SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1996
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
0-23494
(Commission File No.)
BRIGHTPOINT, INC.
(Exact name of registrant as specified in its charter)
Delaware 35-1778566
(State or other juris- (I.R.S. Employer
diction of incorporation) Identification No.)
6402 Corporate Drive, Indianapolis, Indiana 46278
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (317) 297-6100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g)of the Act:
Common Stock, $.01 par value
Preferred Share Purchase Rights
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. |_|
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 12, 1997 was approximately $250,551,173. As of March
12, 1997 there were 22,028,431 shares of the registrant's Common Stock
outstanding.
Documents Incorporated by Reference:
Annual Report to Stockholders for Fiscal Year Ended December 31, 1996
(incorporated into Part II)
Proxy Statement for 1996 Annual Meeting of Stockholders
(incorporated into Part III)
<PAGE>
PART I
Item 1. Business.
General
Brightpoint, Inc. (the "Company") is a leading worldwide distributor of
wireless communications products and provider of value-added logistics services
such as inventory management, fulfillment, packaging and programming. The
Company offers products from manufacturers under brand names such as Nokia,
Ericsson, Lucent Technologies, Motorola, Siemens and Philips and has developed a
global customer base of more than 10,000 carriers, agents, resellers, dealers
and retailers. The Company has grown rapidly, with net sales increasing from
$419.1 million for the year ended December 31, 1995 to $589.7 million for the
year ended December 31, 1996 and with pro forma net income increasing from $7.3
million to $12.6 million (excluding the after-tax effect of one-time merger
expenses of $2.1 million) during the same period.
The market for wireless products and services has grown substantially and
continues to expand. The number of wireless subscribers in the United States has
increased from approximately 300,000 in 1985 to more than 44 million in 1996,
growing by more than ten million, or approximately 29%, in 1996 alone. On a
worldwide basis, wireless subscribers increased by 52 million, or 60%, to 140
million total subscribers in 1996. The Company has been successful in expanding
its international presence, with international sales as a percentage of net
sales increasing from approximately 36% to 51% from the year ended December 31,
1995 to the year ended December 31, 1996.
The emergence of new wireless communications services, such as personal
communications services ("PCS"), enhanced specialized mobile radio ("ESMR"),
satellite communications systems, the buildout of new wireless communications
infrastrucure by service providers, the pricing of handsets, the allocation of
additional wireless spectrum and the transition from analog technologies to
digital technologies are factors contributing to increases in the wireless
communications subscriber base and the sales of wireless products. The Company
currently provides distribution and value-added logistics services for many of
the leading manufacturers and service providers which participate in these new
and emerging wireless communications markets.
The Company focuses on serving as an effective link between manufacturers
and wireless service providers in the wireless communications industry. The
Company's primary strategies include (i) being the most efficient market channel
for its
-2-
<PAGE>
vendors and the low cost/high service provider to its wireless customers, (ii)
meeting the growing outsourcing demands of manufacturers and wireless service
providers with value-added logistics services, (iii) increasing its worldwide
presence and (iv) benefiting from the development of new technologies that allow
it to offer new products and services.
The Company was incorporated under the laws of the State of Indiana in
August 1989 under the name Wholesale Cellular USA, Inc. and reincorporated under
the laws of the State of Delaware in March 1994. In September 1995, the Company
changed its name to Brightpoint, Inc. The Company's principal executive offices
are located at 6402 Corporate Drive, Indianapolis, Indiana 46278, and its
telephone number is (317) 297-6100.
Recent Developments
On November 12, 1996, the Company declared a three-for-two stock split
payable to stockholders of record on December 17, 1996, and on January 28, 1997,
the Company declared a five-for-four stock split payable to stockholders of
record on March 3, 1997. Both stock splits were effected in the form of stock
dividends. Accordingly, all references herein related to share amounts, per
share amounts and average shares outstanding have been adjusted retroactively to
reflect these stock splits.
In November 1996, the Company acquired the 50% interest of Brightpoint
International Ltd. ("Brightpoint International") it did not already own.
Brightpoint International, through its direct and indirect subsidiaries,
conducts all of the Company's sales and marketing activities outside of North
and South America.
In February 1997, the Company adopted a Rights Agreement, commonly known as
a "poison pill", which provides that in the event an individual or entity
beneficially owns 15% or more of the shares of the Company's capital stock,
stockholders of the Company shall have the right to purchase shares of the
Company's (or in some cases, the acquiror's) common stock at 50% of its then
market value. Also in February 1997, the Company amended its By-laws to: (i)
include a procedure for proposing the conduct of business at a meeting of the
stockholders and (ii) include a procedure for proposing the nomination of
directors.
