SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
STONEPATH GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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STONEPATH GROUP, INC.
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
April 22, 2002
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Meeting") of Stonepath Group, Inc. (the "Company") which will be held at
the offices of Buchanan Ingersoll Professional Corporation, Eleven Penn Center,
1835 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103, on Friday, May
31, 2002 at 10:00 A.M. local time. Your Board of Directors and management look
forward to personally greeting those stockholders able to attend.
At the Meeting, stockholders will be asked to:
(1) elect the Company's directors;
(2) approve amendments to the Company's Amended and Restated 2000
Stock Incentive Plan to increase: (i) the number of shares of the
Company's Common Stock which may be issued thereunder; and (ii)
the number of shares of the Company's Common Stock that may be
issued upon the exercise of stock option grant(s) under Section
162(m) of the Internal Revenue Code of 1986, as amended;
(3) ratify the appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 2002; and
(4) consider such other matters as may be properly brought before the
Meeting and at any adjournment(s) or postponement(s) thereof.
These matters are discussed in greater detail in the accompanying Proxy
Statement.
Your Board of Directors recommends a vote FOR the election of the
Company's directors nominated, FOR the amendments to the Amended and Restated
2000 Stock Incentive Plan, and FOR the ratification of KPMG LLP as the Company's
independent auditors.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
Meeting. You are requested to sign, date and mail the enclosed proxy promptly.
A copy of the Company's Annual Report for the year ended December 31,
2001 is enclosed for your information. No material contained in the Annual
Report is to be considered a part of the proxy solicitation material.
We wish to thank you for your loyal support of the Company and your
participation in this process.
Sincerely,
/s/ Dennis L. Pelino
----------------------
Dennis L. Pelino
Chairman of the Board
STONEPATH GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 31, 2002
April 22, 2002
To the Stockholders of Stonepath Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Stonepath Group, Inc. (the "Company") will be held at the offices
of Buchanan Ingersoll Professional Corporation, Eleven Penn Center, 1835 Market
Street, 15th Floor, Philadelphia, Pennsylvania 19103, on Friday, May 31, 2002 at
10:00 A.M. local time, for the following purposes:
(1) to elect the Company's directors;
(2) to approve amendments to the Company's Amended and Restated 2000
Stock Incentive Plan to increase: (i) the number of shares of the
Company's Common Stock which may be issued thereunder; and (ii)
the number of shares of the Company's Common Stock that may be
issued upon the exercise of stock option grant(s) under Section
162(m) of the Internal Revenue Code of 1986, as amended (the
"Code");
(3) to ratify the appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 2002; and
(4) to consider such other matters as may be properly brought before
the Meeting and at any adjournment(s) or postponement(s) thereof.
A copy of the Company's Annual Report for the year ended December 31,
2001 is enclosed for your information. No material contained in the Annual
Report is to be considered a part of the proxy solicitation material.
Only stockholders of record as of the close of business on April 12,
2002 will be entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof.
All stockholders are cordially invited to attend the Meeting. However,
to assure your representation at the Meeting, you are urged to complete, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
/s/ Stephen M. Cohen
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Stephen M. Cohen
Senior Vice President, General Counsel and
Secretary
STONEPATH GROUP, INC.
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Stonepath Group, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders (the "Meeting") of the Company to be held at the offices of
Buchanan Ingersoll Professional Corporation, Eleven Penn Center, 1835 Market
Street, 15th Floor, Philadelphia, Pennsylvania 19103, on Friday, May 31, 2002 at
10:00 A.M. local time, and at any adjournment(s) or postponement(s) thereof for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The proxy solicitation materials were mailed on or about April 22,
2002 to all stockholders entitled to vote at the Meeting.
Record Date and Share Ownership
Stockholders of record at the close of business on April 12, 2002 (the
"Record Date") are entitled to notice of and to vote at the Meeting, and at any
adjournment(s) or postponement(s) thereof. At the Record Date, 20,903,110 shares
of the Company's Common Stock, $.001 par value per share (the "Common Stock"),
and 3,824,460 shares of Series C Convertible Preferred Stock, par value $.001
per share (the "Preferred Stock"), were issued, outstanding and entitled to
notice of and to vote as a single class (in the case of the Preferred Stock, on
the basis of the number of shares of Common Stock into which each share of
Preferred Stock is convertible) on all matters at the Meeting and at any
adjournment(s) or postponement(s) thereof. As of the Record Date, each share of
Preferred Stock was convertible into one (1) share of Common Stock, and
therefore, each share of Preferred Stock is entitled to one vote.
Revocability of Proxies
The execution of a proxy will not affect a stockholder's right to
attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
used at the Meeting by filing with the Secretary of the Company either: (i) a
written notice of revocation; (ii) a proxy bearing a later date than the most
recently submitted proxy; or (iii) by attendance at the Meeting and voting in
person. Attendance at the Meeting will not, by itself, revoke a proxy.
Annual Report
A copy of the Company's Annual Report for the year ended December 31,
2001 accompanies this Proxy Statement. No material contained in the Annual
Report is to be considered a part of the proxy solicitation material.
The mailing address of the Company's executive office is Two Penn
Center Plaza, Suite 605, Philadelphia, PA 19102.
Quorum and Voting Requirements; Solicitation
The Company's Bylaws provide that the stockholders holding a majority
of the shares issued, outstanding and entitled to vote on the Record Date must
be present in person or by proxy at the Meeting to constitute a quorum for the
transaction of business at the Meeting.
Although there are no controlling precedents under Delaware law
regarding the treatment of broker non-votes in certain circumstances, the
Company intends to apply the principles set forth below. As used herein,
"uninstructed shares" means shares held by a broker who has not received
instructions from its customers on such matters and the broker has so notified
the Company on a proxy form in accordance with industry practice or has
otherwise advised the Company that it lacks voting authority. As used herein,
"broker non-votes" means the votes that could have been cast on the matter in
question by brokers with respect to uninstructed shares if the brokers had
received their customers' instructions and such shares cannot otherwise be voted
in accordance with the American Stock Exchange's regulations.
The vote required for Proposal 2 to approve the amendments to the
Company's Amended and Restated 2000 Stock Incentive Plan, and Proposal 3 to
ratify the selection of auditors is the affirmative vote of the majority of the
shares entitled to vote that are present in person or by proxy at the Meeting.
Accordingly, abstentions and broker non-votes have the effect of negative votes
with respect to the approval of these Proposals. With respect to Proposal 1,
nominees receiving a plurality of the votes cast will be elected as directors.
Abstentions and broker non-votes will not be taken into account in determining
the outcome of the election of a director.
Proxies which are validly executed by stockholders and which are
received by the Company no later than the business day preceding the Meeting
will be voted in accordance with the instructions contained thereon. If no
instructions are given, the proxy will be voted in accordance with the
recommendations of the Board of Directors and in the discretion of the proxy on
all other matters presented at the Meeting. For the reasons set forth in more
detail in the Proxy Statement, the Board of Directors recommends a vote FOR the
election of the Company's directors, FOR the approval of the amendments to the
Company's Amended and Restated 2000 Stock Incentive Plan, and FOR the
ratification of KPMG LLP as the Company's independent auditors.
Registered stockholders (those who hold shares directly rather than
through a bank or broker) can simplify their voting by voting via the internet
at www.votestock.com. Internet voting information is provided on the Proxy Card.
Use of a Log-In Number and stockholders' Social Security Number or Tax
Identification Number is designed to verify stockholders' identities and allow
stockholders to vote their shares and confirm that their voting instructions
have been properly recorded. The Control Number is located above a stockholder's
name and address on the Proxy Card. If a stockholder holds shares through a bank
or broker, the stockholder will receive separate instructions on the form
received from the bank or broker. Although most banks and brokers now offer
Internet voting, availability and specific processes will depend on their voting
arrangements.
The cost of this proxy solicitation will be borne by the Company. The
Company will reimburse brokers and other persons holding stock in their names or
in the names of nominees for their expenses incurred in sending proxy materials
to principals and obtaining their proxies.
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Shareholder Proposals
Proposals of stockholders that are intended to be included within the
proxy material for our 2003 Annual Meeting of Stockholders must comply with the
requirements of SEC Rule 14a-8 and must be received no later than December 23,
2002 in order to be included in the Proxy Statement and proxy relating to that
Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
Nominees for Consideration at the Meeting
The Bylaws provide that the Board of Directors shall consist of at
least one (1), but not more than that number of Directors established from time
to time by the affirmative vote of a majority of the Board of Directors. The
Board of Directors, in its discretion by majority vote, may increase and
decrease the number of directors on the Board of Directors. The Board has
resolved to have six (6) directors. Each person who is appointed or elected to
the Board of Directors will hold that position until the close of the next
annual meeting of stockholders, until he or she ceases to be a director by
operation of law or until he or she resigns.
The six (6) persons listed below have been nominated by the Board of
Directors to serve as directors of the Company.
Unless otherwise specified, each properly executed proxy received will
be voted for the election of the nominees named below to serve as directors
until the end of their respective terms or until his/her successor is elected
and qualified. The Company is not aware of any reason that any nominee will be
unable to serve or will decline to serve as a director. In the event that any
nominee is unable to serve or will not serve as a director, it is intended that
the proxies solicited hereby will be voted for such other person or persons as
shall be nominated by management.
INFORMATION ABOUT NOMINEES FOR DIRECTOR
The following table sets forth certain information with respect to each
of the nominees for director and their current positions with the Company.
Year in Which
Service as a
Director's Name and Age Principal Occupation Director Began
----------------------- -------------------- --------------
Dennis L. Pelino, 54 Chairman of the Board of 2001
Directors and Chief
Executive Officer
J. Douglass Coates, 59 Director 2001
Frank Palma, 64 Director 2001
David R. Jones, 53 Director 2000
Aloysius T. Lawn, IV, 43 Director 2000
Robert McCord, 43 Director 2001
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Dennis L. Pelino
Dennis L. Pelino has served as our Chairman of the Board of Directors
and Chief Executive Officer since June 21, 2001. Mr. Pelino has over two decades
of executive experience in the logistics industry. From 1986 to 1999, he was
employed by Fritz Companies, Inc., initially as director of International
Operations and Sales and Marketing, in 1993 as its Chief Operating Officer and
commencing in 1996, also as its President. Mr. Pelino was also a member of the
Board of Directors of Fritz Companies from 1991 to 1999. During Mr. Pelino's
tenure, he acquired or started over 50 companies for Fritz as it became one of
the leading global logistics companies. Prior to Fritz, Mr. Pelino held senior
executive positions in the container shipping industry and in the domestic
full-service truck leasing industry. Most recently, from 1999 through 2001, Mr.
Pelino has been involved as a director and principal of a number of private
ventures which explored opportunities in the logistics industry and which
provided consulting services relative to business opportunities in Latin
America, China and other Far Eastern regions.
J. Douglass Coates
J. Douglass Coates has served as a member of our Board of Directors
since August 2001. He has been Principal of Manalytics International, Inc., a
transportation, logistics and supply chain consulting firm based in San
Francisco, California, since 1992. He was previously president, ACS Logistics, a
division of American President Lines, and President of Milne Truck Lines, then a
subsidiary of the Sun Company. Mr. Coates holds a Bachelor of Science degree in
engineering from Pennsylvania State University and an MBA from the Wharton
School of the University of Pennsylvania.
Frank Palma
Frank Palma has served as a member of our Board of Directors since
August 2001. Mr. Palma has significant experience in the field of executive
search and human resources. Since August 2000, Mr. Palma has been the principal
and Chief Executive Officer of Frank Palma Associates, LLC, an executive
recruiting firm. Briefly before that, he was the Chief Operating Officer of
Global Sources, Inc., a human resources firm, and from 1985 to 2000, he was an
Executive Vice President with Goodrich & Sherwood Associates, Inc., a human
resource consulting services firm. Mr. Palma holds a Bachelor of Science degree
in Business Management from the City College of New York and has completed
graduate course work at Cornell University and New York University.
David R. Jones
David Jones has served as a member of our Board of Directors since
September 2000. Mr. Jones has been President of DR Jones Financial, Inc., a
privately-held consulting firm since its formation in September 1995. He is
presently a director of Financial Asset Securities Corporation, an affiliate of
Greenwich Capital Markets, Inc. Prior to forming DR Jones Financial, Inc., Mr.
