body or entity to which the Company or its properties is subject except
where such violation would not have a material adverse effect on the Company's
business; and
(d) Reservation of Securities. The requisite number of shares
of common stock of the Company issuable upon conversion of the Series D Shares
has been duly authorized and reserved for issuance and no further corporate
action is required for the valid issuance of such shares.
(e) Series D Shares. The Series D Shares to be issued to the
Holder pursuant to this Agreement will be, upon issuance, duly authorized,
validly issued, fully paid and non-assessable. Further, there are no outstanding
pre-emptive rights associated with the issuance of the Series D Shares.
(f) SEC Reports. The Company has provided Holder with an
opportunity to review all periodic reports, registration statements declared
effective by the SEC and other filings made by it with the SEC since June 2001
(the "SEC Reports"). As of their date of their filing, the Company's SEC Reports
did not contain any untrue statements of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading.
5. Representations and Warranties of the Holder.
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In order to induce the Company to enter into this Agreement
and complete the transactions described herein, the Holder makes the following
representations and warranties to the Company as of the Closing.
(a) Accredited Investor. The Holder has such knowledge and
experience in business and financial matters such that the Holder is capable of
evaluating the merits and risks of purchasing the Series D Shares. The Holder is
an "accredited investor" as that term is defined in Rule 501 of Regulation D of
the Act.
(b) Loss of Investment. The Holder(s) (i) overall commitment
to investments which are not readily marketable is not disproportionate to its
net worth; (ii) investment in the Company will not cause such overall commitment
to become excessive; (iii) can afford to bear the loss of its entire investment
in the Company; and (iv) has adequate means of providing for its current needs
and personal contingencies and has no need for liquidity in its investment in
the Company;
(c) Investment Intent.
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(i) the Holder hereby acknowledges that the Holder
has been advised that the exchange of securities covered by this Agreement has
not been registered with, or reviewed by, the Securities and Exchange Commission
("SEC") because it is intended to be a non-public offering pursuant to Sections
3(a)(9) and 4(2) and Rule 506 of Regulation D of the Act. The Holder represents
that the Series D Shares are being purchased for the Holder's own account and
not on behalf of any other person, for investment purposes only and not with a
view towards distribution or resale to others. The Holder agrees that the Holder
will not attempt to sell, transfer, assign, pledge or otherwise dispose of all
or any portion of the Series D Shares or Series D Conversion Shares unless they
are registered under the Act or unless in the opinion of counsel an exemption
from such registration is available, such counsel and such opinion to be
satisfactory to the Company. The Holder understands that the Series D Shares
have not been registered under the Act by reason of a claimed exemption under
the provisions of the Act which depends, in part, upon the Holder's investment
intention; and
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(ii) the Series D Shares and any certificates issued
in replacement therefor or upon conversion thereof shall bear the following
legend, in addition to any other legend required by law or otherwise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN BY
THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO
RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR
DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER."