On January 28, 1997, the Company amended its line of credit agreement with
Bank One, Indianapolis, N.A., acting as agent for a group of banks, to increase
available borrowings to $100,000,000. The additional $25,000,000 of credit
matures April 30, 1997, at which time such additional credit will be
renegotiated.
-3-
<PAGE>
Wireless Communications Industry Overview
The wireless communications industry provides voice and data communications
services primarily through cellular telephone, ESMR and paging services. The
recent allocation of additional frequency spectrum in the United States has
resulted in the emergence of PCS service providers who offer digital wireless
service. Advances in system technology and equipment (including, the transition
from analog to digital systems), increased competition at the carrier level and
the creation of new services, features and platforms, lower equipment prices and
service charges, have increased consumer acceptance and worldwide demand for
wireless communications products and services.
United States Wireless Market. According to the Cellular Telecommunications
Industry Association, the number of cellular subscribers in the United States
has increased from approximately 300,000 in 1985 to more than 44 million in
1996, growing by more than ten million, or approximately 29%, in 1996 alone. It
is estimated that market penetration for cellular subscribers in the United
States, based on population, was approximately 14% in 1996.
The Company believes that the United States wireless communications market
is expanding, primarily due to decreases in monthly service fees and retail
prices for wireless phones. In addition, many service providers are upgrading
their existing systems. Digital systems are expected to offer certain advantages
over analog systems, including improved transmission of voice and data and
greater transmission capacity, thereby enabling carriers to add additional
customers. New digital wireless phones can enhance privacy and offer more
advanced features than analog phones, including messaging and call waiting. The
emergence of PCS service providers is further expected to stimulate demand for
handsets and accessories as the subscriber base broadens and as existing
subscribers migrate between systems.
International Wireless Market. The market for cellular services and
products outside of the United States also has increased significantly in recent
years. The number of wireless subscribers outside the United States increased
from approximately 8.1 million subscribers in 1991 to approximately 96 million
subscribers by the end of 1996, growing by approximately 43 million subscribers,
or approximately 80%, in 1996 alone. It is estimated that market penetration for
wireless subscribers outside the United States, based on population, was
approximately 2.0% in 1996.
-4-
<PAGE>
The Company expects that rapid growth in international markets will
continue as a result of low market penetration, the buildout of wireless
systems, economic growth and high population density in many countries. The
Company also believes that wireless communications systems in certain of these
countries offer lower cost alternatives to the construction of conventional
wire-based telephone facilities. Due to these factors and the limited
availability and quality of land-line service, the Company believes that
consumers in many countries outside of the United States will increasingly
utilize wireless communications systems.
PCS and Other Wireless Communications Technologies. In 1996, several new
PCS systems were launched in major U.S. markets. Offering digital service, data
capabilities, different airtime rates and features, the PCS carriers compete
with incumbent cellular service providers for wireless subscribers. The digital
platforms adopted by the U.S. PCS and cellular carriers fall into three main
classifications: GSM, CDMA and TDMA. The Company has distribution and/or
value-added service contracts with several PCS carriers. Among the carriers now
under contract are BellSouth Personal Communications Inc.; Omnipoint
Communications, Inc.; Pocket Communications, Inc.; Powertel, Inc.; and Aerial
Communications, Inc. Satellite-based wireless systems are also expected to
contribute to subscriber demand with some forecasts calling for 8 million
subscribers by the year 2005. The Company currently provides distribution
services for many of the wireless communications equipment manufacturers which
the Company expects to participate in these new and emerging wireless
communications markets, including Nokia Mobile Phones, Inc. ("Nokia"), Ericsson,
Inc. ("Ericsson"), Siemens A.G. ("Siemens") and Philips Consumer Communications
("Philips"). As a result, the Company believes it is well positioned to provide
distribution and inventory management and value-added logistics services for
emerging wireless communications products.
Changing Distribution Dynamics. The United States wireless products
equipment distribution business has undergone a significant transformation in
recent years. Historically, the business was highly fragmented, consisting
principally of numerous small, privately-owned companies with relatively limited
capital and other resources. While certain of these companies remain factors in
the business, increased price competition and the increased capital requirements
of doing business have resulted in significant consolidation within the
industry. In addition, the Company believes that the maturing of the industry
has resulted in a growing trend among carriers and resellers toward relying on
equipment distributors to perform distribution, inventory management, product
fulfillment, programming, activation and other value-added services.
-5-
<PAGE>
In markets outside the United States, the dynamics of the wireless
communications equipment distribution business vary by country. In many
countries, the distribution of wireless communications equipment is controlled
primarily by manufacturers and service providers. However, in certain countries
service providers are seeking relationships with distributors offering a broad
array of products from several manufacturers as well as value-added services.
