<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
November 30, 1997 0-22972
CELLSTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2479727
(State of Incorporation) (I.R.S. Employer Identification No.)
1730 Briercroft Court
Carrollton, Texas 75006
Telephone (972) 466-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
RIGHTS TO PURCHASE SERIES A PREFERRED STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
On February 25, 1998, the aggregate market value of the voting stock held by
nonaffiliates of the Company was approximately $581,115,900, based on the
closing sale price of $30.00 as reported by the NASDAQ/NMS. (For purposes of
determination of the above stated amount, only directors, executive officers
and 10% or greater stockholders have been deemed affiliates).
On February 25, 1998, there were 29,377,009 outstanding shares of Common
Stock, $0.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
<PAGE>
CELLSTAR CORPORATION
INDEX TO FORM 10-K/A, AMENDMENT NO. 1
<TABLE>
<CAPTION>
PAGE
NUMBER
<C> <S> <C>
Part I.
Item 1. Business *
Item 2. Properties *
Item 3. Legal Proceedings *
Item 4. Submission of Matters to a Vote of Security Holders *
Part II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters *
Item 6. Selected Consolidated Financial Data *
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations *
Item 7A. Quantitative and Qualitative Disclosures About Market Risk *
Item 8. Consolidated Financial Statements and Supplementary Data *
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure *
Part III.
Item 10. Directors and Executive Officers of the Registrant 3
Item 11. Executive Compensation 5
Item 12. Security Ownership of Certain Beneficial Owners and
Management 10
Item 13. Certain Relationships and Related Transactions 11
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K *
</TABLE>
- --------------------
* Not amended.
2
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item regarding executive officers of the
Company is set forth under the heading "Executive Officers of the Registrant" in
Part I of this report, which information is incorporated herein by reference.
The Company's Amended and Restated Certificate of Incorporation provides
for a Board of Directors divided into three classes, as nearly equal in number
as possible, with the term of office of one class expiring each year at the
Company's Annual Meeting of Stockholders. Each class of directors is elected
for a term of three years, except in the case of elections to fill vacancies or
newly created directorships. Information concerning members of the Board of
Directors is set forth below.
CLASS III DIRECTORS -- TERMS EXPIRING IN 1998
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Alan H. Goldfield....................... 54 Chairman of the Board and Chief Executive Officer
Terry S. Parker......................... 53 Director
CLASS I DIRECTORS--TERMS EXPIRING IN 1999
NAME AGE CURRENT POSITION
---- --- ----------------
Richard M. Gozia........................ 53 President, Chief Operating Officer and Director
Sheldon I. Stein........................ 44 Director
Daniel T. Bogar......................... 38 Senior Vice President - Latin American Region and
Director
CLASS II DIRECTORS - TERMS EXPIRING IN 2000
NAME AGE CURRENT POSITION
---- --- ----------------
James L. Johnson........................ 70 Director
John T. Stupka.......................... 48 Director
</TABLE>
Set forth below is a description of the backgrounds of each of the
directors of the Company.
ALAN H. GOLDFIELD is a founder of the Company and has been the Chairman of
the Board and Chief Executive Officer of the Company since its formation. Mr.
Goldfield served as President of the Company from its formation until March
1995, when Terry S. Parker was appointed President, and from August 1996 until
December 1996, when Richard M. Gozia was appointed President. Mr. Goldfield
serves as an officer and director of the Company pursuant to his employment
agreement. See "Item 11. Executive Compensation -- Employment Contracts and
Termination of Employment and Change in Control Arrangements." Mr. Goldfield
presently serves on the Employee Stock Option Committee of CellStar's Board of
Directors.
TERRY S. PARKER has served as a director of the Company since March 1995
and served as President and Chief Operating Officer of the Company from March
1995 through July 1996. Mr. Parker served as Senior Vice President of GTE
Corporation and President of GTE's Personal Communications Services, GTE's
wireless division, from October 1993 until he joined the Company. From 1991 to
1993, Mr. Parker served as President of GTE Telecommunications Products and
Services. Prior to 1991, Mr. Parker served as President of GTE Mobile
Communications. Mr. Parker serves on the Boards of Directors for HighwayMaster
Communications, Inc., EqualNet Corporation and Illinois Superconductor
Corporation.
