SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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STONEPATH GROUP, INC.
1600 Market Street, Suite 1515
Philadelphia, PA 19103
April 14, 2003
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
30, 2003 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 the adoption of the Stonepath Group, Inc. 2003 Employee
Stock Purchase Plan;
(3) approve amendments to the Stonepath Group, Inc. Amended and
Restated 2000 Stock Incentive Plan to increase the number of
shares of the Company's Common Stock which may be issued
thereunder;
(4) ratify the appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 2003; and
(5) 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 adoption of the Stonepath Group, Inc.
2003 Employee Stock Purchase Plan, FOR the amendments to the Stonepath Group,
Inc. 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,
2002 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,
Dennis L. Pelino
Chairman of the Board
STONEPATH GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 30, 2003
April 14, 2003
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 30, 2003 at
10:00 A.M. local time, for the following purposes:
(1) to elect the Company's directors;
(2) to approve the adoption of the Stonepath Group, Inc. 2003
Employee Stock Purchase Plan;
(3) to approve amendments to the Stonepath Group, Inc. Amended and
Restated 2000 Stock Incentive Plan to increase the number of
shares of the Company's Common Stock which may be issued
thereunder;
(4) to ratify the appointment of KPMG LLP as the Company's
independent auditors for the year ending December 31, 2003; and
(5) 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,
2002 is enclosed for your information. No material contained in the Annual
Report is to be considered a part of our proxy solicitation material.
Only stockholders of record as of the close of business on April 11,
2003 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,
Stephen M. Cohen
Senior Vice President, General Counsel and
Secretary
STONEPATH GROUP, INC.
1600 Market Street, Suite 1515
Philadelphia, PA 19103
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 30, 2003 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 14,
2003 to all stockholders entitled to vote at the Meeting.
Record Date and Stock Ownership
Stockholders of record at the close of business on April 11, 2003 (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, 27,945,914 shares
of the Company's Common Stock, $.001 par value per share (the "Common Stock")
were issued, outstanding and entitled to notice of and to vote on all matters at
the Meeting and at any adjournment(s) or postponement(s) thereof.
Quorum and Voting Requirements
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.
All shares of Common Stock represented by valid proxies received by the
Secretary of the Company prior to the Meeting will be voted as specified in the
proxy. If no specification is made, the shares will be voted FOR the election of
each of the Board's nominees to the Board of Directors and FOR each of the other
matters submitted by the Board of Directors for vote by the stockholders. Unless
otherwise indicated by the stockholder, the proxy card also confers
discretionary authority on the Board-appointed proxies to vote the shares
represented by the proxy on any matter that is properly presented for action at
the Meeting. Abstentions and broker non-votes (which arise from proxies
delivered by brokers and others, where the record holder has not received
direction on voting and does not have discretionary authority to vote on one or
more matters) are each included in the determination of the number of shares
present for purposes of determining a quorum. At the Meeting, directors will be
elected by a plurality vote and all other matters will be decided by the
affirmative vote of a majority of the shares of Common Stock present at the
meeting, in person or by proxy, and entitled to vote. Abstentions are counted as
shares present at the meeting for purposes of determining the votes cast on any
matter and have the effect of a vote against any matter as to which abstention
is specified. Broker non-votes are not considered shares present for purposes of
the vote on any matter as to which the broker non-vote is specified and will not
affect the outcome of the vote.
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.
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.
Annual Report
A copy of the Company's Annual Report for the year ended December 31,
2002 accompanies this Proxy Statement. No material contained in the Annual
Report is to be considered a part of our proxy solicitation material.
The mailing address of the Company's executive office is 1600 Market
Street, Suite 1515, Philadelphia, PA 19103.
Solicitation
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.
Shareholder Proposals
Proposals of stockholders that are intended to be included within the
proxy material for our 2004 Annual Meeting of Stockholders must comply with the
requirements of SEC Rule 14a-8 and must be received no later than December 15,
2003 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 such
number of directors as is established from time to time by the affirmative vote
of a majority of 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, 55 Chairman of the Board of 2001
Directors and Chief
Executive Officer
J. Douglass Coates, 60 Principal-Manalytics 2001
International, Inc.
Robert McCord, 44 Managing Director, PA Early 2001
Stage
David R. Jones, 54 Private Consultant 2000
Aloysius T. Lawn, IV, 44 General Counsel-Talk 2001
America Holdings, Inc.
John Springer, 46 Director of Global Operations - Nominee
Golf Division, Nike, Inc.
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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 B.S. in Engineering from
Pennsylvania State University and an MBA from the Wharton School of the
University of Pennsylvania.
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
an MBA from the Amos Tuck School of Business Administration.
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
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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 a B.S. with high honors from Harvard University and his MBA from the
Wharton School.
John Springer
John H. Springer has extensive global supply chain management and
logistics experience having held both domestic U.S. and International Logistics
positions at IBM Corporation; Union Pacific Corporation's third party logistics
unit; and most recently at Dell Computer from 1995 to 2002. Mr. Springer joined
Nike Inc. in 2002 and is its Director of Global Operations, Nike Golf. Mr.
Springer has been active in the Council of Logistics Management throughout his
career, including holding the position of President for the Central Texas
region. He earned his B.S. at Syracuse University in Transportation &
Distribution Management, and his MBA from St. Edwards University in Austin,
Texas.
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INFORMATION ABOUT EXECUTIVE OFFICERS
Our executive officers and significant employees as of April 11, 2003
are as follows:
Year in Which
Officer's Name and Age Office Service Began
---------------------- ------ -------------
Dennis L. Pelino, 55 Chairman of the Board of 2001
Directors and Chief Executive
Officer
Gary Koch, 44 Significant Employee - CEO 2001
of Domestic Operations
Jason Totah, 43 Significant Employee - 2002
President of International
Operations
Stephen M. Cohen, 46 Senior Vice President, General 2000
Counsel and Secretary
Bohn H. Crain, 39 Chief Financial Officer and 2002
Treasurer
Thomas L. Scully, 53 Vice President - Finance and 2001
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 M.G.R., Inc d/b/a 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 20 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
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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.
Bohn H. Crain
Bohn H. Crain has served as our Chief Financial Officer since January
10, 2002 and our Treasurer since May 30, 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 the Company'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 B.S. in Business Administration-Accounting from the University of Texas.
Thomas L. Scully
Thomas L. Scully has served as our Vice President-Finance and Principal
Accounting Officer since November 19, 2001. Before joining the Company, Mr.
Scully was a 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 an Audit Partner at BDO
Seidman, LLP ("BDO") 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.
Jason Totah
Jason Totah is a significant employee of the Company and serves as the
President of Global Transportation Services, Inc. ("Global") and Stonepath
Logistics International Services, Inc. Mr. Totah joined Global in 1990 and has
held several positions including Seattle Branch Manager and Senior Vice
President, Sales and Marketing, and Senior Vice President of Sales and
Operations. Prior to Global, he worked in international logistics for Amoco
Petroleum, stationed in various locations around the world. He graduated from
Oregon State in 1983 with a degree in agriculture engineering.
Board Meetings
During the year ended December 31, 2002, the Board of Directors held
five (5) meetings and acted by unanimous consent on six (6) occasions.
Additionally, there were seven (7) Audit Committee meetings and four (4)
Compensation Committee meetings held during 2002. During 2002, each Board member
attended 75% or more of the meetings held by the Board and any committee upon
which such director served.
7
Board Committees
Audit Committee
The Audit Committee is responsible for monitoring the integrity of the
Company's financial statements and reporting processes and systems of internal
control regarding finance, accounting, and legal compliance and approving 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 Frank Palma.
Robert McCord is expected to replace Frank Palma on the Audit Committee.
Compensation Committee
The Compensation Committee is responsible for determining the
compensation of the officers and employees of the Company and administering the
Company's compensation plans. The members of the Compensation Committee are
Aloysius T. Lawn, IV, Chairman, as well as David R. Jones and Frank Palma. Upon
his election as a director, John Springer will be replacing Frank Palma on the
Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE COMPANY'S DIRECTORS
---
8
PROPOSAL 2
APPROVAL OF THE STONEPATH GROUP, INC. 2003 EMPLOYEE STOCK
PURCHASE PLAN
The stockholders of the Company are being asked to vote on a proposal
to approve the Stonepath Group, Inc. 2003 Employee Stock Purchase Plan (the
"Stock Purchase Plan") that was adopted by the Board of Directors (the "Board")
on March 25, 2003, subject to stockholder approval at the Meeting. The Stock
Purchase Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company has authorized 1,000,000 shares of Common Stock for purchase under the
Stock Purchase Plan. The term of the Stock Purchase Plan is ten (10) years,
unless sooner terminated by the Board.