The Company believes that it is positioned to capitalize on opportunities in
many of these countries (as their markets evolve) by offering superior value in
terms of price, service and reliability.
Strategy
The Company focuses on being an effective link between manufacturers and
wireless service providers in the wireless communications industry. The
Company's primary strategies include (i) establishing the Company as the most
efficient market channel for its suppliers and the low cost/high service
provider to its customers, (ii) enhancing its industry positioning by meeting
the rapidly growing outsourcing demands of manufacturers and wireless service
providers with value-added services, (iii) increasing its worldwide presence and
(iv) benefiting from new technologies that allow it to offer new products and
services on a timely basis.
Products and Services
The Company offers a selection of wireless communications products
purchased from various manufacturers designed to work on all operating platforms
(such as AMPS, GSM, TDMA and CDMA) and/or specific frequencies. The Company's
product offerings feature brand names such as Nokia, Ericsson, Lucent
Technologies, Motorola, Siemens and Philips. For the years ended December 31,
1995 and 1996, approximately 86.3% and 88.3%, respectively, of the Company's net
sales were derived from sales of wireless telephones. For such periods, a
significant portion of the Company's wireless telephone sales represented Nokia,
Ericsson and Motorola products. The Company continually reviews and evaluates
wireless communications products in determining the mix of products purchased
for resale to customers and seeks to acquire distribution rights for wireless
products which the Company believes have the potential for significant market
penetration.
In addition, the Company distributes wireless accessory products, such as
batteries, battery eliminators and chargers, cases, antennas and "hands-free"
kits. For the years ended December 31, 1995 and 1996, sales of accessories
accounted for approximately 13.7% and 11.1%, respectively, of the Company's net
sales. Accessory products typically carry higher margins than wireless handsets.
-6-
<PAGE>
The Company believes that marketing, distribution and private labeling of
accessory products are natural extensions of the Company's business.
Accordingly, the Company has introduced a complete line of branded accessory
products manufactured by third parties under the Brightlink(TM) name, which it
markets and distributes. The Company distributes these branded and third party
accessory lines through existing and new distribution channels, including mass
merchandisers and other retail channels. The Company had entered into an
exclusive license agreement with BellSouth Cellular Corp. for use of the
trademark Mobile America(TM). This license agreement has been terminated.
In addition to the sale of products, the Company provides various
distribution and value-added logistics services. Such distribution services
include purchasing, handling, packaging, warehousing, picking, packing, shipping
and "just-in-time" delivery. Value-added logistics services consist of end-user
product fulfillment, programming, private labeling, specialized packaging,
product branding, prepaid technology integration and product warranty and repair
services. The Company believes that these services respond to the outsourcing
requirements of manufacturers, carriers, resellers and mass retailers. The
Company intends to pursue opportunities to provide inventory management and
value-added logistics services to its customers and vendors to complement its
distribution capabilities. Revenue from these services are billed separately or
are included in the margin earned on handset or accessory sales.
Product manufacturers typically provide warranties which the Company
extends to its customers. The Company employs service technicians who perform
equipment maintenance and repair services on-site through arrangements with
equipment manufacturers. The Company has not derived significant revenues from
these activities.
Information about foreign and domestic operations and export
sales
The Company operates in worldwide markets. Its business activities are
conducted in four divisions: North America; Latin America; Europe, Middle East
and Africa; and Asia-Pacific. A summary of the Company's operations by division
is presented below (in thousands):
-7-
<PAGE>
1996
----
Net Sales (based on customer location):
North America $287,377
Latin America 98,420
Europe, Middle East and
Africa 76,292
Asia-Pacific 127,629
--------
$589,718
========
Income before income taxes and minority interest:
North America $ 7,113
Latin America 4,268
Europe, Middle East and Africa 3,607
Asia-Pacific 5,135
--------
$ 20,123
========
Identifiable assets:
North America $126,003
Latin America 73,633
Europe, Middle East and Africa 44,451
Asia-Pacific 54,958
--------
$299,045
========
The Company has initiated operations in certain regions by acquiring
existing businesses and/or establishing majority-owned subsidiaries with a local
partner to operate within the particular area. This business development
strategy has been employed in the United Kingdom, China and Australia.
Customers
The Company has developed a global customer network of more than 10,000
wireless carriers, agents, resellers, dealers and retailers. The Company intends
to focus its sales efforts on carriers, service providers and their agents,
dealers and resellers which the Company believes will continue to be the
significant purchasers of the Company's products.
