<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 0-22972
CELLSTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2479727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
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 __
---
On June 30, 1997, there were 29,140,345 outstanding shares of Common
Stock, $0.01 par value per share.
<PAGE>
CELLSTAR CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------ --------------------- ------
<S> <C>
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited) 3
May 31, 1997 and November 30, 1996
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) 4
Three and six months ended May 31, 1997 and 1996
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) 5
Six months ended May 31, 1997
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 6
Six months ended May 31, 1997 and 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
- ------- -----------------
Item 1. LEGAL PROCEEDINGS 17
Item 2. CHANGES IN SECURITIES 17
Item 3. DEFAULTS UPON SENIOR SECURITIES 17
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
Item 5. OTHER INFORMATION 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 18
</TABLE>
2
<PAGE>
PART 1- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 61,524 27,296
Accounts receivable (less allowance for doubtful accounts of
$33,632 and $29,023, respectively) 136,929 131,812
Inventories 120,986 94,473
Deferred income taxes 4,380 4,274
Prepaid expenses 4,428 1,513
----------- -----------
Total current assets 328,247 259,368
Property and equipment, net 19,858 20,134
Goodwill (less accumulated amortization of $1,910
and $1,330, respectively) 18,132 16,597
Other assets 2,571 2,452
----------- -----------
$ 368,808 298,551
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 141,762 116,091
Notes payable to financial institutions 68,105 56,136
Accrued expenses 14,907 12,250
Income taxes payable 9,948 2,958
Current portion of long-term debt 582 568
----------- -----------
Total current liabilities 235,304 188,003
Long-term debt, less current portion 5,959 6,285
----------- -----------
Total liabilities 241,263 194,288
----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 45,000,000 shares
authorized; 29,136,282 and 19,273,562 shares
issued and outstanding, respectively 291 193
Additional paid-in capital 71,442 68,167
Common stock warrants 4 4
Foreign currency translation adjustments (4,802) (4,520)
Retained earnings 60,610 40,419
----------- -----------
Total stockholders' equity 127,545 104,263
----------- -----------
$ 368,808 298,551
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended May 31, ended May 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Net product sales $366,927 202,624 612,433 377,489
Activation income 7,871 19,459 15,884 46,332
Residual income 2,764 3,488 5,890 6,725
-------- ------- ------- -------
Total revenues 377,562 225,571 634,207 430,546
Cost of sales 336,916 195,943 561,710 368,913
-------- ------- ------- -------
Gross profit 40,646 29,628 72,497 61,633
Selling, general and
administrative expenses 22,003 31,681 43,763 60,587
-------- ------- ------- -------
Operating income (loss) 18,643 (2,053) 28,734 1,046
Other income (expense):
Interest expense (1,791) (2,436) (3,505) (4,975)
Other, net 988 79 1,077 515
-------- ------- ------- -------
Total other income (expense) (803) (2,357) (2,428) (4,460)
-------- ------- ------- -------
Income (loss) before income taxes 17,840 (4,410) 26,306 (3,414)
Provision (benefit) for income taxes 3,631 (1,358) 6,115 (1,100)
-------- ------- ------- -------
Net income (loss) $ 14,209 (3,052) 20,191 (2,314)
======== ======= ======= =======
Net income (loss) per share $ 0.48 (0.11) 0.69 (0.08)
======== ======= ======= =======
Weighted average number of shares
and equivalent shares outstanding $ 29,681 28,911 29,425 28,911
======== ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Six months ended May 31, 1997
(Unaudited)
(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, 1996 19,274 $ 193 68,167 4 (4,520) 40,419 104,263
Net income - - - - - 20,191 20,191
Shares issued under stock option
plans 35 - 624 - - - 624
Shares issued for acquisition of
minority interest 115 1 2,748 - - - 2,749
Three-for-two common stock split 9,712 97 (97) - - - -
Foreign currency translation
adjustment - - - - (282) - (282)
------- ------ ------ ----- ------- ------- -------
Balance at May 31, 1997 29,136 $ 291 71,442 4 (4,802) 60,610 127,545
======= ====== ====== ===== ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended May 31, 1997 and 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 20,191 (2,314)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,345 2,725
Deferred income taxes (106) 1,847
Changes in certain operating assets and liabilities:
Accounts receivable (5,399) 1,175
Inventories (26,513) 24,953
Prepaid expenses (2,503) 310
Other assets (360) 404
Accounts payable 25,671 (24,080)
Accrued expenses 3,986 3,336
Income taxes payable 6,990 (4,987)
---------- ----------
Net cash provided by operating activities 24,302 3,369
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (1,441) (1,999)
Acquisition of minority interest (502) -
Equity investments in foreign subsidiary and joint venture (412) -
---------- ----------
Net cash used in investing activities (2,355) (1,999)
---------- ----------
Cash flows from financing activities:
Net borrowings (payments) on notes payable to financial institutions 11,969 (9,002)
Principal payments on long-term debt (312) (304)
Proceeds from issuance of common stock 624 -
---------- ----------
Net cash provided by (used in) financing activities 12,281 (9,306)
---------- ----------
Net increase (decrease) in cash and cash equivalents 34,228 (7,936)
Cash and cash equivalents at beginning of period 27,296 31,508
---------- ----------
Cash and cash equivalents at end of period $ 61,524 23,572
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
CELLSTAR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
Although the interim consolidated financial statements of CellStar
Corporation (the "Company") are unaudited, it is the opinion of the
Company's management that all adjustments (consisting of only normal
recurring adjustments) necessary for a fair statement of the results have
been reflected therein. Operating revenues and net earnings for any interim
period are not necessarily indicative of results that may be expected for
the entire year.
These statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's Form 10-K
for the year ended November 30, 1996.
(2) Geographic Area Information
The Company operates predominantly within one business segment, wholesale
and retail sales of wireless handsets and other wireless communications
products. Certain financial information by geographic area as of and for
the six months ended May 31, 1997 and 1996 is shown below (in thousands):
<TABLE>
<CAPTION>
United Asia- Latin
States Pacific America Europe Corporate Total
-------------- -------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
May 31, 1997
Total revenues, net of
intercompany amounts $ 343,463 219,982 50,301 20,461 - 634,207
Intercompany sales (purchases) 21,271 2,627 (24,059) 161 - -
Operating income (loss) 12,277 23,751 1,431 (1,572) (7,153) 28,734
Identifiable assets 188,835 122,917 47,882 9,174 - 368,808
May 31, 1996
Total revenues, net of
intercompany amounts $ 239,285 129,773 61,488 - - 430,546
Intercompany sales (purchases) 25,006 (824) (24,182) - - -
Operating income (loss) 3,678 10,223 (5,688) - (7,167) 1,046
Identifiable assets 140,235 75,194 63,409 - - 278,838
</TABLE>
(3) Stock Split
On May 20, 1997, the Board of Directors approved a three-for-two common
stock split, which split was effected in the form of a stock dividend that
was distributed on June 17, 1997 to stockholders of record on June 2, 1997.
All weighted average historical share and net income (loss) per share
amounts have been retroactively adjusted for the stock split.
(4) Acquisition of Minority Interest
On May 30, 1997, the Company acquired the remaining 20.0% minority interest
of CellStar Pacific, the Company's Singapore subsidiary, which conducts
operations in Singapore, the Philippines, and Malaysia, for common stock
valued at $2.7 million and $0.5 million in cash.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a global provider of wireless 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 in both U.S. and international sales 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. The Company's international sales of wireless
communications products have increased primarily as a result of its entry into
the Asia-Pacific and Latin American Regions.
The Company expects that with future increases, if any, to its revenues,
more funds will be required to support corresponding increases in the Company's
inventory and accounts receivable levels. In addition, more funds may be
required to fund new ventures. See "Liquidity and Capital Resources" below.
This Quarterly Report on Form 10-Q contains forward-looking statements
relating to such matters as anticipated financial performance and business
prospects. When used in this Quarterly Report, the words "anticipates,"
"expects," "may," "intend" 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, including foreign currency risks, political
instability, changes in foreign laws, regulations, and tariffs, new
technologies, competition, customer and vendor relationships, seasonality,
inventory obsolescence and availability, "gray market" resales and inflation,
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.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain unaudited consolidated statements of
operations data for the Company expressed as a percentage of total revenues for
the three and six months ended May 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three months Six months
ended May 31, ended May 31,
1997 1996 1997 1996
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Net product sales 97.2 % 89.8 % 96.6 % 87.7 %
Activation income 2.1 8.6 2.5 10.8
Residual income 0.7 1.6 0.9 1.5
------------ ------------- ----------- ------------
Total revenues 100.0 100.0 100.0 100.0
Cost of sales 89.2 86.9 88.6 85.7
------------ ------------- ----------- ------------
Gross profit 10.8 13.1 11.4 14.3
Selling, general and administrative expenses 5.8 14.0 6.9 14.1
------------ ------------- ----------- ------------
Operating income (loss) 5.0 (0.9) 4.5 0.2
------------ ------------- ----------- ------------
Other income (expense):
Interest expense (0.5) (1.1) (0.6) (1.2)
Other, net 0.3 0.1 0.2 0.2
------------ ------------- ----------- ------------
Total other income (expense) (0.2) (1.0) (0.4) (1.0)
------------ ------------- ----------- ------------
Income (loss) before income taxes 4.8 (1.9) 4.1 (0.8)
Provision (benefit) for income taxes 1.0 (0.6) 0.9 (0.3)
------------ ------------- ----------- ------------
Net income (loss) 3.8 % (1.3) % 3.2 % (0.5) %
============ ============= =========== ============
</TABLE>
9
<PAGE>
The amount of net revenues and the approximate percentages of net revenues
attributable to the Company's operations for the three and six months ended May
31, 1997 and 1996 are shown below:
<TABLE>
<CAPTION>
Three months ended May 31, Six months ended May 31,
1997 1996 1997 1996
--------------- -------------- ----------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
United States:
Net product sales $ 182,462 48.3 % 112,752 50.0 % 330,547 52.1 % 195,390 45.4 %
Activation income 4,510 1.2 15,170 6.7 8,203 1.3 37,975 8.8
Residual income 2,083 0.6 3,041 1.4 4,713 0.7 5,920 1.4
---------- ---------- --------- ---------- --------- ------ --------- --------
Total United States 189,055 50.1 130,963 58.1 343,463 54.1 239,285 55.6
---------- ---------- --------- ---------- --------- ------ --------- --------
Asia-Pacific:
Net product sales 152,553 40.4 62,987 27.9 217,892 34.4 129,773 30.1
Activation income 958 0.3 - - 2,090 0.3 - -
Residual income - - - - - - - -
---------- ---------- --------- ---------- --------- ------ --------- --------
Total Asia-Pacific 153,511 40.7 62,987 27.9 219,982 34.7 129,773 30.1
---------- ---------- --------- ---------- --------- ------ --------- --------
Latin America:
Net product sales 21,628 5.7 26,885 11.9 43,533 6.9 52,326 12.2
Activation income 2,403 0.6 4,289 1.9 5,591 0.9 8,357 1.9
Residual income 681 0.2 447 0.2 1,177 0.2 805 0.2
---------- ---------- --------- ---------- --------- ------ --------- --------
Total Latin America 24,712 6.5 31,621 14.0 50,301 8.0 61,488 14.3
---------- ---------- --------- ---------- --------- ------ --------- --------
Europe:
Net product sales 10,284 2.7 - - 20,461 3.2 - -
Activation income - - - - - - - -
Residual income - - - - - - - -
---------- ---------- --------- ---------- --------- ------ --------- --------
Total Europe 10,284 2.7 - - 20,461 3.2 - -
---------- ---------- --------- ---------- --------- ------ --------- --------
Total $ 377,562 100.0 % 225,571 100.0 % 634,207 100.0 % 430,546 100.0 %
========== ========== ========= ========== ========= ====== ========= ========
</TABLE>
10
<PAGE>
THREE MONTHS ENDED MAY 31, 1997 COMPARED TO THREE MONTHS ENDED MAY 31, 1996
Revenues. Total revenues increased $152.0 million, or 67.4%, from
$225.6 million in the second fiscal quarter of 1996 to $377.6 million in the
second fiscal quarter of 1997.
U.S. revenues increased by $58.1 million, or 44.3%, primarily from an
increase in net product sales of $69.7 million, or 61.8%, from $112.8 million to
$182.5 million. The increase in net product sales was largely due to the
increase in revenues from distribution and fulfillment contracts for the
provision of products and value-added services. In addition, the U.S. operations
achieved growth due to the continuation of the strategy to shift 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. U.S. activation income decreased primarily as a result of the sale of
substantially all of the Communication Centers on November 26, 1996.