(d) State Securities Laws. The Holder understands that no
securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Series D Shares;
(e) Authority; Power; No Conflict. The execution, delivery and
performance by the Holder of this Agreement and the transactions contemplated
hereby are within the powers of the Holder, have been duly authorized and will
not constitute or result in a breach or default under, or conflict with, any
order, ruling or regulation of any court or other tribunal or of any
governmental commission or agency, or any agreement or other undertaking, to
which the Holder is a party or by which the Holder is bound, and, if the Holder
is not an individual, will not violate any provision of the charter documents,
By-Laws, indenture of trust, partnership agreement or other governing instrument
of the Holder. The signatures on this Agreement are genuine, and the signatory,
if the Holder is an individual, has legal competence and capacity to execute the
same, or, if the Holder is not an individual, the signatory has been duly
authorized to execute the same; and this Agreement constitutes the legal, valid
and binding obligations of the Holder, enforceable in accordance with its terms;
(f) No General Solicitation. The Holder acknowledges that no
general solicitation or general advertising (including communications published
in any newspaper, magazine or other broadcast) has been received by it and that
no public solicitation or advertisement with respect to the offering of the
Series D Shares has been made to it;
(g) Advice of Tax and Legal Advisors. The Holder has relied
solely upon the advice of its own tax and legal advisors with respect to the tax
and other legal aspects of this investment;
(h) Access to Information. The Holder has had access to, and
an opportunity to review all material and relevant information concerning the
Company, its management, financial condition, capitalization, market
information, properties and prospects, including all SEC Reports, necessary to
enable Holder to make an informed investment decision with respect to its
investment in the Series D Shares. Holder acknowledges that it has had the
opportunity to ask questions of and receive answers from, and to obtain
additional information from, representatives of the Company concerning the terms
and conditions of the acquisition of the Series D Shares and the present and
proposed business and financial condition of the Company, and has had all such
questions answered to its satisfaction and has been supplied all information
requested; and
(i) Understanding of Investment Risks. Prior to making an
investment in the Series D Shares, the Holder has fully considered, among other
things, the business risks enumerated in the Company's Form 10-K for the year
ended December 31, 2001, and any other risk factors that have been included
within any reports or registration statements filed with the SEC.
6. Restrictions on Transfer.
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(a) General Restriction. The Series D Shares and all
securities issued in exchange therefor or upon conversion or exercise thereof
(for purposes of this Section 6, the "Restricted Securities"), will be
transferable only upon the satisfaction of the conditions set forth in this
Section 6. Any transfer or purported transfer in violation of this Section 6
will be void.
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(b) Notice of Transfer. Prior to any transfer of any
Restricted Securities, the holder thereof will give written notice to the
Company describing in reasonable detail the manner and terms of the proposed
transfer and the identity of the proposed transferee, accompanied by the written
agreement of the proposed transferee to be bound by all of the provisions of
this Section 6. The Company may request an opinion of counsel of such Holder
prior to such transfer to the effect that such transfer is exempt from the
registration requirements of the Act.
(c) Restrictive Legends. For so long as the Series D Shares
and Series D Conversion Shares remain subject to the restrictions on transfer
set forth in this Section 6, the certificates representing such Series D Shares
and Series D Conversion Shares will, in addition to the legend identified at
Section 5(d)(ii), bear a restrictive legend in substantially the following
forms:
"The securities represented by this certificate are subject
to certain restrictions on transfer set forth in an Exchange
Agreement, dated as July 19, 2002, by and among the Company
and the registered holder of this certificate. A copy of such
agreement is on file and may be inspected by the registered
holder of this certificate at the principal executive office
of the Company."
(d) Restriction Upon Resale of the Series D Conversion Shares.
In addition to the restrictions upon transfer identified in sections 6(a)
through 6(c) the Holder agrees not to sell, transfer, assign, encumber or
otherwise dispose of (collectively, a "resale") the Series D Conversion Shares
except in accordance with the following limitations:
(i) Resale of the Series D Conversion shares will be
prohibited for the earlier of: (x) one (1) year from the Closing; or (y) until
such time that the average closing price of the common stock of the Company for
a period of ten (10) consecutive Trading Days is $4.50 or greater.
