Exhibit 10.24
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO STONEPATH
GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM
BORROWING NOTE
FOR VALUE RECEIVED, each of
STONEPATH GROUP, INC., a Delaware corporation (the “
Parent ”), and the other companies listed on
Exhibit A attached hereto (such other companies
together with the Parent, each a “ Company ” and
collectively, the “ Companies ”), jointly and
severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House,
South Church Street, George Town, Grand Cayman, Cayman Islands,
Fax: 345-949-8080 (the “ Holder ”) or its
registered assigns or successors in interest, the sum of Ten
Million Dollars ($10,000,000), or, if different, the aggregate
principal amount of all Loans (as defined in the Security Agreement
referred to below) allocated hereto, together with any accrued and
unpaid interest hereon, on August 30, 2008 (the “
Maturity Date ”) if not sooner paid.
This Secured Convertible Minimum
Borrowing Note (this “ Note ”) is intended to be
a registered obligation within the meaning of Treasury Regulation
Section 1.871-14(c)(1)(i) and each Company (or its agent)
shall register this Note (and thereafter shall maintain such
registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to
this Note to the contrary, transfer of this Note (or the right to
any payments of principal or stated interest thereunder) may only
be effected by (i) surrender of this Note and either the
reissuance by the Company of this Note to the new holder or the
issuance by the Company of a new instrument to the new holder, or
(ii) transfer through a book entry system maintained by the
Company (or its agent), within the meaning of Treasury Regulation
Section 1.871-14(c)(1)(i)(B).
Capitalized terms used herein
without definition shall have the meanings ascribed to such terms
in the Security Agreement among the Companies and the Holder dated
as of the date hereof (as amended, modified and/or supplemented
from time to time, the “ Security Agreement
”).
The following terms shall apply to
this Note:
ARTICLE I
CONTRACT RATE
1.1
Contract
Rate . Subject to Sections
4.2 and 5.10, interest payable on the outstanding principal amount
of this Note (the “ Principal Amount ”) shall accrue at a
rate per annum equal to the “prime rate” published in
The Wall Street Journal from time to time (the
“ Prime Rate
”), plus
one percent (1%) (the “ Contract Rate ”). The Contract
Rate shall be increased or decreased as the case may be for each
increase or decrease in the Prime Rate in an amount equal to such
increase or decrease in the Prime Rate; each change to be effective
as of the day of the change in the Prime Rate. Subject to
Section 1.2, the Contract Rate shall not at any time be less
than an annual rate of five and one-half percent (5.50%).
Interest shall be (i) payable on September 1, 2005 and on
the first Business Day of each consecutive calendar month
thereafter through and including the Maturity Date and on the
Maturity Date, whether by acceleration or otherwise.
1.2
Contract Rate
Adjustments and Payments . The Contract Rate
shall be calculated on the last Business Day of each calendar month
hereafter (other than for increases or decreases in the Prime Rate
which shall be calculated and become effective in accordance with
the terms of Section 1.1) until the Maturity Date (each a
“ Determination
Date ”) and shall be
subject to adjustment as set forth herein. If (i) the
Parent shall have registered the shares of the Common Stock
underlying the conversion of this Note and each Warrant on a
registration statement declared effective by the Securities and
Exchange Commission (the “ SEC ”), and (ii) the
market price (the “ Market Price ”) of the Common Stock
as reported by Bloomberg, L.P. on the Principal Market for the five
(5) trading days immediately preceding a Determination Date
exceeds the then applicable Fixed Conversion Price by at least
twenty-five percent (25%), the Contract Rate for the succeeding
calendar month shall automatically be reduced by 200 basis points
(200 b.p.) (2%) for each incremental twenty-five percent (25%)
increase in the Market Price of the Common Stock above the then
applicable Fixed Conversion Price. Notwithstanding the
foregoing (and anything to the contrary contained herein), in no
event shall the Contract Rate at any time be less than zero percent
(0%).
ARTICLE II
LOANS; PAYMENTS UNDER THIS NOTE
2.1
Loans . All Loans evidenced
by this Note shall be made in accordance with the terms and
provisions of the Security Agreement.
2.2
No Effective
Registration . Notwithstanding
anything to the contrary herein, the Holder shall not be required
to accept shares of Common Stock as payment following a conversion
by the Holder if there fails to exist an effective current
Registration Statement (as defined in the Registration Rights
Agreement) covering the shares of Common Stock to be issued, or if
an Event of Default hereunder exists and is continuing, unless such
requirement is otherwise waived in writing by the Holder in whole
or in part at the Holder’s option.