Net product sales in the Asia-Pacific Region increased $89.6 million,
or 142.2%, from $63.0 million to $152.6 million. The Company's operations in
Hong Kong, CellStar Asia, provided $118.8 million in net product sales in the
second fiscal quarter of 1997, an increase of $65.1 million compared to $53.7
million for the same period a year earlier. The higher revenue levels resulted
from the expansion in overall demand for wireless phones in the region coupled
with the improved ability of manufacturers to supply product to meet that
demand, particularly in China. Net product sales in the Company's Singapore
operations, CellStar Pacific, increased by $19.3 million, or 207.5%, from $9.3
million to $28.6 million. This increase was primarily due to increased demand in
the Philippines and Indonesia. CellStar Taiwan, which commenced operations in
the third quarter in fiscal 1996, provided $5.2 million of net product sales in
the second quarter of 1997. The Asia-Pacific operations are substantially
wholesale-related, and as a result, activation income is not significant.
Net product sales in Latin America decreased by $5.3 million, or 19.7%,
from $26.9 million to $21.6 million. The decline in net product sales was
primarily due to the continuation of the strategy to shift 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 in the second fiscal quarter of 1996 to reduce
currency, accounts receivable and inventory risks. An additional factor
contributing to this decline was a sharp decline in net product sales in Brazil,
which decreased from $8.8 million to $1.4 million. The decline in Brazil was due
to the continued deterioration in the business climate in Brazil for the
cellular phone industry.
Net product sales in the Company's European operation in the United
Kingdom, which commenced in the second quarter of 1996, were $10.3 million in
the second quarter of fiscal 1997.
Gross Profit. Gross profit increased by $11.0 million, from $29.6
million to $40.6 million, while, as a percentage of total revenues, gross profit
decreased from 13.1% to 10.8%. The increase in gross profit was primarily due
to the increase in CellStar Asia's net product sales of high-end products, which
increased gross profit as a percentage of revenues as well. This increase in
gross profit and gross profit percentage in CellStar Asia was partially offset
by a decrease in U.S. retail revenue, which has a higher gross profit margin
than wholesale net product sales. The gross margin percentage for the second
fiscal quarter decreased primarily due to the sale in November 1996 of
substantially all of the Company's Communication Centers and to the increase in
revenues from distribution and fulfillment contracts that reflect lower
margins and reduced accounts receivable and inventory obsolescence risks.
Additionally, the Company experienced a decrease in Latin American foreign
currency losses of $1.4 million.
11
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $9.7 million, or 30.6%, from $31.7 million to
$22.0 million. Approximately $5.5 million, or 56.7%, of the decrease was
attributable to the reduction of employees related to the sale of the
Communication Centers. The sale of the Communication Centers also gave rise to
other decreases in selling, general and administrative expenses totaling
approximately $2.6 million. Additionally, reductions in other administrative
expenses of $2.5 million contributed to the total reduction in selling, general
and administrative expenses. These decreases were partially offset by a $1.6
million increase in other employee-related costs. Overall, the Company reduced
selling, general and administrative expenses as a percentage of total revenues
from 14.0% to 5.8%.
Operating Income (Loss). Operating income (loss) increased from a
loss of $2.1 million to income of $18.6 million due to the increase in revenues
from the Asia-Pacific Region and the decrease in selling, general and
administrative expenses. Correspondingly, operating income (loss) as a
percentage of total revenues increased from (0.9%) to 5.0%.
Interest Expense. Interest expense decreased in the second fiscal
quarter of 1997 to $1.8 million from $2.4 million in the second fiscal quarter
of 1996. The decrease in interest expense resulted primarily from the
maintenance of lower balances under the Company's revolving credit agreements.
Income Taxes. Income tax expense increased by $5.0 million in the second
fiscal quarter of 1997 compared to the same period a year earlier. This increase
was primarily due to higher income before income taxes for the second fiscal
quarter of 1997. The effective tax rate was lower for the second fiscal quarter
of 1997 compared to the same period a year earlier, primarily due to increased
income before income taxes in the Asia-Pacific Region where the tax rate is less
than the U.S. statutory tax rate.
SIX MONTHS ENDED MAY 31, 1997 COMPARED TO SIX MONTHS ENDED MAY 31, 1996
Revenues. Total revenues increased $203.7 million, or 47.3%, from
$430.5 million in the six-month period ended May 31, 1996 to $634.2 million in
the six-month period ended May 31, 1997.
U.S. revenues increased by $104.2 million, or 43.5%, primarily from an
increase in net product sales of $135.1 million, or 69.1%, from $195.4 million
to $330.5 million. The increase in net product sales was largely due to the
increase in revenues from distribution and fulfillment contracts for the
provision of products and value-added services. In addition, the U.S.
operations achieved growth due to the continuation of the strategy to shift 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. U.S. activation income decreased primarily as a result of
the sale of substantially all of the Communication Centers on November 26, 1996.
Net product sales in the Asia-Pacific Region increased $88.1 million, or
67.9%, from $129.8 million to $217.9 million. The Company's operations in Hong
Kong, CellStar Asia, provided $170.5 million in net product sales in the first
half of fiscal 1997, an increase of $61.1 million compared to $109.4 million for
the same period a year earlier. The higher revenue levels resulted from the
expansion in overall demand for wireless phones in the region coupled with the
improved ability of manufacturers to supply product to meet that demand,
particularly in China. Net product sales in the Company's Singapore operations,
CellStar Pacific, increased $18.5 million, or 90.7%, from $20.4 million to $38.9
million. This increase was primarily due to increased demand in the Philippines
and Indonesia. CellStar
12
<PAGE>
Taiwan, which commenced operations in the third quarter in fiscal 1996, provided
$8.5 million of net product sales in the first half of fiscal 1997. The Asia-
Pacific operations are substantially wholesale-related, and as a result,
activation income is not significant.
Net product sales in Latin America decreased $8.8 million, or 16.8%, from
$52.3 million to $43.5 million. The decline in net product sales was primarily
due to the continuation of the strategy to shift 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 in the second fiscal quarter of 1996 to reduce currency,
accounts receivable and inventory obsolescence risks. An additional factor
contributing to this decline was a sharp decline in net product sales in Brazil,
which decreased from $16.3 million to $4.1 million. The decline in Brazil was
due to the continued deterioration in the business climate in Brazil for the
cellular phone industry.
Net product sales in the Company's European operation in the United
Kingdom, which commenced in the second quarter of 1996, were $20.5 million for
the first six months of fiscal 1997.
Gross Profit. Gross profit increased $10.9 million, from $61.6 million to
$72.5 million, while, as a percentage of total revenues, gross profit decreased
from 14.3% to 11.4%. The increase in gross profit was primarily due to the
increase in CellStar Asia's net product sales of high-end products, which
increased gross profit as a percentage of revenues as well. This increase in
gross profit and gross profit percentage in CellStar Asia was partially offset
by a decrease in U.S. retail revenue, which has a higher gross profit margin
than wholesale net product sales. The gross margin percentage for the first half
of fiscal 1997 decreased primarily due to the sale in November 1996 of
substantially all of the Company's Communication Centers and to the increase in
revenues from distribution and fulfillment contracts that reflect lower
margins and reduced accounts receivable and inventory obsolescence risks.
Additionally, the Company experienced a decrease in Latin American foreign
currency losses of $2.3 million.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $16.8 million, or 27.7%, from $60.6 million to
$43.8 million. Approximately $11.2 million, or 66.7%, of the decrease was
attributable to the reduction of employees related to the sale of the
Communication Centers. The sale of the Communication Centers also gave rise to
other decreases in selling, general and administrative expenses totaling
approximately $5.5 million. Additionally, reductions in other administrative
expenses of $2.3 million contributed to the total reduction in selling, general
and administrative expenses. These decreases were partially offset by a $2.4
million increase in employee-related costs. Overall, the Company reduced
selling, general and administrative expenses as a percentage of total revenues
from 14.1% to 6.9%.
Operating Income (Loss). Operating income increased from $1.0 million to
$28.7 million due to the increase in revenues from the Asia-Pacific Region and
the decrease in selling, general and administrative expenses. Correspondingly,
operating income as a percentage of total revenues increased from 0.2% to 4.5%.
Interest Expense. Interest expense declined in the six months ending
May 31, 1997 to $3.5 million from $5.0 million in the six months ended May 31,
1996. The decrease in interest expense resulted primarily from the maintenance
of lower balances under the Company's revolving credit agreements.
13
<PAGE>
Income Taxes. Income tax expense increased $7.2 million in the six-month
period ended May 31, 1997 compared to the same period a year earlier. The
increase was primarily due to higher income before income taxes for the six-
month period ended May 31, 1997. The effective tax rate was lower for the six-
month period ended May 31, 1997 compared to the same period a year earlier
primarily due to increased income before income taxes in the Asia-Pacific Region
where the tax rate is less than the U.S. statutory tax rate.
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. The Company also receives extended credit
terms from key suppliers.
The Company expects that with future increases, if any, to its revenues,
more funds will be required to support corresponding increases in the Company's
inventory and accounts receivable levels. In addition, more funds may be
required to fund new ventures. As a result, the Company anticipates that its
need for liquidity and capital resources will increase in fiscal 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
growth plans for fiscal 1997. The Company is currently evaluating alternative
sources of financing.
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. 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 June 25, 1997, the
borrowing base limited borrowings to $73.8 million ($70.4 million at May 31,
1997). At June 25, 1997, $68.5 million was outstanding under such facility. The
primary revolving credit facility contains, among other provisions, covenants
relating to minimum net worth and certain financial provisions, capital
expenditures, dividend payments, additional debt, mergers, and acquisitions and
dispositions of assets.
CellStar Asia has a $15.0 million credit agreement with a bank, which
agreement matures on July 31, 1997. Fundings under this credit agreement are
limited by a borrowing base computed as a percentage of CellStar Asia's accounts
receivable and inventories. At May 31, 1997, the borrowing base limited
borrowings to $15.0 million, all of which was available. The Company currently
does not intend to renew this facility upon maturity, since CellStar Asia
currently generates sufficient cash flow from operations to fund the working
capital needs of that operation.
The Company's Brazilian subsidiary had borrowings of $2.8 million at
May 31, 1997 under a line of credit with a Brazilian bank. On June 16, 1997, the
Company retired this line of credit with borrowings from its primary revolving
credit facility. Additionally, the Company's subsidiary in Argentina had a $1.0
million short-term credit facility at May 31, 1997. This short-term credit
facility was retired on June 11, 1997.
At May 31, 1997, the Company had $61.5 million of cash and cash
equivalents, an increase of $34.2 million since November 30, 1996. The increase
correlates with the Company's cash flows
14
<PAGE>
provided by operating activities plus borrowings under its primary revolving
credit facility, which borrowings were used for working capital purposes. A
majority of the Company's cash resides outside 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 receives 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. Additionally,
the Company's inventories and accounts payable have increased in the United
States and Asia-Pacific Region since November 30, 1996 as a result of increased
net product sales.
Cash used in investing activities of $2.3 million related to purchases
of various computer and office equipment amounting to $1.4 million, $0.5 million
for the acquisition of the remaining 20.0% minority interest in CellStar
Pacific, and $0.4 million for equity investments in a foreign subsidiary and
joint venture.
INTERNATIONAL OPERATIONS
The Company's international operations are subject to political and
economic risks, including but not limited to political instability, currency
devaluations and controls, increased credit risks and changing tax and trade
regulations. Although the Company experienced no material foreign currency
transactions gains or losses during the second quarter of fiscal 1997, the
Company has historically experienced material foreign currency transaction
losses related primarily to its operations in the Latin American Region. The
currencies in the Company's Asia-Pacific and European regions have historically
exhibited a greater degree of stability relative to the U.S. dollar than have
the currencies in Latin America. The Company maintains a significant presence in
Hong Kong, and with the transfer of Hong Kong from the United Kingdom to the
People's Republic of China on July 1, 1997, the Company's operations in the
Asia-Pacific Region will be exposed to the possibility of a higher degree of
currency volatility and economic instability than has historically been the
case.
During the second fiscal quarter, the Company continued its strategy of
increasing direct sales to South American customers from the Company's Miami,
Florida warehouse. During the past several quarters, pursuit of this strategy
and other factors have resulted in a reduction in the level of inventory and
accounts receivable maintained by the Company's Latin American subsidiaries and
a reduction in the Company's fixed costs in the region. While these initiatives
have reduced the Company's exposure to certain economic and political risks
associated with transacting business in the Latin American Region, the Company
continues to maintain a significant presence in the region. As such, the Company
will remain subject to the risks created by the volatile political and economic
conditions that have historically prevailed in the region.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is effective for interim or annual periods
ending after December 15, 1997. Statement No. 128 will change how the Company
calculates its earnings per share. Management
15
<PAGE>
believes the adoption of Statement No. 128 will not have a material effect on
the Company's earnings per share amounts.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material developments have occurred in the Company's legal proceedings
previously reported in the Company's Annual Report on Form 10-K for its 1996
fiscal year.
