<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended Commission File Number
November 30, 1996 0-22972
CELLSTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2479727
(State of Incorporation) (I.R.S. Employer
Identification No.)
1730 Briercroft Court
Carrollton, Texas 75006
Telephone (972) 466-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
On January 31, 1997, the aggregate market value of the voting stock held by
nonaffiliates of the Company was approximately $277,603,415, based on the
closing sales price of $23.125 as reported by the NASDAQ/NMS. (For purposes of
determination of the above stated amount, only directors, executive officers and
10% or greater stockholders have been deemed affiliates).
On January 31, 1997, there were 19,274,812 outstanding shares of Common Stock,
$0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Proxy Statement for the Annual Meeting of Stockholders of the
Company to be held during 1997 are incorporated by reference into Part III of
the Form 10-K.
<PAGE>
CELLSTAR CORPORATION
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
Page
Number
Part I.
- -------
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 17
Part II.
- --------
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 18
Item 6. Selected Consolidated Financial Data 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 20
Item 8. Consolidated Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 30
Part III.
- ---------
Item 10. Directors and Executive Officers of the Registrant 31
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners and
Management 31
Item 13. Certain Relationships and Related Transactions 31
Part IV.
- --------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 32
</TABLE>
2
<PAGE>
Part I.
Item 1. Business
General
CellStar Overview
CellStar Corporation ("CellStar" or the "Company") is an integrated
wholesaler and retailer of cellular phones and other wireless communications
products, with operations in the United States, the Asia-Pacific region, Latin
America and the United Kingdom. The Company is one of the world's largest non-
carrier wholesale distributors of cellular phones for Motorola Inc.
("Motorola"), Nokia Mobile Phones, Inc. ("Nokia") and Ericsson Inc.
("Ericsson"). The Company is also one of the largest non-carrier wholesale
distributors of cellular phones for NEC Corporation ("NEC") in the United
States. The Company is also a retailer of wireless communications products and
services, with 36 retail locations in the United States, 6 retail locations in
the Asia-Pacific region and 20 locations in Latin America as of November 30,
1996.
The Company was formed as a Delaware corporation in 1981 to distribute and
install automotive aftermarket products. In 1984, the Company began offering
cellular phone products and services, and in 1989, the Company became an
authorized distributor of Motorola cellular phones in certain regions of the
United States. The Company entered into a similar arrangement with Motorola in
Latin America in 1991 and in the Asia-Pacific region in 1994. In addition to its
operations in the United States, as of November 30, 1996, the Company conducted
operations in Hong Kong, China, Singapore, Malaysia, Taiwan and the Philippines
(collectively, the "Asia-Pacific Region"), Mexico, Colombia, Venezuela, Ecuador,
Chile, Argentina, and Brazil (collectively, the "Latin American Region") and the
United Kingdom.
Industry Overview
Wireless communications technology provides a communications link between
the public switched phone network and wireless communications devices, such as
cellular handheld, mobile and transportable phones, pagers and two-way radios.
Since its inception in 1983, the market for commercial cellular phone service
has experienced rapid growth worldwide. According to industry estimates, as of
December 31, 1995, there were approximately 85 million cellular phone
subscribers worldwide, of which approximately 32 million subscribers were in the
United States, approximately 7 million subscribers were in the Asia Pacific
Region, approximately 3 million subscribers were in the Latin American Region
and approximately 5 million subscribers were in the United Kingdom.
As the communications industry evolves, new wireless communications
technologies, such as personal communications services ("PCS"), enhanced
specialized mobile radio ("ESMR") systems, and satellite-based systems, continue
to emerge as alternatives to cellular systems. The Company anticipates that the
continued growth of communications technologies and services such as PCS, ESMR
and satellite-based systems will impact the composition of the wireless
communications market. Although these new technologies are expected to compete
with cellular technology, the Company believes that the wireless communications
equipment industry as a whole will benefit from the emergence of such
technologies, as well as from the rapid growth of the worldwide cellular market
in general and the expected continuance of upgrades from analog to digital
cellular technology.
3
<PAGE>
United States
Industry
In the United States, cellular phone service was developed as an
alternative to conventional landline systems and existing mobile phone service
and has been one of the fastest growing market segments in the communications
industry. The number of U.S. cellular subscribers has grown significantly since
the inception of the cellular phone industry in 1983. According to industry
estimates, as of December 31, 1995, there were approximately 32 million
subscribers in the United States. In 1996, according to industry estimates, the
number of cellular subscribers in the United States grew over 10 million.
The chart below sets forth certain estimated information regarding U.S.
cellular phone shipments and subscriber growth.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Number of Cellular Phones Shipped 16,619 14,381 12,774 8,565 6,049
Number of Subscribers 42,300 32,187 23,630 16,255 11,428
</TABLE>
Source: Dataquest, Cellular Telephony Market Worldwide Overview - Market
Trends 1996 (December 1996 Estimates)
The Company believes that the U.S. market for wireless services will
continue to expand due to the increasing affordability and availability of such
services and shorter development cycles for new products and enhancements. In
addition, many cellular service providers are upgrading their existing cellular
systems from analog to digital technology as a result of capacity constraints in
many of the larger cellular markets and in order to respond to competition.
Digital technology increases system capacity and is expected to offer other
advantages, such as improved overall average signal quality, improved call
security, potentially lower incremental costs for additional subscribers and the
ability to provide data transmission services. If digital technology improves
and becomes more affordable, the Company may benefit both from the sale of
digital cellular phones as replacements for existing analog cellular phones and
from the increased system capacity digital technology offers.
Wholesale Operations
General. Approximately 87% of the Company's U.S. revenues during fiscal
1996 were derived from wholesale operations. In the United States, manufacturers
such as Motorola, Nokia, Ericsson and NEC sell cellular phones directly to large
cellular carriers, such as AT&T Wireless Services, Inc., and large mass
merchandisers, such as Sears, Roebuck and Co. The Company's wholesale operations
complement these manufacturers' distribution channels, in that these
manufacturers generally also sell to wholesale distributors such as the Company
in order to access smaller volume purchasers. The Company also acts as a
wholesale distributor of cellular accessories manufactured by original equipment
manufacturers ("OEMs") and other suppliers to cellular carriers and mass
merchandisers, as well as to smaller volume purchasers.
4
<PAGE>
During fiscal 1996, the Company sold its products to over 3,000 U.S.
wholesale customers, the ten largest of which accounted for approximately 24% of
the Company's consolidated net product sales in fiscal 1996. The Company offers
cellular phones and accessories manufactured by OEMs, such as Motorola, Nokia,
NEC and Ericsson, and aftermarket accessories manufactured by a variety of
suppliers. Accessories include, among others, antennas, batteries, battery
packs, battery eliminators and battery chargers. The Company sells these
products under private labels to cellular carriers such as Southwestern Bell
Mobile Systems, Inc., GTE Mobilnet, AirTouch Cellular, Cellular One and U.S.
Cellular.
The Company continues to broaden its product mix to include products that
are compatible with new systems, such as GSM (Global System for Mobile
Communications) and other digital systems. The Company anticipates that its
product offerings will continue to expand with the evolution of new technologies
as they become commercially viable.
During fiscal 1996, the Company began to take advantage of the growing
demand for value-added facilitation and fulfillment services, including
aftermarket and OEM product packaging and configuration, inventory management,
order processing, return and repair management, marketing and design, credit and
collections, and phone sales. The Company has provided some or all of these
services to small carriers and, in October 1996, the Company entered into an
agreement with Pacific Bell Mobile Services, pursuant to which the Company
provides certain of these facilitation services.
The Company's primary distribution facility, a 120,000 square foot
warehouse facility, is located at its international headquarters in the
Dallas/Fort Worth metropolitan area. The Company also operates a wholesale
distribution facility in Miami, Florida to serve customers in the Latin American
Region. During fiscal 1996, the Company altered its business strategy to sell to
customers exporting into Colombia, Venezuela, Ecuador, Chile, Argentina and
Brazil ("South America") directly from the Miami location rather than from its
operations in South America. The Company also offers facilitation services for
its operations in the Latin American Region out of the Miami location. The
Company also operates smaller distribution facilities from its Hayward,
California location.
Sales and Marketing. The Company markets its products nationally to
wholesale purchasers through its direct sales force and trade journal
advertising. The Company offers advertising allowances, ready-to-use advertising
materials and displays, easy access to hard-to-find products, credit terms, a
variety of name brand products and highly responsive customer service.
Retail Operations
General. Approximately 13% of the Company's U.S. revenues in fiscal 1996
were derived from retail operations. On November 26, 1996, as part of its move
to focus on its core wholesale business, the Company sold 334 of its 355
Communication Centers to MCI Telecommunications Corporation ("MCI"). Prior to
such sale, the Company was a large activation agent of cellular phones in the
United States, activating cellular service for large cellular carriers
throughout the United States. During fiscal 1996, the Company had an average of
approximately 350 Communication Centers in operation. As of November 30, 1996,
the Company conducted its U.S. retail operations through 15 stand-alone retail
stores in four states and its 21 remaining Communication Centers.
The Company's retail stores generate revenues from three sources: the sale
of cellular phones and other products, activation commissions and, in many
cases, residual payments. An
5
<PAGE>
activation commission is paid by a cellular carrier when a customer initially
subscribes for cellular service. The amount of the activation commission paid by
a cellular carrier is based on the service plans and promotional marketing
programs offered by that particular cellular carrier. Many of the Company's
carrier contracts provide for a residual payment, which is a monthly payment
made by a cellular carrier to the Company based on the cellular phone usage by a
customer activated by the Company. Because standard cellular industry practice
among activation agents is to offer certain cellular phones to a cellular
subscriber at no charge, as a practical matter, the Company does not believe it
can operate at the retail level on a profitable basis without agency agreements
with cellular carriers that provide for activation commissions or residual fees.
The Company's relationships with its carriers are governed by contracts,
pursuant to which the Company is engaged as an agent to solicit and sell
cellular phone services in certain geographic areas and may not act as a
representative or agent for any other carrier or reseller in those areas.
In the Dallas/Fort Worth, Texas, Kansas City, Missouri, and Kansas City and
Wichita, Kansas markets, the Company conducts its retail operations under the
name National Auto Cellular, and in the Houston and Austin, Texas markets, the
Company conducts business under the name PC Cellular. The Company recently
closed its retail locations in San Diego, California and Syracuse, New York.
Sales and Marketing. The Company promotes its stand-alone retail stores
through direct mailings and local media, including billboards, newspapers and
radio. Most of the Company's advertising expenditures are spent on print and
radio advertising in order to take advantage of cooperative advertising
allowances generally provided by manufacturers and cellular phone carriers. To
penetrate local markets, the Company has made use of subagent relationships.
Subagents solicit customers and activate cellular service on behalf of the
Company and receive a majority of the activation commissions, while the Company
receives the residual commissions.
Asia-Pacific Region
Industry
According to industry estimates, in 1995, the number of cellular
subscribers in the Asia-Pacific Region grew over 3 million. In 1996, according
to industry estimates, the number of cellular subscribers in the Asia-Pacific
Region grew over 5 million. Whereas demand for wireless service in major
industrialized countries has been driven primarily by automobile and business
travel, the Company believes that in the Asia-Pacific Region, demand for such
services has been and will continue to be driven by an unsatisfied demand for
basic phone service due to the lack of adequate landline service and limited
wireless penetration. The Company believes that wireless systems in this region
offer a more attractive alternative to landline systems because wireless systems
do not require the substantial amount of time and investment in infrastructure
(in the form of buried or overhead cables) associated with landline systems.
Based on these factors, as well as the large population bases and economic
growth in this region, the Company believes that phone users will increasingly
utilize wireless systems, despite the fact that wireless service may be more
expensive to the consumer than conventional landline communications.
6
<PAGE>
The chart below sets forth certain estimated information regarding cellular
phone shipments and subscriber growth in the Asia-Pacific Region.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Number of Cellular Phones Shipped 5,883 3,606 1,685 954 545
Number of Subscribers 11,865 6,753 3,576 2,054 1,195
</TABLE>
Source: Dataquest, Cellular Telephony Market Worldwide Overview - Market
Trends 1996 (December 1996 Estimates)
Operations
General. The key to the Company's expansion in the Asia-Pacific Region has
been its relationships with wireless equipment manufacturers. The Company
typically enters a new market with the support of a manufacturer. The Company
distributes products in the Asia-Pacific Region primarily for Motorola and
Ericsson. Throughout the Asia-Pacific Region, CellStar acts as a wholesale
distributor of wireless phones to large and small volume purchasers, including
indirect sales to the large cellular carriers.
Although the Company's business in the Asia-Pacific Region is predominantly
wholesale, operations within a particular country may be either wholesale,
retail, or both, and may be owned solely by the Company or jointly with local
partners, depending on the market and regulatory environment in the host
country.
The following table outlines the Company's entry into the Asia-Pacific
Region:
<TABLE>
<CAPTION>
Type of Operation
Country Year Entered (as of November 30, 1996)
- ------- ------------ -------------------------
<S> <C> <C>
Hong Kong/China 1993 Wholesale
Singapore 1995 Wholesale and Retail
The Philippines 1995 Wholesale
Malaysia 1995 Wholesale and Retail
Taiwan 1995 Wholesale
</TABLE>
All of the Company's operations in this region are wholly or majority-owned
except for the Company's operations in Malaysia. CellStar (Asia) Corporation,
Ltd. ("CellStar Asia"), the oldest of the Company's business units in the region
and the Company's most significant operation outside the United States, began as
a joint venture in 1993 and became wholly-owned in June 1995. CellStar Asia's
revenue is derived principally from wholesale sales of wireless products to Hong
Kong-based companies that ship wireless products to China.
At November 30, 1996, the Company sold its products to approximately 56
wholesale customers in the Asia-Pacific Region, the ten largest of which
accounted for approximately 21% of the Company's consolidated net product sales
in fiscal 1996. The Company offers wireless phones and accessories manufactured
by OEMs, such as Motorola and Ericsson, and
7
<PAGE>
aftermarket accessories manufactured by a variety of suppliers. Accessories
include, among others, hands-free kits, earphones and plug-in chargers.
The Company continues to broaden its product mix in the Asia-Pacific Region
to include products that are compatible with new systems, such as ETAC (Enhanced
Total Access Communications), GSM and other digital systems. The Company
anticipates that its product offerings will continue to expand with the
evolution of new technologies as they become commercially viable.
The Company's operations and sales in the Asia-Pacific Region are subject
to political and economic risks, including political instability, currency
controls, currency devaluations, exchange rate fluctuations, increased credit
risks, inflation, foreign tax laws, changes in import/export regulations and
tariff and freight rates. Political and other factors beyond the control of the
Company, including trade disputes among nations, currency fluctuations or
internal instability in any nation where the Company conducts business, could
have a materially adverse effect on the Company.
Sales and Marketing. The Company markets its products to wholesale
purchasers through direct sales and advertising. To penetrate local markets in
the Philippines, the Company has made use of subagent relationships.
Latin American Region
Industry
According to industry estimates, in 1995, the number of cellular
subscribers in the Latin American Region grew over 1 million. In 1996, according
to industry estimates, the number of cellular subscribers in the Latin American
Region grew by close to 2 million. The Company believes that in the Latin
American Region, demand for such services has been and will continue to be
driven by an unsatisfied demand for basic phone service due to lack of adequate
landline service and limited wireless penetration, as well as expansion of
wireless capacity in this region.
8
<PAGE>
The chart below sets forth certain estimated information regarding cellular
phone shipments and subscriber growth in the Latin American Region.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Number of Cellular Phones Shipped 2,222 1,461 1,010 434 271
Number of Subscribers 5,272 3,305 1,951 962 527
</TABLE>
Source: Dataquest, Cellular Telephony Market Worldwide Overview - Market Trends
1996 (December 1996 Estimates)
Operations
General. The key to the Company's expansion in the Latin American Region
has been its relationships with wireless equipment manufacturers and wireless
service carriers. The Company distributes products in the Latin American Region
for Motorola, Ericsson and Nokia. CellStar acts as a wholesale distributor of
cellular phones in the Latin American Region to large volume purchasers, such as
the large cellular carriers (e.g., Telcel, the cellular subsidiary of Telmex),
as well as to smaller volume purchasers.
Although the Company's business in the Latin American Region is
predominantly wholesale, operations within a particular country may be either
wholesale, retail, or both. In fiscal 1996, the Company instituted a program to
reduce the overall level of assets maintained in the Latin American Region to
reduce its exposure to financial and operating risks in the region and to reduce
working capital requirements. Changes to the Company's operating strategy
include sales of products from the Miami, Florida warehouse to South American
customers exporting into South American countries and a general reduction in the
number of employees in the region.
The following table outlines the Company's entry into its Latin American
Region:
<TABLE>
<CAPTION>
Type of Operation
Country Year Entered (as of November 30, 1996)
- ------- ------------ -------------------------
<S> <C> <C>
Mexico 1991 Wholesale and Retail
Venezuela 1993 Wholesale and Retail
Brazil 1993 Wholesale and Retail
Chile 1993 Wholesale and Retail
Colombia 1994 Wholesale and Retail
Ecuador 1995 Wholesale and Retail
Argentina 1995 Wholesale
</TABLE>
The Company acts through wholly-owned subsidiaries in each of the countries
in this region. The Company's largest wholesale customers in the region are
cellular carriers. As of November 30, 1996, the Company operated 20 full-service
retail stores in Latin America -- 13 in Mexico, 3 in Columbia, and 1 in each of
Venezuela, Chile, Brazil and Ecuador. As of
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<PAGE>
November 30, 1996, the Company also operated 4 kiosks in Venezuela. The Company
receives activation commissions in all Latin American retail markets except
Brazil.
At November 30, 1996, the Company sold its products to approximately 550
wholesale customers in the Latin American Region, the ten largest of which
accounted for approximately 7% of the Company's consolidated net product sales
in fiscal 1996. The Company offers cellular phones and accessories manufactured
by OEMs, such as Motorola, Nokia and Ericsson, and aftermarket accessories
manufactured by a variety of suppliers. Accessories include, among others,
batteries, battery eliminators, chargers, leather cases, power supplies and
antennas. The Company sells these products to mass merchandisers and other
retailers.
The Company continues to broaden its product mix in the Latin American
Region to include products that are compatible with new systems, such as
digital. The Company anticipates that its product offerings will continue to
expand with the evolution of new technologies as they become commercially
viable.
The Company's operations and sales in the Latin American Region are subject
to political and economic risks, including political instability, currency
controls, currency devaluations, exchange rate fluctuations, increased credit
risks, inflation, foreign tax laws, changes in import/export regulations and
tariff and freight rates. Political and other factors beyond the control of the
Company, including trade disputes among nations, currency fluctuations or
internal instability in any nation where the Company conducts business, could
have a materially adverse effect on the Company.
Sales and Marketing. The Company markets its products through direct sales
and advertising. In the Latin American markets where it conducts retail
operations, the Company primarily utilizes direct mailings and newspapers to
promote its retail operations. To penetrate local markets, the Company has made
use of subagent relationships in Mexico, Venezuela, Colombia and Ecuador. During
fiscal 1996, the Company launched prepaid cellular programs in Mexico and
Venezuela. The Company expects these prepaid programs to make wireless
communications services more accessible to the overall population in these
markets because it eliminates the need for established credit and monthly fees.
Other Regions
During fiscal 1996, the Company formed a majority-owned U.K. subsidiary to
distribute cellular phones, pagers, PCS, mobile radio and other wireless
communications equipment and related accessory products throughout the United
Kingdom. The Company also signed an agreement with Motorola to distribute
wireless products throughout the United Kingdom. The Company is also considering
entry into other countries where the Company believes the environment is
conducive to the growth of the wireless market. The Company will continue to
assess evolving market conditions, economic conditions and other factors which
may affect its prospects in a particular foreign country.
Industry Relationships
The Company has established relationships with leading wireless equipment
manufacturers and wireless service carriers. These alliances have been key to
the Company's market and product expansion.
Although the Company purchased its products from more than 20 suppliers in
fiscal 1996, substantially all of the Company's purchases were from Motorola,
Nokia, Ericsson and
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<PAGE>
NEC. The Company also distributed cellular products that are manufactured by
these and other manufacturers under its own trade name, CellStar. The Company
has various one-year supply contracts with Motorola, Nokia and Ericsson that
specify territories, minimum purchase levels, pricing and payment terms. These
contracts typically provide that the Company will receive the benefit of price
decreases on products in the Company's inventory if such products were shipped
to the Company within a specified period of time prior to the price decrease.
The Company's expansion is due to several factors, one of which is its
relationship with Motorola, the largest manufacturer of cellular products in the
world, according to industry sources, and the Company's largest supplier. For
the year ended November 30, 1996, Motorola accounted for approximately 74% of
the Company's product purchases, including CellStar branded products. The
Company considers its relationships with its suppliers to be satisfactory. The
Company believes that its relationship with Motorola will enable it to continue
to offer a wide variety of cellular products in the marketplace. In July 1995,
Motorola purchased 696,437 shares of the outstanding common stock of the
Company. While the Company believes that its relationship with Motorola and
other significant vendors is satisfactory, there can be no assurance that these
relationships will continue. The loss of Motorola or any other significant
vendor or a substantial price increase imposed by a vendor could have a
materially adverse impact on the Company. In addition, if the Company is unable
to obtain sufficient amounts of products from its vendors on a timely basis, its
operations could be materially and adversely affected.
Seasonality and Cyclicality
The effects of seasonal fluctuations have not historically been apparent in
the Company's operating results due to the Company's rapid growth in revenues.
However, the Company's sales are influenced by a number of seasonal factors in
the different countries and markets in which it operates, including the
purchasing patterns of customers in different markets, product promotions of
competitors and suppliers, availability of distribution channels, and product
supply and pricing. Seasonality contributed to the increase in the Company's
sales during the fourth quarter of 1996. The Company's sales are also influenced
by cyclical economic conditions in the different countries and markets in which
it operates. An economic downturn in one of the Company's principal markets
could have a material adverse effect on the Company's operating results.
Asset Management
Management Information Systems
During fiscal 1996, the Company continued to invest in technology to
improve financial and information technology control systems. The Company is
continuing to focus on materials management and international operations. In
addition, the Company has targeted several new short-term and long-term projects
to enhance its information systems, including (i) development of data
warehousing and decision support technologies, (ii) updates to the network
operating system and core network servers to newer technology, (iii) upgrades to
allow remote computing, (iv) advancements in inventory planning and control, (v)
implementation of electronic commerce utilizing the Internet and (vi)
integration and more efficient communication between global sites.
Inventory
The Company purchases its products from more than 20 suppliers that ship
directly to the Company's warehouse or distribution facilities. Inventory
purchases are based on quality,
11
<PAGE>
price, service, market demand, product availability and brand recognition.
Certain of the Company's major vendors provide favorable purchasing terms to the
Company, including price protection credits, stock balancing, increased product
availability and cooperative advertising and marketing allowances. The Company
provides stock balancing to certain of its customers. The manufacturers of
products typically provide replacement warranties, which the Company extends to
its customers. Currently, the Company has no long-term contracts for the
purchase of merchandise.
The market for wireless products is characterized by rapidly changing
technology and frequent new product introductions. The Company's success depends
in large part upon its ability to identify and obtain the right to market
products that will meet the changing requirements and demands of the
marketplace. Inventory control is important to the Company's ability to maintain
margins while offering its customers competitive prices and rapid delivery of a
wide variety of products. The Company uses its management information system and
an electronic purchase order system to help manage inventory and sales margins.
There can be no assurance that the Company will be able to identify, obtain
and offer products necessary to remain competitive. The Company has in the past
experienced shortages in supply for certain products that have been in high
demand, and no assurance can be given that product shortages will not occur in
the future.
The Company maintains a significant investment in its product inventory
and, therefore, is subject to the risks of inventory obsolescence and excessive
inventory levels. The Company attempts to limit this risk by managing inventory
turns and by entering into arrangements with its vendors, including price
protection credits and return privileges for slow-moving products. The Company's
significant inventory investment in its international operations exposes it to
certain political and economic risks. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."
During fiscal 1996, the Company embarked upon a program to re-engineer its
materials management processes, including reconfiguration of its main warehouse
layout to optimize cycle times and reduce inventory handling costs. During
fiscal 1997, the Company intends to continue implementation of the re-
engineering program and to expand on technologies such as Radio Frequency (to
capture outbound serial numbers into the Company's AS/400 system) and
integration of the Company's major shipping partner into the AS/400 system.
Typically, the Company ships its products within 24 hours from receipt of
customer orders. Therefore, the only backlog is on products that the Company is
unable to obtain from a supplier. At November 30, 1996, no such orders were
considered firm.
Trademarks
The Company markets certain of its products under the trade name CellStar.
The Company has registered its trade name on the Principal Register of the
United States Patent and Trademark Office and has registered or applied for
registration of its trade name in certain foreign jurisdictions. The Company
also has filed for registrations of its other trade names in the United States
and other jurisdictions where it does business.
Competition
The Company operates in a highly competitive environment and believes that
such competition will intensify in the future. The Company competes primarily on
the basis of inventory availability and selection, delivery time, service and
price. Many of the Company's competitors are larger and have greater capital and
management resources than the Company.
12
<PAGE>
In addition, potential users of cellular systems may find their communications
needs satisfied by other current and developing technologies. For example, ESMR,
PCS or satellite-based systems are being developed to compete with cellular
systems. The Company's ability to remain competitive will therefore depend upon
its ability to anticipate and adapt its business to such technological changes.
There can be no assurance that the Company will be successful in anticipating
and adapting to such technological changes.
In the current U.S. wholesale wireless phone and accessory product markets,
the Company's primary competitors are cellular carriers and other independent
distributors such as Brightpoint, Inc. ("Brightpoint") and Pana-Pacific
Corporation. The Company also competes with logistics companies. The Company's
major competitors in the United States in the retail cellular phone markets are
other agents and resellers and cellular carriers that have retail outlets.
Competitors of the Company in the Asia-Pacific and Latin American Regions
include national carriers that have retail outlets with direct end-user access,
and U.S. and foreign-based exporters and distributors, including Brightpoint. In
addition, the Company competes for activation fees and residual fees with agents
and subagents for the cellular carriers.
Products that reach the market outside of normal distribution channels,
such as "gray market" resales (e.g., unauthorized or illegal resales, which may
avoid applicable duties and taxes), may also have a negative impact on the
Company's operations.
Employees
As of November 30, 1996, the Company had approximately 1,010 employees. Of
these employees, approximately 540 work in U.S. operations, approximately 180
work in the Asia-Pacific operations, approximately 270 work in the Latin
American operations and approximately 20 work in the U.K. operations. Of the
Company's U.S. employees, approximately 185 are involved in wholesale
operations, approximately 260 are involved in retail operations, and
approximately 95 are corporate office personnel. None of the Company's U.S. or
Asia-Pacific employees are subject to collective bargaining agreements. In
Mexico, approximately 115 employees are subject to labor agreements. The Company
never has experienced any material labor disruption and is unaware of any
efforts or plans to organize additional employees. Management believes that its
labor relations are satisfactory.
Executive Officers of the Registrant
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
<S> <C> <C>
Alan H. Goldfield 53 Chief Executive Officer and Chairman of the
Board of Directors
Richard M. Gozia 52 President, Chief Operating Officer and Director
Mark Q. Huggins 47 Senior Vice President -- Administration, Chief
Financial Officer and Treasurer
A.S. Horng 39 General Manager of CellStar Asia
Daniel T. Bogar 37 Vice President -- South American Operations
and Director
Michael S. Hedge 40 Vice President -- Wholesale Sales and Director
Timothy L. Maretti 43 Vice President -- Mexican Operations
Evelyn Henry Miller 39 Vice President -- Corporate Controller
Elaine Flud Rodriguez 40 Vice President, General Counsel and Secretary
Richard L. White 37 Vice President & Chief Information Officer
</TABLE>
13
<PAGE>
Alan H. Goldfield is a founder of the Company and has been the Chairman of
the Board of Directors and Chief Executive Officer of the Company since its
formation in 1981. Mr. Goldfield served as President of the Company from its
formation until March 1995, when Terry S. Parker was appointed President, and
from August 1996 until December 1996, when Richard M. Gozia was appointed
President. Mr. Goldfield serves as an officer and director of the Company
pursuant to his employment agreement.
Richard M. Gozia has been the President and Chief Operating Officer of the
Company since December 1996. Mr. Gozia joined CellStar as Executive Vice
President-Administration and Chief Financial Officer in June 1996. He has been a
member of the Board of Directors since June 1996. Mr. Gozia serves as an officer
and director of the Company pursuant to his employment agreement. From 1994 to
1996, Mr. Gozia served as Executive Vice President of Spectravision, Inc., a
provider of in-room hotel movies. From 1991 to 1994, Mr. Gozia was Chairman and
Chief Executive Officer of Wyatt Cafeterias, Inc.
A.S. Horng has been General Manager of CellStar Asia since September 1993.
He currently has responsibility for all of the Company's operations in the
Asia-Pacific Region. From 1991 to 1993, Mr. Horng was President of C-Mart USA
Corporation, a distributor and manufacturer of aftermarket cellular phone
accessory products. Mr. Horng serves CellStar Asia pursuant to his employment
agreement.
Mark Q. Huggins joined the Company as Senior Vice President -
Administration, Chief Financial Officer and Treasurer in January 1997. From
September 1992 until January 1997, Mr. Huggins served as Chief Financial Officer
of Van Camp Seafood Company, Inc., a manufacturer of canned seafood products.
From May 1991 until September 1992, Mr. Huggins served as Vice President -
Finance of Clarke American Checks, Inc., a check printer. Mr. Huggins serves as
an officer of the Company pursuant to his employment agreement.
Daniel T. Bogar has served as Vice President of South American Operations
since October 1993 and has been a director of the Company since July 1994. From
August 1991 to November 1992, Mr. Bogar managed the Company's operations in
Mexico, and from 1987 to 1991, Mr. Bogar was General Manager of the Company's
Houston operations. Mr. Bogar has been responsible for the Company's South
American operations since November 1992.
Michael S. Hedge has served as Vice President of Wholesale Sales and as a
director of the Company since October 1993. From 1990 to 1993, Mr. Hedge was the
Company's Wholesale Distribution Sales Manager. From 1987 until 1990, Mr. Hedge
was Sales Manager of the Company's Houston operations.
Timothy L. Maretti has served as Vice President of Mexican Operations of
the Company since October 1993. In January 1995, Mr. Maretti was given the
additional responsibility of developing the Company's operations in certain
areas of the Asia-Pacific Region, and in January 1996, Mr. Maretti was given the
additional responsibility of developing the Company's operations in Brazil. From
March 1992 to 1993, Mr. Maretti served as general director of the Company's
Mexican operations. From 1987 to 1992, Mr. Maretti served as vice president-
regional general manager of Southwestern Bell Mobile Systems, Inc., Dallas.
Evelyn Henry Miller has served as Vice President - Corporate Controller of
the Company since November 1995. From August 1993 until October 1995, Ms. Miller
served as Director, Corporate Accounting of Aviall, Inc. ("Aviall"), the world's
largest independent overhauler of turbine engines and distributor of airline
parts. From April 1988 until August 1993, Ms. Miller served in various other
capacities for Aviall, including Director, Financial Planning and Analysis;
Senior Manager, Accounting; and Manager, Inventory Accounting and Control. Prior
to joining Aviall, Ms. Miller served as Assistant Controller, Accounting
14
<PAGE>
Operations for Dallas Market Center (a Trammell Crow Company) and held several
positions with KPMG Peat Marwick. Ms. Miller is a Certified Public Accountant.
Elaine Flud Rodriguez joined the Company in September 1993 and has been
Vice President, General Counsel and Secretary since October 1993. From October
1991 to August 1993, she was General Counsel and Secretary of Zoecon
Corporation, a pesticide manufacturer and distributor owned by Sandoz Ltd. Prior
thereto she was engaged in the private practice of law with Atlas & Hall and
Akin, Gump, Strauss, Hauer & Feld. Ms. Rodriguez is licensed to practice law in
the states of Texas and Louisiana.
Richard L. White has served as Vice President and Chief Information Officer
of the Company since November 1996. From October 1995 until joining the Company,
Mr. White served as a director with BSG Alliance/IT, a systems integrater. From
April 1983 to October 1995, Mr. White held several positions with various units
of AMR Corporation, an airline holding company, including Vice President -
Technology for Data Management Services, an AMR Services subsidiary specializing
in offshore data capture and image processing, Manager of Project
Consulting/Risk Assessment for The Sabre Group, and various management positions
with The Sabre Group and American Airlines' technology services.
Item 2. Properties
The Company's corporate headquarters and distribution facility, located at
1730 and 1728 Briercroft Court in Carrollton, Texas, are owned by the Company,
subject to a first lien mortgage. The corporate headquarters contains
approximately 43,000 square feet and is utilized as the Company's primary
corporate offices and as a product return center. The distribution facility
contains approximately 120,000 square feet and is used as the Company's primary
warehouse and distribution center.
The Company leases its Miami, Florida distribution facility which contains
approximately 22,500 square feet and is used to serve customers in the Latin
American Region. As of November 30, 1996, the Company leased a total of 23 other
U.S. operating facilities (not including Communication Centers located in Sam's
Clubs) in 5 states and a total of 27 operating facilities in Mexico, Venezuela,
Chile, Brazil, Colombia, Argentina, Ecuador, China, Hong Kong, Taiwan,
Singapore, the Philippines and Malaysia. These facilities serve as offices,
warehouses, distribution centers or retail locations.
The Company believes that its existing facilities will be adequate to meet
current requirements and that suitable additional space will be available as
needed to accommodate future expansion of its operations.
Item 3. Legal Proceedings
On May 14, 1996, a purported class action lawsuit was filed in the United
States Federal District Court for the Northern District of Texas, Dallas
Division, styled as follows: Sidney Gluck, John Dolcemaschio, James Miller and
Nancy L. Miller v. CellStar Corporation, Alan H. Goldfield, Terry S. Parker,
John S. Bain, Kenneth W. Sanders, and KPMG Peat Marwick, L.L.P. (the "Gluck
Suit"). The Gluck Suit alleges violations of Section 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5
promulgated thereunder, as well as certain state laws. The plaintiffs allege
that the defendants misrepresented or failed to disclose material facts
concerning the business prospects and financial condition of the Company, and
that the value of the Company's common stock was artificially inflated as a
result of such misrepresentations or
15
<PAGE>
failures to correct the alleged misrepresentations. The Gluck Suit seeks
compensatory and exemplary damages and reimbursement of attorneys' fees and
costs.
On May 21, 1996, a purported class action lawsuit was filed in the United
States Federal District Court for the Northern District of Texas, Dallas
Division, styled as follows: Diane Larson against CellStar Corporation, Alan H.
Goldfield, Terry S. Parker and Evelyn M. Henry (the "Larson Suit"). The Larson
Suit alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule
10b-5 promulgated thereunder. The plaintiffs allege that the defendants
misrepresented the actual financial condition of the Company and its current and
future business prospects by overstating the Company's revenues and earnings and
reflecting a bullish outlook for the Company when it was allegedly experiencing
a slowdown in growth. They allege that these actions artificially inflated the
price of the Company's common stock. The Larson Suit seeks money damages and
reimbursement of attorneys' fees and cost.
On June 14, 1996, a purported class action lawsuit was filed in the
United States Federal District Court for the Northern District of Texas, Dallas
Division, styled as follows: Elvia H. Goggin and R. Heath Larry vs. CellStar
Corporation, Alan H. Goldfield and Terry S. Parker (the "Goggin Suit"). The
Goggin Suit alleges violations of Sections 10(b) and 20(a) of the Exchange Act
and Rule 10b-5 promulgated thereunder. The plaintiffs allege that the defendants
made false and misleading statements regarding CellStar's performance and
misrepresented or failed to disclose material facts affecting CellStar's
expenses and profits, thereby allegedly artificially inflating and maintaining
the market price of CellStar common stock and distorting investors' assessment
of the Company. The Goggin Suit seeks money damages and reimbursement of
attorneys' fees and costs.
On July 22, 1996, a purported class action lawsuit was filed in the
United States Federal District Court for the Northern District of Texas, Dallas
Division, styled as follows: Reed and Lillian Riemer v. Cellstar Corporation,
Alan H. Goldfield, Terry S. Parker, John S. Bain, Kenneth W. Sanders and KPMG
Peat Marwick, L.L.P. (the "Riemer Suit"). The Riemer Suit alleges violations of
Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated
thereunder, as well as certain state laws. The plaintiffs allege that the
defendants made untrue statements of material fact and/or omitted to state
material facts about the business, financial condition, performance and future
prospects of the Company, and that the value of the Company's common stock was
artificially inflated as a result of such statements and omissions. The Riemer
Suit seeks compensatory and exemplary damages and reimbursement of counsel and
expert fees and costs.
The Riemer Suit has been consolidated with the Gluck Suit, the Larson Suit,
and the Goggin Suit, and the State of Wisconsin Investment Board has been
appointed lead plaintiff in the consolidated action. The lead plaintiff, joined
by Diane Larson, Martin Katz, Mostafa Aboul-Fetouh, Ahmed Aboul-Fetouh, Enass
Aboul-Fetouh and Norma Vittor, filed a Consolidated Amended Complaint that
asserts (i) claims against the Company, Alan H. Goldfield, Terry S. Parker, John
S. Bain, Kenneth W. Sanders, Evelyn M. Henry and Leonard C. Ratley for
violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder, Texas Civil Statute section 27.01, common law fraud, and for
negligent misrepresentation; (ii) an additional claim against those individual
defendants for violations of Section 20(a) of the Exchange Act; and (iii) claims
against those individual defendants, Daniel T. Bogar, James L. Johnson, Ronald
J. Kramer, Michael S. Hedge and Kenneth E. Kerby for breach of a fiduciary duty
of disclosure under Delaware common law. The Consolidated Amended Complaint
alleges, among other things, that the defendants misrepresented or failed to
disclose material facts regarding the business, financial condition, performance
and future prospects of the Company and that, as a result of such statements or
omissions, the value of the Company's common stock was artificially inflated.
Claims are also asserted against the Company's auditors, KPMG Peat Marwick
L.L.P. The plaintiffs seek compensatory damages, exemplary damages and costs and
expenses, including attorneys' fees and expert fees. All defendants have filed
motions to dismiss all claims asserted in the Consolidated Amended Complaint.
The motions are pending.
The Company believes it has meritorious defenses to these claims and is
vigorously defending this action. The ultimate outcome is not currently
predictable.
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. Management believes that
the disposition of these other matters will not have a materially adverse effect
on the consolidated financial condition or results of operations of the Company.
16
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's security holders
during the fiscal quarter ended November 30, 1996.
17
<PAGE>
Part II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock began trading on the NASDAQ National Market
System under the symbol CLST on December 7, 1993. Prior to the Company's initial
public offering in December 1993, there was no established public trading market
for the Company's common stock. As of January 31, 1997, there were 205
stockholders of record, although the Company believes that the number of
beneficial owners is significantly greater than that number because a large
number of shares are held of record by CEDE & Co. The following table sets
forth, on a per share basis for the periods indicated and since the Company's
initial public offering, the high and low sale prices for the common stock
during fiscal 1996 as reported by NASDAQ.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal Year ended November 30, 1996
Quarter Ended:
February 29, 1996...................... $29.250 $17.375
May 31, 1996........................... $18.000 $ 5.750
August 31, 1996........................ $10.375 $ 6.250
November 30, 1996...................... $12.750 $ 6.000
Fiscal Year ended November 30, 1995
Quarter Ended:
February 28, 1995...................... $25.500 $16.125
May 31, 1995........................... $25.125 $17.125
August 31, 1995........................ $34.375 $19.500
November 30, 1995...................... $37.125 $22.500
</TABLE>
The Company has never declared or paid cash dividends on its common stock.
The Company presently intends to retain all earnings to finance the continued
growth and development of its business and does not anticipate paying any cash
dividends on the common stock in the foreseeable future. Any future
determination as to the payment of cash dividends will depend on a number of
factors, including future earnings, capital requirements, the financial
condition and prospects of the Company and any restrictions under credit
agreements existing from time to time, as well as other factors as the Board of
Directors may deem relevant. There can be no assurance that the Company will pay
any dividends in the future. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations-Liquidity and Capital
Resources."
18
<PAGE>
Item 6. Selected Consolidated Financial Data
The selected data presented below was derived from the audited financial
statements of the Company for the periods presented. The selected financial
data should be read in conjunction with "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(In thousands, except per share and operating data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Net product sales $ 845,569 723,886 447,741 224,845 136,946
Activation income 88,474 75,690 60,153 42,223 39,387
Residual income 13,558 12,339 10,528 8,308 4,626
----------- ----------- ----------- ----------- -----------
Total revenues 947,601 811,915 518,422 275,376 180,959
Cost of sales 810,000 702,074 448,780 229,796 148,490
----------- ----------- ----------- ----------- -----------
Gross profit 137,601 109,841 69,642 45,580 32,469
----------- ----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative expenses 135,585 76,553 44,598 28,321 19,882
Fees and bonus to stockholders - - - 3,135 9,084
----------- ----------- ----------- ----------- -----------
Total operating expenses 135,585 76,553 44,598 31,456 28,966
----------- ----------- ----------- ----------- -----------
Operating income 2,016 33,288 25,044 14,124 3,503
Other income (expense), net (8,882) (2,950) 232 (1,228) (1,635)
----------- ----------- ----------- ----------- -----------
(Loss) income before income taxes (6,866) 30,338 25,276 12,896 1,868
Income taxes (1) (453) 7,442 9,028 5,043 1,880
----------- ----------- ----------- ----------- -----------
Net (loss) income $ (6,413) 22,896 16,248 7,853 (12)
=========== =========== =========== =========== ===========
Net (loss) income per share $ (0.33) 1.22 0.88 0.58 -
=========== =========== =========== =========== ===========
Weighted average number of shares
outstanding 19,274 18,822 18,441 13,500 13,500
=========== =========== =========== =========== ===========
Balance Sheet Data:
Working capital $ 71,365 74,410 63,668 7,052 9,584
Total assets $ 298,551 314,921 186,354 89,894 52,762
Notes payable to financial institutions, current
portion of notes payable to stockholders
and current portion of long-term debt $ 56,704 99,187 12,735 8,968 4,037
Long-term debt, less current portion $ 6,285 6,880 3,095 - -
Notes payable to stockholders, less current portion $ - - - 7,214 13,420
Stockholders' equity (deficit) $ 104,263 111,295 76,642 7,749 (51)
Operating Data:
International revenues as % of total revenues 39.9% 41.1% (2) 23.3% (2) 22.5% 31.0%
Number of U.S. retail locations at year end:
Stand-alone stores 15 16 17 12 11
Communication Centers 21 347 76 - -
</TABLE>
(1) The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"), as of December 1, 1991, without
restatement of prior years' consolidated financial statements. As a result of
applying Statement 109 in 1992, net loss for the year ended November 30, 1992
decreased approximately $776,000 ($.06 per share) due to the recognition of a
deferred tax benefit that could not be recognized under the provisions of APB
Opinion No. 11.
(2) Excludes sales to CellStar Asia, which were included in U.S. sales prior to
the Company's acquisition of the remaining 50% interest in CellStar Asia in June
1995. If the Company's acquisition of the remaining 50% interest in CellStar
Asia in June 1995 is given pro forma effect as of December 1, 1993,
international revenues as a percent of total revenues would be 51.9% and 34.7%
for fiscal 1995 and 1994, respectively.
19
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company is an integrated wholesaler and retailer of cellular phones and
other wireless communications products. From fiscal 1992 to fiscal 1996, the
Company's total revenues grew from $181.0 million to $947.6 million. The Company
accomplished this growth primarily by focusing its efforts on the cellular phone
industry. To date, U.S. sales of cellular phone products have increased
primarily as a result of greater market penetration and decreasing unit prices.
Higher unit sales have resulted in an increase in total revenues, which have
more than offset decreases in unit prices. The Company's international sales of
cellular phone products have increased primarily as a result of its entry into
the Asia-Pacific and Latin American Regions.
The Company reported a net loss for fiscal 1996 of $6.4 million, compared
to net income of $22.9 million for fiscal 1995, and a net loss per share of
$0.33 for fiscal 1996, compared to net income per share of $1.22 for fiscal
1995. Such results were primarily due to a write-down of receivables in Brazil
and unprofitable growth of the Company's Communication Centers located in Sam's
Clubs.
This Annual Report on Form 10-K comtains forward-looking statements
relating to such matters as anticipated financial performance and business
prospects. When used in this Annual Report, the words "anticipate," "estimate,"
"expect," "may," "project," "believes" and similar expressions are intended to
be among the statements that identify forward-looking statements. From time to
time, the Company may also publish forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for forward
looking statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual results
and experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward looking statements. The
Company's overall operations are also subject to certain risks. See "Business--
Industry Overview--Industry Relationships--Seasonality and Cyclicality--Asset
Management--Competition," above, and "--Liquidity and Capital Resources--Impact
of Inflation--Seasonality and Cyclicality," below. Foreign operations and sales
are further subject to political and economic risks, including political
instability, currency controls, currency devaluations, exchange rate
fluctuations, credit risks, inflation, foreign tax laws, changes in
import/export regulations and tariffs. See "Business--Asia-Pacific Region--
Operations--Latin American Region--Operations--Industry Relationships--
Seasonality and Cyclicality--Asset Management--Competition," above, and "--
Liquidity and Capital Resources--International Operations--Impact of Inflation--
Seasonality and Cyclicality," below.
To enable the Company to focus its resources more effectively on its core
wholesale operations, in November 1996, the Company completed the sale to MCI of
substantially all of its Communication Centers for $16.1 million. The
transaction did not result in a material gain. The Company also signed a
distribution agreement with MCI to supply MCI with cellular phones and
accessories for the Communication Centers.
20
<PAGE>
The Company expects that with future increases, if any, to its revenues
more funds will be needed to support corresponding increases in the Company's
inventory and accounts receivable levels. See "--Liquidity and Capital
Resources" below.
Results of Operations
The Company's historical records do not enable management to provide
accurate information with respect to disaggregated wholesale and retail prices,
volumes and gross margins. The gross margins realized from its wholesale product
revenues are generally lower than the margins realized from its retail product
revenues. Therefore, if wholesale revenues increase relative to retail revenues,
gross profit as a percentage of total revenues decreases. However, due to the
more labor intensive nature of its retail operations, selling, general and
administrative expenses are higher with respect to retail sales, which offsets
the higher gross margins the Company realizes from retail product sales.
The following table sets forth certain statement of operations data for the
Company expressed as a percentage of total revenues for the past three fiscal
years:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net product sales 89.2 % 89.2 % 86.4 %
Activation income 9.3 9.3 11.6
Residual income 1.5 1.5 2.0
---------- ---------- ----------
Total revenues 100.0 100.0 100.0
Cost of sales 85.5 86.5 86.6
---------- ---------- ----------
Gross profit 14.5 13.5 13.4
Selling, general and administrative expenses 14.3 9.4 8.6
---------- ---------- ----------
Operating income 0.2 4.1 4.8
Other income (expense):
Interest expense (0.9) (0.8) (0.2)
Other income, net - 0.4 0.2
---------- ---------- ----------
Total other income (expense) (0.9) (0.4) -
(Loss) income before income taxes (0.7) 3.7 4.8
Income taxes - (0.9) (1.7)
---------- ---------- ----------
Net (loss) income (0.7) % 2.8 % 3.1 %
========== ========== ==========
</TABLE>
21
<PAGE>
The Company classifies revenues generated by its majority-owned foreign
subsidiaries as revenues attributable to its international operations and
classifies export sales to its nonconsolidated ventures as revenues attributable
to its U.S. operations. The amount of net revenues and the approximate
percentages of net revenues attributable to the Company's operations for the
past three fiscal years are shown below:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- --------------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S.:
Net product sales/(1)/ $ 485,788 51.3 % 415,094 51.1 % 354,193 68.3 %
Activation income 71,072 7.5 52,704 6.5 35,286 6.8
Residual income 11,884 1.3 10,379 1.3 8,625 1.6
------------ ------ ------------ ------- ----------- -------
Total U.S. 568,744 60.1 478,177 58.9 398,104 76.7
------------ ------ ------------ ------- ----------- -------
Asia-Pacific:
Net product sales/(2)/ 247,773 26.1 183,274 22.6 - -
Activation income 720 0.1 - - - -
Residual income - - - - - -
------------ ------ ------------ ------- ----------- -------
Total Asia-Pacific 248,493 26.2 183,274 22.6 - -
------------ ------ ------------ ------- ----------- -------
Latin America:
Net product sales 101,440 10.7 125,518 15.5 93,548 18.1
Activation income 16,682 1.8 22,986 2.8 24,867 4.8
Residual income 1,674 0.1 1,960 0.2 1,903 0.4
------------ ------ ------------ ------- ----------- -------
Total Latin America 119,796 12.6 150,464 18.5 120,318 23.3
------------ ------ ------------ ------- ----------- -------
Europe:
Net product sales 10,568 1.1 - - - -
Activation income - - - - - -
Residual income - - - - - -
------------ ------ ------------ ------- ----------- -------
Total Europe 10,568 1.1 - - - -
------------ ------ ------------ ------- ----------- -------
Total $ 947,601 100.0 % 811,915 100.0 % 518,422 100.0 %
============ ====== ============ ======= =========== =======
</TABLE>
- ---------------
(1)Includes export sales of $90.2 million and $59.8 million in 1995 and 1994,
respectively, to CellStar Asia prior to June 3, 1995 when CellStar Asia became a
wholly-owned subsidiary of the Company.
(2)Fiscal year 1995 includes sales of $143.1 million by CellStar Asia after June
2, 1995.
22
<PAGE>
Fiscal 1996 Compared to Fiscal 1995
Revenues. Total revenues increased $135.7 million, or 16.7%, from $811.9
million in fiscal 1995 to $947.6 million in fiscal 1996.
U.S. revenues increased 18.9%, from $478.2 million in fiscal 1995 to $568.7
million in fiscal 1996. The increase was due to increases in net product sales
of $70.7 million, activation income of $18.4 million and residual income of $1.5
million. The increase in net product sales was due primarily to a shift in
strategy from in-country product sales by the Company's South American
subsidiaries to sales from the Company's Miami, Florida warehouse to customers
exporting into South American countries. The Company adopted this strategy to
reduce currency, accounts receivable and inventory risks. In addition, the U.S.
operations achieved growth in net product sales to wholesale customers in the
United States.
U.S. activation income increased primarily as a result of an overall
increase in sales of cellular phone units at the retail level. The increase in
unit sales at the retail level was attributable to the Company's expansion of
Communication Centers beginning in the fourth quarter of fiscal 1994. Since the
Company sold substantially all of its Communication Centers in November 1996,
the Company expects a decline in activation income in fiscal 1997. The increase
in residual income primarily corresponded to the Company's growing cellular
phone user base where the Company operated stand-alone retail stores, which
increase was partially offset by lower average monthly user phone bills.
The Company's international revenues, which include direct revenues derived
primarily from the operations of its subsidiaries in the Latin American and
Asia-Pacific Regions, increased 13.5%, from $333.7 million in fiscal 1995 to
$378.8 million in fiscal 1996. The growth in international revenues was due to
the acquisition of the remaining 50% interest in CellStar Asia, which resulted
in CellStar Asia's sales being classified as international sales beginning in
June 1995. Prior to the June 1995 acquisition, CellStar Asia's operations were
not consolidated with the operations of the Company, and sales of products to
CellStar Asia were considered revenues of the Company's U.S. operations. Net
product sales to CellStar Asia for the period prior to the acquisition totaled
$90.2 million in fiscal 1995. In the period following the acquisition, CellStar
Asia had $143.1 million and $199.7 million in fiscal 1995 and 1996,
respectively, of net product sales, which were included in the Company's
international revenues. In the aggregate, sales by CellStar Asia decreased from
$228.0 million in fiscal 1995 to $199.7 million in fiscal 1996. The decrease
was due to several factors including the unavailability of the highly popular
PCS phones and increased competition that caused downward pressure on selling
prices. The Company's operations in Singapore, CellStar Pacific PTE LTD,
provided $40.2 million of net product sales in fiscal 1995 compared to $46.1
million of net product sales in fiscal 1996. CellStar (Taiwan) Company Ltd.,
which commenced operations in the second quarter in fiscal 1996, provided $2.0
million of net product sales in fiscal 1996. The Asia-Pacific operations are
substantially wholesale related, and, as a result, activation income is not
significant.
The Company's operations in the Latin American Region provided $101.4
million of net product sales in fiscal 1996, compared to $125.5 million in
fiscal 1995. The decline was due primarily to a sharp decline in sales in Brazil
which decreased from $47.0 million in fiscal 1995 to $30.6 million in fiscal
1996. This decline was due to the continued deterioration in the business
climate in Brazil for the cellular phone industry and to a change in the
Company's strategy of selling products from its warehouse in Miami, Florida to
customers exporting into South American countries. The decline in net product
sales was partially offset by a $20.0 million increase in net product sales in
Argentina, a market the Company entered in late 1995. Activation income
generated by the Company's operations in the Latin American Region decreased
from $23.0 million in fiscal 1995 to $16.7 million in fiscal 1996. This decrease
was primarily attributable to the decline in activation income in Venezuela,
which decreased from $4.8 million in fiscal 1995 to $0.7 million in fiscal 1996
due to weak economic conditions and political turmoil in Venezuela.
Gross Profit. Gross profit increased $27.8 million, or 25.3%, from $109.8
million in fiscal 1995 to $137.6 million in fiscal 1996, while gross profit as a
percentage of total revenues increased from 13.5% to
23
<PAGE>
14.5% in fiscal 1995 and 1996, respectively. This increase in the gross margin
percent was primarily due to the consolidation of CellStar Asia's higher gross
margin revenues following the Company's acquisition of the remaining 50%
interest in CellStar Asia in June 1995 and an increase in higher margin U.S.
retail sales. Revenues for fiscal 1995 include export sales of $90.2 million,
with a gross margin of 4.0%, to CellStar Asia prior to June 1995 when it became
a wholly-owned subsidiary. After CellStar Asia became a wholly-owned subsidiary,
its revenues were consolidated with the Company's rather than being reported as
U.S. net product sales. U.S. retail sales increased from $90.5 million in fiscal
1995 to $127.9 million in fiscal 1996 due to the increase in the number of
Communication Centers. These gross profit increases were partially offset by
provisions for inventory obsolescence and the effect of economic declines in the
Latin American Region.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $59.0 million, or 77.0%, from $76.6 million in
fiscal 1995 to $135.6 million in fiscal 1996. Approximately $28.0 million, or
47.5%, of the increase resulted from an increase in trade accounts receivable
reserves to reflect a deterioration in the trade accounts receivable portfolio,
primarily for Brazil-related receivables. See "--International Operations"
below. Bad debt expense as a percentage of total revenues increased from 0.3% in
fiscal 1995 to 2.9% in fiscal 1996. An additional $11.7 million, or 19.8%, of
the increase in selling, general and administrative expenses was attributable to
an increase in salaries and employee benefits for the addition of employees to
support the growth of the Company's operations, primarily related to the
Communication Centers. The Communication Centers also contributed to other
increases in selling, general and administrative expenses as these operations
experienced higher operating expenses than wholesale operations. The Company
sold 334 of its Communication Centers on November 26, 1996. As a percentage of
total revenues, selling, general and administrative expenses increased from 9.4%
to 14.3%.
Operating Income. Operating income decreased substantially from $33.3
million in fiscal 1995 to $2.0 million in fiscal 1996 due mainly to the
significant increase in selling, general and administrative expenses, as
discussed above.
(Undistributed Loss) Equity in Earnings of Joint Ventures. (Undistributed
loss) equity in earnings of joint ventures decreased in fiscal 1996 by $3.4
million from fiscal 1995. The decrease was attributable to the Company's
acquisition of the remaining 50% interest in CellStar Asia in June 1995. The
Company's 50% equity interest in the operations of CellStar Asia prior to the
date of the acquisition was classified as equity in earnings of joint ventures.
Interest Expense. Interest expense increased in fiscal 1996 to $8.3 million
from $6.1 million in fiscal 1995. The increase in interest expense resulted
primarily from the maintenance of higher average balances under the Company's
revolving credit agreements. See "-Liquidity and Capital Resources" below.
(Benefit) Provision for Income Taxes. The Company's income tax expense
decreased in fiscal 1996 by $7.9 million, or 106.7%, from fiscal 1995, due to a
tax benefit resulting from accumulated losses related to the Company's Brazilian
operations and a lower overall effective tax rate. The lower effective tax rate
in fiscal 1996 was primarily attributable to foreign and U.S. tax effects from
foreign operations.
24
<PAGE>
Fiscal 1995 Compared to Fiscal 1994
Revenues. Total revenues increased $293.5 million, or 56.6%, from $518.4
million in fiscal 1994 to $811.9 million in fiscal 1995. The increase in fiscal
1995 revenues was fueled primarily by the Company's international growth.
U.S. revenues increased 20.1%, from $398.1 million in fiscal 1994 to $478.2
million in fiscal 1995. The increase was due to increases in net product sales
of $60.9 million, activation income of $17.4 million and residual income of $1.8
million. A large portion of the increase in net product sales was attributable
to export sales to CellStar Asia prior to it becoming a wholly-owned subsidiary
of the Company on June 2, 1995. Prior to the acquisition, CellStar Asia's
operations were not consolidated with the operations of the Company and sales to
CellStar Asia were considered revenues of the Company's U.S. operations. Export
sales to CellStar Asia increased from $59.8 million in fiscal 1994 to $90.2
million through June 2, 1995 for fiscal 1995, reflecting increased demand for
cellular phones in the Asia-Pacific Region. Excluding export sales to CellStar
Asia, U.S. revenues increased 14.7%, from $338.3 million in fiscal 1994 to
$388.0 million in fiscal 1995.
The following unaudited pro forma information presents the consolidated
results of operations of the Company as if the acquisition of CellStar Asia had
occurred on December 1, 1993, with pro forma adjustments to give effect to the
elimination of sales by the Company to CellStar Asia, amortization of goodwill
related to the acquisition, interest expense on acquisition debt, and certain
other adjustments at November 30 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues $ 806,648 519,712
Net income 24,913 15,215
Net income per share 1.32 0.83
</TABLE>
U.S. activation income increased primarily as a result of an overall
increase in sales of cellular phone units at the retail level, which was
partially offset by a decrease in the average commission per activation paid by
cellular carriers. The increase in unit sales at the retail level was
attributable to the Company's expansion of Communication Centers beginning in
the fourth quarter of fiscal 1994. The number of Communication Centers increased
from 76 at November 30, 1994 to 347 at November 30, 1995. The increase in
residual income primarily corresponds to the Company's growing cellular phone
user base, which was partially offset by lower average monthly user phone bills.
The Company's international revenues, which include direct revenues derived
from the operations of its subsidiaries in the Latin American and Asia-Pacific
Regions, increased 177.4%, from $120.3 million in fiscal 1994 to $333.7 million
in fiscal 1995. The growth in international revenues was due to the acquisition
of the remaining 50% interest in CellStar Asia, which resulted in CellStar
Asia's sales being classified as international sales beginning in June 1995, as
well as subscriber growth in these markets. Prior to the June 1995 acquisition,
CellStar Asia's operations were not consolidated with the operations of the
Company, and sales of products to CellStar Asia were considered revenues of the
Company's U.S. operations. Product sales to CellStar Asia, prior to the
acquisition, totaled $90.2 million in fiscal 1995 and $59.8 million in fiscal
1994. After the acquisition, CellStar Asia had $143.1 million of net product
sales, which were included in the Company's international revenues. In the
aggregate, sales by CellStar Asia increased from $61.1 million in fiscal 1994 to
$228.0 million in fiscal 1995. The Company's operations in Singapore, CellStar
Pacific, which commenced operations in the first quarter in fiscal 1995,
provided $40.2
25
<PAGE>
million of net product sales in fiscal 1995. The revenue growth experienced in
the Company's Asia-Pacific operations resulted from continued market expansion.
The Asia-Pacific operations are substantially wholesale related, and, as a
result, activation income is not significant.
Net product sales generated by the Company's operations in the Latin
American Region increased from $93.5 million in fiscal 1994 to $125.5 million in
fiscal 1995, due primarily to the fact that the Company's Brazilian and
Colombian subsidiaries began operations during 1994. Activation income generated
by the Company's operations in the Latin American Region decreased from $24.9
million in 1994 to $23.0 million in fiscal 1995, as a result of a $6.4 million
decline in activation income in Mexico, primarily due to lower carrier
commissions received per activation, which was partially offset by a combined
increase of $4.5 million in Venezuela, Colombia and Chile.
Gross Profit. Gross profit increased $40.2 million, or 57.8%, from $69.6
million in fiscal 1994 to $109.8 million in fiscal 1995, while gross profit as a
percentage of total revenues increased from 13.4% to 13.5% in fiscal 1994 and
1995, respectively. This increase was primarily due to the increase in revenues
which was in part a result of the acquisition of the remaining 50% interest in
CellStar Asia in June 1995. In fiscal 1995, gross profit was negatively
impacted by decreases in cellular phone prices, an increase in the proportion of
wholesale revenue relative to retail revenue and lower first quarter gross
profit margins in Mexico resulting from the peso devaluation in December 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $32.0 million, or 71.7%, from $44.6 million in
fiscal 1994 to $76.6 million in fiscal 1995. Approximately $19.8 million, or
61.9%, of the increase was attributable to an increase in salaries and employee
benefits due to the continued growth and expansion of the Company, primarily
from the expansion of Communication Centers beginning in the fourth quarter of
fiscal 1994, as well as the Company's expansion in South America and the Asia-
Pacific Region. As a percentage of total revenues, selling, general and
administrative expenses increased from 8.6% to 9.4%. Other increases in
selling, general and administrative expenses were a result of the increased
level of operations from the Company's South American operations and the
continued expansion in Communication Centers, which generally require higher
operating expenses than wholesale operations. Bad debt expense remained
relatively constant at 0.3% of revenues.
Operating Income. Operating income increased from $25.0 million in fiscal
1994 to $33.3 million in fiscal 1995, primarily due to an increase in gross
profit, which was partially offset by the increase in selling, general and
administrative expenses discussed above. Operating income as a percentage of
total revenues decreased from 4.8% in fiscal 1994 to 4.1% in fiscal 1995,
primarily due to the increase in wholesale revenues relative to retail revenues
and an increase in selling, general and administrative expenses relative to
total revenues.
(Undistributed Loss) Equity in Earnings of Joint Ventures. (Undistributed
loss) equity in earnings of joint ventures increased in fiscal 1995 by
approximately $2.1 million from fiscal 1994. The increase was primarily
attributable to the increase in net income of CellStar Asia, resulting from
stronger cellular phone demand in China and other Asia-Pacific markets, prior to
it becoming a wholly-owned subsidiary of the Company in June, 1995.
Interest Expense. Interest expense increased in fiscal 1995 to $6.1 million
from $1.0 million in fiscal 1994. The increase in interest expense resulted
primarily from the maintenance of higher average balances under the Company's
revolving credit agreement. See "-Liquidity and Capital Resources" below.
(Benefit) Provision for Income Taxes. The Company's income tax expense
decreased in fiscal 1995 by $1.6 million, or 17.6%, from fiscal 1994, due
primarily to a lower effective tax rate in fiscal 1995, which was partially
offset by higher income before income taxes in fiscal 1995. The lower effective
tax rate in fiscal 1995 was primarily attributable to the increase in income
from CellStar Asia and CellStar
26
<PAGE>
Pacific, which are taxed at lower rates than other countries in which the
Company operates, and the Company's increase in (undistributed loss) equity in
earnings of joint ventures net of taxes.
Liquidity and Capital Resources
The Company primarily relies on cash generated from operations and
borrowings under its revolving credit agreements to fund working capital,
capital expenditures and expansions. In addition, the Company receives extended
credit terms from key suppliers to fund working capital requirements of its
operations. Historically, the Company has used long-term debt to fund the
acquisition of significant fixed assets.
The Company expects to increase inventory and accounts receivable levels
and to fund new foreign ventures. As a result, the Company anticipates its need
for liquidity and capital resources will increase in 1997. In light of the
Company's anticipated working capital and expansion plans for fiscal 1997 and
the amount presently available under the Company's revolving credit agreements,
the Company will require outside sources of funds in addition to those available
from operations and under such revolving credit agreements to provide the
resources necessary to continue its growth. If the Company is unable to obtain
additional financing in sufficient amounts, it will have to modify its expansion
plans for 1997.
The Company's primary revolving credit facility is with a group of five
banks and currently has a maximum borrowing limit of $90.0 million. This
facility was reduced from $135.0 million to $90.0 million on July 31, 1996.
Fundings under the line are limited by a borrowing base computed as a percentage
of certain U.S. accounts receivable and inventories. Borrowings are secured
primarily by U.S. accounts receivable and inventories. At January 27, 1997, the
borrowing base limited borrowings to $65.9 million ($85.6 million at November
30, 1996). Effective December 24, 1996, the advance rates of the borrowing base
were lowered. The U.S. revolving credit facility contains, among other
provisions, covenants relating to minimum net worth and certain financial
ratios, capital expenditures, dividend payments, additional debt, mergers, and
acquisitions and dispositions of assets. At November 30, 1996, the Company was
not in compliance with certain covenants in the U.S. revolving credit facility
regarding limitations on capital spending and maintenance by the Company's most
significant U.S. subsidiary of a minimum net worth. The Company's lenders have
waived non-compliance with those covenants. Covenants are measured on a
quarterly basis. There can be no assurance that the Company will not require
additional waivers in the future or, if required, that the lenders will grant
them.
CellStar Asia has a $15.0 million credit agreement with a bank, which
agreement matures at July 31, 1997. This facility was reduced from $22.5 million
to $15.0 million at March 31, 1996. Fundings under this credit agreement are
limited by a borrowing base computed as a percentage of CellStar Asia's accounts
receivable and inventories. At January 31, 1997, the borrowing base limited
borrowings to $15.0 million ($15.0 million at November 30, 1996), all of which
was available at such times. Upon maturity, the Company intends to renew this
agreement or negotiate a new facility under similar terms.
The Company's Brazilian subsidiary has a $2.9 million line of credit with a
Brazilian bank that is secured by a letter of credit issued under the Company's
U.S. revolving credit facility.
At November 30, 1996, the Company had $27.3 million of cash and cash
equivalents, a decrease of $4.2 million since November 30, 1995. The decrease in
cash correlates with the decrease in the aggregate of accounts payable and notes
payable to financial institutions. A majority of the Company's cash resides
outside of the United States, primarily in its Asia-Pacific Region subsidiaries.
Because the Company's policy is to indefinitely reinvest earnings of foreign
subsidiaries to minimize income taxes on a global basis, cash in those
subsidiaries remains in the region to support operations in that region. The
Company's U.S. growth and South American operating losses have caused these
operations to require working capital from external sources. As a result, the
Company received extended credit terms from key suppliers. The Company
anticipates that such extended credit terms will continue to be made available
to the Company for the near-term. This situation did not materially impact the
Company's ability to obtain inventory and thus did not have a significant impact
on sales for the fiscal year. There can be no assurance that such extended
credit terms will continue to be made available. If such extended credit
27
<PAGE>
terms are not made available, the Company will need to seek additional sources
to fund working capital requirements.
Cash of $6.1 million was used primarily to purchase various computer and
office equipment. By comparison, the Company spent $12.3 million during fiscal
1995 for the construction of its distribution warehouse in Carrollton, Texas and
office equipment primarily for the expansion of Communication Centers.
International Operations
The Company's international operations are subject to political and
economic risks including political instability, currency devaluations and
controls, increased credit risks and changes in tax laws and trade regulations.
Such risks, if realized, could have a material adverse effect on the Company.
The economic environments in several countries in the Latin American Region have
historically been volatile.
The Company's operations in the Latin American Region were negatively
impacted by several factors during 1996, including a significant deterioration
in the trade accounts receivable portfolio and an increase in the provision for
inventory obsolescence. In recognition of the deterioration of its trade
accounts receivable portfolio in specific markets in the Latin American Region,
the Company added $19.9 million to its trade accounts receivable reserves in the
region during 1996. Brazil was primarily responsible for a majority of this
increase in the allowance. In early 1996, the Company instituted a program to
reduce the overall level of assets maintained in the Latin American Region. The
intent of this program is to reduce the Company's working capital requirements
related to its operations in the Latin American Region and to reduce the
Company's exposure to financial and operating risks in the region. This program
resulted in a $29.5 million, or 39.9%, reduction in assets in the Latin American
Region from $73.9 million at February 29, 1996 to $44.4 million at November 30,
1996. Other changes to the Company's business strategy in the Latin American
Region include sales of products from the Miami, Florida warehouse to customers
exporting into South American countries and a general reduction in the number of
employees in the region. The Company expects to continue pursuit of these
strategies in the future; however, their impact on the Company is not expected
to be as significant in 1997 as in 1996. The Company has reduced its trade
accounts receivable exposure related to this region. However, the Company
maintains concentrations of accounts receivable among relatively few customers
in the region and there can be no assurance that the Company will not sustain
additional credit losses in the future.
As a result of economic volatility in the Latin American Region, many
currencies in the region have consistently lost value relative to the U.S.
dollar over time. This regional history of local currency devaluations relative
to the U.S. dollar, along with the Company's largely U.S. dollar-based cost
structure for its operations in the Latin American Region, produce the potential
for the Company to incur foreign currency transaction losses. Primarily as a
result of currency devaluations relative to the U.S. dollar in several countries
in the Latin American Region, the Company experienced foreign currency
transaction losses of $1.8 million, $1.3 million, and $1.4 million in fiscal
years 1996, 1995 and 1994, respectively.
Impact of Inflation
Historically, inflation has not had a significant impact on the Company's
overall operating results. However, the effects of inflation in volatile
economies in foreign markets could have an adverse impact on the Company.
28
<PAGE>
Seasonality and Cyclicality
The effects of seasonal fluctuations have not historically been apparent in
the Company's operating results due to the Company's rapid growth in revenues.
However, the Company's sales are influenced by a number of seasonal factors in
the different countries and markets in which it operates, including the
purchasing patterns of customers in different markets, product promotions of
competitors and suppliers, availability of distribution channels, and product
supply and pricing. Seasonality contributed to the increase in the Company's
sales during the fourth quarter of 1996. The Company's sales are also influenced
by cyclical economic conditions in the different countries and markets in which
it operates. An economic downturn in one of the Company's principal markets
could have a material adverse effect on the Company's operating results.
Accounting Pronouncements Not Yet Adopted
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" effective for fiscal years beginning after
December 15, 1995. FASB Statement No. 121 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Management
believes that adopting Statement No. 121 will not have a material effect in
fiscal 1997 on the Company's consolidated financial position or results of
operations.
In October 1995, FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation." FASB Statement No. 123 contains optional compensation expense
recognition provisions and mandatory disclosure provisions. Companies electing
to adopt the compensation expense recognition provisions would be required to
measure and recognize compensation expense based on a fair value method of
accounting. The disclosure provisions apply to all companies regardless of the
method used to account for stock compensation arrangements and must be adopted
for fiscal years beginning after December 15, 1995. Management believes that
adopting Statement No. 123 will not have a material effect in fiscal 1997 on the
Company's consolidated financial position or results of operations.
Management's Responsibility for the Consolidated Financial Statements
The consolidated financial statements of the Company are the responsibility
of management. They have been prepared in accordance with generally accepted
accounting principles and include estimates and judgments made by management. To
meet the responsibility for reliable financial data, management maintains a
system of internal accounting controls which is designed to provide reasonable
assurance that transactions are executed as authorized and are accurately
recorded and that assets are properly safeguarded. Although accounting controls
are designed to achieve this objective, it must be recognized that errors or
irregularities may occur. In addition, it is necessary to assess and balance the
relative cost and the expected benefit of internal accounting controls.
29
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements on Page F-1 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
30
<PAGE>
Part III.
Item 10. Directors and Executive Officers of the Registrant
The information required by this item regarding Directors of the Company
is set forth in the Proxy Statement (the "Proxy Statement") to be delivered to
the Company's stockholders in connection with the Company's 1997 Annual Meeting
of Stockholders under the heading "Election of Directors," which information is
incorporated herein by reference. The name, age and position of each executive
officer of the Company is set forth under the heading "Executive Officers of the
Registrant" in Part I of this Form 10-K, which information is incorporated
herein by reference.
Item 11. Executive Compensation
The information required by this item is set forth in the Proxy Statement
under the heading "Executive Compensation," which information is incorporated
herein by reference. Information contained in the Proxy Statement under the
captions "Executive Compensation--Report of the Compensation Committee of the
Board of Directors on Executive Compensation" and "Comparative Performance
Graph" is not incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is set forth in the Proxy Statement
under the caption "Certain Transactions," which information is incorporated
herein by reference.
31
<PAGE>
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements on page F-1 of this Form
10-K.
2. Financial Statement Schedules
All schedules are omitted because the information is not applicable or is
presented in the Consolidated Financial Statements or related Notes.