3
<PAGE>
RICHARD M. GOZIA has been the President and Chief Operating Officer of the
Company since December 1996. Mr. Gozia joined CellStar as Executive Vice
President -- Administration and Chief Financial Officer in June 1996. He has
been a member of the Board of Directors since June 1996. Mr. Gozia serves as
an officer and director of the Company pursuant to his employment agreement.
See "Item 11. Executive Compensation -- Employment Contracts and Termination of
Employment and Change in Control Arrangements." From 1994 to 1996, Mr. Gozia
served as Executive Vice President of SpectraVision, Inc. ("SpectraVision"), a
provider of in-room hotel movies. In June 1995, SpectraVision filed for
protection under the federal bankruptcy laws. From 1991 to 1994, Mr. Gozia was
Chairman and Chief Executive Officer of Wyatt Cafeterias, Inc. In June 1995,
Triangle FoodService Corporation, formerly Wyatt Cafeterias, Inc., filed for
protection under the federal bankruptcy laws. Mr. Gozia presently serves on the
Employee Stock Option Committee of CellStar's Board of Directors.
SHELDON I. STEIN has served as a director of the Company since August 1996.
Mr. Stein is a Senior Managing Director of and oversees the Southwestern
Corporate Finance Department for Bear, Stearns & Co. Inc. Mr. Stein also serves
on the Boards of Directors of Fresh America Corp., The Men's Wearhouse, Inc.,
FirstPlus Financial Group, Inc., Tandycrafts, Inc. and Precept Business
Services, Inc. Mr. Stein also serves as a trustee of Brandeis University. Mr.
Stein presently serves on the Audit and Compensation Committees of CellStar's
Board of Directors.
DANIEL T. BOGAR has served as Senior Vice President -- Latin American
Region since January 1998 and as a director of the Company since July 1994. Mr.
Bogar served as Vice President of Latin American Operations from April 1997 to
February 1998. From 1993 to 1997, Mr. Bogar served as Vice President of South
American Operations. From 1991 to 1992, Mr. Bogar managed the Company's
operations in Mexico, and from 1987 to 1991, Mr. Bogar was General Manager of
the Company's Houston, Texas operations.
JAMES L. JOHNSON has served as a director of the Company since March 1994.
Mr. Johnson has been Chairman Emeritus of GTE Corporation since May 1992 and
served as GTE's Chairman and Chief Executive Officer from April 1988 to April
1992. Mr. Johnson began his career with Southwestern Associated Telephone
Company (the predecessor company of GTE Central) in 1949. He has been a member
of GTE's Board of Directors since 1985 and is currently a director of Harte
Hanks Communications, Inc., M.O.N.Y (Mutual of New York, Inc.), Valero Energy
Corp., Walter Industries Incorporated and Finova Group Incorporated (formerly
GFC Financial). Mr. Johnson is also past Chairman of the United States Telephone
Association. Mr. Johnson presently serves on the Audit and Compensation
Committees of CellStar's Board of Directors.
JOHN T. STUPKA has served as a director of the Company since January 1997.
Mr. Stupka has served as President, Chief Executive Officer and director of
Mobile Telecommunications Technologies, Inc. since August 1996. From July 1995
to August 1996, Mr. Stupka was Senior Vice President -- Strategic Planning for
SBC Communications (formerly Southwestern Bell Telephone Company). From
November 1985 to August 1995, Mr. Stupka was President and Chief Executive
Officer of Southwestern Bell Mobile Systems. Mr. Stupka presently serves on
the Audit and Compensation Committees of CellStar's Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such persons are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
that they file.
To the Company's knowledge, based solely on its review of the copies of
such reports received by it with respect to fiscal 1997, or written
representations from certain reporting persons, the Company believes that all
filing requirements applicable to its directors, officers and persons who own
more than 10% of a registered class of the Company's equity securities have been
complied with, except that Daniel T. Bogar, an executive officer and director of
the Company filed one late report covering two transactions.
