Document:

Exhibit 10.28

 

LAURUS MASTER FUND, LTD.

c/o Laurus Capital Management, LLC

825 Third Avenue

New York, New York 10022

 

August 31,
2005

 

Stonepath Group, Inc.

Stonepath Logistics Domestic Services, Inc.

Stonepath Logistics International Services, Inc.

Stonepath Offshore Holdings, Inc.

World Trade Center

220 Alaskan Way, Suite 200

Seattle, Washington 98121

 

M.G.R., Inc.

Distribution Services, Inc.

1150 Gateway Dr. W.

Shakopee, Minnesota 55379

 

Stonepath
Logistics Government Services, Inc.

45070 Old Ox Road

Sterling, Virginia 20166

 

United American
Acquisitions and Management, Inc.

30610 Ecorse Road

Romulus, Michigan 48174

 

Stonepath
Logistics International Services, Inc.

Global Container Line, Inc.

1930 6th Avenue S., Suite 401

Seattle, Washington 98134

 

Re:  Escrow Letter

 

Ladies and
Gentlemen:

 

Reference is made to (a) the
Security Agreement dated as of the date hereof (as amended, restated, modified
and supplemented from time to time, the “Security Agreement”) among Stonepath Group, Inc., Stonepath
Logistics Domestic Services, Inc., Stonepath
Logistics International Services, Inc., a Delaware corporation, Stonepath Offshore Holdings, Inc., M.G.R., Inc.,
Distribution Services, Inc., Stonepath Logistics
Government Services, Inc., United American Acquisitions and Management, Inc.,
Stonepath Logistics International Services, Inc.
and Global Container Line, Inc. (each, a “Company” and collectively, the “Companies”),
and Laurus Master Fund, Ltd. (“Laurus”)
and (b) the Ancillary Agreements (as defined in the Security Agreement)
(the Security Agreement and the Ancillary Agreements, collectively, the

 

 

“Release Documents”).  Capitalized terms used herein that are not
defined shall have the meanings given to them in the Security Agreement.

 

The Companies have
requested that Laurus close into escrow the
transactions contemplated by the Security Agreement and Laurus
is willing to do so on the terms and conditions set forth herein.

 

For good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree and acknowledge as follows:

 

1.                                       Until
such time as the Escrow Release Conditions (as defined in Section 2 below)
are satisfied, the Companies shall jointly and severally pay to Laurus interest on the Capital Availability Amount at the
Contract Rate set forth in the Notes. 
The aforementioned interest payments shall
accrue and be charged by Laurus to the Companies’
account on the date the Escrow Release Conditions are satisfied.  In the event the Escrow Release Conditions
are not satisfied by the Outside Date (as defined in Section 3 below), the
aggregate accrued and unpaid interest payments shall be jointly and severally
payable by the Companies to Laurus on demand.

 

2.                                       Executed
originals of the documents, instruments and agreements set forth on Exhibit A
hereto (the “Release Documents”) have been duly executed by the Companies (to
the extent the Companies are parties thereto) and have been delivered to Laurus in escrow based upon the express understanding that
such Release Documents will be held and retained by Laurus
in escrow until such time as each of the following conditions shall have been
satisfied in a manner and pursuant to such documentation satisfactory to Laurus (collectively, the “Escrow Release Conditions”):  (a) Laurus
shall have received a payoff letter from Patriarch
Partners Agency Services, LLC (“Patriarch”), pursuant to which Patriarch
agrees, among other things, that, upon receipt of the payment in good funds of
all obligations and liabilities owing by the Companies to Patriarch, Patriarch’s
Lien in the Companies’ assets shall be automatically released, (b) no
Event of Default shall have occurred and then be continuing, and (c) Laurus shall have otherwise determined in its sole and
absolute discretion to consummate the transactions contemplated by the Security
Agreement.

