exv10w35



 







EXHIBIT 10.35









March 30, 2006




VIA FEDEX AND E-MAIL




Mr. Edgar B. Kelly

Shareholders’ Agent

82550 Delano Drive

Indio, CA 92201





			
	Re:	 	Earn-Out Payment Calculation for 2005 Earn-Out Period




Dear Mr. Kelly:




     This correspondence to you is intended to constitute the annual earn-out
certificate referenced in our agreement.



     The earn-out calculation set forth in the attached schedule shows the
details of the adjusted earnings compared to the earnings target.



     With regard to the timing of payment, Stonepath Group, Inc. (“Stonepath
Group”) is currently arranging for financing to assist with payments of its
current earn-out obligations to former owners of all subsidiaries. As a result,
subject to the conditions contained herein, we have reached agreement with you
to amend the Stock Purchase Agreement by and among Stonepath Group, Inc.,
Stonepath Logistics International Services, Inc., Global Transportation
Services, Inc., the Shareholders of Global Transportation Services, Inc. and
Jason F. Totah, dated as of March 5, 2002 (the “Agreement”), with respect to the
following provisions:




	1)	 	THE THIRD SENTENCE OF SECTION 1.2(B)(II) OF THE AGREEMENT IS AMENDED AS
FOLLOWS:




“The Base Earn-Out Payments shall be made on April 1st of each of the years 2003
through 2008, or such earlier date in any such year as Stonepath is required to
file its Form 10-K with the SEC pursuant to the rules and regulations under the
Exchange Act (the “Earn-Out Payment Dates”), following each calendar year (or
shorter period) in which Net Income Before Taxes is determined, except that (A)
the payment to be made in the year 2006 shall be made on June 30, 2006 and shall
be considered the Earn-Out Payment Date for such year, and (B) the payment to be
made in the year 2008 for the period between January 1, 2007 and the fifth
anniversary of the Closing shall be made on April 30, 2007.”





	2)	 	SECTION 1.2(B)(IV) OF THE AGREEMENT IS AMENDED AND RESTATED IN ITS ENTIRETY
AS FOLLOWS:





     “(iv) Additional payments (each an “Additional Earn-Out Payment”) shall be
paid to the Shareholders in an amount equal to forty percent (40%) of the amount
by which the Company’s cumulative Net Income Before Taxes (calculated in
accordance with this Section 1.2) over the course of the Earn-Out Period (taking
into account losses as well as income during any calendar year or portion
thereof) exceeds Ten Million Dollars ($10,000,000) (the “Additional Earn-Out
Threshold”). The Annual Earn-Out Certificate for the years 2006 and 2007 shall
include the amount of the Company’s cumulative Net Income Before Taxes. If the
Additional Earn-Out Threshold has been reached as of the end of December 31,
2005, the Purchaser shall make an advance payment on the Earn-Out Payment Date
in 2006 in an amount equal to fifty percent (50%) of the amount of the
Additional Earn-Out Payment



	 	 	 	 	 
	 
	 	Stonepath Group, Inc.	 	 
	 
	 	World Trade Center	 	 
	 
	 	2200 Alaskan Way, Suite 200	 	 
	 
	 	Seattle, WA 98121	 	 
	T: (206) 336-5400
	 	 	 	F: (206) 336-5401






 









 









calculated as at December 31, 2005. The remaining balance of the Additional
Earn-Out Payment otherwise owed on the Earn-Out Payment Date in 2006 shall be
due and payable on the Earn-Out Payment Date in 2007. In no event shall the
Additional Earn-Out Payment (including any advance payment described in this
Section 1.2(b)(iv)) exceed Two Million Dollars ($2,000,000).”




     With the delivery of the attached certificate, the parties agree that the
Additional Earn-Out Threshold, referenced below, has been reached with respect
to and as of the end of December 31, 2005, and thus fifty percent (50%) of the
amount of the Additional Earn-Out Payment shall be due on the Earn-Out Payment
Date in 2006 and the remaining fifty percent (50%) of the amount of the
Additional Earn-Out Payment shall be due on the Earn-Out Payment in 2007.