ITEM 2. CHANGES IN SECURITIES
On May 20, 1997, the Company's Board of Directors authorized a three-for-
two common stock split payable in the form of a 50.0% stock dividend. The stock
dividend was distributed on June 17, 1997, to stockholders of record on June 2,
1997. See Note 3 to Notes to Unaudited Consolidated Financial Statements.
On May 30, 1997, the Company issued 114,583 unregistered shares of the
Company's common stock to Leap International PTE LTD ("Leap"). Such issuance was
made in connection with the purchase from Leap of the remaining 20.0% of the
Company's Singapore subsidiary, CellStar Pacific. The Company exchanged the
Company's common stock (valued at $2.75 million), along with $0.5 million in
cash, for 100,000 shares of CellStar Pacific. The Company's common stock was
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended. No underwriters were used by the
Company in connection with such issuance.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on April 23, 1997. The
stockholders voted on proposals to:
1. Elect two Class II Directors of the Company for a term expiring in 2000;
and
2. Approve the amendment and restatement of the CellStar Corporation 1993
Amended and Restated Long-Term Incentive Plan.
17
<PAGE>
The proposals were approved by the following votes:
1. Election of Class II Directors
<TABLE>
<CAPTION>
Shares
Voted Shares
Nominee For Withheld
------- --- --------
<S> <C> <C>
James L. Johnson 14,867,395 459,368
John T. Stupka 14,865,832 460,931
</TABLE>
2. Amendment and restatement of the CellStar Corporation 1993 Amended and
Restated Long-Term Incentive Plan
<TABLE>
<CAPTION>
Shares Shares
Voted Voted Broker
For Against Abstentions Nonvotes
--- ------- ----------- --------
<S> <C> <C> <C>
12,925,980 2,294,894 28,875 77,014
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
3.1 Amended and Restated Certificate of Incorporation of CellStar
Corporation. (1)
3.2 Amended and Restated Bylaws of CellStar Corporation. (3)
4.1 The Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws of CellStar Corporation filed as Exhibits 3.1 and 3.2 are
incorporated into this item by reference. (1)(3)
4.2 Specimen Common Stock Certificate of CellStar Corporation. (2)
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 ("Rights Agreement"). (4)
4.4 First Amendment to Rights Agreement, dated as of June 18, 1997. (5)
4.5 Form of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of CellStar Corporation. (4)
4.6 Form of Rights Certificate. (4)
18
<PAGE>
4.7 Form of Certificate of Correction to Certificate of Designation,
Preferences and Rights of Series A Preferred Stock of CellStar
Corporation. (5)
10.1 Amendment Number Two to Supply and Service Agreement between MCI
Telecommunications Corporation and CellStar, Ltd., entered into as of
March 30, 1997. (6)
10.2 Registration Rights Agreement, entered into as of May 30, 1997, between
Leap International PTE LTD and CellStar Corporation. (6)
10.3 Exchange Agreement, entered into as of May 30, 1997, between CellStar
Corporation and Leap International PTE LTD. (6)
10.4 Purchase Agreement, entered into as of May 30, 1997, between CellStar
(Asia) Corporation Ltd. and Leap International PTE LTD. (6)
10.5 1993 Amended and Restated Long-Term Incentive Plan (as amended through
April 21, 1997). (6)
27.1 Financial Data Schedule. (6)
_________________
(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 Annual Report on
Form 10-K for the fiscal year ended November 30, 1995, and
incorporated herein by reference.
(3) 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.
(4) Previously filed as an exhibit to the Company's Registration
Statement on Form 8-A (File No. 000-22972).
(5) Previously filed as an exhibit to the Company's Registration
Statement on Form 8-A/A, Amendment No. 1 (File No. 000-22972),
filed June 30, 1997, and incorporated herein by reference.
(6) Filed herewith.
(B) REPORTS ON FORM 8-K.
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CELLSTAR CORPORATION
By:/s/ Mark Q. Huggins
-------------------
Mark Q. Huggins,
Senior Vice President-Administration
and Chief Financial Officer
(Principal Financial Officer)
By:/s/ Evelyn Henry Miller
------------------------
Evelyn Henry Miller
Vice President and Corporate Controller
Date: July 1, 1997
20
<PAGE>
EXHIBIT INDEX
-----------------
Exhibit
No. Description
- ------- ----------------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of CellStar
Corporation. (1)
3.2 Amended and Restated Bylaws of CellStar Corporation. (3)
4.1 The Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of CellStar Corporation filed as Exhibits
3.1 and 3.2 are incorporated into this item by reference. (1)(3)
4.2 Specimen Common Stock Certificate of CellStar Corporation. (2)
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 ("Rights Agreement"). (4)
4.4 First Amendment to Rights Agreement, dated as of June 18, 1997. (5)
4.5 Form of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of CellStar Corporation. (4)
4.6 Form of Rights Certificate. (4)
4.7 Form of Certificate of Correction to Certificate of Designation,
Preferences and Rights of Series A Preferred Stock of CellStar
Corporation. (5)
10.1 Amendment Number Two to Supply and Service Agreement between MCI
Telecommunications Corporation and CellStar, Ltd., entered into as of
March 30, 1997. (6)
10.2 Registration Rights Agreement, entered into as of May 30, 1997,
between Leap International PTE LTD and CellStar Corporation. (6)
10.3 Exchange Agreement, entered into as of May 30, 1997, between CellStar
Corporation and Leap International PTE LTD. (6)
10.4 Purchase Agreement, entered into as of May 30, 1997, between CellStar
(Asia) Corporation Ltd. and Leap International PTE LTD. (6)
10.5 1993 Amended and Restated Long-Term Incentive Plan (as amended through
April 21, 1997). (6)
27.1 Financial Data Schedule. (6)
___________________________
(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 Annual Report on
Form 10-K for the fiscal year ended November 30, 1995, and
incorporated herein by reference.
21
<PAGE>
(3) 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.
(4) Previously filed as an exhibit to the Company's Registration
Statement on Form 8-A (File No. 000-22972).
(5) Previously filed as an exhibit to the Company's Registration
Statement on Form 8-A/A, Amendment No. 1 (File No. 000-22972),
filed June 30, 1997, and incorporated herein by reference.
(6) Filed herewith.
22
<PAGE>
EXHIBIT 10.1
AMENDMENT NUMBER TWO
THIS AMENDMENT NUMBER TWO to the Supply and Service Agreement between MCI
Telecommunications Corporation ("MCI") and CellStar, Ltd. ("CellStar"), is
entered into as of this 30th day of March, 1997.
WHEREAS, MCI and CellStar (the "Parties") entered into the Supply and
Service Agreement as of November 18, 1996 ("the Agreement");
WHEREAS, the Parties amended the Agreement with Amendment Number One dated
as of January 4, 1997;
WHEREAS, the Parties amended the Agreement with a January 8, 1997 letter
agreement; and
WHEREAS, MCI and CellStar desire to amend the Agreement further, to change
certain terms of the Agreement;
NOW, THEREFORE, the Parties hereto agree that the Agreement is amended,
effective March 30, 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 Two 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/ R.M. GOZIA
------------------------------ ------------------------------
Printed Printed
Name: Victoria Harker Name: Richard M. Gozia
--------------------------- ---------------------------
Title: Vice President of Finance Title: President
--------------------------- ---------------------------
Date: 6/4/97 Date: 5-21-97
---------------------------- ----------------------------
<PAGE>
ATTACHMENT A (Revised as of March 30, 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
BUXXA56TTL002 ULTRA TEAL 929.8625 L
BUXXA86CIC002 ULTRA CRAN 929.8625 L
BUXXA56BBL002 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
<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
BUXXA16BLK002 ULTRA BLACK 929.6125 L
<PAGE>
PART NUMBER DESCRIPTION FREQUENCY COV
PTN1F01GRY001 MOTOROLA NPCS/1/ N
VOICENOW PAGER
BRSXA86CHG000 MOTOROLA 929.8625 L
RSVP PAGER
BAPXA86BLK000 MOTOROLA 929.8625 L
ADVISOR PRO FLEX
BAPXA58BLK000 MOTOROLA 929.5825 R/N
ADVISOR PRO FLEX
BFXXA86BLK000 UNIDEN FX9400 929.8625 L
PAGER
PREPAID PAGERS
PART NUMBER DESCRIPTION FREQ COVERAGE
SKYF2PP050 PRONTO FLX 931.4375 L/R/N
(50 PREPAID PAGES)
SKYF2PP500 PRONTO FLX 931.4375 L/R/N
(500 PREPAD PAGES)
PREPAID CALLING CARDS
Harley 20 Unit
Collectors' Independence Day 4 30 Units
Collectors' Independence Day 4 30 Units (Promotional Cards)
MCI Prepaid Kit - Counter Spinner
MCI Prepaid Kit - Double Pocket Acrylic
MCI Prepaid Refill Packs - 15 Unit
MCI Prepaid Refill Packs - 30 Unit
MCI Prepaid Refill Packs - 60 Unit
MCI Prepaid Refill Packs - 75 Unit
- --------------------
/1/PageNet Narrowband PCS frequency.
<PAGE>
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
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of May
---------
30, 1997, between Leap International PTE LTD ("Leap") and CellStar Corporation
----
(the "CellStar").
--------
RECITALS
--------
A. CellStar and Leap are parties to an Exchange Agreement dated as of May 30,
1997, (the "Exchange Agreement"), pursuant to which CellStar has purchased
------------------
shares of capital stock of CellStar Pacific PTE LTD ("CellStar Pacific")
----------------
held by Leap.
B. In consideration of the transactions described in the Exchange Agreement,
CellStar now wishes to grant to Leap registration rights in 114,583 of the
shares of Common Stock, par value $0.01 (the "CellStar Stock"), of CellStar
--------------
transferred to Leap under the Exchange Agreement, represented by
certificate number C1263.
-----
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
Registration of the CellStar Stock
----------------------------------
1. Incidental Registration. If CellStar proposes to file a registration
-----------------------
statement pursuant to the Securities Act of 1933 (the "1933 Act") under Form
--------
S-1, S-2, S-3, or any similar form, then CellStar shall use its reasonable best
efforts to include under such registration statement all shares of the CellStar
Stock that Leap may request, limited to:
(i) One registration statement that becomes effective under the Securities
Act in which Leap is not subject to reduction in clause (ii) below;
and
(ii) CellStar Stock not in an amount in excess of an amount that will, in
the opinion of the managing underwriter of any offering, adversely
affect such offering;
2. Cutback. If Leap is required, pursuant to clause (ii) above, to
-------
reduce the number of shares of CellStar Stock registered, then persons
requesting registration of shares pursuant to registration rights that are not
subject to reduction shall first be permitted to register their shares. Leap
shall be permitted to register a fraction of all shares then remaining available
for registration, if any, equal to the quotient of the number of shares for
which Leap has requested registration, divided by the total of the number of
shares for which Leap has requested registration plus all other shares for which
other stockholders have requested registration and that are subject to
reduction.
1
<PAGE>
3. Conditions to Registration. (a) As a condition to Leap's
--------------------------
participation in any underwritten offering, Leap shall (i) execute the
underwriting agreement reasonably agreed on by CellStar and the underwriter,
(ii) pay its pro rata share of offering expenses, all underwriting discounts,
selling commissions and transfer taxes applicable to its shares and the fees of
its own counsel, if any, and (iii) cooperate with, and provide information to,
CellStar in connection with the preparation of the registration statement and
the sale of stock contemplated thereby.
(b) As a condition to Leap's participation in any registration that is not
an underwritten offering, Leap shall (i) pay its pro rata share of offering
expenses and transfer taxes applicable to its shares and the fees of its own
counsel, if any, and (ii) cooperate with, and provide information necessary to
effect such registration to, CellStar in connection with the preparation of the
registration statement and the sale of stock contemplated thereby.
4. Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
5. Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. This agreement is not assignable.
6. Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger, or reputable overnight courier, and
shall be deemed given when received at the addresses of the parties set forth
below, or at such other address furnished in writing to the other parties
hereto.
If to CellStar: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
2
<PAGE>
8. Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
9. Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect to this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
This Agreement has been executed and delivered as of the date first written
above.
LEAP INTERNATIONAL PTE LTD
By: /s/ Lim Chai Hock
----------------------------
Lim Chai Hock
General Manager
CELLSTAR CORPORATION
By: /s/ Alan H. Goldfield
----------------------------
Alan H. Goldfield
Chairman and CEO
3
<PAGE>
EXHIBIT 10.3
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the "Agreement") is entered into as of May 30, 1997,
---------
between CellStar Corporation, a Delaware corporation ("CellStar"), and Leap
--------
International PTE LTD, a company organized and existing under the laws of
Singapore ("Leap").