 

3.                                       In
the event the Release Documents are not released from escrow on or prior to
5:00 p.m. on September 12, 2005 (the “Outside Date”), (a) at Laurus’ option, the Release Documents shall be of no
further force and effect and shall be returned to the Companies and (b) the
Companies shall immediately jointly and severally pay to Laurus
a break-up fee in cash in the amount of $875,000 (the “Break-up Fee”).  If the transactions contemplated under the
Security Agreement are consummated with Laurus’
consent following the Outside Date, the amount of the Closing/Annual Payment
required to be paid by the Companies to Laurus in
accordance with Section 5(b)(i) of the
Security Agreement shall be offset by the amount of the Break-up Fee actually
received by Laurus.

 

This letter agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and construed in
accordance with the laws of the State of New York.

 

2

 

This letter agreement may
be executed by the parties hereto in one or more counterparts, each of which
shall be deemed an original and all of which when taken together shall
constitute one and the same agreement. 
Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.

 

If you are in agreement
with the foregoing, please sign this letter below.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  LAURUS
  MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  
	
  CONSENTED
  AND AGREED TO:

  
	
   

  
	
  STONEPATH
  GROUP, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  STONEPATH
  LOGISTICS DOMESTIC

  
	
  SERVICES,
  INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  STONEPATH
  LOGISTICS INTERNATIONAL

  
	
  SERVICES,
  INC., a Delaware corporation

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
									

 

[Additional Signature Page to Follow]

 

3

 

	
  STONEPATH
  OFFSHORE HOLDINGS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  M.G.R., INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  DISTRIBUTION
  SERVICES, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  STONEPATH
  LOGISTICS GOVERNMENT

  
	
  SERVICES,
  INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  UNITED
  AMERICAN ACQUISITIONS

  
	
  AND
  MANAGEMENT, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
								

 

[Additional Signature Page to Follow]

 

4

 

STONEPATH
LOGISTICS INTERNATIONAL

SERVICES, INC., a Washington corporation

 

 

	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  GLOBAL
  CONTAINER LINE, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
				

 

5Exhibit 10.28

 

Agreement No. <XXXXX>

 

KMG CHEMICALS, INC.

PERFORMANCE-BASED RESTRICTED STOCK UNIT
AGREEMENT

(SERIES 1)

 

THIS PERFORMANCE-BASED RESTRICTED STOCK UNIT
AGREEMENT (this “Agreement”)
is made and entered into by and between KMG Chemicals, Inc., a Texas
corporation (the “Company”) and <Employee Name>, an individual and Employee of the
Company (“Grantee”), on the 2nd
day of September, 2005 (the “Grant Date”),  subject to the terms and provisions of the KMG
Chemicals, Inc. 2004 Long-Term Incentive Plan, effective as of October 14,
2004 (the “Plan”).  The Plan is hereby incorporated herein in its
entirety by this reference.  Capitalized
terms not otherwise defined in this Agreement shall have the meaning given to
such terms in the Plan.

 

WHEREAS, Grantee is
an Employee of the Company, and in connection therewith, the Company desires to
grant to Grantee performance-based restricted stock units, subject to the terms
and conditions of this Agreement and the Plan, with a view to increasing
Grantee’s interest in the Company’s success and growth; and

 

WHEREAS, Grantee
desires to be the holder of such units subject to the terms and conditions of
this Agreement;

 

NOW, THEREFORE, in
consideration of the premises, mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:

 

1.                                      Grant
of Target Units.  Subject to the
terms and conditions of this Agreement and the Plan, the Company hereby grants
to Grantee <                              
(            )> Target Units (“Target Units”).   Subject to Section 3 hereof,
each Target Unit shall initially represent one share of the Company’s Common
Stock (“Share”), $.01 par
value.  Each Target Unit represents an
unsecured promise of the Company to deliver Shares to the Grantee pursuant to
the terms and conditions of the Plan and this Agreement.  As a holder of Target Units, the Grantee has
only the rights of a general unsecured creditor of the Company.