4
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid to the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers who were serving as such on
November 30, 1997 (based on salary and bonus earned during fiscal
1997)(collectively, the "Named Executive Officers" or individually, a "Named
Executive Officer") for each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- -------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ COMPEN-
PRINCIPAL SALARY BONUS SATION AWARDS(S) SARS SATION
POSITION YEAR ($) ($) ($) ($) (#)(1)(2) ($)
- --------------------------- ------ ------- ------- ----------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan H. Goldfield 1997 850,000 850,000 -- -- -- 24,284/(3)/
Chairman of the Board 1996 850,000 -- -- -- 94,305 22,484/(3)/
and Chief Executive 1995 850,000 -- 59,145/(4)/ -- 375,000 --
Officer
A.S. Horng 1997 666,662 800,000 -- -- 45,000 --
Chairman, Chief 1996/(5)/ -- -- -- -- -- --
Executive Officer and 1995/(5)/ -- -- -- -- -- --
General Manager of
CellStar (Asia)
Corporation Limited
Richard M. Gozia 1997 392,115 397,655 -- -- 225,000 8,021/(6)/
President, Chief 1996 125,000 -- -- -- 75,000 --
Operating Officer and 1995/(5)/ -- -- -- -- -- --
Director
Daniel T. Bogar 1997 240,000 240,000 -- -- 15,000 4,750/(7)/
Senior Vice President 1996 200,000 40,000 -- -- 44,690 --
- Latin American 1995 203,333 -- -- -- 15,000 --
Region and Director
Timothy L. Maretti 1997 200,000 200,000 -- -- 15,000 --
Senior Vice President 1996 200,000 60,000 -- -- 37,190 --
-U.S. Region 1995 203,333 -- -- -- 15,000 --
</TABLE>
- -----------------------------------------
(1) Reflects options to acquire shares of Common Stock. The Company has not
granted stock appreciation rights.
(2) All figures in this column reflect an adjustment for the Company's three-
for-two Common Stock split that was effected in the form of a stock
dividend in June 1997.
(3) Consists of life insurance premiums paid by the Company.
(4) Represents $59,145 paid or reimbursed by the Company for medical expenses
of Mr. Goldfield and his family. See " -- Employment Contracts and
Termination of Employment and Change in Control Arrangements."
(5) In accordance with Item 402 of Regulation S-K promulgated under the
Exchange Act, no information is included for fiscal years during which the
Named Executive Officer did not serve as an executive officer of the
Company.
(6) Consists of $3,271 in life insurance premiums paid by the Company and
$4,750 of Company contributions to the Company's 401(k) plan.
(7) Consists of Company contributions to the Company's 401(k) plan.
5
<PAGE>
OPTION GRANTS DURING 1997 FISCAL YEAR
The following table provides information related to options granted to the
Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
- ---------------------------------------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE
NAME GRANTED(#)(2) FISCAL YEAR ($/SH)(3) EXPIRATION DATE 5% ($) 10% ($)
- -------------------- ------------ ------------ ----------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alan H. Goldfield -- -- -- -- -- --
A.S. Horng 45,000/(4)/ 3.7 13.25 January 26, 2007 374,978 950,269
Richard M. Gozia 225,000/(5)/ 18.4 11.333 December 19, 2006 1,603,634 4,063,924
Daniel T. Bogar 15,000/(4)/ 1.2 13.25 January 26, 2007 124,993 316,756
Timothy L. Maretti 15,000/(4)/ 1.2 13.25 January 26, 2007 124,993 316,756
</TABLE>
- --------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Company's Common Stock over the term of the
options. These numbers do not take into account provisions of certain
options providing for termination of the option following termination of
employment, nontransferability or vesting over periods of up to ten years.
(2) Reflects options to acquire shares of Common Stock. The Company has not
granted stock appreciation rights. All share numbers have been adjusted to
reflect the Company's three-for-two Common Stock split that was effected
in the form of a stock dividend in June 1997.
(3) Exercise prices have been adjusted to reflect the Company's three-for-two
Common Stock split that was effected in the form of a stock dividend in
June 1997. 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 to the
Company or its designated agent of an executed irrevocable option exercise
form together with irrevocable instructions from the optionee 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 Compensation Committee in its sole discretion.
(4) The options become exercisable with respect to 25% of the shares covered
thereby on each of January 27, 1998, 1999, 2000 and 2001. In the event of
a "change of control" (as defined in the Company's 1993 Amended and
Restated Long-Term Incentive Plan) of the Company, any unexercisable
portion of the options will become immediately exercisable. The exercise
price is equal to the fair market value of the Common Stock on the date of
grant.
(5) The options become exercisable with respect to 25% of the shares covered
thereby on each of December 20, 1997, 1998, 1999 and 2000. In the event of
a "change of control" (as defined in the Company's 1993 Amended and
Restated Long-Term Incentive Plan) of the Company, any unexercisable
portion of the options will become immediately exercisable. The exercise
price is equal to the fair market value of the Common Stock on the date of
grant.