Under the Stock Purchase Plan, employees of the Company and its
subsidiaries who are eligible and elect to participate are granted options to
purchase Common Stock at no less than a 15% discount from the fair market value
of such stock. Participation in the Stock Purchase Plan is voluntary.
The following is a summary of the principal features of the Stock
Purchase Plan. The summary, however, does not purport to be a complete
description of all of the provisions of the Stock Purchase Plan. The complete
text of the Stock Purchase Plan appears as Exhibit A to this Proxy Statement and
the following description is qualified in its entirety by reference to Exhibit
A.
Purpose of the Stock Purchase Plan
The Board believes that it is in the best interests of the Company to
maintain an equity incentive program which will provide a meaningful opportunity
for officers, employees and directors who are also part- or full-time employees
to acquire a proprietary interest in the enterprise and thereby encourage such
individuals to remain in the Company's service and more closely align their
interests with those of the stockholders.
Implementation and Administration of the Stock Purchase Plan
The Stock Purchase Plan will be implemented by a series of offering
periods of six (6) consecutive calendar months each, with the initial plan
offering period being for five (5) months commencing on August 1, 2003.
Thereafter, the offering periods will commence on January 1 and July 1 of each
year, or such other time as determined by the Board of Directors. The Board has
the discretion to change the duration and/or frequency of the offering periods
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first offering period to be affected.
The Stock Purchase Plan may be administered by the full Board, a
committee of members of the Board appointed by the Board or by a third party
authorized as administrator by the Board (in any of the foregoing cases, the
"Plan Administrator"). The Plan Administrator will have full and exclusive
discretionary authority to construe, interpret, and apply the terms of the Stock
9
Purchase Plan, to determine eligibility and to adjudicate all disputed claims
filed under the Stock Purchase Plan, and to establish such rules as it deems
necessary for the proper administration of the Stock Purchase Plan. The Plan
Administrator may change the offering periods, limit the frequency and/or number
of changes in the amount withheld during an offering period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
compensation, and establish such other limitations or procedures as the Plan
Administrator determines, in its sole discretion, are advisable and consistent
with the Stock Purchase Plan. Every finding, decision and determination made by
the Plan Administrator will, to the full extent permitted by law, be binding and
final on all parties.
Eligibility
The Plan Administrator will have the authority to determine an
employee's eligibility to participate in the Stock Purchase Plan. Under the
Stock Purchase Plan, persons, including officers and directors, who are
customarily employed for at least ten (10) hours per week on a given enrollment
date by the Company or any of the Company's designated subsidiaries ("Eligible
Employees"), are eligible to purchase shares of Common Stock pursuant to the
Stock Purchase Plan; provided, however, that no employee will be granted an
option under the Stock Purchase Plan to the extent that, (i) immediately after
the grant, such Eligible Employee (or any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company and/or hold outstanding options to purchase such
stock possessing 5% or more of the total combined voting power or value of all
classes of capital stock of the Company or any subsidiary of the Company or (ii)
his rights to purchase stock under all employee stock purchase plans of the
Company and its subsidiaries accrues at a rate which exceeds $25,000 worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time. Those persons who are Eligible Employees as of August 1, 2003 shall be
eligible to participate as of the initial offering period under the Stock
Purchase Plan. Thereafter, any person who is employed on a given enrollment date
of a given offering period shall be eligible to participate in such offering
period, subject to the limitations set forth in the Stock Purchase Plan.
Terms of Purchase; Price
The Stock Purchase Plan permits Eligible Employees to purchase shares
of Common Stock, subject to the limitations set forth in Section 423(b) of the
Code, through accumulated payroll deductions. An Eligible Employee must complete
a subscription agreement authorizing such payroll deductions and must file it
with the Company's Treasury Department prior to the applicable enrollment date.
After the initial offering period, purchases under the Stock Purchase Plan may
be made two (2) times per year at a price equal to the lesser of (i) 85% of the
closing price of the Company's Common Stock reported on the American Stock
Exchange on the first business day of the offering period or (ii) 85% of the
closing price of the Company's Common Stock reported on the American Stock
10
Exchange on the last business day of the offering period. In addition to other
restrictions set forth in the Stock Purchase Plan, each participating employee
may purchase an amount of the Company's Common Stock not exceeding 15% of the
participant's compensation which he receives on each pay day during the offering
period.
Under the Stock Purchase Plan, an option to purchase shares of Common
Stock will be granted to each Eligible Employee as of the first trading day of
each offering period. The payroll deduction authorized by the Eligible Employee
will be credited to an individual account maintained for him under the Stock
Purchase Plan. Unless withdrawn earlier, the funds held for each Eligible
Employee will automatically be applied on the last trading day of each offering
period to purchase shares of Common Stock for such Eligible Employee in
accordance with the Stock Purchase Plan.
Unless an Eligible Employee withdraws from the Stock Purchase Plan as
described below, his option for the purchase of shares will be exercised
automatically on the last trading day of the purchase period, and the maximum
number of full shares subject to the option will be purchased for such person at
the applicable purchase price with the accumulated payroll deductions in his
account.
Withdrawal; Termination of Employment
A participant may withdraw and discontinue his participation in the
Stock Purchase Plan or may decrease the rate of his payroll deductions during
the offering period by completing and filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The Plan Administrator
may, in its discretion, limit the number of participation rate changes during
any offering period. An Eligible Employee may withdraw all but not less than all
of the payroll deductions credited to his account not yet used to exercise his
option under the Stock Purchase Plan at any time prior to the last business day
of the offering period by giving written notice to the Company, and no further
contributions for the purchase of shares of Common Stock may be made by that
participant during such offering period. If an Eligible Employee withdraws from
an offering period, payroll deductions will not resume at the beginning of the
succeeding offering periods. A participant's withdrawal from an offering period
will not preclude him, however, from being eligible to participate in any future
offering periods under the Stock Purchase Plan. No interest shall accrue on the
contributions in participants' accounts.
If a participant loses his status as an Eligible Employee for any
reason (including retirement or death), he will be deemed to have elected to
withdraw from the Stock Purchase Plan and the payroll deductions credited to his
account during the offering period but not yet used to exercise the option will
be returned to him or, in the case of death, his estate.
Amendment and Termination
The Board of Directors may at any time and for any reason amend or
terminate the Stock Purchase Plan. Except as otherwise provided in the Stock
Purchase Plan, no termination of the Stock Purchase Plan may affect the options
previously granted, provided that an offering period may be terminated by the
Board on any exercise date if the Board determines that the termination of the
offering period or the Stock Purchase Plan is in the best interests of the
11
Company and its stockholders. In addition, except as otherwise provided in the
Stock Purchase Plan, no such amendment may make any change in any previously
granted option which adversely affects the rights of any participant.
In the event that the Board determines that the ongoing operation of
the Stock Purchase Plan may result in unfavorable accounting consequences, the
Board may, in its discretion, and, to the extent desirable or necessary, modify
or amend the Stock Purchase Plan to reduce or eliminate such accounting
consequences including, but not limited to, (i) altering the purchase price for
any offering period including an offering period underway at the time of the
change in purchase price, (ii) shortening any offering period so that offering
period ends on a new exercise date, including an offering period underway at the
time of the Board action, and (iii) allocating shares. Such modifications or
amendments will not require stockholder approval or the consent of any Stock
Purchase Plan participants.
Adjustments
Except as otherwise provided in the Stock Purchase Plan and subject to
any required action by the stockholders of the Company, the maximum number of
shares each participant may purchase each offering period in the event of a
stock dividend, combination, reclassification, stock split or other similar
event may be proportionately adjusted, if at all, as the Board deems
appropriate, with respect to: (i) the aggregate number of shares of Common Stock
that may be issued under the Stock Purchase Plan, (ii) each outstanding option
to purchase shares of Common Stock made under the Stock Purchase Plan, and (iii)
the price per share for any outstanding option under the Stock Purchase Plan.
In the event of the proposed dissolution or liquidation of the Company,
the offering period then in progress will be shortened by setting a new exercise
date and will terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless otherwise provided by the Board.
In the event of a proposed sale of all or substantially all the assets
of the Company, or the merger of the Company with or into another corporation,
each outstanding option will be assumed or an equivalent option substituted by
the successor corporation or a parent or subsidiary of the successor
corporation. In the event a successor corporation refuses to assume or
substitute for the option, any purchase periods then in progress will be
shortened by setting a new exercise date.