----
RECITALS
--------
A. Leap owns 100,000 ordinary shares, par value S$1.00, of CellStar Pacific
PTE LTD (the "CellStar Pacific Stock").
----------------------
B. CellStar and Leap wish to exchange 114,583 shares of common stock, $0.01
par value (the "CellStar Stock") of CellStar for 84,615 shares of the
--------------
CellStar Pacific Stock (the "CellStar Pacific Shares").
-----------------------
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
ARTICLE 1
Exchange
--------
Upon the terms and subject to the conditions contained in this Agreement,
and on the basis of the representations, warranties, covenants and agreements
set forth herein, CellStar hereby sells, conveys, transfers, assigns and
delivers the CellStar Stock in exchange for the CellStar Pacific Shares, and
Leap hereby sells, conveys, transfers, assigns and delivers the CellStar Pacific
Shares in exchange for the CellStar Stock.
ARTICLE 2
Closing Deliveries
------------------
2.1 CellStar's Deliveries. CellStar agrees to deliver to Leap at the
---------------------
Closing the following items:
(a) Stock Certificates. Certificates representing the CellStar
------------------
Stock, registered in such name or names and in such denominations as Leap shall
have notified CellStar prior to the Closing, with any necessary transfer stamps,
acquired at CellStar's expense, affixed. The number of shares of CellStar Stock
exchanged hereunder was calculated by the parties to equal US$2,750,000, based
upon recent market prices of CellStar common stock.
1
<PAGE>
2.2 Leap's Deliveries. Leap hereby delivers to CellStar the certificates
-----------------
representing the CellStar Pacific Shares accompanied by duly executed share
transfers in respect of the CellStar Pacific Shares and duly stamped at Leap's
expense.
2.3 Closing Date. The consummation of the transactions contemplated by
------------
this Agreement (the "Closing") shall take place at the offices of Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, after close
of business on May 30, 1997, such time and date being herein called the "Closing
Date".
ARTICLE 3
Representations and Warranties of Leap
--------------------------------------
Leap hereby represents and warrants to CellStar:
3.1 Ownership and Transfer. Leap has good, valid and marketable title to
----------------------
the CellStar Pacific Shares, free and clear of all security interests, liens
(choate or inchoate), encumbrances, mortgages, pledges, equities, charges,
assessments, restrictions, reservations, defects in title and other burdens and
interests of other persons, whether arising by contract or under law or equity
(collectively, "Liens"). Consummation of the transactions contemplated hereby
-----
will transfer to CellStar good, valid and marketable title to the CellStar
Pacific Shares, free and clear of all Liens. The CellStar Pacific Stock
constitutes all of the issued and outstanding shares of capital stock of
CellStar Pacific Pte Ltd ever issued to, or beneficially owned, directly or
indirectly, by Leap.
3.2 No Conflict. Leap has obtained all consents, qualifications, orders,
-----------
approvals, or authorizations of any governmental or regulatory authority or any
third party, required in connection with Leap's valid execution, delivery and
performance of this Agreement and the consummation by Leap of the transaction
contemplated hereby. Neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
result in any violation of the terms of, (ii) contravene or conflict with or
(iii) constitute a default under the Memorandum and Articles of Association of
Leap, any agreement to which Leap is a party or any judgment, decree, order,
law, rule or regulation or other restriction applicable to Leap and, in each
case, would prevent the consummation of the transactions contemplated hereby.
Neither the execution, delivery and performance by Leap of this Agreement, nor
the consummation of the transactions contemplated hereby will result in the
creation of any Lien on the CellStar Pacific Stock.
3.3 Investment Representations.
--------------------------
(a) Suitability as an Investor. Leap (i) is an "Accredited
-------------------------- ----------
Investor," as that term is defined in Regulation D under the Securities Act of
- --------
1933, as amended (the "1933 Act"), or has such knowledge, skill and experience
--------
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the CellStar Stock and the suitability thereof
2
<PAGE>
as an investment for it, (ii) understands that an investment in the CellStar
Stock involves a risk of financial loss, and (iii) has received such documents
and information as it has requested and has had an opportunity to ask questions
of officials of CellStar and to receive satisfactory answers concerning the
terms and conditions of the investment proposed herein, and based thereon, Leap
believes it can make an informed investment decision.
(b) Investment. Leap is acquiring the CellStar Stock for investment
----------
for its own account and not with a view to, or for resale in connection with,
any distribution thereof in violation of federal and state securities laws.
(c) Restricted Securities. Leap understands that the shares of
---------------------
CellStar Stock transferred hereunder have not been registered under applicable
state or federal securities laws of the United States by reason of certain
exemptions from the registration provisions thereof which depend upon, among
other things, the bona fide nature of Leap's representations and investment
intent as expressed herein. Leap understands that any shares of CellStar Stock
transferred hereunder may be offered, resold, pledged or otherwise transferred
only (a) to CellStar, (b) pursuant to an exemption from registration in
accordance with Rule 144 (if available) or another available exemption under the
1933 Act or (c) pursuant to an effective registration statement under the 1933
Act, in each case in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction subject to CellStar's right prior
to any resale pursuant to clause (b) above to require delivery of any opinion of
counsel, certification or other information satisfactory to CellStar. Leap
acknowledges that all shares of CellStar Stock transferred hereunder will bear
appropriate legends referencing its investment intent and the restrictions on
transfer reflected in this Section.
3.4 Advisors. Leap has had an opportunity to consult with its own
--------
advisors, including its legal, accounting and tax advisors and has assumed full
responsibility for determining on Leaps's behalf whether the transactions
contemplated by this Agreement are satisfactory to Leap. Leap has not relied on
any advice or work product of CellStar or any of its affiliated entities, or any
of their respective directors, officers, agents, attorneys or accountants in
determining whether the transactions contemplated hereby are satisfactory to
Leap.
ARTICLE 4
Representations and Warranties of CellStar
------------------------------------------
CellStar hereby represents and warrants to Leap:
4.1 Ownership and Transfer. CellStar is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of Delaware and is
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to so qualify.
3
<PAGE>
CellStar possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and to carry out the
transactions contemplated by this Agreement.
4.2 Authority. The execution, delivery and performance of this Agreement
---------
have been duly authorized by CellStar. This Agreement constitutes a valid and
binding obligation of CellStar, enforceable against CellStar in accordance with
its terms.
4.3 No Conflict. CellStar has obtained all consents, qualifications,
-----------
orders, approvals or authorizations of any governmental or regulatory authority
or any third party required in connection with CellStar's valid execution,
delivery and performance of this Agreement and the consummation by CellStar of
the transactions contemplated hereby. Neither the execution, delivery or
performance of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any violation of the terms of, (ii)
contravene or conflict with or (iii) constitute a default under, any agreement
to which CellStar is a party or any judgment, decree, order, law, rule or
regulation or other restriction applicable to CellStar. Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby will result in the creation of any Lien on the
CellStar Stock.
4.4 Authorization of Shares. The shares of CellStar Stock transferred
-----------------------
hereunder shall have been, on the Closing Date, duly authorized for issuance and
delivery to Leap pursuant to this Agreement against delivery of the CellStar
Pacific Shares set forth herein, and, on the Closing Date, will be validly
issued, fully paid and non-assessable; the issuances of the shares of CellStar
Stock transferred hereunder is not subject to the preemptive or other similar
rights of any security holder of CellStar.
ARTICLE 5
Conditions Precedent to Closing
-------------------------------
5.1 Conditions Precedent to the Obligation of CellStar to Close. The
-----------------------------------------------------------
obligation of CellStar to close shall be subject to the following conditions
precedent:
(a) Fulfillment by Leap of its covenants and agreements as set forth in
this Agreement.
(b) The representations of Leap contained in this Agreement shall be
accurate in all material respects on the date when made and shall also be
accurate on the Closing Date to the same extent as if made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between CellStar Pacific and Mr. Lim Chai Hock in the form attached hereto
as Exhibit A providing for the continued employment of Mr. Lim for a period
---------
of time following the Closing.
4
<PAGE>
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar and Leap in the form attached hereto as Exhibit
-------
B.
-
(e) The execution and delivery at the Closing of a Purchase Agreement
between CellStar (Asia) Corporation Ltd. ("CellStar Asia") and Leap in the
form attached hereto as Exhibit C.
---------
5.2 Conditions Precedent to the Obligation of Leap to Close. The
-------------------------------------------------------
obligation of Leap to close shall be subject to the following conditions
precedent:
(a) Fulfillment by CellStar of its obligations and agreements set forth in
this Agreement.
(b) The representations and warranties of CellStar contained in this
Agreement shall be accurate in all material respects on the date when made
and shall also be accurate on the Closing Date to the same extent as if
made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between CellStar Pacific and Mr. Lim in the form attached hereto as Exhibit
-------
A providing for the continued employment of Mr. Lim for a period of time
-
following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar and Leap in the form attached hereto as Exhibit
-------
B.
-
(e) The execution and delivery at the Closing of a Purchase Agreement
between CellStar Asia and Leap in the form attached hereto as Exhibit C.
---------
ARTICLE 6
Indemnification
---------------
6.1 Indemnification of CellStar. Subject to the other provisions of this
---------------------------
Article, Leap shall defend, indemnify and hold CellStar harmless from and
against, and promptly reimburse CellStar for, any and all loss, expense, damage,
deficiency, liability and obligation, including investigative costs, costs of
defense, settlement costs and attorneys' fees (collectively, "Losses"), arising
------
out of or in connection with any breach or asserted breach of any
representation, warranty or agreement of Leap contained in this Agreement.
6.2 Indemnification of Leap. Subject to the other provisions of this
-----------------------
Article, CellStar shall defend, indemnify and hold Leap harmless from and
against, and promptly reimburse Leap for any and all Losses arising out of or in
connection with any breach or asserted breach of any representation, warranty or
agreement of CellStar contained in this Agreement.
5
<PAGE>
ARTICLE 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
7.2 Survival. None of (i) the consummation of the transactions
--------
contemplated hereby, (ii) the delay or omission of a party to exercise any of
its rights hereunder, nor (iii) any investigation or disclosure that any party
makes or any knowledge that any party obtains as a result thereof or otherwise,
shall affect the liability of the parties to one another for breaches of, or
misrepresentations under, this Agreement or prevent any party from relying on
the representations and warranties contained herein.
The liability of any party hereto under Article 6 for breaches of its
representations, warranties, covenants and agreements made hereunder shall
survive the consummation of the transactions described herein.
7.3 Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. The parties may assign their respective rights under this
Agreement.
7.4 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7.5 Waiver. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there by any estoppel to enforce any provision of
this Agreement, except by written instrument of the party charged with such
waiver of estoppel.
7.6 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger or reputable overnight courier, and
shall be deemed given when received at the addresses of the parties set forth
below, or at such other address furnished in writing to the other parties
hereto.
If to CellStar: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
6
<PAGE>
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
7.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy inuring to any party upon any breach or default of any party
under this Agreement shall impair any such rights, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach of default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies either under this Agreement or by law or otherwise afforded to the
parties shall be cumulative or not alternative.
7.8 Severability. In case any provision of this agreement shall be
------------
invalid, illegal or unenforceable, such provision shall be reformed to the
extent necessary to permit enforcement thereof, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
7.10 Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect of this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
7.11 Cooperation. The parties to this Agreement shall use reasonable
-----------
efforts to take, or cause to be taken, all reasonable actions and to do, or
cause to be done all things reasonable necessary (including executing additional
instruments or agreement), proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
7.13 Confidential Information. Leap acknowledges that it has received
------------------------
confidential and proprietary information of and concerning CellStar and Leap
hereby covenants that, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, it will not disclose to any person such confidential information unless
it is previously made public by CellStar, and that it will not use such
confidential information in any capacity.
7
<PAGE>
This Agreement has been executed and delivered as of the date first written
above.
CELLSTAR CORPORATION
By: /s/ ALAN H. GOLDFIELD
-----------------------------------------------
Alan H. Goldfield
Chairman and CEO
LEAP INTERNATIONAL PTE LTD
By: /s/ LIM CHAI HOCK
-----------------------------------------------
Lim Chai Hock
General Manager
8
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), dated as of the 1st day of June,
1997, is by and between CELLSTAR PACIFIC PTE. LTD., a company organized and
existing under the laws of Singapore (the "Company"), and LIM CHAI HOCK (the
"Employee").
WHEREAS, the Employee has intimate knowledge of the cellular markets in
Singapore, Malaysia, Thailand, Indonesia, Philippines and Brunei (hereinafter
the "Asean Region") and India, Pakistan, Sri Lanka and Bangladesh (hereinafter
the "Indian Sub-Continent") and Vietnam (the Asean Region, Indian Sub-Continent
and Vietnam hereinafter 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 May 31,
1998, (the period from the date hereof through May 31, 1998, 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 General Manager with duties consistent
therewith and set forth in Exhibit A or such other duties 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
1
<PAGE>
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 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 has and 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 express 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 twelve (12) months following the termination of
this Agreement 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 One Percent (1%) of the
capital stock of a publicly owned corporation) in any business or other entity
organized for profit which is engaged in the wholesale distribution of cellular,
PCS and paging products in significant competition with the Company in the
markets in which the Company conducts business during the term of this
Agreement.