6
<PAGE>
OPTION EXERCISES DURING 1997 FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised by
the Named Executive Officers during the 1997 fiscal year and the number and
value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#)(1) AT FY-END ($)(2)
-------------------------- ---------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#)(1) ($)(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan H. Goldfield.... -- -- 469,305 -- 6,103,817 --
A.S. Horng........... -- -- 42,659 73,125 462,351 869,287
Richard M. Gozia..... -- -- 18,750 281,250 353,906 4,333,669
Daniel T. Bogar...... 33,440 632,656 13,125 43,126 161,797 539,936
Timothy L. Maretti... 40,940 266,473 -- 37,501 -- 479,703
</TABLE>
- --------------------
(1) Figures in this column reflect an adjustment for the Company's three-for-
two Common Stock split that was effected in the form of a stock dividend in
June 1997.
(2) The closing price for the Company's Common Stock as reported by the Nasdaq
Stock Market on November 28, 1997 (the last trading day of fiscal 1997) was
$25.875. Value is calculated on the basis of the difference between the
option exercise price and $25.875 multiplied by the number of shares of
Common Stock underlying the option.
(3) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise related.
COMPENSATION OF DIRECTORS
During fiscal 1997, each director of the Company who was not an officer or
other employee of the Company (an "Independent Director") was entitled to
receive an annual retainer fee of $25,000, plus $1,500 for each meeting of the
Board or committee of the Board that he attended. In addition, pursuant to the
Company's 1994 Amended and Restated Director Nonqualified Stock Option Plan (the
"Directors' Plan"), each Independent Director automatically receives an option
(the "Initial Option") to purchase 2,500 shares of Common Stock upon becoming a
non-employee director of the Company. Beginning in Fiscal 1998, each Independent
Director will receive only $750 for each telephonic Board or committee meeting
attended. In addition, to the extent that any committee meeting is held on the
same day as a full Board meeting or another committee meeting, only one $1,500
or $750 fee (as applicable) will be paid. Also beginning in fiscal 1998, in
addition to the Initial Option, each Independent Director will receive an annual
grant pursuant to the Company's 1993 Amended and Restated Long-Term Incentive
Plan (the "1993 Incentive Plan") of an option (the "Annual Option") to purchase
5,000 shares of Common Stock, which option will be automatically granted on the
date of the first full Board meeting following the end of each fiscal year. The
Annual Option will vest with respect to 25% of the shares covered thereby on
each anniversary of the date of grant and will expire ten years following the
date of grant. The exercise price of all options granted to Independent
Directors must be equal to the fair market value of the Company's Common Stock
on the date of grant.
Directors who are also employees of the Company receive no additional
compensation for serving as directors. All directors of the Company are entitled
to reimbursement of their reasonable out-of-pocket expenses in connection
7
<PAGE>
with their travel to, and attendance at, meetings of the Board of Directors or
committees thereof.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into employment agreements (collectively, the
"Employment Agreements" or individually, an "Employment Agreement") with Mr.
Goldfield, Mr. Gozia and Mr. Horng (collectively, the "Executives" and
individually, an "Executive"), effective December 1, 1994, May 24, 1996 and
January 22, 1998, respectively. The Employment Agreements of Messrs. Goldfield
and Horng provide for annual base salaries of $850,000 and $800,000,
respectively, subject to increase by the Compensation Committee of the Board of
Directors. Mr. Gozia's Employment Agreement originally provided for an annual
base salary of $250,000, which salary was increased to $400,000 by the
Compensation Committee upon Mr. Gozia's promotion to President and Chief
Operating Officer in December 1996. Each of the Employment Agreements also
provides that the Executive is eligible to receive an annual bonus.
The Company is obligated under the Employment Agreements to provide to Mr.
Goldfield, Mr. Gozia and Mr. Horng (i) life insurance policies with face amounts
of $5,000,000, $1,250,000 and $4,000,000, respectively, and (ii) disability
insurance policies with annual disability benefits of $300,000, $200,000 and
$640,000, respectively, until attainment of age 65. In addition, the Company is
obligated to pay or reimburse each Executive for all medical and dental expenses
incurred by him or his spouse or dependents. The Company has in place insurance
to cover a portion of such expenses.