Transferability
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Stock Purchase Plan may be assigned, transferred or otherwise disposed of in any
way (other than by will, the laws of descent and distribution or as otherwise
provided in the Stock Purchase Plan) by the participant.
Federal Income Tax Consequences
The following summary is based upon an interpretation of the present
Code and applicable treasury regulations and may be inapplicable if such laws
12
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.
Options issued under the Stock Purchase Plan are intended to be options
issued pursuant to an "employee stock purchase plan" within the meaning of
Section 423 of the Code. Accordingly, upon the automatic exercise of an option,
if an Eligible Employee holds the shares for the applicable holding period, he
or she will be entitled for federal income tax purposes to special tax
treatment. Under such circumstances, any gain realized upon disposition of the
shares will be treated as ordinary income to the extent of the lesser of (i) 15%
of the fair market value of the shares on the date the option was granted, or
(ii) the amount by which the fair market value of the shares on the date of
disposition exceeded the option price. Any additional gain will be treated as
long-term capital gain. The applicable holding period is the longer of (i) two
(2) years after the date the option is granted, or (ii) one (1) year after the
date the shares are issued (the "Applicable Holding Period"). The Company will
not be entitled to any tax deduction for federal income tax purposes with
respect to shares so acquired and disposed of by an Eligible Employee.
Notwithstanding the foregoing, if the Eligible Employee disposes of the
stock prior to satisfying the Applicable Holding Period, any excess of the fair
market value of the Common Stock on the date of exercise over the option price
is taxable as ordinary income to such employee. The Company will be entitled to
a tax deduction for federal income tax purposes equal to the amount of income
recognized by the employee.
The foregoing discussion is not a complete description of the federal
income tax aspects of options or stock awards under the Stock Purchase 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 options
issued under the Stock Purchase Plan. Participants in the Stock Purchase 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTER
FOR THIS PROPOSAL TO APPROVE THE STONEPATH GROUP, INC.
--- 2003 EMPLOYEE STOCK PURCHASE PLAN
13
PROPOSAL 3
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 "Stock
Incentive Plan") to increase the number of shares of the Company's Common Stock
reserved for issuance under the Stock Incentive Plan by 3,000,000 shares. The
Board of Directors unanimously adopted these amendments on March 25, 2003,
subject to stockholder approval at the Meeting.
The proposed amendments will assure that a sufficient reserve of Common
Stock remains available for issuance under the Stock Incentive Plan 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 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 Stock Incentive Plan was approved in September 2000 by the
stockholders of the Company at that time, and subsequent amendments to the Stock
Incentive Plan were approved by the stockholders of the Company on May 31, 2002.
A total of 10,000,000 shares of Common Stock of the Company currently are
reserved for issuance under the Stock Incentive Plan. As of March 15, 2003,
8,145,600 shares were subject to awards currently outstanding under the Stock
Incentive Plan (the "Plan Options") and 2,282,900 shares were subject to awards
granted outside the Stock Incentive Plan (the "Non-Plan Options").
The following is a summary of the principal features of the Stock
Incentive Plan. The summary, however, does not purport to be a complete
description of all of the provisions of the Stock Incentive Plan. The complete
text of the Stock Incentive Plan, as amended herein, appears as Exhibit B to
this Proxy Statement and the following description is qualified in its entirety
by reference to Exhibit B.
Purpose
The purposes of the Stock Incentive 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.
14
Term
The Stock Incentive Plan became effective on June 1, 2000. The Stock
Incentive Plan has no fixed expiration date.
Administration
The Stock Incentive 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 Stock Incentive
Plan and to make interpretations and determinations involving the Stock
Incentive 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
Stock Incentive Plan.
Shares Subject to the Stock Incentive Plan
The number of shares of Common Stock which may be issued under the
Stock Incentive Plan is currently 10,000,000 and, upon approval of this Proposal
by the stockholders, will be 13,000,000. 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 2,500,000 shares of Common Stock may be granted to any one individual
participant during any one calendar year period. In addition, the following
shares may be added back to the Stock Incentive Plan and made available for
issuance under the Stock Incentive 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 Stock Incentive Plan; and (iii) any shares of
Common Stock underlying an award that is terminated (other than by exercise).
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 (5)
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 (2) 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.
15
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 Stock Incentive 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 Stock Incentive 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 Stock
Incentive 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 Stock Incentive 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
Stock Incentive 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
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% of the 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.
16
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 Stock Incentive 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.
If the Company or any of its subsidiaries terminates a participant's
service for "Cause" (as defined in the Stock Incentive 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
17
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 Stock Incentive Plan, and (iii) the
price for each share subject to any then outstanding options under the Stock
Incentive 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 Stock Incentive 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 Stock Incentive 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 fifteen (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.
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 Stock Incentive Plan provides that, in the event the Stock Incentive Plan is
18
terminated as a result of or following a "change in control" (as defined in the
Stock Incentive 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 Stock
Incentive 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
Stock Incentive Plan, provided that no such action will deprive any person,
without such person's consent, of any rights theretofor granted under the Stock
Incentive Plan.
Tax Withholding
Whenever shares are to be issued or cash is to be paid under the Stock
Incentive 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 Stock Incentive Plan is
at the discretion of the Plan Administrator and therefore future awards under
the Stock Incentive Plan cannot be determined in advance. The following table
sets forth (a) the total number of shares subject to options granted under the
Stock Incentive Plan to the listed persons and groups through the fiscal year
ended December 31, 2002 and (b) the market value or average per share exercise
price of such options.
19
Amended and Restated 2000 Stock Incentive Plan
Number of Avg. per Share
Name of Individual or Group Options Granted Exercise Price ($)
--------------------------------------------------------------------------------------------------
Dennis L. Pelino, Chairman and 3,700,000(1) $1.07
Chief Executive Officer
Stephen M. Cohen, Vice President, 850,000(2) $0.68
General Counsel and Secretary
Bohn H. Crain, Chief Financial Officer 350,000(3) $1.51
and Treasurer
Thomas L. Scully, Vice President - 50,000(4) $1.45
Controller and Principal Accounting
Officer
All current executive officers, as a
group 4,950,000 $1.04
All current directors who are not
employees, as a group 345,000 $0.91
All employees who are not current
executive officers, as a group 1,869,000 $1.28
-------------------
(1) Does not include the grant to Mr. Pelino on March 10, 2003 of options to
purchase 300,000 and 400,000 shares of the Company's Common Stock at
exercise prices of $1.68 and $2.00 per share, respectively.
(2) Does not include the grant to Mr. Cohen on March 25, 2003 of options to
purchase 10,000 shares of the Company's Common Stock at an exercise price
of $1.81 per share.
(3) Does not include the grant to Mr. Crain on February 24, 2003 of options
to purchase 200,000 shares of the Company's Common Stock at an exercise
price of $1.53 per share. Does not include the grant to Mr. Crain on
March 25, 2003 of options to purchase 25,000 shares of the Company's
Common Stock at an exercise price of $1.81 per share.
(4) Does not include the grant to Mr. Scully on March 25, 2003 of options to
purchase 8,300 shares of the Company's Common Stock at an exercise price
of $1.81 per share.
20
Federal Income Tax Consequences
The following summary is based upon an interpretation of the present
Code and applicable treasury regulations and 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.
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 (30) 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
21
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 Stock Incentive 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 Stock Incentive
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 Stock Incentive 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 Stock Incentive 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 Stock Incentive 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENTS TO THE STONEPATH GROUP, INC.
--- AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
22
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2003
KPMG LLP has been selected by the Audit Committee and the Board of
Directors to serve as the independent auditors for the Company for the fiscal
year ending December 31, 2003. 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 Audit Committee and 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 2002 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 paid or payable to KPMG LLP for the audit of the
Company's financial statements for 2002 and the review of the Company's interim
financial statements....................................................$290,000
Financial Information Systems Design and Implementation Fees:......$-0-
All Other Fees:
The aggregate fees paid or payable to KPMG LLP for professional
services rendered during 2002 other than the audit of the Company's financial
statements, consisted primarily of fees relating to audits performed on the
financial statements of two (2) companies that were acquired by the Company,
certain financial due diligence and other procedures (including tax compliance)
performed in connection with significant transactions and acquisitions of the
Company, and review of registration statements and other filings made by the
Company with the Securities and Exchange Commission.....................$157,692
The Audit Committee has determined the rendering of non-audit services
by KPMG LLP is compatible with maintaining the auditor's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR RATIFICATION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
--- FOR THE 2003 FISCAL YEAR
23
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 17,
2003, by:
o the holders of more than 5% of any class of the Company's voting
securities;
o each of the directors;
o each of the executive officers; and
o all directors and executives officers of the Company as a group.