For the years ended December 31, 1995 and 1996, sales of the Company's
products to customers in foreign markets accounted for approximately 36% and
51%, respectively, of net sales. The Company is seeking to continue to increase
product sales in foreign markets and believes that such markets present
significant growth opportunities. The Company is, and as foreign sales increase
will become more so, subject to risks inherent in foreign trade, including
increased credit risk, customs duties and import quotas and other trade
restrictions, fluctuations in foreign currency exchange rates, shipping delays,
failure or material interruption of wireless systems and services and
international political, regulatory and economic developments, any or all of
which could have an adverse effect on the Company's operating margins and
results of operations. The Company has no material hedged monetary assets,
liabilities or commitments.
-8-
<PAGE>
A significant portion of the Company's net sales has been derived from a
concentrated customer base. For the years ended December 31, 1995 and 1996,
sales of wireless products to the Company's five largest customers accounted for
approximately 17.2% and 15.4%, respectively, of the Company's net sales. No
single customer accounted for more than 6% of the Company's net sales for the
year ended December 31, 1996. The loss of one or more of its principal customers
may have a material adverse effect on the Company.
Purchasing and Supply
The Company has developed key relationships with the leading manufacturers
and suppliers of wireless communications equipment. The Company generally
negotiates directly with manufacturers and suppliers to ensure adequate
inventories of brand name products on a timely basis and on favorable pricing
terms. In 1996, the Company purchased its products from more than 45 suppliers.
Inventory purchase decisions are based on quality, price, customer demand,
product availability and brand recognition. Certain of the Company's suppliers
provide favorable purchasing terms to the Company, including price protection,
cooperative advertising and marketing allowances. Product manufacturers
typically provide warranties which the Company extends to its customers.
For the years ended December 31, 1995 and 1996, the Company's three largest
suppliers accounted for approximately 38.1% and 62.3%, respectively, of product
purchases. For the year ended December 31, 1995, the Company's three largest
suppliers, Nokia, BellSouth Cellular Corp., and Ericsson accounted for
approximately 19.7%, 9.9%, and 8.6%, respectively, of product purchases. For the
year ended December 31, 1996, the Company's three largest suppliers, Nokia,
Ericsson, and Siemens accounted for approximately 38.4%, 17.3%, and 6.6%,
respectively, of product purchases. These or other suppliers may determine
essentially at any time to impose price increases on products sold to the
Company or otherwise determine not to continue to sell such products to the
Company on commercially reasonable terms, or at all, which may adversely affect
the Company's operating margins or result in decreased product sales.
The Company maintains agreements with a number of its significant
suppliers, including Ericsson, Nokia and Philips. These agreements are generally
non-exclusive, require the Company to satisfy minimum purchase requirements and
can be terminated on relatively short notice. The agreements also provide for
certain territorial
-9-
<PAGE>
restrictions. The Company purchases products from other manufacturers and
dealers pursuant to purchase orders placed from time to time in the ordinary
course of business. The Company believes that its relationships with its
suppliers are good.
Sales, Marketing and Distribution
The Company's executive officers and sales staff are responsible for the
Company's sales and marketing efforts. The Company's domestic sales force,
targets two principal customer groups, wireless service providers and their
agent dealers and national retailers. The Company's executive officers and
international sales staff, actively seek to establish and maintain relationships
with international wireless service providers. The international sales staff
consists of 12 persons for the Asia-Pacific market, 9 persons for the Europe,
Middle East and Africa market and 4 persons for the Latin America market. Due to
the service-oriented focus of the Company, the Company's executive officers
devote a substantial amount of time developing and maintaining personal
relationships with the Company's significant customers.
The Company has two domestic sales offices, located in Indianapolis,
Indiana and Miami, Florida. Brightpoint International and its subsidiaries
conduct all of the Company's sales and marketing activities outside of North and
South America.
The Company believes that product recognition by customers and consumers is
an important factor in the marketing of the Company's products. Accordingly, the
Company promotes itself and certain of its product lines through advertising in
national trade publications and attendance at international, national and
regional trade shows. In addition, the Company has introduced a line of
accessories under the Brightlink(TM) name. The Company also solicits customers
through direct mail, broadcast facsimile and telemarketing activities. The
Company's manufacturers and dealers use a variety of methods to promote their
products directly to consumers, including print and media advertising based on
product features.
Backlog is not material to the Company's business.
-10-
<PAGE>
Seasonality
The Company's sales are influenced by a number of seasonal factors
associated with consumer electronics and retail sales which tend to result in
increased volume in the latter part of the calendar year. The overall growth of
the Company's business has reduced the impact of such factors on the Company's
operating results. However, seasonality contributed to the increase in the
Company's sales in the fourth quarter of 1996.