 

2.                                      Transfer
Restrictions.  Grantee shall not
sell, assign, transfer, exchange, pledge, encumber, gift, devise, hypothecate
or otherwise dispose of (collectively, “Transfer”)
any Target Units granted hereunder.  Any
purported Transfer of Target Units in breach of this Agreement shall be void
and ineffective, and shall not operate to Transfer any interest or title in the
purported transferee.

 

 

3.                                      Vesting
and Payment of Target Units.

 

(a)                                  For
purpose of this Agreement, the “Measurement
Period Beginning Date” shall be August 1, 2004.  Subject to Section 4 hereof, the
Target Units granted hereunder shall vest and become payable to Grantee three (3) years
after the Measurement Period Beginning Date (the “Measurement Period Ending Date”), provided that (i) Grantee
is still an Employee at that time and has continuously been an Employee since
the Grant Date (the “Service Requirement”),
and (ii) the performance goals for the Company during the measurement
period, as set out in the matrix below (the “Performance
Requirement”), have been satisfied as determined by the
Committee.  As determined by the Committee,
the percentage of Target Units that become vested shall be the percentage
designated on the applicable intersection on the matrix (below) based on
the actual performance of the Company for these criteria, subject to Section 4
hereof, through the Measurement Ending Date. 
If, for purpose of calculating satisfaction of the Performance
Requirement, quotations for Shares are not available on the Nasdaq SmallCap
Quotation Market (or on a comparable successor market) for any applicable date,
the quotation on the closest succeeding date shall be used.  

 

	
  Revenue

  	
   

  	
   

  	
   

  
	
  Growth Rate

  	
   

  	
  Percentage of Units Vested if Average Annual Return on Equity% is

  	
   

  
	
  (Average

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15.0% or

  	
   

  
	
  Annualized)

  	
   

  	
  0 - 7.49%

  	
   

  	
  7.5 - 9.99%

  	
   

  	
  10.0 - 12.49%

  	
   

  	
  12.5 - 14.99%

  	
   

  	
  more

  	
   

  
	
  0 - 4.99%

  	
   

  	
  0.0

  	
  %

  	
  10.0

  	
  %

  	
  20.0

  	
  %

  	
  30.0

  	
  %

  	
  40.0

  	
  %

  
	
  5.0 – 9.99%

  	
   

  	
  5.0

  	
  %

  	
  17.5

  	
  %

  	
  30.0

  	
  %

  	
  42.5

  	
  %

  	
  55.0

  	
  %

  
	
  10.0 – 14.99%

  	
   

  	
  10.0

  	
  %

  	
  25.0

  	
  %

  	
  40.0

  	
  %

  	
  55.0

  	
  %

  	
  70.0

  	
  %

  
	
  15.0% - 19.99%

  	
   

  	
  20.0

  	
  %

  	
  32.5

  	
  %

  	
  50.0

  	
  %

  	
  67.5

  	
  %

  	
  85.0

  	
  %

  
	
  20.0% or more

  	
   

  	
  30.0

  	
  %

  	
  40.0

  	
  %

  	
  60.0

  	
  %

  	
  80.0

  	
  %

  	
  100.0

  	
  %

  

 

(b)                                 Settlement of Target Units.  On or before the Settlement Date (hereinafter
defined), the Company shall award to Grantee the number of Shares which have
become vested as determined in accordance with Section 3(a), 3(d), 4(a) or
4(b), as adjusted in accordance with Section 3(c), if
applicable.  All Shares delivered to or
on behalf of Grantee in exchange for vested Target Units shall be subject to
any further transfer or other restrictions as may be required by securities law
or other applicable law as determined by the Company.  For purpose of this Agreement, the “Settlement Date” shall be two and one-half (21⁄2) months
after any Target Units become vested pursuant to either Section 3(a),
3(d), 4(a) or 4(b), but if audited financial statements of the Company
for the applicable measuring period are not available at such time, such date
shall be not later than the later of (i) two and one-half (21⁄2) months after
the end of the employee’s tax year in which the amount vests, or (ii) two
and one-half (21⁄2) months 

 

2

 

after the end of the Company’s fiscal year
in which the Target Units become vested.