3. Exhibits
--------
3.1 Amended and Restated Certificate of Incorporation of the
Company.(1)
3.2 Amended and Restated Bylaws of the Company.(2)
4.1 The Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws of the Company filed in response to items 3.1
and 3.2 are incorporated in this item by reference.(1)(2)
4.2 Specimen Common Stock Certificate of the Company. (3)
4.3 Rights Agreement, dated as of December 30, 1996, by and between
CellStar Corporation and Chase Mellon Shareholder Services, L.L.C.,
as Rights Agent. (12)
10.1 Employment Agreement by and between the Company and Alan H.
Goldfield, effective as of December 1, 1994. (3) (14)
10.2 Employment Agreement by and between CellStar, Ltd., the Company and
Mark Q. Huggins, effective as of January 15, 1997. (13)(14)
10.3 Authorized Agency Agreement by and between CellStar, Ltd., and
Southwestern Bell Mobile Systems, Inc., entered into as of December
17, 1996. (13)(15)
10.4 Authorized Agency Agreement by and between National Auto Center and
Southwestern Bell Mobile Systems, Inc., entered into as of February
5, 1993. (4)
10.5 Agency Agreement by and between National Auto Center, Inc. and GTE
Mobilnet of South Texas Limited Partnership, dated effective as of
February 1, 1993.(4)
10.6 Agency Agreement by and between National Auto Center, Inc. and GTE
Mobilnet of Austin Limited Partnership, dated effective as of
February 1, 1993. (4)
10.7 Agreement by and between Motorola Inc. by and through its Pan
American Cellular Subscriber Group, and CellStar, Ltd., effective
January 1, 1996 (United States). (5)
10.8 Master Agreement for the Purchase of Products and Inventory
Maintenance, Assembly and Fulfillment (IAF) Services between
Pacific Bell Mobile Services and CellStar, Ltd., effective
September 20, 1996. (13)(15)
10.9 Agreement by and between CellStar Pacific PTE LTD and Motorola
Inc., dated February 9, 1995 (the Philippines) (the "Philippines
Agreement"). (7)
10.10 Amendment to the Philippines Agreement, dated July 20, 1995. (3)
32
<PAGE>
10.11 Agreement by and between National Auto Center and the Pan American
Cellular Subscriber Division of Motorola Inc., dated as of January 1,
1995 (Latin American and Caribbean Territory). (6)
10.12 Agreement by and between CellStar, Ltd. and Motorola Inc., Greater China
Cellular Subscriber Division, dated as of April 28, 1995 (People's
Republic of China). (8)
10.13 Agreement by and between CellStar, Ltd. and Motorola Inc., Greater China
Cellular Subscriber Division, dated as of April 28, 1995 (Taiwan). (3)
10.14 Agreement by and between CellStar Pacific PTE LTD and Ericsson Mobile
Communications AB, dated as of April 12, 1995 (China, Hong Kong, Taiwan
and Korea). (8)
10.15 Distribution Contract by and between Cellular Express and Radiomovil
Dipsa, S.A. de C.V., dated as of September 23, 1992 (English translation
of executed agreement). (4)
10.16 Agent Agreement by and between CellStar Celular C.A. and
Telecomunicaciones Movilnet C.A., dated July 23, 1993. (4)
10.17 Lease by and between Alan H. Goldfield and National Auto Center, Inc.
regarding 605 West Airport Freeway, Irving, Texas. (4)(14)
10.18 Exclusive Cellular Subagent Agreement by and between National Auto Center
and Alan H. Goldfield d/b/a National Tape. (4)(14)
10.19 Registration Rights Agreement by and between the Company and Audiovox
Corporation. (4)
10.20 Form of Warrant for the purchase of shares of common stock to be issued
to Ladenburg, Thalmann & Co., Inc. and Raymond James & Associates, Inc.
(4)
10.21 Agency Agreement by and between CellStar de Colombia Ltda. and Occidente
y Caribe Celular S.A., dated as of June 24, 1994. (9)
10.22 Joint Venture Agreement by and among CellStar International
Corporation\Asia, Leap International Pte Ltd. and Hong An Hsein, dated
February 1, 1995. (3)
10.23 National Retail Dealer Agreement by and between National Auto Center,
Inc. and McCaw National Accounts, Inc. (6)
10.24 Agreement by and between Express Telecommunication Company, Inc.
(Extelcom) and CellStar Philippines, Inc., dated January 16, 1995. (6)
10.25 Stock Purchase Agreement by and between the Company and Motorola Inc.,
dated as of July 20, 1995. (1)
10.26 Registration Rights Agreement by and between the Company and Motorola
Inc., dated as of July 20, 1995. (1)
10.27 Amended and Restated Loan Agreement among National Auto Center, Inc., the
Company, each of the banks or other lending institutions signatory
thereto and Texas Commerce Bank National Association, dated as of July
20, 1995 (the "Credit Agreement"). (1)
10.28 First Amendment to Credit Agreement, dated as of February 29, 1996. (2)
10.29 Second Amendment to Credit Agreement, as of July 31, 1996. (5)
10.30 Third Amendment to Credit Agreement, dated as of July 31, 1996. (5)
10.31 Deed of Trust among CellStar, Ltd., First Interstate Bank of Texas, N.A.
and P. Michael Wells, Jr., dated April 28, 1995. (1)
10.32 First Modification of Deed of Trust by and between CellStar, Ltd. and
First Interstate Bank of Texas, N.A., dated as of August 31, 1995. (1)
10.33 Second Modification of Deed of Trust by and between CellStar, Ltd. and
First Interstate Bank of Texas, N.A. (11)
10.34 Promissory Note from CellStar, Ltd. to First Interstate Bank of Texas,
N.A. dated April 15, 1996. (11)
10.35 Promissory Note from CellStar, Ltd. to First Interstate Bank of Texas,
N.A. , dated August 31, 1995. (1)
33
<PAGE>
10.36 Loan Agreement by and between NDB Bank, Hong Kong Branch, and
CellStar (Asia) Corporation Limited (the "Asia Loan Agreement"),
dated August 9, 1995. (1)
10.37 Supplement to Debenture, dated November 22, 1995, relating to the
Asia Loan Agreement. (3)
10.38 CellStar Corporation 1993 Amended and Restated Long-Term Incentive
Plan. (13)(14)
10.39 CellStar Corporation Amended and Restated Annual Incentive
Compensation Plan. (13)(14)
10.40 CellStar Corporation 1994 Amended and Restated Director
Nonqualified Stock Option Plan. (7)(14)
10.41 Form of Stock Purchase Agreement by and between Alan H. Goldfield
and CellStar International Corporation/Asia, dated as of June 2,
1995. (10)
10.42 Employment Agreement, effective as of May 24, 1996, by and between
CellStar, Ltd., the Company and Richard M. Gozia. (11)(14)
10.43 Joint Venture Agreement, dated as of April 1, 1996, between
CellStar International Corporation\S.A., Simon Rex Earle and
Martin Robert deRooy and CellStar UK Limited (11)
10.44 Supply and Service Agreement by and between CellStar, Ltd., and MCI
Telecommunications Corporation, dated as of November 26, 1996 (the
"MCI Supply Agreement"). (13)(15)
10.45 Amendment Number One to MCI Supply Agreement, dated as of January
4, 1997. (13)
10.46 Amendment to MCI Supply Agreement, dated January 8, 1997. (13)
10.47 Distributor Supply Agreement between Motorola Ltd., trading as
Motorola, Cellular Subscriber Division, UK, and CellStar UK
Limited, executed April 3, 1996. (13)
10.48 Accessory Supply Agreement between Motorola Limited, trading as
European Cellular Subscriber Group, and CellStar UK Limited,
executed October 25, 1996. (13)(15)
10.49 Separation Agreement and Release between Kenneth E. Kerby and
CellStar, Ltd., effective December 19, 1996. (13)(14)
10.50 Loan Agreement by and between The First National Bank of Chicago,
Hong Kong Branch, and CellStar (Asia) Corporation Limited (the
"Amended Asian Loan Agreement"), dated July 31, 1996. (13)
10.51 Employment Agreement by and between CellStar (Asia) Corporation
Limited and Hong An-Hsien, dated as of June 1, 1995. (13)(14)
21.1 Subsidiaries of the Company. (13)
23.1 Consent of KPMG Peat Marwick LLP. (13)
27 Financial Data Schedule
99.1 Shareholders Agreement by Alan H. Goldfield to Motorola Inc., dated
as of July 20, 1995. (1)
_______________
(1) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1995, and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 29, 1996, and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1995, and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's Registration Statement No.
33-70262 on Form S-1, and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1996, and incorporated herein by
reference.
34
<PAGE>
(6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1994, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1995, and incorporated herein by
reference.
(8) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1995, and incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1994, and incorporated herein by
reference.
(10) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated June 2, 1995, and incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1996, and incorporated herein by
reference.
(12) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated December 30, 1996, and incorporated herein by reference.
(13) Filed herewith.
(14) The exhibit is a management contract or compensatory plan or arrangement.
(15) Certain provisions of this exhibit are subject to a request for
confidential treatment filed with the Securities and Exchange Commission.
4. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the covered
by this report on Form 10-K.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CELLSTAR CORPORATION
By: /s/ Alan H. Goldfield
------------------------------
Alan H. Goldfield
Chairman of the Board and
Chief Executive Officer
Date: February 27, 1997
36
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Alan H. Goldfield Date: February 27, 1997
----------------------------------------
Alan H. Goldfield
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
By: /s/ Richard M. Gozia Date: February 27, 1997
----------------------------------------
Richard M. Gozia
President, Chief Operating Officer
and Director
By: /s/ Mark Q. Huggins Date: February 27, 1997
----------------------------------------
Mark Q. Huggins
Senior Vice President - Administration,
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
By: /s/ Evelyn Henry Miller Date: February 27, 1997
----------------------------------------
Evelyn Henry Miller
Vice President -- Corporate Controller
(Principal Accounting Officer)
By: /s/ Michael S. Hedge Date: February 27, 1997
----------------------------------------
Michael S. Hedge
Vice President -- Wholesale Sales
and Director
By: /s/ Daniel T. Bogar Date: February 27, 1997
----------------------------------------
Daniel T. Bogar
Vice President -- South American Operations
and Director
By: /s/ James L. Johnson Date: February 27, 1997
----------------------------------------
James L. Johnson
Director
By: /s/ Sheldon I. Stein Date: February 27, 1997
----------------------------------------
Sheldon I. Stein
Director
By: /s/ John T. Stupka Date: February 27, 1997
----------------------------------------
John T. Stupka
Director
By: /s/ Terry S. Parker Date: February 27, 1997
----------------------------------------
Terry S. Parker
Director
37
<PAGE>
CellStar Corporation and Subsidiaries
Index to Consolidated Financial Statements
Independent Auditors' Report........................................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations.................................. F-4
Consolidated Statements of Stockholders' Equity ....................... F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements............................. F-7
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
CellStar Corporation:
We have audited the accompanying consolidated balance sheets of CellStar
Corporation and subsidiaries as of November 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended November 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CellStar
Corporation and subsidiaries as of November 30, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended November 30, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Dallas, Texas
January 31, 1997
F-2
<PAGE>
CellStar Corporation and Subsidiaries
Consolidated Balance Sheets
November 30, 1996 and 1995
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 27,296 31,508
Accounts receivable (less allowance for doubtful accounts of
$29,023 and $3,738, respectively) 131,812 125,079
Inventories 94,473 109,287
Deferred income taxes 4,274 3,158
Prepaid expenses 1,513 2,124
--------- ---------
Total current assets 259,368 271,156
Property and equipment, net 20,134 23,181
Goodwill (less accumulated amortization of $1,330 and $437, respectively) 16,597 17,047
Other assets 2,452 3,537
--------- ---------
$ 298,551 314,921
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 116,091 78,758
Notes payable to financial institutions 56,136 98,603
Accrued expenses 12,250 8,446
Income taxes payable 2,958 10,355
Current portion of long-term debt 568 584
--------- ---------
Total current liabilities 188,003 196,746
Long-term debt, less current portion 6,285 6,880
--------- ---------
Total liabilities 194,288 203,626
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized;
19,274,000 shares issued and outstanding 193 193
Additional paid-in capital 68,167 68,167
Common stock warrants 4 4
Foreign currency translation adjustments (4,520) (3,901)
Retained earnings 40,419 46,832
--------- ---------
Total stockholders' equity 104,263 111,295
--------- ---------
$ 298,551 314,921
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CellStar Corporation and Subsidiaries
Consolidated Statements of Operations
Years ended November 30, 1996, 1995 and 1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Net product sales $ 845,569 723,886 447,741
Activation income 88,474 75,690 60,153
Residual income 13,558 12,339 10,528
----------- ----------- -----------
Total revenues 947,601 811,915 518,422
Cost of sales 810,000 702,074 448,780
----------- ----------- -----------
Gross profit 137,601 109,841 69,642
Selling, general and administrative expenses 135,585 76,553 44,598
----------- ----------- -----------
Operating income 2,016 33,288 25,044
Other income (expense):
Interest expense (8,350) (6,144) (1,016)
(Undistributed loss) equity in earnings of joint ventures (219) 3,222 1,073
Other, net (313) (28) 175
----------- ----------- -----------
Total other income (expense) (8,882) (2,950) 232
----------- ----------- -----------
(Loss) income before income taxes (6,866) 30,338 25,276
(Benefit) provision for income taxes (453) 7,442 9,028
----------- ----------- -----------
Net (loss) income $ (6,413) 22,896 16,248
=========== =========== ===========
Net (loss) income per share $ (0.33) 1.22 0.88
=========== =========== ===========
Weighted average number of shares outstanding 19,274 18,822 18,441
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CellStar Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended November 30, 1996, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Common currency
------------ paid-in stock translation Retained
Shares Amount capital warrants adjustments earnings Total
------ ------ ---------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1993 13,500 $ 135 - - (74) 7,688 7,749
Net income - - - - - 16,248 16,248
Issuance of common stock 5,060 51 52,940 - - - 52,991
Warrants issued in connection with
initial public offering - - - 4 - - 4
Foreign currency translation
adjustment - - - - (350) - (350)
------ ------ ---------- -------- ----------- -------- -------
Balance at November 30, 1994 18,560 186 52,940 4 (424) 23,936 76,642
Net income - - - - - 22,896 22,896
Issuance of common stock 714 7 15,227 - - - 15,234
Foreign currency translation
adjustment - - - - (3,477) - (3,477)
------ ------ ---------- -------- ----------- -------- -------
Balance at November 30, 1995 19,274 193 68,167 4 (3,901) 46,832 111,295
Net loss - - - - - (6,413) (6,413)
Foreign currency translation
adjustment - - - - (619) - (619)
------ ------ ---------- -------- ----------- -------- -------
Balance at November 30, 1996 19,274 $ 193 68,167 4 (4,520) 40,419 104,263
====== ====== ========== ======== =========== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CellStar Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended November 30, 1996, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (6,413) 22,896 16,248
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Allowance for doubtful accounts, net of chargeoffs 24,538 849 1,103
Provision for inventory obsolescence 8,718 466 338
Depreciation and amortization 5,799 3,372 1,623
Gain on sale of assets (128) - -
(Undistributed loss) equity in earnings of joint ventures 219 (3,222) (1,073)
Deferred income tax benefit (1,116) (1,823) (1,424)
Changes in certain operating assets and liabilities:
Accounts receivable (32,637) (71,391) (30,512)
Inventories 6,067 (5,971) (51,413)
Prepaid expenses 611 (1,480) (518)
Other assets 318 (1,708) (741)
Accounts payable 36,162 (5,166) 24,682
Accrued expenses 3,361 3,056 1,074
Income taxes payable (7,397) 3,495 1,757
---------- ---------- ----------
Net cash provided by (used in) operating activities 38,102 (56,627) (38,856)
---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (6,139) (12,284) (4,615)
Proceeds from sale of assets 6,903 - -
Acquisition, net of cash acquired - - (260)
Purchase of equity investments in joint ventures - (750) -
---------- ---------- ----------
Net cash provided by (used in) investing activities 764 (13,034) (4,875)
---------- ---------- ----------
Cash flows from financing activities:
Net (payments) borrowings on notes payable to financial institutions (42,467) 86,103 10,000
Proceeds from issuance of note payable to stockholder - 3,728 -
Payments on notes payable to stockholders - (22,000) (13,682)
Proceeds from issuance of long-term debt - 4,425 -
Principal payments on long-term debt (611) (291) (198)
Net proceeds from issuance of common stock and common
stock warrants - 15,234 54,031
---------- ---------- ----------
Net cash (used in) provided by financing activities (43,078) 87,199 50,151
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (4,212) 17,538 6,420
Cash and cash equivalents at beginning of year 31,508 13,970 7,550
---------- ---------- ----------
Cash and cash equivalents at end of year $ 27,296 31,508 13,970
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
CellStar Corporation and subsidiaries (the "Company") is an
integrated wholesaler and retailer of cellular phones and other wireless
communications products, with operations in the United States, the Asia-Pacific
Region, Latin America and the United Kingdom. The Company is one of the world's
largest non-carrier wholesale distributors of cellular phones for Motorola,
Nokia and Ericsson. The Company is also one of the largest non-carrier wholesale
distributors of cellular phones for NEC in the United States. The Company is
also a retailer of wireless communications products and services, with 36 retail
locations in the United States, 6 retail locations in the Asia-Pacific Region
and 20 retail locations in Latin America as of November 30, 1996.
All significant intercompany balances and transactions have been
eliminated in consolidation. The fair value of current assets and liabilities
approximates carrying value due to their short maturity. The fair value of
long-term debt approximates carrying value due to the market rates of interest
being charged. Certain prior year amounts have been reclassified to conform to
the current year presentation.
(b) Inventories
Inventories are stated at the lower of cost (primarily on a moving
average basis) or market.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation of
equipment is provided over the estimated useful lives of the respective assets,
which range from three to thirty years, on a straight-line basis. Leasehold
improvements are amortized over the shorter of their useful life or the related
lease term. Major renewals are capitalized, while maintenance, repairs and minor
renewals are expensed as incurred.
(d) Preopening Costs
Labor and certain other costs related to the opening of new retail
locations are expensed as incurred.
(e) Revenue Recognition
For the Company's wholesale business, revenue is recognized when
product is shipped. In accordance with contractual agreements with cellular
service providers, the Company receives an initial activation commission for
obtaining subscribers for cellular phone services in connection with the
Company's retail operations. The agreements contain various provisions for
additional commissions ("residual commissions") based upon subscriber usage. The
agreements also provide for the reduction or elimination of initial activation
commissions if subscribers deactivate service within stipulated periods. The
Company recognizes initial activation and residual commission revenue when
earned and provides an allowance for estimated cellular service deactivations,
which is reflected as a reduction of accounts receivable in the accompanying
consolidated balance sheets.
(f) Foreign Currency
Assets and liabilities of the Company's foreign subsidiaries have
been translated at the rates of exchange at the end of each period. Revenues and
expenses have been translated at the weighted average rates of exchange in
effect during the respective period. Gains and losses resulting from translation
are accumulated as a separate component of stockholders' equity, except for
subsidiaries
F-7
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
located in countries whose economies are considered highly inflationary. In such
cases, translation adjustments are included primarily in cost of sales in the
accompanying consolidated statements of operations. Transaction gains or losses
for the years ended November 30, 1996, 1995 and 1994 were $1.8 million, $1.3
million and $1.4 million, respectively, and are included in the accompanying
consolidated statements of operations. The currency exchange rates of the Latin
American countries in which the Company conducts operations have historically
been volatile. The Company manages the risk of foreign currency devaluation by
attempting to increase prices of products sold at or above the anticipated rate
of local currency devaluation relative to the U.S. dollar, by indexing certain
of its receivables to exchange rates in effect at the time of their payment and
by entering into foreign currency exchange contracts in certain instances.
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(h) Net (Loss) Income Per Share
Net (loss) income per share is computed by dividing net (loss) income
by the weighted average number of shares of common stock and common stock
equivalents outstanding during each period. The dilutive effect of common stock
options and warrants, treated as common stock equivalents, is calculated using
the treasury stock method. Primary and fully diluted earnings per common and
common equivalent share are essentially the same.
(i) Statements of Cash Flow Information
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid investments with an original maturity of 90
days or less to be cash equivalents. The Company paid approximately $8.7
million, $6.0 million and $1.0 million of interest expense for the years ended
November 30, 1996, 1995 and 1994, respectively. The Company paid approximately
$7.8 million, $4.0 million and $8.7 million of income taxes for the years ended
November 30, 1996, 1995 and 1994, respectively. The Company wrote-off accounts
receivable of approximately $2.8 million, $2.0 million and $1.3 million for the
years ended November 30, 1996, 1995 and 1994, respectively.
(j) Equity Investments
The Company accounts for its investments in common stock of its joint
ventures using the equity method. The investments are included in other assets.
(k) 401(k) Savings Plan
The Company established a savings plan for employees in 1994.
Employees are eligible to participate if they were full-time employees as of
July 1, 1994 or upon completing ninety days of service. The plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974. Under
provisions of the plan, eligible employees are allowed to contribute as much as
15% of their compensation, up to the annual maximum allowed by the Internal
Revenue Service. To date, the Company has made no contributions to the plan.
F-8
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(l) Goodwill
Goodwill represents the excess of the purchase price over the fair
value of net assets acquired and is amortized using the straight-line method
over 20 years. The Company assesses the net realizable value of this intangible
asset by determining the estimated future cash flows related to such assets. In
the event that assets are found to be carried at amounts which are in excess of
estimated future operating cash flows, then the intangible assets will be
adjusted for impairment to a level commensurate with a discounted cash flow
analysis of the underlying assets.
(m) Use of Estimates
Management of the Company has made a number of estimates and
assumptions related to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities in preparation of these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(2) Related Party Transactions
(a) Transactions with Motorola
Motorola is a major supplier of cellular phones and accessories to
the Company. Total purchases from Motorola approximated $609.7 million, $420.2
million and $310.4 million for the years ended November 30, 1996, 1995 and 1994,
respectively. Included in accounts payable at November 30, 1996 and 1995 was
approximately $90.8 million and $54.1 million, respectively, due to Motorola for
purchases of inventory.
In accordance with a stock purchase agreement dated July 20, 1995,
Motorola purchased 696,437 shares of restricted stock from the Company for
approximately $15.0 million. The proceeds were used to pay a portion of the
$22.0 million note payable to the Chief Executive Officer made in connection
with the Company's acquisition of CellStar Asia (note 10).
(b) Transactions with Audiovox Corporation
In December 1993, the Company entered into a one-year distributor
agreement with Audiovox Corporation ("Audiovox") whereby the Company was named
an exclusive independent distributor of certain Audiovox products in Texas,
Oklahoma, New Mexico and Mexico. Effective in 1995, the Company only served as a
sales representative for certain Audiovox automotive products. Total inventory
purchases from Audiovox were $0.5 million, $1.2 million and $21.6 million for
the years ended November 30, 1996, 1995 and 1994, respectively. Included in
accounts payable at November 30, 1996 and 1995 was $0.3 million and $0.4
million, respectively, due to Audiovox for purchases of inventory.
(3) Inventories
Inventories consisted of the following at November 30, 1996 and 1995
(in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Inventories $102,795 $110,091
Reserves (8,322) (804)
---------- ----------
Inventories, net $ 94,473 $109,287
========== ==========
</TABLE>
F-9
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(4) Property and Equipment
Property and equipment consisted of the following at November 30,
1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land and building $ 6,837 6,837
Furniture, fixtures and equipment 14,894 12,587
Jet aircraft 4,306 4,306
Leasehold improvements 1,688 2,998
Construction in progress - 998
------------ ------------
27,725 27,726
Less accumulated depreciation
and amortization (7,591) (4,545)
------------ ------------
$ 20,134 23,181
============ ============
</TABLE>
(5) Debt
Notes payable to financial institutions consisted of the following at
November 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
U.S. revolving credit facility $ 53,233 70,000
Asian revolving credit facility - 21,603
Brazilian note payable - 7,000
Brazilian credit facility 2,903 -
------------ ------------
$ 56,136 98,603
============ ============
</TABLE>
The U.S. revolving credit facility, with Texas Commerce Bank ("TCB")
as agent, was reduced from $135.0 million to $90.0 million in July 1996. The
facility matures on July 20, 1998 and is secured primarily by certain of the
Company's U.S. accounts receivable and inventory. At November 30, 1996, the
availability of funds under the U.S. revolving credit facility was governed by a
borrowing base of $85.6 million. Effective December 24, 1996, the advance rates
of the borrowing base were lowered. Borrowings were limited to $65.9 million at
January 27, 1997.
The U.S. revolving credit facility contains, among other provisions,
covenants relating to minimum net worth, the maintenance of certain financial
ratios, capital spending, dividend payments, additional debt, mergers, and
acquisitions and dispositions of assets. The Company did not comply with certain
covenants at November 30, 1996 and accordingly has received waivers with respect
to such covenants from its lenders. Covenants are measured on a quarterly basis.
There can be no assurance that the Company will not require additional waivers
in the future or, if required, that the lenders will grant them.
The Asian revolving credit facility, extended by the First National
Bank of Chicago, Hong Kong branch, was reduced from $22.5 million to $15.0
million on March 31, 1996. The facility matures on July 31, 1997 and is secured
primarily by CellStar Asia's accounts receivable and inventory and the Company's
guarantee. The availability of funds under the Asian revolving credit facility
is governed by a
F-10
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
borrowing base. The Asian revolving credit facility contains, among other
provisions, covenants relating to CellStar Asia's net worth and certain
financial ratios.
The outstanding balance under the Brazilian note payable was repaid
by the Company during 1996. At November 30, 1996, the Company's Brazilian
subsidiary had a $2.9 million line of credit with a Brazilian bank that was
secured by a letter of credit issued by TCB.
The weighted average interest rate on short-term borrowings at
November 30, 1996 and 1995 was 9.57% and 7.65%, respectively.
Long-term debt consisted of the following at November 30, 1996 and
1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Equipment loan $ 2,723 3,039
Mortgage note payable 4,130 4,425
---------- ----------
6,853 7,464
Less current portion (568) (584)
---------- ----------
$ 6,285 6,880
========== ==========
</TABLE>
The equipment loan is a note payable to a finance company which bears
interest at the Federal Reserve Bank's one-month Commercial Paper Rate plus
3.12% (8.57% at November 30, 1996). The note is payable in monthly installments
of approximately $41,000 through July 2003 and is secured by the Company's jet
aircraft. The Company has an option to convert the interest rate to a fixed rate
at a comparable U.S. Treasury base rate plus 3.25%.
The $4.1 million mortgage note is due to a financial institution in
quarterly installments of approximately $74,000 through September 2005; bears
interest at the institution's prime rate plus 1.0%, 9.25% at November 30, 1996,
and is secured by the Company's headquarters facilities.
Required principal payments on long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ending
November 30, Payments
- ------------ --------
<S> <C>
1997 $ 568
1998 592
1999 618
2000 647
2001 678
Thereafter 3,750
</TABLE>
F-11
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(6) Income Taxes
Income tax (benefit) expense for the years ended November 30, 1996,
1995 and 1994 consisted of the following (in thousands):
<TABLE>
<CAPTION>
Current Deferred Total
----------- ------------ -----------
<S> <C> <C> <C>
Year ended
November 30, 1996:
United States:
Federal $ (4,682) (1,383) (6,065)
State (366) (78) (444)
Latin America 1,237 204 1,441
Asia-Pacific 4,474 141 4,615
----------- ----------- -----------
$ 663 (1,116) (453)
=========== =========== ===========
Year ended
November 30, 1995:
United States:
Federal $ 4,793 (1,187) 3,606
State 575 (25) 550
Latin America 655 (450) 205
Asia-Pacific 3,242 (161) 3,081
----------- ----------- -----------
$ 9,265 (1,823) 7,442
=========== =========== ===========
Year ended
November 30, 1994:
United States:
Federal $ 6,899 (1,177) 5,722
State 681 (107) 574
Latin America 2,872 (140) 2,732
----------- ----------- -----------
$ 10,452 (1,424) 9,028
=========== =========== ===========
</TABLE>
F-12
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Income tax (benefit) expense differed from the amounts computed by
applying the United States Federal income tax rate of 35% to pretax income as a
result of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Expected tax (benefit) expense $ (2,403) 10,618 8,847
Foreign and U.S. tax effects
attributable to foreign operations 2,658 (2,630) 409
State income taxes, net of
Federal benefit (289) 358 386
(Undistributed loss) equity in earnings
of joint ventures - (1,128) (375)
Change in the valuation
allowance for deferred
tax assets - - (71)
Other, net (419) 224 (168)
---------- ---------- ---------
Actual tax (benefit) expense $ (453) 7,442 9,028
========== ========== =========
</TABLE>
The tax effect of temporary differences underlying significant portions
of deferred tax assets at November 30, 1996 and 1995, is presented below (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
United States:
Accounts receivable, principally
allowance for doubtful accounts $ 2,734 956
Inventory adjustments for tax
purposes 2,265 2,545
Other, net (897) (860)
Asia-Pacific:
Accounts receivable, principally
allowance for doubtful accounts 20 161
Latin America:
Other, net 152 356
---------- ----------
Net deferred tax asset $ 4,274 3,158
========== ==========
</TABLE>
Based on the expectation that the temporary differences will reverse
in the next year and the ability to carryback deferred tax benefits, management
believes it is more likely than not that the Company will realize the benefit of
such deferred tax assets.
The Company does not provide for Federal income taxes or tax benefits
on the undistributed earnings and/or losses of its international subsidiaries
because earnings are reinvested and, in the opinion of management, will continue
to be reinvested indefinitely. At November 30, 1996, the Company had not
provided Federal income taxes on earnings of international subsidiaries of
approximately $23.8 million. Upon distribution of these earnings in the form of
dividends or otherwise, the Company would be subject to both U.S. income taxes
and withholding taxes in the various international jurisdictions.
F-13
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Because many types of transactions are susceptible to varying
interpretations under foreign and U.S. income tax laws and regulations, the
amounts recorded in the accompanying consolidated financial statements may be
subject to change upon final determination by the respective taxing authorities.
Management believes it has provided an adequate tax provision.
(7) Leases
The Company leases certain land, retail stores, office facilities and
equipment under operating leases which range from two to ninety-nine years and
which generally contain renewal options for consecutive five-year terms. Rental
expense for operating leases was approximately $4.3 million, $3.1 million and
$2.1 million for the years ended November 30, 1996, 1995 and 1994, respectively.
Future minimum lease payments under operating leases as of November 30, 1996 are
as follows (in thousands):
<TABLE>
<CAPTION>
November 30, Amount
----------
<S> <C>
1997 $ 3,234
1998 2,630
1999 1,574
2000 1,077
2001 157
Thereafter 1,247
----------
$ 9,919
==========
</TABLE>
(8) Concentration of Credit Risk and Major Customer Information
CellStar Asia accounted for 11.5% or $59.8 million of total revenues
for the year ended November 30, 1994 and accounted for 11.1% or $90.2 million of
total revenues for the year ended November 30, 1995, prior to it becoming a
wholly-owned subsidiary of the Company (note 10). No other customer accounted
for 10% or more of total revenues in each of the years ended November 30, 1996,
1995 and 1994.
F-14
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(9) Geographic Area Information
The Company operates predominantly within one business segment,
wholesale and retail sales of cellular phones and related equipment. Financial
information by geographic area as of and for the years ended November 30, 1996,
1995 and 1994, is as follows (in thousands):
<TABLE>
<CAPTION>
United Latin
States Asia-Pacific America Europe Total
---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
November 30, 1996:
Total revenues, net of intercompany amounts $ 568,744 248,493 119,796 10,568 947,601
Intercompany sales (purchases) 38,802 (2,121) (36,676) (5) -
(Loss) income before income taxes (3,870) 20,094 (22,877) (213) (6,866)
Net income (loss) 2,639 15,479 (24,318) (213) (6,413)
Identifiable assets 159,993 82,024 44,382 12,152 298,551
November 30, 1995:
Total revenues, net of intercompany amounts $ 478,177 183,274 150,464 - 811,915
Intercompany sales (purchases) 103,332 (32,564) (70,768) - -
Income before income taxes 10,213 19,775 350 - 30,338
Net income 6,057 16,694 145 - 22,896
Identifiable assets 149,320 93,441 72,160 - 314,921
November 30, 1994:
Total revenues, net of intercompany amounts $ 398,104 - 120,318 - 518,422
Intercompany sales (purchases) 66,199 - (66,199) - -
Income before income taxes 19,170 - 6,106 - 25,276
Net income 12,874 - 3,374 - 16,248
Identifiable assets 131,219 - 55,135 - 186,354
</TABLE>
(10) Purchase of CellStar Asia
In October 1993, the Company purchased a 50% ownership interest in a
newly-formed company, CellStar Asia, for approximately $0.2 million. On February
1, 1995, the Company entered into a joint venture agreement with Leap
International PTE LTD. ("Leap"), a Singapore company, and Horng An Hsien ("Mr.
Horng"), an individual who was also the Company's joint venture partner in
CellStar Asia. Under the terms of the joint venture agreement, the parties
formed CellStar Pacific PTE LTD ("CellStar Pacific"), a Singapore company which
was owned 75% by the Company, 20% by Leap and 5% by Mr. Horng. The Company's
initial investment was approximately $0.2 million. An additional 5% of CellStar
Pacific was purchased by the Company in fiscal 1995. CellStar Asia and CellStar
Pacific distribute cellular phone products in the People's Republic of China and
other Asia-Pacific markets.
F-15
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
On June 2, 1995, the Company's Chief Executive Officer acquired the
remaining 50% interest in CellStar Asia for cash of $1.0 million and 1.0 million
shares of restricted common stock with a fair value of $21.0 million.
Simultaneously, the Chief Executive Officer then transferred this ownership
interest in CellStar Asia to the Company in exchange for a note payable of $22.0
million, giving the Company 100% ownership in CellStar Asia. The acquisition of
the remaining 50% interest in CellStar Asia is being accounted for as a purchase
and the results of operations of CellStar Asia have been included in the
consolidated financial statements from the date of acquisition. The Company's
50% equity interest in the operations of CellStar Asia, prior to the date of
acquisition, is included in equity in earnings of joint venture. Goodwill of
$17.5 million is being amortized on a straight-line basis over 20 years. The
following unaudited pro forma information presents the consolidated results of
operations of the Company as if the acquisition of CellStar Asia had occurred on
December 1, 1993, with pro forma adjustments to give effect to the elimination
of sales by the Company to CellStar Asia, amortization of goodwill, interest
expense on acquisition debt, and certain other adjustments at November 30, 1995
and 1994 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Revenues $ 806,648 519,712
Net income 24,913 15,215
Net income per share 1.32 0.83
</TABLE>
Prior to the acquisition, the Company's sales to CellStar Asia were
$90.2 million and $59.8 million in 1995 and 1994, respectively. Gross profit
recognized by the Company on these sales was $3.6 million and $1.8 million in
1995 and 1994, respectively.
(11) Stockholders' Equity
(a) Reorganization and Initial Public Offering
On December 1, 1993, a wholly-owned subsidiary of the Company was merged
with and into National Auto Center, Inc. ("NAC"), a Texas corporation which was
incorporated in 1981. As a result of this transaction, the Company acquired all
of the outstanding common stock of NAC. In connection with the reorganization,
all of the outstanding stock of Audiomex Export Corp. ("Audiomex"), the parent
company of Celular Express, S.A. de C.V. (the Mexican operations), was
contributed to NAC. NAC and Audiomex had been jointly owned by Audiovox and the
Company's Chief Executive Officer, each of which was issued 6.75 million shares
of the Company's common stock in the reorganization. The reorganization was
treated in a manner similar to a pooling of interests.
In December 1993, the Company issued 5.06 million shares of common stock
to the public. The net proceeds of this initial public offering were $53.0
million. The proceeds were used to pay $13.7 million of notes payable to the
Company's stockholders, $2.5 million of a note payable to a financial
institution, and $2.9 million of accrued fees and bonus to stockholders. The
balance of the proceeds was added to the Company's working capital for general
corporate purposes.
F-16
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(b) Common Stock Options and Warrants
In December 1993, the Company issued warrants for 440,000 shares of its
common stock. The warrants are exercisable at $13.80 per share for a period of
four years commencing in December 1994, subject to adjustment in certain events,
and expire in December 1998.
In December 1993, the Company adopted the 1993 Stock Option Plan ("the
Plan") covering 500,000 shares of common stock of the Company. On March 14,
1995, the number of shares covered by the Plan was increased to 1.5 million.
Options under the Plan will be granted as determined by the Company's Board of
Directors. The options will expire ten years from the date of grant unless
earlier termination due to death, disability, retirement or other termination of
employment of the optionee. Options, other than options granted to the Company's
Chief Executive Officer, have vesting schedules ranging from immediate vesting
on the date of grant to vesting 25% per year commencing on the first anniversary
of the date of grant. The exercise price is the quoted market value of the
common stock on the date of grant.
In March 1994, the Board of Directors also adopted the 1994 Directors'
Nonqualified Stock Plan (the "Directors' Option Plan") and subsequently amended
it in November 1994. The Directors' Option Plan provides that each non-employee
director of the Company as of the date the Directors' Option Plan was adopted
and each person who thereafter becomes a non-employee director will
automatically be granted an option to purchase 2,500 shares of common stock. The
purchase price for the shares on the grant date is equal to fair market value of
the shares on the grant date. A total of 50,000 shares of common stock is
authorized for issuance pursuant to the Directors' Option Plan. Each option
granted under the Directors' Option Plan will become exercisable six months
after its date of grant and will not be exercisable more than ten years after
its date of grant. The options will expire ten years from the date of grant
unless earlier termination due to death, disability, retirement or other
termination of employment of the optionee.
F-17
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Details of stock options are as follows:
<TABLE>
<CAPTION>
Number of Shares Option Price
------------------- -----------------
1994
- -------------------------
<S> <C> <C>
Granted 120,000 $11.50 - 19.00
Exercised - -
Forfeited 27,500 $11.50
Outstanding, end of year 92,500 $11.50 - 19.00
Exercisable, end of year - -
<CAPTION>
1995
- -------------------------
<S> <C> <C>
Granted 598,600 $18.50 - 29.75
Exercised 17,125 $11.50 - 18.62
Forfeited 13,750 $11.50 - 18.50
Outstanding, end of year 660,225 $11.50 - 29.75
Exercisable, end of year 9,750 $11.50 - 19.00
<CAPTION>
1996
- -------------------------
<S> <C> <C>
Granted 471,665 $ 6.50 - 26.25
Exercised - -
Forfeited 404,422 $11.50 - 29.75
Outstanding, end of year 727,468 $ 6.50 - 22.75
Exercisable, end of year 180,468 $11.50 - 22.75
Reserved for future grants under the Plan 780,032
Reserved for future grants under the Directors' Option Plan 42,500
</TABLE>
(c) Common Stock Ownership and Voting Rights
In December 1993, Audiovox granted the Chief Executive Officer a two-
year option to purchase, in whole or in part, up to 1.5 million shares of the
Company's common stock owned by Audiovox. On June 2, 1995, the Chief Executive
Officer exercised this option at $11.50 per share. Additionally, Audiovox
granted the Chief Executive Officer an option to purchase up to 250,000 shares
of the Company's common stock at $13.80 per share, commencing in December 1993
and expiring in December 1996. These options were subject to certain
restrictions and adjustments.
The Chief Executive Officer had the right to vote the 1.3 million shares
owned by Audiovox until December 3, 1995. Further, the Chief Executive Officer
has a revocable proxy to vote the 1.0 million shares transferred for the
acquisition of CellStar Asia (note 10).
(d) Stockholder Rights Plan
On December 30, 1996, the Board of Directors of the Company declared a
dividend distribution of one common stock purchase right ("Right") for each
share of the Company's common stock outstanding on January 9, 1997. Each Right
entitles the holder to buy one one-thousandth of a share of Series A Preferred
Stock, par value $10.00 per share, at a purchase price of $80.00 per one one-
thousandth of a share, subject to adjustment. The Rights are not currently
exercisable, but would become exercisable if certain events occurred relating to
a person or group acquiring or
F-18
<PAGE>
CellStar Corporation and Subsidiaries
Notes to Consolidated Financial Statements
attempting to acquire 15% or more of the outstanding shares of common stock of
the Company. The Rights expire on January 9, 2007, unless earlier redeemed by
the Company.
(12) Commitments and Contingencies
(a) Employment Contracts
In January 1995, the Board of Directors approved an employment agreement
with the Company's Chief Executive Officer ("CEO"). This agreement has no fixed
expiration date. Instead, the agreement expires on the fifth anniversary of the
date the Board of Directors determines to fix the expiration date. The
agreement, among other provisions, provides the CEO with a base salary of
$850,000 (subject to adjustment by the Board of Directors), potential annual
incentive payments, stock options and life and disability insurance. In 1996 and
1995, the Chief Executive Officer received a base salary of $850,000. In 1994,
the Chief Executive Officer received a base salary of $400,000 plus a bonus,
based on the Company's operating performance, of an additional $400,000. These
amounts are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. In May 1996, the Board of
Directors approved an employment agreement with the Company's Chief Financial
Officer (current President and Chief Operating Officer). Such agreement will
expire on May 24, 2001, and provides for a base salary of $250,000 (subject to
adjustment by the Board of Directors), potential for annual incentive payments,
stock options and life and disability insurance. In 1996, the Chief Financial
Officer received a prorated base salary of $125,000.
(b) Litigation
During the period from May 14, 1996 through July 22, 1996, four separate
purported class action lawsuits were filed in the United States District Court,
Northern District of Texas, Dallas Division against the Company; certain of the
Company's current and former officers, directors and employees; and the
Company's independent auditors. The four lawsuits have been consolidated, and
the State of Wisconsin Investment Board has appointed as lead plaintiff in the
consolidated action.
A Consolidated Amended Complaint has been filed, which asserts claims
for violations of Section 10(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 10b-5 promulgated thereunder, violations
of Section 20(a) of the Exchange Act, state statutory fraud, common law fraud,
negligent misrepresentation and breach of fiduciary duty. The Consolidated
Amended Complaint alleges that the defendants made untrue statements of material
fact and/or omitted to state material facts about the business, financial
condition, performance and future prospects of the Company and that, as a result
of such statements or omissions, the value of the Company's common stock was
artificially inflated. Plaintiffs seek compensatory damages, exemplary damages
and costs and expenses, including attorneys' fees and expert fees.
All defendants have filed motions to dismiss all claims asserted in the
Consolidated Amended Complaint. The motions are pending. The Company believes it
has meritorious defenses to these claims and is vigorously defending this
action. The ultimate outcome is not currently predictable.
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. Management believes that
the disposition of these other matters will not have a materially adverse effect
on the consolidated financial condition or results of operations of the Company.
(c) Financial Guarantee
The Company has guaranteed up to RM6.4 million (Malaysian ringgits),
$2.5 million as of November 30, 1996, for bank borrowings of its Malaysian
joint venture.
F-19
<PAGE>
CellStar Corporation and Subsidiaries
Supplemental Financial Data (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Three Months Ended Quarter Quarter Quarter Quarter
- ------------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
1996
Total revenues $ 204,975 225,571 223,590 293,465
Gross profit 32,005 29,628 30,792 45,176
Net income (loss) 738 (3,052) (12,331) 8,232
Net income (loss) per share 0.04 (0.16) (0.64) 0.43
<CAPTION>
1995
<S> <C> <C> <C> <C>
Total revenues $ 190,876 177,772 198,300 244,967
Gross profit 23,849 23,226 30,746 32,020
Net income 5,143 5,163 6,222 6,368
Net income per share 0.28 0.28 0.33 0.33
</TABLE>
F-20
<PAGE>
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation of the
Company.(1)
3.2 Amended and Restated Bylaws of the Company.(2)
4.1 The Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws of the Company filed in response to items 3.1
and 3.2 are incorporated in this item by reference.(1)(2)
4.2 Specimen Common Stock Certificate of the Company. (3)
4.3 Rights Agreement, dated as of December 30, 1996, by and between
CellStar Corporation and Chase Mellon Shareholder Services, L.L.C.,
as Rights Agent. (12)
10.1 Employment Agreement by and between the Company and Alan H.
Goldfield, effective as of December 1, 1994. (3) (14)
10.2 Employment Agreement by and between CellStar, Ltd., the Company and
Mark Q. Huggins, effective as of January 15, 1997. (13)(14)
10.3 Authorized Agency Agreement by and between CellStar, Ltd., and
Southwestern Bell Mobile Systems, Inc., entered into as of December
17, 1996. (13)(15)
10.4 Authorized Agency Agreement by and between National Auto Center and
Southwestern Bell Mobile Systems, Inc., entered into as of February
5, 1993. (4)
10.5 Agency Agreement by and between National Auto Center, Inc. and GTE
Mobilnet of South Texas Limited Partnership, dated effective as of
February 1, 1993.(4)
10.6 Agency Agreement by and between National Auto Center, Inc. and GTE
Mobilnet of Austin Limited Partnership, dated effective as of
February 1, 1993. (4)
10.7 Agreement by and between Motorola Inc. by and through its Pan
American Cellular Subscriber Group, and CellStar, Ltd., effective
January 1, 1996 (United States). (5)
10.8 Master Agreement for the Purchase of Products and Inventory
Maintenance, Assembly and Fulfillment (IAF) Services between
Pacific Bell Mobile Services and CellStar, Ltd., effective
September 20, 1996. (13)(15)
10.9 Agreement by and between CellStar Pacific PTE LTD and Motorola
Inc., dated February 9, 1995 (the Philippines) (the "Philippines
Agreement"). (7)
10.10 Amendment to the Philippines Agreement, dated July 20, 1995. (3)
10.11 Agreement by and between National Auto Center and the Pan American
Cellular Subscriber Division of Motorola Inc., dated as of January 1,
1995 (Latin American and Caribbean Territory). (6)
10.12 Agreement by and between CellStar, Ltd. and Motorola Inc., Greater China
Cellular Subscriber Division, dated as of April 28, 1995 (People's
Republic of China). (8)
10.13 Agreement by and between CellStar, Ltd. and Motorola Inc., Greater China
Cellular Subscriber Division, dated as of April 28, 1995 (Taiwan). (3)
10.14 Agreement by and between CellStar Pacific PTE LTD and Ericsson Mobile
Communications AB, dated as of April 12, 1995 (China, Hong Kong, Taiwan
and Korea). (8)
10.15 Distribution Contract by and between Cellular Express and Radiomovil
Dipsa, S.A. de C.V., dated as of September 23, 1992 (English translation
of executed agreement). (4)
10.16 Agent Agreement by and between CellStar Celular C.A. and
Telecomunicaciones Movilnet C.A., dated July 23, 1993. (4)
10.17 Lease by and between Alan H. Goldfield and National Auto Center, Inc.
regarding 605 West Airport Freeway, Irving, Texas. (4)(14)
<PAGE>
10.18 Exclusive Cellular Subagent Agreement by and between National Auto Center
and Alan H. Goldfield d/b/a National Tape. (4)(14)
10.19 Registration Rights Agreement by and between the Company and Audiovox
Corporation. (4)
10.20 Form of Warrant for the purchase of shares of common stock to be issued
to Ladenburg, Thalmann & Co., Inc. and Raymond James & Associates, Inc.
(4)
10.21 Agency Agreement by and between CellStar de Colombia Ltda. and Occidente
y Caribe Celular S.A., dated as of June 24, 1994. (9)
10.22 Joint Venture Agreement by and among CellStar International
Corporation\Asia, Leap International Pte Ltd. and Hong An Hsein, dated
February 1, 1995. (3)
10.23 National Retail Dealer Agreement by and between National Auto Center,
Inc. and McCaw National Accounts, Inc. (6)
10.24 Agreement by and between Express Telecommunication Company, Inc.
(Extelcom) and CellStar Philippines, Inc., dated January 16, 1995. (6)
10.25 Stock Purchase Agreement by and between the Company and Motorola Inc.,
dated as of July 20, 1995. (1)
10.26 Registration Rights Agreement by and between the Company and Motorola
Inc., dated as of July 20, 1995. (1)
10.27 Amended and Restated Loan Agreement among National Auto Center, Inc., the
Company, each of the banks or other lending institutions signatory
thereto and Texas Commerce Bank National Association, dated as of July
20, 1995 (the "Credit Agreement"). (1)
10.28 First Amendment to Credit Agreement, dated as of February 29, 1996. (2)
10.29 Second Amendment to Credit Agreement, as of July 31, 1996. (5)
10.30 Third Amendment to Credit Agreement, dated as of July 31, 1996. (5)
10.31 Deed of Trust among CellStar, Ltd., First Interstate Bank of Texas, N.A.
and P. Michael Wells, Jr., dated April 28, 1995. (1)
10.32 First Modification of Deed of Trust by and between CellStar, Ltd. and
First Interstate Bank of Texas, N.A., dated as of August 31, 1995. (1)
10.33 Second Modification of Deed of Trust by and between CellStar, Ltd. and
First Interstate Bank of Texas, N.A. (11)
10.34 Promissory Note from CellStar, Ltd. to First Interstate Bank of Texas,
N.A. dated April 15, 1996. (11)
10.35 Promissory Note from CellStar, Ltd. to First Interstate Bank of Texas,
N.A. , dated August 31, 1995. (1)
10.36 Loan Agreement by and between NDB Bank, Hong Kong Branch, and
CellStar (Asia) Corporation Limited (the "Asia Loan Agreement"),
dated August 9, 1995. (1)
10.37 Supplement to Debenture, dated November 22, 1995, relating to the
Asia Loan Agreement. (3)
10.38 CellStar Corporation 1993 Amended and Restated Long-Term Incentive
Plan. (13)(14)
10.39 CellStar Corporation Amended and Restated Annual Incentive
Compensation Plan. (13)(14)
10.40 CellStar Corporation 1994 Amended and Restated Director
Nonqualified Stock Option Plan. (7)(14)
10.41 Form of Stock Purchase Agreement by and between Alan H. Goldfield
and CellStar International Corporation/Asia, dated as of June 2,
1995. (10)
10.42 Employment Agreement, effective as of May 24, 1996, by and between
CellStar, Ltd., the Company and Richard M. Gozia. (11)(14)
<PAGE>
10.43 Joint Venture Agreement, dated as of April 1, 1996, between
CellStar International Corporation\S.A., Simon Rex Earle and
Martin Robert deRooy and CellStar UK Limited (11)
10.44 Supply and Service Agreement by and between CellStar, Ltd., and MCI
Telecommunications Corporation, dated as of November 26, 1996 (the
"MCI Supply Agreement"). (13)(15)
10.45 Amendment Number One to MCI Supply Agreement, dated as of January
4, 1997. (13)
10.46 Amendment to MCI Supply Agreement, dated January 8, 1997. (13)
10.47 Distributor Supply Agreement between Motorola Ltd., trading as
Motorola, Cellular Subscriber Division, UK, and CellStar UK
Limited, executed April 3, 1996. (13)
10.48 Accessory Supply Agreement between Motorola Limited, trading as
European Cellular Subscriber Group, and CellStar UK Limited,
executed October 25, 1996. (13)(15)
10.49 Separation Agreement and Release between Kenneth E. Kerby and
CellStar, Ltd., effective December 19, 1996. (13)(14)
10.50 Loan Agreement by and between The First National Bank of Chicago,
Hong Kong Branch, and CellStar (Asia) Corporation Limited (the
"Amended Asian Loan Agreement"), dated July 31, 1996. (13)
10.51 Employment Agreement by and between CellStar (Asia) Corporation
Limited and Hong An-Hsien, dated as of June 1, 1995. (13)(14)
21.1 Subsidiaries of the Company. (13)
23.1 Consent of KPMG Peat Marwick LLP. (13)
27 Financial Data Schedule
99.1 Shareholders Agreement by Alan H. Goldfield to Motorola Inc., dated
as of July 20, 1995. (1)
_______________
(1) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1995, and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 29, 1996, and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1995, and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's Registration Statement No.
33-70262 on Form S-1, and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1996, and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1994, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 1995, and incorporated herein by
reference.
(8) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1995, and incorporated herein by
reference.
(9) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended August 31, 1994, and incorporated herein by
reference.
(10) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated June 2, 1995, and incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended May 31, 1996, and incorporated herein by
reference.
(12) Previously filed as an exhibit to the Company's Current Report on Form
8-K, dated December 30, 1996, and incorporated herein by reference.
(13) Filed herewith.
(14) The exhibit is a management contract or compensatory plan or arrangement.
(15) Certain provisions of this exhibit are subject to a request for
confidential treatment filed with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") effective as of January 15,
1997, by and between CellStar, Ltd., a Texas limited partnership (the
"Employer"), CellStar Corporation, a Delaware corporation and parent company of
Employer ("Parent"), and Mark Q. Huggins (the "Employee").
R E C I T A L S
---------------
WHEREAS, Employer desires to obtain the benefit of the services of Employee
as an employee of Employer and as an officer of Parent for the period of time
provided in this Agreement; and
WHEREAS, Employee desires to render services to Employer and Parent on the
terms and conditions hereinafter provided;
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
ARTICLE I
EMPLOYMENT
1.1 Employment. Effective January 15, 1997, the Employer shall employ the
----------
Employee and the Employee shall accept employment by the Employer for the period
and upon the terms and conditions contained in this Agreement.
1.2 Term. The term of this Agreement shall commence on January 15, 1997
----
(the "Effective Date"), and shall end on January 15, 1999 (the "Original Term"),
unless earlier terminated as provided herein (the period from January 15, 1997,
through January 15, 1999, or the date of such earlier termination, as
applicable, is hereinafter referred to as the "Term").
1.3 Office and Duties.
-----------------
(a) Position. During the Term, the Employee shall serve as Senior Vice
--------
President-Administration and Chief Financial Officer of Parent, with
authority, duties and responsibilities consistent with such offices, and
shall perform such other services for Employer, Parent and their affiliated
entities consistent with the position of Senior Vice President-
Administration and Chief Financial Officer as may be reasonably assigned to
him from time to time by senior management of Employer and/or Parent and by
the Board of Directors of Parent. During the Term, Employee shall also
accept election or appointment, and serve, as an officer and/or director of
any affiliated entity of Employer and Parent, and perform the duties
appropriate thereto, without additional compensation
<PAGE>
other than as set forth herein. Employee's actions as Senior Vice
President-Administration and Chief Financial Officer shall at all times be
subject to the direction of the Board of Directors of Parent.
(b) Commitment. During the Term, the Employee shall devote
----------
substantially all of his time, energy, skill and best efforts to the
performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of Employer, Parent and their
affiliated entities. Subject to the foregoing, the Employee may serve in
any capacity with any civic, educational or charitable organization;
provided that such activities and services do not interfere or conflict
with the performance of his duties hereunder. Employee shall comply with
reasonable policies, standards and regulations established from time to
time by senior management of Employer and Parent and/or the Board of
Directors of Parent.
1.4 Compensation.
------------
(a) Base Salary. Employer shall pay the Employee as compensation an
-----------
aggregate salary ("Base Salary") of $230,000 per year during the Term, or
such greater amount as shall be approved by the Compensation Committee of
the Parent's Board of Directors. The Base Salary for each year shall be
paid by Employer in accordance with the regular payroll practices of
Employer.
(b) Annual Incentive Payment. Each year during the Term, the Employee
------------------------
shall be eligible to participate in an annual incentive plan approved by
the Compensation Committee of Parent's Board of Directors. Pursuant to
action of the Compensation Committee of the Board of Directors of Parent,
the parties understand that, for the fiscal year ending in November 1997,
the Employee will be eligible to earn an annual incentive payment under
Parent's Amended and Restated Annual Incentive Compensation Plan of up to
50% of that portion of his base salary earned during such fiscal year;
provided that Parent achieves such performance standards as are set forth
in such plan and as are established by the Compensation Committee for such
fiscal year.
(c) Stock Options. Pursuant to action of the Compensation Committee
-------------
of the Board of Directors of Parent, effective on the Effective Date,
Employee shall be granted a stock option entitling him to purchase 40,000
shares of Parent's common stock at the reported market closing sales price
thereof on such date (the "Option"). The Option shall become exercisable by
the Employee at the rate of 25% of the shares covered thereby per year
during the Term, beginning on the first anniversary of the Effective Date.
The Option shall contain such additional terms as are set forth in Parent's
1993 Amended and Restated Long-Term Incentive Plan and as are established
by the Compensation Committee of the Board of Directors of Parent.
(d) Payment and Reimbursement of Expenses. During the Term, Employer
-------------------------------------
shall pay or reimburse the Employee for all reasonable travel and other
expenses incurred by the Employee in performing his obligations under this
Agreement in accordance with
2
<PAGE>
the policies and procedures of Employer for officers, provided that the
Employee properly accounts therefor in accordance with the regular policies
of Employer.
(e) Fringe Benefits and Perquisites. During the Term, the Employee
-------------------------------
shall be entitled to participate in or receive benefits under any stock
purchase, profit-sharing, pension, retirement, life, medical, dental,
disability or other plan or arrangement made available by Employer or
Parent to officers of Parent, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and
arrangements. Nothing paid to the Employee under any plan or arrangement
made available to the Employee shall be deemed to be in lieu of
compensation hereunder.
(f) Vacations. During the Term and in accordance with the with
---------
the regular policies of Employer, the Employee shall be entitled to the
number of paid vacation days in each calendar year determined by Employer
from time to time for its officers.
(g) Relocation Expenses. Employee shall be entitled to receive
-------------------
relocation expenses in accordance with Employer policy, including the
following: (i) up to three months reasonable temporary living expenses in
the Dallas/Fort Worth, Texas area; and (ii) reasonable expenses (including
taxes) associated with relocation of Employee and Employee's family from
San Antonio, Texas to the Dallas/Fort Worth, Texas area, including (x) real
estate fees associated with the sale of Employee's home in San Antonio,
Texas, (y) reasonable moving costs from San Antonio, Texas to the
Dallas/Fort Worth, Texas area and (z) normal real estate acquisition costs
in the Dallas/Fort Worth area (including normal points and other fees);
provided that such relocation occurs within two years of the Effective Date
1.5 Termination.
-----------
(a) Disability. Employer may terminate this Agreement for Disability.
----------
"Disability" shall exist if, because of ill health, physical or mental
disability, or any other reason beyond his control, and notwithstanding
reasonable accommodations made by Employer, the Employee shall have been
unable, unwilling or shall have failed to perform his duties under this
Agreement, as determined in good faith by Parent's Board of Directors or a
committee thereof, for a period of 120 consecutive days, or if, in any 12-
month period, the Employee shall have been unable or unwilling or shall
have failed to perform his duties for a period of 80 or more business days,
irrespective of whether or not such days are consecutive.
(b) Cause. Employer may terminate the Employee's employment for
-----
Cause. Termination for "Cause" shall mean termination because of the
Employee's (i) gross incompetence, (ii) willful gross misconduct that
causes or is likely to cause material economic harm to Employer, Parent or
their affiliated entities or that brings or is likely to bring substantial
discredit to the reputation of Employer, Parent or any of their affiliated
entities, as determined by the Board of Directors of Parent in good faith,
(iii) failure to follow directions of Parent's Board of Directors that are
consistent with his duties under this Agreement, (iv) conviction of, or
entry of a pleading of guilty or
3
<PAGE>
nolo contendre to, any crime involving moral turpitude or entry of an order
duly issued by any federal or state regulatory agency having jurisdiction
in the matter permanently prohibiting Employee from participating in the
conduct of the affairs of Employer, Parent or their affiliated entities, or
(v) material breach of any provision of this Agreement that is not remedied
within 60 days after receipt of written notice from Employer or Parent
specifying such breach.
(c) Without Cause. During the Term, Employer may terminate the
-------------
Employee's employment Without Cause, subject to the provisions of
subsection 1.6(b) (Termination Without Cause or for Company Breach).
------------------------------------------------
Termination "Without Cause" shall mean termination of the Employee's
employment by Employer other than termination for Cause or for Disability.
(d) Company Breach. The Employee may terminate his employment
--------------
hereunder for Company Breach. For purposes of this Agreement a "Company
Breach" shall be deemed to occur in the event of a material breach of this
Agreement by Employer or Parent, including without limitation any material
reduction in the authority, duties and responsibilities that the Employee
has on the Effective Date of this Agreement; provided, however, that the
-------- -------
foregoing items shall not constitute Company Breach unless the Employee
notifies Employer or Parent (as applicable) thereof in writing, specifying
in reasonable detail the basis therefor and stating that it is grounds for
Company Breach, and unless Employer or Parent fails to cure such Company
Breach within 60 days after such notice is sent or given under this
Agreement.
(e) Change in Control. The Employee may terminate his employment
-----------------
hereunder within 12 months of a Change in Control (defined below):
(i) "Change in Control" shall mean any of the following:
(1) any consolidation or merger of Parent in which Parent is
not the continuing or surviving corporation or pursuant to which
shares of Parent's common stock would be converted into cash,
securities or other property, other than a merger of Parent in
which the holders of Parent common stock immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(2) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Parent;
(3) any approval by the stockholders of Parent of any plan or
proposal for the liquidation or dissolution of Parent;
(4) the cessation of control (by virtue of their not
constituting a majority of directors) of Parent's Board of
Directors by the individuals
4
<PAGE>
(the "Continuing Directors") who (x) at the date of this Agreement
were directors or (y) become directors after the date of this
Agreement and whose election or nomination for election by Parent's
stockholders, was approved by a vote of at least two-thirds of the
directors then in office who were directors at the date of this
Agreement or whose election or nomination for election was
previously so approved); or
(5) (A) the acquisition of beneficial ownership ("Beneficial
Ownership"), within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of an
aggregate of 15% or more of the voting power of Parent's
outstanding voting securities by any person or group (as such term
is used in Rule 13d-5 under the Exchange Act) who Beneficially
Owned less than 10% of the voting power of Parent's outstanding
voting securities on the Effective Date of this Agreement, (B) the
acquisition of Beneficial Ownership of an additional 5% of the
voting power of Parent's outstanding voting securities by any
person or group who Beneficially Owned at least 10% of the voting
power of Parent's outstanding voting securities on the Effective
Date of this agreement, or (C) the execution by Parent and a
stockholder of a contract that by its terms grants such stockholder
(in its, hers or his capacity as a stockholder) or such
stockholder's Affiliate (as defined in Rule 405 promulgated under
the Securities Act of 1933 (an "Affiliate")) including, without
limitation, such stockholder's nominee to Parent's Board of
Directors (in its, hers or his capacity as an Affiliate of such
stockholder), the right to veto or block decisions or actions
of Parent's Board of Directors; provided, however,
-------- -------
that notwithstanding the foregoing, the events described in items
(A), (B) or (C) above shall not constitute a Change in Control
hereunder if the acquiror is (aa) Alan H. Goldfield or his
Affiliates, (bb) a trustee or other fiduciary holding securities
under an employee benefit plan of Employer, Parent or one of their
affiliated entities and acting in such capacity, (cc) a corporation
owned, directly or indirectly, by the stockholders of Parent in
substantially the same proportions as their ownership of voting
securities of Parent or (dd) a person or group meeting the
requirements of clauses (i) and (ii) of Rule 13d-1(b)(1) under the
Exchange Act or (ee) in the case of an acquisition described in
items (A) or (B) above (but not in the case of an acquisition
described in item (C) above), any other person whose acquisition
of shares of voting securities is approved in advance by a
majority of the Continuing Directors; provided further,
-------- -------
however that none of the following shall constitute a Change
-------
in Control: (aa)the right of the holders of any voting securities
of Parent to vote as a class on any matter or (bb) any vote
required of disinterested or unaffiliated directors or stockholders
including, without limitation, pursuant to Section 144 of the
Delaware General Corporation Law or Rule 16b-3 promulgated pursuant
to the Exchange Act.
5
<PAGE>
(6) subject to applicable law, in a Chapter 11 bankruptcy
proceeding, the appointment of a trustee or the conversion of a
case involving Parent to a case under Chapter 7.
(f) Without Good Reason. During the Term, the Employee may terminate
-------------------
his employment Without Good Reason. Termination "Without Good Reason" shall
mean termination of the Employee's employment by the Employee other than
termination for Company Breach.
(g) Explanation of Termination of Employment. Any party terminating
----------------------------------------
this Agreement shall give prompt written notice ("Notice of Termination")
to the other party hereto advising such other party of the termination of
this Agreement stating in reasonable detail the basis for such termination.
The Notice of Termination shall indicate whether termination is being made
for Cause, Without Cause or for Disability (if Employer has terminated the
Agreement) or for Company Breach, upon a Change in Control or Without Good
Reason (if the Employee has terminated the Agreement).
(h) Date of Termination. "Date of Termination" shall mean the date
-------------------
specified in the Notice of Termination.
1.6 Compensation Upon Termination.
-----------------------------
(a) Termination for Cause or Disability or Without Good Reason. If
----------------------------------------------------------
Employer shall terminate the Employee's employment for Cause or Disability
or if the Employee shall terminate his employment Without Good Reason, then
Employer's obligation to pay salary and benefits pursuant to Section 1.4
(Compensation) shall terminate, except that Employer shall pay the
------------
Employee his accrued but unpaid salary and benefits pursuant to Section 1.4
(Compensation) through the Date of Termination.
------------
(b) Termination Without Cause or for Company Breach. If Employer shall
-----------------------------------------------
terminate the Employee's employment Without Cause or if the Employee shall
terminate his employment for Company Breach, then Employer shall pay to the
Employee, as severance pay in a lump sum on the 15th day following the Date
of Termination, the following amounts:
(i) his then-unpaid Base Salary through the Date of Termination at
the rate in effect as of the Date of Termination; and
(ii) in lieu of any further Base Salary and Annual Incentive
Payments for periods subsequent to the Date of Termination, an amount
equal to the greater of (i) Employee's Base Salary at the rate in
effect as of the Date of Termination divided by 12 and multiplied by
six or (ii) Employee's Base Salary at the rate in effect as of the Date
of Termination divided by 365 and multiplied by the number of days
remaining in the Original Term.
6
<PAGE>
In addition, the Employee will be entitled to a prorated portion of any
annual incentive payment earned for the fiscal year in which his employment
is terminated, if earned in accordance with the terms of its grant.
If the Employee terminates his employment for Company Breach based upon
a material reduction by Employer of the Employee's Base Salary, then for
purposes of this subsection 1.6(b) (Termination Without Cause or for
--------------------------------
Company Breach), the Employee's Base Salary as of the Date of Termination
--------------
shall be deemed to be the Employee's Base Salary immediately prior to the
reduction that the Employee claims as grounds for Company Breach.
(c) Termination Upon a Change in Control. If the Employee terminates
------------------------------------
his employment after a Change in Control pursuant to subsection 1.5(e)
(Change in Control), then Employer shall pay to the Employee as severance
-----------------
pay and as liquidated damages (because actual damages are difficult to
ascertain), in a lump sum, in cash, within 15 days after termination, an
amount equal to $100 less than two times the Employee's "annualized
includable compensation for the base period" (as defined in Section 280G of
the Internal Revenue Code of 1986); provided, however, that if such lump
-------- -------
sum severance payment, either alone or together with other payments or
benefits, either cash or non-cash, that the Employee has the right to
receive from Employer, including, but not limited to, accelerated vesting
or payment of any deferred compensation, options, stock appreciation rights
or any benefits payable to the Employee under any plan for the benefit of
employees, would constitute an "excess parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1986), then such lump sum
severance payment or other benefit shall be reduced to the largest amount
that will not result in receipt by the Employee of a parachute payment. The
determination of the amount of the payment described in this subsection
shall be made by Parent's independent auditors.
(d) No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any payment provided for in this Section 1.6 (Compensation Upon
-----------------
Termination) by seeking other employment or otherwise.
-----------
1.7 Death of Employee. If the Employee dies prior to the expiration of
-----------------
this Agreement, the Employee's employment and other obligations under this
Agreement shall automatically terminate and all compensation to which the
Employee is or would have been entitled hereunder shall terminate as of the end
of the month in which the Employee's death occurs.
7
<PAGE>
ARTICLE 2
NON-COMPETITION AND CONFIDENTIALITY
2.1 Non-Competition.
---------------
(a) Description of Proscribed Actions. During the Term and for a
---------------------------------
period of two (2) years thereafter, in consideration for the obligations of
Employer and Parent hereunder, including without limitation their
disclosure (pursuant to subsection 2.2(b) (Obligation of The Company)
-------------------------
below) of Confidential Information, the Employee shall not:
(i) directly or indirectly, engage or invest in, own, manage,
operate, control or participate in the ownership, management, operation
or control of, be employed by, associated or in any manner connected
with, or render services or advice to, any Competing Business (defined
below); provided, however, that the Employee may invest in the
-------- -------
securities of any enterprise (but without otherwise participating in
the activities of such enterprise) if (x) such securities are listed on
any national or regional securities exchange or have been registered
under Section 12(g) of the Exchange Act and (y) the Employee does not
beneficially own (as defined Rule 13d-3 promulgated under the Exchange
Act) in excess of 5% of the outstanding capital stock of such
enterprise;
(ii) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor (whether paid or unpaid), stockholder, partner or in
any other individual or representative capacity whatsoever, either for
his own benefit or for the benefit of any other person or entity,
solicit, divert or take away any suppliers, customers or clients of the
Company or any of its Affiliates; or
(iii) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor (whether paid or unpaid), stockholder, partner or in
any other individual or representative capacity whatsoever, either for
his own benefit or for the benefit of any other person or entity,
either (i) hire, attempt to hire, contact or solicit with respect to
hiring, any employee of Employer or Parent or any Affiliate thereof,
(ii) induce or otherwise counsel, advise or encourage any employee of
Employer, Parent or any Affiliate thereof to leave the employment of
Employer, Parent or any Affiliate thereof, or (iii) induce any
representative or agent of Employer, Parent or any Affiliate thereof to
terminate or modify its relationship with Employer, Parent or such
Affiliate.
(b) Judicial Modification. The Employee agrees that if a court of
---------------------
competent jurisdiction determines that the length of time or any other
restriction, or portion thereof, set forth in this Section 2.1 (Non-
----
Competition) is overly restrictive and unenforceable, the court may reduce
-----------
or modify such restrictions to those which it deems reasonable and
8
<PAGE>
enforceable under the circumstances, and as so reduced or modified, the
parties hereto agree that the restrictions of this Section 2.1 (Non-
----
Competition) shall remain in full force and effect. The Employee further
-----------
agrees that if a court of competent jurisdiction determines that any
provision of this Section 2.1 (Non-Competition) is invalid or against
---------------
public policy, the remaining provisions of this Section 2.1 (Non-
----
Competition) and the remainder of this Agreement shall not be affected
-----------
thereby, and shall remain in full force and effect.
(c) Nature of Restrictions. The Employee acknowledges that the
----------------------
business of Employer and Parent and their Affiliates is international in
scope and that the Restrictions imposed by this Agreement are legitimate,
reasonable and necessary to protect Employer's, Parent's and their
Affiliates' investment in their businesses and the goodwill thereof. The
Employee acknowledges that the scope and duration of the restrictions
contained herein are reasonable in light of the time that the Employee has
been or will be engaged in the business of Employer, Parent and/or their
Affiliates, and the Employee's relationship with the suppliers, customers
and clients of Employer, Parent and their Affiliates. The Employee further
acknowledges that the restrictions contained herein are not burdensome to
the Employee in light of the consideration paid therefor and the other
opportunities that remain open to the Employee. Moreover, the Employee
acknowledges that he has other means available to him for the pursuit of
his livelihood.
(d) Competing Business. "Competing Business" shall mean any
------------------
individual, business, firm, company, partnership, joint venture,
organization, or other entity engaged in the wholesale distribution or
retail sales of wireless communication equipment in any domestic or
international market area in which Employer, Parent or any of their
Affiliates does business at any time during the Employee's employment with
Employer or any of its Affiliates.
2.2 Confidentiality. For the purposes of this Section 2.2
---------------
(Confidentiality), the term "the Company" shall be construed also to include
- ----------------
Employer, Parent and any and all Affiliates of Employer and Parent.
(a) Confidential Information. "Confidential Information" shall mean
------------------------
information that is used in the Company's business and
(i) is proprietary to, about or created by the Company;
(ii) gives the Company some competitive advantage, the opportunity
of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company;
(iii) is not typically disclosed to non-employees by the Company,
or otherwise is treated as confidential by the Company; or
9
<PAGE>
(iv) is designated as Confidential Information by the Company or
from all the relevant circumstances should reasonably be assumed by the
Employee to be confidential to the Company.
Confidential Information shall not include information publicly known
(other than as a result of a disclosure by the Employee ). The phrase
"publicly known" shall mean readily accessible to the public in a written
publication and shall not include information that is only available by a
substantial searching of the published literature or information the
substance of which must be pieced together from a number of different
publications and sources, or by focused searches of literature guided by
Confidential Information.
(b) Obligation of The Company. During the Term, the Company shall
-------------------------
provide access to, or furnish to, the Employee Confidential Information of
the Company necessary to enable the Employee properly to perform his
obligations under this Agreement.
(c) Non-Disclosure. The Employee acknowledges, understands and agrees
--------------
that all Confidential Information, whether developed by the Company or
others or whether developed by the Employee while carrying out the terms
and provisions of this Agreement (or previously while serving as an officer
of the Company), shall be the exclusive and confidential property of the
Company and (i) shall not be disclosed to any person other than employees
of the Company and professionals engaged on behalf of the Company, and
other than disclosure in the scope of the Company's business in accordance
with the Company's policies for disclosing information, (ii) shall be
safeguarded and kept from unintentional disclosure and (iii) shall not be
used for the Employee's personal benefit. Subject to the terms of the
preceding sentence, the Employee shall not use, copy or transfer
Confidential Information other than as is necessary in carrying out his
duties under this Agreement.
2.3 Injunctive Relief. Because of the Employee's experience and
-----------------
reputation in the industries in which Employer, Parent and their Affiliates
operate, and because of the unique nature of the Confidential Information, the
Employee acknowledges, understands and agrees that Employer and Parent will
suffer immediate and irreparable harm if the Employee fails to comply with any
of his obligations under Article 2 (Non-Competition and Confidentiality) of this
-----------------------------------
Agreement, and that monetary damages will be inadequate to compensate Employer
and Parent for such breach. Accordingly, the Employee agrees that Employer and
Parent shall, in addition to any other remedies available to them at law or in
equity, be entitled to injunctive relief to enforce the terms of Article 2 (Non-
----
Competition and Confidentiality), without the necessity of proving inadequacy of
- -------------------------------
legal remedies or irreparable harm.
10
<PAGE>
ARTICLE 3
MISCELLANEOUS
3.1 Period of Limitations. No legal action shall be brought and no
---------------------
cause of action shall be asserted by or on behalf of Employer or Parent or any
of their Affiliates against the Employee, the Employee's spouse, heirs,
executors or personal or legal representatives after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of
action of Employer or Parent or any Affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two-
year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action such shorter period shall
govern.
3.2 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
3.3 Indulgences, Etc. Neither the failure nor any delay on the part
-----------------
of either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power, or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence.
3.4 Employee's Sole Remedy. The Employee's sole remedy shall be
----------------------
against Employer or Parent for any claim, liability or obligation of any nature
whatsoever arising out of or relating to this Agreement or an alleged breach of
this Agreement or for any other claim arising out of the Employee's employment
by Employer, his service to Employer or its Affiliates or the termination of the
Employee's employment hereunder (collectively, "Employee Claims"). The Employee
shall have no claim or right of any nature whatsoever against any of Employer's
or its Affiliates' directors, former directors, officers, former officers,
employees, former employees, stockholders, former stockholders, agents, former
agents or the independent counsel in their individual capacities arising out of
or relating to any Employee Claim. The Employee hereby releases and covenants
not to sue any person other than Employer or Parent over any Employee Claim.