Jones was Senior Vice President-Asset Backed Finance of Greenwich Capital
Markets, Inc. from 1989 to 1995. Mr. Jones served as a Vice President, and
subsequently as a Managing Director of The First Boston Corporation, an
investment banking firm, from 1982 to 1989 and as Manager-Product Development of
General Electric Credit Corp., an asset-based lender and financial services
company, from 1981 to 1982. Mr. Jones is a graduate of Harvard College and has a
Masters Degree in business administration from the Amos Tuck School of Business
Administration.
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Aloysius T. Lawn, IV
Aloysius T. Lawn has served as a member of our Board of Directors since
February 2001. Mr. Lawn is the Executive Vice President - General Counsel and
Secretary of Talk America Holdings, Inc., an integrated communications service
provider with products designed to benefit the residential and small business
markets. Prior to joining Talk America Holdings, Inc. in 1996, Mr. Lawn was an
attorney in private practice with extensive experience in private and public
financings, mergers and acquisitions, securities regulation and corporate
governance from 1985 through 1995. Mr. Lawn graduated from Yale University and
Temple University School of Law.
Robert McCord
Robert McCord has served as a member of our Board of Directors since
March 2001. He is also a Managing Director of PA Early Stage, an affiliated fund
of Safeguard Scientifics, Inc. At PA Early Stage, which he co-founded in 1997,
Mr. McCord specializes in business development for its portfolio companies. He
also serves as President and CEO of the Eastern Technology Council, a consortium
of more than 1,200 technology-oriented companies. At the Technology Council he
provides contacts, capital and information for senior executives. Mr. McCord
co-founded and also serves as a principal of the Eastern Technology Fund, which
provides seed and early-stage funding for technology companies in the eastern
corridor. Previously, he served as Vice President of Safeguard Scientifics,
Inc., a leader in identifying, developing and operating premier technology
companies. Before joining Safeguard, Mr. McCord spent a decade on Capitol Hill
where he served as Chief of Staff, Speechwriter and Budget Analyst in a variety
of congressional offices. He specialized in budget and deregulatory issues and,
as CEO of the bipartisan Congressional Institute for the Future, he ran a staff
which tracked legislation and provided policy analyses and briefings. Mr. McCord
earned his Bachelor's degree, with high honors, from Harvard University and his
MBA from the Wharton School.
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INFORMATION ABOUT EXECUTIVE OFFICERS
Our executive officers and significant employees as of April 22, 2002
are as follows:
Year in Which
Officer's Name and Age Office Service Began
---------------------- ------ -------------
Dennis L. Pelino, 54 Chairman of the Board of 2001
Directors and Chief Executive
Officer
Gary Koch, 43 Significant Employee - 2001
Domestic Operations
Stephen M. Cohen, 45 Senior Vice President, General 2000
Counsel and Secretary
Bohn H. Crain, 38 Chief Financial Officer 2002
Thomas L. Scully, 52 Vice President - Finance and 2001
Treasurer/Principal
Accounting Officer
For biographical information regarding Mr. Pelino, please see his
biography under "Information about Nominees for Director" set forth above.
Gary Koch
Gary Koch is a significant employee of the Company and serves as the
Chief Executive Officer of Air Plus and Stonepath Logistics Domestic Services,
Inc. Mr. Koch co-founded Air Plus in May 1990. Prior to its acquisition by the
Company on October 5, 2001, Mr. Koch built Air Plus into a leading
transportation logistics company serving a customer base of manufacturers,
distributors and national retail chains with approximately $60.0 million in
annual revenues, over 200 employees and 16 offices in North American cities. Mr.
Koch has over twenty years of logistics experience in the U.S. and Canadian
markets with expertise in traditional air freight and distribution logistics.
Mr. Koch received a B.S. in marketing from Purdue University.
Stephen M. Cohen
Stephen M. Cohen has served as the Company's Senior Vice President,
General Counsel and Secretary since April 2000. Since 1980, Mr. Cohen has been
engaged in the practice of law, having most recently been a shareholder of
Buchanan Ingersoll Professional Corporation from March 1996 to April 2000 and a
partner of Clark Ladner, Fortenbaugh & Young from March 1990 to March 1996. Mr.
Cohen's practice focused on corporate finance and federal securities matters.
Mr. Cohen received a B.S. from the School of Commerce and Finance of Villanova
University, a J.D. from Temple University and a L.L.M. in Taxation from
Villanova University School of Law.
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Bohn H. Crain
Bohn H. Crain has served as our Chief Financial Officer since January
10, 2002. Mr. Crain has over 15 years of experience in finance and accounting as
well as extensive experience in the transportation and logistics industry. Prior
to joining Stonepath's executive team, from January 2001 to September 2001, he
served as Executive Vice President and Chief Financial Officer for Schneider
Logistics, Inc., a third party logistics company. Before Schneider, from May
2000 to January 2001, Mr. Crain served as Vice President and Treasurer for
Florida East Coast Industries, Inc., and prior to that, from June 1989 to May
2000, he held various Vice-President and treasury positions with CSX and various
of its subsidiaries. Mr. Crain holds a Bachelor's degree in business
administration - accounting from the University of Texas.
Thomas L. Scully
Thomas L. Scully has served as our Vice President - Finance and
Treasurer since November 19, 2001. Before joining Stonepath, Mr. Scully was
Senior Manager within the assurance and advisory services of Deloitte & Touche,
LLP from December 1996 to November 2001. Prior to Deloitte & Touche, from
October 1980 to June 1996, Mr. Scully was Audit Partner at BDO Seidman, LLP
where he led numerous accounting, auditing and tax engagements for publicly
traded and privately-held local, national, and international clients. Prior to
BDO, he held the position of Audit Supervisor at Coopers & Lybrand, LLP. Mr.
Scully is a certified public accountant and earned a B.S. from St. Joseph's
University, Philadelphia.
Board Meetings
During the year ended December 31, 2001, the Board of Directors held 5
meetings and acted by unanimous consent on 4 occasions. Additionally, there were
4 Audit Committee meetings and 5 Compensation Committee meetings held during
2001. During 2001, each Board member attended 75% or more of the meetings held
by the Board and any committee upon which such Director served.
Board Committees
Audit Committee
The Audit Committee is responsible for reviewing the Company's
financial and accounting practices and making recommendations concerning the
engagement of its independent auditors. The members of the Audit Committee are
David R. Jones, Chairman, as well as Aloysius T. Lawn, IV, and Robert McCord.
Compensation Committee
In January 2001, the Board of Directors established a Compensation
Committee. The Compensation Committee is responsible for determining the
compensation of the officers and employees of the Company and administering the
Company's stock option plan. The members of the Compensation Committee are
Aloysius T. Lawn, IV, Chairman, as well as David R. Jones and Frank Palma.
8
VOTE REQUIRED FOR APPROVAL
Nominees receiving a plurality of the votes cast will be elected as
Directors. An abstention or failure to vote on this Proposal will not be
considered in determining the number of affirmative and negative votes cast by
stockholders on Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE COMPANY'S DIRECTORS.
9
PROPOSAL 2
APPROVAL OF AMENDMENTS TO THE STONEPATH GROUP, INC. AMENDED
AND RESTATED 2000 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve amendments to the
Stonepath Group, Inc. Amended and Restated 2000 Stock Incentive Plan (the
"Plan") to increase (i) the number of shares of the Company's Common Stock
reserved for issuance under the Plan by 5,000,000 shares and (ii) the number of
shares of the Company's Common Stock that may be issued upon the exercise of
stock option(s) granted to any one individual participant during any one
calendar year period to 2,500,000. The Board of Directors unanimously adopted
these amendments on March 25, 2002, subject to stockholder approval at the
Annual Meeting.
The proposed amendments will assure that a sufficient reserve of Common
Stock remains available for issuance under the Plan and provides the Plan
Administrator (as defined below) with greater flexibility in connection with the
size of such grants in order to allow the Company to continue to utilize equity
incentives to attract and retain the services of officers, employees, directors
and consultants (collectively, "covered persons") to the Company which the
Company views as essential to its long-term growth and financial success. The
Company relies significantly on equity incentives in the form of stock awards
and stock option grants in order to attract and retain covered persons and
believes such equity incentives are necessary for the Company to remain
competitive in the marketplace for such talent. Stock and option grants made to
newly-hired or continuing covered persons will be based on both competitive
market conditions and individual performance. In addition, the Company has
acquired other companies in the past, and anticipates future acquisitions. It is
important that the Company be able to offer equity incentives to employees of
the companies acquired so that they remain incentivized after the acquisition
has been completed.
The Plan was approved in September 2000 by the stockholders of the
Company at that time, and no material changes have been made to the Plan since
such approval (except as proposed herein). A total of 5,000,000 shares of Common
Stock of the Company currently are reserved for issuance under the Plan. As of
April 15, 2002, 2,052,250 shares were subject to awards currently outstanding
under the Plan ( the "Plan Options") and 4,380,633 shares were subject to awards
granted outside the Plan (the "Non-Plan Options"). After reservation of the
1,800,000 Non-Plan Options granted to our Chief Executive Officer in 2001 (as
discussed hereafter), 6,147,750 shares will remain available for any new awards
to be granted in the future as more fully explained below.
The following is a summary of the principal features of the Plan. The
summary, however, does not purport to be a complete description of all of the
provisions of the Plan. The complete text of the Plan, as amended herein,
appears as Exhibit A to this Proxy Statement and the following description is
qualified in its entirety by reference to Exhibit A.
10
Purpose
The purposes of the Plan are to: (i) better align the interests of
stockholders with the interest of officers, directors, employees and consultants
of the Company and its subsidiaries by creating a direct linkage between
participants' rewards and the performance of the Company and its subsidiaries;
(ii) encourage stock ownership and proprietary interests in the Company's stock;
and (iii) assist the Company and its subsidiaries in attracting and retaining
highly competent officers, directors, employees and consultants vital to its
success.
Term
The Plan became effective on June 1, 2000. The Plan has no fixed
expiration date.
Administration
The Plan may be administered by the full Board of Directors or by a
committee of the Board comprised of two or more "Non-Employee Directors" within
the meaning of Rule 16b-3(b)(3) of the Securities Exchange Act of 1934, as
amended (the Board of Directors or the committee shall hereinafter be referred
to as the "Plan Administrator"). The Plan Administrator has, among other
matters, the exclusive authority to make awards under the Plan and to make
interpretations and determinations involving the Plan.
Participation and Types of Awards
Employees, officers and directors of the Company and its subsidiaries
are currently eligible to receive non-qualified stock options, restricted stock
awards, and "incentive stock options" within the meaning of Section 422 of the
Code. In addition, advisors and consultants who perform services for the Company
are eligible to receive non-qualified stock options and stock awards under the
Plan.
Shares Subject to the Plan
The number of shares of Common Stock which may be issued under the Plan
is currently 5,000,000 and, upon approval of this Proposal by the stockholders,
will be 10,000,000. All of the shares of Common Stock may be awarded in the form
of stock options or stock awards, however, pursuant to Section 162(m) of the
Code, currently stock options with respect to no more than 1,000,000 shares of
Common Stock may be granted to any one individual participant during any one
calendar period and, upon approval of this Proposal by the stockholders, that
number will be amended to 2,500,000. In addition, the following shares may be
added back to the Plan and made available for issuance under the Plan: (i) any
shares of Common Stock that are forfeited, cancelled or re-acquired by the
Company; (ii) any shares of Common Stock tendered in satisfaction of tax
withholding or other obligations relating to proposed awards under the Plan; and
(iii) shares of Common Stock repurchased by the Company that have been
designated for allocation to the Plan.
11
Performance-Based Compensation
Section 162(m) of the Code limits to $1,000,000 annually the deduction
a public corporation may claim for compensation paid to any of its top five
executive officers, except in limited circumstances. One such exception is for
"performance-based compensation," which is defined as compensation paid solely
on account of the attainment of one or more performance goals, but only (i) if
the goals are determined by a compensation committee of the board comprised of
two or more outside directors, (ii) the performance goals are disclosed to
stockholders and approved by a majority vote before the remuneration is paid,
and (iii) before the remuneration is paid, the compensation committee certifies
that the performance goals and any other material terms were in fact satisfied.