     In addition, as further consideration for the subject matter contained
herein, (A) concurrent with the disbursement of the $1,000,000 Base Earn-Out
Payment due on July 1, 2006, the Company shall include an interest payment on
such amount at an annual rate of eight percent (8%), calculated from April 1,
2006 through June 29, 2006, and (B) the parties agree that the subject matter of
such amendments shall in no way constitute an Event of Default with respect to
Section 1.4 of the Agreement. Notwithstanding anything to the contrary above,
however, in the event that the Purchaser fails to make the required payments on
the Earn Out Payment Date in 2006, the Purchaser shall have a three (3) month
period through September 30, 2006 in which to cure under Section 1.4 of the
Agreement.



     All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.



     The obligations of Stonepath Group and Stonepath Logistics International
Services, Inc. (“SLIS”) set forth in this letter agreement, and the amendments to
the Agreement set forth herein, are subject to the approval of the Board of
Directors of Stonepath Group and SLIS.



     Please confirm your agreement to our understanding by executing this letter
in the space provided below.



	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	STONEPATH GROUP, INC.
	 
	 	 
	 

	 	/s/ ROBERT AROVAS
	 

	 	 
	 

	 	Robert Arovas
	Agreed and accepted:

	 	President and Chief Financial Officer






	 	 	 	 	 
	By:

	 	/s/ EDDIE KELLY
 

	 	 
	 

	 	Eddie Kelly	 	 
	 

	 	Shareholders’ Agent	 	 
	cc:

	 	Jason F. Totah	 	 






	 	 	 	 	 
	 
	 	Stonepath Group, Inc.	 	 
	 
	 	World Trade Center	 	 
	 
	 	2200 Alaskan Way, Suite 200	 	 
	 
	 	Seattle, WA 98121	 	 
	T: (206) 336-5400
	 	 	 	F: (206) 336-5401






 









 










STONEPATH GROUP, INC.

2005 Performance to be Paid April 2006




	 	 	 	 	 
	 	 	Net Profit Earn-Outs	 
	 	 	Global	 
	2005 Net Earnings
	 	$	3,276,758	 
	Income tax Expense
	 	 	—	 
	 
	 	 	 
	2005 Pre-Tax Earnings
	 	$	3,276,758	 
	Adjustments
	 	 	 	 
	Corporate Management Fees
	 	$	420,000	 
	Corporate Technology Fee
	 	 	105,000	 
	Underallocated Intl Corp Overhead
	 	 	293,886	 
	Amortization
	 	 	68,012	 
	New Location Loss (Carryforward)
	 	 	(157,758	)
	Sharing of Gajadhar Salary
	 	 	(17,007	)
	Quantum at Other Terminals
	 	 	(124,264	)
	Jason Salary/Benefits in Corporate
	 	 	(346,800	)
	 
	 	 	 
	 
	 	 	 	 
	Adjusted 2005 Earnings
	 	$	3,517,828	 
	 
	 	 	 	 
	Earnings Target
	 	$	2,000,000	 
	 
	 	 	 
	 
	 	 	 	 
	2005 Earnings Excess/(Shortfall)
	 	$	1,517,828	 
	Prior Year Excess Carryforward
	 	$	8,007,363	 
	 
	 	 	 
	2005 Earnings Excess/(Shortfall) Carry to 2006
	 	$	9,525,190	 
	 
	 	 	 	 
	2005 Earn-Out Opportunity
	 	$	1,000,000	 
	2005 Earn-Out Reduction
	 	 	—	 
	 
	 	 	 
	2005 Earn-Out Payments
	 	$	1,000,000	 
	 
	 	 	 	 
	Minimum Target
	 	$	—	 
	% Impact of Shortfall to Earn-Out
	 	 	100	%
	 
	 	 	 	 
	2002 Excess/(Shortfall)
	 	$	2,502,967	 
	2003 Excess/(Shortfall)
	 	$	3,292,659	 
	2004 Excess/(Shortfall)
	 	$	2,211,737	 
	2005 Excess/(Shortfall)
	 	$	1,517,828	 
	 
	 	 	 
	 
	 	 	 	 
	Cumulative Excess/(Shortfall)
	 	$	9,525,190	 






	 	 	 	 	 
	 

	 	Stonepath Group, Inc.	 	 
	 
	 	World Trade Center	 	 
	 
	 	2200 Alaskan Way, Suite 200	 	 
	 
	 	Seattle, WA 98121	 	 
	T: (206) 336-5400
	 	 	 	F: (206) 336-5401