(ii) Beginning on the date that the prohibition upon
resale identified in clause (i) above lapses through the second anniversary of
the Closing, resale of the Series D Conversion Shares will be subject to the
following "spill-out" limitations:
(A) On any day when the common stock trades
fewer than 100,001 shares, the Holder may sell up to twenty percent (20%) of the
reported daily volume as traded on the AMEX or a subsequent market (the "Daily
Volume");
(B) On any day when the common stock trades
between 100,001 and 150,000 shares, the Holder may sell up to twenty five
percent (25%) of the Daily Volume;
(C) On any day when the common stock trades
between 150,001 and 300,000 shares, the Holder may sell up to thirty percent
(30%) of the Daily Volume;
(D) On any day when the common stock trades
between 300,001 and 700,000 shares, the Holder may sell up to thirty five
percent (35%) of the Daily Volume; and
(E) On any day when the common stock trades
more than 700,000 shares, the Holder may sell up to forty five percent (45%) of
the Daily Volume;
provided further, however, that on any Trading Day when the common
stock closes above $6.00 per share, each of the above percentages shall be
increased by ten percent (10%) for that Trading Day; provided further, however,
that once the average closing price of the common stock is $7.50 per share or
above for thirty (30) consecutive Trading Days, there shall be no restriction on
the number of shares of the common stock that the Holder may sell on that
Trading Day. (The trading activity set forth in the foregoing clauses shall be
referred to as the "Permitted Sales"). Nothing contained herein shall restrict
the ability of the Holder to sell any number of shares of the common stock in a
direct placement(s) with a single purchaser or group of purchasers, such direct
placement(s) to be made on an off-market basis, provided such purchaser agrees
to the restrictions upon resale identified above.
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(iii) All restrictions upon resale will lapse upon an "Event
of Liquidation" or an "Automatic Conversion" as defined within the Certificate
of Designation of the Series D Shares.
(iv) If at any time while the provisions of Section 6(d) of
this Agreement remain in effect, the Company shall split, subdivide or otherwise
combine its common stock, into a different number of securities of the same
class, any reference contained herein to the closing price of the Company's
common stock shall be proportionately adjusted to retain the same relative price
and terms as if before such split, subdivision or combination.
7. Registration Rights.
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(a) Shelf Registration. The Company shall prepare and file, not later
than thirty (30) days following the Closing, a Registration Statement with the
SEC and use its best efforts to, as promptly as possible after having cleared
all SEC comments, have such Registration Statement declared effective for the
purpose of facilitating the public resale of the Series D Conversion Shares. The
Company's obligation, however, shall extend only to the inclusion of the Series
D Conversion Shares in a Registration Statement filed under the Act. The Company
shall have no obligation to assure the terms and conditions of distribution, to
obtain a commitment from an underwriter relative to the sale of the Series D
Conversion Shares or to otherwise assume any responsibility for the manner,
price or terms of the distribution of the Series D Conversion Shares. The
registration rights of Holder herein may be transferred to a transferee of the
Series D Shares, provided such transfer is in accordance with the terms of this
Agreement.
(b) Registration Procedures. Whenever it is obligated to register the
Series D Conversion Shares pursuant to this Agreement, the Company shall:
(i) prepare and file with the SEC a Registration Statement
with respect to the Series D Conversion Shares in the manner set forth at
Section 7(a) hereof and use its best efforts to cause such Registration
Statement to become effective and to remain effective for that period identified
in Section 7(b)(vii) hereafter;
(ii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the period specified in Section 7(b)(vii) below;
(iii) furnish to the Holder such number of copies of the
Registration Statement and the prospectus included therein (including each
preliminary prospectus), as such person may reasonably request in order to
facilitate the public sale or other disposition of the Series D Conversion
Shares covered by such Registration Statement;
(iv) use its best efforts to register or qualify the Series D
Conversion Shares covered by such Registration Statement under the securities or
blue sky laws of such jurisdictions as the Holder shall reasonably request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(v) immediately notify the Holder under such Registration
Statement at any time when a prospectus relating thereto is required to be
delivered under the Act, of the happening of any event as a result of which the
prospectus contained in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required or necessary to be stated therein in order to make the statements
contained therein not misleading in light of the circumstances under which they
were made;
(vi) make available for inspection by the Holder, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by the Holder in connection with such
Registration Statement;
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(vii) for purposes of Section 7(a) above, the Company shall be
obligated to maintain an effective Registration Statement for the earlier of two
years or: (i) when the Series D Conversion Shares covered thereby has been
disposed of by the Holder; (ii) when and to the extent the Series D Conversion
Shares are permitted to be publicly sold under Rule 144(k) (or any successor
provision to such Rule) under the Act, or (iii) when the Series D Conversion
Shares are otherwise freely transferable to the public without further
restriction under the Act;
(viii) if the common stock of the Company is listed on any
securities exchange or automated quotation system, the Company shall use its
best efforts to list (with the listing application being made at the time of the
filing of such Registration Statement or as soon thereafter as is reasonably
practicable) the Series D Conversion Shares covered by such Registration
Statement on such exchange or automated quotation system;
(ix) notify the Holder if there are any amendments to the
Registration Statement, any requests by the SEC to supplement or amend the
Registration Statement, or of any threat by the SEC or state securities
commission to undertake a stop order with respect to sales under the
Registration Statement; and
(x) cooperate in the timely removal of any restrictive legends
from the shares of Series D Conversion Shares in connection with the resale of
such shares covered by an effective Registration Statement.