Management Information System
The Company believes that its information systems provide strong financial
controls and facilitate the provision of value-added logistics services. During
1996, the Company made significant investments in the enhancement of its
information systems and anticipates continuing to make such investments. The
system integrates marketing, sales, product fulfillment and distribution,
inventory control and purchasing, financial and credit control and internal
communications. The Company believes its information systems provide strong
internal control over business processes.
Competition
The markets for wireless handsets and accessories are characterized by
intense price competition and significant price erosion over the life of a
product. The Company competes principally on the basis of value (in terms of
price, time and reliability), product availability and service. The Company
competes with numerous well-established United States and international
wholesale distributors, value-added logistics service providers and
manufacturers of wireless communications equipment, including the Company's
suppliers, as well as carriers of wireless services, many of which possess
substantially greater financial and other resources than the Company and have
established reputations for success in the sale and service of wireless
communications products. Certain of these competitors have the financial
resources necessary to enable them to withstand substantial price competition
and implement extensive advertising campaigns, both generally and in response to
efforts by additional competitors entering into new markets or introducing new
products.
While the Company has established strategic relationships with customers
and suppliers, the wireless communications products distribution industry has,
in the past, been characterized by low barriers to entry and frequent
introduction of new products. However, as the market requirement shifts from
pure distribution to a mix of distribution and value-added services, entry
barriers are expected to rise in relationship to the increased cost of
-11-
<PAGE>
infrastructure, the expanded human resource requirement and the advanced
management and information systems capabilities that the service segment of the
business mandates. The Company's ability to compete successfully will be largely
dependent upon its ability to anticipate and respond to various competitive
factors affecting the industry, including new products which may be introduced,
changes in consumer preferences, demographic trends, international, national,
regional and local economic conditions and discount pricing and promotional
activities by competitors.
The markets for wireless communications products are characterized by
rapidly changing technology and evolving industry standards, often resulting in
product obsolescence or short product life cycles. Accordingly, the Company's
success is dependent upon its ability to anticipate technological changes in the
industry and to continually identify, obtain and market new products that
satisfy evolving industry and customer requirements. The use of alternative
wireless technologies, including ESMR and satellite communications systems, may
reduce demand for cellular and PCS telephone products and widespread commercial
introduction could materially change the types of products sold by the Company.
Employees
The Company has 403 employees in its domestic and international locations.
None of the Company's employees are covered by a collective bargaining
agreement. The Company believes its employee relations are good.
Item 2. Properties
The Company's corporate headquarters are located in a 162,000 square foot
facility in Indianapolis, Indiana. This facility includes approximately 40,000
square feet of office space and approximately 122,000 square feet of warehouse
and product fulfillment space to serve as the Company's primary distribution
center. The original lease term for 90,000 square feet of this facility
commenced on January 1, 1996 and expires on January 31, 2006 and may be renewed
for two five-year terms. The Company entered into a new lease agreement dated
July 17, 1996 for a 72,000 square foot expansion to this facility. This lease
commences on January 1, 1997 and expires on December 31, 2006 and may be renewed
for two five-year terms. The monthly base rental under these obligations is
approximately $81,700. The Company is also obligated to pay real estate taxes.
At the end of the initial lease term, the Company has an option to purchase the
leased premises for approximately $11.5 million. The Company believes that this
facility will be sufficient to accommodate future expansion and growth of its
operations.
-12-
<PAGE>
In August 1995, the Company entered into a three-year lease for 14,415
square feet of warehouse and office space in Miami, Florida. The Company has
consolidated its Miami operations into this new office and warehouse facility
during 1996. The lease provides for monthly rent of approximately $7,300.
In March 1997 the Company opened a 65,000 square foot distribution facility
in Sparks, Nevada. The agreement provides for monthly rent of approximately
$18,300 per month and expires on February 28, 2002.
As a result of the Company's merger with Allied Communications, the Company
assumed a lease for 22,000 square feet of warehouse and office space in
Bensalem, Pennsylvania. The lease provides for monthly rent of approximately
$7,500 and expires in December 1999.
The Company's former executive offices were located in approximately 10,800
square feet of leased space in Indianapolis, Indiana. The lease provides for
monthly rent of approximately $9,900 and expires in June 1999. The Company plans
to utilize this facility for performing product warranty and repair services in
the future and is currently renegotiating this lease.
The Company's international acquisitions added leased facilities in
Manchester, England, Johannesburg, South Africa, Hong Kong, and Sydney,
Australia. These facilities are approximately 19,000, 3,100, 7,000, and 16,000
square feet, respectively, and provide for monthly rents of approximately
$8,900, $1,000, $6,200, and $7,800, respectively.