As of March 17, 2003, an aggregate of 27,945,914 shares of Common Stock
and 360,745 shares of Series D Preferred Stock were issued and outstanding. Each
share of Series D Preferred Stock is convertible into 10 shares of our Common
Stock. 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 17, 2003 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 2,506,222 8.34%
Stephen M. Cohen(3) Officer 556,851 1.95%
Bohn H. Crain(4) Officer 92,601 *
Thomas L. Scully(5) Officer 15,204 *
David R. Jones(6) Director 130,000 *
Aloysius T. Lawn, IV(7) Director 50,000 *
Robert McCord(8) Director 100,000 *
J. Douglass Coates(9) Director 25,000 *
Frank Palma(10) Director 25,000 *
Michael Karp Beneficial Owner 1,411,250 5.04%
University City Housing
1062 Lancaster Avenue, Suite 30B
Rosemont, PA 19010
Brown Simpson Partners I, Ltd. Beneficial Owner 2,011,840 6.71%
Carnegie Hall Tower
152 West 57th Street, 21st Fl.
New York, NY 10019(11)
All directors and executive officers 3,500,878 11.31%
as a group (9 people)
24
---------------------
(*) 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 406,222 shares of Common Stock. Also includes 2,100,000 shares
of Common Stock issuable upon exercise of vested options. Does not
include 2,300,000 shares of Common Stock issuable pursuant to options
not presently exercisable and not exercisable within 60 days of March
17, 2003.
(3) Includes 11,850 shares of Common Stock. Also includes 545,001 shares of
Common Stock issuable upon exercise of vested options and options which
vest within 60 days of March 17, 2003. Does not include 314,999 shares
of Common Stock issuable pursuant to options not presently exercisable
and not exercisable within 60 days of March 17, 2003.
(4) Includes 17,600 shares of Common Stock. Also includes 75,001 shares of
Common Stock issuable upon exercise of vested options and options which
vest within 60 days of March 17, 2003. Does not include 499,999 shares
of Common Stock issuable pursuant to options not presently exercisable
and not exercisable within 60 days of March 17, 2003.
(5) Includes 15,204 shares of Common Stock issuable upon exercise of vested
options and options which vest within 60 days of March 17, 2003. Does
not include 43,096 shares of Common Stock issuable pursuant to options
not presently exercisable and not exercisable within 60 days of March
17, 2003.
(6) Includes 80,000 shares of Common Stock. Also includes 50,000 shares of
Common Stock issuable upon exercise of vested options and options which
vest within 60 days of March 17, 2003. Does not include 15,000 shares
of Common Stock issuable pursuant to options not presently exercisable
and not exercisable within 60 days of March 17, 2003.
(7) Includes 50,000 shares of Common Stock issuable upon the exercise of
vested options and options which vest within 60 days of March 17, 2003.
Does not include 15,000 shares of Common Stock issuable pursuant to
options not presently exercisable and not exercisable within 60 days of
March 17, 2003.
(8) Includes 100,000 shares of Common Stock issuable upon the exercise of
vested options and options which vest within 60 days of March 17, 2003.
(9) Includes 25,000 shares of Common Stock issuable upon the exercise of
vested options and options which vest within 60 days of March 17, 2003.
Does not include 25,000 shares of Common Stock issuable pursuant to
options not presently exercisable and not exercisable within 60 days of
March 17, 2003.
(10) Includes 25,000 shares of Common Stock issuable upon the exercise of
vested options and options which vest within 60 days of March 17, 2003.
Does not include 40,000 shares of Common Stock issuable pursuant to
options not presently exercisable and not exercisable within 60 days of
March 17, 2003.
(11) Represents shares of Common Stock issuable upon conversion of 201,184
shares of Series D Preferred Stock. However, under the Certificate of
Designation for the Series D Preferred Stock, no holder can receive
shares of Common Stock upon conversion which would cause the aggregate
number of shares of Common Stock beneficially owned by such holder and
its affiliates to exceed 4.99% of the shares of Common Stock
outstanding following such conversion, unless waived by the holder.
25
SERIES D PREFERRED STOCK
------------------------
Shares of
Series D Preferred Stock
Owned Beneficially and
Name of Beneficial Owner of Record (1)(2) Percentage of Class
------------------------ ---------------- -------------------
Brown Simpson Partners I, Ltd. 201,184 55%
Carnegie Hall Tower
152 West 57th Street, 21st Fl.
New York, NY 10019
Halifax Fund, LP 40,197 11%
195 Maplewood Avenue
Maplewood, NJ 07040
Schottenfeld Associates, L.P. 25,451 7%
880 Third Avenue, 16th Floor
New York, NY 10022
Bridgewater Partners, L.P. 20,119 6%
880 Third Avenue, 16th Floor
New York, NY 10022
CSL Associates LP 20,119 6%
399 Park Avenue, 37th Floor
New York, NY 10020
Norton Herrick Irrevocable Securities Trust 40,201 11%
20 Community Place, 2nd Floor
Morristown, NY 07960
TOTAL 347,271
-------------------------
(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 D Preferred
Stock beneficially owned by them.
(2) Each of the shares of Series D Preferred Stock is convertible into 10
shares of the Company's Common Stock. Shares of the Series D Preferred
Stock have limited voting rights, on an as converted to Common Stock
basis, in connection with a consolidation, sale or merger of the
Company that could result in a change of control.
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
2002 all reporting persons timely complied with all filing requirements
applicable to them.
26
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") consists of three (3) directors who are not employees of the Company
and who are considered "independent" under the rules of The American Stock
Exchange.
Role of the Committee
The Compensation Committee establishes, oversees and directs the
Company's executive compensation programs and policies and administers the
Company's stock option and other long-term incentive plans. The Compensation
Committee seeks to align executive compensation with Company objectives and
strategies, business financial performance and enhanced stockholder value.
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 and the Company's 2003 Employee Stock
Purchase 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. 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 2002 were made to compensate the ongoing performance
of the Company's executive officers. Bonuses in 2002 were made to recognize
contributions to the implementation of the Company's new business strategy. The
Committee's specific decisions concerning 2002 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 2002 to
address the need to recruit and retain executives with relevant industry
experience.
The actions taken by the Compensation Committee during 2002 were
designed to reward the Company's senior management group for their efforts in
successfully implementing the Company's business plan and to provide additional
27
incentives to continue their efforts to continue to achieve significant growth
in the Company's business and financial performance.
In determining the compensation to be provided to the Company's senior
management group during 2002, the Compensation Committee took into account the
following matters:
o The successful acquisition and integration of the Company's
principal subsidiaries
o The recognition of revenue growth which exceeded the Company's
plans
o The organic growth of the businesses that have been acquired by
the Company
o The success in obtaining a credit facility to assist in the
Company's further growth
The Compensation Committee granted to the Company's Chairman and Chief
Executive Officer options to purchase 1,900,000 shares of Common Stock in 2002
and granted him options to purchase an additional 700,000 shares of Common Stock
in March 2003. These awards reflected the philosophy of the Compensation
Committee and Board of Directors that it is important to provide Mr. Pelino with
the opportunity to acquire up to ten percent (10%) of the amount of the
Company's outstanding Common Stock on a fully diluted basis. This objective is
the result of the Compensation Committee's discussions with Mr. Pelino, its
consideration of the advice of an independent compensation consultant and peer
group compensation levels, and its view of Mr. Pelino's importance to the
Company.
While it has created no obligation on the part of the Company to do so,
in the event that individual and company performance objectives determined by
the Compensation Committee from time to time are met, the Compensation Committee
intends to consider awarding such additional stock options to Mr. Pelino in the
future as may be necessary to permit him to obtain an equity interest of such an
amount.
Part of the options awarded to Mr. Pelino in March 2003 were also
provided to him in lieu of a minimum $360,000 cash bonus the Compensation
Committee would have otherwise provided to him under the terms of his employment
agreement and in recognition of his willingness to purchase 100,000 shares of
the Company's Common Stock in the Company's recent private placement at the
request of one of the lead investors.
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
28
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, 2002 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").
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 2002 $360,000 -- -- 1,900,000(2) --
and Chief Executive officer 2001 $158,691 $180,000 -- 1,800,000(3) --
Stephen M. Cohen, Senior 2002 $200,000 $15,000 -- 100,000(4) $62,000
Vice President, General 2001 $227,884 $50,000 -- 750,000(5) --
Counsel and Secretary 2000 $103,927 -- -- 300,000(6) --
Bohn H. Crain, Chief Financial 2002 $200,000 $37,500 -- 350,000(7) $44,000
Officer and Treasurer
Thomas L. Scully, Vice 2002 $105,000 $12,500 -- 25,000 --
President - Controller and 2001 $12,519 -- -- 25,000 --
Principal Accounting Officer
--------------------
(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 ten percent (10%) of the total annual
salary and bonus reported for that individual in any year, unless
otherwise noted.