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,
2
<PAGE>
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 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 at the monthly
------
rate of S$24,000.00 (exclusive of the employer's portion of the required
contribution to the Central Provident Fund). The salary due the Employee
hereunder shall be payable in monthly installments. The Company and Employee may
by mutual written agreement agree to increase or decrease the amount of
compensation payable to Employee during any specified period during the term of
this Agreement provided that such written Agreement is entered into prior to the
period for which any adjustment of compensation is applicable. The Company may,
from time to time at the discretion of the Board of Directors, pay a bonus or
bonuses to Employee 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 not to exceed S$5,000.00 per month, unless otherwise approved by
the Board of Directors, for all 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.
3
<PAGE>
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,
1998, (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;
(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.
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. 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 Blk 512, Bukit Batok
Street 52, #10-518, Singapore 650512; and if to the Company, c/o Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, with a copy
to CellStar Corporation, 1730 Briercroft Court, Carrollton, Texas 75006, Attn:
President. An address may be changed by notice in writing signed by the
addressee.
4
<PAGE>
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.
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 SINGAPORE.
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 PACIFIC PTE LTD.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
THE EMPLOYEE
---------------------------------
LIM CHAI HOCK
5
<PAGE>
EXHIBIT A
---------
DUTIES OF GENERAL MANAGER
- -- Conduct the day to day business of the Company.
- -- Report to the Board of Directors and achieve 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 B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of May
---------
30, 1997, between Leap International PTE LTD ("Leap") and CellStar Corporation
----
(the "CellStar").
--------
RECITALS
--------
A. CellStar and Leap are parties to an Exchange Agreement dated as of May 30,
1997, (the "Exchange Agreement"), pursuant to which CellStar has purchased
------------------
shares of capital stock of CellStar Pacific PTE LTD ("CellStar Pacific")
----------------
held by Leap.
B. In consideration of the transactions described in the Exchange Agreement,
CellStar now wishes to grant to Leap registration rights in 114,583 of the
shares of Common Stock, par value $0.01 (the "CellStar Stock"), of CellStar
--------------
transferred to Leap under the Exchange Agreement, represented by
certificate number __________.
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
Registration of the CellStar Stock
----------------------------------
1. Incidental Registration. If CellStar proposes to file a registration
-----------------------
statement pursuant to the Securities Act of 1933 (the "1933 Act") under Form S-
--------
1, S-2, S-3, or any similar form, then CellStar shall use its reasonable best
efforts to include under such registration statement all shares of the CellStar
Stock that Leap may request, limited to:
(i) One registration statement that becomes effective under the Securities
Act in which Leap is not subject to reduction in clause (ii) below;
and
(ii) CellStar Stock not in an amount in excess of an amount that will, in
the opinion of the managing underwriter of any offering, adversely
affect such offering;
2. Cutback. If Leap is required, pursuant to clause (ii) above, to
-------
reduce the number of shares of CellStar Stock registered, then persons
requesting registration of shares pursuant to registration rights that are not
subject to reduction shall first be permitted to register their shares. Leap
shall be permitted to register a fraction of all shares then remaining available
for registration, if any, equal to the quotient of the number of shares for
which Leap has requested registration, divided by the total of the number of
shares for which Leap has requested registration plus all other shares for which
other stockholders have requested registration and that are subject to
reduction.
1
<PAGE>
3. Conditions to Registration. (a) As a condition to Leap's
--------------------------
participation in any underwritten offering, Leap shall (i) execute the
underwriting agreement reasonably agreed on by CellStar and the underwriter,
(ii) pay its pro rata share of offering expenses, all underwriting discounts,
selling commissions and transfer taxes applicable to its shares and the fees of
its own counsel, if any, and (iii) cooperate with, and provide information to,
CellStar in connection with the preparation of the registration statement and
the sale of stock contemplated thereby.
(b) As a condition to Leap's participation in any registration that is not
an underwritten offering, Leap shall (i) pay its pro rata share of offering
expenses and transfer taxes applicable to its shares and the fees of its own
counsel, if any, and (ii) cooperate with, and provide information necessary to
effect such registration to, CellStar in connection with the preparation of the
registration statement and the sale of stock contemplated thereby.
4. Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
5. Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. This agreement is not assignable.
6. Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger, or reputable overnight courier, and
shall be deemed given when received at the addresses of the parties set forth
below, or at such other address furnished in writing to the other parties
hereto.
If to CellStar: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
2
<PAGE>
8. Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
9. Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect to this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
This Agreement has been executed and delivered as of the date first written
above.
LEAP INTERNATIONAL PTE LTD
By:
----------------------------
Lim Chai Hock
General Manager
CELLSTAR CORPORATION
By:
----------------------------
Alan H. Goldfield
Chairman and CEO
3
<PAGE>
EXHIBIT C
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement") is entered into as of May 30, 1997,
---------
between CellStar (Asia) Corporation Ltd., a company organized and existing under
the laws of Hong Kong ("CellStar Asia"), and Leap International PTE LTD, a
-------------
company organized and existing under the laws of Singapore ("Leap").
----
RECITALS
--------
A. Leap owns 100,000 ordinary shares, par value S$1.00, of CellStar Pacific
PTE LTD (the "CellStar Pacific Stock").
----------------------
B. CellStar Asia wishes to purchase from Leap 15,385 shares of the CellStar
Pacific Stock (the "CellStar Pacific Shares") for cash consideration
-----------------------
payable at the Closing (as hereinafter defined).
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
ARTICLE 1
Sale and Purchase
-----------------
Upon the terms and subject to the conditions contained in this Agreement,
and on the basis of the representations, warranties, covenants and agreements
set forth herein, Leap shall sell, convey, transfer, assign and deliver to
CellStar Asia, and CellStar Asia shall purchase from Leap, at the Closing, the
CellStar Pacific Shares in consideration for the payment of Five Hundred
Thousand Twelve and 50/100's US Dollars (US$500,012.50) (the "Closing Payment").
---------------
ARTICLE 2
Closing Deliveries
------------------
2.1 CellStar Asia's Deliveries. CellStar Asia agrees to deliver to Leap
--------------------------
at the Closing the following items:
(a) Closing Payment. The Closing Payment, by wire transfer of next-
---------------
day funds to the account previously identified by Leap.
1
<PAGE>
2.2 Leap's Deliveries. Leap hereby delivers to CellStar Asia the
-----------------
certificates representing the CellStar Pacific Shares, endorsed in blank or
accompanied by duly executed share transfers in respect of the CellStar Pacific
Shares and duly stamped at Leap's expense.
2.3 Closing Date. The consummation of the transactions contemplated by
------------
this Agreement (the "Closing") shall take place at the offices of Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, after close
of business on May 30, 1997, such time and date being herein called the "Closing
Date".
ARTICLE 3
Representations and warranties of Leap
--------------------------------------
Leap hereby represents and warrants to CellStar Asia:
3.1 Ownership and Transfer. Leap has good, valid and marketable title to
----------------------
the CellStar Pacific Shares, free and clear of all security interests, liens
(choate or inchoate), encumbrances, mortgages, pledges, equities, charges,
assessments, restrictions, reservations, defects in title and other burdens and
interests of other persons, whether arising by contract or under law or equity
(collectively, "Liens"). Consummation of the transactions contemplated hereby
-----
will transfer to CellStar Asia good, valid and marketable title to the CellStar
Pacific Shares, free and clear of all Liens. The CellStar Pacific Stock
constitutes all of the issued and outstanding shares of capital stock of
CellStar Pacific Pte Ltd ever issued to, or beneficially owned, directly or
indirectly, by Leap.
3.2 No Conflict. Leap has obtained all consents, qualifications, orders,
-----------
approvals, or authorizations of any governmental or regulatory authority or any
third party, required in connection with Leap's valid execution, delivery and
performance of this Agreement and the consummation by Leap of the transaction
contemplated hereby. Neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
result in any violation of the terms of, (ii) contravene or conflict with or
(iii) constitute a default under the Memorandum and Articles of Association of
Leap, any agreement to which Leap is a party or any judgment, decree, order,
law, rule or regulation or other restriction applicable to Leap and, in each
case, would prevent the consummation of the transactions contemplated hereby.
Neither the execution, delivery and performance of this Agreement by Leap, nor
the consummation of the transactions contemplated hereby will result in the
creation of any Lien on the CellStar Pacific Stock.
3.3 Advisors. Leap has had an opportunity to consult with its own
--------
advisors, including its legal, accounting and tax advisors and has assumed full
responsibility for determining on Leaps's behalf whether the transactions
contemplated by this Agreement are satisfactory to Leap.
2
<PAGE>
Leap has not relied on any advice or work product of CellStar Asia or any of its
affiliated entities, or any of their respective directors, officers, agents,
attorneys or accountants in determining whether the transactions contemplated
hereby are satisfactory to Leap.
ARTICLE 4
Representations and Warranties of CellStar Asia
-----------------------------------------------
CellStar Asia hereby represents and warrants to Leap:
4.1 Ownership and Transfer. CellStar Asia is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of Hong Kong and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to so qualify. CellStar Asia
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its businesses as now conducted and to carry out the transactions
contemplated by this Agreement.
4.2 Authority. The execution, delivery and performance of this Agreement
---------
have been duly authorized by CellStar Asia. This Agreement constitutes a valid
and binding obligation of CellStar Asia, enforceable against CellStar Asia in
accordance with its terms.
4.3 No Conflict. CellStar Asia has obtained all consents, qualifications,
-----------
orders, approvals or authorizations of any governmental or regulatory authority
or any third party required in connection with CellStar Asia's valid execution,
delivery and performance of this Agreement and the consummation by CellStar Asia
of the transactions contemplated hereby. Neither the execution, delivery or
performance of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any violation of the terms of, (ii)
contravene or conflict with or (iii) constitute a default under the Memorandum
and Articles of Association of CellStar Asia, any agreement to which CellStar
Asia is a party or any judgment, decree, order, law, rule or regulation or other
restriction applicable to CellStar Asia.
ARTICLE 5
Conditions Precedent to Closing
-------------------------------
5.1 Conditions Precedent to the Obligation of CellStar Asia to Close. The
----------------------------------------------------------------
obligation of CellStar Asia to close shall be subject to the following
conditions precedent:
(a) Fulfillment by Leap of its obligations and agreements as set forth in
this Agreement.
3
<PAGE>
(b) The representations of Leap contained in this Agreement shall be
accurate in all material respects on the date when made and shall also be
accurate on the Closing Date to the same extent as if made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between the CellStar Pacific and Mr. Lim Chai Hock in the form attached
hereto as Exhibit A providing for the continued employment of Mr. Lim for a
---------
period of time following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar Corporation and Leap in the form attached hereto
as Exhibit B.
---------
(e) The execution and delivery at the Closing of an Exchange Agreement
between CellStar Corporation ("CellStar") and Leap in the form attached
hereto as Exhibit C.
---------
5.2 Conditions Precedent to the Obligation of Leap to Close. The
-------------------------------------------------------
obligation of Leap to close shall be subject to the following conditions
precedent:
(a) Fulfillment by CellStar Asia of its obligations and agreements set
forth in this Agreement.
(b) The representations and warranties of CellStar Asia contained in this
Agreement shall be accurate in all material respects on the date when made
and shall also be accurate on the Closing Date to the same extent as if
made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between the CellStar Pacific and Mr. Lim in the form attached hereto as
Exhibit A providing for the continued employment of Mr. Lim for a period of
---------
time following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar Corporation and Leap in the form attached hereto
as Exhibit B.
---------
(e) The execution and delivery at the Closing of an Exchange Agreement
between CellStar and Leap in the form attached hereto as Exhibit C.
---------
ARTICLE 6
Indemnification
---------------
6.1 Indemnification of CellStar Asia. Subject to the other provisions of
--------------------------------
this Article, Leap shall defend, indemnify and hold CellStar Asia harmless from
and against, and promptly reimburse CellStar Asia for, any and all loss,
expense, damage, deficiency, liability and obligation, including investigative
costs, costs of defense, settlement costs and attorneys' fees
4
<PAGE>
(collectively, "Losses"), arising out of or in connection with any breach or
------
asserted breach of any representation, warranty or agreement of Leap contained
in this Agreement.