The persons described in this Section 3.4 (other than Employer, Parent and the
Employee) shall be third-party beneficiaries of this Agreement for purposes of
enforcing the terms of this Section 3.4 (Employee's Sole Remedy) against the
-----------------------
Employee.
3.5 Notices. All notices, requests, demands and other
-------
communications required or permitted under this Agreement and the transactions
contemplated herein shall be in writing and shall be deemed to have been duly
given, made and received when sent by telecopy (with a copy sent by mail) or
when personally delivered or one business day after it is sent by overnight
service, addressed as set forth below:
11
<PAGE>
If to the Employee:
Mark Q. Huggins
----------------------
----------------------
If to Employer or Parent:
CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
Any party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions of
this subsection for the giving of notice, which shall be effective only upon
receipt.
3.6 Provisions Separable. The provisions of this Agreement are
--------------------
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
3.7 Entire Agreement. This Agreement contains the entire
----------------
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained, which shall be deemed terminated effective
immediately. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
3.8 Headings; Index. The headings of paragraphs herein are included
---------------
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
3.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Texas, without giving
effect to principles of conflict of laws.
3.10 Dispute Resolution. Subject to Employer's and Parent's right to
------------------
seek injunctive relief in court as provided in Section 2.3 (Injunctive Relief)
-----------------
of this Agreement, any dispute, controversy or claim arising out of or in
relation to or connection to this Agreement, including without limitation any
dispute as to the construction, validity, interpretation, enforceability or
breach of this Agreement, shall be exclusively and finally settled by
arbitration, and any party may submit such dispute, controversy or claim,
including a claim for indemnification under this Section 3.10 (Dispute
-------
Resolution), to arbitration.
- ----------
12
<PAGE>
(a) Arbitrators. The arbitration shall be heard and determined by one
-----------
arbitrator, who shall be impartial and who shall be selected by mutual
agreement of the parties; provided, however, that if the dispute involves
-------- -------
more than $2,000,000, then the arbitration shall be heard and determined by
three (3) arbitrators. If three (3) arbitrators are necessary as provided
above, then (i) each side shall appoint an arbitrator of its choice within
thirty (30) days of the submission of a notice of arbitration and (ii) the
party-appointed arbitrators shall in turn appoint a presiding arbitrator of
the tribunal within thirty (30) days following the appointment of the last
party-appointed arbitrator. If (x) the parties cannot agree on the sole
arbitrator, (y) one party refuses to appoint its party-appointed arbitrator
within said thirty (30) day period or (z) the party-appointed arbitrators
cannot reach agreement on a presiding arbitrator of the tribunal, then the
appointing authority for the implementation of such procedure shall be the
Senior United States District Judge for the Northern District of Texas, who
shall appoint an independent arbitrator who does not have any financial
interest in the dispute, controversy or claim. If the Senior United States
District Judge for the Northern District of Texas refuses or fails to act
as the appointing authority within ninety (90) days after being requested
to do so, then the appointing authority shall be the Chief Executive
Officer of the American Arbitration Association, who shall appoint an
independent arbitrator who does not have any financial interest in the
dispute, controversy or claim. All decisions and awards by the arbitration
tribunal shall be made by majority vote.
(b) Proceedings. Unless otherwise expressly agreed in writing by the
-----------
parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in Dallas, Texas,
at a site chosen by mutual agreement of the parties, or if the parties
cannot reach agreement on a location within thirty (30) days of the
appointment of the last arbitrator, then at a site chosen by the
arbitrators;
(ii) The arbitrators shall be and remain at all times wholly
independent and impartial;
(iii) The arbitration proceedings shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, as amended from time to time;
(iv) Any procedural issues not determined under the arbitral
rules selected pursuant to item (iii) above shall be determined by the
law of the place of arbitration, other than those laws which would
refer the matter to another jurisdiction;
(v) The costs of the arbitration proceedings (including
attorneys' fees and costs) shall be borne in the manner determined by
the arbitrators;
(vi) The decision of the arbitrators shall be reduced to writing;
final and binding without the right of appeal; the sole and exclusive
remedy regarding any
13
<PAGE>
claims, counterclaims, issues or accounting presented to the
arbitrators; made and promptly paid in United States dollars free of
any deduction or offset; and any costs or fees incident to enforcing
the award shall, to the maximum extent permitted by law, be charged
against the party resisting such enforcement;
(vii) The award shall include interest from the date of any breach
or violation of this Agreement, as determined by the arbitral award,
and from the date of the award until paid in full, at 6% per annum;
and
(viii) Judgment upon the award may be entered in any court having
jurisdiction over the person or the assets of the party owing the
judgment or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may
be.
3.11 Survival. The covenants and agreements of the parties set forth
--------
in Article 2 (Non-Competition and Confidentiality), and Article 3
-----------------------------------
(Miscellaneous) are of a continuing nature and shall survive the expiration,
-------------
termination or cancellation of this Agreement, regardless of the reason
therefor.
3.12 Subrogation. In the event of payment under this Agreement,
-----------
Employer and Parent shall be subrogated to the extent of such payment to all of
the rights of recovery of the Employee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable Employer or Parent
effectively to bring suit to enforce such rights.
3.13 No Duplication of Payments. Employer and Parent shall not be
--------------------------
liable under this Agreement to make any payment in connection with any claim
made against the Employee to the extent the Employee has otherwise actually
received payment (under any insurance policy, Bylaw or otherwise) of the amounts
otherwise indemnifiable hereunder.
3.14 Binding Effect, Etc. This Agreement shall be binding upon and
--------------------
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of Employer, Parent, spouses, heirs, and personal and legal
representatives. Employer and Parent shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all, substantially all, or a substantial part, of their business or assets, by
written agreement in form and substance satisfactory to the Employee, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent that Employer or Parent would be required to perform if no such
succession had taken place.
* * * * * * * *
14
<PAGE>
IN WITNESS WHEREOF, Employer and Parent have caused this Agreement to
be executed by their officer/general partner thereunto duly authorized, and
Employee has signed this Agreement, all as of the day and year first above
written.
CELLSTAR CORPORATION
By: /s/ R. M. GOZIA
----------------------------------------------------
Name: /s/ R. M. Gozia
----------------------------------------------
Title: /s/ President
----------------------------------------------
CELLSTAR, LTD.
By National Auto Center, Inc., its General Partner
By: /s/ R. M. GOZIA
----------------------------------------------------
Name: /s/ R. M. Gozia
----------------------------------------------
Title: /s/ President
----------------------------------------------
/s/ MARK Q. HUGGINS
-------------------------------------------------------
Mark Q. Huggins
15
<PAGE>
EXHIBIT 10.3
AUTHORIZED AGENCY AGREEMENT
BETWEEN
SOUTHWESTERN BELL MOBILE SYSTEMS, INC.
AND
CELLSTAR, LTD.
THIS AGREEMENT is made and entered into this 17th day of Dec.,
1996, by and between SOUTHWESTERN BELL MOBILE SYSTEMS, INC. ("SBMS"), acting in
its capacity as general partner of the Dallas SMSA Limited Partnership, and
being a corporation organized and existing under the laws of the States of
Delaware and Virginia with its principal place of business at 17330 Preston
Road, Suite 100A, Dallas, Texas 75252, and CELLSTAR, LTD., a Texas limited
partnershipwith its principal place of business at 1730 Briarcroft Court,
Carrollton, Texas 75006 ("AGENT").
W I T N E S S E T H:
--------------------
Whereas, SBMS is involved in the development, establishment and resale of
cellular radio service ("CRS"), which requires the use by CRS subscribers
("Subscribers") of cellular terminal equipment ("CPE");
Whereas, SBMS and/or its Affiliates is or may become involved in the
development and/or sale of other services, including but not limited to long
distance/toll service for CRS Subscribers, paging services, other Commercial
Mobile Radio Services, and competitive landline local exchange and/or long
distance services (collectively referred to as the "Services");
Whereas, SBMS has been granted regulatory authority to provide CRS in the
cellular geographic service area(s) within the Dallas - Ft. Worth and Sherman -
Denison metropolitan statistical areas ("MSA") and desires to provide CRS in
these Areas, as well as other Services in designated areas, through Authorized
Agents, Resellers, Distributors, direct sales and other forms of distribution to
Subscribers;
Whereas, SBMS has adopted and used or intends to adopt and use certain
valuable trademarks and service marks, symbols, logos and other identifying
indicia ("Marks") in the provision of its Services and CPE;
Whereas, AGENT is desirous of selling SBMS' CRS as a nonexclusive,
authorized CRS agent of SBMS and is desirous of selling, installing, providing
warranty service and/or maintaining CPE necessary for Subscribers to utilize
Services;
1
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT BY "[REDACTED]".
<PAGE>
Whereas, SBMS and AGENT further agree AGENT shall sell, install, and/or
maintain and provide warranty service for CPE, and is licensed to use certain
identifying trademarks and the like in its business operations, as more
specifically detailed hereinafter.
Now, therefore, in consideration of the mutual promises herein contained,
it is hereby agreed:
1. DEFINITIONS
-----------
Activation. The act of initiating an Authorized Service in or to a
----------
Subscriber's CPE by SBMS.
Affiliate. A person, association, partnership, corporation or joint-stock
---------
company, trust or other business entity however organized ("Person") is an
affiliate of that entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Person. Control shall be defined as (i) ownership of a majority of the voting
power of all classes of voting stock or (ii) ownership of a majority of the
beneficial interests in income and capital of an entity other than a
corporation.
Authorized Services. Those Services provided by SBMS that AGENT is
-------------------
authorized hereunder to sell on behalf of SBMS, including CRS and any other
Services set forth on Exhibit "A" hereto, which shall be amended, from time to
time, as determined by SBMS in its sole discretion.
Area. The Dallas - Ft. Worth and Sherman - Denison metropolitan
----
statistical areas ("MSAs") within which SBMS has applied for and obtained
regulatory authority to provide CRS. The counties generally comprising these
MSAs and any additional counties that may be added to the areas served through
the Dallas SMSA Limited Partnership shall be deemed added to the Area, without
the necessity of an amendment to this Agreement with respect to other Authorized
Services, Area is defined as those Areas in which SBMS is authorized to and is
providing or reselling such Authorized Service, except as may be otherwise
defined or limited on Exhibit "A".
Cellular Radio Service (CRS). Any and all service (including resale of
----------------------------
said service) authorized by the F.C.C under Part 22 of its rules as amended
under the cellular orders set forth in An Inquiry Into the Use of the Bands 825-
845 MHz and 870-890 MHz for Cellular Communications Systems; and Amendments of
Parts 2 and 22 of the Commission's Rules Relative to Cellular Communications
Systems (CC Docket No. 79-318), 86 F.C.C. 2d 469 (1981), modified as set forth
in reconsideration order 89 F.C.C. 2d. 58 (1982), and as further modified as set
forth in reconsideration orders, rules or orders from time to time.
Commercial Mobile Radio Services (CMRS). Any and all services (including
---------------------------------------
resale of said services) that (i) fit the definition of commercial mobile
services pursuant to Section 332 of
2
<PAGE>
the Communications Act, 47 U.S.C. (S)332, (ii) are subject to regulation as
commercial mobile radio services by the FCC under the orders set forth in
Implementation of Sections 3(n) and 332 of the Communications Act:, Regulatory
Treatment of Mobile Services (CC Docket No. 93-252) or such other orders or
rules as may be in effect from time to time, or (iii) are the functional
equivalent of a commercial mobile service as defined in 47 U.S.C. (S)332. CMRS
shall in any event include CRS, all forms of specialized mobile radio service
(SMR and ESMR), and personal communications services (PCS).
CPE. The cellular terminal equipment needed for using CRS and other
---
Authorized Services.
Marks. Any and all trademarks, service marks, trade names, insignia,
-----
symbols, logos, decorative designs, or the list SBMS owns or is licensed or
sublicensed to use in connection with the Authorized Services or products
relating thereto and which SBMS, in its sole discretion, determines from time to
time that AGENT is authorized to use.
Paging Services. A service provided by a communication common carrier
---------------
engaged in rendering one-way communication.
Reseller. Any person, association, partnership, corporation, joint stock
--------
company, trust, or other entity that purchases bulk quantities of CRS from a
cellular carrier for resale distribution, directly or indirectly, to ultimate
users of CRS.
Subscriber. A customer of an Authorized Service provided by SBMS. Each
----------
CRS telephone number assigned to a customer of SBMS' CRS is deemed to be a
separate Subscriber, regardless of how many CRS telephone numbers may be
assigned to or used by any one customer.
Successor. Any person, association, partnership, corporation, joint stock
---------
company, trust or other entity however organized, that succeeds to or acquires
the rights, title or interests of another.
2. ACKNOWLEDGMENTS AND REPRESENTATIONS
-----------------------------------
SBMS and AGENT acknowledge that they have read this Agreement and
understand and accept the terms, conditions and covenants contained herein as
being reasonably necessary to maintain SBMS' high standards for CRS and other
Services, thereby to protect and preserve the goodwill of SBMS' CRS, Services
and its Marks. AGENT has read and understands the obligations imposed by the
FCC upon CRS licensees and their duties to SBMS as specified in Section 22.9l2
of the FCC's cellular rules.
AGENT acknowledges that SBMS' ability to provide CRS and other Services is
conditioned upon the continuing validity of its FCC operating license(s) and any
other required
3
<PAGE>
licenses, certificates and permits, and may be affected by state and federal
court decisions and regulatory approvals. SBMS makes no representation
concerning whether said licenses, certificates, and permits will continue to be
valid. AGENT agrees that if SBMS is prohibited from, or otherwise ceases selling
an Authorized Service in the Area, SBMS may declare this Agreement null and void
as to any or all Authorized Services with no penalty.
AGENT acknowledges that it has conducted an independent investigation of
the business of selling CRS and any other Services that it will conduct pursuant
to this Agreement. AGENT recognizes that entry into business as an AGENT of
SBMS involves business risks and the AGENT'S success in such business will
depend primarily upon its abilities and efforts. SBMS expressly disclaims the
making of, and AGENT acknowledges that it has not received or relied upon, any
guaranty, express or implied, as to the amount of commissions or other gross
revenue that it may earn as a result of its agency relationship with SBMS and
acknowledges that it has no knowledge of any representations relating to its
agency relationship with SBMS by an officer, employee or agent of SBMS that are
contrary to the terms herein. AGENT represents to SBMS, as an inducement to its
entry into this Agreement, that AGENT has made no misrepresentations to SBMS in
its application for appointment as a nonexclusive, Authorized Agent of SBMS or
in any other manner.
AGENT and SBMS mutually agree that they shall not have any liability to the
other for any lost profits, consequential, or special damages even if advised of
the possibility of such damages.
3. RELATIONSHIP OF THE PARTIES
---------------------------
SBMS hereby appoints AGENT as a nonexclusive Authorized Agent within the
Area to solicit and contract, on behalf of SBMS, with Subscribers for the
Authorized Services subject to all of the terms and conditions hereof.
During the term of this Agreement or thereafter, SBMS reserves the right
without obligation or liability to AGENT, to market the Authorized Services and
CPE in the same geographical areas served by AGENT, whether through SBMS' own
representatives or through others, including but not limited to, other
Authorized Agents, retailers, Resellers and distributors.
Upon enrollment of a particular Subscriber, that Subscriber shall become a
customer of SBMS, and SBMS shall offer and furnish such customer billing
services and other customer services as SBMS deems appropriate. SBMS shall be
responsible to collect any charges for Authorized Services from Subscribers.
With the sole exception of the Subscribers enrolled by AGENT for the
account of SBMS, with respect to which AGENT acts as agent of SBMS and owes SBMS
the fiduciary and other obligations of an agent to its principal, SBMS and AGENT
acknowledge and agree that their agency relationship arising from this Agreement
does not constitute or create a general agency,
4
<PAGE>
joint venture, partnership, employment relationship or franchise between them.
The parties agree that personnel employed by AGENT to perform services
under this Agreement are not SBMS employees and AGENT assumes full
responsibility for their acts. Such personnel employed by AGENT shall be
informed that they are not entitled to the provisions of any SBMS' employee
benefits. With respect to such personnel, AGENT shall have sole responsibility
for supervision, daily direction and control. SBMS will not be responsible for
worker's compensation, disability benefits, unemployment insurance and
withholding income taxes and social security for said personnel.
3A. RELATIONSHIP WITH SUB-AGENTS
----------------------------
AGENT warrants that it entered into or may enter into appropriate
agreements with all persons or businesses (other than Agent's own employees)
(subject to the conditions stated below) that sell the Authorized Services on
behalf of AGENT ("Sub-Agent"), and that such agreements are, or will be
sufficient to enable it to comply with all provisions of this Agreement except
those that by their nature would not be applicable to a Sub-Agent. Without
limiting the generality of the foregoing, AGENT understands, convents and agrees
that (i) any Sub-Agent appointed by AGENT must agree to comply with all of the
restrictive covenants in Paragraph 18 of this Agreement and the Confidentiality
Obligations in Paragraph 31 of this Agreement. AGENT may not delegate its
responsibilities under this Authorized Agency Agreement to any Sub-Agent, and
shall remain liable to SBMS pursuant to the terms of this Agreement
notwithstanding any agreement with a Sub-Agent, (ii) AGENT will inform SBMS
within thirty (30) days of the identity of any new Sub-Agent, and SBMS shall
have the right to disapprove any new Sub-Agent that in the sole opinion of
SBMS, reflects adversely upon SBMS or which is or has been associated in any way
with a competitor of SBMS in the Area or, for any reasonable business purpose;
and SBMS shall have the right to request the removal of any Sub-Agent who
breaches the agreements set forth above or whose actions, in the sole opinion of
SBMS, reflect adversely upon SBMS; (iii) AGENT shall inform SBMS prior to any
intended relocation of any of its Sub-Agents, which relocation shall then be
subject to SBMS' approval; (iv) Prior to AGENT'S appointment of a Sub-Agent,
SBMS may request, and AGENT will provide, any further information SBMS deems
necessary with respect to any prospective Sub-Agent. A complete list of all
current Sub-Agents, along with the names of the owners, managers, principals,
officers and directors thereof is attached as Exhibit "D". All existing Sub-
Agents of AGENT who are listed in Exhibit " D" are approved by SBMS except to
the extent the relationship between AGENT and a Sub-Agent is inconsistent with
the agreement; however, any Sub-Agent not listed in Exhibit " D" must be
approved in accordance with the procedure in this Paragraph A. AGENT understands
and agrees that Sub-Agents of AGENT shall not be permitted to use, in any manner
whatsoever, the name, trademarks or service marks of SBMS, unless expressly
agreed in a writing signed by AGENT, SBMS and Sub-Agent. Any unauthorized use
of SBMS' name, trademarks or service marks shall be grounds for immediate
termination of any Sub-Agent agreements.
5
<PAGE>
4. AGENT RESPONSIBILITIES
----------------------
a. AGENT agrees to provide materials and advertising to actively
promote SBMS' Authorized Services in a quality manner, and appropriate
sales facilities to enhance the sale of SBMS' Authorized Service.
b. AGENT will sell SBMS' Authorized Services to customers by employing
the following techniques (in addition to others): providing
demonstrations of SBMS' Service, explaining its benefits, explaining the
terms and conditions of purchase of the Service, providing sales
literature prepared by SBMS, and training the customer in the use of
SBMS' service. AGENT will offer CRS subject to all of the applicable
terms of SBMS' form of contract for customers. AGENT will offer Services
subject to all terms and conditions established by SBMS for each such
service, which form of contract will be attached hereto as an addendum.
c. AGENT agrees that it must obtain SBMS' prior written approval to (i)
open any locations in addition to those listed in Exhibit "B" and (ii)
must notify SBMS sixty (60) days prior to closing any location listed in
Exhibit "B". However, an amendment of this Agreement shall not be
necessary to subject any new or additional AGENT locations to the terms
and conditions of this Agreement; rather, the opening of such locations
shall automatically subject them to the terms and conditions of this
Agreement. AGENT agrees to establish and maintain installation and
maintenance facilities at the locations set forth in Exhibit "B";
provided that AGENT may request the consent of SBMS to close or
centralize certain of such facilities, which consent shall not be
unreasonably withheld. Agent may, in Agent's discretion, maintain
installation and maintenance facilities at such other locations as AGENT
may establish from time to time, approval of SBMS shall not be
unreasonably withheld, and to furnish high quality and prompt
installation, warranty and maintenance service for all CPE sold by it to
Subscribers. AGENT, at its own expense, shall obtain from the
manufacturer(s) and distributor(s) all required training in the
operation, installation, warranty and maintenance service of CPE. AGENT
shall be obligated to comply with all of the requirements of the Quality
Assurance Program contained in the Certification Training Manual, as
amended from time to time, and with the specific requirements described
in the remainder of this subparagraph (c). AGENT'S installation,
warranty and maintenance service CRS facility shall be required to
obtain certification from the manufacturer(s) of CPE AGENT sells and
AGENT shall be responsible to secure such certifications. AGENT may only
delegate its installation, warranty and maintenance service obligations
hereunder to a subcontractor with the express prior written approval of
SBMS, which approval will not be unreasonably withheld or withdrawn, and
with any approval necessary from each manufacturer and/or distributor of
an approved model of CPE to be sold or leased by AGENT. Such delegation
shall be by written agreement between AGENT and the service
subcontractor. Notwithstanding such agreement with a service
subcontractor,
6
<PAGE>
AGENT shall remain responsible to SBMS for all installation, warranty
and maintenance service obligations hereunder. AGENT shall reimburse
SBMS for the reasonable cost of installation, repair or warranty which
SBMS, in its sole discretion, deems necessary to have performed at a
facility other than AGENT'S for customers as to whom AGENT fails to
comply with SBMS' standards applicable thereto. Notwithstanding the
foregoing, AGENT's obligations to repair and maintain CPE are subject to
any limitations on AGENT's and/or the manufacturers warranty obligation.
d. AGENT agrees to maintain sufficient liability insurance to protect
SBMS from all claims arising out of the acts, omissions, and/or
representations of AGENT. SBMS shall be named as an additional insured
party on each policy. Such insurance coverage shall be maintained under
one or more policies of insurance from a recognized insurance company
qualified to do business within the Area providing in the aggregate
minimum liability protection of ONE MILLION DOLLARS ($1,000,000.00) per
occurrence for bodily and personal injury and death and ONE MILLION
DOLLARS ($1,000,000.00) per occurrence of property damage. Each such
insurance policy shall provide for not less than thirty (30) days prior
notice to all insured of any modification, cancellation or nonrenewal.
SBMS may, at any time and with ninety (90) days prior notice to AGENT,
require AGENT to increase its coverage of any type of insurance in
reasonable amounts and require different or additional kinds of
insurance, to reasonably reflect inflation, identification of special
risks, changes in law or standards of liability, higher damage awards or
other changes in circumstances. Upon request, AGENT shall furnish SBMS
with a copy of the insurance policy or a binder that demonstrates that
AGENT maintains insurance required as set forth above, such policy or
binder to specifically show SBMS as an additional insured. The
furnishing of such proof of insurance is required within fifteen (15)
days of the execution of this Agreement by AGENT and AGENT agrees to
furnish such proof as soon as prudent after such policies are renewed.
e. AGENT agrees to take all necessary steps to ensure compliance with
AGENT'S obligations under this Agreement by AGENT and its personnel and
any other parties involved in the sale of the Authorized Services by
AGENT, including but not limited to Sub-Agents.
f. AGENT agrees to maintain operations and follow procedures that are
in full compliance with SBMS' requirements as specified in SBMS' Agent
Operations Manual, as amended and distributed from time to time, and to
allow SBMS reasonable access to AGENT'S facilities for inspection. The
SBMS Agent Operations Manual is binding upon AGENT as if fully set forth
herein.
g. For its own account, AGENT agrees to sell CPE to be used by
Subscribers of SBMS' CRS or other end users. AGENT may only offer FCC
approved equipment. AGENT agrees to maintain an inventory of CPE
sufficient to meet reasonable
7
<PAGE>
anticipated demand by Subscribers which AGENT enrolls. AGENT also agrees
to maintain a minimum inventory of parts. In particular, but without
limitation, AGENT agrees not to use any CPE bearing trademarks similar
to or resembling the Marks of SBMS. Except for any SBMS-owned CPE which
AGENT handles on behalf of SBMS, all CPE sales and leases shall be made
by or on behalf of AGENT for its own account and not as agent for, or
for the account of, SBMS. AGENT may establish sale and lease prices,
fees and charges for the CPE and SBMS shall have no control over such
prices or over AGENT'S CPE. With respect to the sale or lease of AGENT'S
CPE, Subscribers shall be customers of AGENT and SBMS shall have no
responsibility to AGENT or to Subscribers with respect to the sale or
lease of AGENT'S CPE.
h. AGENT agrees that AGENT will at all times faithfully, honestly and
diligently perform its obligations hereunder, and that AGENT will
continuously exert its best efforts to promote and enhance the use of
SBMS' Authorized Services.
i. In the relevant Area, AGENT agrees that it will not, at any time
either during the term of this Agreement, or any extension thereof, (1)
induce, influence or suggest to any Subscriber of SBMS' CRS to purchase
CRS or any other CMRS from another Reseller or provider of CRS or CMRS
or switch to and/or contract with another CRS provider, (2) induce,
influence or suggest to any Subscriber of any other Authorized Service
to purchase a service competing with a service provided or offered by
SBMS from any other provider or Reseller of such competing service,
whether or not the competing service is technologically the same as the
Authorized Service in question. As more fully described in Paragraph 18,
AGENT agrees not to act as a representative or agent of any other
reseller or provider of CMRS in the relevant Area. Notwithstanding any
language to the contrary, AGENT shall have the right to enter into or
continue current provision of Paging Services and other Services that
are not SBMS' Authorized Services as of the date of execution of this
Agreement ("Additional Authorized Services"), provided, however, that in
the event SBMS should enter into the business of providing Paging
Services or other Additional Authorized Services, AGENT and SBMS agree
to negotiate in good faith with respect to AGENT'S provision of such
Paging Services or other Additional Authorized Services.
j. AGENT agrees not to take any action inconsistent with the provisions
of this Agreement and shall use its best efforts to support SBMS'
efforts in providing the Authorized Services to Subscribers.
k. AGENT agrees not to take any action inconsistent with, and agrees to
support SBMS' efforts before legal or regulatory authorities regarding
any modification of rates.
8
<PAGE>
l. AGENT agrees that during and after the term of this Agreement, AGENT
will not reveal, divulge, make known, sell, exchange, give away, or
transfer in any way any part of its list of Subscribers or use such
information for any purpose other than (i) AGENT (but no other successor
business entity) maintaining such periodic contact with Subscribers as
is required for warranty service, installation or maintenance of CPE,
(ii) the resolution of disputes between AGENT (but no other corporate
entity) and Subscribers relating to CPE charges and (iii) AGENT (but no
other corporate entity) business activities unrelated to CRS, CMRS, or
any other Authorized Services; provided, however, AGENT shall be under
no such limitation to the extent such Subscriber list or information
known to AGENT regarding such Subscriber list becomes available to any
third party in a manner destroying its nature as a trade secret, other
than through the fault of AGENT and, provided further, that AGENT shall
be under no restriction regarding the use of such information as long as
such use is consistent with the terms of this Agreement.
m. AGENT agrees to advertise association with SBMS' Authorized Services
as an Authorized Agent of SBMS, pursuant to any written procedures SBMS
may publish from time to time.
n. AGENT agrees to use its best efforts to install and maintain CPE for
Subscribers referred to AGENT by SBMS' direct sales force and sales
associates for installation and maintenance on a "first come, first
serve basis", in accordance with SBMS standards established from time to
time.
5. SBMS' RESPONSIBILITIES
----------------------
SBMS will:
a. Upon approval, and subject to compliance with procedures and
guidelines established from time to time, SBMS will furnish the
Authorized Services to Subscribers.
b. Secure any necessary regulatory approvals to conduct the Authorized
Services.
c. Establish the rates, terms, and conditions of the sale of its
Authorized Services to Subscribers.
d. Establish the administrative procedures and guidelines for sale of
Authorized Services, enrollment of Authorized Services Subscribers,
and customer service provided to Subscribers.
e. Promote SBMS' Authorized Services and provide promotional literature
as
9
<PAGE>
SBMS deems necessary and appropriate. SBMS may advertise SBMS'
Authorized Services from time to time if it deems necessary and
appropriate.
f. Provide a reasonable amount of training on sales of SBMS' Authorized
Services and administrative procedures associated with the enrollment
of Subscribers.
g. Bill Subscribers for SBMS' Authorized Services charges and provide
customer service and assistance, including collection of Authorized
Services charges.
10
<PAGE>
6. CPE BEARING SBMS' MARKS
-----------------------
AGENT shall not have the right, except after SBMS' approval, to sell
CPE bearing SBMS' Marks to any person or entity other than a Subscriber to whom
AGENT has sold SBMS' Authorized Service(s) hereunder. This clause is intended
to protect SBMS' Marks and to assure that such Marks are used properly.
7. COMMISSIONS
-----------
SBMS shall pay commissions to AGENT for Subscribers enrolled by AGENT
onto SBMS' Authorized Services. A Subscriber will be deemed to be enrolled only
when the Subscriber's CRS telephone number is installed in CPE and activated by
SBMS. The current commissions and related Authorized Services are defined and
outlined in the attached Exhibit "C." This commission schedule may be revised
or restructured by SBMS in its sole discretion, upon thirty (30) days advance
written notice to AGENT or by mutual agreement of the parties at any time.
AGENT recognizes that SBMS' ability to sell the Authorized Services
may be affected by state and federal court decisions and state and federal
regulatory approvals. AGENT agrees that if SBMS is prohibited from, or
otherwise ceases, selling the Authorized Services in the Area, SBMS may declare
this Agreement null and void with no penalty.
Commissions shall only continue to accrue as long as this Agreement is
in effect, and the expiration or termination of this Agreement shall effectively
terminate AGENT'S right to any further commissions that would otherwise accrue
after the date of expiration or termination. Subscriber activation commissions
shall be debited in the event a Subscriber does not remain continuously active
on SBMS' system for at least that period(s) of time indicated in Exhibit "C."
SBMS may withhold and offset or apply AGENT compensation against 30
days past due amount owed to SBMS. Whenever AGENT fails to comply with any term
hereof or any procedure referenced in this Agreement or AGENT does not provide
complete and/or accurate information concerning Subscribers to whom an
Authorized Service is sold or, if applicable, the CPE is sold or leased, SBMS
shall have the right to withhold all or a portion of any compensation or other
amount otherwise payable hereunder to AGENT with respect to such Authorized
Service or if applicable, CPE.
8. USE OF MARKS BY AGENT
---------------------
Periodically SBMS will publish a list of the Marks AGENT is licensed
to use under the Agreement. The right granted hereunder shall be the non-
exclusive right of AGENT to use the Marks solely in the Area defined herein.
Such list will also be supplemented with rules and regulations pertaining to the
Marks. AGENT agrees to comply with all such rules and procedures prescribed by
SBMS from time to time during the term of this Agreement. AGENT
11
<PAGE>
acknowledges that its right to use the Marks is derived solely from this
Agreement and is limited to the identification of AGENT as an agent of SBMS.
AGENT recognizes the great value of the goodwill associated with the Marks, and
acknowledges that the Marks and all rights therein and goodwill pertaining
thereto belong exclusively to SBMS, and that the Marks have a secondary meaning
in the mind of the public. AGENT acknowledges and agrees that all usage of the
Marks by AGENT and any goodwill established thereby shall inure to the exclusive
benefit of SBMS and its Affiliates and that this Agreement does not confer any
goodwill or other interests in the Marks upon AGENT. Any unauthorized use of the
Marks by AGENT, or any use not in compliance herewith, shall constitute an
infringement of the rights of SBMS and its Affiliates in and to the Marks and
shall further constitute a material breach of this Agreement.
AGENT shall use the Marks with such words qualifying or identifying
the agency relationship of SBMS and AGENT as SBMS from time to time shall in its
sole discretion prescribe. AGENT shall not use the Marks as part of any
corporate or trade name or with any prefix, suffix or other modifying words,
terms, designs or symbols, or in any modified form, nor may AGENT use the Marks
in connection with the sale or lease of any unauthorized product or service or
in any other manner not expressly authorized by this Agreement or separately in
writing by SBMS. If AGENT uses SBMS' Marks on any of AGENT'S stationery, other
forms or business cards, AGENT agrees to display the Marks on such stationery,
other forms, and business cards used in connection with Authorized Services in
the manner prescribed by SBMS.
AGENT agrees to obtain such fictitious or assumed name certificates or
registrations as may be required by applicable law, provided the fictitious or
assumed name, if in connection with this Agreement, is approved in writing by
SBMS and SBMS is provided a copy of the certificate and/or registration. If any
fictitious or assumed name used by AGENT includes anything that identifies SBMS
or its Marks, SBMS may at any time require AGENT to cease using such fictitious
or assumed name, and to cancel any corresponding certificate and/or
registration.
If it becomes advisable at any time in SBMS' sole discretion for AGENT
to modify or discontinue use of any Mark or substitute one or more additional
trade or service marks to identify its relationship with SBMS or, if applicable,
any CPE, AGENT agrees to comply therewith within a reasonable time after notice
thereof by SBMS and the sole obligation of SBMS in any such event shall be to
reimburse AGENT for the out-of-pocket costs, if any, of complying with this
obligation. In addition, AGENT shall replace obsolete identification signs or
identification material with new signs or identification material should AGENT
adopt new Marks replacing one or more Marks identified by SBMS in such list as
herein before specified.
Upon reasonable notice from SBMS, AGENT shall provide to SBMS written
reports containing such statistical and other types of information as SBMS shall
reasonably request for the purpose of ascertaining or determining compliance
with the licensing provisions of this Agreement. Further, upon SBMS' request,
AGENT shall provide SBMS with samples of all
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advertising and other literature, packages, labels, and labeling prepared by
AGENT which use the Marks or the logos. When using the Marks or the logos under
this Agreement, AGENT undertakes to comply with all laws pertaining to
trademarks in force at any time in the Area defined herein.
9. SBMS' TITLE AND PROTECTION OF SBMS' RIGHTS
------------------------------------------
AGENT agrees that it will not attack the title or any rights of SBMS
in and to the Marks either during the term of this Agreement or thereafter.
SBMS hereby indemnifies AGENT and undertakes to hold AGENT harmless against any
damages and costs from claims or suits arising out of the use by AGENT of the
Marks as authorized in this Agreement, provided that prompt notice is given to
SBMS of any such claim or suit and provided, further, that SBMS shall have the
option to undertake and conduct the defense of any suit so brought and that no
settlement of any such claim or suit is to be made by AGENT without the prior
written consent of SBMS.
AGENT agrees to assist SBMS and SBMS agrees to reimburse AGENT for all
associated reasonable costs to the extent necessary in the procurement of any
protection or to protect any of SBMS' rights to the Marks, and SBMS, if it so
desires, may commence or prosecute any claims or suits in its own name or in the
name of AGENT or join AGENT as a party thereto. When known, AGENT shall
immediately notify SBMS in writing of any infringements or imitations by others
of the Marks that are the same as or similar to those covered by this Agreement.
SBMS shall have the sole right to determine whether any action shall be taken on
account of any such infringements or imitations. AGENT shall not institute any
suit or take any action on account of any such infringements or imitations
without first obtaining the written consent of SBMS.
10. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES
------------------------------------------------
AGENT shall secure and maintain in force all licenses and permits
required of AGENT and its employees in the enrollment of Subscribers and the
sale of CPE, installation and maintenance of CPE, including without limitation,
all required FCC permits and certifications, if required, and business and sales
tax licenses, and shall conduct its business in full compliance with all state
and federal laws, ordinances and regulations applicable to AGENT'S business.
SBMS shall sell or resell the Authorized Services in accordance with applicable
rules, regulations, statutes and decisions governing such Services.
AGENT shall promptly pay, when due, all taxes and assessments against
any real or personal property used in connection with AGENT'S business, and all
liens or encumbrances of every kind or character created or placed upon or
against any such property, and all accounts and other indebtedness of every kind
incurred by AGENT in the conduct of its business.
AGENT shall comply, at its own expense, with the provisions of all
applicable municipal requirements and those state and federal laws, inclusive of
Executive Orders applicable to AGENT as an employer. AGENT will fully comply
with the provisions of the Federal Occupational Safety and Health Act of 1970
and with any rules and regulations issued pursuant
13
<PAGE>
to this Act.
AGENT understands that if AGENT operates its CPE business or
represents SBMS' Authorized Services in a manner that is inconsistent with or
contrary to state or federal law or regulation, such action will reflect
adversely upon the name and goodwill of SBMS and its Affiliates. Therefore,
AGENT agrees to comply, if applicable, with Part 22 of the FCC rules, and all
tariffs, other governmental rules and procedures in existence relating to the
sale of the Authorized Services and the sale, lease, warranty service and the
conduct of AGENT'S CPE business hereunder as well as any rules and procedures
relating to such matters reasonably prescribed from time to time by SBMS. AGENT
shall be responsible to familiarize itself with the laws and regulations
applicable to the conduct of its business.
11. ADVERTISING AND BUSINESS PRACTICES OF AGENT
-------------------------------------------
All advertising and promotion by AGENT shall be completely factual and
shall conform to the highest standards of ethical advertising. All advertising
and marketing materials that AGENT desires to use in connection with Authorized
Services or CPE and that have not been prepared by or previously approved by
SBMS must be submitted to SBMS for approval prior to use.
AGENT agrees that it will not begin its advertising and promotion without
SBMS' prior written consent.
AGENT shall notify SBMS in writing within five (5) days of the commencement
of any material action, suit or proceeding, and of the issuance of any order,
writ, injunction, award or decree of any court, agency of other governmental
instrumentality, involving AGENT in connection with any business conducted by
AGENT on behalf of SBMS hereunder.
12. AGENT'S BUSINESS RECORDS
------------------------
AGENT agrees to create and to maintain at its principal office and
preserve for three years from the date of their preparation, full, complete and
accurate records of its business conducted pursuant to this Agreement. Such
records shall include, without limitation, records of all Authorized Services
enrollments and CPE sales, leases or rentals, and SBMS shall be entitled to
inspect the same upon reasonable notice.
13. ASSIGNMENT
----------
This Agreement is fully assignable by SBMS to any affiliated person or
entity and shall inure to the benefit of any assignee or other legal successor
to the interest of SBMS herein.
AGENT acknowledges that SBMS has entered into this Agreement in
reliance upon the character, business experience and ability of AGENT and its
owner(s), officers and managers and
14
<PAGE>
that neither the rights and duties created by this Agreement nor a controlling
interest in the ownership of AGENT may be voluntarily, involuntarily, directly
or indirectly assigned, or otherwise transferred (including, without limitation,
by transfer of capital stock or partnership interests, by merger or
consolidation, by issuance of additional securities representing an ownership
interest in AGENT or convertible thereto, or in the event of the death of a
shareholder or partner of AGENT, by will, in declaration of or transfer in trust
or the laws of intestate succession) without the written approval of SBMS, which
will not be unreasonably withheld, subject to such conditions as SBMS deems
reasonably necessary. Any such assignment or transfer without such approval
shall constitute a breach hereof, subject to termination and convey no rights to
or interests herein. Any change in management, personnel or identity that
materially impairs the ability of AGENT to market the Authorized Services shall
also constitute such a breach. "Control" for purposes hereof is defined in
Paragraph 1 above.
14. TERM AND EXTENSION OF AGENCY RELATIONSHIP
-----------------------------------------
The term of this Agreement shall be three (3) years, commencing upon
final execution of this Agreement. AGENT shall provide to SBMS written notice
of the date on which AGENT initiates operations under this Agreement in the
Area. AGENT agrees that SBMS must provide written consent before AGENT actually
initiates business operations.
Upon expiration of this Agreement, if SBMS plans to continue to sell
Authorized Services in the Area and AGENT has substantially complied with all
provisions of this Agreement, then this Agreement shall automatically extend for
additional one (1) year renewal periods subject to either party's option to
terminate this Agreement upon written notice as outlined below. Upon extension
of their agency relationship, SBMS and AGENT shall continue their business
relationship on the same terms and conditions set forth in this Agreement,
subject to changes required by regulatory authorities or as mutually agreed upon
by SBMS and AGENT. AGENT and/or SBMS shall give the other party written notice
of exercise of its option to terminate this Agreement not less than sixty (60)
nor more than one hundred twenty (120) days prior to the expiration of the
original term or the renewal period.
15. LATE PAYMENTS; SECURITY DEPOSIT
-------------------------------
In the event any amount payable by AGENT to SBMS is more than thirty
(30) days overdue, SBMS may, at its sole option, do one or more of the
following: (i) require AGENT to pay its account in full; (ii) apply
commissions and any other credits or other amounts payable to AGENT to reduce
the AGENT'S account payable balance; (iii) require AGENT to deposit with SBMS
an irrevocable commercial letter of credit, cash or other form of security
acceptable to SBMS in its sole discretion to secure future delays or defaults in
payment; or (iv) thirty days after providing written notice to Agent of the
overdue payment, if payment remains overdue, terminate this Agreement. This
deposit will secure payment of any amounts due under this Agreement or any other
agreement between the parties.
15
<PAGE>
AGENT understands that in order to purchase CPE from SBMS (if SBMS
determines that it will sell CPE) other than on a cash on delivery basis, AGENT
may be required to sign security agreements, financing statements and related
documents.
16. TERMINATION OF AGREEMENT
------------------------
A. By Agent
--------
If AGENT is in substantial compliance with this Agreement and SBMS
materially breaches this Agreement and fails to cure such breach within thirty
(30) days after written notice thereof is delivered to SBMS, AGENT may terminate
this Agreement effective thirty (30) days after delivery to SBMS of written
notice thereof and AGENT shall not be bound by the provisions in Paragraph 18,
"Covenants Not to Compete."
B. By SBMS
-------
SBMS shall have the right to terminate this Agreement effective upon
thirty (30) days written notice if (a) the FCC Cellular Radio Decisions are not
continued in substantially the same form and such change materially adversely
impacts SBMS' (or an Affiliate's) ability to conduct its business in the Area;
(b) state and/or federal regulatory approval empowering SBMS or its Affiliate to
construct and provide the Authorized Services and/or CPE in the Area is not
granted to either SBMS or an Affiliate, is granted subject to terms and
conditions unacceptable to SBMS or an Affiliate, or is granted under such terms
and conditions that, in SBMS' opinion, materially affect the intended purpose of
this Agreement; or (c) regulatory authorization of the commission schedule of
this Authorized Agent Agreement is made subject to terms and conditions
unacceptable to SBMS or its Affiliates; (d) prior to selling or providing any
Authorized Service to AGENT, SBMS decides not to provide the Authorized Services
in the particular area set forth in Exhibit "A".
Further, SBMS shall have the right to terminate this Agreement effective
upon written notice if: (a) AGENT makes an assignment for the benefit of
creditors; (b) an Order for Relief under Title 11 of the United States Code is
entered by any United States Court against AGENT; (c) a trustee or receiver of
any substantial part of the AGENT'S assets is appointed by any Court; (d) AGENT
sells all or substantially all of AGENT'S inventory or assets other than any
sale in the ordinary course of business.
In addition, SBMS shall have the right to terminate this Agreement
effective upon delivery of notice of termination of AGENT, if AGENT (or one or
more of its owners and affiliates): (i) has made any material misrepresentation
or omission in its application to establish an agency relationship with SBMS or
is convicted of or pleads no contest to a felony or other crime or offense that,
in SBMS' reasonable sole opinion, is likely to adversely affect the reputation
of SBMS or its affiliated companies or the goodwill of the Marks; (ii) attempts
to make an unauthorized assignment of this Agreement; (iii) receives a notice of
violation of the
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<PAGE>
terms or conditions of any license or permit required by AGENT or its
employee(s) in the conduct of AGENT'S Authorized Services and fails to correct
such violation, or to terminate the employment of such employee(s) within the
time period specified in such notice, if any, or within thirty (30) days after
receipt of such notice, whichever first expires; (iv) fails to achieve a minimum
average of twenty-five (25) gross activations for three (3) consecutive months;
or (v) fails to comply with any provision of this Agreement, including any
applicable tariff relating to Authorized Services and/or CPE, and AGENT does not
correct such failure within ten (10) days as to monetary defaults and within
thirty (30) days if non-monetary default after written notice of such failure to
comply is delivered to AGENT.
17. OBLIGATIONS OF AGENT UPON TERMINATION OR EXPIRATION
---------------------------------------------------
AGENT agrees that upon the expiration or termination of this Agreement,
AGENT and its owner(s) and Affiliates will: (i) not thereafter use any actual or
similar Marks, or any actual or similar trade name, service mark, trademark,
logo, insignia, symbol or decorative design therefore used by AGENT specifically
in the sale of the Authorized Services in any manner or for any purpose in the
Area except that AGENT and its owner(s) may use or continue to use any trade
name, service mark, logo, insignia, symbol or decorative design that AGENT or
its owner(s) lawfully used in any business prior to the date of this Agreement;
and will not utilize for any purpose any actual or similar trade name, trade or
service mark or other commercial symbol that suggests or indicates a connection
or association with SBMS or any affiliated company of SBMS, and will not
directly or indirectly, at any time or in any manner, identify itself or any
other business as being associated with SBMS or any affiliated company of SBMS;
(ii) return to SBMS all advertising and marketing materials, forms, and other
materials containing any Mark or otherwise identifying or relating to SBMS'
Authorized Services in the Area; (iii) take such action as may be required to
cancel all fictitious or assumed name or equivalent registrations relating to
any Mark; or authorize SBMS, and any officer of SBMS, as AGENT'S attorney in
fact, to take such actions as may be required to cancel such fictitious or
assumed name or equivalent registration if AGENT fails or refuses to do so, and
all governmental agencies administering fictitious or assumed name or equivalent
registrations may accept and rely upon appropriate documents executed by SBMS or
its officer canceling any such registration; and (iv) provide SBMS with an
updated list of names, addresses and all other relevant information AGENT then
possesses concerning Subscribers of Authorized Services AGENT has enrolled in
the Area.
18. COVENANT NOT TO COMPETE
------------------------
In consideration of SBMS' grant to AGENT of the right to use the Marks, the
right to advertise affiliation with SBMS as an Authorized Agent of SBMS and the
great value of the goodwill associated with AGENT'S ability to use the Marks,
which rights and value are not available to distributors generally, and in
recognition of the value of specialized, technical knowledge of the cellular
industry and other services imparted by SBMS to AGENT from time to time, AGENT
agrees to be bound by the covenants in this Paragraph 18. Such rights and
17
<PAGE>
value shall constitute independent consideration for the covenants in this
Paragraph 18.
Therefore, for value received, as identified above, AGENT agrees that
AGENT, its officers, directors, key employees, and principals, any Affiliate or
the person or persons owning a controlling interest in AGENT or an Affiliate,
shall during the term of this Agreement and except as noted below, and AGENT and
the person or persons owning a controlling interest in AGENT for a period of one
(1) year following the latter of the expiration or termination of this
Agreement;
(1) not, directly or indirectly, induce, influence or suggest to any
Subscriber of SBMS' CRS to purchase CRS or any other CMRS from another
reseller or provider of CRS or CMRS in the Area as existing at the
time of execution of this Agreement;
(2) not directly or indirectly, influence or suggest to any
Subscriber of any other Authorized Service to purchase a competing
service from any other provider or reseller of such competing service
in the Area as existing at the time of execution of this Agreement,
whether or not the competing service is technologically the same as
the Authorized Service in question;
(3) not, under any circumstances or conditions whatsoever, directly
or indirectly, as an individual, partner, stockholder, director,
officer, employee, manager or in any other relation or capacity
whatsoever engage in the sale or promotion of CRS, CMRS, or any other
Authorized Service on behalf of any competing reseller or provider of
such service in the Area as existing at the time of execution of this
Agreement.
(4) not, directly or indirectly, allow any other person, firm or
other entity to use the name, trade name, goodwill or any other assets
or property of AGENT or SBMS in any manner in connection with such
other entity's sale of CRS, CMRS or any other Authorized Service on
behalf of a competing reseller or provider of service in the Area, and
AGENT specifically agrees not to transfer, assign, authorize or
consent to the transfer of an AGENT telephone number to such a
competing person, firm or other entity upon the expiration or
termination of this Agreement.
Notwithstanding any language to the contrary, subject to the obligation to
negotiate in good faith as set forth in Section (4) (i), the restrictive
covenants contained herein shall not operate so as to restrict AGENT from the
business of providing or selling Paging Services or nonexclusive Additional
Authorized Services.
19. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS
-------------------------------------------------
18
<PAGE>
Except as expressly provided to the contrary herein, each term and
condition of this Agreement, and any portion thereof, shall be considered
severable and if, for any reason, any such provision hereof is held to be
invalid, contrary to, or in conflict with any applicable present or future law,
regulation or public policy in a final, unappealable ruling issued by any court,
agency or tribunal with competent jurisdiction in a proceeding to which SBMS or
its Affiliate is a party, that ruling shall not impair the operation of, or have
any other effect upon, such other portions of this Agreement as may remain
otherwise enforceable which shall continue to be given full force and effect and
bind the parties hereto, although any portion held to be invalid shall be deemed
not to be a part of this Agreement from the date the time for appeal expires, if
AGENT is a party thereto, otherwise upon AGENT'S receipt of a notice of
nonenforcement thereof from SBMS.
To the extent that Paragraphs 4 or 18 contain or impose a restriction
upon AGENT that is deemed unenforceable by virtue of its scope in terms of area,
business activity prohibited and/or length of time, but could be enforceable by
reducing any or all thereof, AGENT and SBMS agree that same shall be enforced to
the fullest extent permissible under the laws and public policies applied in the
jurisdiction in which enforcement is sought. SBMS and AGENT shall mutually
agree to a modification of any invalid or unenforceable term or condition hereof
to the extent required to be valid and enforceable. Such modifications to this
Agreement shall be required only in the Area directly affected by any such
ruling.
20. WAIVER OF OBLIGATIONS
---------------------
SBMS and AGENT may by written instrument unilaterally waive or reduce
any obligation of or restriction upon the other under this Agreement, effective
upon delivery of written notice thereof to the other or such other effective
date stated in the notice of waiver.
Whenever this Agreement requires the consent of a party, such request
shall be in writing and no consent may be unreasonably withheld. All consents
or withholding of consent with reasons therefore shall be in writing.
SBMS and AGENT shall not be deemed to have waived or impaired any
right, power or option reserved by this Agreement (including, without
limitation, the right to demand exact compliance with every term, condition and
covenant herein, or to declare any breach hereof to be a default and to
terminate this Agreement prior to the expiration of its term), by virtue of any
custom or practice of the parties at variance with the terms hereof or any
failure, refusal or neglect of SBMS or AGENT to exercise any right under this
Agreement or to insist upon exact compliance by the other with its obligations
hereunder, including without limitation any rule or procedure, or any waiver,
forbearance, delay, failure or omission by SBMS to exercise any right, power or
option, whether of the same, similar or different nature, with respect to one or
more other Authorized Agents or other forms of distribution.
21. RIGHTS OF PARTIES ARE CUMULATIVE
--------------------------------
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<PAGE>
The rights of SBMS and AGENT hereunder are cumulative and no exercise
or enforcement by SBMS or AGENT of any right or remedy hereunder shall preclude
the exercise or enforcement by SBMS or AGENT of any other right or remedy
hereunder or that SBMS or AGENT is entitled by law to enforce.
20
<PAGE>
22. GOVERNING LAW AND LIMITATION OF ACTIONS
---------------------------------------
Except to the extent governed by United States law that preempts state
law, this Agreement shall be interpreted under and governed by the laws of the
State of Texas.
Any lawsuit or other claim arising out of or in connection with this
Agreement or the relationship of the parties must be brought, if at all, within
twenty-five (25) months after the cause of action accrues, regardless of when it
is discovered.
If any suit or action shall be brought to enforce or declare any of
the terms of this Agreement, to terminate this Agreement or to recover any
damages sustained as a result of a default in the performance of any obligations
under this Agreement, or a breach of any of the representations and warranties
herein contained or otherwise pursuant to this Agreement, then the party not
prevailing in such suit or action shall be liable to the prevailing party for
the prevailing party's cost and expenses, including, without limitation, court
costs and reasonable attorney's fees and expert witness' fees (including without
limitations, the value of time spent by in-house personnel), the amount of which
shall be fixed by the court and shall be made a part of any judgment rendered.
The parties agree that such suit or action must be brought, if at all, within
one (1) year after the underlying cause of action accrues.
23. TESTIMONY
---------
Matters relating to this Agreement may be an issue before various
regulatory bodies. Upon reasonable notice AGENT agrees to fully cooperate with
SBMS regarding any such matters including willingly providing employees of AGENT
to testify at appropriate times regarding any aspect of this Agreement or other
related issues. SBMS agrees to reimburse AGENT for reasonable costs expended in
supplying such testimony.
24. BINDING EFFECT
--------------
This Agreement is binding upon the parties hereto, their respective
executors, administrators, heirs, assigns and successors in interest.
All obligations by either party that expressly or by their nature
survive the expiration or termination of this Agreement shall continue in full
force and effect subsequent to and notwithstanding its expiration or termination
and until they are satisfied in full or by their nature.
25. IMPOSSIBILITY OF PERFORMANCE
----------------------------
Neither SBMS nor AGENT shall be liable for loss or damage or deemed to
be in breach of this Agreement if its failure to perform its obligations results
from: (i) compliance with any law, ruling, order, regulation, requirement or
instruction of any federal, state or municipal government or any department or
agency thereof or court of competent jurisdiction; (ii) acts of
21
<PAGE>
God; (iii) acts or omissions of the other party; (iv) fires, strikes, embargoes,
war, insurrection or riot. Any delay resulting from any of said causes shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable.
26. INTERPRETATION
--------------
The preambles and exhibits to this Agreement are a part of this Agreement,
which constitute the entire agreement of the parties, and there are no other
oral or written understandings or agreements between SBMS and AGENT relating to
the subject matter hereof.
Nothing in this Agreement is intended, nor shall be deemed, to confer
any rights or remedies upon any person or legal entity not a party hereto,
except for those affiliates of SBMS as may be involved in the provision of one
or more of the Authorized Services, provided that SBMS shall remain liable to
Agent pursuant to the terms of this Agreement.
The headings of the several paragraphs hereof are for convenience only
and do not define, limit or construe the contents of such paragraphs.
The term "AGENT" as used herein is applicable to one or more persons,
a corporation or a partnership. If two or more persons are at any time AGENT
hereunder, whether or not as partners or joint ventures, their obligations and
liabilities to SBMS shall be joint and several.
This Agreement shall be interpreted and governed without regard as to
which party hereto drafted the Agreement.
This Agreement shall be executed in multiple copies, each of which
shall be deemed an original.
27. INDEMNITY
---------
Subject to the provisions of Paragraph 3 and the insurance requirements set
forth in Paragraph 4, each party hereto agrees to defend, indemnify and save
harmless the other party and its successors and assigns and its employees and
agents and their heirs, legal representatives and assigns from any and all
claims or demands whatsoever, including the costs, expenses and reasonable
attorneys' fees incurred on account thereof, that may be made (i) by the
indemnifying party's employees or any other persons for bodily injury or damage
to property occasioned by the acts or omissions of the indemnifying party or its
subcontractor, or the employees or agents of any of them, and (ii) by the
party's employees under workers compensation or similar acts.
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<PAGE>
28. SURVIVAL
--------
The terms, provisions, representations, and warranties contained in
this Agreement that by their sense and context are intended to survive the
performance thereof by either or both parties hereunder shall so survive the
completion of performances and termination of this Agreement, including the
making of any and all payments due hereunder.
29. LICENSES
--------
No licenses, express or implied, under any patents are granted by SBMS
or its Affiliates to AGENT.
30. NOTICES AND PAYMENTS
--------------------
All payments due AGENT shall be made to such address or bank as AGENT
from time to time designates. All notices and reports required to be delivered
by the provisions of the Agreement shall be deemed so delivered three (3)
business days after placement in the United States Certified or Registered Mail,
postage prepaid and addressed to the party to be notified at its most current
principal business address of which the notifying party has been notified. All
reports and other information required by this Agreement shall be directed to
SBMS at the data processing center or the address provided to AGENT from time to
time, or to such other persons and places as SBMS may direct from time to time.
Any required report not actually received or postmarked by SBMS or AGENT during
regular business hours on the date due, shall be deemed delinquent.
31. CONFIDENTIAL INFORMATION
------------------------
Any specifications, drawings, sketches, models, samples, data,
computer programs or documentation, or technical or business information
("Information") furnished or disclosed by SBMS to AGENT hereunder shall be
deemed the exclusive property of SBMS, including title to copyright in all
copyrightable material, and, when in tangible form, shall be returned to SBMS
upon completion or termination of authorized work. Unless such Information is
required to be disclosed by law, was previously known to AGENT free of any
obligation to keep it confidential, or has been or is subsequently made public
by SBMS or a third party, it shall be held in confidence by AGENT, shall be used
only for the purposes hereunder, and may be used for other purposes only upon
such terms and conditions as may be mutually agreed upon in writing. In
addition, the parties hereby agree that Subscriber lists and related information
or data are the exclusive property of SBMS and are to be used by AGENT solely in
the performance of its obligations and duties as described herein and are to be
returned to SBMS upon the termination of this Agreement.
So long as this Agreement is in effect, AGENT shall not publicly disclose
any of the terms of this Agreement without the prior written consent of SBMS,
except as may be required
23
<PAGE>
by law or otherwise authorized by the terms of this
Agreement.
AGENT is served with process to obtain Information, AGENT shall
immediately notify SBMS, which shall have the right to seek to quash such
process regardless of any such efforts by Agent.
Unless marked "proprietary," any Information furnished or disclosed by
AGENT to SBMS shall not obligate SBMS to hold such Information in confidence.
32. COVENANT NOT TO SOLICIT EMPLOYMENT
----------------------------------
Agent and SBMS recognize and agree that each party hereto takes a
great deal of time to hire and train employees for its respective business.
Agent and SBMS fully understand the time and expense each party incurs to
obtain qualified personnel, and Agent and SBMS agree not to offer employment to
or employ any of the other party's employees without written consent by a Vice
President or the President of the other party.
33. AUTHORITY
---------
Each of the parties represents, warrants and agrees that it is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of the state of its formation, and has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; that the execution and delivery of this
Agreement and the performance hereof have been duly and validly authorized by
all necessary corporate or partnership action; and that the execution and
delivery by it of this Agreement and the performance of this Agreement by it
will not conflict with or result in a breach of or constitute or result in a
default under any of the terms, conditions or provisions of the Articles or
Certificates of Incorporation, By-Laws, or other of its governing instruments or
any judgment, order, decree, law, regulation or ruling of any court or
governmental authority or any agreement, contract, commitment or other
instrument to which it is a party or by which it is bound.
Specifically, AGENT represents and warrants that (i) AGENT is not a
party to any agreement to distribute, promote or otherwise sell CRS, CMRS or any
other Authorized Service ( except Paging Services or Additional Authorized
Services) on behalf of any competing provider, reseller or agent in the Area;
(ii) the execution and delivery by it of this Agreement and the performance of
this Agreement by it will not conflict with or result in a breach or constitute
or result in a default under any of the terms, conditions or provisions of any
agreement between AGENT and any other carrier, reseller or agent of CRS, CMRS or
any other Authorized Service.
34. RIGHT OF FIRST REFUSAL TO SUBLET OR ASSIGN STORE LOCATION(S)
------------------------------------------------------------
A. Preapproval of SBMS as Subtenant or Assignee
24
<PAGE>
In connection with negotiating the lease(s) for store location(s) (the
"Lease Premises"), Agent will use its reasonable best efforts to obtain a clause
in each such lease allowing for the free transferability of AGENT'S interest in
the lease(s) in the form of any unrestricted right on the part of Agent to
sublet, assign or otherwise transfer the Leased Premises to SBMS or any
Affiliate thereof.
B. Terms of Sublease or Agreement
The assignment or sublease shall specifically state that rental
payments shall be made directly to the landlord under the lease(s), and
Agent shall indemnify SBMS for any and all defaults under the lease(s) or
any other damage claims, etc. which arose during AGENT'S possession of the
Lease Premises.
C. Right of First Refusal
If, during the term of this Agreement, Agent shall elect to close or
relocate one or more of the sales locations located in any one or more of
the Leased Premises, Agent shall give written notice (the "Relocation
Notice") to SBMS of its desire to close or relocate one or more of its
sales locations on or before sixty (60) days prior to anticipated closure
or relocation of such sales location. The Relocation Notice shall include
a copy of the lease(s) for the particular Leased Premise(s) which are the
subject of the Relocation Notice, together with any and all amendments,
letter agreements, correspondence, etc. with respect to that particular
lease(s).
Within thirty (30) days after the receipt by SBMS of the Relocation
Notice and lease(s), SBMS shall advise Agent in writing whether it intends
to become AGENT'S subleasee or assignee under the lease(s). If the consent
of the landlord is required, Agent shall use its best efforts to obtain
such consent and shall generally cooperate fully with SBMS in connection
with the assignment or subletting of the Leased Premises to SBMS. The terms
and conditions of the sublease or assignment shall be identical to those
set forth in the lease(s).
If SBMS does not advise Agent of its intentions with respect to the
lease(s) within such thirty (30) day period, Agent shall be free to attempt
to sublet or assign the lease(s) to a third party under any terms and
conditions. If Agent should attempt to sublet or assign the Leased
Premises under different terms and conditions than those set forth in the
lease(s). Agent shall first offer in writing the Leased Premises under the
new terms and conditions to SBMS who shall have fifteen (15) days in which
to determine if it will enter a sublease or assignment with Agent under
such different terms or conditions.
35. RIGHT OF FIRST REFUSAL TO PURCHASE STORE LOCATION(S)
----------------------------------------------------
If at any time during the term of this Agreement or upon termination
of this Agreement,
25
<PAGE>
Agent receives a bona fide offer to purchase any or all of Agent's store
location(s), from a third party, and Agent desires to accept such offer, Agent
shall cause such offer to be reduced to writing and shall notify SBMS in writing
of such offer. Agent shall provide SBMS thirty (30) business days to exercise a
right of first refusal with respect to AGENT'S store location(s) by delivering
to Agent a written notice indicating SBMS' desire to make the same purchase
under terms and conditions identical in all material respects to the terms and
conditions of the third party's offer. Notwithstanding the foregoing, if a term
of the third party's offer specifies consideration other than cash, SBMS may
exercise its right of first refusal by agreeing to pay an amount in cash
reasonably equivalent to the value of such noncash consideration.
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement in two counterparts on the day and year first above written, AND
HEREBY DECLARE THAT THEY HAVE READ AND DO UNDERSTAND EACH AND EVERY TERM,
-----------------------------------------------------
CONDITION, AND COVENANT CONTAINED IN THIS AGREEMENT OR IN ANY DOCUMENT
- ----------------------------------------------------------------------
INCORPORATED BY REFERENCE.
- --------------------------
CELLSTAR, LTD.
By: /s/ Alan H. Goldfield
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
Name: Alan H. Goldfield
--------------------------------------
(Print/Type)
Date: 12/16/96
--------------------------------------
SOUTHWESTERN BELL MOBILE SYSTEMS, INC.,
AS GENERAL PARTNER FOR:
- -------------------------------------------
By: /s/ Lowell Whitlock
----------------------------------------
Title: VP / GM - DFW
------------------------------------
Name: Lowell Whitlock
-------------------------------------
(Print/Type)
Date: 12/17/96
--------------------------------------
Approved as to Form: /s/ illegible
26
<PAGE>
EXHIBIT A
---------
AUTHORIZED SERVICES
- -------------------
1. Commercial Mobile Radio Services (CMRS)
2. CMRS Long Distance
27
<PAGE>
EXHIBIT B
---------
AUTHORIZED AGENT LOCATIONS
- --------------------------
This Exhibit "B" sets forth the initial locations at which AGENT is
authorized to operate as described in this Agreement.
It is agreed by AGENT and SBMS that if the initial business location(s)
and/or the date upon which Authorized Services operations of AGENT will commence
are not known at the date of execution of this Agreement, the same may be added
from time to time as such information becomes known but no later than the
effective date of AGENT operations.
AGENT shall not change or add business locations without SBMS' prior
written approval. AGENT shall consult with SBMS before initiating any action to
change or supplement any of its business locations.
Any business locations that AGENT opens and operates in the Area shall be
subject to all of the terms of the Agreement, whether or not an amendment is
signed by the parties adding the addresses of any new or different locations.
COUNTIES IN WHICH AGENT IS AUTHORIZED:
Dallas and Tarrant
BUSINESS LOCATIONS:
1. 605 W. Airport Freeway, Irving, Texas 75062
2. 512 N. Central Expressway, Richardson, Texas 75080
3. 4146 S. Cooper, Arlington, Texas 76015
4. 4216 LBJ Freeway, Dallas, Texas 75244
5. 5937 Donnelly, Ft. Worth, Texas 76107
EFFECTIVE DATE OF AGENT OPERATIONS:
(under this Agreement)
- -----------------------------------
28
<PAGE>
EXHIBIT C
----------
COMMISSION SCHEDULE (DALLAS-FT. WORTH)
TO AUTHORIZED AGENCY AGREEMENT
(THIS EXHIBIT C SHALL BE EFFECTIVE AS OF AUGUST 1, 1996)
CELL STAR, LTD.
COMMISSIONS
- -----------
Commissions will be paid by SBMS to AGENT in the following manner:
<TABLE>
<CAPTION>
RATE PLAN COMMISSION
--------- ----------
<S> <C>
Bell 15 I, Basic [REDACTED]
Weekender III, Bell 250 I, III and Corporate [REDACTED]
Bell 400 I, III, Bell 700 I, III, and Bell 950 I, III [REDACTED]
</TABLE>
<TABLE>
<CAPTION>
SPECIAL PLAN COMMISSION
------------ ----------
<S> <C>
Bell 15 III [REDACTED]
Weekender I [REDACTED]
</TABLE>
Commissions will be paid within thirty (30) days of the bill close date on
paperwork properly completed and received by SBMS by the second business day of
the following month. Incomplete or incorrect paperwork will be returned to the
Agent and will not be paid during the current cycle unless it is received back
by SBMS by the second business day of the following month. Agent inquiries must
be submitted within six (6) months of the activation date to be eligible for
payment.
Subscriber activation commissions shall be debited in full in the event
Subscriber does not remain on SBMS system in the Area for at least [REDACTED]
subsequent to activation. In addition, if Subscriber switches rate plans during
the initial [REDACTED], then the Agent's commission will be debited or credited
by the difference in the two commission rates.
Commissions will not be paid on paperwork SBMS deems to be fraudulent. This
includes, but is not limited to, forged signatures or forged initials. If it is
determined that the Agent, its sales personnel or Sub-Agent committed the
fraudulent activation, then the Agent will be held responsible for any
subsequent charge-offs involved with such activation.
RESIDUALS
- ---------
Residuals will be paid in the following manner:
ACTIVATIONS RESIDUALS
[REDACTED] [REDACTED]
Residuals will be paid by calculating [REDACTED] will not be included in
the calculation of residual payments. Any customer account in a suspend or final
status will not be eligible in the calculation for residuals.
MSA/NW OCTOBER 30, 1996
1
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
Example: [REDACTED]
Agent's right to payment of residuals shall terminate following expiration of
this Agreement, including any renewal period, or as otherwise provided herein.
SBMS, in its sole discretion, may terminate or suspend payment of Agents' entire
residual base if the current month's gross activations [REDACTED]
drop below [REDACTED].
TRADE-IN
- --------
Agent may be eligible to receive payment pursuant to the Trade-in Program to be
established by SBMS. Failure to comply with all current Trade-in Program
guidelines may result in Agent's loss of eligibility to participate in the
Trade-in Program. The Trade-in Program may be revised or restructured at any
time by SBMS, in its sole discretion, upon fifteen (15) days advance written
notice to Agent.
VERTICAL SERVICES
- -----------------
Vertical Services will be paid in the following manner:
Commissions will be paid on vertical services equal to [REDACTED]
CO-OP
- -----
Co-op will be paid in the following manner:
Advertising Co-op will be accrued [REDACTED]
Co-op guidelines must be followed in order to receive co-op payments. Co-op
payments shall be due and payable to Agent 30 days following submission of
invoices approved by the SBMS Marketing Department, provided however, no Co-op
invoices will be paid until such amounts have been earned and accrued in Agent's
Co-op account.
MSA/NW OCTOBER 30, 1996
2
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
SPIFFS
- ------
[REDACTED]
<TABLE>
<CAPTION>
NET ACTIVATIONS SPIFF
--------------- -----
<S> <C>
[REDACTED] [REDACTED]
</TABLE>
GENERAL
- -------
In order to receive compensation as set forth in this Exhibit C, SBMS must be
notified and in agreement with any transfer of ownership of store locations.
SBMS reserves the right to withhold or apply commissions and residuals against
overdue receivables owed to SBMS by Agent, or against write-offs assessed by
SBMS resulting from fraudulent paperwork deemed to be caused by the Agent, its
sales personnel, or its Sub-Agent.
Agent must submit customer deposit checks that have been returned to them by a
financial institution (e.g. NSF check, closed account, etc.) to SBMS Dallas
Treasury whose address is 15660 Dallas Parkway, Suite 1300, Dallas, TX 75248,
within two months from the date of the check in order to receive reimbursement.
This Exhibit C may be revised or restructured at any time by SBMS, in its sole
discretion, upon thirty (30) days advance written notice to Agent.
Agent will be compensated for the services and rate plans as set forth in this
Exhibit C. SBMS reserves the right to compensate Agent for all other services
and rate plans not set forth herein in amounts to be determined solely by SBMS.
DEFINITIONS
- -----------
Net activations are equal to [REDACTED]
** Non-vested deactivations are [REDACTED].
SOUTHWESTERN BELL MOBILE SYSTEMS ACKNOWLEDGMENT:
- -------------------------------- --------------
AGENT: Cellstar, Ltd.
BY: /s/ Lowell D. Whitlock BY: /s/ Alan H. Goldfield
----------------------------- -----------------------------------
NAME: LOWELL D. WHITLOCK NAME: ALAN H. GOLDFIELD
--------------------------- ---------------------------------
TITLE: VICE PRESIDENT & TITLE: CHAIRMAN AND CHIEF
GENERAL MANAGER EXECUTIVE OFFICER
-------------------------- --------------------------------
DATE: 12/17/96 DATE: 12/16/96
--------------------------- ---------------------------------
MSA/NW OCTOBER 30, 1996
3
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT D
---------
Subagents
Ratel Communications
John Boling
3001 D. Airport Freeway
Bedford, Texas 76021
817-267-1770
Cellular International
Fima Kuperburg
10434 Ryker #C
Dallas, Texas 75238
214-341-2610
Beepers Etc.
Leo Prather/Cleveland Armstead
13455 Noel Road, Suite 1000
Dallas, Texas 75240
214-774-4537
Advanced Cellular Technology
Mike Jeffus
1420 Schukar Court
Irving, Texas 75061
972-986-2213
Cellular Paging
Chris Adeime
3317 West Illinois
Dallas, Texas 75211
214-339-5283
Cellular Paging
Chris Adeime
2431 A South Collins
Arlington, Texas 76014
817-265-4117
<PAGE>
EXHIBIT D
---------
Subagents
Callnet Communication
Felix Osimiri
2302 Gus Thomason
Dallas, Texas 75228
214-327-9308
Radio Shack
Larry Criner
1601 B West Ennis Avenue
Ennis, Texas 75119
214-875-5770
Beepers Unlimited
Bobby & Debbie Harris
1147 East Industrial
Sulphur Springs, Texas 75482
903-439-6049
Universal Paging
Marvis Oa
3068 Forest Lane, Suite 209B
Dallas, Texas 75234
214-357-6565
Prime Time Communications
Keith Stenson
4607 Village Fair Drive, #327
Dallas, Texas 75234
214-374-7534
Protech Electronics
Scott Grant
3884 Shiloh Road, Suite 100
Garland, Texas 75041
972-864-4720
<PAGE>
EXHIBIT D
---------
Subagents
Larry Haag
1802 Guildford Street
Garland, Texas 75044
972-414-8430
Mobile Advantage
Eric Jobe
503 A West Henderson
Cleburne, Texas 76031
817-558-0610
Mobile Electronics
Eric Jobe
726 East Highway 377
Grandbury, Texas 76048
817-279-7243
Moeller Cellular
David Pitre
3805 B Camp Bowie
Cleburne, Texas 76107
817-731-1011
Mobile Communications
Jay Montgomery
903 South Main
Weatherford, Texas 76086
817-596-0099
Texoma Prime
Connie Ferguson
Route 6, Box 569A
Gainesville, Texas 76240
888-453-3229
<PAGE>
EXHIBIT D
---------
Subagents
Golden Key Leasing
Darrell Wright
P.O. Box 541
Arlington, Texas 76004-0541
817-226-4477
Telemart
Ben Tobar
546 Harwood Road
Hurst, Texas 76054
817-498-7831
National Tape
dba National Auto Accessories
Alan Goldfield, Sole Proprietor
2608 South Buckner
Dallas, Texas 75127
214-285-2188
Cellular on the Go
Curt Miller
3512 Sweetwood
Bedford, Texas 76021
817-364-2878
K.A. Marketing
Sandy Monroe
1 Stone Briar Way
Frisco, Texas 75034
972-957-7547
972-993-3993
<PAGE>
EXHIBIT D
---------
Subagents
Bengo Networks
Ben Udechukwu
9492 Webb Chapel
Dallas, Texas 75220
972-654-0721
Advanced Voice Systems
Hazel Altheia
11551 Forest Central, Suite 105
Dallas, Texas 75243
214-340-1976
<PAGE>
EXHIBIT 10.8
MASTER AGREEMENT NO. P/PS-960163
MASTER AGREEMENT
FOR
THE PURCHASE OF PRODUCTS
AND
INVENTORY MAINTENANCE, ASSEMBLY AND FULFILLMENT (IAF) SERVICES
BETWEEN
PACIFIC BELL MOBILE SERVICES
AND
CELLSTAR, LTD.