 

(c)                                  Dividends, Splits and Voting Rights.  If the Company (i) declares a stock
dividend or makes a distribution on Common Stock in Shares, (ii) subdivides
or reclassifies outstanding Shares into a greater number of Shares, or (iii) combines
or reclassifies outstanding Shares into a smaller number of Shares, then the
number of Target Units granted under this Agreement shall be proportionately
increased or reduced, as applicable, so as to prevent the enlargement or
dilution of Grantee’s rights and duties hereunder.  The determination of the Committee regarding
such adjustments shall be binding.

 

(d)                                 Change in Control.  If there is a Change in Control of the
Company (as defined in the Plan), then the Service Requirement of this Section 3
shall automatically be deemed satisfied and all the Units shall become 100%
vested on the effective date of such Change in Control.

 

4.                                      Forfeiture.

 

(a)                                  Termination Due to Death or Total and Permanent
Disability.  If Grantee’s
employment with the Company is terminated due to death or Total and Permanent
Disability (as defined in the Plan) of the Grantee, then vesting of the Units
will occur as follows:  (1) the Service
Requirement shall be deemed satisfied for a number
of Units equal to the total unvested Units multiplied by a fraction, the
numerator of which is the number of Grantee’s Months of Service from the
Measurement Period Beginning Date to the date of such termination of
employment, and the denominator of which is thirty-six (36), and (2) the
Performance Requirement shall be deemed satisfied for a percentage of the Units determined in (1) above
that is determined in accordance with the performance goals set forth in the
matrix under Section 3(a), except that the average annualized
revenue growth rate and average annual return on equity percentage is
determined over the period coincident with Grantee’s Months of Service (as
determined in (1) above) only.   For
purposes of this Section 4(a), a “Month
of Service” means a calendar month and any fraction thereof during
which Grantee was an employee of the Company.

 

(b)                                 Termination Due to Retirement.  If Grantee’s employment with the Company is
terminated due to Retirement (as defined in the Plan) of the Grantee, then the
Service Requirement of Section 3(a) shall automatically be deemed
satisfied on the effective date of such Retirement.  In this case, the settlement of Units shall
be made in accordance with Section 3(b) in such amount and at
such times for which the Units would have been settled pursuant to Section 3(b) if
Grantee had remained employed until the Measurement Period Ending Date but only
to the extent that the performance goals set forth in the matrix under Section 3(a) are
satisfied at such date.  Notwithstanding
the preceding sentence, in the event of Grantee’s Retirement, but only if
Grantee is a “Key Employee” within the meaning given to such term under Section 409A
of the Internal Revenue Code, in no event shall any Shares be awarded to
Grantee before the date which is six (6) months after the date of such
Retirement.

 

(c)                                  Termination Other than Death, Total and Permanent
Disability or Retirement. 
If Grantee’s employment with the Company is voluntarily or involuntarily
terminated by the Company or Grantee for any reason other than due to death,
Total and 

 

3

 

Permanent Disability or Retirement, then Grantee shall immediately
forfeit all Target Units that are not already vested as of such date.  Upon the forfeiture of any Target Units
hereunder, the Grantee shall cease to have any rights in connection with such
Target Units as of the date of such forfeiture. 
A transfer of employment by the Grantee, without an interruption of
employment service, between or among the Company and any parent or subsidiary
of the Company as determined by the Committee, shall not be considered a
termination of employment for purposes of this Agreement.

 

5.                                      Grantee’s
Representations.  Notwithstanding any
provision hereof to the contrary, the Grantee hereby agrees and represents that
Grantee will not acquire any Shares, and that the Company will not be obligated
to issue any Shares to the Grantee hereunder, if the issuance of such Shares
constitutes a violation by the Grantee or the Company of any law or regulation
of any governmental authority.  Any
determination in this regard that is made by the Committee, in good faith,
shall be final and binding.  The rights
and obligations of the Company and the Grantee are subject to all applicable
laws and regulations.