(2) These options were granted on July 3, 2003 and vest to the extent of
633,333 on each of the first two anniversaries of the award date and to
the extent of 633,334 on the third anniversary of the award date, with
100% acceleration of vesting in the event of a change of control
transaction. These options also vest fully upon death, disability, or
termination of employment without cause.
(3) These options were granted in conjunction with Mr. Pelino's employment
by the Company on June 21, 2001 and are fully vested.
(4) These options were granted on July 3, 2002. Twenty-five (25%) percent
of the options vest on July 3, 2003 and the remainder vest pro rata
over the following 36 months, with 100% acceleration of vesting
following a change of control transaction.
(5) 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 following change of control, or upon
a termination of employment without cause. In the event of death or
disability, the options which would have become vested within the next
twelve (12) months become vested.
29
(6) These options were surrendered by Mr. Cohen during the fourth quarter
of 2001.
(7) 150,000 of these options were granted on January 10, 2002, of which
50,000 vested on January 10, 2003, with the remainder vesting pro rata
over the following twenty-four (24) months and with 100% acceleration
of vesting following a change of control transaction, or upon a
termination of employment without cause. 200,000 of these options were
granted on July 3, 2002, of which 50,000 vest on July 3, 2003, with the
remainder vesting pro rata over the following thirty-six (36) months
and with 100% acceleration of vesting following a change of control
transaction or upon a termination of employment without cause.
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.
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.
Effective as of February 1, 2003 we entered into an Amended Employment
Agreement with our Chief Financial Officer, Bohn H. Crain. This agreement
amended and restated our prior Agreement with Mr. Crain dated January 10, 2002.
Pursuant to this Agreement, we have agreed to employ Mr. Crain as our Chief
Financial Officer through February 1, 2006 at an annual base salary of $200,000.
In addition to his annual base salary, 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. Mr. Crain is also entitled to certain severance benefits upon his
death, disability or termination of employment. 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.
30
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 any of these officers 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. In each of their agreements, a change in control is generally
defined as the occurrence of any one of the following:
o 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, becoming the beneficial owner, directly or
indirectly, of our securities representing 50% or more of the
combined voting power of our then outstanding securities;
o 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;
o 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;
o 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
o during any period of twelve (12) 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 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 stock options granted to these executive
officers fully vest upon a "change in control," as defined within our Stock
Incentive Plan.
31
Directors Compensation
During 2002, Mr. Pelino 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. Upon joining our
Board of Directors, 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.
One-half of these options vested 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, on November 5, 2002 each member of our Audit Committee
received options to purchase 15,000 shares of our Common Stock at an exercise
price of $1.45 per share. One-half of these options vest on November 5, 2003,
and the balance vest on November 5, 2004, contingent upon continued Board
service.
Stock Options and Warrants
The following table sets forth information on option grants in fiscal
2002 to the Named Executive Officers.
Option Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
% of Total Stock Price Appreciation
Options for Option Term
Granted to Market -------------------------------
Number of Employees Price on
Options in Fiscal Exercise Date of Expiration
Name Granted Year Price Grant Date 5% 10%
---- --------- ---------- -------- --------- ---------- ---- -----
Dennis L. Pelino (1) 1,900,000 52.73% $1.30 $1.09 July 2012 $903,000 $2,902,000
Stephen M. Cohen 100,000 2.78% $1.30 $1.09 July 2012 48,000 153,000
Bohn H. Crain (2) 150,000 4.16% $1.78 $1.78 January 2012 168,000 426,000
200,000 5.55% $1.30 $1.09 July 2012 95,000 305,000
Thomas L. Scully 25,000 0.69% $1.30 $1.13 September 2012 14,000 41,000
------------------
(1) Does not include the grant to Mr. Pelino on March 10, 2003 of options
to purchase 300,000 and 400,000 shares of the Company's Common Stock at
exercise prices of $1.68 and $2.00 per share, respectively.
(2) Does not include the grant to Mr. Crain on February 24, 2003 of options
to purchase 200,000 shares of the Company's Common Stock at an exercise
price of $1.53 per share, or the grant to Mr. Crain on March 25, 2003
of options to purchase 25,000 shares of the Company's common stock at
an exercise price of $1.81 per share.
The following table sets forth information concerning year-end option
values for fiscal 2002 for the Named Executive Officers. All options were based
on the closing price of our Common Stock on December 31, 2002 of $1.45.
32
Fiscal Year End Option Values
Number of Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year End Options at Fiscal Year End
Shares ----------------------------- ---------------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Dennis L. Pelino - - 1,800,000 1,900,000(1) $1,134,000 $285,000
Stephen M. Cohen - - 437,500 412,500 372,000 281,000
Bohn H. Crain - - - 350,000(1) 0 30,000
Thomas L. Scully - - 8,948 41,052 0 4,000
-----------------------
(1) Does not include options to purchase 300,000 and 400,000 shares of the
Company's Common Stock granted to Mr. Pelino on March 10, 2003 at
exercise prices of $1.68 and $2.00 per share, respectively, or options
to purchase 200,000 shares of the Company's Common Stock granted to Mr.
Crain on February 24, 2003 at an exercise price of $1.53 per share and
options to purchase 25,000 shares of the Company's Common Stock granted
to Mr. Crain on March 25, 2003 at an exercise price of $1.81 per share.
Outstanding Stock Options
The Amended and Restated Stonepath Group, Inc. 2000 Stock Incentive
Plan (the "Stock Incentive Plan") covers 10,000,000 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 Stock Incentive Plan. The Stock Incentive
Plan is administered by the Board of Directors or a committee designated by the
Board of Directors.
All stock options granted under the Stock Incentive 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 Stock Incentive
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 Stock Incentive Plan to a stockholder owning more than 10% of the issued and
outstanding Common Stock may not exceed five (5) 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 Stock
Incentive 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 17, 2003, options to purchase 8,145,600 shares of Common
Stock were outstanding under the Stock Incentive Plan. With the exception of
271,000 options granted at exercise prices above $2.00 per share, all of the
options granted under the Stock Incentive Plan are subject to exercise prices
between $.50 and $2.00 per share.
33
Generally, most of the options under the Stock Incentive Plan are
granted subject to periodic vesting over a period between three (3) and four (4)
years, contingent upon continued employment with the Company. In addition to the
stock options covered by the Stock Incentive Plan, the Company has outstanding
options to purchase 2,282,900 shares of Common Stock. The following schedule
identifies the vesting schedule associated with all of the Company's outstanding
options:
Plan Non-Plan Total
------------ ------------- -------------
Vested as of 12/31/02 2,942,381 2,256,650 5,199,031
To vest in 2003 2,077,235 26,250 2,103,485
To vest in 2004 1,472,010 -- 1,472,010
To vest in 2005 1,229,474 -- 1,229,474
To vest in 2006 424,500 -- 424,500
------------ ------------- --------------
8,145,600 2,282,900 10,428,500
============ ============= ==============
At March 17, 2003, these options were outstanding at the following
exercise prices:
Number of Options
-----------------------------------------------------------------
Range of
Plan Non-Plan Total Exercise Prices
----------------------- --------------- ------------------ -------------------------------
3,315,000 1,792,500 5,107,500 $0.50 - $1.00
4,559,600 83,200 4,642,800 $1.21 - $2.00
271,000 144,000 415,000 $2.05 - $4.00
-- 73,600 73,600 $6.38 - $10.00
-- 189,600 189,600 $12.50 - $17.50
----------------------- --------------- ------------------
8,145,600 2,282,900 10,428,500
Outstanding Warrants
As of March 17, 2003, warrants to purchase 2,792,093 shares of Common
Stock were outstanding. Most of these warrants were granted in connection with
investment related transactions. With the exception of warrants to purchase
8,157 shares at an exercise price of $6.00, warrants to purchase 150,000 shares
at $1.23 per share, and warrants to purchase 297,000 shares at $1.49 per share,
all of the remaining warrants are subject to an exercise price of $1.00 per
share and expire in July 2005.
34
Equity Compensation Plan Information At Fiscal Year End
The following table sets forth information, as of December 31, 2002,
with respect to the Company's Stock Incentive Plan under which Common Stock is
authorized for issuance, as well as other compensatory options granted outside
of the Company's Stock Incentive Plan.