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT BY "[REDACTED]".
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
TABLE OF CONTENTS
-----------------
1. DEFINITIONS 1
2. TERM OF AGREEMENT 3
3. MASTER AGREEMENT 3
4. SCOPE OF WORK 4
4.1 CUSTOMER PARTNER TEAM 4
4.2 EXTERNAL RELATIONSHIPS 4
4.2.1 Sourcing 4
4.2.2 Vendors and Product Suppliers 5
4.2.3 Retailers and Other Resellers 6
4.2.4 Direct Sales Accounts (Subscriber and Business Customers) 6
4.3 WORKING RELATIONSHIP 6
4.3.1 Dedicated Product Inventory Ownership and Management 6
4.3.2 Open Stock Forecast and Supply 7
4.3.3 Product Assembly 7
4.3.4 Credit Line Administration, Order Processing and Fulfillment 7
4.3.5 Accounts Receivable, Invoicing and Collections 8
4.3.6 Inventory Accounting and Control 9
4.3.7 Maintenance of Books and Records 9
4.3.8 Inventory/Warehousing 9
4.3.9 Returns Processing 9
4.3.10 Use of Fictitious Business Name 9
4.4 COMPENSATION 10
4.4.1 Start-up Costs 10
4.4.2 Inventory Carrying Costs 10
4.4.3 Standard Product Cost 10
4.4.4 Credit for Customer Receivable 11
4.4.5 Fulfillment Services Costs 11
4.4.6 Monthly Recurring Service Fees 11
4.4.7 Returns 11
4.4.8 Purchase Price Variances 11
4.5 PBMS/SUPPLIER AGREEMENTS 12
5. ORDERS 13
6. PRICES 14
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
7. INVOICING AND PAYMENT 14
8. SHIPPING AND PACKING 15
9. TAXES 15
10. RECORDS AND AUDITS 16
11. INDEPENDENT CONTRACTOR 16
12. NONEXCLUSIVE AGREEMENT 16
13. INDEMNIFICATION 16
14. INSURANCE 17
15. ACCESS 18
16. INFORMATION 19
17. QUALITY 20
18. REGISTRATION 21
19. INSIGNIA 22
20. HAZARDOUS MATERIALS 22
21. CODES, LAWS OR REGULATIONS 22
22. NOTICE OF DELAYS 22
23. CHANGES AND SUSPENSIONS 22
24. TERMINATION AND CANCELLATION 23
25. PARTIAL TERMINATION OR CANCELLATION 23
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
26. NONASSIGNMENT 24
27. NOTICES 24
28. PUBLICITY 24
29. COMPLIANCE WITH LAWS 24
30. TITLE 25
31. NO THIRD PARTY BENEFICIARIES 25
32. AMENDMENTS AND WAIVERS 25
33. EXECUTIVE ORDERS 25
34. HEADINGS 25
35. GOVERNING LAW 25
36. REMEDIES CUMULATIVE 25
37. SEVERABILITY 25
38. SURVIVAL 26
39. PATENTS 26
40. FORCE MAJEURE 26
41. SUBCONTRACTING PLAN 26
42. MBE/WBE/DVBE CANCELLATION CLAUSE 26
43. DELIVERY OF PRODUCTS AND PERFORMANCE OF SERVICES 27
44. USE OF CELLSTAR'S PUBLISHED SPECIFICATIONS 28
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
45. DOCUMENTATION 28
46. RISK OF LOSS 28
47. WARRANTIES 28
48. TERMINATION OF ORDERS 29
49. ALTERNATE DISPUTE RESOLUTION 29
50. PRECEDENCE 30
51. LIMITATION OF LIABILITY 30
52. CORPORATE AUTHORIZATION 30
53. ENTIRE AGREEMENT 31
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
EXHIBITS
--------
EXHIBIT A: Executive Orders and Associated Regulations
EXHIBIT A-1: Job Specific Subcontracting Plan
EXHIBIT A-2: MBE/WBE/DVBE Summary Subcontracting Report
(Job Specific Results)
EXHIBIT A-3: Commodity Product Subcontracting Plan
EXHIBIT A-4: MBE/WBE/DVBE Summary Subcontracting Report
(Commodity Results)
EXHIBIT B: Description of Products, Services & Prices
EXHIBIT C: PBMS' Credit and Collection Costs
EXHIBIT D: PCS Price List
EXHIBIT E: Sample Order
EXHIBIT F: Assembly Cost Model
APPENDIX 1: Procedures Manual
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
THIS MASTER AGREEMENT ("AGREEMENT"), EFFECTIVE SEPTEMBER 20, 1996, IS BETWEEN
CELLSTAR, LTD., A TEXAS LIMITED PARTNERSHIP ("CELLSTAR"), AND PACIFIC BELL
MOBILE SERVICES, A CALIFORNIA CORPORATION ("PBMS"). THE PARTIES, INTENDING TO
BE LEGALLY BOUND, AGREE AS FOLLOWS:
1. DEFINITIONS
For purposes of this Agreement, the following terms and all other terms
defined in this Agreement shall have the meanings so defined unless the
context clearly indicates otherwise. A term defined in the singular shall
include the plural and vice versa when the context so indicates.
"AFFILIATE" - means with respect to PBMS (a) any corporation or other
entity owning, either directly or indirectly, a majority of the outstanding
stock of PBMS ("Parent"), or (b) any corporation or other entity in which a
majority of the ownership interest is held, either directly or indirectly,
by Parent or PBMS.
"CELLSTAR ORDER" - means an order executed by CellStar under a product
supplier/PBMS agreement.
"COMPONENT INVENTORY" - means items carried in inventory at the component
level for resale to subscribers as repair or replacement items. These
components are usually but not always "B Stock" items which have been
received as returns without apparent defect or reconditioned merchandise
which cannot be sold as new equipment.
"CUSTOMERS" - means either Retailers, resellers, business and/or end users.
"DEDICATED PRODUCTS" - means Products purchased by CellStar at PBMS"
direction under terms negotiated by PBMS with the Product manufacturers.
Subject to Section 4.3.1.c, Dedicated Products shall be reserved
exclusively for PBMS' use.
"FULFILLMENT SERVICES" - means picking, assembling of Products, packaging,
preparation of shipping documents, shipping to Customers, processing of
Customer returns and tracking of shipments and all associated Services
associated with providing Products to Customers and receiving Products back
from Customers.
"INFORMATION" - means all ideas, discoveries, concepts, know-how,
techniques, designs, specifications, drawings, sketches, models, manuals,
samples, tools, pricing, Customer lists, competitor, manufacturer, or
manufacturing information, computer programs, technical information, and
other confidential business, Customer or personnel information or data,
whether written, oral or otherwise owned or controlled by the disclosing
party.
"INSIGNIA" - means PBMS' and as applicable, the manufacturers' trademarks,
trade names, symbols, decorative designs or evidence of PBMS' inspection.
1
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
"MATERIAL ADVERSE CHANGE" - means a material adverse change in (a) the
business assets, operations, prospects or financial condition of either
party, or (b) the ability of either party to perform its obligations under
this Agreement.
"OPEN STOCK" - means Products purchased at CellStar's discretion and in
CellStar's inventory available to the general market.
"OPEN STOCK INVENTORY" - means original equipment manufacturer accessories
carried in inventory by CellStar for sale to PBMS and other CellStar
customers. These items may be packaged as PBMS branded items in unique
PBMS retail packages. When so packaged at the request of PBMS, these items
are converted to "Dedicated Products".
"ORDERS" - means purchase orders, in written (e.g. mailed or faxed), or
electronic form (e.g. EDI, flat file) as may be delivered to CellStar for
the purpose of ordering Products and/or Services hereunder. A purchase
order shall be substantially in the form of Exhibit E (Sample Order)
attached hereto and made a part hereof. Each such purchase order, in
written or electronic form shall be deemed to be a separate and independent
agreement between the parties thereto with respect to the subject matter
thereof and shall incorporate (a) all of the provisions of this Agreement
(including any appendices, exhibits, specifications and other documents
attached hereto) as it may from time to time be amended, and (b) any
specifications attached thereto.
"PCS" - means Personal Communication Services.
"PROCEDURES MANUAL" - means a multi-paged document, (the initial version of
which is attached hereto and incorporated by reference hereto as Appendix
1), which details processes and deliverables which will be routinely
performed in the relationship between CellStar and PBMS, and which shall be
periodically revised, from time to time, upon written agreement by both
parties.
"PRODUCTS" - means the equipment and materials, including but not limited
to: PCS handsets, accessories, and collateral material, as may be furnished
to PBMS' Customers by CellStar hereunder.
"PURCHASE PRICE VARIANCE" - means the difference between the actual
delivered cost of Products or components and the standard cost contained in
CellStar's accounting systems.
"RETAILER" - means any vendor of products, whether through traditional
retail outlet or through membership or discount or wholesale establishments
selling to the end user consumer.
"SERVICES" - means all services furnished by CellStar hereunder to PBMS
and/or to PBMS' Customers.
"SPECIFICATIONS" - means CellStar's commercial and technical specifications
(including drawings) for the Products and Services provided hereunder and
such other specifications, e.g. (Procedures Manual), as are listed in the
exhibits or appendices, attached hereto and made a part hereof, or as are
attached to and made a part of the applicable Order.
2
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
"WARRANTY" - means the warranties for CellStar's Services or the Products
covered by CellStar's and/or the Product manufacturer's warranties under
this Agreement.
2. TERM OF AGREEMENT
a. This Agreement shall become effective as of the date stated above (the
"Effective Date"), and unless sooner terminated or canceled as provided
herein, shall continue through September 20, 2001.
b. Either CellStar or PBMS may terminate this Agreement upon one hundred
and eighty (180) calendar days' prior written notice to the other
setting forth the effective date of such termination. The termination,
cancellation or expiration of this Agreement shall not affect the
obligations of the parties under any Order previously executed
hereunder, and the terms and conditions of this Agreement shall continue
to apply to such Order as if this Agreement had not expired, or been
terminated or canceled. Upon the termination, cancellation or
expiration of this Agreement, PBMS agrees to purchase any Dedicated
Products remaining in CellStar's inventory, including any Open Stock
inventory which has been converted to Dedicated Product inventory.
3. MASTER AGREEMENT
a This Agreement anticipates the future issuance of Orders by Pacific Bell
Mobile Services and any PBMS Affiliate as may be designated by Pacific
Bell Mobile Services in writing. Each such entity executing an Order
shall be deemed to be a party to that Order and shall be subject to the
terms and conditions of this Agreement for purposes of that Order;
provided that no PBMS Affiliate shall be permitted to issue an Order
hereunder until (i) such Affiliate has satisfied CellStar's credit
standards, and (ii) an authorized representative of such Affiliate has
executed appropriate documentation pursuant to which it agrees to be
bound by the terms and conditions of this Agreement for the obligations
incurred under such Order. For the purposes of any Order executed
hereunder by any PBMS Affiliate, the term "PBMS" in this Agreement shall
be deemed to also refer to such Affiliate where the context so
indicates. Prior to any Affiliate's execution of an Order hereunder,
PBMS shall obtain that Affiliate's written agreement to be bound by all
the terms and conditions of this Agreement.
b. The provisions of this Agreement shall apply to all contracts entered
into between CellStar and PBMS during the term of this Agreement with
respect to the Products and Services which are the subject of this
Agreement unless the parties expressly agree otherwise by a written
modification to this Agreement, signed by the persons who executed this
Agreement or any other authorized representative of the parties, or
unless an Affiliate of PBMS enters into a separate written agreement
with CellStar, signed by CellStar and the persons authorized to execute
agreements for the PBMS Affiliate. Any such separate agreement signed
between CellStar and a PBMS Affiliate shall apply only to CellStar and
such Affiliate and have no effect
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whatsoever on PBMS. In the absence of such a modification to this
Agreement or such separate agreement, any terms in any other contract
respecting the subject matter of this Agreement which are additional to,
different from or inconsistent with the provisions of this Agreement
shall be deemed to be void and of no effect whatsoever.
4. SCOPE OF WORK
This Agreement describes the principles of the relationship between PBMS
and CellStar and describes CellStar's provision of Products and value added
Services, including but not limited to, sourcing, inventory, assembly,
credit, collections and fulfillment Services to support Product
distribution to PBMS' Customers.
4.1 CUSTOMER PARTNER TEAM
The parties will jointly commit resources to support the following
business processes and structures to accomplish PBMS' and CellStar's
objectives under this Agreement.
The Customer Partner Team ("CPT") shall set direction, priorities,
expectations and boundaries and act to resolve business issues which
arise. The CPT will particularly focus on emphasizing collaborative
work between the parties and to preserve and promote partnering
between the parties.
CPT members shall consist of three (3) representatives each from
CellStar and PBMS. At least one representative from each party will
be at the vice president level or higher. Those representatives,
together with the other CPT members shall be responsible for:
1. Maintaining and reviewing the Services cost structure;
2. Reviewing current processes and additional issues as the parties
may identify for process improvements;
3. At least once each calendar quarter, reviewing pricing, and
recommending price adjustments to the CPT, if necessary;
4. Reviewing forecasting, supply management, and delivery processes
in an effort to streamline processes and to reduce costs
associated with these processes for the benefit of both parties;
and
5. Facilitating the Alternate Dispute Resolution ("ADR") process as
defined in this Agreement.
4.2 EXTERNAL RELATIONSHIPS
4.2.1 SOURCING
PCS Equipment. PBMS has entered into, or may enter into,
-------------
agreements ("PBMS/supplier agreements") with certain
manufacturers or suppliers (hereinafter individually and
collectively "product suppliers") for the purchase of Products.
CellStar agrees that, except with respect to Open Stock, it
shall, upon receipt of an Order by PBMS, place a CellStar
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Order under the PBMS/supplier agreement specified by PBMS for the
quantity of Dedicated Products identified by PBMS in such Order.
Notwithstanding the above, CellStar shall not be obligated to
purchase Products on behalf of PBMS which will bring anticipated
inventory above a level of expected 60 day sales. PBMS shall
provide CellStar the applicable PBMS/supplier agreement (or all
pertinent portions thereof) in order for CellStar to place a
CellStar Order. If CellStar cannot abide by any term(s) set out
in the PBMS/supplier agreement (or portions thereof) provided by
PBMS, CellStar shall immediately notify PBMS and shall not
proceed with placing a CellStar Order under such agreement until
PBMS and CellStar expressly agree otherwise in writing. Further
terms around CellStar's use of PBMS/supplier agreements are set
forth in Section 4.2.2 below and the section entitled
"PBMS/Supplier Agreements" of this Agreement.
4.2.2 VENDORS AND PRODUCT SUPPLIERS
a. Generally, in this Agreement where the term "vendor" or
"manufacturer" is used, it means the supplier providing Open
Stock to CellStar. Where the term "product supplier" is
used, it means the supplier providing Dedicated Products to
CellStar under a CellStar Order issued pursuant to the
PBMS/supplier agreement.
b. With respect to Dedicated Products, PBMS will be responsible
for product supplier selection and certification, product
selection, pricing and contract negotiations for Dedicated
Products. As to each CellStar Order for Dedicated Products,
PBMS shall pass through to CellStar the rights of PBMS under
the product supplier agreement, including but not limited
to, product supplier indemnity and warranties applicable to
CellStar's use of the Dedicated Products, to the extent
allowed by the product supplier. Nothing in this Agreement
shall diminish any pass-through warranties, indemnity or
other rights extended to CellStar through PBMS, by the
product suppliers.
c. If PBMS directs CellStar to issue a CellStar Order for the
purchase of Dedicated Products under a PBMS/supplier
agreement, PBMS will ensure that the product supplier has
granted CellStar all necessary rights to place that Order.
d. CellStar will procure, receive, inventory, pack for
shipping, ship, and disburse Dedicated Products received
from the vendors and product suppliers.
e. CellStar will be solely responsible for entering into any
necessary vendor agreements for the purchase of Open Stock
Products. CellStar shall pass through to PBMS the rights of
CellStar under the vendor agreement, including but not
limited to, vendor indemnity and warranties applicable to
PBMS' and its Customers' use of the Open Stock Products, to
the extent allowed by the vendor. Nothing in this Agreement
shall diminish any
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pass-through warranties, indemnity or other rights extended
to PBMS through CellStar, by the vendor.
4.2.3 RETAILERS AND OTHER RESELLERS
a. Generally all Customer contact will be through PBMS.
b. Generally, issues related to Customer payment, credit and
collections will be handled through CellStar.
c. CellStar will provide Products to Customers as specified in
Exhibit D and invoice Customers at PBMS' direction as stated
in the applicable Order or if not stated in the Order, as
specified in the Procedures Manual.
d. CellStar will process Customer returns in accordance with
PBMS' sales policy as specified in the Procedures Manual.
4.2.4 DIRECT SALES ACCOUNTS (SUBSCRIBER AND BUSINESS CUSTOMERS)
PBMS will handle all billing and accounts receivable transactions
with direct sales account Customers. CellStar's primary
responsibility in connection with Direct Sales Accounts ("Direct
Sales Accounts") will be to provide fulfillment Services and to
process Customer returns in accordance with the Procedures
Manual.
4.3 WORKING RELATIONSHIP
The following processes will be contained and further described in the
Procedures Manual:
4.3.1 DEDICATED PRODUCT INVENTORY OWNERSHIP AND MANAGEMENT
a. CellStar will maintain inventories in its facilities and
will be responsible for risk of physical loss or damage, and
any requested insurance as is consistent with prepaid and
add conventions.
b. CellStar will determine inventory and safety stock levels
necessary to support PBMS' business pursuant to a rolling 90
calendar day forecast which PBMS shall provide and update
monthly.
c. PBMS and CellStar recognize that product suppliers may
prohibit sale of handsets outside PBMS' services territory.
In light of that recognition, PBMS and CellStar shall work
cooperatively with the product suppliers to dispose of slow-
moving stock. If CellStar wishes to sell Dedicated Products
to third parties in addition to PBMS' Customers, CellStar
shall 1) gain the written consent of PBMS Director of
Procurement prior to the sale, and 2) if requested by PBMS
and at a charge to be agreed upon, remove the Insignia from
the Product.
d. CellStar will provide space for PBMS to perform quality
control inspections on inbound Dedicated Products as
reasonably required by PBMS, as specified in the Procedures
Manual.
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4.3.2 OPEN STOCK FORECAST AND SUPPLY
a. PBMS will provide a forecast of PBMS' requirements for Open
Stock Products on a rolling 90 calendar day forecast. Such
forecast shall be updated by PBMS.
b. CellStar will advise PBMS promptly, within 2 business days,
of any Open Stock vendor supply constraints.
c. CellStar will make reasonable best efforts to provide Open
Stock Product availability to fill all PBMS Orders.
4.3.3 PRODUCT ASSEMBLY
a. CellStar will assemble and package components to PBMS'
specifications.
b. CellStar will control the security and data collection
processes for SIM cards.
c. CellStar will provide PBMS with sales forecasting and
DRP/MRP assistance to facilitate efficient inventory
management accessible manually initially, by 11-1-1996.
d. PBMS will provide input to sales forecasting modules and
DRP/MRP system parameters to (i) facilitate efficient
inventory management and (ii) ensure product availability as
necessary.
e. PBMS and CellStar will work together to develop cost
effective production/assembly processes.
4.3.4 CREDIT LINE ADMINISTRATION, ORDER PROCESSING AND FULFILLMENT
a. PBMS' Customer Care and Order Processing systems shall be
capable of accepting orders from Retailers and other
resellers, individual subscribers, and business Customers.
b. PBMS will determine and administer all Order processing
procedures, specific Customer Order packaging requirements,
pricing, sales and marketing relationships with its
Customers.
c. PBMS will pass Customer shipping instructions (including
without limitation, Order packaging and labeling
specifications), and billing information to CellStar
electronically through the PBMS Order Processing system, as
specified in the Procedures Manual, or in such other manner
used by PBMS to communicate the information.
d. CellStar shall generate a packing list for each Order.
e. CellStar will provide Retailer and other reseller credit
line administration for Orders received from PBMS.
Exceptions to credit lines may be approved by PBMS' Chief
Financial Officer or designate and PBMS assumes
responsibility for Customer credit risk with respect to such
approved exceptions. CellStar assumes responsibility for
all other credit risk associated with the financial strength
of Retailers and other resellers invoiced by CellStar. PBMS
shall be responsible for collection or repayment to CellStar
for customer deductions for allowances, fines,
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penalties and other debits unrelated to traditional credit
risk. Notwithstanding the foregoing sentence, if PBMS in
good faith believes that any Customer deduction for
allowances, fines, etc. are the result of a CellStar error
in fulfilling CellStar's obligations under the applicable
Order and further believes that CellStar should assume the
burden of that deduction, then PBMS may present the issue to
the CPT for resolution.
f. CellStar shall provide all Fulfillment Services with respect
to Customer Orders.
g. CellStar will provide electronic confirmation to PBMS of all
shipments completed on behalf of PBMS including carrier
tracking codes by January 31, 1997.
4.3.5 ACCOUNTS RECEIVABLE, INVOICING AND COLLECTIONS
a. PBMS will bill individual subscribers and business Customers
for its Direct Sales Accounts through PBMS' Customer Care
and Billing systems (CCBS). Accordingly, PBMS will not
provide this type of billing information to CellStar.
b. CellStar will invoice Retailers and other resellers upon
Product shipment in accordance with PBMS' instructions
regarding the Customer's billing information as stated in
the applicable Order or, if not stated in the applicable
Order, as specified in the Procedures Manual.
c. CellStar will collect payments from Retailers and other
resellers.
d. CellStar will perform payment reconciliation with Retailers
and other resellers to assist PBMS in properly classifying
deductions and resolving disputes for unauthorized Customer
deductions from invoices. PBMS will reimburse CellStar for
all Customer deductions (not associated with traditional
risk of creditworthiness), whether authorized or otherwise,
in accordance with PBMS' Deductions Policy. PBMS shall
reimburse CellStar for any unresolved Customer deduction
that is outstanding for more than 180 days without regard of
the status of collection efforts. Notwithstanding the
foregoing sentence, if PBMS in good faith believes that any
such Customer deduction arose from a CellStar error which
was in CellStar's control, in fulfilling CellStar's
obligations under the applicable Order, PBMS shall present
the issue to the CPT for resolution. If PBMS reimburses
CellStar for a Customer deduction and CellStar subsequently
collects the deduction from the Customer, CellStar shall
immediately credit PBMS that amount.
e. CellStar will invoice PBMS for Products shipped to the
Customer immediately following Product shipment to the
Customer.
f. Upon PBMS' request, CellStar will promptly provide
information to PBMS on each Customer's sales and credit
status.
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4.3.6 INVENTORY ACCOUNTING AND CONTROL
CellStar covenants and agrees to employ methods of inventory
accounting and control that are in accordance with generally
accepted accounting principles.
4.3.7 MAINTENANCE OF BOOKS AND RECORDS
CellStar covenants and agrees to maintain books and records
covering all transactions under this Agreement and shall make
such books and records available for PBMS' inspection at any
time, including CPA auditors from a major accounting firm hired
by or engaged by PBMS, by and through CellStar's representatives
and agents, during regular business hours on any business day.
4.3.8 INVENTORY/WAREHOUSING
CellStar shall separately inventory and warehouse Dedicated
Products from Open Stock. CellStar shall designate an area for
Dedicated Products in a separate secure area and in accordance
with PBMS' instructions.
4.3.9 RETURNS PROCESSING
a. CellStar will process Customer returns from Retailers and
other resellers, individual subscribers, and business
Customers through its J.D. Edwards system and PBMS' Customer
Care and Order Processing systems.
b. PBMS will be responsible for setting the appropriate
standard cost value of the A and B and discard stock items
in the inventory master file. CellStar will determine the
value of the returned products based on the returns
procedures set forth in the Procedures Manual. CellStar will
bill PBMS for any inventory writedown from A to B or discard
stock value.
c. All Customer returns and vendor and product supplier
warranty procedures for the Products shall be in accordance
with the Procedures Manual.
4.3.10 USE OF FICTITIOUS BUSINESS NAME
a. The parties understand and agree that CellStar will, for
certain purposes, need to use the name "Pacific Bell Mobile
Services Fulfillment" or such other substantially similar
name as CellStar is able to register as an assumed name in
the State of Texas and Dallas County, Texas (the "Name").
PBMS hereby authorizes CellStar to use the name for the
following purposes: (i) receipt and acceptance of payment
from Customers (including, without limitation, via lock-box
wire transfer or check), (ii) inclusion in shipping
collateral provided to Customers, (iii) invoicing of
Customers and provision of Customer statements, (iv) written
and oral correspondence with Customers, (v) such other
purposes
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as are authorized in writing by PBMS and (vi) collection
activities; provided that any use of the Name by CellStar
shall be in accordance with the guidelines provided by PBMS
entitled "Four Basic Rules", incorporated by reference into
this Agreement. PBMS further authorizes CellStar to register
the Name with the Secretary of State of the State of Texas
and in Dallas County, Texas. CellStar's right to use the
Name is a nonexclusive right and PBMS shall retain all
ownership and intellectual property rights in the Name.
Except as provided herein, CellStar shall not use the Name
in any advertising or publicity matter without PBMS' prior
written consent.
b. Upon expiration, termination or cancellation of this
Agreement, CellStar may continue to use the Name only during
the period the Services are transitioned to PBMS or its
authorized contractor and for the purpose of receiving or
collecting remaining payments, if any, due CellStar from
Customers in connection with the Agreement (collectively,
the "Transition Period"). Upon the conclusion of the
Transition Period, and upon PBMS' request, CellStar shall
confirm in writing that it has ceased all use of the Name.
4.4 COMPENSATION
As detailed in Exhibits B and C, PBMS shall compensate CellStar for
each of the following Service components:
4.4.1 START-UP COSTS
Upon execution of this Agreement, CellStar will invoice PBMS for
the start-up costs set forth in Exhibit B.
4.4.2 INVENTORY CARRYING COSTS
A recurring charge, calculated and billed monthly as a "cost of
capital" charged on [REDACTED]
4.4.3 STANDARD PRODUCT COST
CellStar shall invoice PBMS standard Product cost at the time of
shipment as set forth in Section 7.a. This cost represents the
sum of all Product components and assembly costs including
assembly charges, packaging and collateral materials and standard
loss allowances as shown on the Product bill of materials.
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4.4.4 CREDIT FOR CUSTOMER RECEIVABLE
Following each shipment, CellStar will record a payable to PBMS
for the value of the invoice to the Retailer or other reseller as
set forth in Section 7.b.
4.4.5 FULFILLMENT SERVICES COSTS
A warehouse picking charge of [REDACTED] per carton shipped.
An additional charge of [REDACTED] per Order picked from
Component Inventory.
Actual transportation charges as billed by the carrier (the
discounted amount) for delivery to the Customer.
Actual insurance charges covering loss or damage in transit.
4.4.6 MONTHLY RECURRING SERVICE FEES
The monthly service fees shall be comprised of the following
components:
a. A monthly "cost of capital" charge predicated on [REDACTED]
b. A monthly Service fee for invoice processing and collection
Services predicated on the cost of such Services plus
margins as set forth in Exhibit C.
c. Non-recoverable returns and freight.
d. Such other items as set forth in Exhibit C.
4.4.7 RETURNS
See Procedures Manual. See also Exhibit B for the fees to be
billed to PBMS for skid storage fees and Products returned by
Customers ("return fees").
4.4.8 PURCHASE PRICE VARIANCES
CellStar shall operate on the basis of a "standard cost"
accounting system and shall invoice all Product cost at "standard
cost" as noted in Section 4.4.3. All purchase price variances
for the account of PBMS shall be invoiced or credited to PBMS as
of the close of each month. Periodic changes in standard cost
will generate a change in inventory valuation and corresponding
debit or credit to Purchase Price Variances accounts. These
debits and credits to the Purchase Price Variances
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accounts for the account of PBMS shall be invoiced or credited by
CellStar as of the close of each month.
4.5 PBMS/SUPPLIER AGREEMENTS
a. PBMS has included in certain third party manufacturer or supplier
agreements (hereinafter "PBMS/supplier agreements") with its PCS
product suppliers (the "product suppliers") the right for a third
party distributor, such as CellStar, to execute orders under the
PBMS/supplier agreements for the purchase of PCS products. As
necessary and as permitted by nondisclosure agreements between
PBMS and its suppliers, PBMS agrees to provide CellStar a copy
of the PBMS/supplier agreements (or pertinent extracts) in order
for CellStar to order Dedicated Products only as PBMS may direct,
and not for the purpose of ordering products for any of
CellStar's other customers. CellStar agrees to keep the terms of
the supplier agreements strictly confidential and not to disclose
the terms of the PBMS/supplier agreements, including pricing, to
any third party, without PBMS' prior written consent, unless that
third party has a legitimate need to know in the performance of
services to CellStar, and is covered by an appropriate
confidentiality agreement prior to accessing the Information.
"Third parties" shall include without limitation, any potential
competitors of the product suppliers, including competitors that
are partners or third parties holding any form of equity interest
in CellStar.
b. In addition to the above and subject to CellStar's rights under
Section 4.2.1. above (regarding instances, if any, in which
CellStar has notified PBMS that it cannot comply with a product
supplier agreement prior to executing a CellStar Order), CellStar
agrees to abide by all applicable terms and conditions of the
PBMS/supplier agreements, including payment and confidentiality
terms. CellStar may not add any supplementary or conflicting
terms to any CellStar Order under a PBMS/supplier agreement
without PBMS' prior written consent. The right to receive any
liquidated damages, promotional monies or other such payments
under a PBMS/supplier agreement shall belong exclusively to PBMS
whether or not CellStar executed a CellStar Order for Dedicated
Products in connection with the product supplier's payment of
liquidated damages, promotional monies or other such payments.
In the event the product supplier pays any such liquidated
damages, promotional monies or other such payments to CellStar in
connection with Dedicated Products, CellStar shall immediately
transfer those funds to PBMS without set-off, administrative
charge or deduction of any kind.
c. In connection with a CellStar Order for Dedicated Products under
a PBMS/supplier agreement, if CellStar does not or, believes it
cannot, make full payment to any product supplier within 30 days
following product delivery by the product supplier under the
applicable CellStar
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Order, CellStar shall notify PBMS immediately and provide
information concerning the reason for the nonpayment.
Notwithstanding the foregoing, CellStar agrees to make best
efforts to make payment to the product suppliers when due and
CellStar expressly acknowledges that failure to do so shall
result in a material breach by CellStar of the terms of this
Agreement, unless PBMS expressly waives CellStar's breach in
writing. PBMS agrees that it shall not cure a breach of
CellStar's payment obligations under a PBMS/supplier agreement
unless and until such time that CellStar's 15 calendar day cure
period (as described in Section 24 of this Agreement) has
elapsed.
d. In the event that PBMS cures CellStar's default on any payment
obligation to a product supplier under a CellStar Order issued
pursuant to a PBMS/supplier agreement, CellStar shall with
respect to that default:
i) TO THE EXTENT THAT CELLSTAR HAS PREVIOUSLY SHIPPED THE
PRODUCTS TO THE CUSTOMER: CellStar shall immediately credit
PBMS' account in full for the money PBMS paid to the product
supplier (the "default amount").
ii) IN THE EVENT THAT THE PRODUCTS HAVE NOT YET BEEN SHIPPED TO
THE CUSTOMER: CellStar shall automatically be deemed to
have sold the Products to PBMS upon the date, and in
consideration of, PBMS' payment to the product supplier.
Any subsequent shipment of such Products to Customers shall
be considered consignment inventory and Product costs shall
not be billed to PBMS, unless CellStar buys back the
Products from PBMS.
e. In the event that this Agreement expires or is terminated or
canceled, any credits, including default amounts remaining in
PBMS' account, shall be paid to PBMS in cash within thirty (30)
days of such expiration, termination or cancellation date.
Additionally, at any time, PBMS may set-off any PBMS payment due
CellStar, by the amount of credits due PBMS.
5. ORDERS
CellStar's commencement of performance of any Order shall be deemed to be
acceptance of such Order upon the terms and provisions of this Agreement.
Any additional or different terms in any CellStar quotation,
acknowledgment, invoice or other communication to PBMS, whether or not such
terms materially alter an Order, shall be deemed objected to by PBMS
without need of further notice of objection and shall be of no effect and
not in any circumstance be binding upon PBMS unless expressly accepted by
PBMS in writing.
Subject to CellStar's rights set forth in the preceding paragraph, the
parties expressly agree that all Orders electronically transmitted by PBMS
to CellStar shall be deemed to constitute a "writing sufficient to indicate
that a contract for sale has been made between
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the parties and signed by the party against whom enforcement is sought or
by his authorized agent or broker" for purposes of section 2201 of the
California Uniform Commercial Code. The parties further agree that data
mechanically or electronically stored by PBMS or CellStar in the course of
business shall constitute acceptable documentation of the contents of any
Order or invoice electronically transmitted by either party to the other.
6. PRICES
Prices are set forth in Exhibit B and D. [REDACTED] Prices changes and
prices for any new Products or Services set forth in Exhibit B shall be
implemented only when agreed to by the CPT. Additionally, the following
shall apply:
(i) Any price changes for assembly costs as set forth in Section 1.c. of
Exhibit B, shall be determined on the basis of the assembly cost model set
forth in Exhibit F.
(ii) Assembly prices for all new Products set forth in Exhibit B,
including price changes for those Products, shall be determined on the
basis of assembly cost model set forth in Exhibit F.
(iii) Any price changes for credit and collection Services as set forth in
Section 3.c. of Exhibit B shall be determined on the basis of the component
cost analysis set forth in Exhibit C.
(iv) Prices for any new administrative Services set forth in Exhibit B,
including any price changes for those Services, shall be determined on the
basis of component cost analysis similar to that set forth in Exhibit C.
7. INVOICING AND PAYMENT
a. Promptly after shipment of Products to the Customer, CellStar shall
render an invoice to PBMS for each such shipment. The invoice shall
identify and separately show quantities and prices for each item
shipped and for Services provided any shipping charges to be borne by
PBMS, applicable sales or use taxes, any discounts and total amount
due. PBMS shall promptly pay CellStar the amount due within one (1)
business day after receipt of the invoice. Both parties are currently
working to develop EFT capabilities. Until such time that EFT is
implemented, PBMS will remit payment by wire transfer each Monday, for
the prior week.
b. Promptly after the shipment of Products to the Customer, CellStar
shall remit payment to PBMS in an amount that equals the invoiced
amount generated by CellStar to the Retailer or other reseller. Both
parties are currently working to develop EFT capabilities. Until such
time that EFT is implemented, CellStar will remit payment by wire
transfer each Monday, for the prior week.
c. Promptly after the performance of Services rendered, CellStar shall
render an invoice electronically for such Services. The invoice shall
identify and separately show prices for the Services, including Cost
of Capital. PBMS shall promptly pay CellStar the amount due via
electronic funds transfer ("EFT') within one (1) business day after
receipt of the invoice. Both parties are currently working to develop
EFT capabilities. Until such time that EFT is
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implemented, PBMS will remit payment by wire transfer each Monday, for
the prior week.
d. If PBMS disputes any invoice rendered or amount paid, PBMS shall so
notify CellStar after payment, and the parties, through the CPT, shall
use their best efforts to resolve such dispute expeditiously. The CPT
shall provide all pertinent information to PBMS and CellStar upon
request to enable and cooperate with PBMS in investigating the amount
in dispute.
e. With respect to Section 7.a. and b. above, upon agreement by both
parties, amounts due for transactions under such Sections may be
consolidated for the purpose of the single transfer of funds. Nothing
in this paragraph e. however, limits PBMS' right to set-off payments
due CellStar as set forth in Section 4.5.e. of this Agreement.
8. SHIPPING AND PACKING
a. CellStar shall ship all Orders to PBMS' Retailers and other resellers
according to the specific shipping instructions for that Customer when
set forth in the Procedures Manual, unless PBMS specifies other
instructions in the applicable Order, provided that CellStar shall
have had a reasonable opportunity to (i) review the applicable
Customer's standard shipping instructions prior to receipt of such
Order, and (ii) make arrangements to accommodate any special
instructions of such Customer. PBMS agrees to reimburse CellStar for
additional freight charges, if any, required to satisfy such special
instructions. Whenever possible however, CellStar shall use the
lowest priced shipping carrier (and where possible use a contract
carrier) capable of shipping the Products on time. In the event the
Order contains other shipping instructions, then notwithstanding the
section entitled "Order of Precedence" in this Agreement, the Order
shall take precedence over the shipping instructions set forth in the
Procedures Manual.
b. CellStar shall ship Products as specified in PBMS' Order to meet PBMS'
specified shipment or arrival date.
c. Unless expressly stated to the contrary, CellStar's charges for
transportation Services including, but not limited to, routing,
transporting, hauling, hoisting, storage and detention, are not
included in any prices furnished for Products.
d. Marking and labeling ("Marking") of packages may vary depending on
Product and Order type. Standard Markings shall include, but not be
limited to, Markings which are or shall be required by applicable laws
and regulations governing the environment and hazardous
materials/wastes, Order number, container number, ship-to address,
return address, Product identification, quantity, date packed and
gross weight, where applicable.
9. TAXES
a. PBMS shall reimburse CellStar the cost of all sales and use taxes and
import and export duties, and other governmental fees to the extent
related to PBMS' Orders not otherwise included in the invoice for the
original shipment to PBMS Customers.
b. CellStar agrees to pay, and to hold PBMS harmless from and against,
any penalty, interest, additional tax or other charge that may be
levied or assessed as
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a result of the delay or failure of CellStar for any reason to pay any
tax or file any return or information required by law, rule or
regulation or by this Agreement to be paid or filed by CellStar.
c. If PBMS is exempt from payment of any applicable sales and/or use tax
upon notifying CellStar of the basis for claiming such exemption
CellStar agrees to take all legal and proper steps to sell the
Products free of sales and/or use tax or to act as PBMS' agent in
applying for any applicable rebate of tax. PBMS will, upon request
furnish CellStar with any applicable tax exemption number.
10. RECORDS AND AUDITS
CellStar shall maintain accurate records of all matters which relate to
CellStar's obligations hereunder in accordance with generally accepted
accounting principles and practices, uniformly and consistently applied in
a format that will permit audit. Unless otherwise provided in this
Agreement, CellStar shall retain such records for a period of four (4)
years from the date of final payment under the Order to which such records
relate. To the extent that such records may be relevant in determining if
CellStar is complying with its obligations under the applicable Order, PBMS
and its authorized representatives shall, at any time, upon reasonable
advance notice, have access to such records for inspection and audit during
normal business hours.
11. INDEPENDENT CONTRACTOR
CellStar hereby declares and represents that CellStar is engaged in an
independent business and will perform its obligations under this Agreement
as an independent contractor and not as the agent or employee of PBMS; that
the persons performing services hereunder are not agents or employees of
PBMS; that CellStar has and hereby retains the right to exercise full
control of and supervision over the performance of CellStar's obligations
hereunder and full control over the employment, direction, compensation and
discharge of all employees assisting in the performance of such
obligations; that CellStar shall be solely responsible for all matters
relating to payment of such employees, including compliance with workers'
compensation, unemployment, disability insurance, social security,
withholding and all other federal, state and local laws, rules and
regulations governing such matters; and that CellStar shall be responsible
for CellStar's own acts and omissions and those of CellStar's agents,
employees and contractors during the performance of CellStar's obligations
under this Agreement.
12. NONEXCLUSIVE AGREEMENT
This Agreement is a nonexclusive agreement. PBMS expressly reserves the
right to contract with others for any of the products or services it may
require. PBMS also reserves the right, at any time, to 1) bring any of the
Services described under this Agreement in-house or 2) enter into an
arrangement whereby a PBMS Affiliate provides the types of Services
described hereunder.
13. INDEMNIFICATION
CellStar shall indemnify, defend and hold harmless PBMS and its Affiliates,
and the directors, shareholders, agents and employees of any of them
("Indemnitees"), from and against any fine, penalty, loss, cost, damage,
injury, claim, expense or liability, including
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attorney's fees and court costs (individually and collectively
"Liabilities"), as a result of (i) injury to or death of any person; (ii)
damage to, loss or destruction of any property; (iii) failure to comply
with the section entitled "Compliance with Laws", or (iv) breach of a
PBMS/supplier agreement where such Liabilities arise out of CellStar's
performance of this Agreement except for that portion of Liabilities which
are caused by PBMS' negligence or willful misconduct. CellStar shall (1)
keep PBMS and any PBMS Indemnitees subject to such Liabilities fully
informed as to the progress of the defense and/or settlement and (2) afford
PBMS or any Indemnitee, each at its own expense, an opportunity to
participate on an equal basis with CellStar in the defense or settlement of
any such Liabilities.
With respect to any claim of infringement of any patent, copyright, trade
secret or other intellectual property right of any third party in
connection with Open Stock, CellStar shall pass through to PBMS the
manufacturer's and/or vendor's indemnity in connection with such
infringement claim to the extent allowed by that manufacturer or vendor.
With respect to any claim of infringement of any patent, copyright, trade
secret or other intellectual, proprietary right of any third party in
connection with Dedicated Products, PBMS shall pass through to CellStar the
product supplier's indemnity in connection with such infringement claim, to
the extent allowed by that product supplier.
While PBMS is on CellStar's premises, PBMS agrees to indemnify CellStar
under the same terms as set forth in paragraph a. above, for Liabilities as
a result of any injury to or death of any person or damage, loss or
destruction of any property which arises from PBMS' negligence or willful
misconduct except for that portion of Liabilities which are caused by
CellStar's negligence or willful misconduct. In addition, PBMS agrees to
indemnify CellStar under the same terms as set forth in paragraph a. above
for Liabilities as a result of failure to comply with the Section entitled
"Compliance With Laws" which arise out of PBMS' performance of this
Agreement.
PBMS agrees to indemnify, defend and hold harmless CellStar and its
affiliates, and the directors, stockholders, agents and employees of any of
them, from and against any Liabilities that arise in connection with
CellStar's use of the Name, except to the extent such Liabilities are due
to CellStar's negligence or misconduct.
14. INSURANCE
Any and all insurance, including Worker's Compensation Insurance, that may
be required under the laws, ordinances, and regulations of any governmental
authority, with respect to CellStar's performance under this Agreement, is
and shall be the sole responsibility of CellStar.
a. Without in any way limiting CellStar's indemnification obligations
hereunder, CellStar shall maintain the following insurance:
i) Commercial General Liability (Bodily Injury and Property Damage)
Insurance including the following supplementary coverages:
1. Contractual Liability to cover liability assumed under this
Agreement;
2. Personal Injury Liability;
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3. Product and Completed Operations Liability Insurance;
4. Property Damage Liability Insurance;
ii) Business Automobile Liability Insurance if any of CellStar's
employee owned, leased, hired or borrowed automobiles are used in
the performance of this Agreement. Coverage shall be in force
for all owned, non-owned and hired automobiles used by CellStar.
iii) The limit of the liability for insurance required above shall
not be less than two million dollars ($2,000,000) combined single
limit per occurrence.
b. The insurance specified above shall:
i) Name PBMS, its Affiliates, directors, agents and employees as
additional insureds in matters covered by this Agreement, at
CellStar's sole expense;
ii) Provide that such insurance is primary coverage with respect to
all insureds;
iii) Contain a Standard Cross Liability Endorsement which provides
that the liability insurance applies separately to each insured
and that the policies cover claims or suits by one insured
against the other;
iv) Contain a waiver of subrogation and an assignment of statutory
lien against PBMS for purposes of Worker's Compensation
Insurance;
v) Include a requirement that the insurer provide PBMS with thirty
(30) days written notice to PBMS prior to the effective date of
any cancellation or material change of the policy or policies of
insurance;
vi) have insurance issued by insurance companies that hold a current
rating of not less than A/XV, according to Best's Key Rating
Guide.
c. If requested by PBMS, CellStar shall provide PBMS with a Certificate
of Insurance executed by a duly authorized representative of the
insurer evidencing the coverages, limits, and provisions specified
above.
d. If CellStar's insurance is on "claims-made" forms, CellStar's
obligations to maintain the insurance and to provide policy
endorsements required herein shall survive the termination of this
Agreement for a period of five (5) years.
15. ACCESS
a. PBMS' Premises
CellStar shall when appropriate have reasonable access to PBMS'
premises during normal business hours and at such other times as may
be agreed upon by the parties in order to enable CellStar to perform
its obligations under this Agreement. CellStar shall coordinate such
access with PBMS' designated representative prior to visiting such
premises. If PBMS for any lawful reason requests CellStar to
discontinue furnishing any person provided by CellStar for performing
work on PBMS' premises, CellStar shall immediately comply with such
request. Such person shall leave PBMS' premises promptly and CellStar
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shall not furnish such person again to perform work on PBMS' premises
without PBMS' prior consent.
b. CellStar's Premises
PBMS shall, upon reasonable prior notice to CellStar and at no
additional charge, have reasonable access to CellStar's premises
during normal business hours in order to observe CellStar's work with
respect to the Products and Services or to take possession of any
Dedicated Products paid for by PBMS. If CellStar for any lawful reason
requests PBMS to discontinue furnishing any person provided by PBMS
for performing work on CellStarOs premises, PBMS shall immediately
comply with such request. Such person shall leave CellStarOs premises
promptly and PBMS shall not furnish such person again to perform work
on CellStarOs premises without CellStarOs prior consent.
c. Rules and Regulations
The employees and agents of CellStar and PBMS shall, while on the
premises of the other, comply with all site rules and regulations,
including, where required by government regulations, submission of
satisfactory clearance from the U.S. Department of Defense and other
governmental authorities concerned.
d. Releases Void
Neither party shall require waivers or releases of any personal rights
from representatives of the other in connection with visits to its
premises, and no such releases or waivers shall be pleaded by either
party in any action or proceeding.
16. INFORMATION
a. In the performance of its obligations under this Agreement, either
party may receive or access (the Oreceiving partyO) Information from
the other party (the Odisclosing partyO). Such Information may
contain material which is proprietary or confidential, disclosures of
patentable inventions with respect to which patents may not have been
issued or for which patent applications may not have been filed, or
material which is subject to applicable laws regarding secrecy of
communications or trade secrets. Accordingly, the receiving party
agrees:
i) that all such Information so acquired by it or its employees,
contractors or agents (individually and collectively "personnel")
hereunder shall be and shall remain the disclosing party's
exclusive property;
ii) to inform all of its personnel engaged in handling such
Information of the proprietary or confidential character of such
Information and of the existence of applicable laws regarding
secrecy of communications;
iii) to limit access to such Information to its personnel having a
need to know;
iv) to keep, and have its personnel who receive or access such
Information keep, such Information confidential;
v) to return promptly or certify that it has destroyed, any copies
of such Information in written, graphic or other tangible form
upon the disclosing partyOs request; and
vi) to use such Information only for purposes of this Agreement and
for other purposes only upon such terms as may be agreed upon
between the parties in writing.
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b. Notwithstanding the foregoing, nothing contained in this Section 16
shall restrict either party in the use or disclosure of any
Information from the other party which:
i) is already in such party's possession without accompanying use or
disclosure restrictions prior to its receipt from the other
party; or
ii) is or subsequently becomes publicly available through no fault of
such party; or
iii) is rightfully received by such party from a third party without
accompanying use or disclosure restrictions; or
iv) is independently developed by such party or a third party without
the aid, application or use of any Information received pursuant
to this Agreement; or
v) is approved in writing for release by the other party.
c. Each party hereto acknowledges and agrees that in the event of the
violation of this Section 16, irreparable damage may occur, and
therefore the aggrieved party shall be entitled to seek court ordered
injunctive relief to halt the violation of this Agreement which such
remedy shall be in addition to any other remedies available to the
aggrieved party at law or in equity.
d. If either party is required by law or by governmental regulation or
rule or receives a request to disclose all or any part of the
disclosing party's Information by applicable law or, under the terms
of a subpoena or other order issued by a court of competent
jurisdiction or by a government agency, the receiving party shall:
(i) promptly notify the disclosing party of the existence, terms and
circumstances surrounding any such requirement or request; (ii)
consult with the disclosing party regarding the advisability of taking
steps to resist or narrow such requirement or request; (iii) if
disclosure of such Information is required, furnish only such portion
of the Information as the receiving party is advised by counsel is
legally required to be disclosed; and (iv) cooperate with the
disclosing party, at the disclosing party's expense, in its efforts to
obtain an order or other reliable assurance that confidential
treatment will be accorded to that portion of the Information that is
required to be disclosed.
17. QUALITY
a. PBMS and CellStar believe that benefits accrue to both parties when
they cooperate to improve quality and to control costs.
b. CellStar shall be engaged in on-going quality improvement efforts and
practices which are consistent with the latest standards and practices
in the industry.
c. CellStar shall maintain a quality assurance system designed to
identify, correct and prevent deficiencies.
d.
i) CellStar agrees to perform all quality control functions in
conformance with the "Warranties" section of the Agreement, the
Specifications and applicable Order; and, in the absence of
Specifications, to good commercial practice. Detailed inspection
records, documentation and
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other data relating to CellStar's standards in effect at
CellStar's premises shall be maintained by and made available to
PBMS upon request.
ii) At PBMS' option, PBMS may at all reasonable times and places,
either perform or observe CellStar performance of inspections and
tests of any Products pertaining to the Agreement. CellStar
shall designate, at each of CellStar's applicable distribution
facilities, one (1) or more responsible employees with whom PBMS
may discuss any matters relating to Product quality and
reliability. CellStar shall also make available to PBMS at no
additional charge, such facilities, data, Specifications and
information regarding CellStar procedures and any other
documents, information and assistance as may be deemed reasonably
necessary by PBMS to perform inspections and tests related to
CellStar's Product handling and as mutually agreed by the CPT in
writing.
iii) PBMS may inspect and test Products, in whole or in part, prior
to or subsequent to final assembly and/or completion of Product
manufacturing or repair processes. Whenever Products are made
available to PBMS for inspection and testing, CellStar shall also
make available to PBMS copies of any Order(s) applicable to such
Products. Whenever CellStar establishes a stock of Products to
be shipped to PBMS or its Customers pursuant to Orders to be
issued by PBMS in the future, such Products shall be available
for inspections by PBMS prior to delivery by CellStar.
iv) PBMS' exercise of, or failure to exercise, the rights provided in
this Section shall not relieve CellStar of its obligation to
furnish all Products in conformance to this Agreement and the
applicable Order.
18. REGISTRATION
To the extent that PBMS purchases Open Stock, CellStar represents that,
from the date of this Agreement on a going forward basis, it will use its
best reasonable efforts to include in its contracts with each manufacturer
that provides Open Stock to CellStar, the manufacturer's commitment and
obligation to comply with all Federal Communications Commission's Rules and
Regulations as may be amended from time to time, including, but not limited
to, all labeling and Customer instruction requirements with respect to that
Open Stock. CellStar agrees to indemnify PBMS for any Liabilities
pursuant to the Section entitled "Indemnification" of this Agreement for
CellStar's breach of this Section entitled "Registration". PBMS agrees
that it will use its best reasonable efforts to include in its contracts
with each product supplier that provides Dedicated Products to CellStar the
product supplier's commitment and obligation to comply with all Federal
Communication Commission's rules and regulations as may be amended from
time to time, including but not limited to all labeling and Customer
instruction requirements with respect to that Dedicated Product. PBMS
agrees to indemnify CellStar for any Liabilities pursuant to the Section
entitled "Indemnification" of this Agreement for PBMS' breach of this
Section entitled "Registration".
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19. INSIGNIA
Upon PBMS' written request, Insignia shall be properly affixed by CellStar
to the Products furnished. Such Insignia shall not be affixed, used or
otherwise displayed on the Products furnished or in connection therewith
without PBMS' written approval. The manner in which such Insignia will be
affixed must be approved in writing by PBMS. If PBMS directs CellStar to
remove Insignia from any Products rejected or not purchased by PBMS,
CellStar shall do so at a price to be negotiated by the CPT for such
removal.
20. HAZARDOUS MATERIALS
a. CellStar shall notify PBMS in writing at least thirty (30) days prior
to shipment when any Open Stock Product or Services or processes
consists of or contains a "hazardous chemical substance or mixture" or
a "hazardous and/or radioactive material", as these terms are defined
in all applicable federal, state and local laws, regulations and
orders ("Regulations").
b. Any hazardous materials in Products or Services provided hereunder by
CellStar shall be transported or handled in accordance with the
requirements of the applicable Regulations including, but not limited
to, those of the Department of Transportation governing transportation
of such hazardous materials.
21. CODES, LAWS OR REGULATIONS
CellStar shall make any changes to its Services and will use its best
efforts to cause the manufacturers of Open Stock to change the Open Stock
and PBMS will use its best efforts to cause the product suppliers of
Dedicated Products to change the Dedicated Products, in order to meet
codes, laws or regulations which are in effect.
22. NOTICE OF DELAYS
Whenever any actual or potential cause delays or threatens to delay
CellStar's performance, CellStar shall immediately so notify PBMS in
writing. Such notice shall include all relevant information concerning the
actual or potential cause of the delay and its background. During the
period such actual or potential cause exists, CellStar shall keep PBMS
advised of its effect on CellStar's performance and of the measures being
taken to remove it.
23. CHANGES AND SUSPENSIONS
a. Subject to Section 48 below, PBMS may, by notice to CellStar, suspend,
in whole or in part, the delivery of Products and the performance of
Services or any Order. If PBMS directs any such change or suspension,
the parties shall agree to any adjustments in prices or dates
necessitated thereby and shall execute a revised Order reflecting such
adjustments.
b. Subject to Section 40 below, CellStar may not, without PBMS' prior
written consent, make any changes whatsoever with respect to the
Products or Services specified in any Order hereunder.
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24. TERMINATION AND CANCELLATION
a. Default
If either party is in material default of any of its obligations under
this Agreement and such default continues for fifteen (15) calendar
days after written notice thereof is given by the party not in
default, such nondefaulting party may cancel this Agreement and/or any
Orders which may be affected by such default.
The parties acknowledge that the first 180 calendar days of this
Agreement will involve prototype development and process refinement
and that breaches which are immaterial in nature with respect to such
efforts shall not constitute a default which shall allow the other
party to cancel this Agreement, unless however the default is ongoing
and the defaulting party does not take reasonable steps within 60
calendar days following notice of the breach, to eliminate the
default.
Default may include any of the following Events of Default which would
allow the nondefaulting party to cancel this Agreement and/or any
Orders immediately:
i) Termination of Business, Bankruptcy, Etc. Either party shall
-----------------------------------------
cease its operations or sell or otherwise dispose of all or
substantially all of its assets or there shall be change in
ownership of either party's business, an assignment for the
benefit of creditors, insolvency, appointment of a receiver or
the filing of any petition under bankruptcy or debtor's relief
laws of, or against either party.
ii) Material Adverse Change Either party shall have reasonably
-----------------------
determined that since the Effective Date, a Material Adverse
Change has occurred with respect to the other party.
iii) Representations and Warranties Any warranty, representation or
------------------------------
certification made by either party or any officer of either party
in this Agreement or in any document executed and delivered by
either party in connection therewith shall be untrue in any
material respect, in any case, on any date as of which the facts
set forth are stated or certified.
b. Termination
Provisions for termination of Orders hereunder are set forth in
Section 48 of this Agreement.
25. PARTIAL TERMINATION OR CANCELLATION
Subject to Section 48, where a provision of this Agreement or applicable
law permits PBMS to terminate or cancel an Order, such termination or
cancellation may, at PBMS' option, be either complete or partial. Subject
to Section 48, in the case of a partial termination or cancellation PBMS
may, at its option, accept a portion of the Products or Services covered by
an Order and pay CellStar for such Products or Services at the prices set
forth in such Order and the parties shall execute a revised Order to
reflect such partial termination or cancellation. The right to cancel an
Order shall also include the right to cancel any other affected Order.
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26. NONASSIGNMENT
Except as otherwise provided by law, neither party shall assign its rights
or delegate its duties ("Assignment") under this Agreement, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Any attempted Assignment or delegation of duties in
contravention of this section shall be void and of no effect. This
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of CellStar and PBMS. The assigning party
shall provide thirty (30) days prior written notice to the other party of
any proposed Assignment.
27. NOTICES
Except as otherwise provided in this Agreement, or applicable Order, all
notices or other communications hereunder shall be deemed to have been duly
given when made in writing and either 1) delivered in person, 2) delivered
to an agent, such as an overnight or similar delivery service, or 3)
deposited in the United States Mail, postage prepaid, and addressed as
follows:
To: CELLSTAR, LTD.
1730 Briercroft Court
Carrollton, TX 75006
Attn.: General Counsel
To: PACIFIC BELL MOBILE SERVICES
4410 Rosewood Dr. Bldg. 1, 4th Floor
Pleasanton, CA 94588
Attn.: Director - Procurement
The address to which notices or communications may be given by either party
may be changed by written notice given by such party to the other pursuant
to this paragraph entitled "Notices".
28. PUBLICITY
CellStar shall not use PBMS' or PBMS' Customers' or manufacturers' names or
any language, pictures or symbols which could, in PBMS' judgment, imply
their identity in any a) written or oral advertising or presentation or b)
brochure, newsletter, book, or other written advertising material of
whatever nature, without PBMS' prior written consent. PBMS shall not use
Open Stock manufacturers' names or any language, pictures, or symbols which
could, in CellStar's judgment, imply their identity in any a) written or
oral advertising or presentation or b) brochure, newsletter, book or other
written advertising material of whatever nature, without CellStar's prior
written consent.
29. COMPLIANCE WITH LAWS
Each party shall comply with all applicable federal, state and local laws,
regulations and codes, including, but not limited to, the procurement of
permits, certificates and licenses when needed in the performance of this
Agreement.
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30. TITLE
Unless otherwise provided in this Agreement, title to Dedicated Products
shall vest in CellStar when the Products have been delivered by the product
suppliers or manufacturers to CellStar's destination.
31. NO THIRD PARTY BENEFICIARIES
This Agreement is for the benefit of PBMS and CellStar and not for any
other person.
32. AMENDMENTS AND WAIVERS
This Agreement may be amended or modified only by a written document signed
by authorized representatives of both parties. No course of dealing or
failure of either party to strictly enforce any term, right or condition of
this Agreement shall be construed as a general waiver or relinquishment of
such term, right or condition. Waiver by either party of any default shall
not be deemed a waiver of any other default.
33. EXECUTIVE ORDERS
Exhibit A entitled "Exhibit A - Executive Orders and Associated
Regulations" is attached hereto and made a part hereof. As used in Exhibit
A "Contractor" shall mean CellStar.
34. HEADINGS
Article, section, or paragraph headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
35. GOVERNING LAW
This Agreement and each Order shall be construed in accordance with the
domestic laws (including the Uniform Commercial Code) but not the rules
governing conflicts of law, of the State of California. To the extent that
an Order involves the performance of Services, such Services shall be
deemed to be "goods" within the meaning of the California Uniform
Commercial Code.
36. REMEDIES CUMULATIVE
Except to the extent of any conflict with the section entitled "Limitation
of Liability", any rights of cancellation, termination, or other remedies
prescribed in this Agreement are cumulative and are not intended to be
exclusive of any other remedies to which the injured party may be entitled,
including but not limited to, the remedies of specific performance and
cover, however, neither party shall retain the benefit of inconsistent
remedies. Notwithstanding the foregoing, the remedy of specific performance
shall apply only in the event of breach of 1) Section 16.c, 2) CellStar's
obligation to sell Dedicated Products only to PBMS' Customers (unless
otherwise permitted by PBMS), and 3) Section 52.
37. SEVERABILITY
If any provision or any part of a provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable any other portion of this Agreement.
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38. SURVIVAL
Provisions contained in this Agreement that by their sense and context are
intended to survive completion of performance, termination or cancellation
of this Agreement shall so survive.
39. PATENTS
No licenses, express or implied, under any patents are granted by either
party to the other party hereunder.
40. FORCE MAJEURE
a. Neither party shall be deemed in default of this Agreement or any
Order hereunder to the extent that any delay or failure in the
performance of its obligations results from any cause beyond its
reasonable control and without its fault or negligence, due to acts of
God, disruption of telecommunications links, acts of civil or military
authority, embargoes, epidemics, war, riots, insurrections, fires,
explosions, earthquakes, floods, unusually severe weather conditions
or strikes.
b. If any force majeure condition occurs, the affected party shall give
immediate notice to the other party and the other party may elect to:
(1) terminate the affected Order(s) or any part thereof, (2) suspend
the affected Order(s) or any part thereof for the duration of the
force majeure condition, with the option to obtain elsewhere products
and services to be furnished under such Order(s) and deduct from any
commitment under such Order(s) the products and services obtained or
for which commitments have been made elsewhere or (3) resume
performance under such Order(s) once the force majeure condition
ceases with an option in the notified party to extend any affected
delivery or performance date up to the length of time the force
majeure condition endured. Unless the notified party gives written
notice within thirty (30) days after being notified of the force
majeure condition, (2) shall be deemed selected.
41. SUBCONTRACTING PLAN
CellStar shall adopt and comply with the Exhibit(s) entitled Prime
Contractor MBE/WBE/DVBE Job Specific Subcontracting Plan and/or Prime
Contractor MBE/WBE/DVBE Commodity Product Subcontracting Plan, attached
hereto and made a part hereof.
42. MBE/WBE/DVBE CANCELLATION CLAUSE
a. If CellStar has represented itself or one of its subcontractors as a
minority- or women-owned business or disabled veteran business
enterprise: CellStar agrees that falsification or misrepresentation
of, or failure to report a disqualifying change in, the MBE/WBE/DVBE
status of CellStar or any subcontractor utilized by CellStar; or
CellStar's failure to comply in good faith with any MBE/WBE/DVBE
utilization goals established by CellStar's Subcontracting Plan; or
CellStar's failure to cooperate in any investigation conducted by
PBMS, or by PBMS' agent, to determine CellStar's compliance with this
section, will constitute a material breach of this Agreement. In the
event of any such breach,
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PBMS may, at its option, cancel this Agreement; and CellStar waives
all claims related to such cancellation.
b. As used in this Agreement, Minority and Women Business Enterprises
(MBEs/WBEs) are defined as businesses which are certified by the
California Public Utilities Commission Clearinghouse to be 51% owned
and operated by a minority individual or group or by one or more
women; for publicly-held businesses, at least 51% of the stock must be
owned by one or more minorities or women who are U.S. citizens or
legal aliens with permanent residence status. In each case, the
management and daily operations must be controlled by one or more of
those individuals. Foreign-owned firms operating in the United States
are not included in these definitions.
For the purposes of this definition, minority group members include
male or female Asian Americans, Black Americans, Filipino Americans,
Hispanic Americans, Native Americans (i.e., American Indians, Eskimos,
Aleuts and Native Hawaiians), Polynesian Americans, and multi-ethnic
(i.e., any combination of MBEs and WBEs where no one specific group
has a 51% ownership and control of the business, but when aggregated,
the ownership and control combination meets or exceeds the 51% rule).
"Control" in this context means exercising the power to make policy
decisions. "Operate" in this context means actively involved in the
day-to-day management of the business.
Disabled Veteran Business Enterprises (DVBEs) are defined as business
concerns certified as DVBEs by the California State Office of Small
and Minority Business (OSMB). The DVBE must be: (1) a sole
proprietorship at least 51% owned by one or more disabled veterans; or
(2) a publicly-owned business in which at least 51% of the stock is
owned by one or more disabled veterans; or (3) a subsidiary which is
wholly owned by a parent corporation, but only if at least 51% of the
voting stock of the parent corporation is owned by one or more
disabled veterans; or (4) a joint venture in which at least 51% of the
joint venture's management and control and earnings are held by one or
more disabled veterans.
In each case the management and control of the daily business
operations are by one or more disabled veterans. For the purpose of
this definition, a disabled veteran is a veteran of the military,
naval or air service of the United States with a service-connected
disability who is a resident of the State of California.
43. DELIVERY OF PRODUCTS AND PERFORMANCE OF SERVICES
a. All dates for shipment or delivery of Products and performance of
Services are firm and time is of the essence. Shipment or delivery
dates shall be specified in each Order. (i) In the event CellStar
fails to meet the scheduled delivery date set forth in the applicable
Order and the Customer cancels the Order, CellStar agrees to assume
return shipping costs for the canceled Products if the late delivery
was due to CellStar's error. (ii) In the event CellStar fails to
meet the scheduled delivery date set forth in the applicable Order but
the Customer nonetheless accepts the late shipment, CellStar shall, if
the CPT
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MASTER AGREEMENT NO. P/PS-960163
agrees, assume liability for any deductions taken by that Customer in
connection with the late shipment if the late shipment was due to
CellStar's error and within CellStar's reasonable control.
b. Notwithstanding anything to the contrary herein, PBMS understands and
agrees that CellStar shall not be responsible for same day shipping
unless CellStar receives the applicable Order by 3:00 pm, Central
Standard Time on the shipment date.
44. USE OF CELLSTAR'S PUBLISHED SPECIFICATIONS
CellStar shall, at no charge, provide PBMS with copies of CellStar's
published Specifications, user instructions, manuals and other training
materials pertaining to the Products and Services purchased hereunder.
PBMS shall have the right to reproduce any and all of such materials as
necessary for PBMS' use of such Products.
45. DOCUMENTATION
Each party shall furnish to the other at no charge, mutually agreeable
documentation, and any succeeding changes thereto, as described herein.
PBMS may reproduce such documentation for use hereunder.
46. RISK OF LOSS
Subject to the following sentence, CellStar will be responsible for risk of
physical loss of or damage to all inventories in their facilities and
during shipment to the destination specified in the applicable Order, until
such time that PBMS' Customer signs the carrier's receipt for the delivery.
CellStar shall secure and prepay cartage insurance on behalf of the
Customer and bill the Customer for such cartage insurance.
47. WARRANTIES
Services
a. CellStar warrants to PBMS that the Services provided hereunder shall
be performed in a fully workmanlike manner to PBMS' reasonable
satisfaction and in accordance with the Specifications set forth in
this Agreement and the applicable Order. CellStar further warrants
that such Services shall be free from material defects in workmanship.
This warranty shall survive inspection, acceptance and payment for a
period of one (1) year.
b. If during the term hereof, PBMS believes that there is a breach of
warranty as described herein, PBMS shall notify CellStar, setting
forth in writing the nature of such claimed breach. CellStar shall
promptly investigate such breach and advise PBMS of CellStar's planned
corrective action. Thereafter, CellStar shall either repair or
replace the affected Product, in CellStar's sole discretion. If such
breach of warranty has not been corrected within a reasonable time
(not to exceed five (5) business days from PBMS' notice to CellStar of
the breach) or if two (2) or more such breaches of warranty occur
within any thirty (30) day period, PBMS may, in addition to all other
rights and remedies provided by law or this Agreement, cancel the
Order for the Services affected by such breach.
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MASTER AGREEMENT NO. P/PS-960163
48. TERMINATION OF ORDERS
Services
PBMS may terminate any Order covering the Services as described in Exhibit
C and this Agreement, upon 90 calendar days written notice to CellStar.
PBMS may terminate any other Order for other types of Services upon
immediate notice. In the event of such termination, PBMS shall pay to
CellStar the reasonable cost for such Services as set forth in Exhibit B
and C, incurred by CellStar up to the date of said termination. PBMS shall
not be responsible for the cost of any work performed by CellStar after
such termination, nor for any costs incurred by CellStar's subcontractors
which CellStar could have reasonably avoided. In no case shall termination
costs exceed the amount, if any, agreed upon in the applicable Order for
such Services. CellStar shall credit or reimburse PBMS for payments made by
PBMS prior to termination to the extent such payments exceed the cost of
work performed by CellStar, up to CellStar's receipt of the notice of
termination.
49. ALTERNATE DISPUTE RESOLUTION
a. If a controversy or claim should arise, a PBMS project representative
and a project representative of CellStar, or their respective
successors in the positions they now hold (herein called the "project
representatives"), will meet in a mutually convenient location, at
least once, and will attempt to, and are empowered to resolve the
matter. Either project representative may request the other to meet
within fourteen (14) days, at a mutually agreed time.
b. If the matter has not been resolved within twenty-one (21) days of
their first meeting, the project representatives shall refer the
matter to a PBMS senior executive, who shall have full authority to
settle the dispute with a senior executive of CellStar. Thereupon,
the project representatives shall promptly prepare and exchange
memoranda stating the issues in dispute and their positions,
summarizing the negotiations which have taken place, and attaching
relevant documents. The senior executives will meet for negotiations
within fourteen (14) days of the end of the twenty-one (21) day period
referred to above, at a mutually agreed time.
c. The first meeting shall be held at the offices of the project
representative receiving the request to meet. If more than one
meeting is held, the meetings shall be held in rotation at the offices
of CellStar and PBMS.
d. If the matter has not been resolved within thirty (30) days of the
meeting of the senior executives (which period may be extended by
mutual agreement), the parties will attempt in good faith to resolve
the controversy or claim under the commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration,
litigation, or some other dispute resolution procedure.
e. If the parties cannot resolve the dispute by mediation, the
controversy or claim arising out of or relating to this Agreement,
shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
The decision of the Arbitrator(s) is/are considered self-execution and
failure of either party to abide by the decision may be considered to
be a breach of contract. Judgment upon the award rendered by the
arbitrator(s) may also be entered in any court having jurisdiction
thereof. for the
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MASTER AGREEMENT NO. P/PS-960163
purpose of determining federal diversity jurisdiction the parties are
considered residents and domicilliaries of different states.
f. Nothing in this provision shall prevent the parties from mutually
agreeing to use an alternative means to resolve the dispute, such as a
"mini-trial" or other procedure, whether or not it is sponsored by the
American Arbitration Association. Additionally, nothing in this
Section 49 shall restrict either party from seeking injunctive relief
under Section 16.c. of this Agreement and with respect to CellStar's
obligation to sell Dedicated Products only to PBMS' Customer, unless
otherwise permitted by PBMS.
50. PRECEDENCE
In the event of any conflict or inconsistency contained within this
Agreement and for purposes of resolving disputes between the parties
regarding the interpretation of this Agreement, resolution thereof shall be
made by giving precedence to the following portions of this Agreement in
the order listed:
1. Exhibits
2. Main Body
3. Orders
4. Procedures Manual (Appendix 1)
Notwithstanding the above, if PBMS includes any specific payment or
delivery instructions in the applicable Order which conflict with the
Exhibits, Main Body, or Procedures Manual, those instructions shall take
precedence over the Exhibits, Main Body and Procedures Manual but only with
respect to those specific instructions.
51. LIMITATION OF LIABILITY
In no event will either party be liable to the other under this Agreement
for any indirect, special, or consequential damages, such as frustration of
economic or business expectations, or lost profits or revenues, whether or
not the other party has been informed of the possibility of such damages.
[REDACTED] Nothing in this Section 51 shall limit either party's liability
in connection with payments or credits which are due or thereafter due and
owing from one party to the other or for any payment or credits due or
thereafter due and owing any product supplier in connection with Products
ordered from that product supplier.
52. CORPORATE AUTHORIZATION
The parties shall take any and all steps necessary or appropriate,
including without limitation, the taking of appropriate corporate action,
to implement and to give effect to the provisions of this Agreement. Each
party acknowledges and agrees that the other has entered into this
Agreement in reliance of the foregoing. Accordingly, each party agrees that
the other party may enforce this provision by obtaining specific
performance or injunctive relief. CellStar, Ltd. is a subsidiary of
CellStar Corporation which guarantees all
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Except Under Written Agreement
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
of the obligations of and performance of CellStar, Ltd. under this
Agreement. By signing this Agreement as a duly authorized officer of
CellStar Corporation the undersigned waives individual notice to CellStar
Corporation and commits to indemnify and hold PBMS harmless from any and
all financial or performance obligations of CellStar, Ltd. which are not
carried out fully in accordance with the terms of this Agreement.
53. ENTIRE AGREEMENT
This Agreement, including all Orders, exhibits and subordinate documents
attached to or referenced in this Agreement or any Orders and all
proposals, descriptions, drawings, Specifications, marketing materials and
other literature published by CellStar in connection with or in
contemplation of any Order or of this Agreement shall constitute the entire
agreement between PBMS and CellStar with respect to the subject matter.
(Signature Page Follows)
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MASTER AGREEMENT NO. P/PS-960163
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
PACIFIC BELL MOBILE SERVICES
By: /s/ KEN ELMER
----------------------------------
(Signature)
Print Name: Ken Elmer
--------------------------
Title: Chief Financial Officer
-------------------------------
Date Signed: 10/5/96
-------------------------
CELLSTAR, LTD.
By National Auto Center, Inc., its General Partner
By: /s/ R.M. GOZIA
----------------------------------
(Signature)
Print Name: Richard M. Gozia
--------------------------
Title: Executive Vice President
-------------------------------
Date Signed: 10/7/96
-------------------------
BY SIGNING THIS AGREEMENT, CELLSTAR CORPORATION FULLY ACCEPTS AND GUARANTEES THE
PERFORMANCE AND FINANCIAL OBLIGATIONS OF CELLSTAR, LTD.
CELLSTAR CORPORATION CELLSTAR CORPORATION
By: /s/ R.M. GOZIA By: /s/ ELAINE F. RODRIGUEZ
--------------------------------- ----------------------------------
(Signature) (Signature)
Print Name: Richard M. Gozia Print Name: Elaine Flud Rodriguez
------------------------- --------------------------
Title: Executive Vice President Title: Vice President
------------------------------ -------------------------------
Date Signed: 10/7/96 Date Signed: 10/7/96
------------------------ -------------------------
PROPRIETARY AND CONFIDENTIAL
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Except Under Written Agreement
<PAGE>
EXHIBIT A
EXECUTIVE ORDERS AND ASSOCIATED REGULATIONS
PBMS as a common carrier of telecommunications services, engage in work as
contractors for various departments and agencies of the United States
Government. Also, certain facilities may be constructed pursuant to federally
assisted construction programs. Because of the foregoing, work under this
contract may be subject to the provisions of certain Executive Orders, federal
laws and associated regulations. To the extent that such Executive Orders,
federal laws and associated regulations apply to the work under this contract,
and only to that extent, Contractor agrees to comply with the provisions of all
such Executive Orders, federal laws and associated regulations, as now in force
or as may be amended in the future, including, but not limited to the following:
1. EQUAL EMPLOYMENT OPPORTUNITY PROVISIONS
In accordance with Executive Order 11246, dated September 24, 1965, and 41
C.F.R.(S)60-1.4, the parties incorporate herein by this reference the
regulations and contract clauses required by those provisions to be made a
part of nonexempt contracts and subcontracts.