2.3
Optional
Redemption in Cash . The Companies will
have the option of prepaying this Note (“ Optional Redemption ”) by paying to the
Holder a sum of money equal to one hundred twenty percent (120%) of
the principal amount of this Note together with accrued
2
but unpaid interest thereon and any and all
other sums due, accrued or payable to the Holder arising under this
Note, the Security Agreement, or any other Ancillary Agreement (the
“ Redemption Amount ”) outstanding on the
Redemption Payment Date (as defined below). The Company shall
deliver to the Holder a written notice of redemption (the “
Notice of Redemption ”) specifying the date for such
Optional Redemption (the “ Redemption Payment Date
”), which date shall be seven (7) days after the date of
the Notice of Redemption (the “ Redemption Period
”). A Notice of Redemption shall not be effective with
respect to any portion of this Note for which the Holder has
previously delivered a Notice of Conversion (defined below)
pursuant to Section 3.1, or for conversions elected to be made
by the Holder pursuant to Section 3.1 during the Redemption
Period. The Redemption Amount shall be determined as if such
Holder’s conversion elections had been completed immediately
prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount (plus any additional
interest and fees accruing on the Notes during the Redemption
Period) must be irrevocably paid in full in immediately available
funds to the Holder. In the event the Companies fail to pay
the Redemption Amount on the Redemption Payment Date, then such
Redemption Notice shall be null and void.
ARTICLE III
CONVERSION RIGHTS AND FIXED CONVERSION PRICE
3.1
Optional
Conversion . Subject to the terms of
this Article III, the Holder shall have the right, but not the
obligation, at any time until the Maturity Date, or during an Event
of Default (as defined in Article IV), and, subject to the
limitations set forth in Section 3.2 hereof, to convert all or
any portion of the outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable
shares of the Common Stock at the Fixed Conversion Price. For
purposes hereof, subject to Section 3.6 hereof, the initial
“ Fixed Conversion
Price ” means $1.08, which
has been determined on the date of this Note as an amount equal to
115% of the average closing price of the Common Stock for the ten
(10) trading days immediately prior to the date of this Note
but in no event greater than 120% of the closing price on the
Closing Date. The shares of Common Stock to be issued upon
such conversion are herein referred to as the “
Conversion Shares.
”
3.2
Conversion
Limitation . Notwithstanding
anything contained herein to the contrary, the Holder shall not be
entitled to convert pursuant to the terms of this Note an amount
that would be convertible into that number of Conversion Shares
which would exceed the difference between (i) 4.99% of the
outstanding shares of Common Stock and (ii) the number of
shares of Common Stock beneficially owned by the Holder. For
purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. The Conversion Shares limitation described in the
first sentence of this Section 3.2 shall automatically become
null and void following notice to any Company upon the occurrence
and during the continuance of an Event of Default, or upon 75 days
prior notice to the Parent, except that at no time shall the number
of shares of Common Stock beneficially owned by the Holder exceed
19.99% of the outstanding shares of Common Stock.
Notwithstanding anything contained herein to the contrary, the
number of shares of Common Stock issuable by the Parent and
acquirable by the Holder at a price below $0.91 per share pursuant
to the terms of this Note, the Security Agreement or any other
Ancillary Agreement, shall not exceed an aggregate of 8,738,173
shares of Common Stock
3
(subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations
affecting the Common Stock) (the “ Maximum Common Stock
Issuance ”), unless the issuance of Common Stock
hereunder in excess of the Maximum Common Stock Issuance shall
first be approved by the Parent’s shareholders. If at
any point in time and from time to time the number of shares of
Common Stock issued pursuant to the terms of this Note, the
Security Agreement or any other Ancillary Agreement, together with
the number of shares of Common Stock that would then be issuable by
the Parent to the Holder in the event of a conversion or exercise
pursuant to the terms of this Note, the Security Agreement or any
other Ancillary Agreement, would exceed the Maximum Common Stock
Issuance but for this Section 3.2, the Parent shall promptly
call a shareholders meeting to consider the shareholder
approval. The Holder shall not be entitled to vote its shares
for any proposal for the issuance of shares of Common Stock in
excess of the Maximum Common Stock Issuance. Notwithstanding
anything contained herein to the contrary, the provisions of this
Section 3.2 are irrevocable and may not be waived by the
Holder or any Company.
3.3
Mechanics of
Holder’s Conversion . In the event that
the Holder elects to convert this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed
and completed notice of conversion in substantially the form of
Exhibit B hereto (appropriately completed)
(“ Notice of
Conversion ”) to the Parent and
such Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees that are
being converted. On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the
Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and
shall provide written notice thereof to the Parent within two
(2) Business Days after the Conversion Date. Each date
on which a Notice of Conversion is delivered or telecopied to the
Parent in accordance with the provisions hereof shall be deemed a
Conversion Date (the “ Conversion Date ”). Pursuant to
the terms of the Notice of Conversion, the Parent will issue
instructions to the transfer agent accompanied by an opinion of
counsel within three (3) Business Days of the date of the
delivery to the Parent of the Notice of Conversion and shall cause
the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by (1) in the event the
Conversion Shares are not covered by a registration statement that
has been declared effective by the SEC or are not otherwise subject
to exemption from registration under the Securities Act, delivering
such original certificates directly to the Holder or (2) in
the event the Conversion Shares are covered by a registration
statement that has been declared effective by the SEC or are
otherwise subject
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