(a) (b) (c)
Number of securities
Number of securites Weighted-average remaining available for
to be issued upon exercise price of future issuance under
exercise of outstanding equity compensation plan
outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (a))
------------- ------------------- ------------------- ------------------------
Equity compensation plans approved by
security holders 7,164,000 $1.09 2,426,417(1)
Equity compensation plans not approved
by security holders 2,283,300 $2.62 --
--------- ---------
Total 9,447,300 $1.46 2,426,417
========= ===== =========
-------------------
(1) Does not include exercised options to purchase 409,583 shares of our
Common Stock under the Company's Stock Incentive Plan.
35
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.
[GRAPHIC OMITTED]
11/24/98 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
STONEPATH GROUP, INC. 100.00 123.46 217.28 9.88 36.54 28.64
PEER GROUP INDEX 100.00 114.27 237.76 283.80 268.51 289.11
AMEX MARKET INDEX 100.00 103.29 128.78 127.20 121.34 116.49
NASDAQ MARKET INDEX 100.00 113.16 199.58 125.44 100.00 69.75
36
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, 2002. The Audit Committee is composed of three directors, each of
whom meets The American Stock Exchange's independence standards. The Audit
Committee had historically operated under a written charter adopted by the Board
of Directors in 2000. At a meeting held on March 25, 2003, the Board of
Directors adopted a new written charter for the Audit Committee which is
attached to this Proxy Statement as Exhibit C. 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:
o reviewed with the independent auditors their audit plan, audit
scope, and identified audit risks;
o 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;
o 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";
o discussed with the independent auditors any relationships that may
impact their objectivity and independence, and generally satisfied
itself that the auditors are independent;
o reviewed and discussed the Company's audited consolidated
financial statements for the year ended December 31, 2002 with
management and the independent auditors;
o 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
o discussed with management and the independent auditors the quality
and adequacy of the Company's internal controls.
37
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, 2002 be included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2002.
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 2003.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
David R. Jones, Chairman
Aloysius T. Lawn, IV
Frank Palma
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Participation of Chief Executive Officer in Recent Private Placement Transaction
At the request of one of the lead investors, Dennis L. Pelino, our
Chief Executive Officer, purchased 100,000 shares of our Common Stock at a price
of $1.54 per share in the recent private placement transaction that was
completed on March 6, 2003. Mr. Pelino's purchase price represented a 14.1%
premium over the purchase price of $1.35 paid by the non-affiliated investors in
the transaction.
Payments to Former Executive Officer
During 2002 and 2003, we made aggregate severance payments of $575,000
to Andrew Panzo, a former executive officer, in connection with a December 14,
2001 Separation Agreement in which Mr. Panzo resigned his position as an officer
of the Company. In connection with the Separation Agreement we also agreed to
cover Mr. Panzo and his family on our medical plan during 2002 and to accelerate
the vesting of the balance of his options to purchase 1,270,000 shares of our
Common Stock. As of December 14, 2001, Mr. Panzo had already vested in 1,102,500
of these options.
Private Exchange Transaction with the Former Holders of our Series C Preferred
Stock
During the quarter ended September 30, 2002, we completed a private
exchange transaction resulting in the restructuring of our outstanding shares of
Series C Preferred Stock. In the restructuring, effective as of July 19, 2002,
all of the Company's shares of Series C Preferred Stock, representing
38
approximately $44.6 million in liquidation preferences, were surrendered and
retired in exchange for a combination of securities consisting of (i) 1,911,071
shares of our Common Stock upon conversion of the Series C Preferred Stock; (ii)
contingent warrants to purchase 1,543,413 shares of Common Stock at an exercise
price of $1.00 through July 18, 2005 (including an amendment to the 158,348
Series C warrants that were originally granted in March 2002 for the purpose of
reducing the exercise price thereof from $26.58 to $1.00 per share and extending
the exercise period from March 2003 to July 18, 2005); and (iii) 360,745 shares
of a newly designated class of Series D Convertible Preferred Stock which in the
future are convertible into 3,607,450 shares of our Common Stock.
Each holder of our Series D Convertible Preferred Stock has the right
to convert at any time all or a portion of his Series D Convertible Preferred
Stock into ten (10) shares of Common Stock for each share of Series D
Convertible Preferred Stock converted, subject to certain anti-dilution
adjustments. Any shares of Series D Convertible Preferred Stock that are
outstanding after December 31, 2004 will automatically be converted into Common
Stock. Automatic conversion will also occur: (i) once the average closing price
of our Common Stock is over $7.50 for thirty (30) consecutive trading days; (ii)
upon a merger or sale transaction after December 31, 2003, unless the
transaction otherwise provides for the exchange of the outstanding shares of
Series D Convertible Preferred Stock for a like-kind preferred stock of the
acquiror/surviving corporation; or (iii) upon the affirmative vote of holders of
eighty percent (80%) of the Series D Convertible Preferred Stock.
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." On
October 18, 2001, we amended the terms of the options granted to Mr. Pelino
under his original employment agreement dated June 22, 2001. We further amended
the terms of Mr. Pelino's options on July 3, 2002, when we accelerated the
vesting of his original options to purchase 1,800,000 shares of our Common Stock
and granted him options to purchase an additional 1,900,000 shares of our Common
Stock.
Effective as of February 1, 2003, we entered into an amended employment
agreement with our Chief Financial Officer, Bohn H. Crain. This agreement
amended and restated our prior agreement with Mr. Crain dated January 10, 2002.
A description of the terms of our new agreement with Mr. Crain can be found in
this Proxy Statement under the heading "Employment Agreements."
Loan to Executive Officer
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 eight percent (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 loan if 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.
By Order of the Board of Directors,
Dennis L. Pelino
Chairman of the Board
Dated: April 14, 2003
39
Exhibit A
2003 EMPLOYEE STOCK PURCHASE PLAN
There is hereby established the 2003 Employee Stock Purchase Plan of Stonepath
Group, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company and
its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of
the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that
section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company, any
committee of the Board that may be appointed by the Board of Directors
or a third party authorized as administrator by the Board of
Directors, with such authority and power as the Board of Directors may
determine, to administer the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Stonepath Group, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean total gross earnings, including overtime,
bonuses, commissions, but excluding severance pay, reimbursements or
other expense allowances, fringe benefits (both cash and noncash),
moving expenses, welfare benefits, or deferred compensation paid to
you after you terminate employment.
(f) "Designated Subsidiary" shall mean any Subsidiary, unless otherwise
determined by the Board of Directors, eligible to participate in the
Plan; provided, however, that no Subsidiary shall be a "Designated
Subsidiary" if such designation would cause the Plan to cease to
qualify under Section 423 of the Code.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed either by statute
or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each Purchase
Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq
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 on the date of such determination, as
reported in The Wall Street Journal or such other source as the Board
deems reliable.
(k) "Offering Periods" shall mean the periods of approximately six (6)
months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after each
period and terminating on the last Trading Day in the periods ending
six months later. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan. The first Offering Period
will be for a period of five months.
(l) "Plan" shall mean this 2003 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period shall commence on the
Enrollment Date and end five months from that date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a share
of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be
adjusted by the Board pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq System are open for trading.
2
3. Eligibility.
(a) Any employee who is regularly scheduled to work more than ten hours
per week and employed by the Company on a given Enrollment Date shall
be eligible to participate in the Plan.