2. CERTIFICATION OF NON SEGREGATED FACILITIES
In accordance with Executive order 11246, dated September 24, 1965, and 41
C.F.R.(S)60-1.8, Contractor certifies that is does not and will not maintain
or provide for its employees any facilities segregated on the basis of race,
color, religion, sex, or national origin at any of its establishments, and
that it does and will not permit its employees to perform their services at
any location, under its control, where such segregated facilities are
maintained. The term "facilities" as used herein means waiting rooms, work
areas, restaurants and other eating areas, time clocks, restrooms, wash
rooms, locker rooms and other storage or dressing areas, parking lots,
drinking fountains, recreation or entertainment areas, transportation and
housing facilities provided for employees, provided that separate or single-
user toilet and necessary changing facilities shall be provided to assure
privacy between the sexes. Contractor will obtain similar certifications from
proposed subcontractors prior to the award of any nonexempt subcontract.
3. CERTIFICATION OF AFFIRMATIVE ACTION PROGRAM
Contractor certifies that it has developed and is maintaining an Affirmative
Action Plan as required by 41 C.F.R.(S)60-1.40.
4. CERTIFICATION OF FILING
Contractor certifies that it will file annually, on or before the 31st day of
March, complete and accurate reports on Standard Form 100 (EEO-1) or such
forms as may be promulgated in its place as required by 41 C.F.R.(S)60-1.7.
5. AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE VIETNAM ERA
In accordance with Executive Order 11701, dated January 15, 1974, and 41
C.F.R.(S)60-250.20, the parties incorporate herein by this reference the
regulations and contract clauses required by those provisions to be made a
part of Government contracts and subcontracts.
6. AFFIRMATIVE ACTION FOR HANDICAPPED PERSONS
In accordance with Executive Order 11758, dated January 15, 1974, and 41
C.F.R.(S)60-741.20, the parties incorporate herein by this reference the
regulations and contract clauses required by those provisions to be made a
part of Government contracts and subcontracts.
7. UTILIZATION OF SMALL BUSINESS CONCERNS AND SMALL DISADVANTAGED BUSINESS
CONCERNS
48 C.F.R., Ch. 1, (S)19.704(4) and 19.708(a) require that the following
clause is included:
Utilization of Small Business Concerns and Small Disadvantaged Business
Concerns (June, 1985)
(a) It is the policy of the United States that small business concerns and
small business concerns owned and controlled by socially and economically
disadvantaged individuals shall have the maximum practicable opportunity
to participate in performing contracts let by any Federal agency,
including contracts and subcontracts for subsystems, assemblies,
components, and related services for major systems. It is further the
policy of the United States that its prime contractors establish
procedures to ensure the timely payment of amounts due pursuant to the
terms of their subcontracts with small business concerns and small
business concerns owned and controlled by socially and economically
disadvantaged individuals.
(b) The Contractor hereby agrees to carry out this policy in the awarding of
subcontracts to the fullest extent consistent with efficient contract
performance. The Contractor further agrees to cooperate in any studies or
surveys as may be conducted by the United States Small Business
Administration or the awarding agency of the United States as may be
necessary to determine the extent of the Contractor's compliance with
this clause.
(c) As used in this contract, the term "small business concern" shall mean a
small business as defined pursuant to section 3 of the Small Business Act
and relevant regulations promulgated pursuant thereto. The term "small
business concern owned and controlled by socially and economically
disadvantaged individuals" shall mean a small business concern:
(1) Which is at least 51 percent owned by one or more socially and
economically disadvantaged individuals; or, in the case or any
publicly owned business, at least 51 percent of the stock of which is
owned by one or more socially and economically disadvantaged
individuals; and
(2) Whose management and daily business operations are controlled by one
or more of such individuals.
The Contractor shall presume that socially and economically disadvantaged
individuals include Black Americans, Hispanic Americans, Native Americans,
Asian-Pacific Americans, Asian-Indian Americans and other minorities, or any
other individual found to be disadvantaged by the Administration pursuant to
section 8(a) of the Small Business Act.
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(d) Contractors acting in good faith may rely on written representations by
their subcontractors regarding their status as either a small business
concern or a small business concern owned and controlled by socially and
economically disadvantaged individuals.
Small Business and Small Disadvantaged Business Subcontracting Plan
Contractor, unless it is a small business concern, as defined in section 3 of
the Small Business Act, agrees to adopt and comply with a small business and
small disadvantaged business subcontracting plan, which shall be included in
and made a part of this contract. The parties incorporate herein by this
reference the regulations and contract clauses required by 48 C.F.R., Ch. 1,
(S)19-704(4) and 19.708(b) to be made a part of Government contracts and
subcontracts.
8. WOMEN-OWNED SMALL BUSINESSES
As prescribed in 48 C.F.R., Ch. 1, (S)19.902, the following clause is
included in solicitations and contracts when the contract amount is expected
to be over the small purchase threshold, unless (a) the contract is to be
performed entirely outside the United States, its possessions, Puerto Rico,
and the Trust Territory of the Pacific Islands, or (b) a personal services
contract is contemplated:
(a) "Women-owned small businesses", as used in this clause, means businesses
that are at least 51 percent owned by women who are United States
Citizens and who also control and operate the business.
"Control", as used in this clause, means exercising the power to make
policy decisions.
"Operate", as used in this clause, means being actively involved in the
day-to-day management of the business
(b) It is the policy of the United States that women-owned small businesses
shall have the maximum practicable opportunity to participate in
performing contracts awarded by any Federal agency.
(c) The Contractor agrees to use its best efforts to give women-owned small
businesses the maximum practicable opportunity to participate in the
subcontracts it awards to the fullest extent consistent with the
efficient performance of its contract.
9. LABOR SURPLUS AREA CONCERNS
As prescribed in 48 C.F.R., Ch. 1, (S)20.302(a)(b), the following clauses are
included:
(a) Applicability. This clause is applicable if this contract exceeds the
appropriate small purchase limitation in Part 13 of the Federal
Acquisition Regulation.
(b) Policy. It is the policy of the Government to award contracts to concerns
that agree to perform substantially in labor surplus areas (LSA's) when
this can be done consistent with the efficient performance of the
contract and at prices no higher than are obtainable elsewhere. The
Contractor agrees to use its best efforts to place subcontracts in
accordance with this policy.
(c) Order of Preference. In complying with paragraph (b) above and with
paragraph (c) of the clause of this contract entitled Utilization of
Small Business Concerns and Small Disadvantaged Business Concerns, the
Contractor shall observe the following order of preference in awarding
subcontracts: (1) small business concerns that are LSA concerns, (2)
other small business concerns, and (3) other LSA concerns.
(d) Definitions. "Labor Surplus Area", as used in this clause, means a
geographical area identified by the Department of Labor in accordance
with 20 C.F.R.(S)654, Subpart A, as an area of concentrated unemployment
or underemployment or an area of labor surplus.
"Labor surplus area concern", as used in this clause, means a concern that
together with its first-tier subcontractors will perform substantially in
labor surplus areas. Performance is substantially in labor surplus areas if
the costs incurred under the contract on account of manufacturing,
production, or performance of appropriate services in labor surplus areas
exceed 50 percent of the contract price.
Labor Surplus Area Subcontracting Program
(a) See the Utilization of Labor Surplus Area Concerns clause of this
contract for applicable definitions.
(b) The Contractor agrees to establish and conduct a program to encourage
labor surplus area (LSA) concerns to compete for subcontracts within
their capabilities when the subcontracts are consistent with the
efficient performance of the contract at prices no higher than obtainable
elsewhere. The Contractor shall:
(1) Designate a liaison officer who will (I) maintain liaison with
authorized representatives of the Government on LSA matters, (ii)
supervise compliance with the Utilization of Labor Surplus Area
Concerns clause, and (iii) administer the Contractor's labor surplus
are subcontracting program;
(2) Provide adequate and timely consideration of the potentialities of
LSA concerns in all make-or-buy decisions;
(3) Ensure that LSA concerns have an equitable opportunity to compete for
subcontracts, particularly by arranging solicitations, time for the
preparation of offers, quantities, specifications and delivery
schedules so as to facilitate the participation of LSA concerns;
(4) Include the Utilization of Labor Surplus Area Concerns clause in
subcontracts that offer substantial LSA subcontracting opportunities;
and
(5) Maintain records showing (I) the procedures adopted and (ii) the
Contractor's performance, to comply with this clause. The records
will be kept available for review by the Government until the
expiration of 1 year after the award of this contract, or for such
longer period as may be required by any other clause of this
contract, or by applicable law or regulations.
(c) The Contractor further agrees to insert in any related subcontract that
may exceed $500,000 and that contains the Utilization of Labor Surplus
Area Concerns clause, terms that conform substantially to the language of
this clause, including this paragraph (c), and to notify the Contracting
Officer of the names of subcontractors.
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<PAGE>
EXHIBIT A-1
PRIME CONTRACTOR MBE/WBE/DVBE JOB SPECIFIC SUBCONTRACTING PLAN
Prime Contractor Name:
----------------------------------------------------------
Address:
-------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Description Of Goods Or Services:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following, together with any attachments is submitted as an MBE/WBE/DVBE
subcontracting plan.
1. Do you plan to subcontract any portion of the goods or services being quoted,
bid or proposed?
YES NO
-------- --------
2. If answer to item 1 is Yes,
A. What is your overall company MBE/WBE/DVBE program goal?
*Minority Business Enterprises (MBEs) %
--------
*Women Business Enterprises (WBEs) %
--------
*Disabled Veteran Business Enterprises (DVBEs) %
--------
B. What is your projected MBE/WBE/DVBE purchases?
*Minority Business Enterprises (MBEs) %
--------
*Women Business Enterprises (WBEs) %
--------
*Disabled Veteran Business Enterprises (DVBEs) %
--------
*SEE MBE/WBE/DVBE SUBCONTRACTING PLAN CLAUSE IN AGREEMENT FOR DEFINITION OF
MBE, WBE AND DVBE
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3. If answer to item 1 is No, or if no MBE/WBE/DVBE subcontractors will be
utilized where subcontracting has been identified, please explain in detail
(attach additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
4. List the principal goods and/or services to be subcontracted to
MBE/WBE/DVBEs, should your quotation, bid or proposal be accepted (attach
additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
5. Describe what good faith efforts you plan to undertake to ensure that
MBE/WBE/DVBEs will have an equitable opportunity to compete for subcontracts
to be awarded (attach additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
6. Contractor agrees that it will maintain, if awarded the resulting
contract/purchase or work order, all necessary documents and records to
support its efforts to achieve its estimated MBE/WBE/DVBE subcontracting
goal(s). Contractor also agrees that it will be responsible for identifying,
soliciting and qualifying MBE/WBE/DVBE subcontractors.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
7. The following individual, acting in the capacity of MBE/WBE/DVBE coordinator
for contractor, will:
*administer the MBE/WBE/DVBE subcontracting plan and
*cooperate in any studies or surveys as may be required by PBMS in order to
determine the extent of compliance by contractor with the subcontracting
plan.
NAME:
------------------------------------------------------
TITLE:
-----------------------------------------------------
TELEPHONE NUMBER:
------------------------------------------
AUTHORIZED SIGNATURE:
--------------------------------------
DATE:
---------------------------
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<PAGE>
Exhibit A-2 MASTER AGREEMENT NO. P/PS-960163
PACIFIC BELL MOBILE SERVICES
MBE/WBE/DVBE SUMMARY SUBCONTRACTING REPORT
(Job Specific Results)
1. Reporting Corporation | 2. Contract/Purchase or | 3. This report reflects the
or Company (Name, | Work Order Number | utilization of Minority
address, city, zip | | Business Enterprise/
and telephone number) | | Women Business Enter-
| | prise/Disabled Veterans
| | Enterprise (MBE/WBE/
| | DVBE) subcontractors
| | for period
| |
| | ________________ through
| |
| | ________________________
| | (Please indicate dates)
4. SUBCONTRACT DOLLAR AND PERCENTAGE
Ethnicity Actual Cumulative
for
Period
$ | % $ | %
Polynesian Female | |
Polynesian Male | |
Filipino Female | |
Filipino Male | |
Hispanic Female | |
Hispanic Male | |
Black Female | |
Black Male | |
Asian Female | |
Asian Male | |
Native American Female | |
Native American Male | |
Multi-Ethnic Female | |
Multi-Ethnic Male | |
Non-Minority Female | |
Disabled Veteran | |
*See Attached Definitions Percent of MBE/WBE/DVBE Purchase/Total Purchase
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Except Under Written Agreement
<PAGE>
Exhibit A-2 MASTER AGREEMENT NO. P/PS-960163
5. SUBCONTRACT ACHIEVEMENT
<TABLE>
<CAPTION>
Subcontracting Plan Estimate Actual for Period Cumulative
MBE WBE DVBE MBE WBE DVBE MBE WBE DVBE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subcontracted Dollars $ $ $ $ $ $ $ $ $
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Contract/Purchase or
Work Order Dollars $ $
--------------------- -----------------------
Subcontracted Percent to
Total Dollars % % % % % % % % %
----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
6
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-2 MASTER AGREEMENT NO. P/PS-960163
6. MBE/WBE/DVBE Subcontractor(s) (Name, address, city, zip, telephone number),
description of goods or service(s) supplied during this reporting and total
dollars paid. (Attach additional sheets if necessary)
Name_____________________ | _________________________ | _______________________
Address__________________ | _________________________ | _______________________
City, State, Zip_________ | _________________________ | _______________________
Telephone
Number___________________ | _________________________ | _______________________
Goods/Service(s)_________ | _________________________ | _______________________
Ethnicity________________ | _________________________ | _______________________
Total Dollars____________ | _________________________ | _______________________
7. Remarks (Explain if the actual results as identified in items 4 and 5 are
below estimated MBE/WBE/DVBE utilization goal submitted as part of this
contract/purchase or work order).
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
8. MBE/WBE/DVBE | I hereby certify that | Date
Coordinator | the above information |
(Name & Title) | is true and correct |
(Print or Type) | |
| |
_______________________ | |
_______________________ | _____________________________ | ____________________
| Signature |
________________________|_______________________________|_____________________
| |
9. Approving Officer | I hereby certify that | Date
(Name & Title) | the above information |
(Print or Type) | is true and correct |
_______________________ | |
7
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-2 MASTER AGREEMENT NO. P/PS-960163
_______________________ | |
_______________________ | _____________________________ | ____________________
| (Signature) |
________________________|_______________________________|_____________________
10. This summary report should be mailed
promptly to:
Pacific Bell Mobile Services Note: Questions and/or
MBE/WBE/DVBE Operations Staff requests for assistance
Results and Analysis Administrator may be referenced to the
2600 Camino Ramon, Room 1E400 MBE/WBE/DVBE
San Ramon, California 94583 Subcontracting Administrator
at (510) 823-7048
8
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
EXHIBIT A-3
PRIME CONTRACTOR MBE/WBE/DVBE COMMODITY PRODUCT SUBCONTRACTING PLAN
Prime Contractor Name:
----------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
RFQ/RFB/RFP/RFI Number (if
applicable)
-------------------------------------------------------------------
Description Of Goods Or Services:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Definition: A commodity (or commercial) product is defined as a unit in regular
- ----------
production that is sold in substantial quantities to the general public and/or
industry at regular prices.
If a company is offering a commodity product, then the subcontracting plan may
relate to the company's general production of both commercial and noncommercial
products, rather than just specific items being procured under the contract.
The following, together with any attachments is submitted as an MBE/WBE/DVBE
subcontracting plan.
1. Do you plan to subcontract any portion of the goods or services being quoted,
bid or proposed?
YES NO
-------------- ---------------
2. If answer to item 1 is Yes,
A. What is your overall company MBE/WBE/DVBE program goal?
*Minority Business Enterprises (MBEs) %
--------
*Women Business Enterprises (WBEs) %
--------
*Disabled Veteran Business Enterprises (DVBEs) %
--------
B. What is your projected MBE/WBE/DVBE purchases?
*Minority Business Enterprises (MBEs) %
--------
*Women Business Enterprises (WBEs) %
--------
*Disabled Veteran Business Enterprises (DVBEs) %
--------
*SEE MBE/WBE/DVBE SUBCONTRACTING PLAN CLAUSE IN AGREEMENT FOR DEFINITION OF MBE,
WBE AND DVBE
9
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
3. If answer to item 1 is No, or if no MBE/WBE/DVBE subcontractors will be
utilized where subcontracting has been identified, please explain in detail
(attach additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
4. List the principal goods and/or services to be subcontracted to
MBE/WBE/DVBEs, should your quotation, bid or proposal be accepted (attach
additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
5. Describe what good faith efforts you plan to undertake to ensure that
MBE/WBE/DVBEs will have an equitable opportunity to compete for subcontracts
to be awarded (attach additional sheets if necessary):
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
6. Contractor agrees that is will maintain, if awarded the resulting
contract/purchase or work order, all necessary documents and records to
support its efforts to achieve its estimated MBE/WBE/DVBE subcontracting
goal(s). Contractor also agrees that it will be responsible for identifying,
soliciting and qualifying MBE/WBE/DVBE subcontractors.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
7. The following individual, acting in the capacity of MBE/WBE/DVBE coordinator
for contractor, will:
*administer the MBE/WBE/DVBE subcontracting plan
*submit summary reports (in the form Exhibit A-4), and
*cooperate in any studies or surveys as may be required by PBMS in order to
determine the extent of compliance by contractor with the subcontracting
plan.
NAME:
------------------------------------------------------
TITLE:
-----------------------------------------------------
TELEPHONE NUMBER:
------------------------------------------
AUTHORIZED SIGNATURE:
--------------------------------------
TYPED/PRINTED NAME:
----------------------------------------
TITLE: DATE:
------------------ ------------------------------
10
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-4 MASTER AGREEMENT NO. P/PS-960163
PACIFIC BELL MOBILE SERVICES
MBE/WBE/DVBE SUMMARY SUBCONTRACTING REPORT
(Commodity Results)
1. Reporting Corporation | 2. Contract/Purchase or | 3. This report reflects the
or Company (Name, | Work Order Number | utilization of Minority
address, city, zip | | Business Enterprise/
and telephone number) | | Women Business Enter-
| | prise/Disabled Veterans
| | Enterprise (MBE/WBE/
| | DVBE) subcontractors
| | for period
| |
| | ________________ through
| |
| | ________________________
| | (Please indicate dates)
4. SUBCONTRACT DOLLAR AND PERCENTAGE
<TABLE>
<CAPTION>
Ethnicity Actual Cumulative Ethnicity Actual Cumulative
for for
Period Period
<S> <C> <C> <C> <C> <C>
$ | % $ | % $ | % $ | %
Polynesian Female | | Asian Female | |
Polynesian Male | | Asian Male | |
Filipino Female | | Native American Female | |
Filipino Male | | Native American Male | |
Hispanic Female | | Multi-Ethnic Female | |
Hispanic Male | | Multi-Ethnic Male | |
Black Female | | Non-Minority Female | |
Black Male | | Disabled Veteran | |
</TABLE>
*See Attached Definitions Percent of MBE/WBE/DVBE Purchase/Total Purchase
11
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-4 MASTER AGREEMENT NO. P/PS-960163
5. SUBCONTRACT ACHIEVEMENT
<TABLE>
<CAPTION>
Subcontracting Plan Estimate Actual for Period Cumulative
MBE WBE DVBE MBE WBE DVBE MBE WBE DVBE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MBE/WBE/DVBE Purchases to
Sales % % % % % % % % %
----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
12
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-4 MASTER AGREEMENT NO. P/PS-960163
6. MBE/WBE/DVBE Subcontractor(s) (Name, address, city, zip, telephone number),
description of goods or service(s) supplied during this reporting and total
dollars paid. (Attach additional sheets if necessary)
Name_____________________ | _________________________ | _______________________
Address__________________ | _________________________ | _______________________
City, State, Zip_________ | _________________________ | _______________________
Telephone
Number___________________ | _________________________ | _______________________
Goods/Service(s)_________ | _________________________ | _______________________
Ethnicity________________ | _________________________ | _______________________
Total Dollars____________ | _________________________ | _______________________
7. Remarks (Explain if the actual results as identified in items 4 and 5 are
below estimated MBE/WBE/DVBE utilization goal submitted as part of this
contract/purchase or work order).
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
8. MBE/WBE/DVBE | I hereby certify that | Date
Coordinator | the above information |
(Name & Title) | is true and correct |
(Print or Type) | |
| |
_______________________ | |
_______________________ | _____________________________ | ____________________
| Signature |
________________________|_______________________________|_____________________
| |
9. Approving Officer | I hereby certify that | Date
(Name & Title) | the above information |
(Print or Type) | is true and correct |
_______________________ | |
13
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
Exhibit A-4 MASTER AGREEMENT NO. P/PS-960163
_______________________ | |
_______________________ | _____________________________ | ____________________
| (Signature) |
________________________|_______________________________|_____________________
10. This summary report should be mailed
promptly to:
Pacific Bell Mobile Services Note: Questions and/or
MBE/WBE/DVBE Operations Staff requests for assistance
Results and Analysis Administrator may be referenced to the
2600 Camino Ramon, Room 1E400 MBE/WBE/DVBE
San Ramon, California 94583 Subcontracting Administrator
at (510) 823-7048
14
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
EXHIBIT B
CELLSTAR
DESCRIPTION OF PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION ONE TIME MONTHLY PRICE
FEE FEE [REDACTED]
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 LOGISTICS
- --------------------------------------------------------------------------------
A Hardware Costs [REDACTED]
- --------------------------------------------------------------------------------
B Personnel Costs [REDACTED]
- --------------------------------------------------------------------------------
C Assembly Costs [REDACTED] [REDACTED]
- --------------------------------------------------------------------------------
D Advance Return and Pick to Ship [REDACTED]
- --------------------------------------------------------------------------------
E Fulfillment Costs [REDACTED]
- --------------------------------------------------------------------------------
F Returns Processing *
. Receiving and Sort [REDACTED]
. Triage and return to vendor
. Triage and repair/refurb
. Restocking Fee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 INVENTORY CARRYING COSTS
- --------------------------------------------------------------------------------
A recurring charge, calculated [REDACTED]
and billed monthly as a "cost
of capital" charged on [REDACTED]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3 CREDIT AND COLLECTIONS
- --------------------------------------------------------------------------------
A Receivable Maintenance [REDACTED]
Costs (calculated on
[REDACTED]
- --------------------------------------------------------------------------------
B Skid Storage Fee (after [REDACTED] days) [REDACTED]
- --------------------------------------------------------------------------------
C Credit and Collection Services [REDACTED]
- --------------------------------------------------------------------------------
</TABLE>
* In addition, PBMS will be billed for the difference when A stock is written
down and for return freight of non PBMS items
1
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
MASTER AGREEMENT NO. P/PS-960163
EXHIBIT C
PBMS Credit & Collection Costs
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Item Annual Monthly Comment
- --------------------------------------------------------------
<S> <C> <C> <C>
Collection Analyst [REDACTED] [REDACTED] [REDACTED]
A/R Posting Rep
Lock Box
PBMS DID Line
Long Distance
D&B Investigation
Postage
Invoices
Credit Applications
EDI Transactions
AS 400
Business Analyst
Sr. Programmer
Programmer
EDI Specialist
EBE @ 20%
- --------------------------------------------------------------
Sub-Total
- --------------------------------------------------------------
Contingency
- --------------------------------------------------------------
TOTAL
- --------------------------------------------------------------
Margin
- --------------------------------------------------------------
Grand Total
- --------------------------------------------------------------
</TABLE>
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT D MASTER AGREEMENT NO. P/PS-960163
PACIFIC BELL PCS PRICE LIST
OEM ACCESSORIES FOR MOTOROLA FLARE
BATTERIES
- --------------------------------------------------------------------------------
SNN4512PB TALK PACK NICD BATTERY - BLACK [REDACTED]
SNN4516PB TALK PACK NIMH BATTERY - BLACK
SNN4582PB XT TALK PACK NICD BATTERY - BLACK
SNN4585PB XT TALK PACK NIMH BATTERY - BLACK
SNN4588PB STANDARD NICD BATTERY - BLACK
SNN4591PB STANDARD NIMH BATTERY - BLACK
SNN4594PB XT SLIM NICD BATTERY - BLACK
SNN4597PB XT SLIM NIMH BATTERY - BLACK
POWER PLUS TALK AND CHARGE
- --------------------------------------------------------------------------------
SLN9933PB ULTRA SAVER/CHARGER
LEATHER CASE
- --------------------------------------------------------------------------------
LCSXPB LEATHER CASE
OEM ACCESSORIES FOR NOKIA 2190
BATTERIES
- --------------------------------------------------------------------------------
BBH2SPB 400 MAH NICD SLIM BATTERY
BBH1SPB 500 MAH NIMH SLIM BATTERY
BBH2HPB 1100 MAH NICD HICAP BATTERY
BBH1HPB 1500 MAH NIMH HICAP BATTERY
POWER PLUS TALK AND CHARGE
- --------------------------------------------------------------------------------
LCH2PB RAPID IN-CAR CHARGER
LEATHER CASE
- --------------------------------------------------------------------------------
LCSXPB LEATHER CASE
OEM ACCESSORIES FOR ERICSSON
CH337
BATTERIES
- --------------------------------------------------------------------------------
BKB1931001PB 550MAH SLIMLINE NIMH BATTERY
BKB1931009PB 950 MAH MIDCAP NIMH BATTERY
BKB1931015PB 700 MAH BASIC NICD BATTERY **
BKB193025PB 1000 MAH HICAP NICD BATTERY **
*BKB1931021PB 1200 MAH NIMH BATTERY
*BKB193085PB 500 MAH NIMH BATTERY
POWER PLUS TALK AND CHARGE
- --------------------------------------------------------------------------------
BML1631001PB VEHICLE POWER ADAPTER PLUS **
LEATHER CASE
KRY1041032PB FLIP LEATHER POUCH **
NOTE:
"*" REPRESENTS NEW SKU
"**" REPRESENTS NEW PRICING
"PB" SUFFIX ON ABOVE PART NUMBERS REPRESENT PACIFIC BELL CUSTOM PACKAGING.
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT E MASTER AGREEMENT NO. P/PS-960163
PACIFIC BELL ---------------------------------------
MOBILE SERVICES Purchase Order
4410 Rosewood Drive, Suite 400 ---------------------------------------
Pleasanton, CA 94588 PURCHASE ORDER NO. REVISION PAGE
Phone (510) 227-2200
Fax (510) 227-2223
---------------------------------------
THIS PURCHASE ORDER NO. MUST APPEAR ON
ALL INVOICES, PACKING LISTS, CARTONS
AND CORRESPONDENCE RELATED TO THIS
ORDER.
---------------------------------------
SHIP TO:
---------------------------------------
VENDOR: BILL TO:
- --------------------------------------------------------------------------------
CUSTOMER ACCT. NO. VENDOR NO. DATE OF ORDER/BUYER REVISED DATE/BUYER
- --------------------------------------------------------------------------------
PAYMENT TERMS SHIP VIA F.O.B.
- --------------------------------------------------------------------------------
FREIGHT TERMS REQUESTOR/DELIVER TO CONFIRM TO/TELEPHONE
- --------------------------------------------------------------------------------
ITEM PART NUMBER/ DELIVERY DATE QUANTITY UNIT UNIT PRICE EXTENSION TAX
DESCRIPTION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPROVAL: TOTAL
------------------------------
AUTHORIZATION
- ------------------------------ ------------------ ------------------------------
Requested By Phone Name
------------------------------
Signature
- ------------------------------ ------------------ ------------------------------
Prepared By Phone
------------------------------
Date
- --------------------------------------------------------------------------------
45
PROPRIETARY AND CONFIDENTIAL
Not for Use or Disclosure Outside
CELLSTAR, LTD. and PACIFIC BELL MOBILE SERVICES
Except Under Written Agreement
<PAGE>
EXHIBIT F MASTER AGREEMENT NO. P/PS-960163
Assembly Cost Model
[REDACTED]
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT 10.38
CELLSTAR CORPORATION
1993 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
--------------------------------------------------
(as amended and restated through March 22, 1996)
This Plan amends and restates the CellStar Corporation 1993 Stock
Option Plan, as previously amended and restated, which first became effective on
December 3, 1993. Capitalized terms used herein are defined in Article 2
hereof.
To the extent permitted under Rule 16b-3, Sections 162(m) and 422 of
the Code, and any other applicable law or regulation, the Committee shall have
the power, in its sole discretion, to apply any or all of the amendments
effected hereby to outstanding Stock Options previously granted under the Plan;
provided that, to the extent that the application of any such amendment to an
outstanding Stock Option shall have an Adverse Consequence for the Company
and/or a Participant, such amendment shall not apply unless it is specifically
approved by the Committee and consented to by the Participant.
This Plan shall be effective as of March 22, 1996, subject to
stockholder approval of the amendments effected hereby; provided that any
Discretionary Amendment shall not be subject to stockholder approval.
ARTICLE 1
PURPOSE
-------
The purpose of the Plan is to attract and retain key Employees,
Nonemployee Directors and Advisors of the Company and its Subsidiaries and to
provide such persons with a proprietary interest in the Company through the
granting of Stock Options, Stock Appreciation Rights, Restricted Stock, and/or
Cash Awards, whether granted singly, in combination, or in tandem. The Plan is
designed to
(a) increase the interest of such persons inthe welfare of the
Company and its Subsidiaries;
(b) furnish an incentive to such persons to continue their
services for the Company and/or its Subsidiaries; and
(c) provide a means through which the Company and its
Subsidiaries may attract able persons to enter their employ
or serve as Advisors.
With respect to Reporting Participants, the Plan and all transactions
under the Plan (other than transactions specifically permitted by the Committee
pursuant to Sections 6.9 and 8.8 of the Plan) are intended to comply with all
applicable conditions of Rule 16b-3. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void ab
initio, to the extent permitted by law and deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
-----------
For purposes of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Adverse Consequence" means (i) the loss of qualification
of a Stock Option for special treatment under Rule 16b-3 or the
commencement of a new holding period under such rule; (ii) the
disqualification of a Stock Option as an Incentive Stock Option or the
repricing of such Stock Option; or (iii) the Company's inability to
claim the Section 162(m) Exception with respect to a Stock Option or
the repricing of such Stock Option.
<PAGE>
2.2 "Advisor" means any person performing advisory or
consulting services for the Company or any Subsidiary, with or without
compensation, to whom the Company chooses to grant an Award in
accordance with the Plan, provided that bona fide services must be
rendered by such person and such services shall not be rendered in
connection with the offer or sale of securities in a capital raising
transaction.
2.3 "Award" means the grant under the Plan of any Stock
Options, Stock Appreciation Rights, shares of Restricted Stock, or
Cash Award, whether granted singly, in combination, or in tandem
(sometimes individually referred to herein as an "Incentive").
2.4 "Award Agreement" means a written agreement between a
Participant and the Company that sets out the terms of the grant of an
Award.
2.5 "Award Period" means the period during
which one or more Incentives granted under an Award may be exercised.
2.6 "Board" means the Board of Directors of
the Company.
2.7 "Cash Award" means an Award granted
pursuant to Article 9 of the Plan.
2.8 "Change of Control" means any of the following: (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger
have the same proportionate ownership of the surviving corporation
immediately after the merger; (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; (iii) approval
by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iv) the cessation of
control (by virtue of their not constituting a majority of directors)
of the Board by the individuals (the "Continuing Directors") who (x)
at the effective date of this Plan were directors or (y) become
directors after the effective date of this Plan and whose election or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the directors then in office who were
directors at the effective date of this Plan or whose election or
nomination for election was previously so approved; (v) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion
of a case involving the Company to a case under Chapter 7; or (vi) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of an aggregate of 15% or more of the voting
power of the Company's outstanding voting securities by any person or
persons acting as a group (within the meaning of Rule 13d-5 under the
Exchange Act) who beneficially owned less than 10% of the voting power
of the Company's outstanding voting securities on the effective date
of this Plan, or the acquisition of beneficial ownership of an
additional 5% of the voting power of the Company's outstanding voting
securities by any person or group who beneficially owned at least 10%
of the voting power of the Company's outstanding voting securities on
the effective date of this Plan; provided, however, that,
-------- -------
notwithstanding the foregoing, an acquisition shall not constitute a
Change of Control hereunder if the acquiror is (v) Alan H. Goldfield
("Goldfield"), (w) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company and acting in such
capacity, (x) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of voting securities of the Company; (y) a person or
group meeting the requirements of clauses (i) and (ii) of Rule 13d-
1(b)(1) under the Exchange Act; or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a
majority of the Continuing Directors; and provided further that no
Change of Control shall be deemed to have occurred from a transfer of
the Company's voting securities by Goldfield to (v) a member of
Goldfield's immediate family (within the meaning of Rule 16a-1(e) of
the Exchange Act) either during Goldfield's lifetime or by will or the
laws of descent and distribution; (w) any trust as to which Goldfield
or a member (or members) of his immediate family is the beneficiary;
(x) any trust as to which Goldfield is the settlor with sole power to
revoke; (y) any entity over which Goldfield has the power, directly or
indirectly, to direct or cause the direction of the management and
policies of the entity, whether through the ownership of voting
securities, by contract or
2
<PAGE>
otherwise; or (z) any charitable trust, foundation or corporation
under Section 501(c)(3) of the Code that is funded by Goldfield. To
the extent that a Participant's Employment Agreement differs from the
Plan with respect to the meaning of "Change of Control," if such
Employment Agreement has been approved by the Compensation Committee
of the Board of Directors, the definition included in such Employment
Agreement shall govern.
2.9 "Code" means the Internal Revenue Code of 1986, as
amended.
2.10 "Committee" means the committee(s) appointed or designated
by the Board to administer the Plan in accordance with Article 3 of
this Plan.
2.11 "Common Stock" means the Common Stock, par value, $.01 per
share, of the Company or, in the event that the outstanding shares of
such Common Stock are hereafter changed into or exchanged for shares
of a different stock or security of the Company or another
corporation, such other stock or security.
2.12 "Company" means CellStar Corporation, a Delaware
corporation.
2.13 "Date of Grant" means the effective date on which an Award
is made to a Participant as set forth in the applicable Award
Agreement.
2.14 "Discretionary Amendment" means any amendment to the Plan
that does not require stockholder approval.
2.15 "Employee" means any employee (including any employee who
is also a director and/or officer) of the Company or its Subsidiaries.
2.16 "Employment Agreement" means an agreement between the
Company or any Subsidiary and a Participant, setting forth the terms
and conditions of the Participant's employment by the Company or such
Subsidiary. For purposes of the Plan, such term shall also be deemed
to include any agreement between the Company or any Subsidiary and an
Advisor, setting forth the terms and conditions of the Advisor's
services for the Company or such Subsidiary.
2.17 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
2.18 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
2.19 "Fair Market Value" of a share of Common Stock means such
value as is determined by the Committee on the basis of such factors
as it deems appropriate; provided that, if the Common Stock is traded
on a national securities exchange or transactions in the Common Stock
are quoted on the NASDAQ National Market System, such value shall be
determined by the Committee on the basis of the last reported sale
price for the Common Stock on the date for which such determination is
relevant, as reported on the national securities exchange or the
NASDAQ National Market System, as the case may be. If the Common Stock
is not listed and traded upon a recognized securities exchange or in
the NASDAQ National Market System, the Committee shall make a
determination of Fair Market Value on the basis of the closing bid and
asked quotations for such stock on the date for which such
determination is relevant (as reported by a recognized stock quotation
service) or, in the event that there are no bid or asked quotations
for such stock on the date for which such determination is relevant,
then on the basis of the mean between the closing bid and asked
quotations on the date nearest preceding the date for which such
determination is relevant for which such bid and asked quotations were
available. In no event shall "Fair Market Value" be less than the par
value of the Common Stock.
2.20 "Incentive" shall have the meaning given it in Section 2.3
above.
3
<PAGE>
2.21 "Incentive Stock Option" or "ISO" means a Stock Option
that by its terms is intended to be treated as an "incentive stock
option" within the meaning of Section 422 of the Code.
2.22 "Nonemployee Director" means a member of the Board of
Directors of the Company or any Subsidiary who is not an Employee.
2.23 "Non-qualified Stock Option" means any Stock Option that
does not qualify as an Incentive Stock Option.
2.24 "Option Exercise Price" means the price that must be paid
by a Participant upon exercise of a Stock Option to purchase a share
of Common Stock.
2.25 "Option Period" means the period during which a Stock
Option may be exercised.
2.26 "Participant" shall mean an Employee, Nonemployee Director
or Advisor to whom an Award is granted under this Plan.
2.27 "Plan" means this CellStar Corporation 1993 Amended and
Restated Long-Term Incentive Plan, as amended from time to time.
2.28 "Reporting Participant" means a Participant who is subject
to the reporting requirements of Section 16 of the Exchange Act.
2.29 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to this Plan, which shares are
subject to the restrictions or limitations set forth in Article 7 of
this Plan and in the related Restricted Stock Agreement.
2.30 "Restricted Stock Agreement" means a written agreement
between the Company and a Participant with respect to an Award of
Restricted Stock.
2.31 "Retirement" means Termination of Service at or after the
Company's established retirement age, unless otherwise defined in a
particular Award Agreement. To the extent that a Participant's
Employment Agreement differs from the Plan with respect to the meaning
of "Retirement," if such Employment Agreement has been approved by the
Compensation Committee of the Board of Directors, the definition
included in such Employment Agreement shall govern.
2.32 "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time.
2.33 "SAR Price" means the price that must be paid by a
Participant upon exercise of an SAR, which shall be at least the Fair
Market Value of each share of Common Stock covered by the SAR,
determined on the Date of Grant of the SAR.
2.34 "Section 162(m)" means Section 162(m) of the Code and the
regulations promulgated thereunder from time to time.
2.35 "Section 162(m) Exception" means the exception under
Section 162(m) for "qualified performance-based compensation."
2.36 "Stock Appreciation Right" or "SAR" means the right to
receive a payment equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the SAR is
exercised over the SAR Price for such shares.
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2.37 "Stock Appreciation Right Agreement" means an agreement
between the Company and a Participant setting forth the terms and
conditions of an Award of Stock Appreciation Rights.
2.38 "Stock Option" means a Non-qualified Stock Option or an
Incentive Stock Option to purchase Common Stock.
2.39 "Stock Option Agreement" means a written agreement between
the Company and a Participant setting forth the terms and conditions
of an Award of Stock Options.
2.40 "Subsidiary" means a subsidiary corporation of the
Company, within the meaning of Section 424(f) of the Code; provided
that, with respect to any Awards under the Plan other than Incentive
Stock Options, the term "Subsidiary" shall be deemed to include (i)
any limited partnership, if the Company or any subsidiary corporation
owns a majority of the general partnership interest and a majority of
the limited partnership interests entitled to vote on the removal and
replacement of the general partner, and (ii) any partnership, if the
partners thereof are composed only of the Company, any subsidiary
corporation, or any limited partnership listed in item (i) above. 2.41
"Ten Percent Owner" means a person who owns, or is deemed within the
meaning of Section 422(b)(6) of the Code to own, stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company (or its parent (within the meaning of Section 424(e) of
the Code) or Subsidiaries). Whether a person is a Ten Percent Owner
shall be determined with respect to a Stock Option based on the facts
existing immediately prior to the Date of Grant of such Stock Option.
2.42 "Termination of Service" occurs when a Participant who is
an Employee, Nonemployee Director or Advisor shall cease to serve in
any such capacity for any reason.
2.43 "Total and Permanent Disability" of a Participant means
that the Participant is qualified for long-term disability benefits
under the Company's disability plan or insurance policy; or, if no
such plan or policy is then in existence, that the Participant,
because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her
duties of employment for a period of six (6) continuous months, as
determined in good faith by the Committee; provided that, with respect
-------------
to any Incentive Stock Option, Total and Permanent Disability shall
have the meaning given it under the rules governing Incentive Stock
Options under the Code. With respect to any Award other than an
Incentive Stock Option, to the extent that a Participant's Employment
Agreement differs from the Plan with respect to the meaning of "Total
and Permanent Disability," if such Employment Agreement has been
approved by the Compensation Committee of the Board of Directors, the
definition included in such Employment Agreement shall govern.
ARTICLE 3
ADMINISTRATION
--------------
The Plan shall be administered by a committee appointed by the Board,
consisting of at least two members of the Board; provided that, (i) with
respect to any Award that is granted to a Reporting Participant, such
committee shall consist of at least such number of directors as are
required from time to time by Rule 16b-3, and each such committee member
shall qualify as a "disinterested person" under Rule 16b-3, if so required;
and (ii) with respect to any Award that is also intended to satisfy the
requirements of the Section 162(m) Exception, such committee shall consist
of at least such number of directors as are required from time to time to
satisfy the Section 162(m) Exception, and each such committee member shall
qualify as an "outside director" within the meaning of Section 162(m). Any
member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
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The Committee shall select one of its members to act as its Chairman.
A majority of the Committee shall constitute a quorum, and the act of a
majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.
Subject to the provisions of the Plan, the Committee shall have the
sole discretion and authority to determine and designate from time to time
the eligible persons to whom Awards will be granted and to determine and
interpret the terms and provisions of each Award Agreement, including
without limitation the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are
approved by the Committee. The Committee shall determine whether an Award
shall include one type of Incentive, two or more Incentives granted in
combination, or two or more Incentives granted in tandem (that is, a joint
grant where exercise of one Incentive results in cancellation of all or a
portion of the other Incentive).
Subject to the provisions of the Plan, the Committee shall also have
sole discretion and authority to (i) interpret the Plan; (ii) prescribe,
amend, and rescind any rules and regulations necessary or appropriate for
the administration of the Plan; (iii) modify or amend any Award Agreement
or waive any conditions or restrictions applicable to any Stock Option or
SAR (or the exercise thereof) or to any shares of Restricted Stock; and
(iv) make such other determinations and take such other action as it deems
necessary or advisable in the administration of the Plan. Any
interpretation, determination, or other action made or taken by the
Committee shall be final, binding, and conclusive on all interested
parties.
With respect to restrictions ("mandated restrictions") in the Plan
that are based on the requirements of Rule 16b-3, Section 422 of the Code,
the Section 162(m) Exception, the rules of any exchange upon which the
Company's securities are listed, or any other applicable law, rule or
restriction (collectively, "applicable law"), to the extent that any such
mandated restrictions are no longer required by applicable law, the
Committee shall have the sole discretion and authority to grant Awards that
are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.
ARTICLE 4
ELIGIBILITY
-----------
Any Employee, Nonemployee Director, or Advisor whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company is eligible to participate in the
Plan; provided that only Employees shall be eligible to receive Incentive
Stock Options; and provided further that no member of the Committee shall
be eligible to participate in the Plan. The Committee, upon its own action,
may grant, but shall not be required to grant, an Award to any Employee,
Nonemployee Director, or Advisor. Awards may be granted by the Committee at
any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may
include or exclude previous Participants, as the Committee shall determine;
provided that no Participant may receive during any fiscal year of the
Company Awards in the form of shares of Common Stock, including Stock
Options, SARs or Restricted Stock, the aggregate of which shall exceed
250,000 shares of Common Stock. Except as required by this Plan, Awards
granted at different times need not contain similar provisions. The
Committee's determinations under the Plan (including without limitation
determinations of which persons, if any, are to receive Awards, the form,
amount and timing of such Awards, the terms and provisions of such Awards
and the agreements evidencing same) need not be uniform and may be made by
it selectively among Employees, Nonemployee Directors and/or Advisors who
receive, or are eligible to receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
----------------------
The number of shares of Common Stock that may be issued pursuant to
Awards granted under the Plan is 1,500,000 (as may be adjusted in
accordance with Articles 12 and 13 hereof). Such shares of Common Stock may
be made available from either authorized but unissued Common Stock or
Common Stock held by the Company in its
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treasury. To the extent permitted by the stockholder approval requirements
of Rule 16b-3, Sections 162(m) and 422 of the Code, and any other
applicable law or regulation, shares of Common Stock previously subject to
Awards which are forfeited, terminated, settled in cash in lieu of Common
Stock, or exchanged for Awards that do not involve Common Stock, or that
are subject to expired and unexercised Stock Options or SARs, shall
immediately become available for Awards under the Plan.
During the term of this Plan, the Company will at all times reserve
and keep available a number of shares of Common Stock sufficient to satisfy
the requirements of this Plan.
ARTICLE 6
STOCK OPTIONS
-------------
6.1 GRANT OF STOCK OPTIONS. The Committee may, in its sole
discretion, grant Stock Options in accordance with the terms and conditions
set forth in the Plan. The grant of a Stock Option shall be evidenced by a
Stock Option Agreement setting forth the Date of Grant, the total number of
shares purchasable pursuant to the Stock Option, the Option Period, the
vesting schedule (if any), and such other terms and provisions as are
consistent with the Plan.
6.2 OPTION EXERCISE PRICE. The Option Exercise Price for any Stock
Option shall be determined by the Committee and shall be no less than One
Hundred Percent (100%) of the Fair Market Value per share of Common Stock
on the Date of Grant; provided that, with respect to any Incentive Stock
Option that is granted to a Ten Percent Owner, the Option Exercise Price
shall be at least 110% of the Fair Market Value of the Common Stock on the
Date of Grant.
6.3 OPTION PERIOD. The Option Period for any Stock Option shall be
determined by the Committee; provided that no portion of any Stock Option
may be exercised after the expiration of ten (10) years from its Date of
Grant; and provided further that, with respect to any Incentive Stock
Option that is granted to a Ten Percent Owner, the term of such Incentive
Stock Option (to the extent required by the Code at the time of grant)
shall be no more than five (5) years from the Date of Grant.
6.4 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate
Fair Market Value (determined on the Date of Grant) of the Common Stock
with respect to which Incentive Stock Options (under this and any other
plan of the Company and its Subsidiaries or parent) are exercisable for the
first time by such Employee during any calendar year to exceed $100,000. To
the extent that any Stock Option is granted under the Plan that is first
exercisable in excess of the foregoing limitations, such Stock Option shall
be deemed to be a Non-qualified Stock Option.
6.5 EXERCISE OF STOCK OPTIONS. Subject to the terms, conditions, and
restrictions of the Plan, each Stock Option may be exercised in accordance
with the terms of the Stock Option Agreement pursuant to which the Stock
Option is granted. If the Committee imposes conditions upon exercise of any
Stock Option, the Committee may, in its sole discretion, accelerate the
date on which all or any portion of the Stock Option may be exercised;
provided that, the Committee shall not, without the Participant's consent,
accelerate any Incentive Stock Option if such acceleration would disqualify
such Stock Option as an Incentive Stock Option. Notwithstanding anything in
the Plan to the contrary, to the extent required by Rule 16b-3, a Reporting
Participant may not exercise a Stock Option or Stock Appreciation Right
until at least six month have expired from the "date of grant" (within the
meaning of Rule 16b-3).
Subject to such administrative regulations as the Committee may from
time to time adopt, a Stock Option will be deemed exercised for purposes of
the Plan when (i) written notice of exercise has been received by the
Company at its principal office (which notice shall set forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised and the date of exercise thereof, which shall be at least three
(3) days after giving such notice, unless an earlier time shall have been
mutually agreed upon) and (ii) payment of the Option Exercise Price is
received by the Company in accordance with Section 6.6 below; provided
that, with respect to a cashless exercise of any Stock Option (in
accordance with clause (c) of Section 6.6 below), such Stock Option will
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be deemed exercised for purposes of the Plan on the date of sale of the
shares of Common Stock received upon exercise. No Stock Option may be
exercised for a fractional share of Common Stock.
6.6 PAYMENT OF OPTION EXERCISE PRICE. The Option Exercise Price may
be paid as follows: (a) in cash or by certified check, bank draft, or money
order payable to the order of the Company, (b) with Common Stock (including
Restricted Stock), valued at its Fair Market Value on the date of exercise,
(c) by delivery (including by FAX) to the Company or its designated agent
of an executed irrevocable option exercise form together with irrevocable
instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of
sale or loan proceeds necessary to pay such purchase price, and/or (d) in
any other form of valid consideration that is acceptable to the Committee
in its sole discretion. In the event that shares of Restricted Stock are
tendered as consideration for the exercise of a Stock Option, a number of
shares of Common Stock issued upon the exercise of the Stock Option, equal
to the number of shares of Restricted Stock used as consideration therefor,
shall be subject to the same restrictions as the Restricted Stock so
submitted.
Upon payment of all amounts due from the Participant, the Company
shall cause certificates for the Common Stock then being purchased to be
delivered to the Participant (or the person exercising the Participant's
Stock Option in the event of his death) at its principal business office
within ten (10) business days after the exercise.
If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right
to purchase such Common Stock may be terminated by the Company.
6.7 LIMITATION ON INCENTIVE STOCK OPTION CHARACTERIZATION. To the
extent that any Stock Option fails to qualify as an Incentive Stock Option,
such Stock Option will be considered a Non-qualified Stock Option.
6.8 TERMINATION OF EMPLOYMENT OR SERVICE.
Unless otherwise permitted by the Committee, in its sole discretion,
in the event of Termination of Service of a Participant, any Stock Options
held by such Participant shall be exercisable as follows:
(a) Termination Due to Death or Total and Permanent Disability.
In the event of a Participant's Termination of Service due to death or
Total and Permanent Disability, such Participant's Stock Options may
be exercised, to the extent such Stock Options could have been
exercised by the Participant on the date of the Participant's death or
Total and Permanent Disability (as applicable), for a period of twelve
(12) months after the Participant's death or Total and Permanent
Disability (as applicable) or until the expiration of the original
Option Period (if sooner).
(b) Termination Due to Retirement. In the event of a
Participant's Termination of Service due to Retirement, such
Participant's Stock Options may be exercised, to the extent such Stock
Options could have been exercised by the Participant on the date of
the Participant's Retirement, for a period of three (3) months after
the date of the Participant's Retirement or until the expiration of
the original Option Period (if sooner).
(c) Termination for Reasons Other than Death, Total and Permanent
Disability, or Retirement. In the event of a Participant's Termination
of Service for any reason other than death, Total and Permanent
Disability, or Retirement, such Participant's Stock Options may be
exercised, to the extent such Stock Options could have been exercised
by the Participant on the date of such Termination of Service, for a
period of thirty (30) days after the date of such Termination of
Service or until the expiration of the original Option Period (if
sooner).
6.9 TRANSFERABILITY OF STOCK OPTIONS.
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(a) Incentive Stock Options. Incentive Stock Options may not be
transferred or assigned other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the
Participant only by the Participant or the Participant's legally
authorized representative, and each Stock Option Agreement in respect
of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the
Stock Option.
The Committee may waive or modify any limitation contained in
this Section 6.9(a) that is not required for compliance with Section
422 of the Code.
(b) Non-qualified Stock Options.
(1) Participants Other Than Reporting Participants. With
respect to Non-qualified Stock Options granted hereunder to any
Participant who is not a Reporting Participant, the Committee
may, in its sole discretion, provide in any Stock Option
Agreement (or in an amendment to any existing Stock Option
Agreement) such provisions regarding transferability of the Non-
qualified Stock Options as the Committee, in its sole discretion,
deems appropriate.
(2) Reporting Participants. Except as may be specified by
the Committee in accordance with the following paragraph, a Non-
qualified Stock Option granted to a Reporting Participant may not
be transferred or assigned other than by will or the laws of
descent and distribution or pursuant to the terms of a qualified
domestic relations order, as defined by the Code or Title I of
ERISA, or the rules thereunder. The designation by a Reporting
Participant of a beneficiary will not constitute a transfer of
the Stock Option.
The Committee may, in its sole discretion, provide in any
Stock Option Agreement (or in an amendment to any existing Stock
Option Agreement) that Non-qualified Stock Options granted
hereunder to a Reporting Participant may be transferred to
members of the Reporting Participant's immediate family, trusts
for the benefit of such immediate family members and partnerships
in which such immediate family members are the only partners,
provided that there cannot be any consideration for the transfer.
The Committee may waive or modify any limitation contained
in this Section 6.9(b)(2) that is not required from compliance
with Rule 16b-3.
ARTICLE 7
RESTRICTED STOCK
----------------
7.1 GRANT OF RESTRICTED STOCK. The Committee may, in its sole
discretion, grant Restricted Stock Awards in accordance with the terms and
conditions set forth in the Plan. The grant of an Award of Restricted Stock
shall be evidenced by a Restricted Stock Agreement setting forth (i) the
Date of Grant, (ii) the number of shares of Restricted Stock awarded, (iii)
the price, if any, to be paid by the Participant for such Restricted Stock,
(iv) the time or times within which such Award may be subject to
forfeiture, (v) specified performance goals, or other criteria, if any,
that the Committee determines must be met in order to remove any
restrictions (including vesting) on such Award, and (vi) such other terms
and provisions as are consistent with the Plan. The provisions of
Restricted Stock Awards need not be the same with respect to each
Participant.
7.2 RESTRICTIONS AND CONDITIONS. Each Restricted Stock Award
shall confer upon the recipient thereof the right to receive a specified
number of shares of Common Stock in accordance with the terms and
conditions of each Participant's Restricted Stock Agreement and the
restrictions and conditions set forth below:
(a) The shares of Common Stock awarded hereunder to a Participant
shall be restricted for a period of time (the "Restriction Period") to
be determined by the Committee for each Participant at the time of the
Award. The restrictions shall prohibit the sale, transfer, pledge,
assignment or other encumbrance
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of such shares and shall provide for possible reversion thereof to the
Company in accordance with subparagraph (f) during the Restriction Period.
The Restriction Period shall commence on the Date of Grant and, unless
otherwise established by the Committee in the Restricted Stock Agreement,
shall expire upon satisfaction of the conditions set forth in the Award
Agreement, which conditions may provide for vesting based on (i) length of
continuous service, (ii) achievement of specific business objectives, (iii)
increases in specified indices, (iv) attainment of specified growth rates,
or (v) any other factor, as determined by the Committee in its sole
discretion. The Committee may, in its sole discretion, remove any or all of
the restrictions on such Restricted Stock whenever it may determine that,
by reason of changes in applicable laws or other changes in circumstances
arising after the date of the Award, such action is appropriate.
(b) From the Date of Grant of a Restricted Stock Award, the
Participant shall have, with respect to his or her shares of Restricted
Stock, all of the rights of a stockholder of the Company, including the
right to vote the shares, and the right to receive any dividends thereon,
subject to forfeiture of such rights, as provided in subparagraph (f)
below.
(c) Each Participant who is awarded Restricted Stock shall be issued a
stock certificate or certificates in respect of such shares of Common
Stock, which shall be registered in the name of the Participant, but shall
be delivered by the Participant to the Company together with a stock power
endorsed in blank. Each such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock,
substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE,
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS AND CONDITIONS SET
FORTH IN THE CELLSTAR CORPORATION 1993 AMENDED AND RESTATED LONG-TERM
INCENTIVE PLAN AND IN A RELATED AWARD AGREEMENT ENTERED INTO BETWEEN
THE REGISTERED OWNER AND CELLSTAR CORPORATION. COPIES OF SUCH PLAN
AND AGREEMENT ARE ON FILE AT THE PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE OF, AND WILL BE FURNISHED WITHOUT CHARGE UPON
WRITTEN REQUEST BY THE RECORD HOLDER, TO CELLSTAR CORPORATION, 1730
BRIERCROFT COURT, CARROLLTON, TEXAS 75006.
Each Restricted Stock Agreement shall require that (i) each
Participant, by his or her acceptance of Restricted Stock, shall
irrevocably grant to the Company a power of attorney to transfer any shares
so forfeited to the Company and agrees to execute any documents requested
by the Company in connection with such forfeiture and transfer, and (ii)
such provisions regarding returns and transfers of stock certificates with
respect to forfeited shares of Common Stock shall be specifically
performable by the Company in a court of equity or law.
(d) Upon the lapse of a Restriction Period, the Company will return
the stock certificates representing shares of Common Stock with respect to
which the restrictions have lapsed to the Participant or his or her legal
representative, and pursuant to the instruction of the Participant or his
or her legal representative will issue a certificate for such shares that
does not bear the legend set forth in subparagraph (c) above.
(e) Any other securities or assets (other than ordinary cash
dividends) that are received by a Participant with respect to shares of
Restricted Stock awarded to such Participant, which shares are still
subject to restrictions established in accordance with subparagraph (a)
above, will be subject to the same restrictions and will be delivered by
the Participant to the Company as provided in subparagraph (c) above.
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(f) Subject to the provisions of the particular Award Agreement, and
unless otherwise permitted by the Committee in its sole discretion, upon
Termination of Service for any reason during the Restriction Period, any
nonvested shares of Restricted Stock held by such Participant shall be
forfeited by the Participant. In the event a Participant has paid any
consideration to the Company for forfeited Restricted Stock, the Company
shall, as soon as practicable after the event causing forfeiture (but in
any event within 5 business days), pay to the Participant, in cash, an
amount equal to the total consideration paid by the Participant for such
forfeited shares. Upon any forfeiture, all rights of a Participant with
respect to the forfeited shares of Restricted Stock shall cease and
terminate, without any further obligation on the part of the Company.
7.3 NOTICE TO COMPANY OF SECTION 83(B) ELECTION. Any Participant who
exercises an election under Section 83(b) of the Code to have his or her receipt
of shares of Restricted Stock taxed currently, without regard to restrictions,
must give notice to the Company of such election immediately upon making such
election. Any such election must be made within 30 days after the effective
date of issuance and cannot be revoked except with the consent of the Internal
Revenue Service.
ARTICLE 8
STOCK APPRECIATION RIGHTS
-------------------------
8.1 GRANTS OF SARS. The Committee may, in its sole discretion, grant
Stock Appreciation Rights in accordance with the terms and conditions set forth
in the Plan. Each SAR Agreement may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as are determined by
the Committee in its sole discretion. An SAR may be granted in combination
with, in addition to, or completely independent of, a Stock Option or any other
Award. An SAR shall entitle a Participant to surrender to the Company all or a
portion of the SAR in exchange for an amount equal to the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the SAR
Price, multiplied by the total number of shares of Common Stock with respect to
which the SAR shall have been exercised.
8.2 SAR PRICE. The SAR Price for any share of Common Stock subject to an
SAR shall be no less than One Hundred Percent (100%) of the Fair Market Value of
the share on the Date of Grant.
8.3 AWARD PERIOD. Subject to Section 8.9 below, the Award Period for any
Stock Appreciation Right shall be determined by the Committee; provided that no
portion of any Stock Appreciation Right may be exercised after the expiration of
ten (10) years from its Date of Grant
8.4 FORM OF PAYMENT. In the discretion of the Committee, the Company may
satisfy its payment obligation upon a Participant's exercise of an SAR (i) in
cash, (b) in shares of Common Stock valued at their Fair Market Value on the
date of exercise, or (c) in part with cash and in part with shares of Common
Stock.
8.5 EXERCISE OF SARS. Subject to the following paragraph, each Stock
Appreciation Right shall be exercisable in accordance with the terms of the
Stock Appreciation Rights Agreement pursuant to which the Stock Appreciation
Right is granted. Subject to the conditions of this Section 8.5 and such
administrative regulations as the Committee may from time to time adopt, an SAR
may be exercised by the delivery of written notice to the Committee setting
forth the number of shares of Common Stock with respect to which the SAR is to
be exercised and the date of exercise thereof, which shall be at least three (3)
days after giving such notice unless an earlier time shall have been mutually
agreed upon. On the date of exercise, the Participant shall receive from the
Company in exchange therefor payment in an amount equal to the excess (if any)
of the Fair Market Value (as of the date of the exercise of the SAR) of one
share of Common Stock over the SAR Price per share specified in such SAR,
multiplied by the total number of shares of Common Stock of the SAR being
surrendered.
A transaction under the Plan involving the exercise of an SAR and the
receipt of cash in complete or partial settlement of the SAR by a Reporting
Participant shall be subject to the satisfaction of all of the following
conditions:
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(a) the Company shall have been subject to and complied with the
reporting requirements of Section 13(a) of the Exchange Act for at least
one year prior to the exercise of the SAR;
(b) the Company regularly releases for publication quarterly and
annual summary statements of sales and earnings;
(c) any election by the Reporting Participant to receive cash in full
or partial settlement of the SAR, as well as the exercise by the insider of
the SAR for cash, shall have been made during the period beginning on the
third business day following the date of release of the financial data
specified in clause (ii) of this sentence and ending on the twelfth day
following such date, unless the exercise by the participant of the SAR is
for cash and the date of exercise is automatic or fixed in advance under
the Plan and is outside the control of the participant, in which case the
condition in this subparagraph (c) shall not be applicable; and
(d) The SAR must be held for six months from the date of acquisition
to the date of cash settlement.
If the conditions to the exercise of an SAR by a Reporting Participant
contained in Rule 16b-3 are subsequently modified, the foregoing conditions
shall automatically be deemed amended to incorporate such modifications.
Furthermore, the Committee may waive any limitation contained in this Section
that is not required for compliance with Rule 16b-3.
8.6 EFFECT ON STOCK OPTIONS AND VICE-VERSA. Whenever a Stock Appreciation
Right is granted in relation to a Stock Option and the exercise of one affects
the right to exercise the other, the number of shares of Stock available under
the Stock Option to which the Stock Appreciation Right relates will decrease by
a number equal to the number of shares of Common Stock for which the Stock
Appreciation Right is exercised. Upon the exercise of a Stock Option, any
related SAR will terminate as to any number of shares of Common Stock subject to
such Stock Appreciation Right that exceeds the total number of shares of Common
Stock for which the Stock Option remains unexercised.
8.7 TERMINATION OF EMPLOYMENT OR SERVICE. Unless otherwise permitted by
the Committee, in its sole discretion, in the event of Termination of Service of
a Participant, any Stock Appreciation Rights held by such Participant shall be
exercisable as set forth below; provided that, whenever a Stock Appreciation
Right is granted in relation to a Stock Option and the exercise of one affects
the right to exercise the other, the Stock Appreciation Right may be exercised
only during the period, if any, within which the Stock Option to which it
relates may be exercised.
(a) Termination Due to Death or Total and Permanent Disability. In the
event of a Participant's Termination of Service due to death or Total and
Permanent Disability, such Participant's Stock Appreciation Rights may be
exercised, to the extent such Stock Appreciation Rights could have been
exercised by the Participant on the date of the Participant's death or
Total and Permanent Disability (as applicable), for a period of twelve (12)
months after the Participant's death or Total and Permanent Disability (as
applicable) or until the expiration of the original Award Period (if
sooner).
(b) Termination Due to Retirement. In the event of a Participant's
Termination of Service due to Retirement, such Participant's Stock
Appreciation Rights may be exercised, to the extent such Stock Appreciation
Rights could have been exercised by the Participant on the date of the
Participant's Retirement, for a period of three (3) months after the date
of the Participant's Retirement or until the expiration of the original
Award Period (if sooner).
(c) Termination for Reasons Other than Death, Total and Permanent
Disability, or Retirement. In the event of a Participant's Termination of
Service for any reason other than death, Total and Permanent Disability, or
Retirement, such Participant's Stock Appreciation Rights may be exercised,
to the extent such Stock Appreciation Rights could have been exercised on
the date of such Termination of Service, for a period of thirty (30) days
after the date of such Termination of Service or until the expiration of
the original Award Period (if sooner).
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8.8 TRANSFERABILITY OF STOCK APPRECIATION RIGHTS.
(a) Participants Other Than Reporting Participants. Subject to
Section 8.9 below, with respect to SARs granted hereunder to any
Participant who is not a Reporting Participant, the Committee may, in its
sole discretion, provide in any Stock Appreciation Rights Agreement (or in
an amendment to any existing Stock Appreciation Rights Agreement) such
provisions regarding transferability of the SARs as the Committee, in its
sole discretion, deems appropriate.
(b) Reporting Participants. Subject to Section 8.9 below, and except
as may be specified by the Committee in accordance with the following
paragraph, a Stock Appreciation Right granted to a Reporting Participant
may not be transferred or assigned other than by will or the laws of
descent and distribution or pursuant to the terms of a qualified domestic
relations order, as defined by the Code or Title I of ERISA, or the rules
thereunder. The designation by a Reporting Participant of a beneficiary
will not constitute a transfer of the SAR.
Subject to Section 8.9 below, the Committee may, in its sole
discretion, provide in any Stock Appreciation Rights Agreement (or in an
amendment to any existing Stock Appreciation Rights Agreement) that Stock
Appreciation Rights granted hereunder to a Reporting Participant may be
transferred to members of the Reporting Participant's immediate family,
trusts for the benefit of such immediate family members and partnerships in
which such immediate family members are the only partners, provided that
there cannot be any consideration for the transfer.
The Committee may waive or modify any limitation contained in this
Section 8.8(b) that is not required from compliance with Rule 16b-3.
8.9 TANDEM INCENTIVE STOCK OPTION - STOCK APPRECIATION RIGHT. Whenever an
Incentive Stock Option and a Stock Appreciation Right are granted together and
the exercise of one affects the right to exercise the other, the following
requirements shall apply:
(a) The Stock Appreciation Right shall expire no later than the
expiration of the underlying Incentive Stock Option;
(b) The Stock Appreciation Right may be for no more than the
difference between the Stock Option Exercise Price of the underlying
Incentive Stock Option and the Fair Market Value of the Common Stock
subject to the underlying Incentive Stock Option at the time the SAR is
exercised;
(c) The Stock Appreciation Right is transferable only when the
underlying Incentive Stock Option is transferable, and under the same
conditions;
(d) The Stock Appreciation Right may be exercised only when the
underlying Incentive Stock Option is eligible to be exercised; and
(e) The Stock Appreciation Right may be exercised only when the Fair
Market Value of the Common Stock subject to the underlying Incentive Stock
Option exceeds the Option Exercise Price of the underlying Incentive Stock
Option.
ARTICLE 9
CASH AWARDS
-----------
9.1 GRANT OF CASH AWARDS. The Committee may, in its sole discretion,
grant Cash Awards in accordance with the terms and conditions set forth in the
Plan. Each related Award Agreement shall set forth (i) the amount of the Cash
Award, (ii) the time or times within which such Award may be subject to
forfeiture, if any, (iii) specified performance goals, or other criteria, if
any, as the Committee may determine must be met in order to
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<PAGE>
remove any restrictions (including vesting) on such Award, and (iv) any other
terms, limitations, restrictions, and conditions of the Incentive that are
consistent with this Plan.
The Award Agreement shall also set forth the vesting period for the Cash
Award, if any, which shall commence on the Date of Grant and, unless otherwise
established by the Committee in the Award Agreement, shall expire upon
satisfaction of the conditions set forth in the Award Agreement; such conditions
may provide for vesting based on (i) length of continuous service, (ii)
achievement of specific business objectives, (iii) increases in specified
indices, (iv) attainment of specified growth rates, or (v) other comparable
measurements of Company performance, as may be determined by the Committee in
its sole discretion.
9.2 TERMINATION OF SERVICE. Subject to the provisions of the particular
Award Agreement, and unless otherwise permitted by the Committee, in its sole
discretion, upon Termination of Service for any reason during a vesting period
(if any), the nonvested portion of a Cash Award shall be forfeited by the
Participant. Upon any forfeiture, all rights of a Participant with respect to
the forfeited Cash Award shall cease and terminate, without any further
obligation on the part of the Company.
9.3 FORM OF PAYMENT. In the sole discretion of the Committee, the Company
may satisfy its obligation under a Cash Award by the distribution of that number
of shares of Common Stock, Stock Options, or Restricted Stock, or any
combination thereof, having an aggregate Fair Market Value (as of the date of
payment) equal to the amount of cash otherwise payable to the Participant, with
a cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash. If required by Rule 16b-3 at the time of distribution, any shares of
Common Stock distributed to a Reporting Participant must be held by such
Participant for at least six months from the date of distribution.
ARTICLE 10
AMENDMENT OR DISCONTINUANCE
---------------------------
The Plan may be amended or discontinued by the Board, or, if the Board
has specifically delegated this authority to the Committee, by the Committee,
without the approval of the stockholders; provided that no amendment shall be
made without approval of the stockholders of the Company if such approval is
required under the Code, Rule 16b-3, the requirements of any exchange upon which
the Company's securities are listed, or any other applicable law or regulation.
In addition, no termination or amendment of the Plan may, without the consent of
the Participant to whom any Award has theretofore been granted, adversely affect
the rights of such Participant with respect to such Award.
ARTICLE 11
TERM
----
Unless sooner terminated by action of the Board, the Plan will terminate on
December 3, 2003.
ARTICLE 12
CAPITAL ADJUSTMENTS
-------------------
If at any time while the Plan is in effect, or while unexercised Stock
Options or SARs or unvested shares of Restricted Stock are outstanding, there
shall be any increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from (1) the declaration or payment of a stock
dividend, (2) any recapitalization resulting in a stock split-up, combination,
or exchange of shares of Common Stock, or (3) other increase or decrease in such
shares effected without receipt of consideration by the Company, then and in
such event:
(a) An appropriate adjustment shall be made in the maximum number of
shares of Common Stock then subject to being awarded under the Plan and in
the maximum number of shares of Common Stock
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<PAGE>
then subject to being awarded to a Participant, to the end that the same
proportion of the Company's issued and outstanding shares of Common Stock
shall continue to be subject to being so awarded;
(b) Appropriate adjustments shall be made in the number of shares of
Common Stock purchasable under outstanding, unexercised Stock Options and
the Option Exercise Price therefor, to the end that the same proportion of
the Company's issued and outstanding shares of Common Stock in each such
instance shall remain subject to purchase at the same aggregate Option
Exercise Price;
(c) Appropriate adjustments shall be made in the number of shares of
Common Stock subject to outstanding, unexercised SARs and the SAR Price
therefor, to the end that the same proportion of the Company's issued and
outstanding shares of Common Stock in each instance shall remain subject to
exercise at the same aggregate SAR Price; and
(d) Appropriate adjustments shall be made in the number of outstanding
shares of Restricted Stock with respect to which restrictions have not yet
lapsed prior to any such change.
Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, (i) the number, or Option Exercise Price, of shares of
Common Stock then subject to outstanding Stock Options granted under the Plan,
(ii) the number, or SAR Price, of SARs then subject to outstanding SARs granted
under the Plan, or (iii) the number of outstanding shares of Restricted Stock.
Upon the occurrence of each event requiring an adjustment with respect
to Stock Options, SARs, or shares of Restricted Stock, the Company shall mail to
each affected Participant its computation of such adjustment which shall be
conclusive and shall be binding upon each such Participant.
ARTICLE 13
RECAPITALIZATION, MERGER AND CONSOLIDATION
------------------------------------------
(a) The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company's capital structure and
its business, or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or preference stocks ranking prior to or
otherwise affecting the Common stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger or
consolidation, any Incentive granted hereunder shall pertain to and apply
to the securities or rights (including cash, property, or assets) to which
a holder of the number of shares of Common Stock subject to the Incentive
would have been entitled.
(c) In the event of any merger or consolidation pursuant to which the
Company is not the surviving or resulting corporation, there shall be
substituted for each share of Common Stock subject to the unexercised or
unvested portions of outstanding Incentives, that number of shares of each
class of stock or other securities or that amount of cash, property, or
assets of the surviving or consolidated company that were distributed or
distributable to the stockholders of the Company in respect to each share
of Common Stock held by them, such outstanding Incentives be thereafter
pertain to such stock, securities, cash, or property in accordance with
their terms (subject to subparagraph (d) below). Notwithstanding the
foregoing, however, all such Incentives may be cancelled by the Board as of
the effective date of any such
15
<PAGE>
reorganization, merger, or consolidation, by giving notice to each holder
thereof or his personal representative of its intention to do so and by
permitting the exercise during the thirty (30) day period next preceding
such effective date of any outstanding Stock Options or SARs, whether or
not vested in accordance with their original terms, and by waiving all
restrictions on outstanding shares of Restricted Stock.
(d) In the event of a Change of Control, then, notwithstanding any
other provision in this Plan to the contrary, all unmatured installments of
Incentives outstanding shall thereupon automatically be accelerated and
exercisable in full, and all restrictions and/or performance goals with
respect to any Incentive shall be deemed satisfied. The determination of
the Committee that any of the foregoing conditions has been met shall be
binding and conclusive on all parties.
ARTICLE 14
LIQUIDATION OR DISSOLUTION
--------------------------
In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant may thereafter receive upon exercise of any Option or SAR (in lieu
of each share of Common Stock of the Company which such Participant would have
been entitled to receive) the same kind and amount of any securities or assets
as may be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any
Incentive, make any partial distribution of its assets, in the nature of a
partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such), then in such event the exercise prices then in effect with respect to any
outstanding Stock Options or SARs shall be reduced, on the payment date of such
distribution, in proportion to the percentage reduction in the tangible book
value of the shares of the Company's Common Stock (determined in accordance with
generally accepted accounting principles) resulting by reason of such
distribution.
ARTICLE 15
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
----------------------------------------
Stock Options, SARs and shares of Restricted Stock may be granted
under the Plan from time to time in substitution for options, stock appreciation
rights or shares of restricted stock held by employees of a corporation who
become or are about to become Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the options, stock appreciation rights or shares of restricted
stock in substitution for which they are granted.
ARTICLE 16
MISCELLANEOUS PROVISIONS
------------------------
16.1 INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant under the Plan, such evidence
as it may deem necessary to establish that the Incentives granted or the shares
of Common Stock to be purchased or transferred are being acquired for investment
and not with a view to their distribution.
16.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.
16
<PAGE>
16.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board
or the Committee, nor any officer or Employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each
and any officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the
Company in respect of any such action, determination, or interpretation.
16.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced
by an Award Agreement, or any amendment thereto, duly authorized by the
Committee and executed on behalf of the Company, and then only to the
extent and upon the terms and conditions expressly set forth therein.
16.5 COMPLIANCE WITH SECURITIES LAWS AND OTHER RULES AND REGULATIONS.
The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall
be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be
required. The Company shall have no obligation to sell or issue shares of
Common Stock under any Incentive if the Committee determines, in its sole
discretion, that issuance thereof would constitute a violation by the
Participant or the Company of any provisions of any law or regulation of
any governmental authority (including Section 16 of the Exchange Act) or
any securities exchange or other forum in which shares of Common Stock are
traded; and, as a condition of any sale or issuance of shares of Common
Stock under an Incentive, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation.