(c) Expenses.
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(i) For the purposes of this Section 7(c), the term
"Registration Expenses" shall mean: all expenses incurred by the Company in
complying with Section 7(a) of this Agreement, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, "blue sky" fees,
fees of the National Association of Securities Dealers, Inc. ("NASD"), fees and
expenses of listing Series D Conversion Shares on any securities exchange or
automated quotation system on which the Company's shares are listed and fees of
transfer agents and registrars. The term "Selling Expenses" shall mean: all
underwriting discounts and selling commissions applicable to the sale of Series
D Conversion Shares.
(ii) Except as otherwise provided herein, the Company will pay
all Registration Expenses in connection with the Registration Statements filed
pursuant to Section 7(a) of this Agreement. All Selling Expenses in connection
with any Registration Statements filed pursuant to Section 7(a) of this
Agreement shall be borne by the Holder.
(d) Obligations of Holder.
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(i) In connection with each registration hereunder, each
Holder will furnish to the Company in writing such information with respect to
such Holder and the securities held by such Holder, and the proposed
distribution by him or them as shall be reasonably requested by the Company in
order to assure compliance with federal and applicable state securities laws, as
a condition precedent to including such Holder's Series D Conversion Shares in
the Registration Statement. Each Holder also shall agree to promptly notify the
Company of any changes in such information included in the Registration
Statement or prospectus as a result of which there is an untrue statement of
material fact or an omission to state any material fact required or necessary to
be stated therein in order to make the statements contained therein not
misleading in light of the circumstances then existing.
(ii) In connection with each registration pursuant to this
Agreement, the Holder whose shares are included therein will not effect sales
thereof until notified by the Company of the effectiveness of the Registration
Statement, and thereafter will suspend such sales after receipt of telegraphic
or written notice from the Company to suspend sales to permit the Company to
correct or update a Registration Statement or prospectus. At the end of any
period during which the Company is obligated to keep a Registration Statement
current, the Holder included in said Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holder shall notify
the Company of the number of shares registered which remain unsold immediately
as soon practicable.
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(e) Information Blackout and Holdbacks.
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(i) At any time when a Registration Statement effected
pursuant to Section 7(a) relating to Series D Conversion Shares is effective,
upon written notice from the Company to the Holder that the Company has
determined in good faith that sale of Series D Conversion Shares pursuant to the
Registration Statement would require disclosure of non-public material
information, the Holder shall suspend sales of Series D Conversion Shares
pursuant to such Registration Statement until such time as the Company notifies
the Holder that such material information has been disclosed to the public or
has ceased to be material or that sales pursuant to such Registration Statement
may otherwise be resumed.
(ii) Notwithstanding any other provision of this Agreement,
each Holder of Series D Conversion Shares shall not effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven (7) days prior to the commencement of any
primary offering to be undertaken by the Company of shares of its own common
stock (the "Primary Offering"), which may also include other securities, and
ending ninety (90) days after completion of any such Primary Offering, unless
the Company, in the case of a non-underwritten offering, or the managing
underwriter, in the case of an underwritten Primary Offering, otherwise agree;
provided, that all directors, officers and employees of the Company holding 1%
of the outstanding shares of common stock enter into similar arrangements. The
provisions of this Section 7(e)(ii) shall only apply to a Primary Offering that
occurs during the period in which the Company has an obligation to maintain an
effective Registration Statement under Section 7(b)(vii) hereof.