(b) Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or
hold outstanding options to purchase such stock possessing five
percent (5%) or more of the total combined voting power or value of
all classes of the capital stock of the Company or of any Subsidiary,
or (ii) to the extent that his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the
shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive, Offering
Periods, or on such other date as the Board shall determine, and continuing
thereafter until terminated in accordance with Section 20 hereof. The Board
shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's
Treasury Department prior to the applicable Enrollment Date and such
subscription agreement shall remain in effect for subsequent Offering
Periods unless sooner terminated by the participant as provided in
Section 10 hereof.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided
in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent
3
(15%) of the Compensation which he or she receives on each pay day
during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole
percentages and whole dollars only. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions during the Offering Period by completing and
filing with the Company a new subscription agreement authorizing a
change in payroll deduction rate. The Board may, in its discretion,
limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's
receipt of the new subscription agreement unless the Company elects
to process a given change in participation more quickly. A
participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section
10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent
(0%) at any time during an Offering Period. Payroll deductions shall
recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if
any, which arise upon the exercise of the option or the disposition
of the Common Stock. At any time, the Company shall have the right to
withhold from the participant's compensation the amount necessary for
the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Purchase Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date during such Purchase Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of
the Exercise Date by the applicable Purchase Price (subject to any
adjustment pursuant to Section 19); and provided that such purchase shall
4
be subject to the limitations set forth in Sections 3(b), 6(a) and 12
hereof. The Board may, for future Offering Periods, increase or decrease,
it its absolute discretion, the maximum number of shares of the Company's
Common Stock an Employee may purchase during each Purchase Period of such
Offering Period. Exercise of the option shall occur as provided in Section
8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in Section
10 hereof, his or her option for the purchase of shares shall be
exercised automatically on each Exercise Date of a Purchase Period,
and the maximum number of full shares subject to option shall be
purchased for such participant at the applicable Purchase Price with
the accumulated payroll deductions in his or her account. No
fractional shares shall be purchased, any payroll deductions
accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account
for the subsequent Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10 hereof. Any other monies
left over in a participant's account after a given Exercise Date
shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is
exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number of
shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Purchase
Period, or (ii) the number of shares available for sale under the
Plan on such Exercise Date, the Board may in its sole discretion (x)
provide that the Company shall make a pro rata allocation of the
shares of Common Stock available for purchase on such Enrollment Date
or Exercise Date, as applicable, in as uniform a manner as shall be
practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and continue all Offering Periods
then in effect, or (y) provide that the Company shall make a pro-rata
allocation of the shares available for purchase on such Enrollment
Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 hereof. The Company may
make pro rata allocation of the shares available on the Enrollment
Date of any applicable Purchase Period pursuant to the preceding
sentence, notwithstanding any authorization of additional shares for
issuance under the Plan by the Company's stockholders subsequent to
such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares
5
purchased upon exercise of his or her option or allocation of such number
of shares with a designated employee brokerage account.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account not yet used to exercise
his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the
participant's payroll deductions credited to his or her account shall
be paid to such participant promptly after receipt of notice of
withdrawal and such participant's option for the Offering Period
shall be automatically terminated, and no further payroll deductions
for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription
agreement.
(b) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering
Period from which the participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an Employee
for any reason, he or she shall be deemed to have elected to withdraw from
the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the
person or persons entitled thereto under Section 15 hereof, and such
participant's option shall be automatically terminated. The Plan does not,
directly or indirectly, create in any Employee or class of Employees any
right with respect to the continuation of employment by the Company or any
Subsidiary and it shall not be deemed to interfere in any way with the
Company's or any Subsidiary's right to terminate or otherwise modify, an
Employee's employment at any time.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the Company
as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under
the Plan shall be one million (1,000,000) shares or lesser amount
determined by Board. The Common Stock issued under the Plan may be
authorized but unissued shares, treasury shares or shares acquired in
the open market or otherwise.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
6
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board, a committee of
members of the Board appointed by the Board, or by a third party authorized
as administrator by the Board, as the case may be. The Board, its committee
or third party administrator shall have full and exclusive discretionary
authority to construe, interpret and apply the terms of the Plan, to
determine eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Board, its
committee, or third party administrator shall, to the full extent permitted
by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to
an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to
receive any cash from the participant's account under the Plan in the
event of such participant's death prior to exercise of the option. If
a participant is married and the designated beneficiary is not the
spouse, spousal consent, which must be provided to the Company in a
notarized document, shall be required for such designation to be
effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such personal
representative or administrator has been appointed (to the knowledge
of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company may
designate.
16. Non-Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to
receive shares under the Plan may be assigned, transferred or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election
to withdraw funds from an Offering Period in accordance with Section 10
hereof.
7
17. Use of Funds. All payroll deductions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant in
the Plan. Statements of account shall be given to participating Employees
at least quarterly or, at the Board's sole discretion, by the Exercise Date
for a particular Purchase Period, which statements shall set forth the
amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of
shares each participant may purchase each Offering Period (pursuant to
Section 7), as well as the price per share and the number of shares of
Common Stock covered by each option under the Plan that has not yet
been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to
an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise by
the Board. The New Exercise Date shall be before the date of the
Company's proposed dissolution or liquidation. The Board shall notify
each participant in writing, at least ten (10) business days prior to
the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn
from the Offering Period as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation (a "Corporate Transaction"),
8
each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date
(the "New Exercise Date") and any Offering Periods then in progress
shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed sale or merger. The Board
shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the
New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
For purposes of this Section 19, an option granted under the Plan
shall be deemed to be assumed, without limitation, if at the time of
issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled
to receive upon exercise of the option the same number and kind of
shares of stock or the same amount of property, cash or securities as
such holder would have been entitled to receive upon the occurrence of
the Corporate Transaction if the holder had been, immediately prior to
the Corporate Transaction, the holder of the number of shares of
Common Stock covered by the option at such time (after giving effect
to any adjustments in the number of shares covered by the option as
provided in this Section 19); provided, however, that if the
consideration received in the Corporate Transaction is not solely
common stock of the successor corporation or its parent (as defined in
Section 424(e) of the Code), the Board may, with the consent of the
successor corporation, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Corporate
Transaction.
20. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 19 hereof, no such termination can
affect options previously granted, provided that an Offering Period
may be terminated by the Board on any Exercise Date if the Board
determines that the termination of the Offering Period or the Plan is
in the best interests of the Company and its stockholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may
make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or
provision or any other applicable law, regulation or stock exchange or
system, as the case may be, rule), the Company shall obtain
stockholder approval in such a manner and to such a degree as
required.
9
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change
the Offering Period or Purchase Period, limit the frequency and/or
number of changes in the amount withheld during an Offering Period or
Purchase Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in
order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, establish reasonable waiting
and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for
each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines it its sole
discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of the
Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such
accounting consequence including, but not limited to:
(1) altering the Purchase Price for any Offering Period including an
Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends on a
new Exercise Date, including an Offering Period underway at the
time of the Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect
to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, state securities laws, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or system upon which
the shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
10
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the date that the Plan
is approved by the stockholders of the Company (the "Effective Date"). The
Plan shall continue in effect for a term of ten (10) years after the
Effective Date unless sooner terminated under Section 20 hereof.
11
Exhibit B
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.
"Stock" means the Common Stock, par value $.001 per share, of the
Company, subject to adjustments pursuant to Section 11.
2
"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.
Section 3. Delegation of Authority to Grant Awards. In accordance with
applicable laws, 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
3
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 13,000,000. 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, 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.
4
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.
(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
5
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)
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
6
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.
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
7
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:
(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
8
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.
(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.
9
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.
(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.
(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, provided pooling of interest treatment
is then still available 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.
10
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.
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 and March 25, 2003
11
Exhibit C
Stonepath Group, Inc.
Audit Committee Charter
I. Audit Committee Purpose
The Audit Committee is appointed annually by the Board of Directors of Stonepath
Group, Inc. (including its subsidiaries and affiliates, the "Company") to assist
the Board of Directors in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities are to:
o Evaluate and recommend appointment of the Company's independent auditor
to the Board of Directors.
o Monitor the integrity of the Company's financial statements and
reporting processes and systems of internal controls regarding finance,
accounting, and legal compliance.
o Monitor the independence and performance of the Company's independent
auditor and internal auditing department.
o Provide an avenue of communication among the independent auditor,
management, the internal auditing department, and the Board of
Directors.
o Monitor the compliance by the Company with legal and regulatory
requirements.
o Prepare the report required by the rules of the Securities and Exchange
Commission (the "SEC") to be included in the Company's annual proxy
statement.
II. Audit Committee Composition and Meetings
The Audit Committee shall be comprised of at least three directors, all
of whom shall be independent of management, and independent of the
Company. Audit Committee members shall meet the applicable independence
and experience requirements, in effect from time to time, of the SEC
and the NASDAQ Stock Market ("NASDAQ"), American Stock Exchange
("AMEX") or such other applicable stock exchange or association on
which the Company's common stock is then listed. Director's fees for
serving on the Company's Board of Directors and any board committee
thereof shall be the only form of compensation that an Audit Committee
member may receive from the Company.
All Audit Committee members shall be financially literate at the time
of appointment by the Board of Directors to the Audit Committee.
Financial literacy means being able to read and understand fundamental
financial statements, including the Company's balance sheet, income
statement, and cash flow statement.
The Audit Committee Chair shall have the financial sophistication and
expertise required by the regulations of NASDAQ, AMEX or such other
applicable stock exchange or association on which the Company's Common
Stock is then listed. If an Audit Committee Chair is not designated or
present, the members of the Audit Committee may designate a Chair by
majority vote of the Audit Committee membership.
Audit Committee members shall be appointed annually by the Board of
Directors and shall serve until their successors are appointed and
qualified. The Board of Directors shall have the power at any time to
change the membership of the Audit Committee and to fill the vacancies
in it, subject to such new member(s) satisfying the independence,
experience and financial expertise requirements referred to above.