 

6.                                      Tax
Withholding.  To the extent that the
receipt of Shares hereunder results in compensation income to Grantee for
federal, state or local income tax purposes, Grantee shall deliver to Company
at such time the sum that the Company requires to meet its tax withholding
obligations under applicable law or regulation, and, if Grantee fails to do so,
Company is authorized to (a) withhold from any cash or other remuneration
(including any Shares), then or thereafter payable to Grantee, any tax required
to be withheld; or (b) sell such number of Shares before their transfer to
Grantee as is appropriate to satisfy such tax withholding requirements, before
transferring the resulting net number of Shares to Grantee in satisfaction of
its obligations under this Agreement.

 

7.                                      Miscellaneous.

 

(a)                                  No Fractional Shares.  All provisions of this Agreement concern
whole Shares.  If the application of any
provision hereunder would yield a fractional Share, such fractional Share shall
be rounded down to the next whole Share if it is less than 0.5 and rounded up to
the next whole Share if it is 0.5 or more.

 

(b)                                 Not an Employment Agreement.  This Agreement is not an employment
agreement, and no provision of this Agreement shall be construed or interpreted
to create any employment relationship between Grantee and the Company for any
time period.  The employment of Grantee
with the Company shall be subject to termination to the same extent as if this
Agreement had not been executed.

 

(c)                                  Notices.  Any notice, instruction, authorization,
request or demand required hereunder shall be in writing, and shall be
delivered either by personal delivery, by telegram, telex, telecopy or similar
facsimile means, by certified or registered mail, return receipt requested, or
by courier or delivery service, addressed to the Company at its then current
main corporate address, and to Grantee at his address indicated on the Company’s
records, or at such other address and number as a party has previously
designated by written notice given to the other party in the manner hereinabove
set forth.  Notices shall be deemed given
when received, if sent by facsimile means (confirmation of such receipt by
confirmed facsimile transmission being 

 

4

 

deemed receipt of communications sent by facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand-delivered, sent by express courier or delivery
service, or sent by certified or registered mail, return receipt requested.

 

(d)                                 Amendment, Termination and Waiver.  This Agreement may be amended, modified,
terminated or superseded only by written instrument executed by or on behalf of
the Company and by Grantee.  Any waiver
of the terms or conditions hereof shall be made only by a written instrument
executed and delivered by the party waiving compliance.  Any waiver granted by the Company shall be
effective only if executed and delivered by a duly authorized executive officer
of the Company other than Grantee.  The
failure of any party at any time or times to require performance of any
provisions hereof shall in no manner affect the right to enforce the same.  No waiver by any party of any term or
condition herein, or the breach thereof, in one or more instances shall be
deemed to be, or construed as, a further or continuing waiver of any such
condition or breach or a waiver of any other condition or the breach of any
other term or condition.

 

(e)                                  Governing Law and Severability.  This Agreement shall be governed by the
internal laws, and not the laws of conflict, of the State of Texas.  The invalidity of any provision of this
Agreement shall not affect any other provision of this Agreement, which shall
remain in full force and effect.

 

(f)                                    Successors and Assigns.  This Agreement shall bind, be enforceable by,
and inure to the benefit of, the Company and its successors and assigns, and
Grantee and Grantee’s permitted assigns under the Plan.

 

[Signature page follows.]

 

5

 

IN WITNESS WHEREOF, this Performance-Based Restricted Stock Unit
Agreement is granted and executed as of the date first written above.

 

	
   

  	
  KMG CHEMICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   David L. Hatcher

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
     Chairman and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GRANTEE:

  
	
   

  	
   

  
	
   

  	
  <<Employee Name>

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name

  	
   

  
							

 

6

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