16.6 WITHHOLDING; NOTICE OF DISPOSITION OF STOCK PRIOR TO EXPIRATION
OF ISO HOLDING PERIOD.
(a) Condition Precedent. Whenever shares of Common Stock are to
be issued pursuant an Award, the Company shall have the right to
require the Participant to remit to the Company an amount sufficient
to satisfy federal, state, local or other withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares of Common Stock.
(b) Manner of Satisfying Withholding Obligation. When a
Participant is required to pay to the Company an amount required to be
withheld under applicable tax laws in connection with an Award, such
payment may be made (i) in cash, (ii) by check, (iii) if permitted by
the Committee, by delivery to the Company of shares of Common Stock
already owned by the Participant having a Fair Market Value on the
date the amount of tax to be withheld is to be determined (the "Tax
Date") equal to the amount required to be withheld, (iv) with respect
to Stock Options, through the withholding by the Company ("Company
Withholding") of a portion of the shares of Common Stock acquired upon
the exercise of the Stock Options (provided that, with respect to any
Stock Option held by a Reporting Participant, at least six months has
elapsed between the Date of Grant of such Stock Option and the
exercise involving tax withholding) having a Fair Market Value on the
Tax Date equal to the amount required to be withheld, or (v) in any
other form of valid consideration, as permitted by the Committee in
its discretion; provided that a Reporting Participant shall not be
permitted to satisfy his or her withholding obligation through Company
Withholding unless required to do so by the Committee, in its sole
discretion. The Committee may waive or modify any limitation contained
in this Section that is not required for compliance with Rule 16b-3.
(c) Notice of Disposition of Stock Acquired Pursuant to Incentive
Stock Options. If shares of Common Stock acquired upon exercise of an
Incentive Stock Option are disposed of by a Participant prior to the
expiration of either two (2) years from the Date of Grant of such
Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock
Option, or in any other disqualifying disposition within the meaning
of Section 422 of the Code, such Participant shall notify the Company
in writing of the date and terms of such disposition. A disqualifying
disposition by a Participant shall not affect the status of any other
Stock Option granted under the Plan as an Incentive Stock Option
within the meaning of Section 422 of the Code.
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<PAGE>
16.7 USE OF PROCEEDS. Proceeds from the sale of shares of Common
Stock pursuant to Incentives granted under this Plan shall constitute
general funds of the Company.
16.8 LEGEND. Each certificate representing shares of Common Stock
issued to a Participant pursuant to the Plan shall bear the following
legend, or a similar legend deemed by the Company to constitute an
appropriate notice of the provisions hereof and the applicable security
laws (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):
On the face of the certificate:
"Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate."
On the reverse:
"The shares of stock evidenced by this certificate are
subject to and transferrable only in accordance with
that certain CellStar Corporation 1993 Amended and
Restated Long-Term Incentive Plan, as amended from time
to time, a copy of which is on file at the principal
office of the Company in Carrollton, Texas. No transfer
or pledge of the shares evidenced hereby may be made
except in accordance with and subject to the provisions
of said Plan. By acceptance of this certificate, any
holder, transferee or pledge hereof agrees to be bound
by all of the provisions of said Plan."
Insert the following legend on the certificate if the shares
were not issued in a transaction registered under the applicable
federal and state securities laws:
"Shares of stock represented by this certificate have
been acquired by the holder for investment and not for
resale, transfer or distribution, have been issued
pursuant to exemptions from the registration
requirements of applicable state and federal securities
laws, and may not be offered for sale, sold or
transferred other than pursuant to effective
registration under such laws, or in transactions
otherwise in compliance with such laws, and upon
evidence satisfactory to the Company of compliance with
such laws, as to which the Company may rely upon an
opinion of counsel satisfactory to the Company."
A copy of this Plan shall be kept on file in the principal office of
the Company in Dallas, Texas.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of March 22, 1996, by its President and Secretary pursuant
to prior action taken by the Board.
CELLSTAR CORPORATION
By: /s/ Terry S. Parker
-----------------------------
President
Attest:
/s/ Elaine Flud Rodriguez
- -------------------------
Secretary
18
<PAGE>
EXHIBIT 10.39
CELLSTAR CORPORATION
AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN
This Plan amends and restates the CellStar Corporation Annual Incentive
Compensation Plan, which first became effective on December 1, 1994.
Capitalized terms used herein are defined in Article II hereof.
To the extent permitted under Rule 16b-3, Section 162(m), and any other
applicable law or regulation, the Committee shall have the power, in its sole
discretion, to apply any or all of the amendments effected hereby to outstanding
Awards previously granted under the Plan; provided that, to the extent that the
application of any such amendment to an outstanding Award shall have an Adverse
Consequence for the Company and/or a Participant, such amendment shall not apply
unless it is specifically approved by the Committee and consented to by the
Participant.
The Plan shall be effective as of March 22, 1996, subject to stockholder
approval of the amendments effected hereby; provided that any Discretionary
Amendment shall not be subject to stockholder approval.
ARTICLE I
PURPOSE
-------
The purpose of the Plan is to recognize the contributions to the growth,
success, and profitability of the Company and its Subsidiaries provided by key
employees of the Company through the awarding of incentive compensation. The
Plan is designed to (a) increase the interest of the key employees in the
welfare of the Company and its Subsidiaries; (b) furnish an incentive to such
employees to continue their services for the Company and/or its Subsidiaries;
and (c) provide a means by which the Company and its Subsidiaries may attract
able persons to enter their employ.
The Plan provides for incentive payments to certain key employees of the
Company and its Subsidiaries based on the achievement of preestablished
Performance Goals. Incentive Compensation payable pursuant to certain Awards
under the Plan is intended to be deductible by the Company pursuant to the
Section 162(m) Exception.
With respect to Reporting Participants, the Plan and all transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3, to
the extent such Rule is applicable. To the extent that any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void ab initio, to the extent permitted by law and deemed advisable by the
Committee.
ARTICLE II
DEFINITIONS
-----------
For purposes of this Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
"Adverse Consequence" means (i) the loss of qualification of an Award for
special treatment under Rule 16b-3 or the commencement of a new holding period
under such rule; or (ii) the Company's inability to claim the Section 162(m)
Exception with respect to an Award.
"Annual Incentive Pool" means, with respect to any Fiscal Year, the amount,
if any, equal to the percentage of Earnings for the Fiscal Year in excess of the
Corporate Threshold for the Fiscal Year, as specified in accordance with Section
5.1 below.
"Award" means the grant by the Committee to an employee of the Company or
its Subsidiaries of the right to receive Incentive Compensation under the Plan.
<PAGE>
"Award Agreement" means a written agreement between a Participant and the
Company that sets out the terms of the grant of an Award.
"Board" means the Board of Directors of the Company.
"Cause" includes (a) any act of dishonesty or moral turpitude (including,
without limitation, any act involving a felony or fraud or that ceases or
reasonably may be expected to cause substantial injury to the Company); or (b)
the failure of a Participant to perform his or her duties of employment. To the
extent that a Participant's Employment Agreement differs from the Plan with
respect to the meaning of "Cause," if such Employment Agreement has been
approved by the Compensation Committee of the Board, the definition included in
such Employment Agreement shall govern.
"Change of Control" means any of the following: (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of Common Stock of the
surviving corporation immediately after the merger; (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; (iii)
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iv) the cessation of control (by
virtue of their not constituting a majority of directors) of the Board by the
individuals (the "Continuing Directors") who (x) at the effective date of this
Plan were directors or (y) become directors after the effective date of this
Plan and whose election or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then in office
who were directors at the effective date of this Plan or whose election or
nomination for election was previously so approved); (v) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7; or (vi) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of an aggregate of 15% or more of the voting power of the Company's outstanding
voting securities by any person or persons acting as a group (within the meaning
of Rule 13d-5 under the Exchange Act) who beneficially owned less than 10% of
the voting power of the Company's outstanding voting securities on the effective
date of this Plan, or the acquisition of beneficial ownership of an additional
5% of the voting power of the Company's outstanding voting securities by any
person or group who beneficially owned at least 10% of the voting power of the
Company's outstanding voting securities on the effective date of this Plan;
provided, however, that, notwithstanding the foregoing, an acquisition shall not
- -------- -------
constitute a Change of Control hereunder if the acquiror is (v) Alan H.
Goldfield ("Goldfield"), (w) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company and acting in such capacity, (x) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of voting securities of
the Company; (y) a person or group meeting the requirements of clauses (i) and
(ii) of Rule 13d-1(b)(1) under the Exchange Act; or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a majority
of the Continuing Directors; and provided further that no change of control
shall be deemed to have occurred from a transfer of the Company's voting
securities by Goldfield to (v) a member of Goldfield's immediate family (within
the meaning of Rule 16a-1(e) of the Exchange Act) either during Goldfield's
lifetime or by will or the laws of descent and distribution; (w) any trust as to
which Goldfield or a member (or members) of his immediate family is the
beneficiary; (x) any trust as to which Goldfield is the settlor with sole power
to revoke; (y) any entity over which Goldfield has the power, directly or
indirectly, to direct or cause the direction of the management and policies of
the entity, whether through the ownership of voting securities, by contract or
otherwise; or (z) any charitable trust, foundation or corporation under Section
501(c)(3) of the Code that is funded by Goldfield. To the extent that a
Participant's Employment Agreement differs from the Plan with respect to the
meaning of "Change of Control," if such Employment Agreement has been approved
by the Compensation Committee of the Board of Directors, the definition included
in such Employment Agreement shall govern.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee(s) appointed or designated by the Board to
administer the Plan in accordance with Article III.
2
<PAGE>
"Common Stock" means the Common Stock, par value, $.01 per share, of the
Company or, in the event that the outstanding shares of such Common Stock are
hereafter changed into or exchanged for shares of a different stock or security
of the Company or another corporation, such other stock or security.
"Company" means CellStar Corporation, a Delaware corporation.
"Corporate Threshold" means, for any Fiscal Year, the minimum level of
Earnings that must be realized by the Company for the Fiscal Year in order to
establish an Annual Incentive Pool for that Fiscal Year, as determined by the
Committee in accordance with Section 5.2 below.
"Disability" or "Disabled" means that the Participant is qualified for
long-term disability benefits under the Company's disability plan or insurance
policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee. To the extent that a Participant's Employment Agreement
differs from the Plan with respect to the meaning of "Disability" or "Disabled,"
if such Employment Agreement has been approved by the Compensation Committee of
the Board of Directors, the definition included in such Employment Agreement
shall govern.
"Discretionary Amendment" means any amendment to the Plan that does not
require stockholder approval.
"Earnings" means the earnings of the Company before income taxes and
extraordinary items, but after accrual for the expense of Awards under the Plan.
"Employment Agreement" means an agreement, if any, between the Company or
any Subsidiary and a Participant, setting forth the terms and conditions of the
Participant's employment by the Company or such Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock means such value as is
determined by the Committee on the basis of such factors as it deems
appropriate; provided that, if the Common Stock is traded on a national
securities exchange or transactions in the Common Stock are quoted on the NASDAQ
National Market System, such value shall be determined by the Committee on the
basis of the last reported sale price for the Common Stock on the date for which
such determination is relevant as reported on the national securities exchange
or the NASDAQ National Market System, as the case may be. If the Common Stock
is not listed and traded upon a recognized securities exchange or in the NASDAQ
National Market System, the Committee shall make a determination of Fair Market
Value on the basis of the closing bid and asked quotations for such stock on the
date for which such determination is relevant (as reported by a recognized stock
quotation service) or, in the event that there are no bid or asked quotations
for such stock on the date for which such determination is relevant, then on the
basis of the mean between the closing bid and asked quotations on the date
nearest preceding the date for which such determination is relevant for which
such bid and asked quotations were available. In no event shall "Fair Market
Value" be less than the par value of the Common Stock.
"Fiscal Year" means the fiscal year of the Company, which is the 12-month
period beginning on each December 1, and ending on the next November 30.
"Good Reason" means that, without a Participant's written consent, the
Company (a) assigns the Participant duties for which the Participant is not
reasonably equipped by his or her skills and experience, (b) reduces the base
salary of the Participant, (c) requires the Participant to be based anywhere
other than the Company's offices located in the greater Dallas-Fort Worth area,
or (d) terminates benefit or compensation plans or reduces or limits the
Participant's participation therein relative to the participation level of other
employees of similar positions and titles. To the extent that a Participant's
Employment Agreement differs from the Plan with respect to the meaning of "Good
Reason," if such Employment Agreement has been approved by the Compensation
Committee of the Board of Directors, the definition included in such Employment
Agreement shall govern.
3
<PAGE>
"Incentive Compensation" means the amount of performance-based compensation
payable under the Plan for a Fiscal Year to a Participant equal to the
Participant's Allocation for such Participant multiplied by the Annual Incentive
Pool for such Fiscal Year; provided, however, that in no event shall a
Participant's Incentive Compensation for any Fiscal Year exceed $1,000,000.
"Participant" shall mean a key employee of the Company or a Subsidiary
selected by the Committee to participate in the Plan.
"Participant's Allocation" means a Participant's allocable percentage of
the Annual Incentive Pool for any Fiscal Year, as determined by the Committee in
accordance with Section 5.6 below.
"Performance Goals" means the performance measures established by the
Committee for each Participant for any Performance Period in accordance with
Sections 5.2 - 5.4 of the Plan.
"Plan" means this CellStar Corporation Amended and Restated Annual
Incentive Compensation Plan, as amended from time to time.
"Reporting Participant" means a Participant who is subject to the reporting
requirements of Section 16 of the Exchange Act.
"Retirement" means termination of a Participant's employment at or after
the Company's established retirement age, unless otherwise defined in a
particular Award Agreement. To the extent that a Participant's Employment
Agreement differs from the Plan with respect to the meaning of "Retirement," if
such Employment Agreement has been approved by the Compensation Committee of the
Board of Directors, the definition included in such Employment Agreement shall
govern.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as
amended from time to time.
"Section 162(m)" means Section 162(m) of the Code and the regulations
promulgated thereunder from time to time.
"Section 162(m) Exception" means the exception under Section 162(m) for
"qualified performance-based compensation."
"Stock-Based Compensation" means any Options or shares of Common Stock or
Restricted Stock received by a Participant in lieu of cash compensation pursuant
to the terms of the Company's 1993 Amended and Restated Long-Term Compensation
Plan.
"Subsidiary" means (i) any corporation in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing a majority of the total
combined voting power of all classes of stock in one of the other corporations
in the chain, (ii) any limited partnership, if the Company or any corporation
described in item (i) above owns a majority of the general partnership interest
and a majority of the limited partnership interests entitled to vote on the
removal and replacement of the general partner, and (iii) any partnership, if
the partners thereof are composed only of the Company, any corporation listed in
item (i) above or any limited partnership listed in item (ii) above.
"Subsidiaries" means more than one of any such corporations, limited
partnerships or partnerships.
"Target Allocation" means, for a Participant for any Fiscal Year, his or
her maximum percentage share of the Annual Incentive Pool for achievement of his
or her Performance Goals for the Fiscal Year, determined by the Committee in
accordance with Section 5.5 below.
4
<PAGE>
ARTICLE III
ADMINISTRATION
--------------
3.1 Committee's Authority. The Plan shall be administered by a committee
---------------------
appointed by the Board, consisting of at least two members of the Board;
provided that (i) with respect to any Award that is granted to a Reporting
Participant, such committee shall consist of at least such number of directors
as are required from time to time by Rule 16b-3, and each such committee member
shall qualify as a "disinterested person" under Rule 16b-3; and (ii) with
respect to any Award that is also intended to satisfy the requirements of the
Section 162(m) Exception, such committee shall consist of at least such number
of directors as are required from time to time to satisfy the Section 162(m)
Exception, and each such committee member shall qualify as an "outside director"
within the meaning of Section 162(m). Any member of the Committee may be
removed at any time, with or without cause, by resolution of the Board, and any
vacancy occurring in the membership of the Committee may be filled by
appointment by the Board. The Committee shall have exclusive authority to (i)
designate the key employees of the Company and its Subsidiaries who shall
participate in the Plan; (ii) establish Performance Goals for each Participant
and certify the extent of their achievement; (iii) establish and certify the
achievement of the Corporate Threshold; (iv) determine each Participant's Target
Allocation; and (v) determine all other terms and conditions of Awards and Award
Agreements under the Plan.
With respect to restrictions ("mandated restrictions") in the Plan that are
based on the requirements of Rule 16b-3, the Section 162(m) Exception, the rules
of any exchange upon which the Company's securities are listed, or any other
applicable law, rule or restriction (collectively, "applicable law"), to the
extent that any such mandated restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.
3.2 Committee Action. A majority of the Committee shall constitute a
----------------
quorum, and the act of a majority of the members of the Committee present at a
meeting at which a quorum is present shall be the act of the Committee.
3.3 Committee's Powers. The Committee shall have the power, in its
------------------
discretion, to take such actions as may be necessary to carry out the provisions
and purposes of the Plan and shall have the authority to control and manage the
operation and administration of the Plan. In order to effectuate the purposes
of the Plan, the Committee shall have the discretionary power and authority to
construe and interpret the Plan, to supply any omissions therein, to reconcile
and correct any errors or inconsistencies, to decide any questions in the
administration and application of the Plan, and to make equitable adjustments
for any mistakes or errors made in the administration of the Plan. All such
actions or determinations made by the Committee, and the application of rules
and regulations to a particular case or issue by the Committee, in good faith,
shall not be subject to review by anyone, but shall be final, binding and
conclusive on all persons ever interested hereunder.
In construing the Plan and in exercising its power under provisions
requiring the Committee's approval, the Committee shall attempt to ascertain the
purpose of the provisions in question and when the purpose is known or
reasonably ascertainable, the purpose shall be given effect to the extent
feasible. Likewise, the Committee is authorized to determine all questions with
respect to the individual rights of all Participants under this Plan, including,
but not limited to, all issues with respect to eligibility. The Committee shall
have all powers necessary or appropriate to accomplish its duties under this
Plan including, but not limited to, the power and duty to:
(a) maintain complete and accurate records of all plan transactions,
contributions, and distributions. The Committee shall maintain the books of
accounts, records, and other data in the manner necessary for proper
administration of the Plan;
(b) adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan, provided the rules and
regulations are not inconsistent with the terms of the Plan as set out
herein. All rules and decisions of the Committee shall be uniformly and
consistently applied to all Participants in similar circumstances;
(c) enforce the terms of the Plan and the rules and regulations it
adopts;
5
<PAGE>
(d) review claims and render decisions on claims for benefits under
the Plan;
(e) furnish the Company or the Participants, upon request, with
information that the Company or the Participants may require for tax or
other purposes;
(f) employ agents, attorneys, accountants or other persons (who also
may be employed by or represent the Company) for such purposes as the
Committee considers necessary or desirable in connection with its duties
hereunder; and
(g) perform any and all other acts necessary or appropriate for the
proper management and administration of the Plan.
ARTICLE IV
ELIGIBILITY
-----------
Any key employee of the Company or any of its Subsidiaries whose judgment,
initiative and efforts contribute, or may be expected to contribute, in the
opinion of the Committee, to the successful performance of the Company is
eligible to be selected as a Participant.
ARTICLE V
DETERMINATION OF GOALS AND INCENTIVE COMPENSATION
-------------------------------------------------
5.1 Designation of Annual Incentive Pool. No later than the 90th day of
------------------------------------
each Fiscal Year, the Committee shall set forth in writing the Committee's
determinations regarding the establishment of an Annual Incentive Pool for such
Fiscal Year.
5.2 Establishment of Performance Goals. At any time before the 90th day of
----------------------------------
each Fiscal Year, the Chairman of the Board may deliver to the Committee his
recommendations for that Fiscal Year regarding designation of Participants and
establishment of Performance Goals for individual Participants.
No later than the 90th day of the Fiscal Year, the Committee shall set
forth in writing (i) the key employees designated as Participants for the Fiscal
Year, (ii) the Corporate Threshold for the Fiscal Year, (iii) the individual
Performance Goals established for each Participant, (iv) the Target Allocation
for each Participant, and (v) the Committee's recommendation for the Annual
Incentive Pool. The Corporate Threshold with respect to any Fiscal Year shall
not be less than 105% of the Earnings for the immediately preceding Fiscal Year.
5.3 Categories of Performance Goals. The individual Performance Goals
-------------------------------
established by the Committee for any Fiscal Year may differ among Participants.
For each Participant, his or her individual Performance Goals shall be based on
criteria in one or more of the following categories: (a) performance of the
Company as a whole, performance of a segment of the Company's business, and (c)
individual performance. In establishing Performance Goals for a Participant,
the Committee shall determine, in its sole discretion, the categories and
criteria to be used in measuring his or her actual performance and the
percentage allocation for each of the criteria (the sum of which shall equal
100%).
5.4 Performance Criteria for any Fiscal Year. Performance criteria for
----------------------------------------
the Company shall relate to the achievement of predetermined financial
objectives for the Company and its Subsidiaries on a consolidated basis.
Performance criteria for a segment of the Company's business shall relate to the
achievement of financial and operating objectives of the segment for which the
Participant is accountable. Individual performance criteria shall relate to the
Participant's overall performance, taking into account, among other measures of
performance, the attainment of individual goals and objectives.
6
<PAGE>
5.5 Target Allocation. No later than the 90th day of the Fiscal Year, the
-----------------
Committee shall determine each Participant's Target Allocation for the Fiscal
Year, which shall be his or her base salary for the Fiscal Year as a percent of
the sum of the base salaries of all Participants for the Fiscal Year.
5.6 Certification. As soon as practicable after the end of each Fiscal
-------------
Year, the Chairman shall report to the Committee regarding the extent to which
each Participant achieved his or her Performance Goals for the Fiscal Year. As
soon as practicable following verification by the Company's independent public
accountants of the Company's financial results for any Fiscal Year and receipt
of the report of the Chairman of the Board regarding the Participants' actual
performance against the Performance Goal(s) for the Fiscal Year, the Committee
shall certify: (i) whether or not the Company's Earnings exceeded the Corporate
Threshold, (ii) the extent to which each Participant achieved his or her
Performance Goal(s) for the Fiscal Year, and (iii) the calculation of the Annual
Incentive Pool, (iv) the determination by the Committee of the Participant's
Allocation for each Participant and (v) the amount of Incentive Compensation
payable to each Participant under the Plan for the Fiscal Year.
The Committee shall determine each Participant's Allocation by multiplying
his or her Target Allocation by the percent determined by the Committee to
represent the extent to which such Participant achieved his or her individual
Performance Goals for the Fiscal Year. The Committee shall then determine each
Participant's Incentive Compensation by multiplying his or her Participant's
Allocation by the amount in the Annual Incentive Pool; provided that, in no
event shall a Participant's Incentive Compensation during any Fiscal Year exceed
$1,000,000. Further, after the Committee has determined a Participant's
Allocation, the Committee, in its discretion, may reduce any such Participant's
Allocation pursuant to Section 5.7 below.
5.7 Committee Discretion. The Committee may, in its discretion, reduce or
--------------------
eliminate a Participant's Target Allocation based upon such objective or
subjective criteria as it deems appropriate or to take into account
circumstances that could not have been anticipated when it established the
Performance Goals.
The Committee shall have the sole discretion and authority to change any
Participant's Performance Goals or criteria for any Fiscal Year to the extent it
deems such changes advisable in light of extraordinary circumstances not
foreseen at the time of grant of an Award; provided that, the Committee may not
retroactively change Performance Goal(s) or criteria relating to any Award
intended to satisfy the Section 162(m) Exception, except (i) in the event of
changes in accounting practices or, (ii) to the extent consistent with Code
Section 162(m) and its regulations, circumstances that could not have been
anticipated when it established such Performance Goals and criteria.
5.8 Nonallocation. The Committee shall not be obligated to apply the
-------------
entire Annual Incentive Pool for any Fiscal Year to Participants' Incentive
Compensation. Any amount not so applied for a Fiscal Year shall lapse and remain
part of the general assets of the Company; no portion of any such amount shall
be carried over to an Annual Incentive Pool for any subsequent Fiscal Year.
ARTICLE VI
PAYMENT OF INCENTIVE COMPENSATION
---------------------------------
6.1 Form and Time of Payment. Subject to any forfeiture provisions set
------------------------
forth in the Plan or in any Award Agreement, a Participant's Incentive
Compensation for each Fiscal Year shall be paid in a cash lump sum as soon as
practicable following certification by the Committee in accordance with Section
5.4 above, unless the Participant has elected to defer receipt of all or a
portion of the Participant's Incentive Compensation in accordance with Section
6.2 below; provided that, in the sole discretion of the Committee, such payment
may be made in the form of Common Stock, nonqualified stock options, or
restricted stock granted under, and in accordance with, the terms of the
Company's 1993 Amended and Restated Long-Term Incentive Compensation Plan. Any
Stock-Based Compensation that is payed in lieu of cash shall be of an equivalent
value to the foregone cash compensation (taking into account, among other
factors, the term of an option and its exercise price, any vesting requirements
with respect to options or shares of Restricted Stock, transferability rights
and all other relevant factors), as verified by the Company's independent public
accountants (and in accordance with the Black Scholes method of valuation when
applicable). The exercise price for any options granted in lieu of cash
Incentive Compensati on awarded hereunder shall be no less than
7
<PAGE>
the Fair Market Value per share of the Company's Common Stock on the date of
certification by the Compensation Committee of such Incentive Compensation.
6.2 Participant Deferrals.
---------------------
(a) General. For each Fiscal Year, a Participant may elect,
prior to the first day of such Fiscal Year (in accordance with
procedures and rules established by the Committee), to defer receipt
of, and contribute to his or her Deferred Account (herein so called)
established under this Plan, any part or all of his Incentive
Compensation. Each election made under this Section 6.2(a) shall be
made in writing on a form prescribed by and filed with the Committee,
and shall be irrevocable for the Fiscal Year for which it is made.
(b) Deferred Accounts. The Company shall establish and
maintain on its books a Deferred Account for each Participant who
elects to defer the receipt of any amount pursuant to this Section
6.2(b). Such Deferred Account shall be designated by the name of the
Participant for whom it is established and the Fiscal Year to which it
relates. The amount attributable to any Incentive Compensation elected
to be deferred shall be credited to such Deferred Account. A
Participant shall have a separate Deferred Account for each Fiscal
Year for which he makes such an election. Each Deferred Account shall
reflect the credits and charges allocable thereto in accordance with
the Plan. The Committee shall maintain, or cause to be maintained,
records which will adequately disclose at all times the state of each
separate Deferred Account hereunder. The books, forms and methods of
accounting shall be entirely subject to the supervision of the
Committee.
(c) Investment of Deferred Accounts. Each Deferred Account
shall accrue interest from the date the Deferred Account is
established until the date it is paid under Section 6.2(e) below, at a
rate which is equal to the Company's cost of funds on the date the
Incentive Compensation is certified by the Committee.
(d) Time of Payment. A Participant shall be entitled to
receive the entire amount in his or her Deferred Account upon the
earliest to occur of (i) the January 2 designated by the Participant
on his or her deferral election, which shall be at least two (2) years
but no more than ten (10) years after the end of the Fiscal Year to
which such Deferred Account relates, (ii) termination of employment
for any reason, including death, or (iii) termination of the Plan.
Such payment shall begin within 60 days after the date which causes
payment to become due.
(e) Form of Payment. A Participant's Deferred Account shall be
paid in one cash payment. The Committee shall value such Deferred
Account as of the date which causes payment to become due.
(f) Amounts Nonforfeitable. When payment of all or a portion
of a Participant's Incentive Compensation is deferred, the amount
deferred is nonforfeitable. Deferred Accounts are unfunded and
constitute general obligations of the Company.
ARTICLE VII
TERMINATION OF EMPLOYMENT PRIOR TO CERTIFICATION
------------------------------------------------
7.1 Pro Rata Payment for Certain Terminations. Unless otherwise permitted
-----------------------------------------
by the Committee in its sole discretion, if a Participant's employment with the
Company and all of its Subsidiaries terminates before the end of a Fiscal Year
for one of the reasons set forth in this Section 7.1, the Committee shall
calculate such Participant's Incentive Compensation as if he or she remained
employed for the entire Fiscal Year, and such Participant shall be entitled to
receive a pro rate portion of such Incentive Compensation based on the portion
of the Fiscal Year such Participant was employed by the Company or a Subsidiary.
The reasons for termination subject to this Section 7.1 are (i) within one year
following a Change of Control, the Company terminates a Participant's employment
for any reason (or for nor reason), (ii) the Company terminates a Participant's
employment other than for Cause, (iii) a
8
<PAGE>
Participant voluntarily terminates employment with Good Reason, (iv) the
Retirement of the Participant, (v) the Participant dies, or (vi) the Participant
becomes Disabled.
7.2 Forfeiture Upon Other Terminations. If, prior to the end of a Fiscal
----------------------------------
Year, a Participant's employment with the Company and all of its Subsidiaries
terminates for any reason other than those described in Section 7.1 above, the
Participant will immediately forfeit any right to receive any Incentive
Compensation hereunder for such Fiscal Year.
ARTICLE VIII
DEATH OR DISABILITY
-------------------
8.1 Payment to Beneficiary. Each Participant shall designate, in a manner
----------------------
prescribed by the Committee, a beneficiary to receive payments due under the
Plan in the event of his or her death. If a Participant dies prior to the date
of payment of his or her Incentive Compensation for a Fiscal Year, such
Incentive Compensation shall be paid to the Participant's named beneficiary, or
if no properly designated beneficiary survives the Participant, such
Participant's Incentive Compensation shall be paid to the Participant's estate
or personal representative.
8.2 Disability. If a guardian or conservator has been appointed for a
----------
Disabled Participant, the Committee shall pay the Participant's Incentive
Compensation to such guardian or conservator.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
9.1 Effect of the Plan. Neither the adoption of this Plan nor any action
------------------
of the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
9.2 Non-Assignability. A Participant may not alienate, assign, pledge,
-----------------
encumber, transfer, sell or otherwise dispose of any rights or benefits awarded
hereunder prior to the actual receipt thereof; and any attempt to alienate,
assign, pledge, sell, transfer or assign prior to such receipt, or any levy,
attachment, execution or similar process upon any such rights or benefits shall
be null and void.
9.3 No Right Continue in Employment. Nothing in the Plan confers upon any
-------------------------------
employee the right to continue in the employ of the Company or any Subsidiary,
or interferes with or restricts in any way the right of the Company and its
Subsidiaries to discharge any employee at any time (subject to any contract
rights of such employee).
9.4 Indemnification of Committee. No member of the Committee, nor any
----------------------------
officer or employee of the Company acting on behalf of the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Committee, and
each officer or employee of the Company acting on its behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action, determination or interpretation.
9.5 No Plan Funding. The Plan shall at all times be entirely unfunded and
---------------
no provision shall at any time be made with respect to segregating assets of the
Company for payment of any amounts hereunder. No Participant, beneficiary, or
other person shall have any interest in any particular assets of the Company by
reason of the right to receive incentive compensation under the Plan.
Participants and beneficiaries shall have only the rights of a general unsecured
creditor of the Company.
9.6 Governing Law. This Plan shall be construed in accordance with the
-------------
laws of the State of Texas and the rights and obligations created hereby shall
be governed by the laws of the State of Texas.
9
<PAGE>
9.7 Amendment or Discontinuance. The Plan may be amended or discontinued
---------------------------
by the Committee, without the approval of the stockholders; provided that no
amendment shall be made without approval of the stockholders of the Company if
such approval is required under the Code, Rule 16b-3, the requirements of any
exchange upon which the Company's securities are listed, or any other applicable
law. In addition, no termination or amendment of the Plan may, without the
consent of the Participant to whom any Award has theretofore been granted,
adversely affect the rights of such Participant with respect to such Award.
9.8 Binding Effect. This Plan shall be binding upon and inure to the
--------------
benefit of the Company, its successors and assigns, and the Participants, and
their heirs assigns and personal representatives.
9.9 Construction of Plan. The captions used in this Plan are for the
--------------------
convenience only and shall not be construed in interpreting the Plan. Whenever
the context so requires, the masculine shall include the feminine and neuter,
and the singular shall also include the plural, and conversely.
9.12 Integrated Plan. This Plan constitutes the final and complete
---------------
expression of agreement among the parties hereto with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of March 22, 1996, by its President and Secretary pursuant to prior action
taken by the Board.
CELLSTAR CORPORATION
By: /s/ Terry S. Parker
--------------------
President
Attest:
/s/ Elaine Flud Rodriguez
- -------------------------
Secretary
10
<PAGE>
EXHIBIT 10.44
SUPPLY AND SERVICE AGREEMENT
This Supply and Service Agreement (this "Agreement") is entered into, as of
this 26 day of November, 1996 and effective as of the closing of the below-
----
defined Asset Purchase Agreement ("Effective Date") by and between CellStar,
Ltd., a Texas limited partnership, ("CellStar") and MCI Telecommunications
Corporation, a Delaware corporation, ("MCI").
WHEREAS, MCI has simultaneously herewith purchased certain assets used by
CellStar in connection with the operation of its retail business involving the
sale and activation of wireless communications equipment at kiosks located
inside Sam's Club locations throughout the United States. (Such kiosks located
inside Sam's Clubs throughout the United States which may hereafter be owned or
operated by MCI are hereinafter referred to as the "Communication Centers"); and
WHEREAS, MCI has simultaneously herewith entered into an Interim Services
Agreement pursuant to which CellStar will be providing to MCI certain
operational and inventory management services ("Interim Services Agreement");
and
WHEREAS, CellStar is willing to provide to MCI the benefits of its supply
arrangements with manufacturers of the products sold in the Communication
Centers, as well as CellStar's distribution process for the supply of such
products to the Communication Centers; and
WHEREAS, MCI wishes to obtain a source of supply for accessory products for
Wireless Handsets (as defined below) listed in Exhibit A (the "Accessory
---------
Products") and cellular telephones ("Cellular Telephones"), Personal
Communications Services ("PCS") handsets and two-way radios listed in Exhibit B
---------
(collectively referred to herein as the "Wireless Handsets") for the
Communication Centers and contemplates repetitive purchases of such products
from CellStar (the Accessory Products and Wireless Handsets purchased by MCI
from CellStar hereunder being collectively referred to herein as the
"Products"); and
WHEREAS, MCI wishes to retain the services of CellStar for the receiving,
warehousing, assembly (if requested), fulfillment and distribution to the
Communication Centers on behalf of MCI of products sourced by MCI from vendors
other than CellStar (including, but not limited to wireless handsets, pagers,
pre-paid calling cards and movie discount passes) as well as promotional
literature, packaging materials and such other items as may be requested by MCI
from time to time (such products, promotional literature, packaging materials
and other items not purchased by MCI from CellStar hereunder hereinafter
collectively referred to as the "Inventory Items"); and
WHEREAS, MCI wishes to obtain the services of CellStar for packaging (if
requested), programming (if requested), returns processing and other customized
fulfillment services; and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions herein contained, and other good and valuable consideration, the
receipt and sufficiency of which
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT BY "[REDACTED]".
<PAGE>
is hereby acknowledged, MCI and CellStar agree as follows:
1. SALE AND PURCHASE OF ACCESSORY PRODUCTS.
(a) MCI agrees to purchase and CellStar agrees to sell Accessory
Products under the terms and conditions set forth in this Agreement. Subject to
(b) and (c) below, MCI agrees that, during the term of this Agreement, it shall
purchase exclusively from CellStar all of its requirements for Accessory
Products for sale in the Communication Centers. CellStar shall not substitute
any Accessory Product without the express written consent of MCI. Additional
accessory products which are not listed on Exhibit A as of the date hereof may
---------
be added to this Agreement and the list set forth on Exhibit A upon written
---------
agreement of the parties. In such an event, the parties will amend this
Agreement accordingly and include a revised Exhibit A.
---------
(b) In the event that CellStar materially breaches the Interim
Services Agreement between the parties as such material breaches are defined in
the Interim Services Agreement, MCI may, at its option, either terminate (i)
this Agreement in its entirety; or (ii) MCI's exclusive obligation hereunder to
purchase all Accessory Products and associated distribution services associated
with such Accessory Products from CellStar.
(c) In addition, the requirement of MCI to purchase a specific
Accessory Product hereunder shall terminate if (i) MCI has failed to approve
such non-OEM Accessory Product after the technical and quality evaluation set
forth herein in Section 16; and (ii) CellStar has been unable to supply an
alternative product that is acceptable to MCI within the time period set forth
in Section 16. In accordance with the provisions of Section 16 hereof, the
obligation of MCI to purchase all of its requirements of such particular non-OEM
Accessory Product hereunder will be reinstated automatically when CellStar has
available and can provide such a non-OEM Accessory Product that conforms to
MCI's commercially reasonable technical and quality specifications. In such
case, MCI will be permitted to satisfy any outstanding purchase commitments that
it has made to any other vendors who have agreed to provide such a non-OEM
Accessory Product that conforms to MCI's technical and quality specifications,
which commitments shall not exceed one hundred and twenty (120) days from the
date MCI's requirement to purchase such Accessory Products from CellStar
pursuant to this subsection 1(c) terminates.
(d) For purposes of this Agreement, the term "OEM Accessory Products"
shall refer to Wireless Handset accessory products manufactured for, by, or on
behalf of, the original equipment manufacturer.
2. SALE AND PURCHASE OF WIRELESS HANDSETS. MCI agrees to purchase and
CellStar agrees to sell the Wireless Handsets listed on Exhibit B attached
---------
hereto under the terms and conditions set forth in this Agreement. It is
understood that MCI has the right but not the obligation to purchase all or a
portion of its requirements for Wireless Handsets for sale in the Communication
Centers from CellStar. CellStar shall not substitute any Wireless Handset
without the express written consent of MCI. Additional wireless handsets which
are not listed on Exhibit B as of the
---------
2
<PAGE>
date hereof may be added to this Agreement and the list set forth on Exhibit B
---------
upon written agreement of the parties. In such an event, the parties will amend
this Agreement accordingly and include a revised Exhibit B.
---------
3. WAREHOUSE, DISTRIBUTION AND FULFILLMENT SERVICES.
(a) CellStar will provide to MCI all warehouse, distribution and
fulfillment services required by MCI in connection with MCI's sale in the
Communication Centers of (i) all Products (except for Accessory Products and
associated distribution services which are deleted from the list of Accessory
Products and Services pursuant to Section 1(b) above); and (ii) all wireless
handsets purchased by MCI from third parties.
(b) CellStar will provide to MCI warehouse, distribution and
fulfillment services required by MCI in connection with the sale by MCI in the
Communication Centers of certain Inventory Items, including all wireless
handsets purchased by MCI from third parties.
(c) The services described in (a) and (b) above shall include but are
not limited to warehousing, assembly (if requested), programming (if requested),
packaging (if requested), shipping, insuring (as agreed below), reporting, and
returns processing (if requested) of such Products, Inventory Items, and
wireless handsets purchased by MCI from third parties, to the Communication
Centers as described in Exhibit C (the "Services") .
---------
(d) Additional services which are not listed on Exhibit C as of the
---------
date hereof may be added to this Agreement and the list set forth in Exhibit C
---------
by written agreement of the parties and only if CellStar is able to provide such
additional services at a Competitive Market Price (as such term is defined in
Section 4(j) hereof). In such an event, the parties will amend this Agreement
accordingly and include a revised Exhibit C.
---------
4. PRICING AND PAYMENT TERMS, AND RIGHT OF OFFSET.
(a) CellStar's prices to MCI for OEM Accessory Products purchased
hereunder shall initially be as set forth on Exhibit A. Those stated prices are
---------
and such Product Prices for OEM Accessory Products thereafter shall be in an
amount equal to the manufacturer's invoice price less any pro-rata manufacturer
discounts, special incentives and similar rebates to which MCI would otherwise
be entitled if MCI were purchasing such products directly from the manufacturer
(but specifically excluding Co-op and MDF, as defined in Sections 9 and 10
respectively, allowances or credits for which shall be handled in accordance
with Sections 9 and 10 hereof respectively). CellStar shall provide standard
private label packaging of such OEM Accessory Products in accordance with
reasonable instructions from MCI and agreed upon by CellStar and the
manufacturer at no additional cost. Should MCI choose not to have CellStar
perform private label packaging of OEM Accessory Products, prices of such OEM
Accessory Products shall be determined using the formula set forth in subsection
4(b) below.
3
<PAGE>
(b) CellStar's prices to MCI for non-OEM Accessory Products purchased
hereunder shall initially be as set forth on Exhibit A. Those stated prices are
---------
and such Product prices for non-OEM Accessory Products thereafter shall be an
amount equal to [REDACTED]. CellStar shall provide standard private label
packaging of such non-OEM Accessory Products in accordance with reasonable
instructions from MCI and agreed upon by CellStar at no additional cost.
(c) Prices for Wireless Handsets purchased hereunder shall initially
be as set forth on Exhibit B. Those stated prices are and such Product prices
---------
for Wireless Handsets thereafter shall be an amount equal to [REDACTED].
(d) Unless otherwise stated herein, actual freight and insurance
associated with each shipment from CellStar's warehouse to the Communication
Centers shall be billed to and payable by MCI as separate line items on each
invoice. CellStar shall make commercially reasonable efforts to insure that all
such freight and insurance charges paid for by MCI under this Agreement are the
lowest in the market. CellStar and MCI shall work together to obtain such
favorable rates.
(e) Prices for Accessory Products and Wireless Handsets calculated as
set forth in subsections (a), (b) and (c) above are hereinafter collectively
referred to as the "Product Prices."
(f) [REDACTED]
(g) [REDACTED]
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
4
<PAGE>
(h) MCI shall pay CellStar for the Services at the rates established
on Exhibit C (the "Service Fees"). Such Service Fees (including the
---------
$0.88 set forth below) shall remain fixed until July 1, 1997 following which
date CellStar may adjust its Service Fees upon thirty (30) days prior written
notice to MCI subject to the procedures and limitations set forth in Section
4(j) below. Prior to July 1, 1997, CellStar reserves the right to change such
Service Fees if MCI (i) requests that CellStar distribute wireless handsets
purchased by MCI from third parties; or (ii) sources its accessories product
program in its entirety to another vendor in accordance with the terms of
Sections 1(b) or 4(j) herein and requests CellStar to distribute such
accessories; provided that any such change in Service Fees requested by CellStar
as a result of (i) above shall be determined by adding $0.88 for each wireless
handset purchased by MCI from such third parties and any change as a result of
(ii) above shall be subject to the procedures and limitations set forth in
Section 4(j) below.
(i) Each delivery of Products and Inventory Items to the Communication
Centers will be separately invoiced, along with related Service Fees for
assembly and order processing. All Product Prices and freight and insurance,
including any expediting fees, shall be included as separate line items on each
invoice and payable by MCI unless otherwise stated herein. Such invoices shall
include, but not be limited to: (i) purchase order number; (ii) SKU or item
numbers shipped; (iii)
5
<PAGE>
quantity shipped and billed; (iv) "ship to" address; (v) Service Fees incurred;
(vi) Services performed; (vii) net invoice amount; and (viii) any other
information or special instructions reasonably requested by MCI. CellStar shall
provide reasonable supporting documentation for each invoice as MCI may
reasonably request including, but not limited to packing slips. CellStar will
also issue invoices from time to time for returns processing credits and/or
fees, credits for penalties, credits for MDF, credits for MCI's twenty percent
(20%) share of 800# orders as described in Exhibit C hereof, and other Service
---------
Fees for Services rendered which are not otherwise invoiced with each delivery.
Co-op reimbursements will be handled in accordance with Section 9 hereof. Such
invoices or credit statements shall include information reasonably requested by
MCI. MCI shall pay all invoiced amounts within thirty (30) days after the date
of invoice.
(j) [REDACTED]
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
6
<PAGE>
(k) CellStar shall provide to MCI a credit against payments owed under
this Agreement for any amounts finally determined to be owed by National Auto or
CellStar under Sections 3.6 and 3.7 of the Asset Purchase Agreement.
5. PERFORMANCE STANDARDS.
(a) CellStar warrants that the Services provided hereunder shall be
performed in a professional and workmanlike manner in accordance with the
deadlines and specifications set forth herein or as reasonably requested by MCI
from time to time.
(b) Notwithstanding whether or not CellStar has had an opportunity to
inspect the Inventory Items, CellStar shall be responsible for all security and
safety of the premises used to perform activities under this Agreement, and
shall be responsible for any loss or damage to Inventory Items while in
CellStar's possession or on CellStar's premises in accordance with Section 11.
CellStar shall make best efforts to identify and eliminate any pattern of
shrinkage of Inventory Items. In addition, CellStar shall immediately correct
any deficiencies it identifies in its processes that are contributing to such
shrinkage. CellStar shall maintain a log for all significant problem
resolutions and shall provide problem trending reporting.
(c) CellStar shall be responsible for establishing a comprehensive
problem escalation, coordination and response procedure to respond to systems
failures, or any developments or problems that impact the order processing and
fulfillment activities described in this Agreement. CellStar shall establish
eight (8) hour per day, five (5) day per week notification procedures to ensure
that appropriate MCI personnel are notified promptly following CellStar's
determination of a significant problem or possible problem. In addition,
CellStar will provide an after hours contact person for MCI who will be
available to MCI twenty-four (24) hours a day, seven (7) days a week. Such
person shall be capable of implementing problem resolution plans that are
mutually agreed upon by MCI and CellStar.
6. FORECASTS.
(a) MCI's Inventory Manager shall provide CellStar on a monthly basis,
within ten (10) days prior to the end of each calendar month, a continuous usage
forecast for the next three
7
<PAGE>
(3) calendar months to assist CellStar in maintaining an orderly production flow
for the purpose of MCI's delivery requirements for both Products and Services.
MCI shall indicate the Product model number or SKU, projected purchase volume by
units, and specific Services requested for each calendar month included in the
forecast. The first calendar month of the three month forecast shall constitute
a firm purchase commitment by MCI for the Products and Services set forth
therein. If there is a shortage of such forecasted Products caused solely by
the manufacturer, CellStar shall allocate products received from the
manufacturer among its customers who have firm purchase commitments on a prorata
basis in accordance with the volume of their respective commitments. MCI shall
draw down on such firm purchase commitment by placing weekly or bi-weekly
Purchase Orders (as defined in Section 7(a) below) against such forecast. MCI
shall have three (3) months to make up any shortfall. If after such three (3)
month period MCI has not satisfied such shortfall, then MCI shall pay to
CellStar the forecasted price of the Products not yet purchased by MCI and
CellStar shall ship such Products to MCI in accordance with MCI's instructions.
(b) If the total of Products included in Purchase Orders for shipment
submitted by MCI in any calendar month exceeds the forecasted amount (such
orders hereinafter referred to as "Out of Forecast Orders"), CellStar agrees
that it shall utilize a "first order in-first shipment out" method for
allocating inventory among customers. CellStar shall make commercially
reasonable efforts to ship such materials by MCI's requested deadline and shall
not be assessed any penalty for failure to meet such deadline. MCI shall
approve any rush charges before they are incurred.
7. PURCHASE ORDERS.
(a) MCI shall submit purchase orders for Products ("Purchase Orders")
to CellStar at 1730 Briercroft Court, Carrollton, Texas 75006 via facsimile or
other mutually agreed upon methods. Each Purchase Order shall be submitted by
MCI and received by CellStar before 1 p.m. (Dallas time) on Monday of each week
(Tuesday when Monday is a holiday) (the "Order Deadline"). Any Purchase Order
received by the Order Deadline shall be shipped by CellStar in order to be
delivered to the Sam's Club address where the particular Communication Center is
located no later than Friday of the same week in which the Purchase Order was
received. In the event CellStar shall fail to timely deliver any order which
was received by CellStar by the Order Deadline, CellStar shall credit to MCI on
future purchases an amount equal to the lesser of ten percent (10%) of the
insured value of Products and Inventory Items ordered for that shipment or fifty
percent (50%) of the insured value of any missing or damaged materials;
provided, however, that CellStar shall not be required to issue such credit to
MCI in the event CellStar's failure to timely and accurately deliver was due to
(i) a Force Majeure event as defined in Section 24 hereof; (ii) the Purchase
Order was changed after the order entry process has been performed; (iii) the
order was an Out of Forecast Order described in Section 6(b) above; (iv) the
damage to or discrepancy in an order was caused by the shipping carrier; (v) the
Inventory Items to be delivered were not available to CellStar in a timely
manner for any reason beyond CellStar's control; (vi) such failure is due solely
to the default of any carrier or supplier; or (vii) such failure is due solely
to the acts or omissions of Sam's Club, MCI or their agents or employees.
CellStar agrees to use commercially reasonable efforts to notify MCI of any
Purchase Orders it receives which request shipment to locations other than the
Sam's Club
8
<PAGE>
locations at which MCI owns kiosks or which are unusual orders due to size or
product mix. CellStar agrees to cooperate with MCI in immediately halting the
shipment of any such orders upon notice from MCI.
(b) All Purchase Orders shall be only upon the terms and conditions of
this Agreement. The only effect of any terms and conditions in MCI's Purchase
Orders shall be to request the time and place of delivery or the number and type
of units to be delivered, but they shall not change, alter or add to the terms
and conditions of this Agreement in any other way. CellStar's invoice shall
also not change the terms and conditions of this Agreement.
(c) In order the facilitate transactions under this Agreement, the
parties may electronically transmit and receive data in agreed formats in
substitution for conventional paper based documents as provided in an Electronic
Data Interchange Trading Partner Agreement to be mutually agreed upon by the
parties.
8. Stock Balancing. [REDACTED] MCI shall be responsible for the cost of
freight and insurance for such returned Accessory Products. MCI will include a
return authorization received from CellStar with any such returned shipment.
[REDACTED]
9. [REDACTED]
10. [REDACTED]
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
9
<PAGE>
11. DELIVERY, RISK OF LOSS AND TITLE.
(a) Unless otherwise mutually agreed upon in writing by the parties,
all deliveries of Products and Inventory Items hereunder are FOB the Sam's Club
location designated on the . Unless otherwise agreed to herein, actual freight
and insurance associated with each shipment shall be billed to and payable by
MCI as separate line items on each invoice. CellStar reserves the right to make
deliveries of any per kiosk shipment in installments; provided, however, that
any additional costs incurred by CellStar as a result of such installment
shipments shall be borne by CellStar.
(b) Title to Products and risk of loss or damage to the Products
shall pass to MCI upon CellStar's delivery to and MCI's acceptance at the Sam's
Club location. Such acceptance by MCI shall be deemed to have occurred when the
receipt of such goods is acknowledged by MCI or by Sam's Club acting on behalf
of MCI. MCI hereby grants to CellStar a purchase money security interest in
Products delivered to MCI and the proceeds thereof now existing or hereafter
arising out of MCI's sale or other disposition of the Products. MCI agrees to
cooperate in whatever manner necessary to assist CellStar in perfecting and
recording such purchase money security interest upon CellStar's request.
(c) Title to Inventory Items shall at all times remain with MCI;
provided, however, that CellStar shall be responsible for any loss or damage to
Inventory Items upon delivery and acceptance by CellStar at CellStar's
warehouse; and provided, further, however, that CellStar shall not be
responsible for loss or damage to fulfillment, collateral and promotional
materials included in the list of Inventory Items in an amount up to five
percent (5%) of the total value of such fulfillment, collateral and promotional
materials received by CellStar during the calendar quarter in which such
shrinkage occurred. Such acceptance by CellStar shall be deemed to have occurred
when the receipt of such goods is acknowledged by CellStar. CellStar shall use
best efforts for the safekeeping and safe handling of all Inventory Items
provided to CellStar pursuant to this Agreement and shall insure the full
replacement value of the Inventory Items located in its warehouse at any time.
10
<PAGE>
12. INSPECTION.
(a) MCI must notify CellStar, in writing, within seventy-two (72)
hours of receipt of shipment of Products or Inventory Items of (i) any
shortages, discrepancies or freight damage claims existing between the items
charged to MCI on any packing slip and the goods actually received by MCI in the
corresponding shipment; or (ii) any damages to the corresponding goods. CellStar
shall promptly correct such shortage, discrepancy, or damage at no charge to MCI
within one (1) business day following notice from MCI if CellStar has goods in
stock in its warehouse. If CellStar does not have such goods in stock in its
warehouse, CellStar shall make best reasonable efforts to correct such shortage,
discrepancy, or damage promptly at no charge to MCI. If written notice of such
shortage, discrepancy, damage, or other objection is not received by CellStar
within that time, MCI shall be deemed to have accepted the missing or damaged
goods, and MCI agrees to pay the total amounts agreed to herein for such missing
or damaged goods. Freight damage claims shall be filed by CellStar directly with
the carrier within seven (7) days of receipt of the notification of damage.
(b) CellStar must notify MCI, in writing, within twenty-four (24)
hours of receipt of shipment of Inventory Items of (i) any shortages,
discrepancies or freight damage claims existing between the items charged to MCI
on any packing slip from MCI or a third party vendor for Inventory Items and the
Inventory Items actually received by CellStar in the corresponding shipment; or
(ii) any damages to the corresponding Inventory Items. MCI shall promptly
intervene with such third party vendors on behalf of CellStar to correct such
shortage, discrepancy, or damage at no charge to CellStar. If after such
intervention by MCI, such third party vendors refuse to correct any such
shortage, discrepancy, or damage, then MCI shall not hold CellStar responsible
for such missing or damaged goods; provided that CellStar has exercised
commercially reasonable care regarding the protection and security of such
goods. If written notice of such shortage, discrepancy, damage, or other
objection is not received by MCI within that time, CellStar shall be deemed to
have accepted the missing or damaged goods, and CellStar agrees to be
responsible to MCI for such missing or damaged goods. Freight damage claims
shall be filed by MCI or its third party vendors directly with the carrier
within seven (7) days of receipt of the notification of damage from CellStar.
CellStar will assist MCI or its third party vendors in the filing of such
freight damage claims and shall retain all packaging and shipping materials from
such damaged shipments until the claim is settled and unless otherwise directed
by MCI.
13. RETURNS.
(a) Return Authorization. A return authorization must be obtained in
accordance with CellStar's standard procedures prior to any Products or
Inventory Items being shipped back to CellStar. Except as specifically set
forth in subsection (d) below, all freight and insurance charges for returned
goods must be paid by MCI.
(b) Warranty Returns for Products.
11
<PAGE>
(i) Accessory Products. Accessory Products shall be accepted for
------------------
return in accordance with the warranty provisions set forth
in Section 18 hereof. Upon receipt, CellStar shall inspect
such Accessory Products and the accompanying documentation,
if any, to determine whether such returned Accessory
Products qualify for warranty protection under the terms of
the applicable warranty. If such Accessory Products are
found to be defective under the terms of the applicable
warranty, CellStar shall, at its option exchange or credit
MCI for such defective Accessory Products and shall report
to MCI accordingly pursuant to the Interim Services
Agreement or Section 17, as appropriate. If CellStar
exchanges such products, CellStar shall ship such exchanged
product, at CellStar's cost (including freight and
insurance), to the Communication Center from which the
defective product was received. If such Accessory Product is
found not to qualify for warranty protection under the terms
of the applicable warranty, CellStar shall, at MCI's option,
return such non-qualifying product at MCI's cost to the
Communication Center from which the product was received or
dispose of such Accessory Products at no cost to MCI.
(ii) Cellular Telephones. Cellular Telephones shall be accepted
-------------------
for return in accordance with the manufacturers' warranty
set forth in Section 18 hereof. Upon receipt, CellStar shall
inspect such Cellular Telephones and the accompanying
documentation, if any, to determine whether such returned
Cellular Telephones qualify for warranty protection under
the terms of the applicable warranty. If such Cellular
Telephones are found to be defective under the terms of the
applicable warranty, CellStar shall, at MCI's option, repair
or return to the manufacturer for repair or replacement such
defective Cellular Telephones at no cost to MCI. Any
repaired or replaced product shall be returned, at
CellStar's cost (including freight and insurance), to the
Communication Center from which the defective product was
received. If such Cellular Telephones are found not to
qualify for warranty protection under the terms of the
applicable warranty, CellStar shall return such non-
qualifying product, at MCI's cost (including freight and
insurance), to the Communication Center from which the
product was received.
(iii) Two-Way Radios. Two-Way Radios shall be accepted for return
--------------
in accordance with the manufacturers' warranty set forth in
Section 18 hereof. Upon receipt, CellStar shall, at its own
expense, coordinate the return of such products to the
manufacturer, for repair or replacement in accordance with
the terms of the applicable warranty.
12
<PAGE>
Any repaired or replaced product shall be returned, at
CellStar's cost (including freight and insurance), to the
Communication Center from which the defective product was
received. If such Two-Way Radios are found not to qualify
for warranty protection under the terms of the applicable
warranty, CellStar shall return such non-qualifying product,
at MCI's cost (including freight and insurance), to the
Communication Center from which the product was received.
(iv) Technical Support for Products. CellStar shall make
------------------------------
available to MCI telephone technical support and assistance
in the diagnosis and resolution of problems with Products
eight hours a day, five (5) days a week during CellStar's
normal business hours. There shall be no charge for such
technical support.
(c) Returns for Inventory Items. CellStar shall accept returns of
Pagers from Communication Centers for processing in accordance with Exhibit C
---------
attached hereto. Pagers accepted for return shall be subject to the returns
processing fees set forth in Exhibit C hereto. The parties may agree to add
---------
returns services for other Inventory Items by mutual written agreement and shall
amend this Agreement accordingly.
(d) Transition Period. Regardless of whether the Products are under
warranty, for a period of forty five (45) days following the Effective Date
hereof, CellStar shall credit to MCI the refund value of such items, including
all freight, insurance, and any taxes related to the return of such Products
returned to CellStar from the Communication Centers. Thereafter, MCI shall be
responsible for all freight and insurance for the return of all Products
returned to CellStar from the Communication Centers.
14. CANCELLATION OR CHANGE OF PURCHASE ORDERS. MCI may cancel, change or
reschedule Products or Inventory Items on any Purchase Order subject to MCI's
payment to CellStar of a cancellation, change or rescheduling fee equal to
[REDACTED] for each Purchase Order that has advanced to order entry/print status
and [REDACTED] for each Purchase Order that has advanced to pick confirm status.
MCI shall not be charged cancellation or change fee for orders having a pre-
order entry status. If any such change or rescheduling results in additional
shipments within the same calendar week to the same "ship to" address, such
shipment shall be made at a cost of [REDACTED] per shipment per "ship to"
address.
15. TAXES. The prices set forth herein are exclusive of any amount for
Federal, State and/or Local excise or sales taxes on the Products and/or
Services provided under this Agreement. If any such excluded tax, exclusive
however, of any taxes measured by CellStar's net income or taxes based on
CellStar's gross receipts or based on CellStar's franchise, is determined to be
applicable to the Products and Services provided under this Agreement or to the
extent CellStar is required to pay or bear burden thereof, one hundred percent
(100%) thereof shall be added to the prices set forth
13
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
herein and paid by MCI. In the event MCI claims exemption from sales or other
such taxes under this Agreement, MCI shall hold CellStar harmless for any
subsequent assessments levied by a proper taxing authority for such taxes,
including interests, penalties and late charges.
16. PRODUCT CHANGES.
(a) MCI shall make best efforts within ten (10) business days from the
Effective Date hereof to (i) perform a commercially reasonable technical and
quality evaluation of Accessory Products provided to MCI as of the date of
closing in accordance with 16(b) and approve or reject Accessory Products in
accordance with the procedures set forth in Section 16(b) herein; and (ii)
provide to CellStar its minimum commercially reasonable technical and quality
specifications for each Accessory Product. If the technical and quality
evaluation required in (i) above results in MCI's rejection of the Accessory
Products, CellStar shall immediately initiate efforts to provide a conforming
Accessory Product. In any case, however, MCI may not source or give notice of
an intent to source such an Accessory Product from another vendor until January
1, 1997.
(b) In the event CellStar wishes to (i) make available to MCI any new
non-OEM Accessory Product, or (ii) change any style or manufacturer for any non-
OEM Accessory Product, CellStar shall, at least twenty (20) business days prior
to offering such Accessory Product for sale or effecting such change, provide to
MCI at least three (3) random samples for a ten (10) business day technical and
quality evaluation in accordance with MCI's minimum technical and quality
specifications described in subsection 16(a) above or MCI's revised commercially
reasonable technical and quality specifications that are provided to CellStar
from time to time. In the event such Accessory Product is approved by MCI, such
Accessory Product shall be added to the list set forth on Exhibit A upon
---------
execution of an amendment hereto.
(c) In the event MCI wishes to buy a new non-OEM Accessory Product or
change any style or specification for any non-OEM Accessory Product, MCI shall
provide to CellStar in writing commercially reasonable technical and quality
specifications for any such new product or changes. CellStar shall stock in its
warehouse such new or changed product within thirty (30) days in accordance with
the following procedure. Within five (5) business days following receipt by
CellStar of MCI's technical and quality specifications, CellStar shall provide
at least three (3) random samples of such new or changed product for a ten (10)
business day technical and quality evaluation in accordance with those minimum
technical and quality specifications. If MCI approves such accessory product,
it shall be added to the list of Accessory Products and this Agreement shall be
amended accordingly. If CellStar is unable to provide three (3) random samples
of such accessory product within five (5) business days or MCI rejects the
accessory products due to failure to satisfy such technical and quality
evaluation, MCI may source such accessory product from another party until
CellStar is able to source such accessory product for MCI. Alternatively,
CellStar and MCI may agree in writing on the substitution of an alternative
accessory product that conforms to MCI's commercially reasonable technical and
quality specifications.
(d) All samples to be provided hereunder shall be sent to Steven
Molyneaux,
14
<PAGE>
National Service Manager, MCI Wireless, 2000 York Road, Oakbrook, Illinois
60521, Suite 126, or such other person or address as MCI may designate in
writing to CellStar from time to time. Within 72 hours following the completion
of any such evaluations or tests, MCI shall provide to CellStar copies of any
test results or other evaluations which it conducts on non-OEM Accessory
Products, including a detailed written explanation of any perceived failure to
meet specifications previously provided to CellStar.
17. RECORDS AND REPORTS.
(a) CellStar shall maintain complete and accurate records of all
invoices, shipping, inventory, insurance, returns, penalties, MDF, Co-op, MCI's
twenty percent (20%) share of #800 items, all amounts billable to and payments
made by MCI, the information listed in subsection (d) below, and any other
matters which relate to CellStar's obligations hereunder, in accordance with
generally accepted accounting practices. CellStar shall retain and make
available upon request such records for a period of three (3) years from the
date of shipment of Products, Inventory Items, or rendering of Services covered
by this Agreement.
(b) CellStar shall provide to MCI by 11 a.m. (EST) each Monday, an
ASCII file (in similar fashion as file transmissions described in the Interim
Services Agreement) containing all of the information contained in each of the
individual invoices issued during the prior calendar week, consolidating such
information by "ship-to" address (which corresponds to a Communication Center or
an area manager's address) and as soon as reasonably available by SKU or item
number. Such file shall also contain all fees invoiced during such calendar week
and such other sales order information as MCI may reasonably request. CellStar
shall provide a paper printout of such ASCII file promptly thereafter.
(c) CellStar shall provide to MCI a consolidated monthly statement.
The monthly statement shall include the information listed in subsection 17(b)
above for outstanding invoices.
(d) Upon the reasonable request of MCI, CellStar agrees to provide
weekly inventory reports on Inventory Items located in its warehouse and cycle
counts within one (1) business day.
(e) CellStar has agreed as part of the Interim Services Agreement to
provide to MCI certain information for inventory information reporting. During
the term of the Interim Services Agreement, all such information will be
provided under the terms and conditions of the Interim Services Agreement.
Thereafter, CellStar shall continue to provide the following information under
the terms of this Agreement to MCI five (5) business days a week (except as
otherwise noted in subsection 17(e)(v)) with Monday information including
Friday, Saturday and Sunday data, no later than noon, CST (except for Mondays
when Friday, Saturday and Sunday data get transmitted at approximately 6:00 p.m.
CST). If any of the following information is not made available within one (1)
business day of the time that MCI notifies CellStar that the information has not
been received in accordance with the deadlines above, then MCI shall be entitled
to a credit
15
<PAGE>
against the Services Fee equal to[REDACTED] per day for each day that the
information is not made available starting on the day of MCI's notice.
(i) MCI Purchase Orders
(ii) Receipts of Inventory Items against MCI Purchase Orders
(iii) Replenishment orders from the Communication Centers
(iv) All orders of items shipped from CellStar's warehouse to
the Communication Centers
(v) Warehouse inventory quantities for all Inventory Items on
a weekly basis
(vi) Adjustments/returns that were sent back to CellStar's
warehouse from the Communication Centers
(vii) Credits/returns related to Inventory Items
(viii) Credits/returns of Inventory Items that do not require
shipment (damaged goods that are non-returnable to the
vendor, shrinkage, miscounted inventory, receiving
discrepancies, etc.)
(ix) Any other inventory management and tracking information
reasonably requested by MCI and agreed to by CellStar.
(f) Upon five (5) business days advance notice, MCI or its
representatives shall have the right to conduct an audit and review, at
reasonable hours and on CellStar premises (no more often than quarterly), of the
books and records of CellStar as they pertain to amounts owed under this
Agreement, Inventory Items, Co-op, MDF, special incentives and similar rebates,
and the net actual cost of Products purchased under this Agreement (in order to
verify the cost plus a factor pricing set forth in Section 4 hereof). MCI shall
bear the costs of such audits unless the auditors find a variance of two percent
(2%) or greater in the amounts invoiced to MCI whereupon such overcharges shall
be refunded to MCI with interest at the prime rate. In the event of such an
overcharge, CellStar shall pay the reasonable costs associated with the audit.
Any undercharges shall be paid by MCI.
18. LIMITED WARRANTIES AND REMEDIES.
(a) CellStar warrants its title to the Products sold by it and
warrants to MCI that its Products are free of defects of workmanship or material
and are in conformity with applicable specifications and descriptions set out in
the printed publications of CellStar or the manufacturer.
16
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
The limited warranty provided by the manufacturers of Wireless Handsets and OEM
Accessory Products shall accompany such Products. A copy of the limited
warranty which will accompany each non-OEM Accessory Product and which will be
extended by CellStar to ultimate purchasers for use is attached hereto as
Exhibit D. CellStar extends to MCI the same such warranties it extends to
- ---------
ultimate purchasers for use, subject to the conditions stated hereinafter in
this Section 18. No claim shall be maintained hereunder unless the facts
giving rise to it are discovered within the warranty period of the Product and
written notice thereof given to CellStar within thirty (30) days of discovery.
The sole and exclusive liability of CellStar for breach of warranty shall be to
refund the purchase price of, or at its option, to replace or repair the Product
or part concerned FOB its service facility or such other places as CellStar may
designate.
(b) The warranty period for the Products shall be as follows:
(i) All non-OEM batteries: Two (2) year warranty (subject to
requirement for proof of purchase after one year).
(ii) All other non-OEM accessories: Lifetime warranty (subject
to requirement for proof of purchase after one year).
(iii) All OEM accessories: Manufacturers' warranty passes
through to MCI. CellStar provides no additional warranty.
(iv) All Wireless Handsets: Manufacturers' warranty passes
through to MCI. CellStar provides no additional warranty.
(c) The foregoing sets forth the sole and exclusive remedy of MCI for
claims (except as to title) based on defect in or failure of Products, whether
the claim is in contract, tort (including negligence), strict liability or
otherwise, and however instituted. Upon expiration of the warranty period, all
such liability shall terminate. Except as set forth in Section 23, the
foregoing warranties are exclusive and in lieu of all other warranties, whether
written, oral, implied or statutory. NO IMPLIED OR STATUTORY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE SHALL APPLY.
19. TRADEMARK LICENSE. CellStar grants to MCI the nonexclusive right to
use CellStar's trade names and trademarks set forth on Exhibit E in marketing
---------
CellStar's Products during the term hereof. MCI agrees to designate the Product
properly and depict marks accurately.
20. TERM. This Agreement shall be for an initial term of two (2) years,
commencing on the date hereof unless otherwise terminated pursuant to the terms
hereof.
21. TERMINATION.
(a) Either party my terminate this Agreement immediately upon written
notice to the other party if (i) the other party is in default of any material
obligations hereunder, and, if curable, such party has failed to cure such
default within thirty (30) days after receipt of such written notice; (ii) the
other party violates any international, federal, state, provincial or local law
relating
17
<PAGE>
to or affecting this Agreement; or (iii) the other party becomes insolvent,
makes a general assignment for the benefit of its creditors, files or does not
object to the filing of any petition in bankruptcy or insolvency in any federal
or state proceeding, has a receiver or trustee appointed over all or any
substantial part of its property or undertakes or is subject to similar actions.
(b) During the initial term hereof, MCI shall additionally have the
right to terminate this Agreement at any time following eighteen (18) months
from the effective date hereof in the event CellStar breaches any of the terms
of the Non-Competition Agreement of even date herewith between the parties,
notwithstanding the fact that such Non-Competition Agreement will have already
terminated according to its own terms.
(c) In the event of a material breach of the Interim Services
Agreement and expiration of any applicable cure period, as such material
breaches and cure periods are defined in the Interim Services Agreement, MCI
shall have the right to terminate this Agreement immediately.
(d) MCI shall have the right to terminate this Agreement upon thirty
(30) days prior written notice if: (i) shrinkage of Inventory Items exceeds
eight percent (8%) of total Inventory Items under the control of CellStar in any
given month (other than fulfillment, collateral, and promotional materials for
which CellStar already has a five percent (5%) shrinkage allowance); or (ii)
shrinkage of Inventory Items exceeds five percent (5%) of total Inventory Items
under the control of CellStar in a second month (other than fulfillment,
collateral, and promotional materials for which CellStar already has a five
percent (5%) shrinkage allowance) provided that MCI has given CellStar a written
warning that shrinkage of Inventory Items exceeded five percent (5%) of total
Inventory Items under the control of CellStar in one previous month during the
term of the Agreement.
22. CONFIDENTIALITY OF INFORMATION.
(a) CellStar agrees that all information related to the Services,
whether received orally, in print, or electronically, including but not limited
to MCI data and business information inputted, received, reported or generated
by CellStar, or stored in any CellStar computer system under the terms of this
Agreement, shall be received by CellStar in strict confidence. MCI agrees that
all information related to all amounts due and payable under the terms of this
Agreement, including but not limited to Product Prices and Service Fees and such
other information that CellStar may, from time to time designate as
confidential, whether received orally, in print, or electronically, shall be
received by MCI in strict confidence. All such information shall be deemed to
be "Confidential Information".
(b) Each party agrees that it shall use such Confidential Information
for the purposes of and only in the performance of this Agreement, and that it
shall not make copies of any such Confidential Information or any part thereof
except to the extent otherwise expressly permitted by this Agreement or by the
owner of the information ("Owner"). The party receiving the Confidential
Information ("Recipient") shall not disclose any Confidential Information to any
third party without the express written consent of the Owner other than to its
employees, consultants and
18
<PAGE>
agents, and its Affiliates' employees, consultants and agents, who have a need
to know to perform under this Agreement, and who are bound to protect the
received Confidential Information from unauthorized use and disclosure under the
terms of a written agreement or corporate policy, provided that in any case, the
Recipient shall be liable for any breaches of confidentiality by any of them.
The Recipient shall protect the Confidential Information using the same degree
of care used to protect Recipient's own confidential or proprietary information
of like importance, but in any case using no less than a reasonable degree of
care. The Recipient shall return Confidential Information and any copies
thereof to the Owner at the completion or termination of this Agreement, or at
such earlier date as the Owner may desire.
(c) If the Recipient is required by law, regulation or court order to
disclose any Confidential Information, the Recipient will promptly notify the
Owner in writing prior to making any such disclosure in order to facilitate the
Owner seeking a protective order or other appropriate remedy from the proper
authority. The Recipient agrees to cooperate with the Owner in seeking such
order or other remedy. The Recipient further agrees that if the Owner is not
successful in precluding the requesting legal body from requiring the disclosure
of the Confidential Information, it will furnish only that portion of the
Confidential Information which is legally required and will exercise all
reasonable efforts to obtain reliable assurances that confidential treatment
will be accorded the Confidential Information.
(d) The Recipient acknowledges that the Confidential Information
constitutes unique, valuable and special trade secret and business information
of the Owner, and that disclosure may cause irreparable injury to the Owner.
Accordingly, the parties acknowledge and agree that the remedy at law for any
breach of the covenants contained in this Agreement may be inadequate, and in
recognition, agrees that the Owner, shall, in addition, be entitled to seek
injunctive relief without bond including reasonable attorneys' fees and other
court costs and expenses, in the event of a breach or threatened breach of any
of the provisions of this Agreement, which relief shall be in addition to and
not in derogation of any other remedies which may be available to the Owner as a
result of such breach.
(e) Notwithstanding the foregoing, the restrictions set forth in this
Section on use and disclosure of Confidential Information shall not apply to
information that: (a) was publicly known at the time of Owner's communication
thereof to Recipient; (b) becomes publicly known through no fault of Recipient
subsequent to the time of Owner's communication thereof to Recipient; (c) is
received from a third party free to disclose it to Recipient; (d) was in
Recipient's possession free of any obligation of confidence at the time of
Owner's communication thereof to Recipient; (e) is developed by Recipient
independently of and without reference to any of Owner's Confidential
Information or other information that Owner disclosed in confidence to any third
party ; (f) is rightfully obtained by Recipient from third parties authorized to
make such disclosure without restriction; (g) is identified by Owner as no
longer proprietary or confidential; or (h) is lawfully required to be disclosed
to any governmental agency or judicial body or is otherwise required to be
disclosed by law.