Internal Revenue Service regulations provide that compensation
attributable to a stock option will be deemed to satisfy the requirement that
performance goals be pre-established if the grant of the option is made by the
compensation committee; the plan under which the option is granted states the
maximum number of shares with respect to which options or rights may be granted
during a specified period to any employee; and, under the terms of the option,
the amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of grant.
The Plan includes features intended to permit the Plan Administrator to
grant options and stock awards to employees that will qualify as
performance-based compensation.
Stock Options
Options granted under the Plan may be either incentive stock options or
non-qualified stock options. The Plan Administrator will determine whether and
to what extent options will be granted under the Plan and whether such options
granted will be incentive stock options or non-qualified stock options;
provided, however, that: (i) incentive stock options may be granted only to
employees of the Company or any of its subsidiaries, (ii) no incentive stock
options may be granted following the tenth anniversary of the effective date of
the Plan, and (iii) the aggregate fair market value (determined as of the date
of grant of the option) of the Common Stock with respect to which incentive
stock options may become exercisable for the first time by any individual during
any calendar year may not exceed $100,000 or, if it does, the portion of such
options which exceeds such amount will be treated as non-qualified stock
options. Unless otherwise specified in the agreement evidencing the option,
options granted under the Plan may be exercised for a period of up to ten (10)
years from the date of grant.
The price at which each share covered by an option may be purchased
will be determined in each case by the Plan Administrator; provided, however,
that such price, in the case of incentive stock options, may not be less than
the fair market value of Common Stock on the date of grant.
Options will be exercisable at such time or times, or upon such events
or events, and subject to such terms, conditions, performance criteria, and
restrictions as will be determined by the Plan Administrator and as set forth in
the agreement relating thereto; provided, however, that: (i) no option will be
exercisable after the expiration of ten (10) years after the date of grant of
12
such option, (ii) no incentive stock option granted to a participant who owns
more than 10% of the combined voting power of all classes of stock of the
Company (or any parent or subsidiary of the Company) will be exercisable after
the expiration of five (5) years after the date of grant of such option and the
exercise price of an incentive stock option granted to such stockholder may not
be less than 110% fair market value of the Common Stock on the date of grant,
and (iii) no option granted to a prospective employee, prospective consultant,
or prospective director may become exercisable prior to the date on which such
person commenced service with the Company or its subsidiaries.
Stock Awards
The Plan Administrator may grant stock awards to any officer, director,
employee or consultant of the Company or any of its subsidiaries. A stock award
entitles the recipient to acquire shares of Common Stock subject to such
restrictions and conditions as the Plan Administrator may determine at the time
of grant. Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives.
Upon execution of a written instrument setting forth the stock award
and paying any applicable purchase price, a participant shall have the rights of
a stockholder with respect to the Common Stock subject to the stock award,
including, but not limited to, the right to vote and receive dividends with
respect thereto; provided, however, that shares of Common Stock subject to stock
awards that have not vested shall be subject to restrictions on transferability.
Unless the Plan Administrator otherwise determines, certificates evidencing the
stock awards shall remain in the possession of the Company until such Common
Stock is vested.
The Plan Administrator at the time of grant shall specify the date or
dates and/or the attainment of pre-established performance goals, objectives and
other conditions on which Common Stock shall become vested, subject to such
further rights of the Company or its assigns as may be specified in the
instrument evidencing the stock award. If the participant or the Company, as the
case may be, fails to achieve the designated goals or the participant's
relationship with the Company is terminated prior to the expiration of the
applicable vesting period, the participant shall forfeit all shares of Common
Stock subject to the stock award which have not then vested. Unvested Common
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of except as specifically provided in the Plan or in the written
instrument evidencing the stock award.
Termination of Service
If a participant ceases involuntarily to perform service for the
Company, all options which such participant is then entitled to exercise may be
exercised until the earlier to occur of the three-month anniversary after
termination of service or the expiration of the relevant option exercise period,
unless otherwise provided for in the award agreement. If a participant ceases to
perform service for the Company or any of its subsidiaries due to death,
disability or retirement, any options then exercisable will be exercisable until
the earlier to occur of the one-year anniversary of termination of service or
the expiration of the relevant option exercise period, unless otherwise provided
for in the award agreement.
13
If the Company or any of its subsidiaries terminates a participant's
service for "Cause" (as defined in the Plan) or such participant voluntarily
terminates service, then any and all options held by such person will terminate
forthwith, unless otherwise provided for in the award agreement.
Stock Adjustments
If, as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, the outstanding shares of Common Stock are
increased or decreased or are exchanged for a new, different or additional
number or kind of shares or other securities of the Company, or other non-cash
assets of the Company are distributed with respect to such shares of Common
Stock or other securities, the Plan Administrator may make an appropriate or
proportionate adjustment in (i) the number of options that can be granted to any
one participant, (ii) the number and kind of shares or other securities subject
to any then outstanding awards under the Plan, and (iii) the price for each
share subject to any then outstanding options under the Plan, without changing
the aggregate exercise price (i.e. the exercise price multiplied by the number
of shares as to which such options remain exercisable). The adjustment by the
Plan Administrator will be final, binding and conclusive.
If, as a result of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Company's
Board of Directors authorizes the issuance or assumption of options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Plan Administrator may grant options upon
such terms and conditions as it may deem appropriate for the purpose of assuming
the old option, or substitution of a new option for the old option.
In the case of (i) the dissolution or liquidation of the Company, (ii)
merger, reorganization, or consolidation in which the Company is acquired by
another person or entity (other than a holding company formed by the Company),
(iii) the sale of all or substantially all of the assets of the Company to an
unrelated person, or (iv) the sale of all or substantially all of the stock of
the Company to an unrelated person (in each case, a "Fundamental Transaction"),
the Plan and all unvested awards granted thereunder will terminate, unless
provision is made in connection with the Fundamental Transaction for the
assumption of the awards or the substitution of such awards with new awards of
the successor entity, with appropriate adjustment as to the number and kind of
shares and, if appropriate, the per share exercise price. In the event of such
termination in which the Company's Board of Directors does not provide for a
Cash Purchase Price (as defined below) in connection with the options, each
participant will be notified of such proposed termination and permitted to
exercise options which are then exercisable for a period of at least 15 days
prior to the date of such termination.
In the event that the Company will be merged or consolidated with
another corporation or entity, other than a corporation or entity which is an
"affiliate" of the Company, under the terms of which the holder of Common Stock
will receive upon consummation thereof a cash payment for each share of Common
Stock of the Company surrendered pursuant to such transaction ("Cash Purchase
Price"), the Company's Board of Directors may provide that all outstanding
options will terminate upon consummation of that transaction and each
participant will receive, in exchange therefor, a cash payment equal to the
amount (if any) by which (i) the Cash Purchase Price multiplied by the number of
shares of Common Stock subject to outstanding options held by such participant
exceeds (ii) the aggregate exercise price of such participant's options.
14
Change in Control
Unless otherwise provided in a participant's option agreement or in a
written employment or other agreement between the participant and the Company,
the Plan provides that, in the event the Plan is terminated as a result of or
following a "change in control" (as defined in the Plan), all vested options
then outstanding at the time of such termination may be exercised for a period
of fifteen (15) days from the date of notice of the proposed termination. In
such event, all participants shall be credited with an additional six (6) months
of service for the purpose of any otherwise unvested options. Upon a change in
control in which the Plan is either assumed or otherwise not subject to
termination, if during the remaining term of such participant's options or stock
award, the participant is terminated other than for "Cause," the participant
will also be credited with an additional six (6) months of service; provided,
however, in the event of a termination for "Cause," all options will immediately
terminate and all unvested portions of stock awards will immediately terminate.
Amendment and Termination
The Board of Directors may alter, amend, suspend or discontinue the
Plan, provided that no such action will deprive any person, without such
person's consent, of any rights theretofore granted under the Plan.
Tax Withholding
Whenever shares are to be issued or cash is to be paid under the Plan,
under circumstances in which the Plan Administrator believes that any federal,
state or local tax withholding will be imposed, including FICA and Medicare
withholding tax, the Company shall have the right to require the participant to
remit to the Company an amount sufficient to satisfy federal, state and local
tax withholding requirements. Such withholding requirements may be paid (i) in
cash; (ii) in the discretion of the Plan Administrator, through the delivery to
the Company of previously-owned shares of Common Stock having an aggregate fair
market value equal to the tax obligation provided that the previously owned
shares delivered in satisfaction of the withholding obligations must have been
held by the participant for at least six (6) months; (iii) in the discretion of
the Plan Administrator, through an election to have the Company withhold shares
of Common Stock otherwise issuable to the participant having an aggregate fair
market value equal to the tax obligation; or (iv) in the discretion of the Plan
Administrator, through a combination of the procedures set forth in subsections
(i)-(iii) above.
Awards Granted to Certain Individuals and Groups
As described above, the number of awards that may be granted to
officers, employees, directors or consultants under the Plan is at the
discretion of the Plan Administrator and therefore future awards under the Plan
cannot be determined in advance. The following table sets forth (a) the total
number of shares subject to options granted under the Plan to the listed persons
and groups during the fiscal year ended December 31, 2001 and (b) the market
value or average per share exercise price of such options.
15
Stonepath Group, Inc. Amended and Restated 2000 Stock Incentive Plan
Avg. per
Number Share
of Options Exercise
Name of Individual or Group Granted Price ($)
--------------------------------------------------------------------------------
Dennis L. Pelino, Chairman 1,800,000 $.82
and Chief Executive Officer
Stephen M. Cohen, Vice 750,000 $.60
President, General Counsel
and Secretary
James P. Elwell, former Vice 100,000 $.60
President-Finance
Andrew P. Panzo, Director 250,000 $.60
and former Chief Executive
Officer
All current executive officers,
as a group 2,575,000 $.76
All current directors who are
not employees, as a group 500,000 $.74
All employees who are not
current executive officers, as a
group 355,000 $.85
Reservation of Shares to Cover Prior Grant to Chief Executive Officer
Upon approval of this Proposal by the stockholders, 1,800,000 shares of
Common Stock will be deemed reserved for issuance under the Plan in connection
with a stock option granted to Dennis L. Pelino, Chairman of the Board of
Directors and Chief Executive Officer of the Company, on June 21, 2001 (the
"Pelino Option"), as if the Pelino Option was granted under the Plan. The
stockholders' approval of this Proposal will also be deemed their approval of
the listing of such shares underlying the Pelino Option, in conjunction with the
listing of the remaining shares of Common Stock reserved for issuance under the
Plan, on the American Stock Exchange. The failure to approve Proposal 2 will not
have any effect on the enforceability of the Pelino Option.
16
Federal Income Tax Consequences
The following summary is based upon an interpretation of the present
Code and applicable treasury regulations may be inapplicable if such laws and
regulations are changed. Additionally, the following summary is limited to the
impact of the United States federal tax laws upon United States citizens
residing in the United States.
Non-Qualified Stock Options
Under the current applicable provisions of the Code, the recipient of
an option will not recognize income upon the receipt of a grant of non-qualified
stock options and the Company will not be entitled to a tax deduction. When a
non-qualified stock option is exercised, however, the excess of the fair market
value of the shares received over the option price for those shares will be
treated for federal tax purposes as ordinary income. Accordingly, the Company
will be entitled to a corresponding tax deduction in the same amount. Any gain
(or loss) realized on the sale or exchange of any shares actually received will
be treated as long-term or short-term capital gain (or loss), depending on the
applicable holding period.
Incentive Stock Options
With respect to incentive stock options ("ISOs"), no taxable income
will be recognized when the option is granted or exercised; provided, however,
that ISOs exercised more than three months after termination of employment will
be taxed in the same manner as non-qualified stock options described above.
Additionally, when an ISO is exercised, the spread between the fair market value
and the exercise price will be an item of tax preference for purposes of the
alternative minimum tax.
If the shares acquired when an ISO is exercised are held for at least
two years from the grant of the options and one year from the exercise of the
options (the "ISO Holding Period"), any gain (or loss) realized upon their sale
will be treated as long-term capital gain (or loss). In such a case, the Company
will not be entitled to a deduction. If the shares are not held for the ISO
Holding Period, then upon disposition ordinary income will be recognized in an
amount equal to the difference between the exercise price and the fair market
value of the Common Stock on the date the option was exercised, limited, however
to the gain realized on the sale. Any additional gain will be taxed as capital
gain. The Company will be entitled to a deduction equal to the amount of any
ordinary income recognized in this manner.