Item 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
-13-
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Incorporated by reference to the caption Common Stock Information contained
on page 24 of the Company's 1996 Annual Report to Stockholders.
Item 6. Selected Financial Data.
Incorporated by reference to the caption Financial Highlights contained on
page 1 of the Company's 1996 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Incorporated by reference to the caption Management's Discussion and
Analysis of Financial Condition and Results of Operations contained on pages 10
through 13 of the Company's 1996 Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the financial information contained on pages
14 through 23 and to the caption Quarterly Results of Operations (Unaudited) on
page 24 of the Company's 1996 Annual Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-14-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company with respect to its most recent fiscal year, the Company believes
that during the fiscal year ending December 31, 1996, all filing requirements
applicable to executive officers, directors and 10% shareholders have been
complied with except, that, certain Form 4's were not timely filed and were
incomplete or inaccurate in connection with reported sales of options relating
to the Company's Common Stock made by Robert Picow, beneficial owner of greater
than 5% of the Company's securities and a director of the Company, in November
and December 1996.
Incorporated by reference to the caption Election of Directors contained on
pages 2 through 5 of the Company's Proxy Statement for the 1996 Annual Meeting
of Stockholders.
Item 11. Executive Compensation.
Incorporated by reference to the caption Executive Compensation contained
on pages 6 through 9 of the Company's Proxy Statement for the 1996 Annual
Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the caption Voting Security Ownership of
Certain Beneficial Owners and Management contained on pages 10 and 11 of the
Company's Proxy Statement for the 1996 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the caption Certain Transactions contained on
pages 11 and 12 of the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) The Financial Statements listed below are incorporated by reference from
pages 14 through 23 of the Company's 1996 Annual Report to Stockholders:
Report of Independent Auditors
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1995 and 1996
-15-
<PAGE>
Consolidated Balance Sheets as of December 31, 1995 and
1996
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1994, 1995
and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996
Notes to Consolidated Financial Statements
(a)(2) The following financial schedule for the year ended
December 31, 1996 is submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a)(3) Exhibits
Exhibit
Number Description
- ------ -----------
3.1 Certificate of Incorporation of the Company (8)
3.2 Amendment to Certificate of Incorporation of the Company (8)
3.3 Revised By-Laws of the Company (8)
3.4 Certificate of Merger of Brightpoint, Inc. into
Wholesale Cellular USA, Inc., effective September 15,
1995. (2)
4.1 Form of Common Stock Certificate (1)
10.1 1995 Stock Option Plan (1)
10.2 1996 Stock Option Plan (8)
10.3 Non-Employee Directors Stock Option Plan (1)
10.4 Form of Employment Agreement between the Company and
Robert J. Laikin, J. Mark Howell and T. Scott Housefield (8)
10.5 Form of Employment Agreement between the Company and
its Executive Vice Presidents (8)
-16-
<PAGE>
10.6 Lease Agreement between the Company and WRC
Properties, Inc., as amended and Unconditional Guaranty
of Lease by Century Cellular Network, Inc. (1)
10.7 Lease Agreement between the Company and Park 100
Properties, Inc. (2)
10.8 Lease Agreement between the Company and Industrial
Affiliates, Ltd. (2)
10.9 Credit Agreement and First and Second Amendments to
Credit Agreement among the Company and Bank One,
Indianapolis, N.A., The First National Bank of Chicago
and Bank One, Indianapolis, N.A. as Agent, dated June
13, 1995, September 15, 1995 and January 19, 1996,
respectively (3)
10.10 Third, Fourth, Fifth and Sixth Amendments to Credit Agreement
among the Company and Bank One, Indianapolis, N.A., The First
National Bank of Chicago and Bank One, Indianapolis, N.A., as
Agent, dated June 7, 1996, June 28, 1996, October 11, 1996 and
January 29, 1997, respectively (8)
10.11 Lease Agreement between the Company and Airport Key
Corporation, dated November 30, 1995 (3)
10.12 Lease Agreement between the Company and Corporate
Drive Associates, LLC, dated June 6, 1995 (3)
10.13 Amendment to Lease Agreement between the Company and
Corporate Drive Associates, LLC, dated October 3, 1995
(3)
10.14 Agreement and Plan of Merger, as amended on April 29,
1996, by and among the Company, Brightpoint
Acquisition, Inc., a wholly-owned subsidiary of the
Company, Allied Communications, Inc., Allied
Communications of Florida, Inc., Allied Communications
of Georgia, Inc., Allied Communications of Illinois,
Inc., Allied Communications of Puerto Rico, Inc.,
Robert Picow and Joseph Forer. (5)
10.15 Stock Purchase Agreement, dated as of October 1, 1996,
among the Company, Brightpoint International Ltd.,
Technology Resource International Ltd., Safkong
Holdings Limited, Marriott Investment & Trade Inc.,
John MacLean-Arnott and Dana Marlin. (6)
10.16 Rights Agreement, dated as of February 20, 1997,
between the Company and Continental Stock Transfer
Trust Company, as Rights Agent. (7)
11.1 Statement re: computation of per share earnings (8)
-17-
<PAGE>
13.1 1996 Annual Report to Stockholders. With the exception
of the information incorporated by reference in Items
5, 6, 7 and 8, the 1996 Annual Report to Stockholders
is not deemed filed as part of this report. (8)
21.1 Subsidiaries (8)
23.1 Consent of Ernst & Young LLP (8)
23.2 Report of Coopers & Lybrand LLP (8)
23.3 Consent of Coopers & Lybrand LLP (8)
27.1 Financial Data Schedule (8)
- ------------
(1) Incorporated by reference to Registration Statement (33-
75148) effective April 7, 1994.