19
<PAGE>
23. INDEMNIFICATION AND INSURANCE.
(a) Patent and Copyright Indemnification. CellStar agrees to defend,
at its expense, any claims or suits against MCI based upon a claim that any
Products furnished hereunder directly infringes a U.S. patent or copyright and
to pay costs and damages finally awarded in any such suit, provided that
CellStar is notified promptly in writing of the suit and at CellStar's request
and at its expense is given control of said claim and all requested assistance
for defense of same. If the use or sale of any Products furnished hereunder is
enjoined as a result of such suit, CellStar at its option and at no expense to
MCI, shall obtain for MCI the right to use or sell said Products or shall
substitute an equivalent Product reasonably acceptable to MCI, and extend this
indemnity thereto or shall accept the return of the Products and reimburse MCI
the purchase price therefor, less a reasonable charge for reasonable wear and
tear. This indemnity does not extend to any suit based upon any infringement or
alleged infringement of any patent or copyright by the alteration of any
Products furnished by CellStar or by the combination of any Products furnished
by CellStar and other elements, nor does it extend to any products of MCI's
design or formula. The foregoing states the entire liability of CellStar for
patent or copyright infringement. IN NO EVENT SHALL CELLSTAR BE LIABLE FOR
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM INFRINGEMENT OR ALLEGED
INFRINGEMENT OF PATENTS, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS EXCEPT
AS OTHERWISE SET FORTH HEREIN.
(b) Other CellStar Indemnification. CellStar shall indemnify and hold
MCI, its officers, directors, employees, affiliates (including their officers,
directors and employees), and agents (the "MCI Indemnified Parties") harmless
from any liabilities, claims, losses and expenses, including without limitation,
interest, penalties, consequential damages and all reasonable attorneys' fees
including in-house counsel fees, accountants, and other experts, that may be
incurred by MCI as a result of or arising out of claims made: (i) by any third
party for injury to persons, including death, and damage to property, including
theft, resulting from CellStar's negligent acts or omissions; (ii) by any third
party for injury to persons, including death, and damage to property, resulting
from any material supplied or used by CellStar in a defective and unreasonably
dangerous condition; (iii) under Worker's Compensation, or similar employer-
employee liability acts, against MCI by persons provided by CellStar; and (iv)
any claim for infringement of any U.S. trademark or copyright by reason of use
of CellStar's trademarks in connection with the Products. If any MCI
Indemnified Party makes an indemnification request to CellStar, the MCI
Indemnified Party shall permit CellStar to defend or settle at its own expense,
any action or claim against the MCI Indemnified Party for which CellStar is
responsible under this provision; provided that (i) any such settlement or
disposition shall impose no obligation whatsoever on the MCI Indemnified Party
that is not wholly discharged or dischargeable by CellStar, and imposes no
conditions or obligations on the MCI Indemnified Party other than the payment of
monies that are readily measurable for purposes of determining the monetary
indemnification or reimbursement obligations of CellStar and (ii) CellStar will
be capable of fully performing its obligations pursuant to such settlement or
disposition, including the financial capacity to pay when due all sums it is
obligated to pay pursuant to such settlement or disposition. The MCI
Indemnified Party shall notify CellStar promptly of any claim
20
<PAGE>
for which CellStar is responsible and shall cooperate with CellStar in every
commercially reasonable way to facilitate defense of any such claim; provided
that the MCI Indemnified Party's failure to notify CellStar shall not diminish
CellStar's obligations under this Section unless CellStar is materially
prejudiced as a result of such failure.
(c) MCI Indemnification. MCI shall indemnify and hold CellStar, its
officers, directors, employees, affiliates (including their officers, directors
and employees), and agents (the "CellStar Indemnified Parties") harmless from
any liabilities, claims, losses and expenses, including without limitation,
interest, penalties, consequential damages and all reasonable attorneys' fees
including in-house counsel fees, accountants, and other experts, that may be
incurred by CellStar as a result of or arising out of claims made: (i) by any
third party for injury to persons, including death, and damage to property,
including theft, resulting from MCI's negligent acts or omissions; (ii) by any
third party for injury to persons, including death, and damage to property,
resulting from any material supplied by MCI in a defective and unreasonably
dangerous condition; and (iii) under Worker's Compensation, or similar employer-
employee liability acts, against CellStar by persons provided by MCI. If any
CellStar Indemnified Party makes an indemnification request to MCI, the CellStar
Indemnified Party shall permit MCI to defend or settle at its own expense, any
action or claim against the CellStar Indemnified Party for which MCI is
responsible under this provision; provided that (i) any such settlement or
disposition shall impose no obligation whatsoever on the CellStar Indemnified
Party that is not wholly discharged or dischargeable by MCI, and imposes no
conditions or obligations on the CellStar Indemnified Party other than the
payment of monies that are readily measurable for purposes of determining the
monetary indemnification or reimbursement obligations of MCI and (ii) MCI will
be capable of fully performing its obligations pursuant to such settlement or
disposition, including the financial capacity to pay when due all sums it is
obligated to pay pursuant to such settlement or disposition. The CellStar
Indemnified Party shall notify MCI promptly of any claim for which MCI is
responsible and shall cooperate with MCI in every commercially reasonable way to
facilitate defense of any such claim; provided that the CellStar Indemnified
Party's failure to notify MCI shall not diminish MCI's obligations under this
Section 23 unless MCI is materially prejudiced as a result of such failure.
(d) Insurance Requirements. During the term of this Agreement,
CellStar shall maintain insurance of the kinds and in the amounts specified
below with insurers of recognized responsibility, licensed to do business in the
State(s) where the work is being performed, and having either: an A.M. Best's
rating of A8, a Standard & Poor's (S&P) rating of AA, or a Moody's rating of
Aa2.
(i) In accordance with the above, CellStar shall maintain the
following insurance coverages:
(1) Workers' Compensation insurance as required by the
State(s) in which the contract is to be performed;
(2) Employer's Liability insurance with limits of not less
21
<PAGE>
than [CONFIDENTIAL MATERIAL REDACTED] per occurrence;
(3) Comprehensive or Commercial General Liability
Insurance, on an Occurrence Basis, including but not limited to
(premises-operations, broad form property damage in addition to
that covered by Section 23(d)(5) below, contractual liability,
independent contractors, personal injury) with limits of no less
than $10,000,000 combined single limit for each occurrence; and
(4) Automobile Liability, Comprehensive Form, with limits
of at lease $1,000,000 combined single limit for each occurrence.
(5) Bailee Liability Insurance, with limits of at least the
full replacement value of all Inventory Items physically located
at CellStar's warehouse at any given time.
(ii) THE REQUIRED MINIMUM LIMITS OF COVERAGE SHOWN ABOVE, HOWEVER,
WILL NOT IN ANY WAY RESTRICT OR DIMINISH CELLSTAR'S LIABILITY UNDER
THIS AGREEMENT.
(iii) CellStar's insurers shall waive all rights of recovery
against MCI for any injuries to persons or damage to property in the
execution of work performed under this Agreement.
(iv) CellStar's insurance shall be considered primary and not
excess or contributing with any other applicable insurance.
(v) All policies (excluding Workers' Compensation) shall name MCI,
its subsidiaries and affiliates, as additional insureds as respects
work performed under this Agreement and all coverage shall include MCI
property. CellStar will submit to MCI a standard "Accord" insurance
certificate (or comparable form acceptable to MCI) signed by an
authorized representative of such insurance company(ies), certifying
that the insurance coverage(s) required hereunder are in effect for
the purposes of this Agreement. Said insurance certificate shall
certify that no material alteration, modification or termination of
such coverage(s) shall be effective without at least 30 days advance
written notice to MCI.
24. FORCE MAJEURE. If the performance of this Agreement, or of any
obligation hereunder, is prevented, restricted or interfered with by reason of
acts of God, wars, revolution, civil commotion, acts of public enemies, blockage
or embargo, strikes, acts of the Government in its sovereign capacity,
interruptions of transportation, material default of any carrier or supplier, or
any other extraordinary and unexpected circumstance beyond the control and
without the fault or
22
<PAGE>
negligence of the performing party, upon giving prompt notice to the other, but
in no event to exceed more than ten (10) days after the performing party's
learning of such event or after the date when the performing party reasonably
should have known of event, the performing party shall be excused from such
performance on a day-to-day basis to the extent of such prevention, restriction
or interference with (and the other party shall likewise be excused from payment
for all services not performed); provided, however, that the performing party
shall use its best efforts to avoid or remove such causes of non-performance and
both parties shall proceed whenever such causes are removed or cease.
25. COMPLIANCE WITH LAWS. Each of the parties shall comply with the
provisions of all applicable federal, state, county and local laws, ordinances,
regulations and codes including but not limited to compliance with the Federal
Communications Commission's Rules and Regulations, and, irrespective of whether
a specification is furnished, if equipment, services or containers furnished
hereunder by CellStar are required to be constructed, packaged, labeled or
registered in a prescribed manner, CellStar shall comply with applicable
federal, state or local law. If MCI exports Products outside the United States,
MCI shall be responsible for complying with all U.S. export laws and regulations
and with all laws and regulations, including, but not limited to, permission to
connect, packaging and instruction, in the countries to which Products have been
exported. Each party shall indemnify and hold harmless the other from and
against all liabilities, claims, costs, losses, damages (including, without
limitation, any indirect, special, consequential, incidental or punitive
damages), and expenses (including attorneys' fees and allocated in-house legal
expenses) arising out of breach of this Section.
26. ASSIGNMENT. The rights and obligations under this Agreement may not
be assigned without, in each instance, the prior written consent of the non-
assigning party.
27. GOVERNING LAW. This Agreement, including all matters relating to the
validity, construction, performance and enforcement thereof, shall be governed
by the laws of the State of New York without giving effect to its principles of
conflicts of law.
28. RELATIONSHIP OF PARTIES.
(a) The relationship of the parties under this Agreement shall be, and
shall at all times remain, one of independent contractors and not that of
franchisor and franchisee, joint venturers, partners , principal and agent,
employees, or any other relationship, and neither party shall have the rights
to bind or obligate the other.
(b) All persons furnished by the parties in performance of the
Services hereunder shall be considered solely that party's employees or agents;
and that party shall be responsible for compliance with all laws, rules, and
regulations involving, but not limited to, employment of labor, hours of labor,
working conditions, payment of wages and payment of taxes, such as unemployment,
social security and other payroll taxes, including applicable contributions from
such persons when required by law. In addition, CellStar shall not improperly
influence any MCI employee in any manner that would cause such MCI employee to
violate MCI's Code of Employee Conduct involving
23
<PAGE>
conflicts of interest regarding acceptance of vendor gifts and gratuities (as
such MCI's Code of Employee Conduct is updated from time to time and provided to
CellStar by MCI).
(c) Each party shall be solely responsible for all reporting and
payment obligations relating to FICA, income tax, unemployment compensation and
workers compensation withholdings, and other employer related obligations of a
similar nature with respect to their own employees.
(d) Each party shall be solely responsible to the other for all acts
and omissions of its employees and agents assigned by such party for the
performance of its obligations hereunder.
29. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, together
with the Interim Services Agreement and the Asset Purchase Agreement,
constitutes the entire Agreement between the parties and supersede any prior or
contemporaneous oral or written representations with regard to the subject
matter hereof. This Agreement may not be modified or amended except by a
writing signed by both parties. No waiver of any provision hereof shall be
effective unless in writing signed by the party alleged to have waived such
provision. Any single waiver shall not operate to waive subsequent or other
defaults.
30. SEVERABILITY. If any provision of this Agreement is contrary to,
prohibited by or held invalid by any law, rule, order or regulation of any
government or by the final determination of any state or Federal court, such
invalidity shall not effect the enforceability of any of the provisions not held
to be invalid.
31. NOTICES. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing, shall be deemed delivered
(i) on the date of delivery when delivered by hand, (ii) on the date of
transmission when sent by telex, electronic mail or facsimile transmission
during normal business hours with telephone confirmation of receipt, (iii) one
(1) day after dispatch when sent by overnight courier maintaining records of
receipt, or (iv) three (3) days after dispatch when sent by registered mail,
postage prepaid, return receipt requested, all addressed as follows (or at such
other addresses as shall be given in writing by either Party to the other):
If to MCI:
MCI Telecommunications Corporation
1200 South Hayes Street
Arlington, VA 22202
Attention: Terry Macko
Segment Marketing
Vice President
Fax: (703) 415-6789
With a copy to:
24
<PAGE>
MCI Telecommunications Corporation
1200 South Hayes Street
Arlington, VA 22202
Attention: Lanese Jorgensen, Esq.
Senior Attorney
Law & Public Policy
Fax: (703) 415-7102
If to CellStar:
CellStar, Ltd.
1730 Briercroft Court
Carrollton, TX 75006
Attention: Alan H. Goldfield
Chairman and CEO
Fax: (972) 323-1589
With a copy to:
CellStar, Ltd.
1730 Briercroft Court
Carrollton, TX 75006
Attention: General Counsel
Fax: (972) 466-5030
With an additional copy to :
CellStar, Ltd.
1730 Briercroft Court
Carrollton, TX 75006
Attention: Chief Financial Officer
Fax: (972) 466-0288
32. DISPUTE RESOLUTION PROCEDURES.
(a) Other than a dispute under Section 4(j) herein, for which the
provisions thereof shall govern, in the event of any disagreement regarding
performance under or interpretation of this Agreement, the parties shall attempt
to reach a negotiated resolution. If such a dispute remains unresolved for a
period of thirty (30) days after one party has provided written notice of the
dispute to the other, then each party shall designate an officer of appropriate
authority to resolve the dispute, in accordance with Section 32(b) below.
(b) Any dispute arising out of or related to this Agreement (including
any dispute
25
<PAGE>
arising under Section 4(j) herein), which cannot be resolved by negotiation
under Section 32(a) above, shall be settled by binding arbitration in accordance
with the J.A.M.S./ENDISPUTE Arbitration Rules and Procedures ("Endispute
Rules"), as amended by this Agreement. The costs of arbitration, including the
fees and expenses of the arbitrator, shall be shared equally by the parties
unless the arbitration award provides otherwise. Each party shall bear the cost
of preparing and presenting its case. The parties agree that this provision and
the Arbitrator's authority to grant relief shall be subject to the United States
Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"), the provisions of this
Agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial
Disputes. The parties agree that the arbitrator shall have no power or
authority to make awards or issue orders of any kind except as expressly
permitted by this Agreement, and in no event shall the arbitrator have the
authority to make any award that provides for punitive or exemplary damages.
The Arbitrator's decision shall follow the plain meaning of the relevant
documents, and shall be final and binding. The award may be confirmed and
enforced in any court of competent jurisdiction. All post-award proceedings
shall be governed by the USAA.
33. WAIVER OF CERTAIN REMEDIES. Notwithstanding any provision of this
Agreement, neither party shall be liable for any indirect, special,
consequential, incidental or punitive damages arising out of this Agreement,
even if advised of the possibility of such damages; provided, that this shall
not limit the liability of the indemnifying party to indemnify the indemnified
party with respect to claims brought by third parties against the indemnified
party as provided for in this Agreement.
34. SURVIVAL. The respective obligations of the parties under this
Agreement that by their nature would continue beyond the termination,
cancellation or expiration, shall survive any termination, cancellation or
expiration, including, but not limited to, obligations to insure and indemnify,
insure and maintain confidentiality, deliver and have the opportunity to inspect
and accept goods under existing Purchase Orders, and provide continued
availability of warranty support and services.
35. PARAGRAPH HEADINGS. The headings of the paragraphs are inserted for
convenience of reference only and are not intended to affect the meaning or
interpretation of this Agreement.
36. ORDER OF PRECEDENCE. This Agreement and all Exhibits are intended to
be read consistently and as a whole. Nonetheless, in the event of any
ambiguity, inconsistency or conflict between the terms of the Agreement and an
Exhibit hereto, the terms and conditions of the Agreement shall control.
37. COUNTERPARTS. This Agreement may be signed in one or more
counterparts each of which shall be deemed to be an original but together shall
constitute one instrument.
26
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
CELLSTAR, LTD. MCI TELECOMMUNICATIONS
By NATIONAL AUTO CENTER, INC. CORPORATION
General Partner
By: /s/ Richard M. Gozia By: /s/ Victoria Harker
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Its: Executive Vice President Its: Vice President of Finance
------------------------------- -------------------------------
27
<PAGE>
EXHIBIT A
ACCESSORY PRODUCTS AND PRICES
-----------------------------
[REDACTED]
Motorola Application
--------
W033020 All
W051019 All
W061020 Flip
W061019 TT250
E26-1-120 650
E8R-1-020 All
W8K3020 Flip
E8S-3-019 TT250
E8S-3-120 650
HFK-5-020 All above
SNN4589P Slim Nickle Metal Batt.
Nokia
-----
E03-3-213 636/638
E03-3-042 232
W051213 636/638
W051027 232
E26-1-213 636/638
E06-1-042 232
E8R-1-042 232
E8S-1-213 636/638
E8S-3-042 232
E8S-3213 636
BBT6LP 636/Slim Nickle Metal Batt.
BTH8SMP 232/Slim Nickle Metal Batt.
E061043 2120
NEC
---
W031025 810
W051025 810
W061025 810
E8R-1-025 810
W8K1025 810
Misc. Accessories
-----------------
E8M-1-079 All handheld
E8B-1-110 All Trans.
28
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
[REDACTED]
E01-1-050 Any 3 Watt
E01-1-055 Any 3 Watt
B01-1-070 Any 3 Watt
HLN9033 Leather Case (Two-Way Radio)
B016063 Connector (Mot. Attache Phone)
29
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT B
WIRELESS HANDSETS AND PRICES
----------------------------
[REDACTED]
Motorola
--------
TT250
550 ProPak
650
Lite II ProPak
Lite II Standard
Attache with battery
Lunch Box with battery
Nokia
-----
636/638
232 (includes all colors)
NEC
---
810
TWO WAY RADIOS
--------------
Motorola Sprint CS10
Accessory
---------
HLN9034 Cs.w/Loop
HLN8240 Belt Clip
HLN8371 Desk Chgr
HLN3987 Int. Elim.
HNN9044 Battery Pack
HTN9026 3h Desk Chgr
HTN8232 10h Desk Ch
HAD9742 Stub Ant.
30
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT C
SERVICES AND FEES
-----------------
1. WAREHOUSE, DISTRIBUTION AND FULFILLMENT SERVICES.
(a) Services Regarding Inventory Items. The services to be performed
hereunder by CellStar regarding Inventory Items shall include the receiving,
handling, storage, assembly (if requested), shipping, and reporting as described
herein of the Inventory Items listed on Attachment A of various vendors (the
------------
"MCI Vendors"). CellStar shall warehouse the Inventory Items at its warehouse
facility located at 1728 Briercroft Court, Carrollton, Texas 75006, or such
other warehouse facilities as shall be approved in writing by MCI from time to
time (the "Warehouse").
(b) Fulfillment Services. The services to be performed hereunder by
CellStar include the assembly (if requested), packaging (if requested),
programming (if requested), shipping, returns processing and other fulfillment
services relating to the Products and the Inventory Items.
(c) Availability. The Services provided by CellStar hereunder shall
be available eight (8) hours per day during normal business hours, five days per
week, fifty-two weeks per year unless otherwise mutually agreed upon by the
parties (excluding New Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving, the day after Thanksgiving, and Christmas).
(d) Maintenance. CellStar agrees to maintain its warehouse in a
clean, orderly, and safe condition; to maintain all equipment used by it in the
performance of its services hereunder in a clean, proper, and safe operating
condition; and to maintain the grounds around the warehouse in a safe, neat and
presentable manner.
(e) Record keeping. CellStar shall maintain, in accordance with
generally accepted accounting principles and practices, such records as may be
necessary to adequately reflect the accuracy of CellStar's charges and invoices
for reimbursement under the Agreement.
2. COMPENSATION. In consideration for the Services to be performed
hereunder, MCI shall pay CellStar Service Fees as set forth on Attachment B, as
------------
invoiced by CellStar in accordance with Section 4 of the Agreement.
3. SAFEKEEPING/TITLE. CellStar shall exercise all commercially
reasonable care for the safekeeping and safe handling of all Inventory Items
provided to CellStar by MCI pursuant to this Agreement, including, but not
limited to placing pagers, prepaid calling cards, movie tickets and other
valuable items in a segregated, locked area. Title to the Inventory Items
shall at all times remain with MCI.
31
<PAGE>
4. OPERATIONS METHODS AND PROCEDURES.
(a) Receiving of Shipments. CellStar shall scan or otherwise enter
Inventory Items into CellStar's inventory management and order processing system
within one full business day of actual receipt of shipment. Product receipt
shall follow the procedures outlined in Attachment C.
------------
(b) Performance of Services. CellStar shall perform the Services in
accordance with its standard and operating procedures as such may be changed
from time to time, including those procedures outlined in Attachment C.
------------
5. IN-BOUND FREIGHT CHARGES. CellStar and MCI understand that MCI
Vendors will be providing in-bound freight shipments of Inventory Items to
CellStar at no charge to CellStar.
6. DAMAGED ITEMS.
(a) In-bound Freight Damage. CellStar shall not be liable for
shipments of Inventory Items until they have been received and accepted at the
Warehouse. CellStar will assist MCI in filing and resolving any freight claims
for these shipments and shall retain all packaging and shipping materials until
the claim is settled unless otherwise directed by MCI.
(b) Out-bound Freight Damage and Warehouse Damage. Subject to the
allowance for shrinkage contained in Section 11(c) of this Agreement, the risk
of loss, damage, or destruction of the Products and Inventory Items shall be
borne by CellStar from the time the shipments are received and accepted at the
Warehouse until the goods are delivered to and accepted by MCI at the Sam's Club
location.
(c) Definition of Damaged Products. Unless otherwise stated in
Section 12, Products and Inventory Items shall be considered damaged when the
actual unit has been marred in any manner, including, but not limited to,
scratched, dented, water stained or stained by any other substance, crushed,
punctured, and/or when the item has obvious damage detected by rattling sound.
Any Inventory Items that is not resalable as a new product, due to any visual
defects or obvious internal damage, shall be considered damaged.
7. INSURANCE.
(a) In-bound Shipment. CellStar shall not be responsible for insuring
in-bound shipments of Inventory Items, nor shall it be responsible for any loss
or damage incurred during such shipment. However, CellStar will assist MCI in
filing and resolving any freight claims.
(b) Warehouse Inventory. CellStar shall insure, and provide proof of
insurance to MCI, naming MCI as beneficiary, the full replacement value of the
Inventory Items stored in the Warehouse at any time. CellStar shall also
maintain property and liability insurance as set forth
32
<PAGE>
in Section 23 of this Agreement. In addition, CellStar will promptly notify MCI
in writing of any claims filed that relate in whole or in part to any Inventory
Items. With respect to any such claims disputed in whole or in part by the
insurance carrier, CellStar will notify MCI of the dispute, provide MCI with
such information as may be requested by MCI in writing and shall not settle such
claims (insofar as they relate to the Inventory Items) for less than the full
value thereof without the written approval of MCI.
(c) Out-bound Shipment. Unless otherwise stated in the Agreement,
CellStar shall insure at MCI's cost all out-bound freight shipments for the full
replacement value of the Products and Inventory Items being transported to any
Communication Center.
8. WAREHOUSE ACCESS. MCI shall have access to the warehouse during
CellStar's normal working hours, upon two (2) hours prior notice to CellStar,
for the purpose of inspecting Inventory Items, evaluating damaged Inventory
Items, performing Inventory Item counts and other reasonable requirements.
33
<PAGE>
ATTACHMENT A
INVENTORY ITEMS
MCI PAGERS
PART NUMBER DESCRIPTION FREQUENCY COV
BPNXA86BLK002 PRONTO BLACK 929.8625 L
BBFXA86BLK002 BRAVO BLACK 929.8625 L
BBFXA58BLK002 BRAVO BLACK 929.5875 R/N
BUXXA86BLK002 ULTRA BLACK 929.8625 L
BUXXA86TTL002 ULTRA TEAL 929.8625 L
BUXXA86CIC002 ULTRA CRAN 929.8625 L
BUXXA86BBL002 ULTRA BLUE 929.8625 L
BUXXA58BLK002 ULTRA BLACK 929.5875 R/N
BAGXA86BLK002 ADVISOR BLACK 929.8625 L
BAGXA58BLK002 ADVISOR BLACK 929.5875 R/N
BAGXA86BLK002S ADVISOR BLACK 929.8625 L
SPORTS
BAGXA58BLK002S ADVISOR BLACK 929.5875 R/N
SPORTS
BUXRE70BLK002 ULTRA BLACK 158.7000 L
BUXRE10BLK002 ULTRA BLACK 158.1000 L
BUXRD84BLK002 ULTRA BLACK 152.8400 L
BPNXA96BLK002 PRONTO BLACK 929.9625 L
BPNXA73BLK002 PRONTO BLACK 929.7375 L
BBFXA96BLK002 BRAVO BLACK 929.9625 L
BBFXA96TTL002 BRAVO TEAL 929.9625 L
BBFXA96CIC002 BRAVO CRAN 929.9625 L
BBFXA96BBL002 BRAVO BLUE 929.9625 L
34
<PAGE>
PART NUMBER DESCRIPTION FREQUENCY COV
BBFXA86TTL002 BRAVO TEAL 929.8625 L
BBFXA86CIC02 BRAVO CRAN 929.8625 L
BBFXA86BBL002 BRAVO BLUE 929.8625 L
BBFXA73BLK002 BRAVO BLACK 929.7375 L
BBFXA73TTL002 BRAVO TEAL 929.7375 L
BBFXA73CIC002 BRAVO CRAN 929.7375 L
BBFXA73BBL002 BRAVO BLUE 929.7375 L
BUXXA96BLK002 ULTRA BLACK 929.9625 L
BUXXA96TTL002 ULTRA TEAL 929.9625 L
BUXXA96CIC002 ULTRA CRAN 929.9625 L
BUXXA96BBL002 ULTRA BLUE 929.9625 L
BUXXA73BLK002 ULTRA BLACK 929.7375 L
BUXXA73TTL002 ULTRA TEAL 929.7375 L
BUXXA73CIC002 ULTRA CRAN 929.7375 L
BUXXA73BBL002 ULTRA BLUE 929.7375 L
BAGXA96BLK002 ADVISOR BLACK 929.9625 L
BAGXA73BLK002 ADVISOR BLACK 929.7375 L
BAGXA96BLK002S ADVISOR BLACK 929.9625 L
SPORTS
BAGXA73BLK002S ADVISOR BLACK 929.7375 L
SPORTS
BUXRD45BIL002 ULTRA BLACK 454.4500 L
BUXXA63BLK002 ULTRA BLACK 929.6375 L
BUXRE78BLK002 ULTRA BLACK 929.7875 L
BUXXA61BLK002 ULTRA BLACK 929.6125 L
35
<PAGE>
PREPAID CALLING CARDS
Holiday Card 30 Unit
Holiday Card 15 Unit
Collectors' Independence Day 4 30 Units
Collectors' Independence Day 4 30 Units (Promotional Cards)
UNITED ARTIST THEATERS PROMOTIONAL MOVIE TICKETS
FULFILLMENT, COLLATERAL AND PROMOTIONAL MATERIALS
Including, but not limited to:
User Guide and Terms & Conditions
Warranty Cards
Box Sleeves
Alpha Paging Software
Sweepstakes Cards
Paging Correspondence Maps
Sports Paging Brochures
Other Brochures
Other Promotional Materials
Sales Aids
Long Distance Welcome Letters
Buckslips
Greeter Flyers
Other Collateral Materials
36
<PAGE>
ATTACHMENT B
SERVICE FEES
Service Price Per Unit/Product
------- ----------------------
Assembly:
Private Label Packaging of Pagers [REDACTED]
(Individual packaging of pagers
approved and requested by MCI)
Order Fulfillment:
A negotiated flat fee per order processed [REDACTED]
and shipped to each "ship to" address,
including but not limited to the following
aspects of Inventory Item handling and
management:
*Receiving
*Scanning in ESN's
*Storage
*Picking, Packing and Prepping for Shipping
*Freight Processing
*Scanning Out ESN's
*Reporting
Returns Processing
(For Inventory Items Only):
MCI Pager Returns Handling Fee [REDACTED]
1-800-Number Fulfillment
(OEM Accessories available through a transparent phone catalog sales
system, based on credit card purchases only.) The Service Fee shall be
in the form of a margin split with MCI: [REDACTED] to CellStar and
[REDACTED] to MCI. CellStar shall receive the first [REDACTED] of
margin on the total purchase prior to MCI receiving its [REDACTED]
share. If CellStar's [REDACTED] share constitutes less than
[REDACTED], CellStar is entitled to collect that total amount only and
37
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
MCI shall not owe CellStar the difference between that amount and
[REDACTED]. (For example, on a [REDACTED] item the split would be
[REDACTED] CellStar/[REDACTED] MCI, on an [REDACTED] item the split
would be [REDACTED] CellStar/[REDACTED] MCI, and on a [REDACTED] item
the split would be [REDACTED] CellStar/[REDACTED] MCI.) All such
credits owed to MCI shall be issued in accordance with the provisions
of Section 4(i) of the Agreement.
38
__________
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
ATTACHMENT C
I. INVENTORY ITEM RECEIVING PROCEDURES
1. Vendors and MCI shall create notification procedures reasonably
acceptable to CellStar regarding shipments of Inventory Items into the
Warehouse.
2. MCI and/or MCI vendors shall provide CellStar the following
information:
(a) MCI Purchase Order number
(b) Vendor shipping reference number
(c) Number of pieces and weight and dimensions of shipment
(d) Loading address
(e) Name and telephone number of contact person
(f) Hours of operation
(g) Description of item (including SKU number)
(h) Cost of good
3. CellStar shall accept Inventory Items and verify bills of lading for
correct address, pallet and box/piece counts. Any discrepancies such as
shortages, overages or any damage to the Inventory Items shall be notated on the
bill of lading and signed by the receiving personnel.
4. CellStar shall verify Inventory Items against the MCI vendor's pack
list and note any discrepancies. A receiving exception report shall be
completed describing any discrepancies, including missing and/or damaged
Inventory Items and forward to MCI within two (2) business days of CellStar's
receipt of shipment.
5. CellStar agrees to return any damaged Inventory Items to the MCI
vendor in accordance with instructions to be provided by MCI.
6. Within one (1) business day following receipt at CellStar's warehouse,
CellStar shall enter the serial numbers for all incoming pagers into CellStar's
inventory management system and generate the reports required pursuant to the
terms of this Agreement.
39
<PAGE>
ATTACHMENT C (CONTINUED)
II. MCI PAGER RETURN PROGRAM
MCI Kiosk Policy
- 30 day returns/exchange policy is in effect at the kiosk level.
- MCI will establish a policy for the kiosks to return pagers.
- The kiosks will call CellStar for a return authorization ("RA") for
return of the pagers.
MCI Agreement with PageNet
- PageNet will take all pagers back. PageNet and MCI have agreed to
appropriate crediting terms and charges for such returns.
MCI Return to CellStar
- Pagers will be returned to CellStar twice a month or as otherwise
determined by MCI.
CellStar Responsibilities
- CellStar will verify the pagers received against the RA issued to the
kiosks.
- CellStar is responsible for sorting MCI pagers contained in each
return shipment from other returned items in the same shipment
(including CellStar pagers sold to customers by CellStar prior to the
closing of the Asset Purchase Agreement). No triage will be performed.
- CellStar will sort pagers by SKU or serial number.
- CellStar will post credit by SKU or serial number through the system
to the kiosk and within the system to the MCI Inventory Item Inventory
Return Branch Plant (as defined in the Interim Services Agreement).
- CellStar will return pagers to PageNet twice a month or as otherwise
determined by MCI.
- CellStar will provide PageNet with advance notice of such returns and
cooperate with PageNet's return procedures.
- CellStar will issue a return to PageNet which will relieve MCI's
Inventory and establish a receivable in MCI's records against PageNet
for the return credit.
- CellStar will track such returns in accordance with other procedures
that are mutually agreed upon in writing by the parties.
- Within two (2) business days of shipment to PageNet, CellStar will
provide closed loop reporting which includes MCI pagers to be received
by SKU, MCI pagers actually received by SKU, MCI pagers waiting to be
shipped to PageNet by SKU, and MCI pagers shipped to PageNet by SKU.
CellStar Charges
- CellStar will charge MCI a $0.25 handling fee for each MCI pager that
is returned
40
<PAGE>
to CellStar.
- CellStar will charge MCI for the actual freight costs (including
insurance) incurred to return the MCI pagers to PageNet.
41
<PAGE>
EXHIBIT D
LIMITED WARRANTY FOR NON-OEM ACCESSORY PRODUCTS
-----------------------------------------------
- --------------------------------------------------------------------------------
LIMITED WARRANTY
CellStar extends this limited warranty directly to you, the original end-user
purchaser of its products, provided your purchase was made in Canada, the United
States or Latin America. If you sell or otherwise transfer the product,
warranty coverage automatically terminates. If any part of your CellStar
product (except for batteries) was defective in material or workmanship on the
date of purchase, return it with proof of purchase to the place of purchase (in
the U.S. only) and CellStar will, at its option, either repair or replace it
with a new or rebuilt part at no charge to you for parts or labor.
If any part of your CellStar battery was defective in material or workmanship on
the date of purchase, return it with proof of purchase within 2 years of the
date of purchase to the place of purchase (in the U.S. only) and CellStar will,
at its option, either repair or replace it with a new or rebuilt part at no
charge to you for parts or labor.
LIMITATIONS. This limited warranty does not cover products which have been
improperly installed, repaired or maintained or which have been subjected to
misuse, abuse, accident, physical damage, abnormal operation or handling,
neglect, exposure to fire, water or excessive changes in climate or temperature;
or operation outside of published maximum ratings and/or acts of God; cosmetic
items; products on which warranty stickers or product serial numbers have been
removed, altered or rendered illegible; inadequate signal reception by the
antenna; or the cost of installation, removal or reinstallation.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
AND EXCLUDES ALL LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ANY CAUSE
WHATSOEVER. Some states and countries do not allow limitations on implied
warranty durations, or the exclusion or limitation of incidental or
consequential damages, so that the above limitation or exclusion may not apply
to you. This warranty gives you specific legal rights, and you may also have
other rights which vary from state to state and from country to country.
EXCLUSION AND DISCLAIMER OF ANY AND ALL EXPRESS AND IMPLIED WARRANTIES BY MCI.
This accessory is not manufactured by MCI but is supplied to MCI by CellStar.
Therefore, MCI MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THIS ACCESSORY. However, this accessory is covered by
CellStar's limited warranty.
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
Please fill out and return this postage paid card to put your
accessory product limited warranty in effect. (See package insert for
specific warranty information.)
Name:
------------------------------------------------------------
Street Address:
--------------------------------------------------
City: State: Zip:
-------------------------- -------------- ------
Location of Purchase:
--------------------------------------------
Part Number: Date of Purchase:
------------------- ---------------
MCI
- --------------------------------------------------------------------------------
43
<PAGE>
EXHIBIT E
TRADEMARKS
----------
Essentials/TM/
CellStar/R/
44
<PAGE>
EXHIBIT 10.45
AMENDMENT NUMBER ONE
THIS AMENDMENT NUMBER ONE to the Supply and Service Agreement between MCI
Telecommunications Corporation ("MCI") and CellStar, Ltd. ("CellStar"), is
entered into as of this 4th day of January, 1997.
WHEREAS, MCI and CellStar (the "Parties") entered into the Supply and
Service Agreement as of November 18, 1996 ("the Agreement"); and
WHEREAS, MCI and CellStar desire to amend the Agreement to change certain
terms of the Agreement;
NOW, THEREFORE, the Parties hereto agree that the Agreement is amended,
effective January 4th, 1997, as follows:
1. Attachment A to Exhibit C shall be hereby deleted and replaced by the
attached Attachment A to Exhibit C.
Unless otherwise deleted or changed herein, all other terms and conditions of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have caused this Amendment Number One to be
duly executed as of the date hereof.
MCI TELECOMMUNICATIONS CELLSTAR, LTD.
CORPORATION BY NATIONAL AUTO CENTER, INC.
GENERAL PARTNER
By: /s/ Victoria Harker By: /s/ Elaine Flud Rodriguez
----------------------------- -----------------------------------
Printed Printed
Name: Victoria Harker Name: Elaine Flud Rodriguez
--------------------------- ---------------------------------
Title: Vice President Title: Vice President
-------------------------- --------------------------------
Date: 2/2/97 Date: 1-30-97
-------------------------- --------------------------------
45
<PAGE>
ATTACHMENT A (Revised as of January 4, 1997)
INVENTORY ITEMS
MCI PAGERS
PART NUMBER DESCRIPTION FREQUENCY COV
BPNXA86BLK002 PRONTO BLACK 929.8625 L
BBFXA86BLK002 BRAVO BLACK 929.8625 L
BBFXA58BLK002 BRAVO BLACK 929.5875 R/N
BUXXA86BLK002 ULTRA BLACK 929.8625 L
BUXXA86TTL002 ULTRA TEAL 929.8625 L
BUXXA86CIC002 ULTRA CRAN 929.8625 L
BUXXA86BBL002 ULTRA BLUE 929.8625 L
BUXXA58BLK002 ULTRA BLACK 929.5875 R/N
BAGXA86BLK002 ADVISOR BLACK 929.8625 L
BAGXA58BLK002 ADVISOR BLACK 929.5875 R/N
BAGXA86BLK002S ADVISOR BLACK 929.8625 L
SPORTS
BAGXA58BLK002S ADVISOR BLACK 929.5875 R/N
SPORTS
BUXRE70BLK002 ULTRA BLACK 158.7000 L
BUXRE10BLK002 ULTRA BLACK 158.1000 L
BUXRD84BLK002 ULTRA BLACK 152.8400 L
BPNXA96BLK002 PRONTO BLACK 929.9625 L
BPNXA73BLK002 PRONTO BLACK 929.7375 L
BBFXA96BLK002 BRAVO BLACK 929.9625 L
BBFXA96TTL002 BRAVO TEAL 929.9625 L
BBFXA96CIC002 BRAVO CRAN 929.9625 L
BBFXA96BBL002 BRAVO BLUE 929.9625 L
BBFXA86TTL002 BRAVO TEAL 929.8625 L
46
<PAGE>
PART NUMBER DESCRIPTION FREQUENCY COV
BBFXA86CIC02 BRAVO CRAN 929.8625 L
BBFXA86BBL002 BRAVO BLUE 929.8625 L
BBFXA73BLK002 BRAVO BLACK 929.7375 L
BBFXA73TTL002 BRAVO TEAL 929.7375 L
BBFXA73CIC002 BRAVO CRAN 929.7375 L
BBFXA73BBL002 BRAVO BLUE 929.7375 L
BUXXA96BLK002 ULTRA BLACK 929.9625 L
BUXXA96TTL002 ULTRA TEAL 929.9625 L
BUXXA96CIC002 ULTRA CRAN 929.9625 L
BUXXA96BBL002 ULTRA BLUE 929.9625 L
BUXXA73BLK002 ULTRA BLACK 929.7375 L
BUXXA73TTL002 ULTRA TEAL 929.7375 L
BUXXA73CIC002 ULTRA CRAN 929.7375 L
BUXXA73BBL002 ULTRA BLUE 929.7375 L
BAGXA96BLK002 ADVISOR BLACK 929.9625 L
BAGXA73BLK002 ADVISOR BLACK 929.7375 L
BAGXA96BLK002S ADVISOR BLACK 929.9625 L
SPORTS
BAGXA73BLK002S ADVISOR BLACK 929.7375 L
SPORTS
BUXRD45BIL002 ULTRA BLACK 454.4500 L
BUXXA63BLK002 ULTRA BLACK 929.6375 L
BUXRE78BLK002 ULTRA BLACK 929.7875 L
BUXXA61BLK002 ULTRA BLACK 929.6125 L
47
<PAGE>
PREPAID CALLING CARDS
Harley 20 Unit
Collectors' Independence Day 4 30 Units
Collectors' Independence Day 4 30 Units (Promotional Cards)
UNITED ARTIST THEATERS PROMOTIONAL MOVIE TICKETS
FULFILLMENT, COLLATERAL AND PROMOTIONAL MATERIALS
Including, but not limited to:
User Guide and Terms & Conditions
Warranty Cards
Box Sleeves
Alpha Paging Software
Sweepstakes Cards
Paging Correspondence Maps
Sports Paging Brochures
Other Brochures
Other Promotional Materials
Sales Aids
Long Distance Welcome Letters
Buckslips
Greeter Flyers
Other Collateral Materials
STAND-ALONE INTERNET SOFTWARE
SKU DESCRIPTION
NETDISKS MCI INTERNET SOFTWARE - DISKS
NETCDROM MCI INTERNET SOFTWARE - CDROM
PAGER ACCESSORIES
Straight Pager Bungee
Curly Pager Bungee
Pager Replacement Clip
Pager Safety Chain
48
<PAGE>
EXHIBIT 10.46
January 8, 1997
VIA FACSIMILE (972/323-1589)
CellStar, Ltd.
1730 Briercroft Court
Carrollton, TX 75006
Attn: Elaine Rodriguez, Vice President
Re: Amendment to Section 13(d) of the Supply and Service Agreement entered
into between CellStar and MCI (the "Distribution Agreement")
-------------------------------------------------------------
Dear Elaine:
This letter shall serve to amend Section 13(d) of the Distribution Agreement and
all defined terms used in this letter shall be the same as the defined terms
used in the Distribution Agreement.
The parties agree that the requirement of Section 13(d) to return such Products
within forty-five (45) days of the Effective Date is hereby amended to require
that the Products be shipped within forty-five (45) days of the Effective Date.
CellStar and MCI also hereby agree that (i) all such remaining return Products
will be shipped on Friday, January 10, 1997 via ground transportation regardless
of whether or not return authorizations for those Products have been processed
by CellStar as of that date; and (ii) MCI will be entitled to receive a credit
for such Products in accordance with Section 13 (d) of the Distribution
Agreement as amended by this letter.
Please sign and date a copy of this letter indicating your agreement and send to
MCI/Law and Public Policy via facsimile (703/415-7102) by no later than
Thursday, January 9, 1997 at 12 noon EST. Thank you.
Sincerely,
/s/ Victoria Harker
Victoria Harker
Vice President Mass Markets Finance
AGREED:
/s/ Elaine Flud Rodriguez
- ---------------------------------
Elaine Rodriguez
cc: Lanese Jorgensen, Esq.
Michael Chase
Claire Shields
Michael McCarthy, Esq.
<PAGE>
EXHIBIT 10.47
CELLSTAR DISTRIBUTOR SUPPLY AGREEMENT
This Agreement is made between:
Motorola Ltd., trading as Motorola, Cellular Subscriber Division, UK, Midpoint,
Alencon Link, Basingstoke, Hampshire, RG21 7PL, United Kingdom (Registered
Office: Jays Close, Viables Industrial Estate, Basingstoke, Hampshire, RG22 4PD,
Registration No. 912182, England) (hereinafter called "Motorola")
and
Cellstar UK Limited, Bushbury House, 435 Wilmslow Road, Withington, Manchester
M20 9AF (hereinafter called the "Distributor").
Recitals
1. Appointment and Acceptance
2. Prices, Payment and Marketing
3. Order and Delivery
4. Distributor Responsibilities
5. Warranty, Customer Service and Type Approval
6. Duration and Termination
7. Remedies
8. Proprietary Rights
9. Confidentiality
10. Sales to the US Government
11. General
Schedules
Page 1
MOTOROLA CONFIDENTIAL PROPRIETARY
<PAGE>
CELLSTAR DISTRIBUTOR SUPPLY AGREEMENT
RECITALS
- --------
A. Whereas Motorola is a producer of cellular subscriber products of
international repute and wishes to appoint the distributor as a
distributor of these products;
B. Whereas the distributor is interested to obtain these products from
Motorola for marketing and sale;
Now it is agreed as follows:
1. APPOINTMENT AND ACCEPTANCE
--------------------------
1.1 Motorola appoints the Distributor as distributor of the cellular
telephone products listed in the Schedule A, (hereinafter
referred to as the "Products") and agrees to deliver the
Products to the Distributor in accordance with the terms of this
Agreement.
1.2 The Agreement is non-exclusive. Motorola may appoint additional
distributors, retailers, dealers or make direct sales itself or
through an affiliate in the Area of Prime Marketing
Responsibility (as defined below). As used in this Agreement the
term an "affiliate" of Motorola shall mean any corporation or
entity ultimately owned or controlled, directly or indirectly,
by Motorola Inc., USA.
1.3 The Distributor's area of prime marketing responsibility is the
UK ("the Area of Prime Marketing Responsibility"). Without
prejudice to the Distributors' right to unrestricted sales
distribution the Distributor recognises that his expertise in
and knowledge of the Area of Prime Marketing Responsibility is a
key factor to its appointment and as such performance in the
Area of Prime Marketing Responsibility to Motorola's
satisfaction is a condition of this Agreement. Specifically, the
Distributor shall maintain, for a period of 6 months from the
commencement of this Agreement, a supply of Products to those
Service Providers not trading directly with Motorola at any time
during this Agreement term.
1.4 Motorola may revise the list of Products from time to time
without any liability to the Distributor. At its sole discretion
Motorola may also at any time discontinue the production or
sale, or modify the design or material specifications of any
Products or parts thereof, without any liability or obligation
to the Distributor or its customers, including, without
limitation, any obligation to modify any Products previously
ordered by the Distributor.
2. PRICES, PAYMENT AND MARKETING
-----------------------------
2.1 The Product prices are listed in Schedule B. Motorola will
inform the Distributor of any change in Motorola prices without
delay and, notwithstanding the terms of Schedule B. Motorola
will apply any change to the prices for Products accordingly.
The change in price for Products shall apply for all orders
received prior to the price change and not yet despatched by
Motorola as well as orders received after the price change. Any
reduction in price will further apply to Products delivered
within 30 days prior to the date of introduction of the new
Motorola prices to the market and still in the Distributor's
inventory, unless 30 days notice of the price change has been
given by Motorola.
2.2 The Distributor shall pay Motorola in accordance with Schedule
C. If the Distributor fails to pay any invoice when due or if
Motorola, in its reasonable discretion, deems the Distributor's
financial condition inadequate, Motorola may, in addition and
without prejudice to its other rights, suspend shipments of the
Products. Without limiting the generality of the foregoing,
Motorola is entitled to terminate the Agreement immediately by
written notice should payments by the Distributor to Motorola be
more than two months overdue.
2.3 Motorola reserves the right at any time to decrease, eliminate,
or otherwise limit the amount or duration of any credit which
may be extended to the Distributor in general and/or with
respect to any single purchase order.
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2.4 Motorola may provide marketing support as it deems necessary to
assist in promoting sales of the Products. This marketing
support will be at 1% of the net sales value on a 50/50 split
basis given similar expenditure from the Distributor.
Motorola's "Options" programme shall apply.
3. ORDER AND DELIVERY
------------------
3.1 Commencing 1st April 1996 and subsequently by the 15th day of
each month the Distributor shall advise Motorola of its
requirements for Products based on a rolling 12 month programme.
The first three months of this programme is a fixed order for
Products which shall bind the Distributor. The next three months
can be modified by plus or minus 20% (by volume) from the prior
order and the remaining 6 months of this programme shall be used
only as a forecast.
3.2 The Distributor shall submit written Purchase Orders to Motorola
in respect of the binding element of clause 3.1 above. The
receipt of such orders will be acknowledged by Motorola but no
order will be binding on Motorola unless a further written
acceptance is submitted by Motorola, or Products are delivered
(whichever occurs first).
3.3 The delivery terms are as specified in Schedule B. Motorola will
endeavor to deliver the Products by the date(s) confirmed by
Motorola. However, Motorola shall in no event by liable for any
losses resulting from delays in the delivery of Products.
Motorola does not warrant to the Distributor the continued
availability of any of the Products, and the Distributor hereby
expressly releases Motorola from liability for any loss or
damage to the Distributor arising out of, or by virtue of, the
failure of Motorola to accept or fulfil any orders due to
particular shortages or general product unavailability howsoever
caused. In the event of such shortages the Distributor consents
to any apportionment of shipments that Motorola, at its sole
discretion, may determine to be appropriate.
3.4 All Products shall remain the property of Motorola until full
payment is made by the Distributor.
3.5 This Distributor agrees to comply with all applicable laws and
regulations regarding the exportation or re-exportation (direct
or indirect) of the Products or technical data supplied by
Motorola.
4. DISTRIBUTOR RESPONSIBILITIES
----------------------------
Without prejudice to any other obligations contained in this Agreement
the Distributor shall:
4.1 Use its best efforts to sell, advertise and promote the sale and
use of all of the Products throughout the Area of Prime
Marketing Responsibility.
4.2 In order to satisfy clause 4.1 above, purchase at least the
minimum annual volumes of the Products referred to in
Schedule A.
4.3 Conform to Motorola's service and engineering instructions when
providing services for Products in order to fully satisfy
customers.
4.4 Order and maintain at least the minimum stock of inventory of
the Products, parts, test equipment and installation equipment
which the parties determine necessary to support the
Distributor's sales effort in the Area of Prime Marketing
Responsibility.
4.5 Maintain a suitable place of business in a suitable location or
locations, as the market may require and co-operate with
Motorola to establish and maintain the standards and reputation
of the Products.
4.6 Appoint such sub-distributors, dealers, retailers in the Area of
Prime Marketing Responsibility for the term of this Agreement as
are necessary in order to provide adequate sales and service
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coverage; instruct such sub-distributors as necessary in the
sale and servicing of Products and ensure they comply with
Motorola's rules and policies concerning trademarks and trade
names. The Distributor shall be liable to Motorola for the
activities or omissions of sub-distributors, dealers, retailers
appointed by the Distributor.
4.7 Furnish to Motorola information relating to orders, sales,
service, and inventory of Products and Product sales budgets and
forecasts, in such a manner as Motorola may from time to time
reasonably request and specifically sell through data on a
weekly basis, with respect to the Area of Prime Marketing
Responsibility.
4.8 Comply with all relevant legal requirements including but not
limited to all appropriate safety, environmental, type approval
and other requirements.
4.9 Provide a warranty for the Products to its customers which
complies with applicable warranty requirements under the laws
and competitive conditions of the country of resale.
5. WARRANTY, CUSTOMER SERVICE AND TYPE APPROVAL
--------------------------------------------
5.1 Motorola will provide the Distributor with warranty, customer
service and support as specified in Schedule D. The obligations
of the parties in respect of Type Approval are also specified in
Schedule D.
6. DURATION AND TERMINATION
------------------------
6.1 This Agreement shall commence on 1st April 1996 and will
continue in force for a period of one year, subject to the
provisions of this clause 6.
6.2 The duration of this Agreement is specified in clause 6.1 above
and it shall continue thereafter subject to Motorola terminating
it by a written three month notice to the other party, such
notice expiring at the end of the term in clause 6.1 above and
being served in accordance with clause 11.14.
6.3 Notwithstanding 6.2 above, either party may terminate this
Agreement upon 30 days written notice to the other party in the
case of a material breach by the other party of any obligation
specified in this Agreement.
6.4 Without prejudice to clause 2.2 above, the Agreement may be
terminated forthwith by either party on giving notice in writing
to the other if the other party, being a company, shall pass a
resolution for winding up (otherwise than for the purpose of a
solvent amalgamation or reconstruction where the resulting
entity assumes all of the obligations of the relevant party
under this Agreement), or a court shall make an order to that
effect, or being a partnership shall be dissolved, or if the
other party shall cease to carry on its business or
substantially the whole of its business, or becomes or is
declared insolvent or commits any act of bankruptcy or proposes
to make any arrangement or composition with its creditors, or if
a liquidator, administrator, receiver, or similar officer is
appointed of any of the assets of the other or any analogous
step is taken in connection with the others insolvency,
bankruptcy or dissolution.
6.5 On the expiration or termination of the Agreement, the
Distributor shall promptly return to Motorola:
6.5.1 all documents placed at its disposal by Motorola.
6.5.2 any type approvals held by the Distributor relating to
Products. Further, the Distributor agrees to render all
necessary assistance free of charge including but not
limited to the signing of the appropriate forms required
by the local type approval authorities, in connection
with the assignment of or re-application for type
approvals for Products.
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6.6 No claims for compensation can be lodged by reason of the
termination or expiry of the Agreement, unless these claims are
based on the breach of contractual provisions by one of the
parties.
6.7 In the case of any change in the ownership or structure of the
Distributor, the Distributor shall inform Motorola immediately.
If Motorola deems the change will materially affect its position
then Motorola reserves the right to terminate the Agreement with
immediate effect without liability on the part of Motorola.
6.8 Subject to clause 6.2 above, nothing contained in this Agreement
shall be deemed to create any express or implied obligation on
either party to renew or extend this Agreement or to create any
right to continue this Agreement on the same terms and
conditions contained in it.
6.9 All sums owed by either party to the other shall become due and
payable immediately upon the termination of this Agreement.
7. REMEDIES
--------
This clause defines the limits of Motorola's liability to the
Distributor in respect of this Agreement whether in contract or tort
including negligence and the Distributor's sole remedies in respect of
any act or default of Motorola.
7.1 Motorola will accept liability for death or personal injury
resulting from its negligence.
7.2 Motorola will accept liability for direct physical damage to the
tangible property of the Distributor to the extent that it is
caused by the negligence of Motorola subject to the exclusions
set out in clause 7.4 below and up to a maximum limit of (pound
sterling) 1 million sterling in the aggregate.
7.3 Except as provided in clause 7.1 and 7.2 above, Motorola's total
liability in respect of any one default shall not exceed 125% of
the total purchase price of all the Products in respect of which
Motorola is in default. If a number of defaults give rise to
substantially the same loss or are attributable to the same or
similar cause, then they shall be regarded as giving rise to
only one claim hereunder. Motorola will be afforded a reasonable
opportunity to remedy any such default.
7.4 Except as provided in clause 7.1 above, Motorola shall not be
liable for loss of profits, business, revenue, goodwill,
anticipated savings, special, indirect or consequential losses
even if foreseeable by or in the contemplation of Motorola or
any claim made against the Distributor by any other person.
7.5 Except as expressly stated herein, all conditions and warranties
implied, statutory or otherwise, are hereby excluded to the
maximum extent permitted by law.
8. PROPRIETARY RIGHTS
------------------
8.1 The Distributor will not impair Motorola's right, title or
interest in its corporate name(s) or logo(s), or any part
thereof, or to trademarks or trade names used on or in
connection with Motorola's Products. Nothing herein shall grant
to the Distributor any such right title or interest. The
Distributor shall not encourage any practice which might be
detrimental to the goodwill of Motorola or Motorola's Products.
8.2 For the purposes of advertising and selling the Products, the
Distributor may, during the term hereof, indicate that it is an
authorised Distributor of Motorola for the Products in which
case the Distributor will submit to Motorola specimens of its
letterhead, business cards, telephone directory listings, truck
markings and business establishment signs for approval of the
format by Motorola, and the Distributor shall follow Motorola's
specification with respect thereto. The
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Distributor shall have no rights to use the trademarks of
Motorola without prior written permission.
8.3 The Distributor agrees, upon expiration or termination of this
Agreement to immediately discontinue (i) using or making
reference to Motorola's corporate name or to trade names and
trademarks of Motorola, and (ii) representing directly or
implicitly, that it is or was a Distributor of Motorola.
8.4 Motorola agrees to defend at its expense any suit brought
against the Distributor based upon a claim that any Products
furnished hereunder directly infringe a third party patent,
copyright or trademark and to pay costs and damages finally
awarded in any such suit, provided that Motorola is notified
promptly in writing of the suit and at Motorola's request and at
its expense is given control of said suit and all requested
assistance for defence of same. If the use or sale of any
Products furnished hereunder is prevented by injunction as a
result of suit. Motorola at its option and at its expense, shall
obtain for the Distributor the right to use or sell said
Products or shall substitute an equivalent Product reasonably
acceptable to the Distributor and extend this indemnity thereto
or shall advise the Distributor to return Products and
discontinue further sales and Motorola shall reimburse the
Distributor the purchase price thereof. This indemnity does not
extend to any suit based upon any infringement or alleged
infringement of any patent, copyright or trademark by the
combination of any Products furnished by Motorola and other
elements nor does it extend to any products of the Distributor's
design or formula. The foregoing states the entire liability of
Motorola for patent, copyright or trademark infringement.
8.5 Motorola has certain rights in Motorola software, firmware or
other computer programs or data residing in the Products
(hereinafter referred to collectively as "Software"), including
without limitation the right to prepare works derived from same
in copies and distribute copies of same. The Distributor shall
not prepare works derived from, reproduce in copies or
distribute copies of, any Motorola Software except for
demonstration purposes.
8.6 Whenever the term "Motorola" is used in this clause it also
covers affiliates of Motorola as defined in clause 1.2.
9. CONFIDENTIALITY
---------------
9.1 Confidential information is defined as information which
relates to the business activities of either party in
particular, but not limited to, all information relating to the
details of this Agreement and the prices at which the
Distributor purchases the Products from Motorola, as well as
information which it may receive in connection with this
Agreement concerning names of the business concerns using the
Products, and the organisation, business dealings or affairs of
Motorola, which is disclosed in oral, written, graphic, and/or
sample form, being clearly designated, labelled or marked as
confidential at the time of its disclosure.
9.2 The Distributor undertakes not to reproduce or distribute such
Confidential information, and to take all reasonable means to
prevent the dissemination of such information to anyone except
the Distributor's employees who may need it for the performance
of their duties, except as may be authorised by Motorola in
writing. The obligations of confidentiality provided for herein
shall survive the expiration or termination of this Agreement
for whatever reason, for a period of 5 years from the date of
such termination.
10. SALES TO THE US GOVERNMENT
--------------------------
10.1 If the Distributor sells Motorola's Products or services to the
US Government or to a prime contractor selling to the US
Government, the Distributor does so solely at its own option and
risk. The Distributor remains solely and exclusively responsible
for compliance with all statutes and regulations governing sales
to the US Government. Motorola makes no representations.
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certifications or warranties whatsoever with respect to the ability
of its goods, services or prices to satisfy any such statutes or
regulations.
11. GENERAL
-------
11.1 Any obligations and responsibilities which by their nature extend
beyond the expiration or termination of this Agreement, including
but not limited to clauses 6.5, 7, 8 and 9, shall survive and
remain in effect.
11.2 The headings used in this Agreement are for convenience only and
shall not be used in order to construe the terms of this Agreement.
11.3 No waiver by either party of any of its rights hereunder shall
prejudice its ability to enforce such rights.
11.4 If any provision of this Agreement is found by any court or
competent authority to be void or unenforceable, such provision
shall be deemed to be deleted from this Agreement and the remaining
provisions shall be given effect so far as is possible.
Notwithstanding the foregoing the parties shall thereupon negotiate
in good faith in order to agree the terms of a mutually satisfactory
provision to be substituted for the provision so found to be void or
unenforceable.
11.5 Neither party shall be under any liability whatsoever in respect of
any breach of this Agreement to the extent that this is due directly
or indirectly to a cause beyond its reasonable control.
11.6 Unless expressly provided for elsewhere in this Agreement, any
revisions to this Agreement must be agreed upon in writing by both
the Distributor and Motorola and must be signed by authorised
representatives of both companies.
11.7 The Agreement and any amendments will be prepared in the English
language. If translated the English version shall be the only
legally binding version and the only version used for
interpretation.
11.8 No assignment of this Agreement by the Distributor or any right or
obligation hereunder shall be made by the Distributor without the
prior written consent of Motorola.
11.9 Motorola may from time to time assign the benefit and/or the burden
of this Agreement in whole or in part to its affiliate without the
consent of the Distributor and may from time to time authorise its
affiliates to have the benefit of any of its rights and/or to carry
out any of its obligations without the consent of the Distributor.
11.10 Motorola and the Distributor are independent contractors. Neither
party shall act or represent itself, as agent, partner, employee,
joint venture or representative of the other party or any of its
affiliates; nor shall either party assume or create any obligation
or liability on behalf of the other party or any of its affiliates
or hold itself out as entitled to do so.
11.11 The Distributor will refrain from any activities which are illegal,
unethical or which might bring Motorola into disrepute or which
constitute or could be made to be a serious conflict of interest or
which might give the appearance of impropriety. The Distributor will
co-operate fully in any investigation or evaluation of such matters.
Breach of this clause by the Distributor will entitle Motorola to
terminate this Agreement without notice.
11.12 All disputes between Motorola and the Distributor arising out of or
relating to this Agreement shall be referred first to senior
executives appointed by the parties who have the authority to settle
the same. If the dispute cannot be resolved through negotiation
within a maximum period of 14 days, or such other period as agreed
in writing by the parties, it may be referred to the exclusive
jurisdiction of the English courts.
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11.13 This Agreement and the rights and duties of the parties shall be
governed and interpreted according to the laws of England. All
disputes shall be submitted to the exclusive jurisdiction of the
English courts.
11.14 All notices hereunder must be made in writing and sent to the
following address either by fax or first class or registered mail:
1. Motorola Ltd., trading as Cellular Subscriber Division, UK
Midpoint, Alencon Link, Basingstoke, Hampshire, RG21 7PL,
England
Tel No: 01256 817474
Fax No: 01256 27092
For the Attention of: Ian Hicks
2. Cellstar UK Limited, Bushbury House, 435 Wilmslow Road,
Withington, Manchester M20 9AF
Tel No: TBA
Fax No: TBA
For the Attention of: TBA
Notices shall be deemed to be received on the next business day
after transmission to the correct fax number in the case of faxes
and five business days after despatch in the case of messages sent
by post. All faxed notices shall be followed up by post.
11.15 This Agreement and its Schedules are the complete and exclusive
statement of the agreement of the parties relating to the subject
matter hereof and supersedes all proposals or prior agreements oral
or written and all other communications between the parties relating
thereto.
11.16 The Schedules outlined below, are an integral part of this Agreement
and may, where necessary, be modified by Motorola upon written
notice to the Distributor. In the event of any conflict between the
Agreement text and the Schedules, the Agreement shall take
precedence:
Schedule A - Products and Volume
Schedule B - Pricing
Schedule C - Payment and Credit Terms
Schedule D - Warranty, Customer Service and Type Approvals
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THE SIGNATORIES TO THIS AGREEMENT ARE FULLY AUTHORISED BY THEIR COMPANY TO SIGN
ON ITS BEHALF.
SIGNATURES TO THE AGREEMENT
- ---------------------------
CELLSTAR UK LIMITED MOTOROLA LTD
Signature: /s/ Alan H. Goldfield Signature: /s/ Ralph Pin
------------------------ ------------------------
Name: Alan H. Goldfield Name: Ralph Pin
------------------------ ------------------------
Title: Director Title: Corp. V.P.
------------------------ ------------------------
Date: April 3rd 1996 Date: 4/3/96
------------------------ ------------------------
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SCHEDULE A
PRODUCTS AND VOLUME
1. Motorola Product Description
----------------------------
ETACS and GSM Products, and accessories, as agreed in writing between the
parties from time to time.
It is the intention of both parties to explore the UK distribution
opportunities for PCN products and accessories. This will be done by
agreement with the relevant UK PCN Operators to ensure commercial viability
to all three parties of the product distribution channels to market.
2. Volume
------
Subject to favourable market conditions the minimum purchase commitment for
the Agreement year is 200,000 units of those Products (excluding
accessories) detailed in this Schedule.
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SCHEDULE B
PRICING
1. All prices for Products are Ex-Works Motorola Distribution Centres, as
defined in Incoterms 1990 (and are exclusive of Tax, Import Duties).
2. Prices for Products and accessories are in Pounds Sterling and as advised in
writing by Motorola from time to time.
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SCHEDULE C
PAYMENT AND CREDIT TERMS
1. All payments will be made in UK Pounds Sterling as defined on the relevant
invoice
2. The due date for payment will be 30 days from the end of the month in which
the invoice is rendered.
3. The Distributor will not withhold payment for shipments which satisfy part
of an order.
4. Motorola reserves the right to claim interest in case of late payments. The
interest shall be compounded at 2% per month and will be charged monthly to
the account.
5. Motorola will give early settlement discount of 2% of the gross invoiced
amount for cash with order, and 1% for payment received by the end of the
fourteenth day following the invoice date.
6. Notwithstanding the above, Motorola may agree in writing alternative methods
of payment and credit terms. Motorola at all times reserves the right to
amend from time to time and without prior notice such payment/credit terms.
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SCHEDULE D
WARRANTY, CUSTOMER SERVICE AND TYPE APPROVAL
1 WARRANTY
--------
1.1 Subject as herein provided Motorola warrants to the Distributor that all
Products supplied hereunder will comply with the applicable Motorola
published specifications at the date of purchase for 12 months from the
date of purchase by the end-user.
1.2 In the event of any proven breach of Motorola's warranty set out in
clause 1.1 of this Schedule D (whether by reason of defective materials,
production faults or otherwise) Motorola's liability shall be limited to
the repair or replacement, at Motorola's option, of module/assemblies
only (where a module is defined as a product's transceiver or handset
and an assembly is defined as transceiver/handset printed circuit
boards).
1.3 This warranty provision is subject to the following exclusions and the
warranty shall not apply to products which Motorola determines have:
i) been subjected to testing for other than specified electrical
characteristics;
ii) been operated in abnormal working conditions or environmental
conditions in excess of the recommendations stipulated in the
relevant specifications;
iii) been mishandled, misused, wilfully damaged, neglected, improperly
tested, repaired, altered or defaced;
iv) been subjected to assembly or processing which alters physical or
electrical properties;
v) arisen as a result of the Distributor's own design, formula,
drawing or specification;
vi) arisen as a result of the Distributor failing to follow Motorola's
instructions.
1.4 Motorola cannot be responsible in any way for defects in any Products
arising as a result of non-Motorola accessories or ancillary equipment
attached to or being used in connection with the Products.
1.5 All faulty modules/assemblies shall be returned as complete modules/
assemblies to Motorola by the Distributor at no cost to Motorola to "the
designated Motorola Repair Centre". Motorola shall at its absolute
discretion repair failed modules/assemblies or provide replacement
module/assemblies as per clause 1.2 of this Schedule D within the
warranty period. Motorola shall pay the shipping cost for returning
repaired and or replacement modules/assemblies to the Distributor. The
Distributor shall forward the modudles/assemblies for repair to the
Motorola designated Repair Centre from a central point of despatch.
1.5.1 The Distributor shall notify Motorola on a monthly basis in
writing, of any faulty accessories. Motorola shall at its
absolute discretion repair / replace faulty accessories or
refund the value of the same at the current Distributor
purchase price.
1.5.2 The Mechanical Serial Number (MSN) of the Transceiver /
Handset is used as a criterion for warranty tracking. Proof of
purchase by the end user shall be utilised.
1.5.3 All units being returned for repair shall have undergone a
local test on an appropriate test set and shall be returned to
Motorola together with the test set printout detailing the
failure mode.
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1.6 Motorola shall use its reasonable endeavours to provide a maximum turn
around time of modules/assemblies sent to Motorola for repair, of
fifteen working days from the date of receipt at the designated
Motorola Repair Centre.
1.7 Warranty Failure Reporting - The Distributor will supply Motorola the
following information on a monthly basis:
1. Product Type 5. Repair Code
2. M.S.N. 6. Repair Description
3. Fault Code 7. Parts Used
4. Fault Description
2. SERVICE AND SUPPORT
-------------------
Service Procedures are available from the Customer Services Manager.
2.1 TRAINING
2.1.1 Motorola shall provide free of charge to the Distributor
technical training for repairs. The Distributor shall have the
option to nominate up to a maximum of 6 persons to attend. For
the duration of the Agreement Motorola undertakes to provide
this level of training for each new product family introduced.
Motorola shall at its sole discretion nominate the course
content and duration. The training shall take place at
Motorola's premises or if deemed necessary at the Distributor's
premises. The Distributor shall bear the travel, accommodation
and subsistence cost of the Distributor's personnel. The
Distributor shall also bear the costs of Motorola's personnel
including travel, accommodation and subsistence in the case
that the location is other than Motorola's designated premises.
The Distributor shall have the option to nominate more than 6
trainees. In this event Motorola shall charge the Distributor a
daily fee of xxxxx per trainee. The Distributor shall bear the
cost of travel, accommodation and subsistence of their own
personnel.
2.1.2 Once the training requirements in clause 2.1.1 of this Schedule
D have been met the Distributor shall be free to request
further training as it deems necessary. Motorola shall be free
to charge the Distributor full commercial rates for the
requested training as stated in clause 2.1.1 of this Schedule
above.
2.1.3 The training courses shall be based on the "Train The Trainer"
concept. Documentation will be provided to each of the
attendees.
2.2 TECHNICAL DOCUMENTATION
2.2.1 Such technical documentation shall be supplied by Motorola to
the Distributor's personnel during the training sessions as
Motorola deems appropriate.
2.2.2 The Distributor shall be entitled to use, duplicate and/or edit
Motorola's training documentation exclusively for its own
internal use. The Distributor must reproduce the relevant
Motorola copyright notice to accompany any such documentation.
2.3 SPARE PARTS
2.3.1 The recommended spares holding per product as advised by
Motorola shall apply.
2.3.2 Motorola's then current Spare Parts Price List, as may be
amended from time to time by the Service Department, shall
apply.
2.3.3 The Distributor shall be responsible for forecasting and
ordering the spare parts from Motorola.
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2.3.4 The order point for spare parts orders shall be Customer
Support.
2.3.5 The contact point for spare parts forecasts shall be Logistics.
Forecasts shall be submitted monthly to Motorola on a three
month rolling basis.
2.3.6 Motorola shall provide the Distributor with five years support
for all Products from the date of the last delivery of the
Product to the Distributor.
When Motorola intends to terminate manufacture of a Product,
Motorola shall inform the Distributor and give them the
opportunity to order and receive a "last time buy" for spare
parts as may be available and required by the Distributor.
In addition to a "last time buy" Motorola may provide spare
parts for the Product for a maximum period of three years from
the date of Product termination.
In the event such spare parts may be unavailable for any reason
then Motorola shall offer a refurbishment or replacement
service (at its sole discretion) for a maximum period of five
years from the date of Product termination.
Such refurbishment/replacement shall be charged to the
Distributor at the then current equivalent repair rate for that
Product.
2.4 REPAIRS
2.4.1 Motorola shall supply the Distributor with a detailed listing
of Faults and Repair Codes as per this Schedule to be used when
sending product for repairs/repaired product.
2.4.2 At Motorola's sole discretion the Distributor may be allowed to
carry out repairs. In this event the Distributor shall comply
with Motorola's service guide lines as a M.A.S.C. (Motorola
Approved Service Centre) as may from time to time be
amended/advised.
2.5 OUT OF WARRANTY REPAIRS
2.5.1 Out of warranty repairs carried out by Motorola shall be
governed by Motorola's price list at the time and as may be
amended from time to time. Motorola shall notify the
Distributor, with 90 days notice, of any changes in prices for
out of warranty repairs. The Distributor shall bear the
transportation cost when returning faulty module/assemblies for
repair, and Motorola shall bear the transportation costs when
returning repaired module/assemblies to the Distributor.
2.6 EXPRESS EXCHANGE
At Motorola's sole discretion the Distributor may be permitted to
participate in Motorola's Express Exchange Programme.
2.6.1 Motorola shall provide to the Distributor such assistance as is
reasonably necessary in setting up an Express Exchange
Programme, or similar, to support the Distributor's own
customers and end users. The Distributor shall be responsible
for establishing the Express Exchange Centres and for
implementing the programme.
2.6.2 Motorola shall provide free of charge to the Distributor a "to
be determined" quantity of product transceivers on a loan basis
to support the warranty base, as well as a master copy of
promotional material and relevant documentation.
2.6.3 The Express Exchange pool of transceivers shall remain the
property of Motorola.
Page 15
MOTOROLA CONFIDENTIAL PROPRIETARY
<PAGE>
CELLSTAR DISTRIBUTOR SUPPLY AGREEMENT
GSM 2.6.4 In the event that across-border visitor using a Motorola
branded transceiver experiences a warranty failure, service
assistance will be provided via the Express Exchange programme
providing the transceiver is in warranty. The Distributor shall
submit a warranty claim to Motorola to cover such assistance
giving details of the transceiver model and MSN - Customer Name
and Country of Origin - Customer's Telephone Number. Motorola
will reimburse the Distributor accordingly.
3. TYPE APPROVAL
-------------
3.1 All Products supplied under the terms of this Agreement shall have
type approval from the relevent competent authority which shall be the
responsibility of Motorola. The Distributor shall provide reasonable
assistance to Motorola in order to fulfil this responsibility; such
assistance shall not be unreasonably withheld.
3.2 Motorola warrants that the products meet the essential requirements of
NET 10 in effect as of the date of declaration (GSM11.10 vg 3.8.0).
Page 16
MOTOROLA CONFIDENTIAL PROPRIETARY
<PAGE>
EXHIBIT 10.48
---------------------------------------------------------------
CELLSTAR UK LTD - MOTOROLA Ltd
ACCESSORY SUPPLY AGREEMENT
---------------------------------------------------------------
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 1
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT BY "[REDACTED]".
<PAGE>
ACCESSORY SUPPLY AGREEMENT
--------------------------
CONTENTS
1. Parties of the Contract
2. Accessories
3. Territory
4. Prices
5. Duration
6. Order and Delivery
7. Marketing
8. Independent Contractors
9. Payment Terms
10. Warranty
11. Resale Conditions
12. Proprietary Rights
13. Governing Law and Language
14. Assignability
15. Survival of Terms
16. Headings
17. Waiver
18. Void Terms
19. Entire Agreement
20. Modifications to this Contract
21. Termination
22. MOTOROLA liability
23. Force Majeure
24. Export Control Regulations
25. Sales to the US Government
26. Ethical Standards
27. Previous Agreement
28. Schedule
- Schedule A : MOTOROLA Branded Accessories/Pricing
29. Appendices
30. Signatures to the Agreement
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 2
<PAGE>
1. PARTIES OF THE CONTRACT
-----------------------
MOTOROLA Limited Trading As European Cellular Subscriber Group,
Registered Offices Jays Close
Viables Industrial Estate
Basingstoke
Hampshire, RG22 4PD
ENGLAND
represented by Don BURNS
Corporate Vice President and General Manager Europe
- -hereinafter called MOTOROLA-
and CELLSTAR UK Limited
Bushbury House
435 Wilmslow Road
Withington,
Manchester, M20 9AF
ENGLAND
represented by Alan GOLDFIELD
Chairman and CEO
- -hereinafter called CELLSTAR
2. ACCESSORIES
-----------
2.1 MOTOROLA shall manufacture and deliver accessories for Cellular Subscriber
equipment and associated items (hereinafter collectively known as
"Accessories") to CELLSTAR Ltd in accordance with the terms of this Agreement.