17
Stock Awards
The recipient of a stock award will generally recognize ordinary income
equal to the excess of (i) the fair market value of the shares received
(determined as of the date on which the shares become transferable or not
subject to a substantial risk of forfeiture, whichever occurs first) over (ii)
the amount, if any, paid for the shares. Such person may, however, make an
election (the "Tax Election"), within thirty days following the grant of the
stock award, to recognize income at the time of the award based on the fair
market value of the shares on the transfer date. The Company will be entitled to
a deduction in the same amount and at the same time that such person recognizes
ordinary income. The ordinary income recognized by a recipient who is an
employee will be subject to tax withholding by the Company. Upon the sale or
other disposition (including any forfeiture) of the shares awarded, the
recipient will realize capital gain (or loss) measured by the difference between
the amount realized and the fair market value of the shares on the date the
award vested (or on the date of grant if such person made the Tax Election).
Tax Effect for the Company
The Company generally will be entitled to receive a tax deduction in
connection with an award under the Plan in the amount equal to the ordinary
income realized by the participant and at the time the participant recognizes
such income. As described above, special rules limit the deductibility of
compensation paid to certain executive officers. Under Section 162(m) of the
Code, the annual compensation paid to any of the above specified executives will
be deductible only to the extent that it does not exceed $1,000,000. However,
the Company can preserve the deductibility of compensation in excess of
$1,000,000 if it complies with the conditions imposed by Section 162(m). These
conditions include stockholder approval of the Plan, setting limits on the
number of awards that any individual may receive, and establishing performance
criteria that must be met before the award actually will vest or be paid. The
Plan has been designed to permit the Plan Administrator to grant options and
stock awards which satisfy the requirements of Section 162(m), thereby
permitting the Company to continue to receive a federal income tax deduction in
connection with such awards.
The foregoing discussion is not a complete description of the federal
income tax aspects of options or stock awards under the Plan. In addition,
administrative and judicial interpretations of the application of the federal
income tax laws are subject to change. Furthermore, no information is given with
respect to state or local taxes that may be applicable to any awards.
Participants in the Plan who are residents of or are employed in a country other
than the United States may be subject to taxation in accordance with the tax
laws of that particular country in addition to or in lieu of United States
federal income taxes.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares entitled to vote at
the Meeting that are present in person or by proxy is required for approval of
this Proposal. An abstention or failure to vote on this Proposal is not an
affirmative vote, and therefore will have the same effect as a negative vote on
this Proposal at the Annual Meeting.
18
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENTS TO THE STONEPATH GROUP, INC. AMENDED AND
RESTATED 2000 STOCK INCENTIVE PLAN.
19
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2002
KPMG LLP has been selected by the Board of Directors to serve as the
independent auditors for the Company for the fiscal year ending December 31,
2002. Representatives of KPMG LLP are expected to be present at the Meeting to
make a statement if they so desire and will be available to respond to
appropriate questions.
The Board of Directors shall consider the selection of another
accounting firm to serve as the Company's independent auditors in the event that
the stockholders do not approve the selection of KPMG LLP as the Company's
independent auditors.
During the 2001 calendar year, KPMG LLP provided the Company with audit
and other services. The fees for such services were as follows:
Audit Fees:
The aggregate fees billed by KPMG LLP during the 2001 calendar year for
the audit of the Company's financial statements for such year and the review of
the Company's interim financial statements..............................$197,603
Financial Information Systems Design and Implementation Fees:..$-0-
All Other Fees:
The aggregate fees billed by KPMG LLP during the 2001 calendar year for
professional services other than audit fees consisted primarily of fees relating
to an acquisition audit and related research, certain SEC filings, as well as
attendance at Company meetings and procedures performed related to significant
transactions............................................................$112,565
The Audit Committee has determined the rendering of non-audit services
by KPMG LLP is compatible with maintaining the auditor's independence.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares entitled to vote at
the Meeting that are present in person or by proxy is required for ratification
of KPMG LLP as the Company's independent auditors for the fiscal year ending
December 31, 2002. An abstention or failure to vote on this Proposal is not an
affirmative vote, and therefore, will have the same effect as a negative vote on
this Proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE 2002
FISCAL YEAR.
20
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
BENEFICIAL OWNERS OF GREATER THAN 5% OF THE COMPANY'S VOTING
SECURITIES
The following tables set forth information with respect to the
beneficial ownership of Common stock and Preferred Stock owned, as of March 15,
2002, by:
[ ] the holders of more than 5% of any class of the Company's voting
securities;
[ ] each of the directors;
[ ] each of the executive officers; and
[ ] all directors and executives officers of the Company as a group.
As of March 15, 2002, an aggregate of 20,903,110 shares of Common Stock
and 3,750,479 shares of Series C Preferred Stock were issued and outstanding.
For purposes of computing the percentages under the following tables, it is
assumed that all options and warrants to acquire Common or Preferred Stock which
have been issued to the directors, executive officers and the holders of more
than 5% of Common or Preferred Stock and are fully vested or will become fully
vested within 60 days from March 15, 2002 have been exercised by these
individuals and the appropriate number of shares of Common Stock and Preferred
Stock have been issued to these individuals.
COMMON STOCK
Shares Owned
Beneficially and
Name of Beneficial Owner Position of Record (1) Percentage of Class
------------------------ -------- ------------- -------------------
Dennis L. Pelino(2) Officer, Director 835,000 3.8%
Stephen M. Cohen(3) Officer 303,517 1.4%
Bohn H. Crain(4) Officer -- *
Thomas L. Scully(5) Officer -- *
David R. Jones(6) Director 95,000 *
Aloysius T. Lawn, IV(7) Director 25,000 *
Robert McCord(8) Director 75,000 *
J. Douglass Coates(9) Director -- *
Frank Palma(9) Director -- *
Michael Karp Beneficial Owner 1,463,250 6.8%
University City Housing
1062 Lancaster Avenue
Suite 30B
Rosemont, PA 19010
Andrew P. Panzo(10) Director 1,424,476 6.6%
All directors and executive
officers as a group (10 people) 2,757,993 11.9%
21
(*) Less than one percent.
(1) Beneficial ownership has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934. Unless otherwise
noted, the Company believes that all persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) Includes 235,000 shares and 600,000 shares of common stock issuable
upon exercise of vested options. Does not include 1,200,000 shares of
common stock issuable pursuant to options not presently exercisable
and not exercisable within 60 days of March 15, 2002.
(3) Includes 11,850 shares and 291,667 shares of common stock issuable
upon exercise of vested options and options which vest within 60 days
of March 15, 2002. Does not include 458,333 shares of common stock
issuable pursuant to options not presently exercisable within 60 days
of March 15, 2002.
(4) Does not include 150,000 shares of common stock issuable pursuant to
options not presently exercisable within 60 days of March 15, 2002.
(5) Does not include 25,000 shares of common stock issuable pursuant to
options not presently exercisable within 60 days of March 15, 2002.
(6) Includes 70,000 shares and 25,000 shares of common stock issuable
upon exercise of vested options and options which vest within 60 days
of March 15, 2002. Does not include 25,000 shares of common stock
issuable pursuant to options not presently exercisable within 60 days
of March 15, 2002.
(7) Includes 25,000 shares of common stock issuable upon the exercise of
vested options and options which vest within 60 days of March 15,
2002. Does not include 25,000 shares of common stock issuable
pursuant to options not presently exercisable within 60 days of March
15, 2002.
(8) Includes 75,000 shares of common stock issuable upon the exercise of
vested options and options which vest within 60 days of March 15,
2002. Does not include 25,000 shares of common stock issuable
pursuant to options not presently exercisable within 60 days of March
15, 2002.
(9) Does not include 50,000 shares of common stock issuable pursuant to
options not presently exercisable within 60 days of March 15, 2002.
(10) Includes 154,476 shares and 1,270,000 shares of common stock issuable
upon exercise of vested options.
22
SERIES C PREFERRED STOCK
Shares of
Series C Preferred Stock
Owned Beneficially and
Name of Beneficial Owner of Record (1) Percentage of Class
------------------------ ------------- -------------------
Brown Simpson Partners I, Ltd. 963,371 25.69%
Carnegie Hall Tower
152 West 57th Street, 21st Fl.
New York, NY 10019
Montrose Investments Ltd. 674,359 17.98%
300 Crescent Ct., Suite 700
Dallas TX 75201
The Raptor Global Portfolio, Ltd. 479,567 12.79%
40 Rowes Wharf, 2nd Fl.
Boston, MA 02110
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and investment
power with respect to all shares of Series C Preferred Stock beneficially
owned by them. These share amounts do not include the warrants to purchase
up to 3,000,000 shares of Common Stock which the Company has agreed to issue
to holders of the Company's Series C Preferred Stock as of July 18, 2002 as
more fully discussed in " Certain Relationships and Related Transactions -
Contingent Warrants."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of copies of forms filed pursuant
to Section 16(a) of the Securities Exchange Act of 1934, as amended, and written
representations from certain reporting persons, we believe that during fiscal
2001 all reporting persons timely complied with all filing requirements
applicable to them.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") consists of three directors who are not employees of the Company and
who are considered "Independent" under the rules of The American Stock Exchange.
Role of Committee. The Compensation Committee establishes, oversees and
directs the Company's executive compensation programs and policies and
administers the Company's stock option and long-term incentive plans. The
Compensation Committee seeks to align executive compensation with Company
objectives and strategies, business financial performance and enhanced
stockholder value.
23
The Compensation Committee regularly reviews and approves generally all
compensation and fringe benefit programs of the Company and also reviews and
determines the actual compensation of the Company's executive officers, as well
as all stock option grants and cash incentive awards to all key employees. The
Compensation Committee reviews and administers the Company's Amended and
Restated 2000 Stock Incentive Plan.
The Compensation Committee's objectives include (i) attracting and
retaining exceptional individuals as executive officers and (ii) providing key
executives with motivation to perform to the full extent of their abilities, to
maximize Company performance and deliver enhanced value to the Company's
stockholders. Because the Company is at an early point in its efforts to
implement its new business strategy, the Compensation Committee believes it is
important to place a greater percentage of executive officers' total
compensation, principally in the form of equity, at risk through the grant of
stock options whose value is derived from the performance of the business and
value of the Common Stock. Executive compensation consists primarily of an
annual salary, annual bonuses linked to the performance of the Company and
long-term equity-based compensation.
Compensation. Salary payments in 2001 were made to compensate the
ongoing performance of the Company's executive officers. Bonuses in 2001 were
made to recognize contributions to the implementation of the Company's new
business strategy. The Committee's specific decisions concerning 2001
compensation for each executive officer were made in light of each officer's
level of responsibility and the Committee's judgment with respect to whether
that executive officer's compensation provides appropriate recognition for
performance and an incentive for future performance.
The Compensation Committee took a variety of actions during 2001 to
address the change in the Company's business and the need to recruit executives
with relevant industry experience.
The most significant action taken by the Compensation Committee during
2001 was to develop the compensation package necessary to hire the Company's
Chairman and Chief Executive Officer, Dennis L. Pelino. Mr. Pelino was regarded
as one of the leading executives in the logistics industry, having been
instrumental in the development of the Fritz Companies, Inc. into one of the
leading global logistics companies. In hiring Mr. Pelino, the Compensation
Committee faced the challenge of developing a compensation package appropriate
to attract a new chief executive officer of his caliber. In retaining Mr.
Pelino, the Company was faced with the challenge of presenting him with an
overall compensation package that was competitive with opportunities, including
several firm offers, that he was considering at the time he agreed to join the
Company. Mr. Pelino's compensation was initially composed of a base salary and a
performance-based bonus and stock options. After the successful implementation
of the Company's new business strategy, the Compensation Committee approved an
increase in Mr. Pelino's base compensation and amended the terms of his options
to more fully recognize Mr. Pelino's value to the Company and to bring his
salary and option package more in line with comparable opportunities.