6.2 Indemnification of Leap. Subject to the other provisions of this
-----------------------
Article, CellStar Asia shall defend, indemnify and hold Leap harmless from and
against, and promptly reimburse Leap for any and all Losses arising out of or in
connection with any breach or asserted breach of any representation, warranty or
agreement of CellStar Asia contained in this Agreement.
ARTICLE 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
7.2 Survival. None of (i) the consummation of the transactions
--------
contemplated hereby, (ii) the delay or omission of a party to exercise any of
its rights hereunder, nor (iii) any investigation or disclosure that any party
makes or any knowledge that any party obtains as a result thereof or otherwise,
shall affect the liability of the parties to one another for breaches of, or
misrepresentations under, this Agreement or prevent any party from relying on
the representations and warranties contained herein.
The liability of any party hereto under Article 6 for breaches of its
representations, warranties and agreements made hereunder shall survive the
consummation of the transactions described herein.
7.3 Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. The parties may assign their respective rights under this
Agreement.
7.4 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7.5 Waiver. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there by any estoppel to enforce any provision of
this Agreement, except by written instrument of the party charged with such
waiver of estoppel.
7.6 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger or reputable overnight courier, and
shall be deemed given when received at the
5
<PAGE>
addresses of the parties set forth below, or at such other address furnished in
writing to the other parties hereto.
If to CellStar Asia: CellStar (Asia) Corporation Ltd.
509-510, 5/FL, Block B
Sing Tao Bldg., 1, Wang Kwong Road
Kowloon Bay, Kowloon, Hong Kong
Attn: Mr. A. S. Hong
With copy to: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
7.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy inuring to any party upon any breach or default of any party
under this Agreement shall impair any such right, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies either under this Agreement or by law or otherwise afforded to the
parties shall be cumulative and not alternative.
7.8 Severability. In case any provision of this agreement shall be
------------
invalid, illegal or unenforceable, such provision shall be reformed to the
extent necessary to permit enforcement thereof, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
7.10 Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect of this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
6
<PAGE>
7.11 Cooperation. The parties to this Agreement shall use reasonable
-----------
efforts to take, or cause to be taken, all reasonable actions and to do, or
cause to be done all things reasonably necessary (including executing additional
instruments or agreement), proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
7.12 Confidential Information. Leap acknowledges that it has received
------------------------
confidential and proprietary information of and concerning CellStar Asia and
Leap hereby covenants that ,unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, it will not disclose to any person such confidential information unless
it is previously made public by CellStar Asia, and that Leap will not use such
confidential information in any capacity.
This Agreement has been executed and delivered as of the date first written
above.
CELLSTAR (ASIA) CORPORATION LTD.
By:
--------------------------------
Alan H. Goldfield
Director and Chairman
LEAP INTERNATIONAL PTE LTD
By:
--------------------------------
Lim Chai Hock
General Manager
7
<PAGE>
EXHIBIT 10.4
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement") is entered into as of May 30, 1997,
---------
between CellStar (Asia) Corporation Ltd., a company organized and existing under
the laws of Hong Kong ("CellStar Asia"), and Leap International PTE LTD, a
-------------
company organized and existing under the laws of Singapore ("Leap").
----
RECITALS
--------
A. Leap owns 100,000 ordinary shares, par value S$1.00, of CellStar Pacific
PTE LTD (the "CellStar Pacific Stock").
----------------------
B. CellStar Asia wishes to purchase from Leap 15,385 shares of the CellStar
Pacific Stock (the "CellStar Pacific Shares") for cash consideration
-----------------------
payable at the Closing (as hereinafter defined).
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
ARTICLE 1
Sale and Purchase
-----------------
Upon the terms and subject to the conditions contained in this Agreement,
and on the basis of the representations, warranties, covenants and agreements
set forth herein, Leap shall sell, convey, transfer, assign and deliver to
CellStar Asia, and CellStar Asia shall purchase from Leap, at the Closing, the
CellStar Pacific Shares in consideration for the payment of Five Hundred
Thousand Twelve and 50/100's US Dollars (US$500,012.50) (the "Closing Payment").
---------------
ARTICLE 2
Closing Deliveries
------------------
2.1 CellStar Asia's Deliveries. CellStar Asia agrees to deliver to Leap
--------------------------
at the Closing the following items:
(a) Closing Payment. The Closing Payment, by wire transfer of next-
---------------
day funds to the account previously identified by Leap.
1
<PAGE>
2.2 Leap's Deliveries. Leap hereby delivers to CellStar Asia the
-----------------
certificates representing the CellStar Pacific Shares, endorsed in blank or
accompanied by duly executed share transfers in respect of the CellStar Pacific
Shares and duly stamped at Leap's expense.
2.3 Closing Date. The consummation of the transactions contemplated by
------------
this Agreement (the "Closing") shall take place at the offices of Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, after close
of business on May 30, 1997, such time and date being herein called the "Closing
Date".
ARTICLE 3
Representations and warranties of Leap
--------------------------------------
Leap hereby represents and warrants to CellStar Asia:
3.1 Ownership and Transfer. Leap has good, valid and marketable title to
----------------------
the CellStar Pacific Shares, free and clear of all security interests, liens
(choate or inchoate), encumbrances, mortgages, pledges, equities, charges,
assessments, restrictions, reservations, defects in title and other burdens and
interests of other persons, whether arising by contract or under law or equity
(collectively, "Liens"). Consummation of the transactions contemplated hereby
-----
will transfer to CellStar Asia good, valid and marketable title to the CellStar
Pacific Shares, free and clear of all Liens. The CellStar Pacific Stock
constitutes all of the issued and outstanding shares of capital stock of
CellStar Pacific Pte Ltd ever issued to, or beneficially owned, directly or
indirectly, by Leap.
3.2 No Conflict. Leap has obtained all consents, qualifications, orders,
-----------
approvals, or authorizations of any governmental or regulatory authority or any
third party, required in connection with Leap's valid execution, delivery and
performance of this Agreement and the consummation by Leap of the transaction
contemplated hereby. Neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
result in any violation of the terms of, (ii) contravene or conflict with or
(iii) constitute a default under the Memorandum and Articles of Association of
Leap, any agreement to which Leap is a party or any judgment, decree, order,
law, rule or regulation or other restriction applicable to Leap and, in each
case, would prevent the consummation of the transactions contemplated hereby.
Neither the execution, delivery and performance of this Agreement by Leap, nor
the consummation of the transactions contemplated hereby will result in the
creation of any Lien on the CellStar Pacific Stock.
3.3 Advisors. Leap has had an opportunity to consult with its own
--------
advisors, including its legal, accounting and tax advisors and has assumed full
responsibility for determining on Leaps's behalf whether the transactions
contemplated by this Agreement are satisfactory to Leap.
2
<PAGE>
Leap has not relied on any advice or work product of CellStar Asia or any of its
affiliated entities, or any of their respective directors, officers, agents,
attorneys or accountants in determining whether the transactions contemplated
hereby are satisfactory to Leap.
ARTICLE 4
Representations and Warranties of CellStar Asia
-----------------------------------------------
CellStar Asia hereby represents and warrants to Leap:
4.1 Ownership and Transfer. CellStar Asia is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of Hong Kong and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to so qualify. CellStar Asia
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its businesses as now conducted and to carry out the transactions
contemplated by this Agreement.
4.2 Authority. The execution, delivery and performance of this Agreement
---------
have been duly authorized by CellStar Asia. This Agreement constitutes a valid
and binding obligation of CellStar Asia, enforceable against CellStar Asia in
accordance with its terms.
4.3 No Conflict. CellStar Asia has obtained all consents, qualifications,
-----------
orders, approvals or authorizations of any governmental or regulatory authority
or any third party required in connection with CellStar Asia's valid execution,
delivery and performance of this Agreement and the consummation by CellStar Asia
of the transactions contemplated hereby. Neither the execution, delivery or
performance of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any violation of the terms of, (ii)
contravene or conflict with or (iii) constitute a default under the Memorandum
and Articles of Association of CellStar Asia, any agreement to which CellStar
Asia is a party or any judgment, decree, order, law, rule or regulation or other
restriction applicable to CellStar Asia.
ARTICLE 5
Conditions Precedent to Closing
-------------------------------
5.1 Conditions Precedent to the Obligation of CellStar Asia to Close. The
----------------------------------------------------------------
obligation of CellStar Asia to close shall be subject to the following
conditions precedent:
(a) Fulfillment by Leap of its obligations and agreements as set forth in
this Agreement.
3
<PAGE>
(b) The representations of Leap contained in this Agreement shall be
accurate in all material respects on the date when made and shall also be
accurate on the Closing Date to the same extent as if made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between the CellStar Pacific and Mr. Lim Chai Hock in the form attached
hereto as Exhibit A providing for the continued employment of Mr. Lim for a
---------
period of time following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar Corporation and Leap in the form attached hereto
as Exhibit B.
---------
(e) The execution and delivery at the Closing of an Exchange Agreement
between CellStar Corporation ("CellStar") and Leap in the form attached
hereto as Exhibit C.
---------
5.2 Conditions Precedent to the Obligation of Leap to Close. The
-------------------------------------------------------
obligation of Leap to close shall be subject to the following conditions
precedent:
(a) Fulfillment by CellStar Asia of its obligations and agreements set
forth in this Agreement.
(b) The representations and warranties of CellStar Asia contained in this
Agreement shall be accurate in all material respects on the date when made
and shall also be accurate on the Closing Date to the same extent as if
made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between the CellStar Pacific and Mr. Lim in the form attached hereto as
Exhibit A providing for the continued employment of Mr. Lim for a period of
---------
time following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar Corporation and Leap in the form attached hereto
as Exhibit B.
---------
(e) The execution and delivery at the Closing of an Exchange Agreement
between CellStar and Leap in the form attached hereto as Exhibit C.
---------
ARTICLE 6
Indemnification
---------------
6.1 Indemnification of CellStar Asia. Subject to the other provisions of
--------------------------------
this Article, Leap shall defend, indemnify and hold CellStar Asia harmless from
and against, and promptly reimburse CellStar Asia for, any and all loss,
expense, damage, deficiency, liability and obligation, including investigative
costs, costs of defense, settlement costs and attorneys' fees
4
<PAGE>
(collectively, "Losses"), arising out of or in connection with any breach or
-------
asserted breach of any representation, warranty or agreement of Leap contained
in this Agreement.
6.2 Indemnification of Leap. Subject to the other provisions of this
-----------------------
Article, CellStar Asia shall defend, indemnify and hold Leap harmless from and
against, and promptly reimburse Leap for any and all Losses arising out of or in
connection with any breach or asserted breach of any representation, warranty or
agreement of CellStar Asia contained in this Agreement.
ARTICLE 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
7.2 Survival. None of (i) the consummation of the transactions
--------
contemplated hereby, (ii) the delay or omission of a party to exercise any of
its rights hereunder, nor (iii) any investigation or disclosure that any party
makes or any knowledge that any party obtains as a result thereof or otherwise,
shall affect the liability of the parties to one another for breaches of, or
misrepresentations under, this Agreement or prevent any party from relying on
the representations and warranties contained herein.
The liability of any party hereto under Article 6 for breaches of its
representations, warranties and agreements made hereunder shall survive the
consummation of the transactions described herein.
7.3 Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. The parties may assign their respective rights under this
Agreement.
7.4 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7.5 Waiver. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there by any estoppel to enforce any provision of
this Agreement, except by written instrument of the party charged with such
waiver of estoppel.
7.6 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger or reputable overnight courier, and
shall be deemed given when received at the
5
<PAGE>
addresses of the parties set forth below, or at such other address furnished in
writing to the other parties hereto.
If to CellStar Asia: CellStar (Asia) Corporation Ltd.
509-510, 5/FL, Block B
Sing Tao Bldg., 1, Wang Kwong Road
Kowloon Bay, Kowloon, Hong Kong
Attn: Mr. A. S. Hong
With copy to: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
7.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy inuring to any party upon any breach or default of any party
under this Agreement shall impair any such right, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies either under this Agreement or by law or otherwise afforded to the
parties shall be cumulative and not alternative.
7.8 Severability. In case any provision of this agreement shall be
------------
invalid, illegal or unenforceable, such provision shall be reformed to the
extent necessary to permit enforcement thereof, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
7.10 Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect of this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
6
<PAGE>
7.11 Cooperation. The parties to this Agreement shall use reasonable
-----------
efforts to take, or cause to be taken, all reasonable actions and to do, or
cause to be done all things reasonably necessary (including executing additional
instruments or agreement), proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
7.12 Confidential Information. Leap acknowledges that it has received
------------------------
confidential and proprietary information of and concerning CellStar Asia and
Leap hereby covenants that ,unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, it will not disclose to any person such confidential information unless
it is previously made public by CellStar Asia, and that Leap will not use such
confidential information in any capacity.
This Agreement has been executed and delivered as of the date first written
above.
CELLSTAR (ASIA) CORPORATION LTD.