Except as expressly provided in this Charter or the Company's by-laws,
or as otherwise provided by the rules of NASDAQ, AMEX or such other
applicable stock exchange or association on which the Company's Common
Stock is then listed, the Audit Committee shall fix its own rules of
procedure.
The Audit Committee shall meet on at least a quarterly basis, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. Audit
Committee members may attend meetings in person, by telephone
conference or similar communications equipment, or as otherwise
permitted by law. The Audit Committee shall meet periodically with
management, the internal auditor and the independent auditor in
separate executive sessions. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Audit Committee or to
meet with any members of, or consultants to, the Audit Committee.
III. Audit Committee Responsibilities and Duties
In performing its functions, the Audit Committee shall undertake those tasks and
responsibilities that, in its judgment, would most effectively contribute and
implement the purposes of the Audit Committee. The following functions are some
of the common recurring activities of the Audit Committee in carrying out its
oversight responsibilities:
Review Procedures and Disclosures
---------------------------------
1. Review and reassess the adequacy of this Charter at least annually and
recommend any proposed changes to the Board of Directors for approval.
Submit the Charter to the Board of Directors for approval and have the
document published in accordance with applicable rules promulgated by
the SEC, and the regulations of NASDAQ, AMEX, or such other applicable
stock exchange or association on which the Company's common stock is
then listed.
2. Meet at least annually with the independent auditor and without the
presence of management or members of the internal audit department.
3. Review and discuss with management and the independent auditor the
Company's annual audited financial statements prior to filing or
distribution, including disclosures made in management's discussion and
2
analysis, and recommend to the Board of Directors whether the audited
financial statements should be included in the Company's Form 10-K.
4. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the release of
earnings and the filing of its Form 10-Q, including the results of the
independent auditor's review of the quarterly financial statements.
5. Review and discuss with the independent auditor the Company's annual
and quarterly financial statements prior to filing, distribution or
incorporation by reference into any registration statements and/or
other periodic or current reports of the Company.
6. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company's selection or application of accounting
principles, any major issues as to adequacy of the Company's internal
controls and any special steps adopted in light of material control
deficiencies.
7. Discuss with management and the independent auditor any material
accounting adjustments that were noted or proposed by the independent
auditor and that were not adopted by the Company.
8. Prior to the release of the Company's Annual Report or as otherwise
required in connection with the Company's periodic reports filed with
the SEC, review and discuss with the Company's auditor:
(a) All critical accounting policies and practices to be used in
such reports;
(b) All alternative treatments of financial information within
GAAP that have been discussed with management, ramifications
of the use of such alternative disclosures and treatments, and
the treatment preferred by the independent auditor; and
(c) Other material written communications between the independent
auditor and management, such as any management letter or
schedule of unadjusted differences.
9. Discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as
well as financial information and earnings guidance provided to
analysts and rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be disclosed and
the types of presentations to be made).
10. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
3
11. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any significant changes to the
Company's accounting principles, any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities
or access to requested information, and any significant disagreements
with management.
12. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in
the Company's internal controls.
13. Consider the integrity of the Company's financial reporting processes
and controls in consultation with management, the independent auditor
and the internal auditors. The Audit Committee shall discuss any
significant financial risk exposures and the steps management has taken
to monitor, control, and report such exposures, including the Company's
risk assessment and risk management policies. The Audit Committee shall
review significant findings prepared by the independent auditor and the
internal auditing department together with management's responses.
Pre-Approval
------------
14. Pre-approve all auditing services, including attest and review
services, and permitted non-audit services (including the fees and
terms thereof) to be performed for the Company by its independent
auditor, subject to the de minimus exceptions for non-audit services
described in Section 10A(i)(1)(B) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which are approved by the Audit
Committee prior to the completion of the audit. The Audit Committee may
form and delegate authority to subcommittees consisting of one or more
members when appropriate, including the authority to grant
pre-approvals of audit, including attest and review services, and
permitted non-audit services, provided that decisions of such
subcommittee to grant pre-approvals shall be presented to the full
Audit Committee at its next scheduled meeting.
15. Review and pre-approve all related party transactions to be entered
into by the Company.
Independent Auditors
--------------------
16. Have sole authority to appoint or replace the independent auditor
(subject, if applicable, to stockholder ratification). The Audit
Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including resolutions
of disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work. The independent auditor shall report
directly to the Audit Committee.
17. Obtain and review with the independent auditor a formal written
statement delineating all relationships between the independent auditor
and the Company consistent with Independent Standards Board Standard 1.
4
The Audit Committee shall evaluate the qualifications, performance and
independence of the independent auditor, including considering whether
the auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the
auditor's independence, taking into account the opinions of management
and internal auditors. The Audit Committee shall present its
conclusions with respect to the independent auditor to the Board of
Directors.
18. Ensure the rotation of the independent audit partners as required by
law.
19. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
Compliance Oversight Responsibilities
-------------------------------------
20. Obtain from the independent auditor assurance that Section 10A(g) of
the Exchange Act has not been implicated.
21. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Business
Conduct and Ethics. The Audit Committee shall review reports and
disclosures of insider and affiliated party transactions and advise the
Board of Directors with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations
and with the Company's Code of Business Conduct and Ethics.
22. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
23. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports
which raise material issues regarding the Company's financial
statements or accounting policies.
24. Review the fees and other significant compensation to be paid to the
independent auditors.
25. To the extent the Audit Committee is notified by the independent
auditor of special or extraordinary audit issues, review the
independent auditor's audit plan and discuss scope, staffing, reliance
upon management, and internal audit and general audit approach.
26. Conduct any investigation appropriate to fulfilling its
responsibilities, and have direct access to the independent auditor as
well as anyone in the Company.
5
Retention of Advisors
---------------------
27. To the extent it deems necessary or appropriate, have the authority to
retain independent legal, accounting or other advisors.
28. Receive from the Company appropriate funding, as determined by the
Audit Committee, for payment of compensation to the independent auditor
for the purpose of rendering or issuing an audit report or related work
or performing other audit, review or attest services for the Company
and to any advisors employed by the Audit Committee.
Internal Audit Department and Legal Compliance (Items 29-32 applicable
to the extent the Company has an internal audit department)
----------------------------------------------------------------------
29. Review the budget, plan, changes in plan (including scope of internal
audit), activities, organizational structure, and qualifications of the
internal audit department, as needed or appropriate.
30. Review the appointment and performance of, and any decision to replace,
the senior internal audit executive, as needed or appropriate.
31. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports, as
needed or appropriate.
32. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's system for
monitoring compliance with applicable laws and regulations, including
response to any material inquiries received from regulators or
governmental agencies.
Other Audit Committee Responsibilities
--------------------------------------
33. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
34. Periodically report to the Board of Directors on significant results of
the foregoing activities.
IV. Scope of Duties
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan, direct or conduct
audits, or to determine whether the Company's financial statements are complete
and accurate and are in accordance with GAAP. This is the responsibility of
management and the independent auditor.
6
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 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 30, 2003, 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, John Springer
For, except vote withhold for the following nominee(s):
__________________________________________________________________________
2. Proposal 2
Approval of the Company's 2003 Employee Stock Purchase Plan. FOR AGAINST ABSTAIN
/ / / / / /
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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.
3. Proposal 3
Approval of Amendments to the Company's Amended & Restated 2000 Stock Incentive Plan. FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal 4
Ratification of the appointment of KPMG LLP to serve as the auditors for the Company FOR AGAINST ABSTAIN
for the fiscal year ending December 31, 2003. / / / / / /
Check appropriate box Indicate changes / /Address Change / /Name Change 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.
NOTE: Please sign name(s) exactly as printed hereon.
Joint owners must each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
SIGNATURE(S)________________________________________
____________________________________________________
Email:______________________________________________
Date:_____________________________, 2003
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CUT HERE
YOUR VOTE IS IMPORTANT
VOTE TODAY IN ONE OF TWO WAYS:
1. VOTE BY INTERNET:
Log-on to www.votestock.com
Enter your control number printed below
Vote your proxy by checking the appropriate boxes
Click on "Accept Vote"
OR
2. VOTE BY MAIL: If you do not wish to vote by Internet, please complete, sign, date and return the above proxy card in the
pre-paid envelope provided.
YOUR CONTROL NUMBER IS:
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You may vote by Internet 24 hours a day, 7 days a week.
Your Internet vote authorizes the named proxies to vote in the same manner as if you
marked, signed and returned your proxy card.
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