24
As a result of the Company's changing business model, the Compensation
Committee also reviewed the employment arrangements with the Company's other
senior executive officers early in 2001. To this end, the Compensation Committee
retained an independent compensation consultant to review proposed new
employment agreements for the then chief executive officer of the Company and
the Company's general counsel which increased their base salary, although the
general counsel's cash payments (taking into account a prior loan made by the
Company) remained constant. The increase in the executives' compensation was
justified due to the increasing responsibilities imposed on them in implementing
the Company's new business strategy. However, in recognition of the fact that
the proposed compensation remained below comparable opportunities available to
them, the Compensation Committee recommended the grant of new options to provide
an incentive to retain these key executives through the transition of the
Company's business. The Company's General Counsel subsequently surrendered
options granted to him during 2000.
The Compensation Committee believes that the foregoing compensation
actions have helped develop a senior management group dedicated to achieving
significant improvement in both the short-term and long-term financial
performance of the Company.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Aloysius T. Lawn, IV, Chairman
David R. Jones
Frank Palma
25
EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid or
accrued for the three fiscal years ended December 31, 2001 to or for the benefit
of our Chief Executive Officer and our other executive officers whose cash
compensation exceeded $100,000 (the "Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Restricted
Stock All Other
Name and Principal Position Salary Bonus Awards Number of Options Compensation(1)
--------------------------- ------ ----- ------ ----------------- ---------------
Dennis L. Pelino, Chairman 2001 $158,691 $180,000 -- 1,800,000(2) --
and Chief Executive officer
Stephen M. Cohen, Senior 2001 $227,884 $ 50,000 -- 750,000(3) --
Vice President, General 2000 $103,927 -- -- 300,000(4) --
Counsel and Secretary
James F. Elwell, former 2001 $201,537 -- 22,000 100,000 $ 34,615
Vice President-Finance (5) 2000 $ 98,307 -- -- --
Andrew P. Panzo, Director and 2001 $212,692 $ 55,000 -- 250,000 $575,000
former Chief Executive 2000 $148,147 -- -- 1,020,000 --
Officer (6) 1999 $ 87,500 -- -- -- --
Lee C. Hansen, former 2001 $161,730 -- -- -- --
President and Director(7) 2000 $150,000 -- -- 900,000 --
1999 $ 34,615 -- -- -- --
(1) During the periods reflected, certain of the officers named in this table
received perquisites and other personal benefits not reflected in the
amounts of their respective annual salaries or bonuses. The dollar amount of
these benefits did not, for any individual in any year, exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for that
individual in any year, unless otherwise noted.
(2) These options were granted in conjunction with Mr. Pelino's employment by
the Company on June 21, 2001. Options to purchase 600,000 shares vested on
October 5, 2001 in conjunction with our acquisition of Air Plus. The
remaining 1,200,000 options vest to the extent of 400,000 per year on each
of the first three (3) annual anniversaries of Mr. Pelino's employment by
the Company, with 100% acceleration of vesting once our stock trades above
$9.00 per share, upon his death or disability, or in the event of his
termination without cause following a change of control transaction.
26
(3) These options were granted in conjunction with an amendment to Mr. Cohen's
employment agreement during April 2001. They vest pro rata over the
thirty-six (36) month period of his employment through April 2004, with 100%
acceleration of vesting in the event of his termination without cause
following a change of control transaction, or an additional year of
acceleration in the event of Mr. Cohen's death or disability.
(4) These options were surrendered by Mr. Cohen during the fourth quarter of
2001.
(5) Mr. Elwell resigned as an employee as of December 31, 2001. The "other
compensation" indicated includes two (2) months of salary as severance. In
addition, as part of his separation from the Company, Mr. Elwell agreed to
surrender options to purchase 250,000 shares of our common stock in exchange
for 22,000 shares.
(6) Mr. Panzo resigned as an executive officer of the Company effective as of
December 19, 2001. The "other compensation" indicated includes a severance
benefit of $575,000, of which $275,000 was paid in January 2002 and the
balance is to be paid in January 2003. In conjunction with the terms of his
separation agreement with the Company, Mr. Panzo fully vested in all of his
options also as of December 19, 2001.
(7) Mr. Hansen resigned as an executive officer of the Company effective as of
June 22, 2001. The salary indicated includes a severance payment of $85,000.
In conjunction with the terms of his agreement with the Company, Mr. Hansen
vested as of June 22, 2001, in options to purchase 697,500 shares of our
common stock. The balance of his options were cancelled.
Employment Agreements
Effective as of February 22, 2002, we entered into an amended
employment agreement with our Chief Executive Officer, Dennis L. Pelino. This
agreement amended and restated our prior agreement with Mr. Pelino dated June
21, 2001. Pursuant to this agreement, we have agreed to employ Mr. Pelino as our
Chief Executive Officer through June 2006 at an annual base salary of $360,000.
In addition to his base salary, Mr. Pelino is entitled to bonus compensation
based upon the achievement of certain target objectives, as well as
discretionary merit bonuses that can be awarded at the discretion of our Board
of Directors. Mr. Pelino is also entitled to certain severance benefits upon his
death, disability or termination of employment. Pursuant to the employment
agreement, Mr. Pelino is also entitled to fringe benefits including
participation in pension, profit sharing and bonus plans, as applicable, and
life insurance, hospitalization, major medical, paid vacation and expense
reimbursement. In conjunction with his original employment agreement, Mr. Pelino
was issued options to purchase 1,800,000 shares of our common stock at an
exercise price of $.82 per share.
As of April 19, 2001, we entered into a three-year employment agreement
with our General Counsel, Stephen M. Cohen. This was further modified effective
December 27, 2001. This had the effect of amending and restating our prior
employment agreement with Mr. Cohen entered into in April 2000. In addition to
an annual salary of $200,000, Mr. Cohen is entitled to bonus compensation based
upon the achievement of certain target objectives, as well as discretionary
merit bonuses that can be awarded at the discretion of our Board of Directors.
Mr. Cohen is also entitled to certain severance benefits upon his death,
disability or termination of employment. Pursuant to his employment agreement,
Mr. Cohen is entitled to fringe benefits including participation in pension,
profit sharing and bonus plans, as applicable, and life insurance,
hospitalization, major medical, paid vacation and expense reimbursement. On
April 19, 2001, we awarded Mr. Cohen options to purchase 750,000 shares of
common stock, at an exercise price of $.60 per share.
27
On January 10, 2002, we entered into a three-year employment agreement
with our Chief Financial Officer, Bohn H. Crain. In addition to an annual base
salary of $200,000, Mr. Crain's employment agreement provides for bonus
compensation based upon the achievement of certain target objectives, as well as
bonus compensation determined at the discretion of the Board of Directors.
Pursuant to his employment agreement, Mr. Crain is entitled to fringe benefits
including participation in pension, profit sharing and bonus plans, as
applicable, and life insurance, hospitalization, major medical, paid vacation
and expense reimbursement. We awarded Mr. Crain options to purchase 150,000
shares of common stock, as of January 10, 2002, at an exercise price of $1.78
per share.
Change in Control Arrangements
Our Chief Executive Officer, Chief Financial Officer and General
Counsel are each employed under agreements that contain change in control
arrangements. If employment of our Chief Executive Officer or our General
Counsel is terminated following a change in control (other than for cause), then
we must pay such terminated employee a termination payment equal to 2.99 times
his salary and bonus, based upon the average annual bonus paid to him prior to
termination of his employment. Plus, all of their unvested stock options shall
immediately vest as of the termination date of their employment due to a change
in control.
In each of their agreements, a change in control is generally defined
as the occurrence of any one of the following:
[ ] any "Person" (as the term "Person" is used in Section 13(d) and
Section 14(d) of the Securities Exchange Act of 1934), except for
the effected employee, becomes the beneficial owner, directly or
indirectly, of our securities representing 50% or more of the
combined voting power of our then outstanding securities;
[ ] there occurs a contested proxy solicitation of our stockholders
that results in the contesting party obtaining the ability to vote
securities representing 50% or more of the combined voting power
of our then-outstanding securities;
[ ] there occurs a sale, exchange, transfer or other disposition of
50% or more in value of our assets to another Person or entity,
except to an entity controlled directly or indirectly by us;
[ ] there occurs a merger, consolidation or other reorganization
involving us in which we are not the surviving entity and in which
our stockholders prior to the transaction continue to own less
than 50% of the outstanding securities of the acquiror immediately
following the transaction, or a plan involving our liquidation or
dissolution other than pursuant to bankruptcy or insolvency laws
is adopted; or
28
[ ] during any period of twelve consecutive months, individuals who at
the beginning of such period constituted the Board of Directors
cease for any reason to constitute at least a majority of the
Board of Directors unless the election, or the nomination for
election by our stockholders, of each new director was approved by
a vote of at least a majority of the directors then still in
office who were directors at the beginning of the period.
Notwithstanding the foregoing, a "change of control" is not be deemed
to have occurred (i) in the event of a sale, exchange, transfer or other
disposition of substantially all of our assets to, or a merger, consolidation or
other reorganization involving, us and any entity in which the effected employee
has, directly or indirectly, at least a 25% equity or ownership interest; or
(ii) in a transaction otherwise commonly referred to as a "management leveraged
buy-out."
In addition, the existing options of our Chief Financial Officer fully
vest upon a "change in control", as defined within our Plan.
Directors Compensation
During 2001, Messrs. Pelino and Panzo received no compensation for
serving on the Board except for reimbursement of reasonable expenses incurred in
attending meetings. Non-employee directors are paid $1,250 per month, provided
that each member attends 75% of all meetings. In addition, an annual fee of
$10,000 is paid to the chairman of the audit and compensation committees. Each
of our non-employee directors received an option to purchase 50,000 shares of
our common stock with an exercise price equal to the closing price of our common
stock on the trading day prior to the date of grant. 50% of these options vest
on the first anniversary of the director's membership on the Board, and the
balance vest on the second anniversary of Board membership. In addition to his
compensation as a Director, during 2001 Mr. McCord received $40,000 cash
compensation and 50,000 options under a consulting agreement with the Company.
David Jones also received $15,000 during 2001 under a consulting arrangement
with the Company.
29
The following table sets forth information on option grants in fiscal
2001 to the Named Executive Officers.
Option Grants in Last Fiscal Year
% of Total Potential Realizable Value at Assumed
Options Annual Rates of Stock Price Appreciation for
Granted to Market Option Term
Number Employees Price on --------------------------------------------
of Options in Fiscal Exercise Date of Expiration
Name Granted Year Price Grant Date 5% 10%
---- ------- ---- ----- ----- ---- -- ---
Dennis L. Pelino 1,800,000 54.88% $0.82 $0.82 June 2011 $928,000 $2,352,000
Stephen M. Cohen 750,000 22.87% $0.60 $0.60 April 2011 283,000 717,000
Andrew P. Panzo 250,000 7.62% $0.60 $0.60 April 2011 94,000 239,000
James F. Elwell 100,000 3.05% $0.60 $0.60 April 2011 38,000 96,000
The following table sets forth information concerning year-end option
values for fiscal 2001 for the Named Executive Officers. All options were based
on the closing bid price of our common stock on December 31, 2001 of $1.85.
Fiscal Year End Option Values
Number of Unexercised Options Value of Unexercised In-the-Money Options
at Fiscal Year End at Fiscal Year End
Shares ----------------------------- -----------------------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexerciseble
---- -------- -------- ----------- ------------- ----------- -------------
Dennis L. Pelino - - 600,000 1,200,000 $ 618,000 $1,236,000
Stephen M. Cohen - - 166,667 583,333 208,334 729,166
Andrew P. Panzo - - 1,270,000 - 1,179,500 -
Lee C. Hansen - - 697,500 - 592,875 -
Stock Options
Effective as of June 1, 2000 (with amendments effective as of July 31,
2000), the Company adopted and implemented the "Amended and Restated Stonepath
Group, Inc. 2000 Stock Incentive Plan," (the "Plan") which covers 5,000,000
shares of common stock. Under its terms, employees, officers and directors of
the Company and its subsidiaries are currently eligible to receive non-qualified
stock options, restricted stock awards, and, incentive stock options within the
meaning of Section 422 of the Code. In addition, advisors and consultants who
perform services for the Company or its subsidiaries are eligible to receive
non-qualified stock options under the Plan. The Plan is administered by the
Board of Directors or a committee designated by the Board of Directors.