Mr. Goldfield's Employment Agreement expires on the fifth anniversary of
the date on which the Board of Directors notifies Mr. Goldfield that it has
determined to fix the expiration date of the Employment Agreement. The
Employment Agreements of Mr. Gozia and Mr. Horng each have a five-year term. All
of the Employment Agreements are subject to earlier termination as follows: (i)
by the Company (a) due to the disability of the Executive, (b) for "cause" or
(c) without "cause"; or (ii) by the Executive (a) upon a material breach by the
Company of the Employment Agreement ("Company Breach"), (b) within twelve months
of a "change in control" or (b) without "good reason" (i.e., for any reason
other than Company Breach). If Mr. Goldfield terminates his employment due to
Company Breach or if he is terminated by the Company without "cause," he will be
entitled to receive his accrued but unpaid base salary and annual incentive
payments through the date of termination plus five times the sum of (a) his base
salary plus (b) the average of his annual incentive payments for the preceding
two years. If either Mr. Gozia or Mr. Horng terminates his employment due to
Company Breach or if either of them is terminated by the Company without
"cause," he will be entitled to receive his accrued but unpaid base salary and
annual incentive payments through the date of termination plus an amount equal
to the product of (i)(a) his base salary plus (b) the average of his annual
incentive payments for the preceding two years (one year for Mr. Horng) divided
by 365 and multiplied by (ii) the number of days remaining in the term of his
Employment Agreement. In the event of termination of employment after a "change
in control," each of the Executives will be entitled to receive an amount equal
to $100 less than three times his "annualized includable compensation," which is
the maximum payment permitted by the Internal Revenue Code that does not
constitute an "excess parachute payment."
Under the Employment Agreements, a termination will be deemed to be
"without cause" if it is for any reason other than due to the disability of the
Executive or for "cause." A termination will generally be considered to be for
"cause" if it is due to the Executive's (i) willful gross misconduct, (ii)
conviction of a felony or (iii) material breach of his Employment Agreement. In
addition, the Employment Agreements of Messrs. Gozia and Horng provide that a
termination will also be deemed to be for "cause" if it is due to his gross
incompetence or failure to follow directions of the Board of Directors. For
purposes of the Employment Agreements, a "change in control" will be deemed to
occur upon the occurrence of any of the following: (1) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger; (2) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; (3) any
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (4) the cessation of control (by
virtue of their not constituting a majority of directors) of the Company's Board
of Directors by the
8
<PAGE>
Continuing Directors (as defined); (5) the acquisition of beneficial ownership
of 15% of the voting power of the Company's outstanding voting securities by any
person or group who beneficially owned less than 10% of such voting power on the
date of the Employment Agreement 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 such
voting power on the date of the Employment Agreement, in each case subject to
certain exceptions; or (6) subject to applicable law, in a Chapter 11 bankruptcy
proceeding, the appointment of a trustee or the conversion of a case involving
the Company to a case under Chapter 7. In addition, the Employment Agreements of
Messrs. Gozia and Horng each provide that a "change in control" will be deemed
to occur (subject to certain exceptions) upon the execution by the Company and a
stockholder of a contract that by its terms grants such stockholder (in its, his
or her capacity as a stockholder) or such stockholder's affiliate, including,
without limitation, such stockholder's nominee to the Board of Directors (in
its, his or her capacity as an affiliate of such stockholder), the right to veto
or block decisions or actions of the Board of Directors.
The Employment Agreements also provide that the Executives will be
indemnified by the Company to the fullest extent permitted by law. The right of
Mr. Goldfield and Mr. Gozia to indemnification is protected by a right to
require the Company to establish and fund a trust for their indemnification
after a change in control or a potential change in control. The Employment
Agreements also include non-competition and confidentiality provisions.
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number of
shares of Common Stock beneficially owned as of February 28, 1998, by (i) each
person known by the Company to beneficially own more than five percent (5%) of
the outstanding shares of Common Stock; (ii) the Named Executive Officers; (iii)
each director and nominee for director of the Company; and (iv) all directors
and executive officers of the Company as a group. Unless otherwise noted, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OR GROUP OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
--------------------------------- ----------------------- ----------------
<S> <C> <C>
Nicholas-Applegate Capital Management/ (1)/ 1,959,168/(2)/ 6.7%
Gardner Lewis Asset Management /(3)/....... 1,487,400/(4)/ 5.1%
George D. Bjurman & Associates /(5)/....... 1,482,480/(6)/ 5.0%
George Andrew Bjurman /(5)/...........
Owen Thomas Barry III /(5)/...........
FMR Corp./(16)/............................ 3,399,025/(17)/ 11.5%
Edward C. Johnson 3d (16).............
