SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 2, 2002
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STONEPATH GROUP, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-26929 65-0867684
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Two Penn Center Plaza, Suite 605, Philadelphia, PA 19102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 215-564-9193
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
We have recently completed the restructuring of our outstanding shares of Series
C Preferred Stock.
On or about March 3, 2000, we completed a private placement transaction in which
we issued 4,166,667 shares of our Series C Preferred Stock and warrants to
purchase 416,667 additional shares of Common Stock for aggregate gross proceeds
of $50,000,000.
The terms of our Series C Preferred Stock initially required us to use the
proceeds from this offering solely for investments in early stage Internet
companies. In February 2001, we received consents from the holders of more than
two-thirds of our issued and outstanding shares of Series C Preferred Stock to
modify this restriction to permit us to use the proceeds to make any investments
in the ordinary course of our business, as from time-to-time determined by our
Board of Directors, or for any other business purpose approved by our Board of
Directors.
In exchange for these consents, we agreed to a private exchange transaction in
which we would issue to the holders of our Series C Preferred Stock as of July
18, 2002, additional warrants to purchase up to a maximum of 2,692,194 shares of
our Common Stock at an exercise price of $1.00 per share, and reduce from $26.58
to $1.00, the per share exercise price of 307,806 existing warrants owned by the
holders of our Series C Preferred Stock. As a condition to receiving the
additional warrants and having their existing warrants re-priced, the holders of
the Series C Preferred Stock agreed to convert their shares of preferred stock
into shares of our Common Stock.
At the request of the largest holder of Series C Preferred Stock (because of
legal limitations in its governing instruments which prevent it from holding our
Common Stock), we expanded the exchange transaction to include an additional
alternative. We provided holders of our Series C Preferred Stock as of July 18,
2002 with the alternative of exchanging the Common Stock issuable upon
conversion of the Series C Preferred Stock, the additional warrants and
re-priced warrants for shares of a newly designated Series D Convertible
Preferred Stock.
As a result of the exercise of these rights by the holders of our Series C
Preferred Stock, all of the Company's shares of Series C Preferred Stock,
representing approximately $44 million in principal amount, together with
warrants to purchase 149,457 shares of our Common Stock, have been surrendered
and retired in exchange for a combination of securities consisting of:
o 1,911,071 shares of Common Stock;
o 1,543,413 warrants to purchase common stock at an exercise price of
$1.00; and
o Shares of Series D Convertible Preferred Stock which are convertible
into 3,607,448 shares of Common Stock.
The following description summarizes certain general terms and conditions of the
shares of Series D Convertible Preferred Stock ("Series D Shares"), is not
complete, and is qualified in its entirety by reference to all of the provisions
of the Certificate of Designation for the Series D Shares and the form of
Exchange Agreement for the Series D Shares:
o Designation and Amount. We have authorized for issuance up to
700,000 Series D Shares, although as of the date hereof we have
issued 360,745 shares.
o Dividends. No dividends are payable or accrue with respect to
the Series D Shares.
o Liquidation Preference. In the event of any liquidation,
dissolution or winding-up of the Company prior to December 31,
2003 (which also includes certain mergers, consolidations and
asset sale transactions), holders of the Series D Shares are
entitled to a liquidation preference equal to $60 per share, paid
prior to and in preference to any payment made or set aside for
holders of Common Stock, but subordinate and subject in preference
to the prior payment in full of all amounts to which holders of
other classes of preferred stock may be entitled to receive as a
result of such liquidation, dissolution or winding-up. In the
event of any liquidation, dissolution or winding-up on or after
December 31, 2003, the holders of the Series D Shares are entitled
to participate in all distributions made to the holders of our
Common Stock on an as if converted basis.
o Conversion. Each holder of our Series D Shares has the right to
convert at any time all or a portion of his Series D Shares into
ten (10) shares of Common Stock for each Series D Share converted,
subject to certain antidilution adjustments. Any Series D Shares
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
Series D Shares for a like-kind preferred stock of the
acquiror/surviving corporation; or (iii) upon the affirmative vote
of holders of eighty (80%) percent of the Series D Shares.
o Voting. Except under limited circumstances (relating to a
merger or sale that would result in an automatic conversion), the
holders of the Series D Shares have no voting rights except as
required by applicable law. For any matter on which the holders of
the Series D Shares are entitled to vote, they will vote together
with the holders of our Common Stock as a single class on an as if
converted basis, unless otherwise required by law.
o Restrictions on Resale. Resale of the shares of Common Stock
issuable upon conversion of the Series D Shares are subject to the
following limitations. Resale of the shares is prohibited until
the earlier of: (i) July 19, 2003; or (ii) until such time that
the average closing price of the Common Stock for a period of ten
(10) consecutive trading days is $4.50 or greater. Thereafter,
from the date that the prohibition upon resale lapses through July
19, 2004, resale of the Common Stock would be subject to the
following "spill-out" limitations:
o On any day when the Common Stock trades fewer than 100,001
shares, the holder may sell up to twenty percent (20%) of
the daily volume as traded on AMEX or a subsequent market
(the "Daily Volume");
o On any day when the Common Stock trades between 100,001 and
150,000 shares, the holder may sell up to twenty five
percent (25%) of the Daily Volume;
o On any day when the Common Stock trades between 150,001 and
300,000 shares, the holder may sell up to thirty percent
(30%) of the Daily Volume;
o On any day when the Common Stock trades between 300,001 and
700,000 shares, the holder may sell up to thirty five
percent (35%) of the Daily Volume; and
o On any day when the Common Stock trades more than 700,000
shares, the holder may sell up to forty five percent (45%)
of the Daily Volume.
On any trading day when the Common Stock closes above $6.00 per
share, each of the above percentages are increased by ten percent
(10%) for that trading day. Once the average closing price of the
Common Stock is $7.50 per share or above for thirty (30)
consecutive trading days, there shall be no restriction on the
number of shares of the Common Stock that the holder may sell on
that trading day. The holder may sell any number of shares of the
Common Stock in a direct placement(s) with a single purchaser or
group of purchasers, such direct placement(s) to be made on an
off-market basis, provided such purchaser agrees to the
restrictions upon resale identified above.
All restrictions upon resale would lapse upon the occurrence of
certain mergers, consolidations and asset sale transactions and
upon the automatic conversion of the Series D Shares.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
4.25 Certificate of Designation of Series D Preferred Stock(1)
4.26 Form of Exchange Agreement by and between the Company and
certain holders of the Company's Series C Preferred Stock(1)
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(1) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed July 31, 2002 (Registration No. 333-91240).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STONEPATH GROUP, INC.
Date: August 2, 2002 By: /s/ Dennis L. Pelino
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Name: Dennis L. Pelino
Title: Chairman and Chief Executive
Officer