30
All stock options granted under the Plan are exercisable for a period
of up to ten (10) years from the date of grant. The Company may not grant
incentive stock options pursuant to the Plan at exercise prices which are less
than the fair market value of common stock on the date of grant. The term of an
incentive stock option granted under the Plan to a stockholder owning more than
10% of the issued and outstanding common stock may not exceed five years and the
exercise price of an incentive stock option granted to such stockholder may not
be less than 110% of the fair market value of common stock on the date of grant.
The Plan contains certain limitations on the maximum number of shares
of common stock that may be awarded in any calendar year to any one individual
for the purposes of Section 162(m) of the Code. As of March 15, 2002, options to
purchase 2,052,250 shares of common stock were outstanding under the Plan. These
stock options have exercise prices ranging from $0.50 to $6.38 per share.
In addition to the stock options covered by the Plan, the Company has
outstanding options to purchase 4,380,633 shares of common stock. At March 15,
2002, these options were outstanding at the following exercise prices:
Number of Stock Options Exercise Price
----------------------- --------------
3,875,833 $ .82 - $ 1.00
251,200 $1.01 - $ 5.00
253,600 $5.01 - $17.50
---------
4,380,633
=========
31
PERFORMANCE PRESENTATION
The following graph shows the total stockholder return of an investment
of $100 in cash on November 24, 1998 (the Company's first day of trading on the
NASDAQ Over-the-Counter Bulletin Board Trading System) for the Company's Common
Stock and an investment of $100 in cash on that day for (i) the NASDAQ Market
Index, (ii) the AMEX Market Index and (iii) a peer group consisting of C.H.
Robinson Worldwide, Inc., EGL, Inc., Expeditors International of Washington,
Inc., Forward Air Corporation, and UTi Worldwide Inc. weighted by their market
capitalization. Historic stock performance is not necessarily indicative of
future stock price performance. All values assume reinvestment of the full
amount of any dividends and are calculated daily.
COMPARE CUMULATIVE TOTAL RETURN
AMONG STONEPATH GROUP, INC.,
NASDAQ MARKET INDEX,
AMEX MARKET INDEX, AND PEER GROUP INDEX
[GRAPHIC OMITTED]
STONEPATH GROUP INC. PEER GROUP INDEX
AMEX MARKET INDEX NASDAQ MARKET INDEX
ASSUMES $100 INVESTED ON NOV. 24, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001
11/24/98 12/31/98 12/31/99 12/31/00 12/31/01
STONEPATH GROUP, INC. 100.00 123.46 217.28 9.88 36.54
PEER GROUP INDEX 100.00 114.27 237.76 283.80 268.51
AMEX MARKET INDEX 100.00 103.29 128.78 127.20 121.34
NASDAQ MARKET INDEX 100.00 113.16 199.58 125.44 100.00
32
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
STONEPATH GROUP, INC.
The following is the report of the Audit Committee for the year ended
December 31, 2001. The Audit Committee is composed of three directors, each of
whom meets The American Stock Exchange's independence standards. The Audit
Committee operates under a written charter adopted by the Board of Directors in
2000. The Audit Committee as a whole meets regularly with the Company's
management and independent auditors to discuss the adequacy of the Company's
internal control environment and financial reporting, accounting matters, audit
results, and compliance with its corporate responsibility program.
In carrying out its responsibilities and fulfilling obligations under
its charter, the Audit Committee, among other things:
[ ] reviewed with the independent auditors their audit plan, audit
scope, and identified audit risks;
[ ] discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61,
"Communications with Audit Committees," as modified or
supplemented, including, among other items, matters related to the
conduct of the audit of the Company's consolidated financial
statements;
[ ] obtained from the independent auditors a written statement
describing all relationships between the independent auditors and
the Company that might bear on the auditors' independence,
consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees";
[ ] discussed with the independent auditors any relationships that may
impact their objectivity and independence, and generally satisfied
itself that the auditors are independent;
[ ] reviewed and discussed the Company's audited consolidated
financial statements for the year ended December 31, 2001 with
management and the independent auditors;
[ ] obtained from management the representation that the Company's
consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the United States of
America; and
[ ] discussed with management and the independent auditors the quality
and adequacy of the Company's internal controls.
Based on its review, analysis and discussions with management and the
independent auditors, the Audit Committee recommended to the Company's Board of
Directors (and the Board approved) that the Company's audited consolidated
financial statements for the three years ended December 31, 2001 be included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2001.
The Audit Committee and the Board, in recognition and consideration of the
recommendation of management, have also recommended, subject to shareholder
ratification, the selection of the Company's independent auditors for 2002.
33
AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
David R. Jones, Chairman
Aloysius T. Lawn, IV
Robert McCord
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Contingent Warrants
In February 2001, we received the consent from the holders of more than
two-thirds of our issued and outstanding shares of Series C Preferred Stock to
modify the use of proceeds provisions as originally defined within the Series C
Preferred Stock Purchase Agreement. As amended, we may now use the proceeds from
the sale of the preferred stock to make any investments in the ordinary course
of our business, as from time-to-time determined by our Board of Directors, or
for any other business purpose approved by the Board of Directors. Previously,
we were limited to use the proceeds for investments in early-stage Internet
companies.
In exchange for this consent we agreed to:
(i) issue to the holders of our Series C Preferred Stock as of July
18, 2002, warrants to purchase up to a maximum of 3,000,000 shares
of our common stock at an exercise price of $1.00 per share if the
then-effective conversion price of the Series C Preferred Stock is
greater than a target price (the "Target Price") equal to the
lower of (a) $6.00 per share; or (b) the market price of our
common stock at such time (but not less than $5.00 per share). The
number of such warrants to be issued will be that number which,
assuming all of the Series C Preferred Stock is converted and all
warrants to purchase 416,667 shares of Common Stock issued in
conjunction with the issuance of the Series C Preferred Stock and
all Series C Contingent Warrants are exercised, is sufficient to
reduce the average cost of the holders' investment in the Company
to the Target Price; and
(ii) reduce to $1.00 per share the exercise price of the existing
warrants held by the holders of our Series C Preferred Stock as of
July 18, 2002.
As a condition to receiving the new warrants and the reduction in the
exercise price of the existing warrants, the holders of the Series C Preferred
Stock will convert their shares of Preferred Stock into shares of our common
stock.
34
Agreement with Former Officers
On December 14, 2001, we entered into a Separation Agreement with
Andrew P. Panzo, our former Chief Executive Officer (prior to our hiring of
Dennis L. Pelino), in which we agreed with Mr. Panzo to terminate his April 19,
2001 employment agreement with us. In this agreement, we agreed to make
severance payments to Mr. Panzo of $275,000 on or before January 2, 2002 and
$300,000 on or before January 2, 2003. We also agreed to continue Mr. Panzo and
his family on our medical plan for a period of one (1) year and to accelerate
the vesting associated with the balance of his options to purchase 1,270,000
shares of our common stock. At the time he was already vested in 1,102,500 of
his options. In connection with the agreement, Mr. Panzo resigned his position
as an officer of the Company, yet remained on our Board of Directors.
On June 22, 2001, we entered into an agreement with Lee Hansen, our
former President, in which the parties agreed to terminate Mr. Hansen's
September 15, 1999 employment agreement with us. In the agreement, we agreed to
pay Mr. Hansen $85,000, to continue Mr. Hansen and his family on our medical
plan for an additional six (6) months and to accelerate the vesting of options
to purchase 135,000 shares of our common stock that otherwise would not have
vested as a result of the termination of his employment with us. As a result,
Mr. Hansen holds currently exercisable options to purchase 697,500 shares of our
common stock at an exercise price of $1.00 per share.
Amendment and Restatement of Employment Arrangements with Executive Officers
Effective as of February 22, 2002, we entered into an amended
employment agreement with our Chief Executive Officer, Dennis L. Pelino. This
agreement amended and restated our prior agreement with Mr. Pelino dated June
21, 2001. A description of the terms of our new agreement with Mr. Pelino can be
found in this Proxy Statement under the heading "Employment Agreements."
Previously, on October 18, 2001, we amended the terms of the options granted to
Mr. Pelino under his original employment agreement dated June 22, 2001. A
description of the terms of Mr. Pelino's options can be found in this Proxy
Statement under the heading "Employment Agreements."
Effective April 19, 2001, and again on December 27, 2001, we amended
the terms of our employment agreement with Stephen M. Cohen, our Senior Vice
President and General Counsel. The terms of our new agreement with Mr. Cohen are
provided in this Proxy Statement under the heading "Employment Agreements."
Consulting Arrangement with Principal Stockholder of Series C Preferred Stock
During June 2001 we entered into an arrangement with Brown Simpson
Partners I, Ltd. (the "Brown Simpson Fund") to provide advisory services for us
from time to time. Under the arrangement, the Brown Simpson Fund provided
ongoing advice regarding possible acquisition projects in which we may be
involved. Brown Simpson Fund is the beneficial owner of 963,371 shares of our
Series C Preferred Stock (25.7% of the Series C Preferred Stock outstanding as
of March 15, 2002). We issued to Brown Simpson Fund an option to purchase
100,000 shares of our Common Stock at an exercise price of $.82 per share (the
market value of our Common Stock on the date we entered our arrangement with the
Brown Simpson Fund) which vested once we completed the Air Plus acquisition.
35
Loans to Officers and Directors
Under the terms of our employment agreement with Mr. Cohen, we provided
him with a loan in the principal amount of $100,000. The loan accrues interest
at the rate of 8% per annum and is due on April 17, 2004, or such earlier date
that Mr. Cohen shall have received aggregate proceeds of $5,000,000 from the
sale of his options or the shares of common stock underlying his options.
However, Mr. Cohen is not required to repay the loans if by April 17, 2004, the
sum of the proceeds which he has received from the sale of his options or the
shares of common stock underlying his options and the remaining equity in the
options as of April 17, 2004 does not equal or exceed $5,000,000.
In June 1999, we extended a loan to Mr. Darr Aley in the principal
amount of $267,000 in connection with our acquisition of Strategicus Partners,
Inc. The loan was to be forgiven over a three year period during which Mr. Aley
was expected to provide consulting services to us. During March 2001, we
restructured the loan to provide for a maturity date of June 2002. However, Mr.
Aley is not required to repay the loan if by the maturity of June 2002, the sum
of the proceeds which he has received from the sale of his warrants or shares
received in connection with the Strategicus transaction, and the remaining value
of such warrants or shares as of the maturity date, does not equal or exceed
$5,000,000.
Consulting Agreement with Director
In March 2001, we entered into a one-year consulting agreement with Mr.
McCord, a director, whereby Mr. McCord would provide services to us related to
our recently published change in business strategy and efforts to acquire
operating businesses. As compensation for his services, we agreed to pay Mr.
McCord a monthly fee of $8,750 and he received an option to purchase 50,000
shares of our common stock at an exercise price of $.70. During 2001, we paid
$40,000 to Mr. McCord for consulting services. The arrangement between the
Company and Mr. McCord lapsed during the third quarter of 2001.
By Order of the Board of Directors,
/s/ Dennis L. Pelino
----------------------
Dennis L. Pelino
Chairman of the Board
Dated: April 22, 2002
36
EXHIBIT A
STONEPATH GROUP, INC.
AMENDED AND RESTATED
2000 STOCK INCENTIVE PLAN
Section 1. General Purpose of the Plan; Definitions. The purpose of the Plan is
to provide officers, employees, directors and consultants of Stonepath Group,
Inc. (the "Company") and other members of the Participating Company Group the
opportunity to receive stock options and stock awards and thereby acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company's stockholders,
thereby encouraging the participants to contribute materially to the growth and
development of the Company and strengthening their desire to remain with the
Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options and Stock Awards.
"Board" means the Board of Directors of the Company.