Abigail P. Johnson (16)...............
Alan H. Goldfield /(7)/.................... 10,313,055/(8)/ 34.7%
A.S. Horng................................. 1,248,284/(9)/ 4.2%
Richard M. Gozia........................... 77,000/(10)/ *
Daniel T. Bogar............................ 33,691/(11)/ *
Timothy L. Maretti......................... 15,001/(12)/ *
James L. Johnson........................... 15,000/(13)/ *
Terry S. Parker............................ 3,750/(13)/ *
John T. Stupka............................. 3,750/(13)/ *
Sheldon I. Stein........................... 20,650/(13)(14)/ *
Current Directors and Executive Officers
as a Group............................... 10,596,731/(15)/ 35.4%
</TABLE>
- ---------------------------
* Less than 1%.
(1) The address for Nicholas-Applegate Capital Management ("Applegate Capital")
is 600 West Broadway, 29th Floor, San Diego, California 92101.
(2) Based on a Schedule 13G, dated February 3, 1998, filed with the SEC by
Applegate Capital. Applegate Capital reported sole voting power with
respect to 1,415,358 shares, shared voting power with respect to 14,914
shares and sole dispositive power with respect to all 1,959,168 shares.
(3) The address for Gardner Lewis Asset Management ("Gardner Lewis") is 285
Wilmington - West Chester Pike, Chadds Ford, Pennsylvania 19317.
(4) Based on a Schedule 13G, dated February 13, 1998, filed with the SEC by
Gardner Lewis. Gardner Lewis reported sole voting power with respect to
1,330,050 shares, shared voting power with respect to 18,050 shares and
sole dispositive power with respect to all 1,487,400 shares.
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(5) The address for George D. Bjurman & Associates ("Bjurman & Associates" ),
George Andrew Bjurman and Owen Thomas Barry III is 10100 Santa Monica
Boulevard, Suite 1200, Los Angeles, California 90067.
(6) Based on a Schedule 13G, dated February 13, 1995, which was jointly filed
with the SEC by Bjurman & Associates, George Andrew Bjurman and Owen Thomas
Barry III (collectively, the "Bjurman Reporting Persons"). According to
such Schedule 13G, Messrs. Bjurman and Barry may, as a result of their
ownership in and positions with Bjurman & Associates, be deemed to be
indirect beneficial owners of the securities held by Bjurman & Associates.
The Bjurman Reporting Persons reported shared voting and dispositive power
with respect to all 1,482,480 shares. Share information has been adjusted
to reflect the Company's three-for-two Common Stock split that was effected
in the form of a stock dividend in June 1997.
(7) The address for Mr. Goldfield is 1730 Briercroft Court, Carrollton, Texas
75006.
(8) Includes 1,185,000 shares that are subject to a revocable (upon 90 days
written notice) proxy granted to Mr. Goldfield by Mr. A.S. Horng, which
proxy gives Mr. Goldfield the right to vote such shares. Also includes
375,000 shares subject to options granted under the 1993 Incentive Plan,
which options are exercisable within 60 days.
(9) Includes 1,185,000 shares that are subject to a revocable (upon 90 days
written notice) proxy to vote such shares held by Alan H. Goldfield. Also
includes 30,000 shares subject to options granted under the 1993 Incentive
Plan, which options are exercisable within 60 days.
(10) Includes 75,000 shares subject to options granted under the 1993 Incentive
Plan, which options are exercisable within 60 days.
(11) Includes 1,450 shares held by Mr. Bogar's wife and 850 shares held jointly
with Mr. Bogar's wife. Also includes 30,001 shares subject to options
granted under the 1993 Incentive Plan, which options are exercisable within
60 days.
(12) Includes 15,001 shares subject to options granted under the 1993 Incentive
Plan, which options are exercisable within 60 days.
(13) Includes 3,750 shares subject to options granted under the Directors' Plan,
which options are exercisable within 60 days.
(14) Includes an aggregate of 900 shares held in three separate trusts for the
benefit of Mr. Stein's three children. Mr. Stein has no voting or
dispositive power with respect to these shares and, therefore, disclaims
beneficial ownership of such shares.
(15) In addition to the ownership of the directors and executive officers listed
in the table and more fully described in footnotes 8 through 14 above,
includes 50,250 shares subject to options granted under the 1993 Incentive
Plan, which options are exercisable within 60 days.