2.2 CELLSTAR will use its best endeavour to market and sell as a non exclusive
distributor the MOTOROLA original accessories, selected in MOTOROLA product
range, to be used with MOTOROLA cellular phones. As a principle, CELLSTAR
commits to promote in priority the MOTOROLA Original accessories whenever
possible. CELLSTAR will avoid misunderstanding from the market concerning
manufacturing origin of MOTOROLA accessory and will focuse on growing the sales
of MOTOROLA original accessories in its current channels.
2.3 The Accessories shall be manufactured and supplied in accordance with
MOTOROLA proprietary specifications and shall bear the part numbers listed in
schedule A to this agreement and as amended in writing from time to time by
mutual agreement between MOTOROLA and CELLSTAR. The branding of the accessories
in schedule A shall include the MOTOROLA name and logo. The Accessories will be
supplied in bulk (i.e. non packaged).
2.4 MOTOROLA may revise the list of Accessories from time to time upon prior
written notice to CELLSTAR. At its sole discretion MOTOROLA may also without any
notice modify the design or material specifications of any Accessories or parts
thereof in order to improve the reliability, quality, safety or cost
effectiveness of the Accessories.
3. TERRITORY
---------
3.1 The area of marketing responsibilities for CELLSTAR is Europe.
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 3
<PAGE>
CELLSTAR shall have a prime focus on France, Germany and United Kingdom which
are hereinafter known as the "Territory".
4. PRICES
------
4.1 The prices to be paid by CELLSTAR and general buying terms for the
Accessories are as set out in schedule A to this agreement.
4.2 MOTOROLA shall inform CELLSTAR of any change in price in writing without
delay. The reduction of the price for Accessories shall apply for all orders on
hand with MOTOROLA as well as new orders and shall further apply to Accessories
delivered 30 days prior to the date of introduction of the new MOTOROLA Net
Price and still in CELLSTAR's inventory.
In order to claim, CELLSTAR shall submit each month in writing to MOTOROLA a
statement of their inventory.
5. DURATION
--------
5.1 The effective start date of this agreement is June 1st, 1996 and shall
terminate on December 31st, 1997.
5.2 This agreement shall be extended for a successive one year period upon
written agreement between parties at least 30 days prior to the end of current
terms, if not terminated under clause 18.
5.3 Both parties will hold quarterly review meetings to address the
performance of the agreement.
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 4
<PAGE>
6. ORDER AND DELIVERY
------------------
6.1 Commencing with the start of the contract and subsequently before the start
of each month, CELLSTAR shall advise MOTOROLA of its requirements based on a 12
month rolling forecast. During the first three (3) months following execution of
this Agreement, such forecast shall be used only as a forecasting tool.
Beginning with months four and five, the forecasted purchases shall represent a
fixed order for Accessories to be delivered. Individually each of the next two
months can be modified by + ou - 20% from the prior delivery program. The
remaining 8 months of this program shall be used only as a forecast.
6.2 Any orders for the Accessories shall be placed by means of written
communications from CELLSTAR. Such orders shall be acknowledged in writing by
MOTOROLA within 5 days upon receipt of such order.
6.3 MOTOROLA agrees that CELLSTAR may submit orders on CELLSTAR's purchase
order form. The terms of this Agreement, as amended from time to time, shall
solely govern the sale of the Accessories to CELLSTAR, and any terms in
CELLSTAR's purchase order or otherwise which vary from the provisions and
conditions of this Agreement shall be null and void.
6.4 All orders shall be addressed to the MOTOROLA Cellular subsidiary office in
the country in which CELLSTAR will settle its operation to the attention of
CELLSTAR Account Manager. No order is binding on MOTOROLA until it is accepted
by MOTOROLA.
6.5 Shipment of accessories will be delivered Freight and Duty Paid to a single
CELLSTAR warehouse in Europe (which may change in time) as designated by
CELLSTAR.
6.6 MOTOROLA will endeavour to accept orders from CELLSTAR which are in
compliance with this Agreement and to deliver Accessories ordered by CELLSTAR
by the date(s) confirmed by MOTOROLA. MOTOROLA shall, however, in no event be
liable or indemnify CELLSTAR losses, damages, penalties, etc. resulting from
delays in the delivery or failure to deliver the accessories.
6.7 By the 10th business day of every month, CELLSTAR will provide MOTOROLA
with details of its month-end MOTOROLA sourced inventory.
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 5
<PAGE>
6.8 By the 10th business day of every month, CELLSTAR will provide MOTOROLA
with the numbers of units of each product sold to third parties in each
country in the territory and in addition will supply :
- - weekly sell through data by country,
and on a monthly basis :
- - market share data,
- - competitive product lines, end user sell out pricing,
- - market promotional/advertising details of competitors,
- - introduction/assessment of new product lines,
- - other data may be determined from time to time.
7. MARKETING
---------
7.1 CELLSTAR shall use the MOTOROLA Original Accessory Logo on their
packages and documentation strictly in accordance with MOTOROLA requirements.
8. INDEPENDENT CONTRACTORS
-----------------------
8.1 MOTOROLA and CELLSTAR are independent contractors. The relationship
between MOTOROLA and CELLSTAR is intended to be and shall be that of seller and
buyer, neither party nor its employees, agents and representatives shall under
any circumstances be considered agents, partners, joint venturers, employees or
representatives of the other party. Neither party shall act or attempt to act,
or represent itself, directly or by implication, as agent, partner, employee,
joint venturer, or representative of the other party or any of its affiliates;
nor shall either party in any manner assume or attempt to assume or create any
obligation or liability of any kind, nature or sort, express, or implied, on
behalf of or in the name of the other party or any of its affiliates.
9. PAYMENT TERMS
-------------
9.1 CELLSTAR shall pay each MOTOROLA invoice according to the terms stated
below :
- - Prices are in U.S $ and may be converted in local currrency at time of
billing upon a local agreement,
- - Payment terms are standard 30 days net from date of invoice, early
settlement discount is available at 2 % for cash with order or 1 % for
settlement within 14 days of the date of invoice,
- - MOTOROLA reserves the right to amend the payment or settlement terms at
their sole discretion.
9.2 If CELLSTAR shall fail to pay any invoice which is due or in the event
that MOTOROLA, in its reasonable discretion, deems CELLSTAR's financial
condition inadequate, MOTOROLA shall have the right, in addition to its other
rights hereunder, to suspend shipments of Accessories.
10. WARRANTY AND SERVICE SUPPORT
----------------------------
10.1 The cellular accessories are warranted by MOTOROLA to be of satisfactory
quality and comply with the applicable MOTOROLA specifications for a period of
(15) fifteen months from the date of delivery to CELLSTAR.
This warranty does not apply
Page 6
<PAGE>
- - if the accessory has been mishandled, misused, wilfully damaged, neglected,
improperly tested, repaired, altered or defaced in any way,
- - if the accessory has a defect arising as a result of any failure to follow
instructions either in the manual or product specification,
- - if the accessory has a defect which has arisen from the use of non-MOTOROLA
approved telephone or ancilliary items attached to or in connection with the
accessory.
11. RESALE CONDITIONS
-----------------
11.1 CELLSTAR has to use its best endeavour to sell, store, transport,
advertise any Product supplied by MOTOROLA in accordance with local law.
11.2 The Accessories supplied by MOTOROLA shall be resold and delivered by
CELLSTAR on a first-in first-out basis.
12. PROPRIETARY RIGHTS
------------------
12.1 CELLSTAR agrees that it will not impair MOTOROLA's right, title, or
interest in its corporate name(s) or logo(s), or any parts thereof, or to
trademarks or tradenames used on or in connection with MOTOROLA's Accessories
and agrees that nothing herein shall grant to CELLSTAR any such right, title
or interest.
CELLSTAR shall not encourage any practice which might be detrimental to the
goodwill of MOTOROLA or MOTOROLA's accessories.
12.2 MOTOROLA agrees to defend at its expense, any claims or suits against
CELLSTAR based upon a claim that any accessories furnished hereunder directly
infringes a third party patent, copyright or trademark and to pay costs and
damages finally awarded in any such suit, provided that MOTOROLA is notified
promptly in writing of the suit and at MOTOROLA's request and at its expense
is given control of said suit and all requested assistance for defense of
same. If the use or sale of a Product(s) furnished hereunder is enjoined as a
result of suit, MOTOROLA at its option and at no expense to CELLSTAR, shall
obtain for CELLSTAR the right to use or sell said Product(s) or shall
substitute an equivalent Product reasonably acceptable to CELLSTAR to return
Product(s) and discontinue further sales and MOTOROLA shall reimburse CELLSTAR
the purchase price thereof.
12.3 This indemnity does not extend to any suit based upon any infringement or
alleged infringement of any patent, copyright or trademark by the combination
of any Product(s) furnished by MOTOROLA and other elements nor does it extend
to any product(s) of CELLSTAR's design or formula. The foregoing states the
entire liability of MOTOROLA for patent, copyright or trademark infringement.
12.4 In no event shall MOTOROLA be liable for incidental or consequential
damages arising from infringement or infringement of patents, copyrights or
trademarks.
12.5 MOTOROLA has certain rights in MOTOROLA software, firmware or computer
programs or data residing in the Accessories (hereinafter referred to
collectively as Software), including without limitation the right to
prepare works derived from same in copies and distribute copies of same.
CELLSTAR shall not prepare works derived from reproduced copies or distributed
copies of any MOTOROLA Software except for demonstration purposes.
13. GOVERNING LAW AND LANGUAGE
--------------------------
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 7
<PAGE>
13.1 This Agreement and the rights and duties of the Parties shall be governed
and interpreted according to Laws of England and any dispute shall be subject
to the exclusive jurisdiction of the English Courts.
13.2 The Agreement and any amendments will be prepared in the English
language. Translations may be made from the English original, but in
interpretation the English version will always take precedence.
14. ASSIGNABILITY
-------------
14.1 No assignment of the Agreement by CELLSTAR or any right or obligation
hereunder shall be made by CELLSTAR without the prior written consent of
MOTOROLA.
15. SURVIVAL OF TERMS
-----------------
15.1 Any obligation and responsibilities which by their nature extend beyond
the expiration or termination of this Agreement shall survive and remain in
effect.
16. HEADINGS
--------
16.1 The headings used in this Agreement are for convenience only and shall
not used in order to construe the terms of this Agreement.
17. WAIVER
------
17.1 No waiver by either party of any of its rights hereunder shall prejudice
its ability to enforce such rights.
18. VOID TERMS
----------
18.1 Any provision of this Agreement is found by any court or competent
authority to be void or unenforceable, such provision shall be deemed to be
deleted from this Agreement and the remaining provisions shall be given effect
so far as is possible. Notwithstanding the foregoing the parties shall
negotiate in good faith in order to agree the terms of a mutually satisfactory
provision to be substituted for the provision so found to be void or
unenforceable.
19. ENTIRE AGREEMENT
----------------
19.1 This Agreement, its schedule and the NDA are the complete and exclusive
statement of the Agreement between the parties which supersedes all proposals
or prior Agreement oral and written and all communications between the
relating to subject matter of this Agreement.
20. MODIFICATIONS TO THIS CONTRACT
------------------------------
20.1 Any revisions to this Agreement must be agreed upon in writing by both
CELLSTAR and MOTOROLA and must be signed by authorized representatives of both
companies. Such revisions shall at all times be governed by the terms of this
Agreement.
21. TERMINATION
-----------
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 8
<PAGE>
21.1 Notwithstanding the terms of clause 5, either party may terminate this
Agreement prematurely upon 7 days written notice to the other party of a
fundamental breach by the other party of its obligations, provided that if any
breach is capable of being remedied, the other party shall not terminate the
Agreement unless and until the breaching party shall have failed to make good
such breach within 30 days after such party has been serviced with a notice
requiring the breach to be made good stating that the notifying party intends
to terminate the Agreement as the end of such 30 days if the notice is not
complied with. Furthermore, MOTOROLA is entitled to terminate the Contract
without advance notice, should payments by CELLSTAR, despite request, be
more than two months overdue.
Notice of termination must be given by written letter.
21.2 On the expiration or termination of the Contract, CELLSTAR has to return
to MOTOROLA all information in his possession as well as the documents placed
at his disposal by MOTOROLA.
21.3 No claims for compensation can be lodged by reason of the Contract, save
where these claims are based on the breach of contractual provisions by one of
the Parties or the default of one of the Parties.
22. MOTOROLA LIABILITY
------------------
22.1 MOTOROLA's entire liability whether in contract or tort including
negligence and CELLSTAR sole remedies in respect of any default are as set out
in this clause 22.
22.2 MOTOROLA will accept liability without limitation for death or personal
injury resulting from the negligence of MOTOROLA.
22.3 MOTOROLA will accept liability for direct physical damage to tangible
property of CELLSTAR to the extent it is caused by the negligence of MOTOROLA,
up to a maximum of 1 million Pound Sterlings, subject to the exclusions set
out in 22.4 below.
22.4 Except as provided in 22.2, above, MOTOROLA shall not be liable for loss
of profits, business, revenue, goodwill anticipated saving special indirect or
consequential losses even if foreseeable by or in the contemplation of
MOTOROLA or for any claim made against CELLSTAR by any other person. In no
event shall MOTOROLA be liable for incidental or consequential damages arising
from infringement or alleged infringement of patents or copyrights.
22.5 Except in the case of any liability on the part of MOTOROLA, MOTOROLA's
total liability in respect of any default shall not exceed a 110 % of the value
of the accessories which are the subject of the default in respect of any one
occurrence. A number of defaults which together result in or contribute to the
same loss or damage shall be treated as one occurrence in assessing MOTOROLA's
liability. MOTOROLA shall always be afforded a reasonable opportunity to correct
any default before being in breach of its obligations.
MOTOROLA CELLSTAR Contact
CONFIDENTIAL
Page 9
<PAGE>
22.6 Except in respect of liability referred to in 22.2 no action arising out
of or in connection with this Agreement shall be brought by either party more
than two years after the party concerned becomes aware or should reasonably have
become aware of the facts constituting the cause of action.
22.7 Except as expressly stated in this Agreement, all conditions, warranties,
and undertakings express or implied statutory or otherwise are hereby excluded
to the maximum extend permitted by the law.
23. FORCE MAJEURE
-------------
23.1 Neither party shall be under any liability whatsoever in respect of any
breach of this Agreement to the extent that it is due directly or indirectly to
any cause of any nature howsoever arising not within the control of the party
who is affected including (without limitation to the generality of the
foregoing) hostilities, government action, labour disputes, fire, flood or Act
of God.
24. EXPORT CONTROL REGULATIONS
--------------------------
24.1 CELLSTAR agrees to comply with any export control regulation due to US and
the local laws under which the two parties are incorporated. MOTOROLA shall
provide all valid documentation material according to US Law referring to
accessories.
25. SALES TO THE US GOVERNMENT
--------------------------
25.1 In the event that CELLSTAR elects to sell MOTOROLA's accessories or
services to the US government, CELLSTAR does so solely at its own option and
risk. CELLSTAR remains solely and exclusively responsible for compliance with
all statutes and regulations governing sales to the US Government. MOTOROLA
makes no representations, certifications or warranties whatsoever with respect
to the ability of its goods, services or prices to satisfy any such statutes or
regulations.
26. ETHICAL STANDARDS
-----------------
26.1 MOTOROLA has historically depended on product quality and superiority
combined with outstanding support capability, to sell its accessories in all
parts of the world. MOTOROLA believes it can continue to grow and to prosper
without succumbing to legally questionable or unethical demands. MOTOROLA will
not do business with any distributor, agent, customer or any other person where
MOTOROLA knows or suspects the existence of questionable practices. CELLSTAR
agrees with the MOTOROLA policy stated in this paragraph and agrees that failure
of CELLSTAR to comply in all respects with said policy shall constitute a just
cause for immediate termination of this agreement in addition to terms of clause
18.
27. PREVIOUS AGREEMENT
------------------
This Agreement replaces any previous agreement covering the Product specified
herein.
28. SCHEDULES
---------
28.1 The schedule outlined below, is an integral part of this Agreement :
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 10
<PAGE>
Schedule A - MOTOROLA Branded Accessories/Pricing
29. APPENDICES
----------
Appendix 1: Mutual Non-Disclosure Agreement.
Appendix 2: Financial backup from CELLSTAR Corporation (USA)
30. SIGNATURES TO THE AGREEMENT
---------------------------
CELLSTAR LIMITED MOTOROLA LIMITED
EUROPEAN CELLULAR SUBSCRIBER DIVISION
Alan GOLDFIELD Don BURNS
/s/ Alan H. Goldfield /s/ Don Burns
SIGNATURE SIGNATURE
10-21-96 25/10/96
DATE DATE
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 11
<PAGE>
--------------------------
ACCESSORY SUPPLY AGREEMENT
SCHEDULE A
--------------------------
1. Turnover commitment
-------------------
The prices defined in Schedule A are defined for a yearly running rate of 10
M$ after a ramp up of 6 months following the signature of the contract.
A quarterly meeting will take place to review achievements and pricing
accordingly.
2. Pricing
-------
The pricelist consists in the attached documents:
. List A : 2 pages
. List B : 2 pages
The pricelist may be amended from time to time.
Prices are valid for a single shipping location in Europe.
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 12
<PAGE>
APPENDIX 1
----------
MUTUAL NON-DISCLOSURE AGREEMENT
-------------------------------
AGREEMENT, made this day of October 1996, between Motorola Limited having
-----
offices at Midpoint, Alencon Link, Basingstoke, Hampshire RG21 7PL, UK
(hereinafter MOTOROLA) and CELLSTAR Corporation, World Headquarters, 1730
Briercroft Court Carrollton, TX 75006 USA (hereinafter THE COMPANY).
Whereas THE COMPANY desires to market and sell MOTOROLA Original accessories for
cellular subscriber equipment and MOTOROLA desires to manufacture and deliver
accessories for cellular subscriber equipment.
In consideration of the mutual covenants and conditions set forth herein and
other good and valuable consideration THE COMPANY and MOTOROLA in respect of
CONFIDENTIAL INFORMATION hereby agree :
By this AGREEMENT, CONFIDENTIAL INFORMATION is defined as meaning information
identified as or relating to MOTOROLA's cellular subscriber products, future
products, accessories therefor, product plans, business plans, marketing plans,
manufacturing techniques, as well as COMPANY's business plans, products plans,
and cellular subscriber accessories (hereinafter THE PRODUCT) which is disclosed
in oral, written, graphic, machine recognisable, sample form and/or any other
tangible form, by one party to the other party, and which is clearly designated,
labelled or marked as confidential or its equivalent at the time of disclosure.
In order for information disclosed orally to be considered confidential it shall
be confirmed in writing within thirty (30) days after such oral disclosure.
The parties hereby agree that for a period of three (3) years (the CONFIDENTIAL
PERIOD) following the date of sending of an item of CONFIDENTIAL INFORMATION,
each shall (1) restrict dissemination of the item of CONFIDENTIAL INFORMATION of
the other party to only those employees (and the employees of Motorola, Inc. and
any subsidiary companies of Motorola, Inc., where necessary) who must be
directly involved with THE PRODUCT and (2) use the same degree of care as for
its own information of like importance, but at least use reasonable care, in
safeguarding against disclosure of the item of CONFIDENTIAL INFORMATION of the
other party.
The party receiving the CONFIDENTIAL INFORMATION from the disclosing party
agrees that this CONFIDENTIAL INFORMATION is and shall at all times remain the
property of the disclosing party. No grant under any of the disclosing party's
intellectual property rights is hereby given or intended, including any license
implied or otherwise.
During the term of this AGREEMENT and not withstanding the other provisions of
this AGREEMENT, nothing received by either party shall be construed as
CONFIDENTIAL INFORMATION which is now available or becomes available to the
public without breach of this AGREEMENT, is released in writing by the
disclosing party, is lawfully obtained from a third party not obligated under
this AGREEMENT and without confidential limitation, is known to the receiving
party prior to such disclosure or is at any time developed by the receiving
party independently of any such disclosure or disclosures from the disclosing
party.
Any property including but no limited to equipment, components and product
samples, furnished by MOTOROLA to THE COMPANY shall be returned to MOTOROLA
upon its request.
In the course of its relationship with the COMPANY, MOTOROLA may provide THE
COMPANY with access to electronic media or computer systems to retrieve MOTOROLA
DATA therefrom for use by THE COMPANY in providing products or services to
MOTOROLA. THE COMPANY agrees that such MOTOROLA DATA shall be deemed to be
CONFIDENTIAL INFORMATION subject to the terms and conditions of this AGREEMENT,
and therefore agrees
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 13
<PAGE>
to maintain the confidentiality of such MOTOROLA DATA and not disclose the same
to any third party, except as authorised by MOTOROLA in writing. THE COMPANY
agrees to destroy all such MOTOROLA DATA and copies thereof upon the request of
MOTOROLA.
This AGREEMENT shall expire three (3) years from the date of final signature
below, unless terminated in writing by either party. Notwithstanding the
foregoing, the duty of confidentiality for CONFIDENTIAL INFORMATION disclosed
the expiry of this AGREEMENT shall be for the CONFIDENTIAL PERIOD.
THE COMPANY shall not export, directly or indirectly, any technical data
acquired from MOTOROLA under this AGREEMENT or any products utilising any such
data to any country for which the U.S. Government or any agency thereof at the
time of export requires an export license or other Government approval without
first obtaining such licence or approval.
This AGREEMENT shall be governed by and construed in accordance with the Laws of
England and the Jurisdiction of the English Courts.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be executed by
their duly authorised representatives and to become effective from the date of
final signature below.
AGREED: /s/Alan H. Goldfield AGREED: /s/Don Burns
----------------------------- ---------------------------------
(Authorised Signature) (Authorised Signature)
by: Alan H. Goldfield by: Don Burns
------------------------------ ---------------------------------
(Name - please print) (Name - please print)
Title: Chairman, CEO Title: Snr. V.P. G.M., ECSD.
------------------------------ ---------------------------------
(please print) (please print)
Date: 10-21-96 Date: 25/10/96
------------------------------ ---------------------------------
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 14
<PAGE>
APPENDIX 2
----------
Accessory Supply Agreement
--------------------------
Review 2 - 24/09/96
-------------------
CELLSTAR Corporation
located at 1730 Briercroft Ct, Carrolton, TX 75006, USA
and
represented by its Chairman Alan H. GOLFIELD
commits to guarantee any oustanding indebtedness of its UK subsidiary,
CELLSTAR UK Limited, to MOTOROLA under the terms of the above referenced
Accessory Supply Agreement.
/s/Alan H. Goldfield
- ------------------------------------
Alan H. GOLDFIELD
Chairman and Chief Executive Officer
MOTOROLA CELLSTAR Contract
CONFIDENTIAL
Page 15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LIST A ALL PRICES EXCLUDE LOCAL TAXES 9/10/96 Cellstar
- -------------------------------------------------------------------------------------------------------------------------
P / N DESCRIPTION CONTENTS AVAIL USD $
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHARGERS / CLA [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SPN4222 EP Euro adaptor SPN4222 Now
- -------------------------------------------------------------------------------------------------------------------------
SPN4221 EP UK adaptor SPN4221 Now
- -------------------------------------------------------------------------------------------------------------------------
SPN4216 EP charger base SPN4216 Now
- -------------------------------------------------------------------------------------------------------------------------
SKN4292 Battery saver SKN4292 Now
- -------------------------------------------------------------------------------------------------------------------------
SLN9933 Ultra saver (no RF connection) SLN9933 Now
- -------------------------------------------------------------------------------------------------------------------------
Intelli XT charger w/Euro SLN9347 + SPN4112 Now
- -------------------------------------------------------------------------------------------------------------------------
Intelli Xt charger w/UK SLN9347 + SPN4111 Now
- -------------------------------------------------------------------------------------------------------------------------
S4160 Univ. Trvl chgr w/Euro S4160 3Q96
- -------------------------------------------------------------------------------------------------------------------------
S4259 Univ. Trvl chgr w/UK S4259 3Q96
=========================================================================================================================
LEATHER CASE [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SLN8500 Leather Carry Case SLN8500 Now
- -------------------------------------------------------------------------------------------------------------------------
CAR KITS
- -------------------------------------------------------------------------------------------------------------------------
S3060 Professional Charger Car Kit S3060 Now
- -------------------------------------------------------------------------------------------------------------------------
S3062 Professional ETACS Car Kit S3062 Now
- -------------------------------------------------------------------------------------------------------------------------
S3285 Professional GSM HF Car Kit 7000 S3285 Now
- -------------------------------------------------------------------------------------------------------------------------
S4386 8000/Flare Car Kit Straight Cord S4386 w/SKN4720 Now
- -------------------------------------------------------------------------------------------------------------------------
S5311 8000/Flare Car Kit 4 Turns Cord S5311 w/SKN4719 Now
- -------------------------------------------------------------------------------------------------------------------------
S5559 8000/Flare Car Kit Full Cord S5559 w/SKN4632 Now
- -------------------------------------------------------------------------------------------------------------------------
S4387 Professional Elite HF Car Kit S4387 Now
- -------------------------------------------------------------------------------------------------------------------------
S4418 Professional Car Kit - Coupled S4418 Now
=========================================================================================================================
ELITE HEADSET [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SLN6660 Elite Handsfree headset SLN6660 Now
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
List A StarTAC & ALL PRICES EXCLUDE LOCAL TAXES 9/10/96 Cellstar
Modulus
- -------------------------------------------------------------------------------------------------------------------------
P / N DESCRIPTION CONTAINED P/N AVAIL USD $
- -------------------------------------------------------------------------------------------------------------------------
Chargers and adaptors StarTAC [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SYN4656 UK AC Plug SYN4656
- -------------------------------------------------------------------------------------------------------------------------
SYN4655 Euro AC Plug SYN4655
- -------------------------------------------------------------------------------------------------------------------------
SPN2083 Travel charger with Euro plug SPN4278, SYN4655
- -------------------------------------------------------------------------------------------------------------------------
SPN2084 Travel charger with UK plug SPN4278, SYN4656
- -------------------------------------------------------------------------------------------------------------------------
SPN4278 Power Supply SPN4278
- -------------------------------------------------------------------------------------------------------------------------
SPN4279 Charger Base SPN4279
- -------------------------------------------------------------------------------------------------------------------------
SPN2086 Charger base with Euro Plug SPN4279, SPN4278, SYN4655
- -------------------------------------------------------------------------------------------------------------------------
SPN2087 Charger base with UK Plug SPN4279, SPN4278, SYN4656
- -------------------------------------------------------------------------------------------------------------------------
SYN4241 Ultra saver - CLA SYN4241 Sept.
- -------------------------------------------------------------------------------------------------------------------------
Batteries StarTAC (ETACS) [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SNN4809 500 mA Slim Main Black - Li.Ion SNN4809 Sept.
- -------------------------------------------------------------------------------------------------------------------------
SNN4810 500 mA Slim Main Charcoal - Li.Io SNN4810
- -------------------------------------------------------------------------------------------------------------------------
SNN4814 900 mA XCap Main Black - Li. Ion SNN4814 Sept.
- -------------------------------------------------------------------------------------------------------------------------
SNN4815 900 mA XCap Main Charcoal - Li SNN4815
- -------------------------------------------------------------------------------------------------------------------------
SNN4819 900 mA Slim Aux. Black - Li.Ion SNN4819 Sept.
- -------------------------------------------------------------------------------------------------------------------------
SNN4820 900 mA Slim Aux. Charcoal - Li.Io SNN4820
- -------------------------------------------------------------------------------------------------------------------------
Carry Cases StarTAC [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SHN5799 Holster SHN5799 Sept.
- -------------------------------------------------------------------------------------------------------------------------
SYN4898 Leather Pouch SYN4898
- -------------------------------------------------------------------------------------------------------------------------
SYN4899 Purse PAK Brown SYN4899
- -------------------------------------------------------------------------------------------------------------------------
SYN4900 Purse PAK Black SYN4900
- -------------------------------------------------------------------------------------------------------------------------
Hands Free Car Kit StarTAC [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SYN4937 H/F Headset Black SYN4937 Sept.
</TABLE>
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
List A StarTAC ALL PRICES EXCLUDE LOCAL TAXES 9/10/96 Cellstar
Modulus
- -------------------------------------------------------------------------------------------------------------------------
P / N DESCRIPTION CONTENTS AVAIL USD $
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S5529 H/F Car Kit SLN3500, SKN4762, SKN4781, [REDACTED]
SJN6392, SMN4083, SSN4002,
SYN4999
- -------------------------------------------------------------------------------------------------------------------------
Chargers and adaptors Modulus [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SYN4656 UK AC Plug SYN4656
- -------------------------------------------------------------------------------------------------------------------------
SYN4655 Euro AC Plug SYN4655
- -------------------------------------------------------------------------------------------------------------------------
SPN4364 Standard charger with UK plug SPN4364
- -------------------------------------------------------------------------------------------------------------------------
SPN4365 Standard base with Euro Plug SPN4365
- -------------------------------------------------------------------------------------------------------------------------
SPN4366 Rapid charger SPN4366
- -------------------------------------------------------------------------------------------------------------------------
SYN5383 CLA SYN5383 Sept.
- -------------------------------------------------------------------------------------------------------------------------
Batteries Modulus (ETACS) [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SNN4802 NiCd Battery SNN4802
- -------------------------------------------------------------------------------------------------------------------------
SNN4803 NiMH Battery SNN4803
- -------------------------------------------------------------------------------------------------------------------------
Hands Free Car Kit Modulus [REDACTED]
- -------------------------------------------------------------------------------------------------------------------------
SYN5623 HUC SYN5623
- -------------------------------------------------------------------------------------------------------------------------
SYN5532 Headset Adaptor SYN5532
- -------------------------------------------------------------------------------------------------------------------------
DHFA SLN3716 + SYN5383
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
10/09/1996
LIST B ALL PRICES EXCLUDE LOCAL TAXES Cellstar
- --------------------------------------------------------------------------------------
Ref P / N DESCRIPTION USD $
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cigarette Lighter Adapters ("Battery savers") [REDACTED]
- --------------------------------------------------------------------------------------
SLN9934 CLA with RF connection for GSM 8000/Flare
- --------------------------------------------------------------------------------------
Car kits [REDACTED]
- --------------------------------------------------------------------------------------
S1744 UK Deluxe CVC
- --------------------------------------------------------------------------------------
S2093 UK Super Deluxe CVC
- --------------------------------------------------------------------------------------
S2088 Austria Deluxe CVC
- --------------------------------------------------------------------------------------
S2095 Austria Super Deluxe CVC
- --------------------------------------------------------------------------------------
S2089 Spain Deluxe CVC
- --------------------------------------------------------------------------------------
S2096 Spain Super Deluxe CVC
- --------------------------------------------------------------------------------------
S2087 Italy Deluxe CVC
- --------------------------------------------------------------------------------------
S2094 Italy Super Deluxe CVC
- --------------------------------------------------------------------------------------
S2409 NMT Deluxe CVC
- --------------------------------------------------------------------------------------
S2426 NMT Super Deluxe CVC
- --------------------------------------------------------------------------------------
S2336 Second Car Kit W/HFA
- --------------------------------------------------------------------------------------
S3071 Second Car Kit W/HFA
- --------------------------------------------------------------------------------------
S2348 Second Car Kit W/HFA
- --------------------------------------------------------------------------------------
S3233 GSM International 2500 Car Kit
- --------------------------------------------------------------------------------------
Mobile Installation [REDACTED]
- --------------------------------------------------------------------------------------
SLN7293 Mobile XCVR Mounting Bracket
- --------------------------------------------------------------------------------------
SLN3194 Hang-Up Cup with Card Reader
- --------------------------------------------------------------------------------------
SSN4256 HFA External Speaker
- --------------------------------------------------------------------------------------
Transportable kits [REDACTED]
- --------------------------------------------------------------------------------------
S2204 Spain Transportable Kit XCVR Series II
- --------------------------------------------------------------------------------------
S2205 Italy Transportable Kit XCVR Series II
- --------------------------------------------------------------------------------------
S3593 GSM International 2500 Transportable Car Kit
- --------------------------------------------------------------------------------------
S2167 UK Transportable Kit
- --------------------------------------------------------------------------------------
S2376 NMT Transportable Kit
- --------------------------------------------------------------------------------------
CCLN4134NMT450 Transportable Module
- --------------------------------------------------------------------------------------
Transformers and chargers [REDACTED]
- --------------------------------------------------------------------------------------
SPN4341 Overnight Charger (Transformer)
- --------------------------------------------------------------------------------------
SPN4321 Overnight Charger (Base)
- --------------------------------------------------------------------------------------
SPN4084 Euro. Overnight Internal Charger
- --------------------------------------------------------------------------------------
SPN4079 UK Overnight Internal Charger
- --------------------------------------------------------------------------------------
SPN4260 Euro. Rapid Internal Charger
- --------------------------------------------------------------------------------------
SPN4261 UK Rapid Internal Charger
- --------------------------------------------------------------------------------------
SPN4257 Euro. Slow Internal Charger
- --------------------------------------------------------------------------------------
SPN4258 UK Slow Internal Charger
- --------------------------------------------------------------------------------------
SPN2035 Euro. Single Station Overnght Charger Base & Transformer
- --------------------------------------------------------------------------------------
SPN4063 UK Rapid Lead Battery Charger
- --------------------------------------------------------------------------------------
SPN4064 Euro. Rapid Lead Battery Charger
- --------------------------------------------------------------------------------------
BATTERIES [REDACTED]
- --------------------------------------------------------------------------------------
NICD
- --------------------------------------------------------------------------------------
GP4 SNN4131 Slim 400mAh - Grey
- --------------------------------------------------------------------------------------
GP4 SNN4132 Slim 400mAh - Black
- --------------------------------------------------------------------------------------
GP6 SNN4102 Slim Extra Capacity 550mAh - Black
- --------------------------------------------------------------------------------------
GP6 SNN4104 Slim Extra Capacity 550mAh - Grey
- --------------------------------------------------------------------------------------
</TABLE>
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
10/09/1996
LIST B ALL PRICES EXCLUDE LOCAL TAXES Cellstar
- --------------------------------------------------------------------------------------
Ref P / N DESCRIPTION USD $
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
4/5 AF SNN4057 Extra Capacity 700 mAh - Black [REDACTED]
- --------------------------------------------------------------------------------------
4/5 AF SNN4058 Extra Capacity 1100 mAh - Black
- --------------------------------------------------------------------------------------
SNN4040 Standard 1500mAh - Black
- --------------------------------------------------------------------------------------
SNN4010 Standard 1500mAh - Grey
- --------------------------------------------------------------------------------------
SNN4025 Extra Capacity 3000mAh - Black
- --------------------------------------------------------------------------------------
SNN4024 Extra Capacity 3000mAh - Grey
- --------------------------------------------------------------------------------------
SNN4250 Slim 700mAh - Black
- --------------------------------------------------------------------------------------
SNN4251 Slim 700mAh - Grey
- --------------------------------------------------------------------------------------
SNN4324 NiCd battery - Black
- --------------------------------------------------------------------------------------
SNN4263 NiCd battery - Grey
- --------------------------------------------------------------------------------------
NIMH [REDACTED]
- --------------------------------------------------------------------------------------
SNN4836 AAA 500mAh - Black
- --------------------------------------------------------------------------------------
GP6 SNN4310 Slim Extra Capacity 750mAh - Black
- --------------------------------------------------------------------------------------
4/5 A/F SNN4258 Extra Capacity 1300mAh - Grey
- --------------------------------------------------------------------------------------
4/5 A/F SNN4259 Extra Capacity 1300mAh - Black
- --------------------------------------------------------------------------------------
LO5 SNN4612 Slim 600mAh - Black
- --------------------------------------------------------------------------------------
LO5 SNN4615 Slim 600mAh - Grey
- --------------------------------------------------------------------------------------
LI- ION [REDACTED]
- --------------------------------------------------------------------------------------
LP4 SNN4383 Slim 350mAh - Black
- --------------------------------------------------------------------------------------
18 x 65 SNN4458 Extra Capacity 1200mAh - Black
- --------------------------------------------------------------------------------------
SNN4459 Extra Capacity 1200mAh - Grey
- --------------------------------------------------------------------------------------
2xLSQ8 SNN4697 AAA Style Lithium
- --------------------------------------------------------------------------------------
Lead Acid [REDACTED]
- --------------------------------------------------------------------------------------
SNN4139 Lead Acid
- --------------------------------------------------------------------------------------
Handy Pak SNN4242 Handy Pak
- --------------------------------------------------------------------------------------
</TABLE>
"[REDACTED]" indicates confidential portions omitted and filed separately with
the Commission.
<PAGE>
EXHIBIT 10.49
SEPARATION AGREEMENT AND RELEASE
--------------------------------
This Separation Agreement and Release (hereinafter the "Agreement")
contains all terms and compromises reached between Kenneth E. Kerby ("Mr.
Kerby") and CellStar Ltd. ("Employer"), in connection with Mr. Kerby's
separation from employment with the Employer. It is the intent of the parties,
by entering into this Agreement, to resolve any and all disputes, claims or
causes of action which might now exist or arise in the future between them.
IT IS THEREFORE AGREED THAT:
1. Effective October 25, 1996, Mr. Kerby voluntarily resigns his
employment with the Employer and shall no longer be considered an employee of
Employer. Furthermore, effective October 25, 1996, Mr. Kerby voluntarily
resigned from all of his positions as an officer of CellStar Corporation and its
affiliated entities. Furthermore, effective upon execution of this Agreement,
Mr. Kerby also resigns from all of his positions as director of CellStar
Corporation and its affiliated entities.
2. In consideration for Mr. Kerby's promises and covenants in this
Agreement, the Employer agrees:
a. to pay Mr. Kerby's salary through October 25, 1996;
b. to continue to pay Mr. Kerby an amount as severance pay equal to his
monthly salary of $16,666.66 (less required withholding), payable in
accordance with Employer's standard procedures, from October 26, 1996,
until November 1, 1997;
c. to pay Mr. Kerby's cost for continued insurance coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") from October 26, 1996 through November 1, 1997;
d. that it will provide out placement services for Mr. Kerby for a period
of six (6) full calendar months;
e. that it will reimburse Mr. Kerby for legal fees incurred in connection
with the negotiation and execution of this Agreement, not to exceed One
Thousand Dollars ($1000.00); and
f. that it will provide a neutral reference to all third parties who
request a reference for Mr. Kerby by informing such parties that it is
company policy to only provide neutral references.
3. In consideration for the promises, payments and benefits provided
herein by Employer, and in order to fully compromise and settle any and all
claims and causes of action of any kind whatsoever relating to or arising out of
Mr. Kerby's employment with Employer, including any claim arising under common
law, contractual claim, or any other federal, state or local statute or
ordinance, Mr. Kerby agrees:
a. that Mr. Kerby will and hereby does unconditionally release, acquit and
forever discharge Employer, all of its parent, subsidiary or affiliate
companies, and all of their officers, directors, representatives,
employees or agents from any and all charges, complaints, claims,
causes of action, suits and expenses (including attorney fees and costs
actually incurred) of any nature whatsoever, known or unknown,
regarding any matter existing on or prior to the date hereof, including
those matters relating to or arising out of Mr.
1
<PAGE>
Kerby's employment or separation thereof from Employer, except as
contained in this instrument. THIS RELEASE INCLUDES, BUT IS NOT LIMITED
TO, TO ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF MR. KERBY'S
EMPLOYMENT WITH EMPLOYER, SEPARATION THEREOF, OR ANY BENEFITS
ASSOCIATED WITH SUCH EMPLOYMENT, INCLUDING ANY CLAIM UNDER TITLE VII OF
THE CIVIL RIGHTS ACTS OF 1964, THE AGE DISCRIMINATION IN EMPLOYMENT
ACT, OR ANY OTHER COMMON LAW, CONTRACTUAL OR STATUTORY CLAIM;
b. that Mr. Kerby will not file any charges or complaints against Employer
with the Equal Employment Opportunity Commission, the Texas Commission
on Human Rights, or any other local, state or federal agency or court,
and that if Mr. Kerby filed or has filed any such complaint or charge,
and/or if any such agency or court assumes jurisdiction of any
complaint or charge against Employer on behalf of Mr. Kerby, Mr. Kerby
will request such agency or court to withdraw from the matter and
dismiss said action.
4. Notwithstanding anything herein contained to the contrary, Mr. Kerby
shall have full rights of indemnification, to the same extent as other officers
and directors of the Employer have such rights, with respect to actions taken or
omitted by him on behalf of the Employer during his employment and also with
respect to any third-party claims.
5. Except as required by law, all parties agree that they will keep the
terms and amount of this Agreement completely confidential and that neither
party hereto will make any disparaging statements or allegations about the other
to any person or governmental agency, including comments about Employer's
employees, officers, directors or agents or about the reputations of Employer or
any such person. It is recognized that the Employer's parent company may be
required to file a copy of this Agreement with the Securities and Exchange
Commission, issue a press release relating to Mr. Kerby's separation, and make
other disclosures required of a public company pursuant to applicable law, and
any such filing, press release or disclosure shall not be deemed to violate the
provisions of this Agreement. The Employer shall not issue any press release
regarding Mr. Kerby without his prior written or telefaxed approval of the text.
6. With respect to any information or data, whatever its nature and form
and whether obtained orally, by observation, from written material or otherwise
obtained by Mr. Kerby during or as the result of Mr. Kerby's employment by the
Employer and relating to any business plans, customer lists, financial
information, financing arrangements or plans of the Employer or any of its
affiliated entities, Mr. Kerby agrees:
a. To hold all such information in strict confidence, and not publish or
otherwise disclose any thereof except to or with the prior consent of
any authorized representative of the Employer.
b. To use all reasonable precautions to assure that all such information
is properly protected and kept from unauthorized persons.
c. To make no use of any such information.
d. To deliver to the Employer all written materials containing or relating
to such information, all of which written materials and other things
shall be and remain the sole property of the Employer. For this
purpose, "written materials" shall be deemed to mean
2
<PAGE>
and include letters, memoranda, reports, notes, notebooks, books of
account, data and all other documents or writings, and all copies
thereof.
Mr. Kerby's agreement not to disclose information concerning this Agreement, the
Employer or any person connected with the Employer shall not apply to compulsory
disclosure pursuant to subpoena, deposition or other legal process. Mr. Kerby
shall promptly notify the Employer of the service of any subpoena or demand for
compulsory disclosure and shall refrain from making such disclosure for the
maximum period of time permitted by law, to permit the Employer to take such
actions as it may deem appropriate to have such service or demand set aside or
to protect the confidential nature of the information being sought.
8. In the event that Mr. Kerby breaches any provision of this Agreement
except for compulsory process, all future obligations of Employer under Section
2.b. of this Agreement shall cease. As a further material inducement to enter
into this Agreement, any party who breaches this Agreement must reimburse the
non-breaching party for any and all loss, cost, damage or expense, including,
without limitation, attorneys fees incurred as a result of any effort, action or
lawsuit to enforce this Agreement. In addition, any breach of the Agreement
will entitle the non-breaching party to seek injunctive relief to enforce this
Agreement and to recover any actual damages incurred as a result of said breach.
In the event of litigation, the losing party must pay the attorneys fees of the
prevailing party.
9. Mr. Kerby represents and acknowledges that in executing the Agreement
he does not rely and has not relied upon any representation made by Employer or
its agents, representatives or attorneys with regard to the subject matter,
basis or fact of said Agreement, except on those contained in this Agreement.
The parties agree that this Agreement represents a resolution of various matters
and shall not be construed to be an admission of any liability or obligation by
either party to the other party.
10. This Agreement shall be binding upon and inure to the benefit of Mr.
Kerby and upon Mr. Kerby's heirs, administrators, representatives, executors,
successors and assigns. This Agreement shall be binding upon and inure to the
benefit of the Employer, all of its parent, subsidiary and affiliated companies,
and any corporation or other entity into which or with which any thereof shall
be liquidated, merged or consolidated.
11. This Agreement is made within the State of Texas and shall in all
respects be interpreted, enforced and governed under the laws thereof, and shall
in all cases be construed as a whole (according to its fair meaning and not
strictly for or against any of the parties).
12. Should any provision of this Agreement be declared or be determined
illegal and invalid, the validity of the remaining parts will not be affected.
13. The parties, by their signatures below, represent and agree that (a)
each has read this Agreement carefully and completely, and understands all
provisions contained therein; (b) Mr. Kerby has been given a period of at least
twenty-one (21) days to consider and review this Agreement; and (c) Mr.
3
<PAGE>
Kerby is aware of his right to consult with legal counsel and has ample
opportunity to do so if he so desires.
14. No change or modification of this Agreement shall be valid unless in
writing and signed by all parties hereto.
15. Mr. Kerby will cooperate with Employer in response to requests for
information or assistance by Employer in connection with all matters relating to
or arising out of his employment with Employer.
16. Mr. Kerby agrees that he will not disclose material non-public
information about Employer or any of its parent, subsidiary or affiliate
companies to anyone other than Employer's officers, directors, attorneys and
accountants except to the extent compelled by compulsory process..
17. MY SIGNATURE BELOW INDICATES THAT I HAVE READ THE ABOVE AGREEMENT AND
VOLUNTARILY AGREE AND CONSENT TO THE TERMS AND CONDITIONS THEREIN.
/s/ Kenneth E. Kerby
- ------------------------------------ Signed in Carrollton, Texas
KENNETH E. KERBY on December 19, 1996
SUBSCRIBED AND SWORN to before me, the undersigned Notary Public on this
the 19th day of December, 1996.
/s/ Karen Taylor Jacks
----------------------------
Notary Public in and for the
State of Texas
[NOTARY SEAL APPEARS HERE]
Karen Taylor Jacks
My Commision Expires
February 20, 2000
FOR THE EMPLOYER:
CELLSTAR LTD.
By: National Auto Center, Inc.
By: /s/ Alan H. Goldfield Signed in Carrollton, Texas
---------------------------- on December 12, 1996.
Alan H. Goldfield
Chairman and CEO
SUBSCRIBED AND SWORN to before me, the undersigned Notary Public on this
the 12th day of December, 1996.
/s/ Mollyn Marie Shew
----------------------------
Notary Public in and for the
State of Texas
[NOTARY SEAL APPEARS HERE]
My Commission Expires
April 8, 2000
4
<PAGE>
EXHIBIT 10.50
LOAN AGREEMENT
--------------
The First National Bank of Chicago, Hong Kong Branch (the "Bank"), whose address
is 13/F Jardine House, 1 Connaught Place, Central, Hong Kong, agrees to extend
the credit facility described below to CellStar (Asia) Corporation Limited (the
"Borrower"), whose address is Rooms 509-510, 5/F, Block B, Sing Tao Building, 1
Wang Kwong Road, Kowloon bay, Kowloon, Hong Kong, under the terms and conditions
set forth in this agreement (the "Agreement").
1. CREDIT FACILITY
---------------
The Bank agrees to extend the following credit facility to the Borrower,
CellStar (Asia) Corporation Limited:
A United States Dollar Fifteen Million (US$15,000,000) revolving credit
(the "Credit Facility") maturing July 31, 1997, the proceeds of which will
be used for general working capital purposes and to negotiate export
commercial letters of credit which may contain discrepancies whereby the
Bank maintains full recourse to the Borrower.
2. CONDITIONS PRECEDENT
--------------------
The Borrower shall provide the Bank the following documents prior to the
extension of the Credit Facility:
(a) A copy of a Board Resolution of the Borrower authorizing the Borrower
to enter into this Agreement and appointing authorized persons to sign
all applications, notices and documents to be delivered hereunder.
(b) Specimen signatures of the authorized persons under the Board
resolution referred to in section 2(b) above.
(c) A copy of this Agreement duly executed by the Borrower.
(d) Corporate guarantees of CellStar Corporation, and National Auto
Center, Inc. (the "Guarantors").
(e) Board resolutions authorizing CellStar Corporation and National Auto
Center, Inc. to guarantee the Credit Facility.
(f) Copy of hazard and theft insurance policy covering inventory
maintained by Borrower.
(g) Such other documents as the Bank may reasonably require.
3. INTEREST RATES
--------------
Interest rates charged to the Borrower under the Credit Facility are based
on the interest rate pricing grids as defined in the National Auto Center,
Inc. credit facility ("Domestic Facility") which is attached as Exhibit A.
The Borrower agrees to pay the Bank interest calculated on a daily basis
and at the rates specified below on all amounts outstanding under the
Credit Facility. Interest will be calculated on the basis of actual days
elapsed in a year of 360 days. All payments will be applied first to
accrued interest, then to principal.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
2
(a) At Borrowers Option:
-------------------
1. Texas Commerce Bank's (Agent) Base Rate (greater of Agent's
"Prime Rate" or Fed Funds Rate plus 1/2%) plus applicable margin
as defined in the Domestic Facility.
2. Eurodollar rate (1, 2 or 3 month) plus applicable margin as
defined in the Domestic Facility.
(b) Default Interest Rate:
---------------------
In addition to the interest specified above, default interest shall be
chargeable to the Borrower from the date of any default at an
additional two percent (2%) per annum on all amounts outstanding.
4. COMMITMENT FEE
--------------
The Borrower agrees to pay the Bank a fee of 0.5 percent (50 basis points)
per annum on the unused portion of the Credit Facility. The commitment fee
will be calculated on a daily basis and will be payable quarterly in
arrears.
5. UPFRONT FEE
-----------
0.35 percent (35 basis points) on the amount of the Credit Facility or
US$52,500.
6. COLLATERAL
----------
The Bank will file with the Registrar of Companies in Hong Kong a floating
charge on the Borrower's trade accounts receivable and inventory contained
in a debenture to be executed by the Borrower in favor of the Bank.
7. BORROWING BASE
--------------
Notwithstanding any other provisions of this Agreement, the aggregate
principal amount outstanding at any one time under the Credit Facility
shall not exceed the lesser of the Borrowing Base or US$15,000,000.
Borrowing Base means:
Eighty percent* of the Borrower's trade accounts receivable in which the
Bank has a perfected, first priority security interest, excluding accounts
more than ninety days past due from the date of invoice, accounts subject
to offset or defense, bonded, affiliate accounts and accounts otherwise
reasonably unacceptable to the Bank plus:
Ninety percent of bills receivable under commercial letters of credit
issued by banks for which the Bank has approved credit limits, and not
exceeding ninety days plus:
Fifty percent of the Borrower's inventory in which the Bank has a
perfected, first priority security interest, net of any obsolescence
reserve, slow moving or inventory in transit.
* Advance rate against trade accounts receivable is reduced to seventy
percent on any individual account which has a month end balance
greater than twenty-five percent of the sum of the acceptable account
balances at that same month end.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
3
8. GUARANTY
--------
Payment of the Borrower under this Credit Facility shall be guaranteed by
CellStar Corporation and National Auto Center, Inc. (the "Guarantors") by
execution of the Bank's form of guaranty agreement.
9. AFFIRMATIVE COVENANTS
---------------------
So long as there is any outstanding under the Credit Facility, the Borrower
shall:
(a) maintain insurance with financially sound and reputable insurers
covering its properties and business against those casualties and
contingencies and in the types and amounts as shall be in accordance
with sound business and industry practices.
(b) maintain its existence and business operations presently in effect in
accordance with all applicable laws and regulations, pay its debts and
obligations when due under normal terms (which, for the avoidance of
doubt shall not limit or restrict the Borrower in accepting trade
credit from its suppliers on normal commercial terms), and pay on or
before their due date, all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested in
good faith if they have been properly reflected on its books and, at
the Bank's request, adequate funds or security has been pledged to
insure payment.
(c) maintain proper books and records of account, in accordance with
generally accepted accounting principles where applicable, and
consistent with financial statements previously submitted to the Bank.
(d) furnish to the bank whatever information, books and records the Bank
may reasonably request, including at a minimum:
(i) annual audited financial statements of the Borrower and the
Guarantors, and
(ii) monthly internally prepared financial statements of the Borrower.
(iii) monthly computer generated account receivable aging/report.
(iv) monthly computer generated inventory report.
(v) monthly borrowing base report.
(vi) quarterly covenant compliance certificate.
10. NEGATIVE COVENANTS
------------------
(a) Definitions:
As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Tangible Net Worth" shall mean total assets less intangible
assets and total liabilities. Intangible assets include goodwill,
patents, copyrights, mailing lists, catalogs, trademarks, bond
discounts and underwriting expenses, organization expenses, and
all other intangibles.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
4
(ii) Unless otherwise noted, the financial requirements set forth in
this Section 10 shall be computed in accordance with generally
accepted accounting principles applied on a basis consistent
with financial statements previously submitted by the Borrower
to the Bank.
(b) Without the written consent of the Bank, and so long as any
outstanding remains under the Credit Facility, the Borrower shall
not:
(i) Permit the ratio of its current assets to its current
liabilities to be less than 1.5:1.0.
(ii) Permit its Tangible Net Worth to be less than US$25,000,000 and
increasing to US$27,000,000 at 8-31-96; and increasing by 50%
of quarterly net income thereafter.
(iii) Permit its total liabilities divided by Tangible Net Worth to
exceed 2.0:1.0.
(iv) Permit the ratio of its earnings before deducting interest
expense and taxes to its interest expense to be less than
1.5:1.0.
(v) Advance any funds and/or dividends in an aggregate amount
greater than US$3,000,000 to affiliated companies through July
31, 1997.
(vi) Create or assume or permit to exist or arise any mortgage,
debenture, charge, or any other encumbrance or security
whatsoever over any of its assets or property, except for liens
in the ordinary course of business and liens for taxes,
assessments or other governmental charges which are not
delinquent and are part of the ordinary course of business, or
which are being contested in good faith and for which adequate
reserves have been established in agreement with the Bank.
(vii) Allow the legal or beneficial ownership of the Borrower to be
changed.
(viii) Guarantee the liabilities of any other legal entity, affiliated
or unaffiliated.
11. ACCELERATION OF PAYMENT
-----------------------
Upon the occurrence of any one of the following events, the Borrower's
indebtedness to the Bank hereunder shall immediately become due and payable
without any notice or demand from the Bank:
(a) The Borrower or the Guarantors fail to pay (i) any installment of
interest on any amount payable hereunder within 5 days after the due
date thereof, or (ii) any installment of principal hereunder when due.
(b) The Borrower or the Guarantors fail to observe or perform any other
term of the Agreement and such failure continues unremedied for a
period of 15 days after the earlier of (i) the giving of notice to
Borrower or Guarantors by the Bank of such failure, or (ii) the
Borrower's or the Guarantors' actual knowledge of such failure; or the
Borrower or the Guarantors make any materially incorrect or misleading
representation, warranty, or certificate to the Bank which was
materially incorrect or misleading when made; or make any materially
incorrect or misleading representation in any financial statement or
other information delivered to the Bank; or default under the terms of
any agreement or instrument relating to any debt for borrowed money
such that the creditor declares the debt due before its maturity.
(c) A default under the Domestic Facility.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
5
(d) The Borrower or the Guarantors default under the terms of any loan
agreement, mortgage, security agreement or any other document executed
in connection with this Agreement and such default continues
unremedied for a period of fifteen days after the earlier of (i) the
giving of notice to Borrower or Guarantors by the Bank of such
failure, or (ii) the Borrower's or the Guarantors' actual knowledge of
such failure; or if any guaranty of this Credit Facility becomes
unenforceable in whole or in part, or the Guarantors fail to promptly
perform under such a guaranty.
(e) The Borrower or the Guarantors become insolvent or unable to pay their
debts as they become due.
(f) The Borrower or the Guarantors make an assignment for the benefit of
creditors; consent to the appointment of a custodian, receiver or
trustee for it or a substantial part of its assets; or commence any
proceeding under any bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction.
(g) A custodian, receiver or trustee is appointed for the Borrower or the
Guarantors or for a substantial part of its assets without the
consent of the party against which the appointment is made.
(h) Proceedings are commenced against the Borrower or the Guarantors under
any bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction and not dismissed within 30 days from the commencement
thereof, or the Borrower or the Guarantors consent to the commencement
of such proceedings.
(i) Any final judgment for the payment of money in excess of US$500,000 is
entered against the Borrower or the Guarantors, or any attachment,
levy or garnishment is issued against any property of the Borrower or
the Guarantors and the same shall not be discharged or a stay of
execution thereof shall not be procured, within 30 days from the date
of entry thereof.
(j) The Borrower or the Guarantors, without the Bank's written consent, is
dissolved, merges or consolidates with any third party; leases, sells
or otherwise conveys a material part of its assets or business outside
the ordinary course of business; or agrees to do any of the foregoing.
(k) There is a substantial change in the existing or prospective financial
condition of the Borrower or the Guarantors which the Bank in good
faith determines to be materially adverse taken as a whole.
12. PAYMENTS WITHOUT DEDUCTION
--------------------------
All payments by the Borrower hereunder shall be made without set-off or
counterclaim and free and clear of and without deducting or withholding for
or on account of all present and future taxes, levies, imposts, duties,
fees or other restrictions or conditions whatsoever.
13. LIEN AND SET-OFF
----------------
To secure payment of any indebtedness of the Borrower under this Agreement
and all the Borrower's other liabilities to the Bank, the Borrower grants
to the Bank a continuing security interest in all securities and other
property of the Borrower in the custody, possession or control of the Bank
and all balances of deposit accounts of the Borrower with the Bank. The
Bank shall have the right upon occurrence of an event described in Section
11 hereof to apply its own debt or liability to the Borrower, or to any
other party liable for payment under this Agreement, in whole or partial
payment of the Borrower's indebtedness or its other present or future
liabilities to the Bank, without any requirement of mutual maturity.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
6
14. EXPENSES
--------
The Borrower shall pay or procure the payment of all stamp and other duties
and taxes and all registration and other like fees to which this Agreement
or other document referred to herein may be subject and shall reimburse the
Bank on demand for all expenses (including reasonable legal fees,
translation and other out-of-pocket expenses) incurred by the Bank in
connection with the negotiation, preparation, execution and enforcement of
this Agreement.
15. NOTICE
------
Notice from one party to another relating to this Agreement shall be deemed
effective if made in writing (including telecommunications) and delivered
to the recipient's address, telex number or facsimile number set forth
under its name below by any of the following means: hand delivery,
registered or certified mail, postage prepaid, with return receipt
requested, mail, postage prepaid, overnight courier service or facsimile,
telex or other wire transmission with request for assurance of receipt in a
manner typical with respect to communication of that type. Notice made in
accordance with this section shall be deemed delivered upon receipt if
delivered by hand or wire transmission, three business days in the place of
receipt after mailing if mailed by registered or certified mail or one
business day in the place of receipt after mailing or deposit with an
overnight courier service if delivered by express mail or overnight
courier.
16. WAIVER
------
No delay on the part of the Bank in the exercise of any right or remedy
shall operate as a waiver. No single or partial exercise by the Bank of any
right or remedy shall preclude any other future exercise of it or the
exercise of any other right or remedy. No waiver or indulgence by the Bank
of any default shall be effective unless in writing and signed by the Bank,
nor shall a waiver on one occasion be construed as a bar to or waiver of
that right on any future occasion.
17. GOVERNING LAW
-------------
This agreement shall be governed by and construed in all respects in
accordance with the laws of Hong Kong and the Borrower hereby irrevocable
submits to the non-exclusive jurisdiction of the Hong Kong courts. This
Agreement is binding on the Borrower and its successors, and shall inure to
the benefit of the Bank, its successors and assigns.
18. MISCELLANEOUS
-------------
(a) This agreement and any related loan documents embody the entire
agreement and understanding between the Borrower and the Bank and
supersede all prior agreements and understandings relating to their
subject matter. If any one or more of the obligations of the Borrower
under this agreement or the Note shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Borrower shall not
in any way be affected or impaired, and such validity, illegality or
unenforceability in one jurisdiction shall not affect the validity,
legality or enforceability of the obligations of the Borrower under
this Agreement or the Note in any other jurisdiction.
/s/JAS /s/AHG
------------ ------------
INITIAL INITIAL
(Bank) (Borrower)
<PAGE>
7
(b) Section headings are for convenience of reference only and shall not affect
the interpretation of this Agreement.
Executed by the parties on July 31, 1996.
For and on behalf of For and on behalf of
First National Bank of Chicago CellStar (Asia) Corporation Limited
Hong Kong Branch
/s/ James A. Schmelter /s/ Alan H. Goldfield
- ----------------------------------- ---------------------------------------
Name: James A. Schmelter Name: Alan H. Goldfield
Address for Notices: Address for Notices:
13/F Jardine House Rooms 509-510,5/F, Block B
- ----------------------------------- ---------------------------------------
1 Connaught Place, Central Sing Tao Building
- ----------------------------------- ---------------------------------------
Hong Kong 1 Wang Kwong Road, Kowloon Bay
- ----------------------------------- ---------------------------------------
Kowloon, Hong Kong
- ----------------------------------- ---------------------------------------
Telephone No: (852) 2844-9222 Telephone No: (852) 2757-0998
--------------------- -------------------------
Facsimile No: (852) 2844-9318 Facsimile No: (852) 2759-5255
--------------------- -------------------------
Telex No : 83536 FCHOP HX Telex No : /
--------------------- -------------------------
<PAGE>
EXHIBIT 10.51
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), dated as of the 1st day of June,
1995, is by and between CELLSTAR (ASIA) CORPORATION LIMITED, a company organized
and existing under the laws of Hong Kong (the "Company"), and HONG AN-HSIEN
(the "Employee").
WHEREAS, the Employee has intimate knowledge of the cellular markets in Hong
Kong, the People's Republic of China, Taiwan and other Asian countries
(collectively referred to as the "Territory"); and
WHEREAS, the Employee has played a crucial role in the organization and
development of the Company and the Company's business in the Territory; and
WHEREAS, the Board of Directors of the Company desires to assure the Company
of the Employee's continued employment in an executive capacity and to
compensate him therefore; and
WHEREAS, the Employee desires to commit himself to serve the Company on the
terms herein provided;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Employee, and the
----------
Employee hereby agrees to serve the Company, on the terms and conditions set
forth herein for the period commencing on the date hereof and expiring on May
31, 2000, (the period from the date hereof through May 31, 2000, or the date of
such termination, as the case may be, being herein called the "Employment
Period").
2. DUTIES.
------
2.1 General Duties. During the Employment Period, the Employee shall
--------------
serve the Company in the capacity of President with duties consistent therewith
and set forth in Exhibit A and shall perform such other services for the Company
consistent with the position of a President as may be reasonably assigned to him
from time to time by the Board of Directors of the Company.
2.2 Primary Activity. During the Employment Period, the Employee shall
----------------
devote all of his working time and energy to the interests and business of the
Company and its subsidiaries; provided, however, that the Employee shall be
excused from performing any services for the Company hereunder during the
periods of temporary illness or incapacity and during reasonable vacations.
While it is acknowledged that the duties of an Employee may require from time to
time attention to business at times other than normal business hours, it is
intended by the parties hereto that the Employee shall
1
<PAGE>
perform his duties hereunder during normal business hours. During the Employment
Period, the Employee shall, to the best of his skill and ability, use his best
efforts and endeavors to the extension and promotion of the business of the
Company, to the proper servicing of such business, and to the protection of the
good will of such business, both as now enjoyed and hereafter acquired.
2.3 Non-Competition. The Employee recognizes and understands that in
---------------
performing the duties and responsibilities of his employment as outlined in this
Agreement, the Employee will occupy a position of trust and confidence, pursuant
to which the Employee will develop and acquire experience and knowledge with
respect to various aspects of the business of the Company and the manner in
which that business is conducted. It is the expressed intent and agreement of
the Employee and Company that this knowledge and experience shall be used in the
furtherance of the business interests of the Company and not in any manner which
would be detrimental to the business interests of the Company. The Employee
therefore agrees that, so long as the Employee is employed pursuant to this
Agreement and for a period of two (2) years following the termination hereof for
any reason, the Employee will not invest, engage or participate in any manner
whatsoever, either personally or in any status or capacity (other than as a
shareholder of less than Five Percent (5%) of the capital stock of a publicly
owned corporation) in any business or other entity organized for profit which is
engaged in significant competition with the Company in the conduct of its
operations in any market in which the Company conducts business during the term
of this Agreement and for a period of two (2) years following the termination
hereof for any reason.
2.4 Covenant and Agreement to Protect Trade Secrets. The Employee
-----------------------------------------------
covenants and agrees that, for the protection of the business and goodwill of
the Company, he will not at any time, other than in the regular course of
business of the Company, in any fashion, form or manner, either directly or
indirectly, divulge, disclose or communicate to any person, firm, corporation,
association or entity in any manner whatsoever any information of any kind,
nature or description concerning the Company's manner of operation, its plans or
other data of any kind, nature or description, including, without limitation,
all files, records, programs, supporting documents, general documents, sales and
marketing programs, sales tactics, price information, cost information, customer
lists, supplier lists, employee lists, financial and accounting data, business
plans, bank accounts and similar items related to the business of the Company
without regard to whether any or all of the foregoing matters would be deemed
confidential, material or important. Upon termination of this Agreement for any
reason, the Employee shall not retain originals or copies of any records or
information with respect to the
2
<PAGE>
Company or any activity of the Company or with respect to any of the Company's
affiliates or their activities.
3. COMPENSATION. As full compensation to the Employee for performance of his
------------
services herein, the Company agrees to pay the Employee and the Employee agrees
to accept the following salary and other benefits during the Employment Period:
3.1 Salary. The Company shall pay the Employee a salary payable in local
------
currency at a monthly rate equivalent to $25,000.00 U.S. The salary due the
Employee hereunder shall be payable in monthly installments. The Company may,
from time to time at the discretion of the Board of Directors, pay a bonus or
bonuses to Employee in an amount equal to up to 50% of Employee's annual base
salary based upon the performance of the Company and the Employee. Any and all
amounts paid to Employee hereunder as salary or bonuses shall be paid less any
amounts required to be withheld by the Company from time to time from such
amount under any applicable Federal, State or local income tax laws or similar
laws then in effect.
3.2 Expense Accounts. The Employee shall be entitled to a business
----------------
expense account for all reasonable expenses properly incurred by the Employee in
performance of his duties.
3.3 Further Benefits. The Employee shall be entitled to participate in
----------------
any health, accident or similar employee benefit plans provided by the Company
generally to its employees to the extent commensurate with the participation
therein of executives of the Company. The Employee shall also be entitled to
such vacation time (not less than two weeks) during each year of his employment
hereunder as the Board of Directors of the Company may permit, to be taken at
such times and in such period as the Employee shall determine upon giving
reasonable notice to the Company.
4. TERMINATION OF AGREEMENT.
------------------------
4.1 Events of Termination. The Employment Period shall cease and
---------------------
terminate upon the earliest to occur of (i) the close of business on May 31,
2000, (ii) death of the Employee, (iii) the mutual agreement of the Board of
Directors, or (iv) in the event that the Board of Directors elects to terminate
this Agreement for one of the following causes:
(a) should Employee, for reasons other than illness, injury or permitted
vacations, be absent from the Company for more than 14 consecutive
days without the consent of the Board of Directors of the Company;
(b) should the Employee fail to comply with reasonable policies,
standards and regulations established by the Board of Directors of
the Company from time to time;
3
<PAGE>
(c) should the Employee breach the terms of this Agreement; or
(d) should Employee be convicted of a crime punishable by imprisonment or
otherwise involving dishonesty, fraud or breach of trust.
This Agreement may also be terminated by Employee at any time following May 31,
1998 upon thirty (30) days' written notice to Company; provided, however, that
the Employee's obligations set forth in Sections 2.3 and 2.4 of this Agreement
shall remain in effect for two (2) years following the termination hereof.
4.2 Effect of Termination. This Agreement and all liabilities and
---------------------
obligations of the parties hereto hereunder shall cease and terminate effective
upon the termination of the Employment Period; provided, however, that the
Company shall pay the Employee that portion of the Employee's salary which has
accrued but remains unpaid prior to the date of termination and provided further
that the obligations set forth in Section 2.3 and 2.4 hereof shall survive
termination hereof for any reason.. Any such unpaid salary shall be paid to the
Employee within ten (10) days of the date of termination. Upon termination of
this Agreement, any and all expense accounts and memberships granted to the
Employee shall be forfeited. Pursuant to such termination, the Employee shall
immediately return to the Company any and all credit cards relevant to the above
stated benefits.
4.3 Remedies. Nothing herein contained shall be construed as prohibiting
--------
any party hereto from pursuing any remedy available to it for any breach of any
provision hereof.
5. NOTICE. All notices, requests, demands and other communications hereunder
------
shall be in writing and shall be deemed to have been given if delivered by hand
or mailed by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed, if to Employee at 81, Ching Chian Road, Rei
Tou, Taipei, Taiwan; and if to the Company, 509-510, 5/Fl., Block B, Sing Tao
Building, 1, Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong; with a copy to
CellStar Corporation, 1730 Briercroft Court, Carrollton, Texas 75006, Attn:
Chief Executive Officer. An address may be changed by notice in writing signed
by the addressee.
6. MISCELLANEOUS.
-------------
6.1 Nonassignment. Neither party hereto may assign this Agreement or any
-------------
rights or obligations hereunder without the prior written consent of the other
party hereto. The provisions of this Agreement shall be binding upon the estate
or beneficiaries of the Employee, and upon the permitted successors and assigns
of the parties hereto.
4
<PAGE>
6.2 Entire Agreement. This Agreement along with the attached Exhibit sets
----------------
forth the entire understanding of the parties, and supersedes all prior
agreements, arrangements and communications, whether oral or written, pertaining
to the subject matter hereof; and this Agreement shall not be modified or
amended except by written agreement of the Employee and the Company.
6.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
-------------
ACCORDANCE WITH THE LAWS OF THE HONG KONG.
6.4 Partial Invalidity. The invalidity or unenforceability in a particular
------------------
circumstance of any portion of this Agreement shall not extend beyond such
provision or such circumstance, and no other provision hereof shall be affected
thereby.
6.5 Headings. Descriptive headings are for convenience only and shall not
--------
control or affect the meaning or construction of any provision of this
Agreement.
6.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
THE COMPANY
CELLSTAR (ASIA) CORPORATION LIMITED
By: /s/ Alan H. Goldfield
------------------------------------
Name: Alan H. Goldfield
-----------------------------------
Title: Chairman
----------------------------------
THE EMPLOYEE
/s/ Hong An-Hsien
----------------------------------------
HONG AN-HSIEN
5
<PAGE>
EXHIBIT A
---------
DUTIES OF PRESIDENT
-- Conduct the day to day business of the Company.
-- Report to the Board of Directors and acheive the goals and objectives as
determined by the Board.
-- Ensure continuous growth in revenue and profitability of Company
throughout the region as directed by the Board.
-- At all times represent and position Company as a professional, responsible
and ethical company.
-- Put in place programs to ensure total customer satisfaction.
-- Develop a core team of professionals that will ensure continuous and
steady growth of Company.
6
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF CELLSTAR CORPORATION
--------------------------------------------
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY INCORPORATION TRADENAMES USED
- ------------------ ------------- ---------------
<S> <C> <C>
National Auto Center, Inc. Texas National Auto Cellular
PC Cellular
TelStar
Communication Center
CellStar
Cellular Accessories
CMart
CellStar Air Services, Inc. Delaware None
NAC Holdings, Inc. Nevada None
CellStar Fulfillment, Inc. Delaware None
CellStar International
Corporation/Asia Delaware None
CellStar International
Corporation/S.A. Delaware None
Audiomex Export Corporation Delaware None
CellStar Ltd. Texas Limited Partnership National Auto Cellular
PC Cellular
Communication Center
CellStar
CellStar Fulfillment, Ltd. Texas Limited Partnership None
A & S Air Service, Inc. Delaware None
CellStar West, Inc./(1)/ Delaware None
CellStar (Asia) Corporation LTD Hong Kong None
CellStar Pacific PTE LTD/(2)/ Singapore None
</TABLE>
- ---------------------------------
/(1)/ 80% owned joint venture
/(2)/ 80% owned joint venture
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION TRADENAMES USED
- ------------------ ------------- ---------------
<S> <C> <C>
CellStar Singapore PTE LTD Singapore None
CellStar S.A. Argentina Servicell
CellStar International
Telefonia Celular, Ltda. Brazil Cellular Express
CellStar Celular Chile S.A. Chile Servicell
CellStar Celular S.A. Venezuela None
CellStar Industria da
Telefonia da Amazonia LTD Brazil None
CellStar de Colombia, Ltda. Colombia Cellular Express
Servicell
CellStar Ecuador S.A. Ecuador None
Celular Express S.A. de C.V. Mexico None
Celular Express
Management S.A. de C.V. Mexico None
CellStar Philippines, Inc./(3)/ Philippines None
CellStar Amtel Sdn Bhd/(4)/ Malaysia None
CellStar (Taiwan) Co., Ltd. Taiwan None
CellStar Telecommunication
Service Company/(5)/ Hong Kong None
Shanghai CellStar International
Trading Company, LTD China None
</TABLE>
- ----------------------------
/(3)/ 100% owned by CellStar Pacific PTE LTD
/(4)/ 40% owned by CellStar Pacific PTE LTD
/(5)/ 60% owned by CellStar (Asia) Corporation LTD
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Stockholders
CellStar Corporation:
We consent to incorporation by reference in the registration statement (No.
33-87754) on Form S-8 of CellStar Corporation of our report dated January 31,
1997, relating to the consolidated balance sheets of CellStar Corporation and
subsidiaries as of November 30, 1996, and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended November 30, 1996, which report appears in
the November 30, 1996 annual report on Form 10-K of CellStar Corporation.
/s/ KPMG PEAT MARWICK LLP
Dallas, Texas
February 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 11/30/96
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<CASH> 27,296
<SECURITIES> 0
<RECEIVABLES> 160,835
<ALLOWANCES> 29,023
<INVENTORY> 94,473
<CURRENT-ASSETS> 259,368
<PP&E> 27,725
<DEPRECIATION> 7,591
<TOTAL-ASSETS> 298,551
<CURRENT-LIABILITIES> 188,003
<BONDS> 0
0
0
<COMMON> 193
<OTHER-SE> 104,070
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 947,601
<TOTAL-REVENUES> 947,601
<CGS> 810,000
<TOTAL-COSTS> 810,000
<OTHER-EXPENSES> 136,117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,350
<INCOME-PRETAX> (6,866)
<INCOME-TAX> (453)
<INCOME-CONTINUING> (6,413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,413)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