"Cause" means (a) with respect to an individual who is party to a
written agreement with a Participating Company which contains a definition of
"cause" or "for cause" or words of similar import for purposes of termination of
Service thereunder by the Participating Company, "cause" or "for cause" as
defined in such agreement; (b) in all other cases (i) any violation of a law,
rule or regulation other than minor traffic violations, including without
limitation, any violation of the Foreign Corrupt Practices Act; (ii) a breach of
fiduciary duty for personal profit; (iii) fraud, dishonesty or other acts of
misconduct in the rendering of services on behalf of the Company or relating to
the employee's employment; (iv) misconduct by the employee which would cause the
Company to violate any state or federal law relating to sexual harassment or
age, sex or other prohibited discrimination or any violation of written policy
of the Company or any successor entity adopted in respect to such law; (v)
failure to follow Company work rules or the lawful instructions (written or
otherwise) of the Board of Directors of the Company or a responsible executive
to whom the employee directly or indirectly reports, provided compliance with
such directive was reasonably within the scope of the employee's duties and the
employee was given notice that his or her conduct could give rise to termination
and such conduct is not, or could not be cured, within ten (10) days thereafter;
or (vi) any violation of a confidentiality or non-competition agreement or
patent assignment agreement or any agreement relating to the Company's
protection of intellectual property rights.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Effective Date" means the date on which the Plan is approved by the
Board as set forth in Section 18.
"Fair Market Value" of the Stock on any given date means (i) if the
Stock is listed on any established stock exchange or a national market system,
including without limitation the National Market or SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; (ii) if the Stock is regularly traded on the
Nasdaq OTC Bulletin Board Service, or a comparable automated quotation system,
its Fair Market Value shall be the mean between the high bid and low asked
prices for the Stock on the last market trading day prior to the day of
determination; or (iii) in the absence of an established market for the Stock,
the Fair Market Value thereof shall be determined in good faith by the Plan
Administrator.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any Option to purchase shares of Stock
granted pursuant to Section 6.
"Option Period" means the period commencing on the grant date of an
Option and ending on the last day of the term of such Option as established
pursuant to Section 8.2.
"Participating Company" means the Company or any or Subsidiary
Corporation or any other member of the Participating Company Group.
"Participating Company Group" means, at any point in time, any
Participating Company or all corporations collectively which are then
Participating Companies.
"Service" means a participant's employment or service with any member
of the Participating Company Group, whether in the capacity of an employee,
officer, director or a consultant. The participant's Service shall not be deemed
to have terminated merely because of a change in the Participating Company for
which the participant renders such Service, provided that there is no
interruption or termination of the participant's Service. Furthermore, a
participant's Service with the Participating Company Group shall not be deemed
to have terminated if the participant takes any military leave, sick leave, or
other bona fide leave of absence approved by a Participating Company; provided,
however, that if any such leave exceeds ninety (90) days, on the ninety-first
(91st) day of such leave the participant's Service shall be deemed to have
terminated unless the participant's right to return to Service with the
Participating Company is guaranteed by statute or contract.
-2-
"Stock" means the Common Stock, par value $.001 per share, of the
Company, subject to adjustments pursuant to Section 11.
"Stock Award" means any award granted pursuant to Section 9.
"Subsidiary" means any, whether now or hereafter existing, corporation
or other entity (other than the Company) in any unbroken chain of corporations
or other entities, beginning with the Company, if each of the corporations or
entities owns stock or other interests possessing 50% or more of the economic
interest or the total combined voting power of all classes of stock or other
interests in one of the other corporations or entities in the chain, whether now
or hereafter existing.
Section 2. Administration. The Plan shall be administered by the full Board of
Directors of the Company or a committee of such Board of Directors comprised of
two or more "Non-Employee Directors" within the meaning of Rule 16b-3(a)(3)
promulgated under the Act (the "Plan Administrator"). Subject to the provisions
of the Plan, the Plan Administrator is authorized to:
(a) construe the Plan and any Award under the Plan;
(b) select the directors, officers, employees and consultants of any
Participating Company to whom Awards may be granted;
(c) determine the number of shares of Stock to be covered by any
Award;
(d) determine and modify from time to time the terms and conditions,
including restrictions, of any Award and to approve the form of
written instrument evidencing Awards;
(e) accelerate at any time the exercisability or vesting of all or any
portion of any Award and/or to include provisions in Awards
providing for such acceleration;
(f) impose limitations on Awards, including limitations on transfer
and repurchase provisions;
(g) extend the exercise period within which Stock Options may be
exercised; and
(h) determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of
the participant and whether and to what extent the Company shall
pay or credit amounts constituting interest (at rates determined
by the Plan Administrator) or dividends or deemed dividends on
such deferrals.
The determination of the Plan Administrator on any such matters shall be
conclusive.
-3-
Section 3. Delegation of Authority to Grant Awards. The Plan Administrator, in
its discretion, may delegate to one or more executive officers of the Company
all or part of the Plan Administrator's authority and duties with respect to
granting Awards and all references in the Plan to the "Plan Administrator" shall
include such executive officers to the extent they are acting pursuant to such
delegation. The Plan Administrator may revoke or amend the terms of such a
delegation at any time, but such revocation shall not invalidate prior actions
of the executive officers that were consistent with the terms of the Plan.
Section 4. Eligibility. Awards may only be granted to employees, directors, and
consultants with any member of the Participating Company Group. For purposes of
the foregoing sentence, "employees," "directors" and "consultants" shall include
prospective employees, prospective directors and prospective consultants to whom
Awards are granted in connection with written offers of an employment or other
service relationship with a Participating Company.
Section 5. Shares Subject to the Plan. The number of shares of Stock which may
be issued pursuant to the Plan shall be 10,000,000. For purposes of the
foregoing limitation, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the number of shares of Stock available for issuance under the Plan. Stock to be
issued under the Plan may be either authorized and unissued shares or shares
held in treasury by the Company. Notwithstanding the foregoing, on and after the
date that the Plan is subject to Section 162(m) of the Code, Stock Options with
respect to no more than 2,500,000 shares of Stock may be granted to any one
individual participant during any one calendar year period.
Section 6. Stock Options. Options granted pursuant to the Plan may be either
Options which are Incentive Stock Options or Non-Qualified Stock Options.
Incentive Stock Options and Non-Qualified Stock Options shall be granted
separately hereunder. The Plan Administrator, shall determine whether and to
what extent Options shall be granted under the Plan and whether such Options
granted shall be Incentive Stock Options or Non-Qualified Stock Options;
provided, however, that: (i) Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code; and (ii) No Incentive Stock
Option may be granted following the tenth anniversary of the Effective Date of
the Plan. The provisions of the Plan and any Stock Option Agreement pursuant to
which Incentive Stock Options shall be issued shall be construed in a manner
consistent with Section 422 of the Code (or any successor provision) and rules
and regulations promulgated thereunder.
Section 7. ISO Fair Market Value Limitation. To the extent that Options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by a
participant for the first time during any calendar year for Stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such Options which exceeds such amount shall be treated as Non-Qualified
Stock Options. For purposes of this Section 7, Options designated as Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of Stock shall be determined as of the time
the Option with respect to such Stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 7,
-4-
such different limitation shall be deemed incorporated herein effective as of
the amendment date and with respect to such Options as required or permitted by
such amendment to the Code. If an Option is treated as an Incentive Stock Option
in part and as a Nonstatutory Stock Option in part by reason of the limitation
set forth in this Section 7, the participant may designate which portion of such
Option the participant is exercising. In the absence of such designation, the
participant shall be deemed to have exercised the Incentive Stock Option portion
of the Option first. Separate certificates representing each such portion shall
be issued upon the exercise of the Option.
Section 8. Terms of Options. Each Option granted under the Plan shall be
evidenced by an agreement between the Company and the person to whom such Option
is granted (the "Option Agreement") and shall be subject to the following terms
and conditions:
8.1 Exercise Price. Subject to adjustment as provided in
Section 11 of this Plan, the price at which each share covered by an Option may
be purchased shall be determined in each case by the Plan Administrator;
provided, however, that such price shall not, in the case of an Incentive Stock
Option, be less than the Fair Market Value of the underlying Stock at the time
the Option is granted. If a participant owns (or is deemed to own under
applicable provisions of the Code and rules and regulations promulgated
thereunder) more than ten percent (10%) of the combined voting power of all
classes of the stock of the Company and an Option granted to such participant is
intended to qualify as an Incentive Stock Option, the Option price shall be no
less than 110% of the Fair Market Value of the Stock covered by the Option on
the date the Option is granted.
8.2 Exercise Period. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Plan
Administrator and set forth in the Option Agreement evidencing such Option;
provided, however, that (i) no Option shall be exercisable after the expiration
of ten (10) years after the date of grant of such Option, (ii) no Incentive
Stock Option granted to a participant who owns more than 10% of the combined
voting power of all classes of stock of the Company (or any parent or subsidiary
of the Company) shall be exercisable after the expiration of five (5) years
after the date of grant of such Option, and (iii) no Option granted to a
prospective employee, prospective consultant or prospective director may become
exercisable prior to the date on which such person commences Service with the
Participating Company. Subject to the foregoing, unless otherwise specified by
the Option Agreement evidencing the Option, any Option granted hereunder shall
have a term of ten (10) years from the effective date of grant of the Option.
8.3 Effect of Termination of Service. Unless otherwise
provided in such participant's Option Agreement:
(i) Death. If a participant shall cease to perform
Service as a result of such participant's death,
any Options then exercisable shall be exercisable
until the earlier to occur of one year anniversary
of the participant's death or the expiration of the
Option Period and only by the participant's
personal representative or persons entitled thereto
under the participant's will or the laws of descent
and distribution.
-5-
(ii) Termination of Service. If a participant shall
cease to perform Service to any member of the
Participating Company Group, all Options to which
the participant is then entitled to exercise may be
exercised until the earlier to occur of the three
month anniversary of the participant's termination
of Service or the expiration of the Option Period
or, if such termination was due to disability or
retirement (as hereinafter defined), until the
earlier to occur of the one year anniversary of the
participant's termination of Service or the
expiration of the Option Period. Notwithstanding
the foregoing, in the event that any termination of
Service shall be for "Cause" (as defined herein) or
the participant voluntarily terminates his or her
Service, then any and all Options held by such
participant shall forthwith terminate. For purposes
of the Plan, "retirement" shall mean the
termination of employment with the Participating
Company Group, other than for Cause, at any time
under circumstances which would entitle such
participant to other retirement benefits provided
by the Participating Company to whom the
participant was providing Service immediately prior
to the termination of Service or such other
circumstances that the Plan Administrator concludes
should be deemed a retirement.
(iii) Limitation on Shares. The Option may not be
exercised for more shares (subject to adjustment as
provided in Section 11) after the termination of
the participant's Service than the participant was
entitled to purchase thereunder at the time of the
termination of such relationship.
8.4 Payment of Exercise Price. The Option exercise price of
each share purchased pursuant to an Option shall be paid in full at the time of
each exercise (the "Payment Date") of the Option (i) in cash; (ii) by delivering
to the Company a notice of exercise with an irrevocable direction to a
broker-dealer registered under the Act to sell a sufficient portion of the
shares and deliver the sale proceeds directly to the Company to pay the exercise
price; (iii) in the discretion of the Plan Administrator, through the delivery
to the Company of previously-owned shares of Common Stock having an aggregate
Fair Market Value equal to the Option exercise price of the shares being
purchased pursuant to the exercise of the Option; provided, however, that shares
of Common Stock delivered in payment of the Option price must have been held by
the participant for at least six (6) months in order to be utilized to pay the
Option price; (iv) in the discretion of the Plan Administrator, by an election
to have the Company withhold shares otherwise issuable to the participant having
a Fair Market Value equal to the Option exercise price of the shares being
purchased pursuant to the exercise of the Option; or (v) in the discretion of
the Plan Administrator, through any combination of the payment procedures set
forth in subsections (i)-(iv)
-6-
8.5 Nontransferability of Options. No Option shall be
assignable or transferable other than by the laws of descent and distribution.
During the lifetime of the participant, an Option shall be exercisable only by
the participant or, in the event of the participant's incapacity, by the
participant's legal guardian or legal representative.
Section 9. Stock Awards.
(a) The Plan Administrator may grant Stock Awards to any officer,
employee or consultant with any member of the Participating
Company Group. A Stock Award entitles the recipient to acquire
shares of Stock subject to such restrictions and conditions as
the Plan Administrator may determine at the time of grant
("Stock Award"). Conditions may be based on continuing
employment (or other business relationship) and/or achievement
of pre-established performance goals and objectives.