(f) Penalty.
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In the event that the Registration Statement covering the
Series D Conversion Shares has not been filed with the SEC within the thirty day
period following the Closing and declared effective within the ninety day period
following the Closing: (x) for each month during the twelve (12) month period
following the Closing in which the Registration Statement has not been filed or
declared effective within either of the aforementioned time periods, the Company
shall pay to the Holder a monthly fee equal to the product of (i) the number of
Series D Shares held by the Holder multiplied by one (1%) percent of the
Liquidation Value (as defined in the Company's Certificate of Designation of
Powers, Preferences and Rights of the Series D Convertible Preferred Stock) so
long as the closing price of the Company's common stock is greater than $3.50
but less than $4.50 for at least ten (10) Trading Days during such month or (ii)
the number of Series D Shares held by the Holder multiplied by two (2%) percent
of the Liquidation Value so long as the closing price of the Company's common
stock is greater than $4.50 for at least ten (10) Trading Days during such
month; and (y) for each month in which the Registration Statement has not been
filed or declared effective at any time after the twelve (12) month period
following the Closing, the Company shall pay to the Holder a monthly fee equal
to the product of the number of Series D Shares held by the Holder multiplied by
two (2%) percent of the Liquidation Value.
(g) Indemnification.
(i) The Company agrees to indemnify, to the extent permitted
by law, each Holder of Series D Conversion Shares, its officers and directors
and each Person who controls such Holder (within the meaning of the Act) against
all losses, claims, damages, liabilities and expenses caused by any untrue
statement of material fact contained in any Registration Statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished to the Company by such Holder for use
therein or by such Holder's failure to deliver a copy of the Registration
Statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder with a sufficient number of copies of the
same.
(ii) In connection with any Registration Statement in which a
Holder of Series D Conversion Shares is participating, each such Holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such Registration Statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Act) against any losses, claims, damages, liabilities and
expenses resulting from: (x) any untrue or alleged untrue statement of material
fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, (but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder); (y) any disposition of the Series D Conversion Shares
by such Holder in a manner that fails to comply with the permitted methods of
distribution identified within the Registration Statement; or (z) such Holder's
failure to deliver a copy of the Registration Statement or prospectus or any
amendments or supplements thereto after the Company has furnished in a timely
manner such Holder with a sufficient number of copies of the same; provided that
the obligation to indemnify (if there shall be more than one Holder) shall be
individual, not joint and several, for each Holder and shall be limited to the
net amount of proceeds received by such Holder from the sale of Series D
Conversion Shares pursuant to such Registration Statement.
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(iii) Any Person entitled to indemnification hereunder shall
(x) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to give
prompt notice shall not impair any Person's right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party) and (y)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(iv) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
(h) Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holder the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit the
Holder to sell the Series D Conversion Shares to the public without
registration, the Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"); and
(iii) furnish to the Holder, so long as the Holder owns any
Series D Conversion Shares, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144 and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Holder of
any rule or regulation of the SEC which permits the selling of the Series D
Conversion Shares without registration."
(i) Definitions.
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9
As used in Sections 6 and 7 of this Agreement, the
following terms shall have the meaning set forth hereafter:
(i) "Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
(ii) "Registration Statement" shall mean the Registration
Statement of the Company to be filed with the SEC pursuant to the provisions of
Section 7(a) of this Agreement which covers the resale of the Series D
Conversion Shares on an appropriate form then permitted by the SEC to be used
for such registration and the sales contemplated to be made thereby under the
Act, or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such Registration Statement, including any pre-and post-
effective amendments thereto, in each case including the prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
(iii) "Series D Conversion Shares" shall mean all or any
shares of common stock or other equity securities of the Company that may be
issued to the Holder upon conversion of the Series D Shares, and any additional
shares of Common Stock or other equity securities of the Company issued or
issuable after the date hereof in respect of any such securities (or other
equity securities issued in respect thereof) by way of a stock dividend or stock
split, in connection with a combination, exchange, reorganization,
recapitalization or reclassification of Company securities, or pursuant to a
merger, division, consolidation or other similar business transaction or
combination involving the Company.