By: /s/ Alan H. Goldfield
--------------------------------
Alan H. Goldfield
Director and Chairman
LEAP INTERNATIONAL PTE LTD
By: /s/ Lim Chai Hock
--------------------------------
Lim Chai Hock
General Manager
7
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), dated as of the 1st day of June,
1997, is by and between CELLSTAR PACIFIC PTE. LTD., a company organized and
existing under the laws of Singapore (the "Company"), and LIM CHAI HOCK (the
"Employee").
WHEREAS, the Employee has intimate knowledge of the cellular markets in
Singapore, Malaysia, Thailand, Indonesia, Philippines and Brunei (hereinafter
the "Asean Region") and India, Pakistan, Sri Lanka and Bangladesh (hereinafter
the "Indian Sub-Continent") and Vietnam (the Asean Region, Indian Sub-Continent
and Vietnam hereinafter 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 May 31,
1998, (the period from the date hereof through May 31, 1998, 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 General Manager with duties consistent
therewith and set forth in Exhibit A or such other duties 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
1
<PAGE>
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 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 has and 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 express 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 twelve (12) months following the termination of
this Agreement 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 One Percent (1%) of the
capital stock of a publicly owned corporation) in any business or other entity
organized for profit which is engaged in the wholesale distribution of cellular,
PCS and paging products in significant competition with the Company in the
markets in which the Company conducts business during the term of this
Agreement.
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,
2
<PAGE>
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 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 at the monthly
------
rate of S$24,000.00 (exclusive of the employer's portion of the required
contribution to the Central Provident Fund). The salary due the Employee
hereunder shall be payable in monthly installments. The Company and Employee may
by mutual written agreement agree to increase or decrease the amount of
compensation payable to Employee during any specified period during the term of
this Agreement provided that such written Agreement is entered into prior to the
period for which any adjustment of compensation is applicable. The Company may,
from time to time at the discretion of the Board of Directors, pay a bonus or
bonuses to Employee 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 not to exceed S$5,000.00 per month, unless otherwise approved by
the Board of Directors, for all 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.
3
<PAGE>
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,
1998, (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;
(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.
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. 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 Blk 512, Bukit Batok
Street 52, #10-518, Singapore 650512; and if to the Company, c/o Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, with a copy
to CellStar Corporation, 1730 Briercroft Court, Carrollton, Texas 75006, Attn:
President. An address may be changed by notice in writing signed by the
addressee.
4
<PAGE>
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.
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 SINGAPORE.
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 PACIFIC PTE LTD.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
THE EMPLOYEE
---------------------------------
LIM CHAI HOCK
5
<PAGE>
EXHIBIT A
---------
DUTIES OF GENERAL MANAGER
- -- Conduct the day to day business of the Company.
- -- Report to the Board of Directors and achieve 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 B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of May
---------
30, 1997, between Leap International PTE LTD ("Leap") and CellStar Corporation
----
(the "CellStar").
--------
RECITALS
--------
A. CellStar and Leap are parties to an Exchange Agreement dated as of May 30,
1997, (the "Exchange Agreement"), pursuant to which CellStar has purchased
------------------
shares of capital stock of CellStar Pacific PTE LTD ("CellStar Pacific")
----------------
held by Leap.
B. In consideration of the transactions described in the Exchange Agreement,
CellStar now wishes to grant to Leap registration rights in 114,583 of the
shares of Common Stock, par value $0.01 (the "CellStar Stock"), of CellStar
--------------
transferred to Leap under the Exchange Agreement, represented by
certificate number __________.
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
Registration of the CellStar Stock
----------------------------------
1. Incidental Registration. If CellStar proposes to file a registration
-----------------------
statement pursuant to the Securities Act of 1933 (the "1933 Act") under Form
--------
S-1, S-2, S-3, or any similar form, then CellStar shall use its reasonable best
efforts to include under such registration statement all shares of the CellStar
Stock that Leap may request, limited to:
(i) One registration statement that becomes effective under the Securities
Act in which Leap is not subject to reduction in clause (ii) below;
and
(ii) CellStar Stock not in an amount in excess of an amount that will, in
the opinion of the managing underwriter of any offering, adversely
affect such offering;
2. Cutback. If Leap is required, pursuant to clause (ii) above, to
-------
reduce the number of shares of CellStar Stock registered, then persons
requesting registration of shares pursuant to registration rights that are not
subject to reduction shall first be permitted to register their shares. Leap
shall be permitted to register a fraction of all shares then remaining available
for registration, if any, equal to the quotient of the number of shares for
which Leap has requested registration, divided by the total of the number of
shares for which Leap has requested registration plus all other shares for which
other stockholders have requested registration and that are subject to
reduction.
1
<PAGE>
3. Conditions to Registration. (a) As a condition to Leap's
--------------------------
participation in any underwritten offering, Leap shall (i) execute the
underwriting agreement reasonably agreed on by CellStar and the underwriter,
(ii) pay its pro rata share of offering expenses, all underwriting discounts,
selling commissions and transfer taxes applicable to its shares and the fees of
its own counsel, if any, and (iii) cooperate with, and provide information to,
CellStar in connection with the preparation of the registration statement and
the sale of stock contemplated thereby.
(b) As a condition to Leap's participation in any registration that is not
an underwritten offering, Leap shall (i) pay its pro rata share of offering
expenses and transfer taxes applicable to its shares and the fees of its own
counsel, if any, and (ii) cooperate with, and provide information necessary to
effect such registration to, CellStar in connection with the preparation of the
registration statement and the sale of stock contemplated thereby.
4. Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
5. Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. This agreement is not assignable.
6. Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger, or reputable overnight courier, and
shall be deemed given when received at the addresses of the parties set forth
below, or at such other address furnished in writing to the other parties
hereto.
If to CellStar: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
2
<PAGE>
8. Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
9. Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect to this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
This Agreement has been executed and delivered as of the date first written
above.
LEAP INTERNATIONAL PTE LTD
By:
----------------------------
Lim Chai Hock
General Manager
CELLSTAR CORPORATION
By:
----------------------------
Alan H. Goldfield
Chairman and CEO
3
<PAGE>
EXHIBIT C
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the "Agreement") is entered into as of May 30, 1997,
---------
between CellStar Corporation, a Delaware corporation ("CellStar"), and Leap
--------
International PTE LTD, a company organized and existing under the laws of
Singapore ("Leap").
----
RECITALS
--------
A. Leap owns 100,000 ordinary shares, par value S$1.00, of CellStar Pacific
PTE LTD (the "CellStar Pacific Stock").
----------------------
B. CellStar and Leap wish to exchange 114,583 shares of common stock, $0.01
par value (the "CellStar Stock") of CellStar for 84,615 shares of the
--------------
CellStar Pacific Stock (the "CellStar Pacific Shares").
-----------------------
AGREEMENT
---------
Based on the foregoing and the mutual promises contained herein, the
parties agree as follows:
ARTICLE 1
Exchange
--------
Upon the terms and subject to the conditions contained in this Agreement,
and on the basis of the representations, warranties, covenants and agreements
set forth herein, CellStar hereby sells, conveys, transfers, assigns and
delivers the CellStar Stock in exchange for the CellStar Pacific Shares, and
Leap hereby sells, conveys, transfers, assigns and delivers the CellStar Pacific
Shares in exchange for the CellStar Stock.
ARTICLE 2
Closing Deliveries
------------------
2.1 CellStar's Deliveries. CellStar agrees to deliver to Leap at the
---------------------
Closing the following items:
(a) Stock Certificates. Certificates representing the CellStar
------------------
Stock, registered in such name or names and in such denominations as Leap shall
have notified CellStar prior to the Closing, with any necessary transfer stamps,
acquired at CellStar's expense, affixed. The number of shares of CellStar Stock
exchanged hereunder was calculated by the parties to equal US$2,750,000, based
upon recent market prices of CellStar common stock.
1
<PAGE>
2.2 Leap's Deliveries. Leap hereby delivers to CellStar the certificates
-----------------
representing the CellStar Pacific Shares accompanied by duly executed share
transfers in respect of the CellStar Pacific Shares and duly stamped at Leap's
expense.
2.3 Closing Date. The consummation of the transactions contemplated by
------------
this Agreement (the "Closing") shall take place at the offices of Rodyk &
Davidson, 9 Raffles Place #55-01, Republic Plaza, Singapore 048619, after close
of business on May 30, 1997, such time and date being herein called the "Closing
Date".
ARTICLE 3
Representations and Warranties of Leap
--------------------------------------
Leap hereby represents and warrants to CellStar:
3.1 Ownership and Transfer. Leap has good, valid and marketable title to
----------------------
the CellStar Pacific Shares, free and clear of all security interests, liens
(choate or inchoate), encumbrances, mortgages, pledges, equities, charges,
assessments, restrictions, reservations, defects in title and other burdens and
interests of other persons, whether arising by contract or under law or equity
(collectively, "Liens"). Consummation of the transactions contemplated hereby
-----
will transfer to CellStar good, valid and marketable title to the CellStar
Pacific Shares, free and clear of all Liens. The CellStar Pacific Stock
constitutes all of the issued and outstanding shares of capital stock of
CellStar Pacific Pte Ltd ever issued to, or beneficially owned, directly or
indirectly, by Leap.
3.2 No Conflict. Leap has obtained all consents, qualifications, orders,
-----------
approvals, or authorizations of any governmental or regulatory authority or any
third party, required in connection with Leap's valid execution, delivery and
performance of this Agreement and the consummation by Leap of the transaction
contemplated hereby. Neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
result in any violation of the terms of, (ii) contravene or conflict with or
(iii) constitute a default under the Memorandum and Articles of Association of
Leap, any agreement to which Leap is a party or any judgment, decree, order,
law, rule or regulation or other restriction applicable to Leap and, in each
case, would prevent the consummation of the transactions contemplated hereby.
Neither the execution, delivery and performance by Leap of this Agreement, nor
the consummation of the transactions contemplated hereby will result in the
creation of any Lien on the CellStar Pacific Stock.
3.3 Investment Representations.
--------------------------
(a) Suitability as an Investor. Leap (i) is an "Accredited
-------------------------- ----------
Investor," as that term is defined in Regulation D under the Securities Act of
- --------
1933, as amended (the "1933 Act"), or has such knowledge, skill and experience
--------
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the CellStar Stock and the suitability thereof
2
<PAGE>
as an investment for it, (ii) understands that an investment in the CellStar
Stock involves a risk of financial loss, and (iii) has received such documents
and information as it has requested and has had an opportunity to ask questions
of officials of CellStar and to receive satisfactory answers concerning the
terms and conditions of the investment proposed herein, and based thereon, Leap
believes it can make an informed investment decision.
(b) Investment. Leap is acquiring the CellStar Stock for investment
----------
for its own account and not with a view to, or for resale in connection with,
any distribution thereof in violation of federal and state securities laws.
(c) Restricted Securities. Leap understands that the shares of
---------------------
CellStar Stock transferred hereunder have not been registered under applicable
state or federal securities laws of the United States by reason of certain
exemptions from the registration provisions thereof which depend upon, among
other things, the bona fide nature of Leap's representations and investment
intent as expressed herein. Leap understands that any shares of CellStar Stock
transferred hereunder may be offered, resold, pledged or otherwise transferred
only (a) to CellStar, (b) pursuant to an exemption from registration in
accordance with Rule 144 (if available) or another available exemption under the
1933 Act or (c) pursuant to an effective registration statement under the 1933
Act, in each case in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction subject to CellStar's right prior
to any resale pursuant to clause (b) above to require delivery of any opinion of
counsel, certification or other information satisfactory to CellStar. Leap
acknowledges that all shares of CellStar Stock transferred hereunder will bear
appropriate legends referencing its investment intent and the restrictions on
transfer reflected in this Section.
3.4 Advisors. Leap has had an opportunity to consult with its own
--------
advisors, including its legal, accounting and tax advisors and has assumed full
responsibility for determining on Leaps's behalf whether the transactions
contemplated by this Agreement are satisfactory to Leap. Leap has not relied on
any advice or work product of CellStar or any of its affiliated entities, or any
of their respective directors, officers, agents, attorneys or accountants in
determining whether the transactions contemplated hereby are satisfactory to
Leap.
ARTICLE 4
Representations and Warranties of CellStar
------------------------------------------
CellStar hereby represents and warrants to Leap:
4.1 Ownership and Transfer. CellStar is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of Delaware and is
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to so qualify.
3
<PAGE>
CellStar possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and to carry out the
transactions contemplated by this Agreement.
4.2 Authority. The execution, delivery and performance of this Agreement
---------
have been duly authorized by CellStar. This Agreement constitutes a valid and
binding obligation of CellStar, enforceable against CellStar in accordance with
its terms.