(2) Incorporated by reference to Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(3) Incorporated by reference to Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
(4) Incorporated by reference to Registration Statement on Form S-3
(33-97084) effective October 24, 1995.
(5) Incorporated by reference to Current Report on Form 8-K,
dated June 12, 1996.
(6) Incorporated by reference to Current Report on Form 8-K,
dated December 31, 1996.
(7) Incorporated by reference to Current Report on Form 8-K,
dated March 28, 1997.
(8) Filed herewith.
(b) Reports on Form 8-K:
On December 3, 1996, the Company filed a Form 8-K with the
Securities and Exchange Commission reporting an acquisition under
Item 2.
On March 28, 1997, the Company filed a Form 8-K with the
Securities and Exchange Commission reporting an other event (the
adoption of its Shareholder Rights Plan) under Item 5.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BRIGHTPOINT, INC.
Dated: March 28, 1997 By: /s/ Robert J. Laikin
------------------------------
Robert J. Laikin
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert J. Laikin Director, Chairman March 28, 1997
- -------------------------- of the Board and Chief
Robert J. Laikin Executive Officer
(Principal Executive
Officer)
/s/ Mark Howell Director, President and March 28, 1997
- -------------------------- Chief Operating Officer
t5
/s/ Phillip A. Bounsall Executive Vice President, March 28, 1997
- -------------------------- Chief Financial Officer
Phillip A. Bounsall (Principal Financial
Officer)
/s/ T. Scott Housefield Director, Executive Vice March 28, 1997
- -------------------------- President and President,
T. Scott Housefield Brightpoint International
Ltd.
/s/ Steven E. Fivel Executive Vice President, March 28, 1997
- -------------------------- General Counsel and
Steven E. Fivel Secretary
/s/ John P. Delaney Vice President, Corporate March 28, 1997
- -------------------------- Controller (Principal
John P. Delaney Accounting Officer)
<PAGE>
/s/ Robert Picow Director March 28, 1997
- --------------------------
Robert Picow
/s/ Joseph Forer Director March 28, 1997
- --------------------------
Joseph Forer
/s/ John W. Adams Director March 28, 1997
- --------------------------
John W. Adams
/s/ Robert F. Wagner Director March 28, 1997
- --------------------------
Robert F. Wagner
/s/ Stephen H. Simon Director March 28, 1997
- --------------------------
Stephen H. Simon
/s/ Rollin M. Dick Director March 28, 1997
- --------------------------
Rollin M. Dick
/s/ Steven B. Sands Director March 28, 1997
- --------------------------
Steven B. Sands
<PAGE>
BRIGHTPOINT, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
- ------------------------------------------------------------- ---------- ------------------------- ---------- ----------
ADDITIONS
- ------------------------------------------------------------- ---------- ------------------------- ---------- ----------
Balance at Charged to Balance at
Beginning Costs and Charged to End
DESCRIPTION of Period Expenses Other Accounts Deductions of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts ................. $ 691,000 $ 589,000 $ -- $ 165,000 (1) $1,115,000
----------------------------------------------------------------------
Total ............................................... $ 691,000 $ 589,000 $ -- $ 165,000 $1,115,000
======================================================================
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts ................. $ 450,000 $ 927,000 $ -- $ 686,000 (1) $ 691,000
----------------------------------------------------------------------
Total ............................................... $ 450,000 $ 927,000 $ -- $ 686,000 $ 691,000
======================================================================
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts ................. $ 328,000 $ 905,000 $ -- $ 783,000 (1) $ 450,000
----------------------------------------------------------------------
Total ............................................... $ 328,000 $ 905,000 $ -- $ 783,000 $ 450,000
======================================================================
</TABLE>
(1) Uncollectible accounts written off.