(iv) "Trading Day" shall mean any day on which the American
Stock Exchange is open for trading.
9. Miscellaneous.
(a) Notices. All notices, requests, consents or other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed first class postage prepaid, registered or certified
mail, or sent by a nationally recognized overnight courier such as federal
express, to the following addresses:
If to the Company:
Stonepath Group, Inc.
Xxx Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, General Counsel
With a copy to:
Xxxxx X. North, Esquire
Xxxxxxxx Xxxxxxxxx Professional Corporation
Eleven Penn Center
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
In the case of Purchaser:
To the address set forth at the end of this Agreement or to
such other addresses as may be specified in accordance herewith from time to
time.
Unless specified otherwise, such notices and other
communications shall for all purposes of this Agreement be treated as being
effective upon being delivered personally or, if sent by mail, five days after
the same has been deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed as set forth above, and postage prepaid or, if
sent by a nationally recognized overnight courier, on the next business day
after the date of mailing, addressed as set forth above.
10
(b) Survival of Representations and Warranties.
Representations and warranties contained herein shall survive the execution and
delivery of this Agreement.
(c) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
provided that this Agreement and the interests herein may not be assigned by
either party without the express written consent of the other party.
(d) Sections and Other Headings. The section and other
headings contained in this Agreement are for the convenience of reference only,
do not constitute part of this Agreement or otherwise affect any of the
provisions hereof. The definitions contained within the Recital section of this
Agreement are incorporated by reference into the remainder of the Agreement.
(e) Further Assurances. From time to time on and after the
Closing, each party hereto will promptly execute and deliver all such further
instruments and assurances, and will promptly take all such further actions, as
the other party may reasonably request in order more effectively to effect or
confirm the transactions contemplated by this Agreement and/or any of the
Exhibits and to carry out the purposes hereof and thereof.
(f) Severability. No invalidity or unenforceability of any
section of this Agreement or any portion thereof will affect the validity or
enforceability of any other section or the remainder of such section.
(g) Equitable Relief. Each of the parties acknowledges that
any breach by such party of his, her, or its obligations under this Agreement
would cause substantial and irreparable damage to one or more of the other
parties and that money damages would be an inadequate remedy therefore.
Accordingly, each party agrees that the other parties or any of them will be
entitled to an injunction, specific performance, and/or other equitable relief
to prevent the breach of such obligations.
(h) Entire Agreement. This Agreement, together with the
exhibits hereto, contains the entire understanding and agreement among the
parties, or between or among any of them, and supersedes any prior
understandings or agreements between or among any of them, with respect to the
subject matter hereof.
(i) Governing Law. This Agreement will be governed by and
interpreted and construed in accordance with the internal laws of the State of
Delaware, as applied to agreements under seal made, and entirely to be
performed, within Delaware.
(j) Counterpart and Facsimile Signatures. This Agreement may
be signed in counterparts and all counterparts together shall become effective
only when the counterpart(s) have been executed and delivered by and on behalf
of the Company and the Holder. Facsimile signatures to this Agreement shall be
deemed to be original signatures.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto
have caused this Agreement to be signed by their duly authorized officers on the
day and year first above written.
Number of Series
C Shares To be
converted and exchanged:
Number of HOLDER:
Series D Shares
To be issued in the
Series D Exchange: By:
---------------------------------
----------------- Name:
-------------------------------
Title:
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STONEPATH GROUP, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
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