4.3 No Conflict. CellStar has obtained all consents, qualifications,
-----------
orders, approvals or authorizations of any governmental or regulatory authority
or any third party required in connection with CellStar's valid execution,
delivery and performance of this Agreement and the consummation by CellStar of
the transactions contemplated hereby. Neither the execution, delivery or
performance of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any violation of the terms of, (ii)
contravene or conflict with or (iii) constitute a default under, any agreement
to which CellStar is a party or any judgment, decree, order, law, rule or
regulation or other restriction applicable to CellStar. Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby will result in the creation of any Lien on the
CellStar Stock.
4.4 Authorization of Shares. The shares of CellStar Stock transferred
-----------------------
hereunder shall have been, on the Closing Date, duly authorized for issuance and
delivery to Leap pursuant to this Agreement against delivery of the CellStar
Pacific Shares set forth herein, and, on the Closing Date, will be validly
issued, fully paid and non-assessable; the issuances of the shares of CellStar
Stock transferred hereunder is not subject to the preemptive or other similar
rights of any security holder of CellStar.
ARTICLE 5
Conditions Precedent to Closing
-------------------------------
5.1 Conditions Precedent to the Obligation of CellStar to Close. The
-----------------------------------------------------------
obligation of CellStar to close shall be subject to the following conditions
precedent:
(a) Fulfillment by Leap of its covenants and agreements as set forth in
this Agreement.
(b) The representations of Leap contained in this Agreement shall be
accurate in all material respects on the date when made and shall also be
accurate on the Closing Date to the same extent as if made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between CellStar Pacific and Mr. Lim Chai Hock in the form attached hereto
as Exhibit A providing for the continued employment of Mr. Lim for a period
---------
of time following the Closing.
4
<PAGE>
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar and Leap in the form attached hereto as Exhibit
-------
B.
-
(e) The execution and delivery at the Closing of a Purchase Agreement
between CellStar (Asia) Corporation Ltd. ("CellStar Asia") and Leap in the
form attached hereto as Exhibit C.
---------
5.2 Conditions Precedent to the Obligation of Leap to Close. The
-------------------------------------------------------
obligation of Leap to close shall be subject to the following conditions
precedent:
(a) Fulfillment by CellStar of its obligations and agreements set forth in
this Agreement.
(b) The representations and warranties of CellStar contained in this
Agreement shall be accurate in all material respects on the date when made
and shall also be accurate on the Closing Date to the same extent as if
made on such date.
(c) The execution and delivery at Closing of an Employment Agreement
between CellStar Pacific and Mr. Lim in the form attached hereto as Exhibit
-------
A providing for the continued employment of Mr. Lim for a period of time
-
following the Closing.
(d) The execution and delivery at Closing of a Registration Rights
Agreement between CellStar and Leap in the form attached hereto as Exhibit
-------
B.
-
(e) The execution and delivery at the Closing of a Purchase Agreement
between CellStar Asia and Leap in the form attached hereto as Exhibit C.
---------
ARTICLE 6
Indemnification
---------------
6.1 Indemnification of CellStar. Subject to the other provisions of this
---------------------------
Article, Leap shall defend, indemnify and hold CellStar harmless from and
against, and promptly reimburse CellStar for, any and all loss, expense, damage,
deficiency, liability and obligation, including investigative costs, costs of
defense, settlement costs and attorneys' fees (collectively, "Losses"), arising
------
out of or in connection with any breach or asserted breach of any
representation, warranty or agreement of Leap contained in this Agreement.
6.2 Indemnification of Leap. Subject to the other provisions of this
-----------------------
Article, CellStar shall defend, indemnify and hold Leap harmless from and
against, and promptly reimburse Leap for any and all Losses arising out of or in
connection with any breach or asserted breach of any representation, warranty or
agreement of CellStar contained in this Agreement.
5
<PAGE>
ARTICLE 7
Miscellaneous
-------------
7.1 Governing Law. This Agreement shall be interpreted and the rights of
-------------
the parties determined in accordance with the laws of the United States
applicable thereto and the laws of the State of Texas without reference to
principles of conflict of laws.
7.2 Survival. None of (i) the consummation of the transactions
--------
contemplated hereby, (ii) the delay or omission of a party to exercise any of
its rights hereunder, nor (iii) any investigation or disclosure that any party
makes or any knowledge that any party obtains as a result thereof or otherwise,
shall affect the liability of the parties to one another for breaches of, or
misrepresentations under, this Agreement or prevent any party from relying on
the representations and warranties contained herein.
The liability of any party hereto under Article 6 for breaches of its
representations, warranties, covenants and agreements made hereunder shall
survive the consummation of the transactions described herein.
7.3 Successors. The provisions hereof shall inure to the benefit of, and
----------
be binding upon, the successors, heirs, executors and administrators of the
parties hereto. The parties may assign their respective rights under this
Agreement.
7.4 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the parties hereto.
7.5 Waiver. No term or condition of this Agreement shall be deemed to
------
have been waived, nor shall there by any estoppel to enforce any provision of
this Agreement, except by written instrument of the party charged with such
waiver of estoppel.
7.6 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, messenger or reputable overnight courier, and
shall be deemed given when received at the addresses of the parties set forth
below, or at such other address furnished in writing to the other parties
hereto.
If to CellStar: CellStar Corporation
1730 Briercroft Court
Carrollton, Texas 75006
Attn: General Counsel
6
<PAGE>
If to Leap: Leap International PTE LTD
Blk 512, Bukit Batok Street 52
#10-518
Singapore 650512
Attn: Lim Chai Hock
7.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy inuring to any party upon any breach or default of any party
under this Agreement shall impair any such rights, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach of default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. All
remedies either under this Agreement or by law or otherwise afforded to the
parties shall be cumulative or not alternative.
7.8 Severability. In case any provision of this agreement shall be
------------
invalid, illegal or unenforceable, such provision shall be reformed to the
extent necessary to permit enforcement thereof, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts (including by facsimile transmission), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
7.10 Choice of Forum. Any lawsuit, controversy, dispute or other
---------------
proceeding in respect of this Agreement shall be adjudicated by any state or
federal court of competent jurisdiction sitting in Dallas County in the State of
Texas. For such purposes, the parties to this Agreement hereby submit and
consent to the jurisdiction of such courts.
7.11 Cooperation. The parties to this Agreement shall use reasonable
-----------
efforts to take, or cause to be taken, all reasonable actions and to do, or
cause to be done all things reasonable necessary (including executing additional
instruments or agreement), proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
7.13 Confidential Information. Leap acknowledges that it has received
------------------------
confidential and proprietary information of and concerning CellStar and Leap
hereby covenants that, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, it will not disclose to any person such confidential information unless
it is previously made public by CellStar, and that it will not use such
confidential information in any capacity.
7
<PAGE>
This Agreement has been executed and delivered as of the date first written
above.
CELLSTAR CORPORATION
By:
-----------------------------------------------
Alan H. Goldfield
Chairman and CEO
LEAP INTERNATIONAL PTE LTD
By:
-----------------------------------------------
Lim Chai Hock
General Manager
8
<PAGE>
EXHIBIT 10.5
CELLSTAR CORPORATION
1993 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
--------------------------------------------------
(as amended and restated through April 21, 1997)
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, as amended and restated, shall be effective as of April 21,
1997, subject to stockholder approval of the amendments effected hereby;
provided that any Discretionary Amendment shall not be subject to stockholder
approval.
ARTICLE 1
PURPOSE
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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 in the 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.
Unless otherwise specified by the Compensation Committee at the time of
grant, 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 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:
<PAGE>
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.
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 "Applicable Law" shall have the meaning set forth in Article 3
below.
2.4 "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").
2.5 "Award Agreement" means a written agreement between a Participant
and the Company that sets out the terms of the grant of an Award.
2.6 "Award Period" means the period during which one or more
Incentives granted under an Award may be exercised.
2.7 "Board" means the Board of Directors of the Company.
2.8 "Cash Award" means an Award granted pursuant to Article 9 of the
Plan.
2.9 "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)
2
<PAGE>
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.
2.10 "Code" means the Internal Revenue Code of 1986, as amended.
2.11 "Committee" means the committee(s) appointed or designated by
the Board to administer the Plan in accordance with Article 3 of this Plan.
2.12 "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.
2.13 "Company" means CellStar Corporation, a Delaware corporation.
2.14 "Date of Grant" means the effective date on which an Award is
made to a Participant as set forth in the applicable Award Agreement.
2.15 "Discretionary Amendment" means any amendment to the Plan that
does not require stockholder approval.
2.16 "Employee" means any employee (including any employee who is
also a director and/or officer) of the Company or its Subsidiaries.
2.17 "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.
2.18 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2.19 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.20 "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
3
<PAGE>
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.
2.21 "Incentive" shall have the meaning given it in Section 2.3
above.
2.22 "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.
2.23 "Mandated Restrictions" shall have the meaning set forth in
Article 3 below.
2.24 "Nonemployee Director" means a member of the Board of Directors
of the Company or any Subsidiary who is not an Employee.
2.25 "Non-qualified Stock Option" means any Stock Option that does
not qualify as an Incentive Stock Option.
2.26 "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.
2.27 "Option Period" means the period during which a Stock Option may
be exercised.
2.28 "Participant" shall mean an Employee, Nonemployee Director or
Advisor to whom an Award is granted under this Plan.
2.29 "Plan" means this CellStar Corporation 1993 Amended and Restated
Long-Term Incentive Plan, as amended from time to time.
2.30 "Reporting Participant" means a Participant who is subject to
the reporting requirements of Section 16 of the Exchange Act.
2.31 "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.
2.32 "Restricted Stock Agreement" means a written agreement between
the Company and a Participant with respect to an Award of Restricted Stock.
2.33 "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.
4
<PAGE>
2.34 "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time.
2.35 "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.
2.36 "Section 162(m)" means Section 162(m) of the Code and the
regulations promulgated thereunder from time to time.
2.37 "Section 162(m) Exception" means the exception under Section
162(m) for "qualified performance-based compensation."
2.38 "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.
2.39 "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.
2.40 "Stock Option" means a Non-qualified Stock Option or an
Incentive Stock Option to purchase Common Stock.
2.41 "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.
2.42 "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.
2.43 "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.
2.44 "Termination of Service" occurs when a Participant who is an
Employee, Nonemployee Director or Advisor shall cease to serve as an
Employee, Nonemployee Director or Advisor for any reason; provided that,
with respect to Incentive Stock Options, Termination of Service occurs when
a Participant ceases to serve as an Employee.
2.45 "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
5
<PAGE>
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 intended to satisfy the requirements of Rule 16b-3, 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 "Non-Employee Director," within the meaning of 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.
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 Mandate Restrictions with respect to outstanding
Awards.
6
<PAGE>
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, to the extent required by Applicable Law, 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 2,000,000 (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 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.
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<PAGE>
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 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 or other mutually agreed
upon location within ten (10) business days after the exercise.
8
<PAGE>
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 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.
(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.
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(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 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.
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(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.
(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
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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:
(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
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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).
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.
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(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 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
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<PAGE>
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:
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(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 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
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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 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.
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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.
16.3 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
18
<PAGE>
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.
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
19
<PAGE>
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 April 23, 1997, by its President and Secretary pursuant to prior action
taken by the Board.
CELLSTAR CORPORATION
By: /s/ RICHARD M. GOZIA
------------------------------------
President
Attest:
/s/ ELAINE FLUD RODRIQUEZ
- ---------------------------
Secretary
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1997
<PERIOD-START> MAR-01-1997 DEC-01-1996
<PERIOD-END> MAY-31-1997 MAY-31-1997
<CASH> 61,524 61,524
<SECURITIES> 0 0
<RECEIVABLES> 170,561 170,561
<ALLOWANCES> 33,632 33,632
<INVENTORY> 120,986 120,986
<CURRENT-ASSETS> 328,247 328,247
<PP&E> 29,165 29,165
<DEPRECIATION> 9,307 9,307
<TOTAL-ASSETS> 368,808 368,808
<CURRENT-LIABILITIES> 235,304 235,304
<BONDS> 0 0
0 0
0 0
<COMMON> 291 291
<OTHER-SE> 127,254 127,254
<TOTAL-LIABILITY-AND-EQUITY> 368,808 368,808
<SALES> 377,562 634,207
<TOTAL-REVENUES> 377,562 634,207
<CGS> 336,916 561,710
<TOTAL-COSTS> 336,916 561,710
<OTHER-EXPENSES> 18,465 38,225
<LOSS-PROVISION> 2,550 4,461
<INTEREST-EXPENSE> 1,791 3,505
<INCOME-PRETAX> 17,840 26,306
<INCOME-TAX> 3,631 6,115
<INCOME-CONTINUING> 14,209 20,191
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,209 20,191
<EPS-PRIMARY> .48 .69
<EPS-DILUTED> 0 0
</TABLE>