(b) Upon execution of a written instrument setting forth the Stock
Award and paying any applicable purchase price, a participant
shall have the rights of a shareholder with respect to the Stock
subject to the Stock Award, including, but not limited to the
right to vote and receive dividends with respect thereto;
provided, however, that shares of Stock subject to Stock Awards
that have not vested shall be subject to the restrictions on
transferability described in Section 9(d) below. Unless the Plan
Administrator shall otherwise determine, certificates evidencing
the Stock Awards shall remain in the possession of the Company
until such Stock is vested as provided in Section 9(c) below.
(c) The Plan Administrator at the time of grant shall specify the
date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which
Stock shall become vested, subject to such further rights of the
Company or its assigns as may be specified in the instrument
evidencing the Stock Award. If the participant or the Company,
as the case may be, fails to achieve the designated goals or the
participant's relationship with the Company is terminated prior
to the expiration of the vesting period, the participant shall
forfeit all shares of Stock subject to the Stock Award which
have not then vested.
(d) Unvested Stock may not be sold, assigned transferred, pledged or
otherwise encumbered or disposed of except as specifically
provided herein or in the written instrument evidencing the
Stock Award.
-7-
Section 10. Tax Withholding.
(a) Whenever shares of Stock or Options are to be issued or cash is
to be paid under the Plan, under circumstances in which the Plan
Administrator believes that any federal, state or local tax
withholding may be imposed, the Company or Subsidiary, as the
case may be, shall have the right to require the participant to
remit to the Company or Subsidiary, as the case may be, an
amount sufficient to satisfy the minimum federal, state and
local tax withholding requirements prior to the delivery of any
certificate for shares or any proceeds; provided, however, that
in the case of a participant who receives an Award of Stock
under the Plan which is not fully vested, the participant shall
remit such amount on the first business day following the Tax
Date. The "Tax Date" for purposes of this Section 10 shall be
the date on which the amount of tax to be withheld is
determined. If a participant makes a disposition of Stock
acquired upon the exercise of an Incentive Stock Option within
either two years after the Option was granted or one year after
its exercise by the participant, the participant shall promptly
notify the Company and the Company shall have the right to
require the participant to pay to the Company an amount
sufficient to satisfy federal, state and local tax withholding
requirements.
(b) A participant who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding
requirements may pay such amount (i) in cash; (ii) in the
discretion of the Plan Administrator, through the delivery to
the Company of previously-owned shares of Stock having an
aggregate Fair Market Value on the Tax Date equal to the tax
obligation provided that the previously owned shares delivered
in satisfaction of the withholding obligations must have been
held by the participant for at least six (6) months; (iii) in
the discretion of the Plan Administrator, through an election to
have the Company withhold shares of Stock otherwise issuable to
the participant having a Fair Market Value on the Tax Date equal
to the amount of tax required to be withheld, or (iv) in the
discretion of the Plan Administrator, through a combination of
the procedures set forth in subsections (i), (ii) and (iii) of
this Section 10(b).
(c) An election by a participant to have shares of Stock withheld to
satisfy federal, state and local tax withholding requirements
pursuant to Section 10(b) must be in writing and delivered to
the Company prior to the Tax Date.
Section 11. Adjustment of Number and Price of Shares.
Any other provision of the Plan notwithstanding:
-8-
(a) If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
transaction, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or additional shares
or new or different shares or other securities of the Company or
other non-cash assets are distributed with respect to such
shares of Stock or other securities, the Plan Administrator
shall make an appropriate or proportionate adjustment in (i) the
number of Stock Options that can be granted to any one
individual participant, (ii) the number and kind of shares or
other securities subject to any then outstanding Awards under
the Plan, and (iii) the price for each share subject to any then
outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by
the number of shares) as to which such Stock Options remain
exercisable. The adjustment by the Plan Administrator shall be
final, binding and conclusive.
(b) In the event that, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors shall
authorize the issuance or assumption of a stock Option or stock
Options in a transaction to which Section 424(a) of the Code
applies, then, notwithstanding any other provision of the Plan,
the Plan Administrator may grant an Option or Options upon such
terms and conditions as it may deem appropriate for the purpose
of assumption of the old Option, or substitution of a new Option
for the old Option, in conformity with the provisions of Code
Section 424(a) and the rules and regulations thereunder, as they
may be amended from time to time.
(c) No adjustment or substitution provided for in this Section 11
shall require the Company to issue or to sell a fractional share
under any Option Agreement or share award agreement and the
total adjustment or substitution with respect to each stock
Option and share award agreement shall be limited accordingly.
(d) In the case of (i) the dissolution or liquidation of the
Company, (ii) a merger, reorganization or consolidation in which
the Company is acquired by another person or entity (other than
a holding company formed by the Company), (iii) the sale of all
or substantially all of the assets of the Company to an
unrelated person or entity, or (iv) the sale of all of the stock
of the Company to a unrelated person or entity (in each case, a
"Fundamental Transaction"), the Plan and all Awards granted
hereunder shall terminate, unless provision is made in
connection with the Fundamental Transaction for the assumption
of the Awards heretofore granted, or the substitution of such
Awards with new awards of the successor entity, with appropriate
adjustment as to the number and kind of shares and, if
appropriate, the per share exercise price as provided in
Subsections (a) and (b) of this Section 11. In the event of such
termination and in the event the Board does not provide for the
Cash Payment described in Subsection (e) of this Section each
participant shall be notified of such proposed termination and
permitted to exercise for a period of at least 15 days prior to
the date of such termination all Options held by such
participant which are then exercisable.
-9-
(e) In the event that the Company shall be merged or consolidated
with another corporation or entity, other than a corporation or
entity which is an "affiliate" of the Company. under the terms
of which holders of Stock of the Company will receive upon
consummation thereof a cash payment for each share of Stock of
the Company surrendered pursuant to such Business Combination
(the "Cash Purchase Price"), the Board of Directors may provide
that all outstanding Options shall terminate upon consummation
of such transaction and each participant shall receive, in
exchange therefor, a cash payment equal to the amount (if any)
by which (i) the Cash Purchase Price multiplied by the number of
shares of Stock of the Company subject to outstanding Options
held by such participant exceeds (ii) the aggregate exercise
price of such Options.
Section 12. Change in Control.
(a) Unless otherwise provided in such participant's Option
Agreement, agreements relating to Stock Awards or in a written
employment or other agreement directly addressing the same
subject matter as addressed below, in the event that the Plan is
terminated as a result of or following a Change in Control (as
defined herein), all vested Options and Stock Awards then
outstanding at the time of such Plan termination may be
exercised for a period of thirty (30) days from the date of
notice of the proposed termination. In such event, all
participants shall be credited with an additional six (6) months
of service for the purpose of any otherwise unvested Options and
Stock Awards. Upon a Change in Control in which the Plan is
either assumed or otherwise not subject to termination, if
during the remaining term of such a participant's Options or
Stock Awards, the participant is terminated other than for
Cause, the participant will, at the time of such termination, be
credited with an additional six (6) months of service for the
purpose of any otherwise unvested Options and Stock Awards;
however, in the event of a termination for Cause, all Options
shall immediately terminate and all unvested portions of Stock
Awards shall immediately terminate. such event,
(b) As used herein, a "Change in Control" shall be deemed to have
occurred if: (i) any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) acquires "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the voting power of
the then outstanding securities of the Company except where the
acquisition is approved by the Board; or (ii) if the Company is
to be consolidated with or acquired by another entity in a
merger or other reorganization in which the holders of the
outstanding voting stock of the Company immediately preceding
the consummation of such event, shall, immediately following
such event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity or in the event
of a sale of all or substantially all of the Company's assets or
otherwise.
-10-
(c) Notwithstanding anything in the Plan to the contrary, the
acceleration of vesting and exercisability provided by
Subsection (a) of this Section shall not occur in the event that
such acceleration would make the transaction causing the Change
in Control to be ineligible for pooling of interests accounting
treatment and, in the absence of such acceleration, the
transaction would qualify for such treatment and the Company
intends to use such treatment with respect to such transaction.
Section 13. No Right to Future Employment. Nothing contained in the Plan nor in
any Award agreement shall confer upon any participant any right with respect to
the continuance of employment by the Company nor interfere in any way with the
right of the Company to terminate his employment or change his compensation at
any time.
Section 14. Amendment and Discontinuance. The Board of Directors may alter,
amend, suspend or discontinue the Plan, provided that no such action shall
deprive any person without such person's consent of any rights theretofore
granted pursuant hereto.
Section 15. Compliance with Section 16. With respect to persons subject to
Section 16 of the Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 (or its successor rule and shall be
construed to the fullest extent possible in a manner consistent with this
intent). To the extent that any Award fails to so comply, it shall be deemed to
be modified to the extent permitted by law and to the extent deemed advisable by
the Plan Administrator in order to comply with Rule 16b-3.
Section 16. Compliance with Governmental Regulations. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to the
Plan, the Company shall not be required to issue any shares of Stock hereunder
prior to registration of the shares subject to the Plan under the Securities Act
of 1933 or the Act, if such registration shall be necessary, or before
compliance by the Company or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules any applicable
exchange or of the Nasdaq Stock Market. The Company shall use its best efforts
to effect such registrations and to comply with such laws, regulations and
rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
Section 17. Participation by Foreign Nationals. The Plan Administrator may, in
order to fulfill the purposes of the Plan and without amending the Plan, modify
grants to foreign nationals or United States citizens employed abroad in order
to recognize differences in local law, tax policy or custom.
-11-
Section 18. Effective Date of Plan - Shareholder Approval. The Plan was approved
by the Board and became effective on June 1, 2000. Those provisions of the Plan
that for federal tax purposes require approval of the stockholders of the
Company (i.e., the granting of incentive stock options) shall not become
effective until adopted by the stockholders, however, the Company reserves the
right to grant Incentive Stock Options provided stockholder approval is secured
within one (1) year from the date thereof. In the event Incentive Stock Options
are granted and Stockholder approval is not timely secured, such Options shall
remain in full force and effect, however, shall automatically convert to
Non-Qualified Options.
Section 19. Governing Law. The Plan shall be governed by the internal laws of
the State of Delaware without giving effect to its choice of law provisions.
Unless otherwise provided in an Option Agreement or Award Agreement, Awards
shall be governed by the same laws as the Plan.
As amended by the Board of Directors on March 25,2002.
-12-
STONEPATH GROUP, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Dennis L. Pelino and Stephen M. Cohen, with full power of substitution, as proxy, to
vote for the undersigned all shares of the common stock, par value $.001 or Series C Convertible Participating Preferred Stock, par
value $.001 per share of Stonepath Group, Inc., a Delaware corporation (the "Company"), that the undersigned would be entitled to
vote if personally present at the Annual Meeting of Shareholders to be held in the Philadelphia Room of the offices of Buchanan
Ingersoll Professional Corporation, 11 Penn Center, 1835 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103 at 10:00 a.m.
local time on Friday, May 31, 2002, or at any adjournments thereof, upon the matters described in the accompanying proxy statement
and upon such other matters as may properly come before the meeting. Said proxy is directed to vote or refrain from voting on the
matters set forth in the accompanying proxy statement in the manner set forth on this proxy.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE), but you need not mark any box if you
wish to vote in accordance with the Board of Directors' recommendations.
THE PROXY CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD
----------------------------------------------------------------------
1. Proposal 1
ELECTION OF DIRECTORS FOR WITHHELD
Nominees: Dennis L. Pelino, David R. Jones, Aloysius T. Lawn, IV, [ ] [ ]
Robert McCord, J. Douglass Coates, Frank Palma
For, except vote withheld for the following nominee(s):
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE APPROVAL OF THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF STONEPATH GROUP, INC.
2. Proposal 2
Amendments to the Company's Amended & Restated 2000 Stock FOR AGAINST ABSTAIN
Incentive Plan
[ ] [ ] [ ]
3. Proposal 3
Ratification of the appointment of KPMG LLP to serve as the FOR AGAINST ABSTAIN
auditors for the Company for the fiscal year ending December 31,
2002. [ ] [ ] [ ]
Check appropriate box. Indicate changes below:
Address Change [ ] Name Change [ ]
NOTE: Please sign name(s) exactly as printed hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
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The undersigned hereby acknowledges receipt of the proxy
statement.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE
UNITED STATES.
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SIGNATURE(S)
____________________________________________________________
____________________________________________________________
DATE____________________, 2002
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