(16) The address for FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson is
82 Devonshire Street, Boston, Massachusetts 02109.
(17) Based on Schedule 13G, dated March 10, 1998, which was jointly filed with
the SEC by FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and Fidelity
Management & Research Company. FMR Corp., through its subsidiary Fidelity
Management & Research Company (which beneficially owns 3,264,325 shares of
Common Stock), owns 171,675 of such shares based on the assumed conversion
of $9,500,000 principal amount of the Company's 5% Convertible Subordinated
Notes Due 2002. FMR Corp. and Mr. Johnson have reported sole voting power
with respect to 100,600 shares of Common Stock, sole dispositive power with
respect to 3,399,025 shares of Common Stock and no voting power with
respect to 3,298,425 shares of Common Stock. Abigail P. Johnson has
reported no voting power with respect to any of the shares of Common Stock
and sole dispositive power with respect to 3,399,025 shares of Common
Stock. Mr. Johnson and Abigail P. Johnson are reporting persons due to
their controlling positions with FMR Corp.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From the beginning of fiscal 1997 through February 28, 1998, the Company
sold approximately $144,000 in inventory to National Tape, a sole proprietorship
owned by Mr. Alan H. Goldfield, the Company's Chairman of the Board and Chief
Executive Officer. The Company's cost of sales for such inventory was
approximately $139,000. National Tape, a retailer of cellular telephones and
related products in Dallas, Texas, and a subagent of the Company, receives the
Company's activation commission from Southwestern Bell Mobile Systems ("SBMS")
when it performs activations for customers who subscribe for cellular service;
the Company receives the residual payments from SBMS for subscriber usage. The
Company believes that the terms of these transactions between National Tape and
the Company are not substantially less favorable to the Company than terms given
to unrelated parties.
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The Company leases a 16,500 square foot facility with retail and warehouse
space from Mr. Goldfield in Irving, Texas. The lease agreement, which was
entered into in October 1993, has a five-year term and provides for a monthly
rental payment of $11,500, subject to an annual adjustment based on changes in
the consumer price index. Lease payments from the beginning of fiscal year 1997
through February 28, 1998 totaled $172,500. The Company believes that the terms
of the lease are no less favorable than terms available from unrelated parties
for comparable retail/warehouse premises.
During fiscal 1997, Mr. Daniel T. Bogar, an executive officer and a member
of the Board of Directors of the Company, was indebted to the Company for an
aggregate principal amount of $125,000 (the "Indebtedness"). Of the
Indebtedness, $85,000 was incurred effective February 11, 1994, and bore
interest at a rate equal to the prime rate published by Texas Commerce Bank plus
0.5%, and $40,000 was incurred effective February 1, 1996, and bore interest at
an annual rate of 6.0%. As of August 1997, all of the Indebtedness was either
repaid or forgiven. The largest aggregate amount of Indebtedness outstanding
since its incurrence was $153,280.
The Company's Hong Kong subsidiary, CellStar (Asia) Corporation Limited
("CellStar Asia"), advanced approximately $150,000 to Mr. A.S. Horng, an
executive officer of the Company, in September 1996 to assist the Company in
establishing its operations in Taiwan. In March 1997, Mr. Horng repaid in full
the amount loaned to him by CellStar Asia without interest. Mr. Horng in turn
advanced approximately $120,000 of such proceeds to the Company's wholly-owned
entity in Taiwan, CellStar Telecommunication Taiwan Co., Ltd. ("CellStar
Taiwan"). In March 1997, CellStar Taiwan repaid to Mr. Horng substantially all
of the amounts advanced on its behalf. As of February 28, 1998, CellStar
Taiwan owed Mr. Horng approximately $3,000. No interest was paid to Mr. Horng.
In January 1998, the Company loaned Mr. Horng $499,260, which Mr. Horng
used to pay the exercise price for employee stock options that would have
expired in January. The loan does not bear interest and is repayable in full
upon the earliest to occur of (i) the sale of the shares received upon exercise
of the employee stock options or (ii) the expiration of 180 days from the date
the indebtedness was incurred. The largest aggregate amount of indebtedness
outstanding pursuant to such loan since its incurrence was $499,260, all of
which was outstanding at February 28, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CELLSTAR CORPORATION
/s/ Mark Q. Huggins
By: _______________________________
Mark Q. Huggins
Senior Vice President-
Administration, Chief
Financial Officer and
Treasurer
Date: March 30, 1998
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