S-1
CERTIFICATE OF INCORPORATION
OF
WHOLESALE CELLULAR USA, INC.
FIRST: The name of the Corporation is:
WHOLESALE CELLULAR USA, INC.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L- 100, in the City of Dover, County of
Kent, 19901. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the laws of the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is eleven million (11,000,000) shares, of which
ten million (10,000,000) shares shall be Common Stock, par value $.01 per share,
and one million (1,000,000) shares shall be Preferred Stock, par value $.01 per
share.
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of the Corporation is hereby expressly authorized to
provide, by resolution or resolutions duly adopted by it prior to issuance, for
the creation of each such series and to fix the designation and the powers,
preferences, rights, qualifications, limitations and restrictions relating to
the shares of each such series. The authority of the
<PAGE>
Board of Directors with respect to each series of Preferred Stock shall include,
but not be limited to, determining the following:
(a) the designation of such series, the number of shares to constitute
such series and the stated value if different from the par value thereof;
(b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable on any
shares of stock of any other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to redemption
by the Corporation, and, if so, the times, prices and other conditions of
such redemption;
(e) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the
assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or
-2-
<PAGE>
sinking fund shall be applied to the purchase or redemption of the shares
of such series for retirement or other corporate purposes and the terms and
provisions relating to the operation thereof;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
Preferred Stock or any other securities and, if so, the price or prices or
the rate or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of conversion or
exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock or shares of
stock of any other class or any other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of
Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions, thereof.
-3-
<PAGE>
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereof shall be cumulative.
FIFTH: The name and address of the sole incorporator are as follows:
Name Address
---- -------
Ralph D. Mosley, Jr. 405 Lexington Avenue
New York, New York l0l74
SIXTH: Unless required by law or determined by the chairman of the meeting
to be advisable, the vote by stockholders on any matter, including the election
of directors, need not be by written ballot.
SEVENTH: The Corporation reserves the right to increase or decrease its
authorized capital stock, or any class or series thereof, and to reclassify the
same, and to amend, alter, change or repeal any provision contained in the
Certificate of Incorporation under which the Corporation is organized or in any
amendment thereto, in the manner now or hereafter prescribed by law, and all
rights conferred upon stockholders in said Certificate of Incorporation or any
amendment thereto are granted subject to the aforementioned reservation.
-4-
<PAGE>
EIGHTH: The Board of Directors shall have the power at any time, and from
time to time, to adopt, amend and repeal any and all By-laws of the Corporation.
NINTH: All persons who the Corporation is empowered to indemnify pursuant
to the provisions of Section 145 of the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect), shall be indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. No repeal or amendment of this Article NINTH shall
adversely affect any rights of any person pursuant to this Article NINTH which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
TENTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for any monetary damages for breaches of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper
-5-
<PAGE>
personal benefit. No repeal or amendment of this Article TENTH shall adversely
affect any rights of any person pursuant to this Article TENTH which existed at
the time of such repeal or amendment with respect to acts or omissions occurring
prior to such repeal or amendment.
The undersigned incorporator hereby affirms that the statements made herein
are true under penalties of perjury, and is hereby executing this Certificate of
Incorporation this 1st day of February, l994.
_________________________(L.S.)
Ralph D. Mosley, Jr.
-6-
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BRIGHTPOINT, INC.
----------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-----------------------------------------
The undersigned, being the Executive Vice President of BRIGHTPOINT, INC.
(the "Corporation"), a corporation existing under the laws of the State of
Delaware, does hereby certify as follows:
FIRST: That the Certificate of Incorporation of the Corporation has been
amended as follows by striking out the first paragraph of Article FOURTH thereof
as it now exists and inserting in lieu and instead thereof a new first paragraph
of Article FOURTH, reading as follows:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is Twenty-Six Million
(26,000,000) shares, of which Twenty-Five Million (25,000,000) shares shall
be Common Stock, par value $.01 per share, and One Million (1,000,000)
shares of Preferred Stock, par value $.01 per share."
SECOND: That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, I have signed this Certificate this 29th day of May,
1996.
BRIGHTPOINT, INC.
By: /s/ J. Mark Howell
------------------------
Name: J. Mark Howell
Title: Executive Vice
President
-2-
BRIGHTPOINT, INC.
BY-LAWS
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in the State of
Delaware is 32 Loockerman Square, Suite L- 100, in the City of Dover, County of
Kent, and the name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
2. The Corporation shall in addition to its registered office in the State
of Delaware establish and maintain an office or offices at such place or places
as the Board of Directors may from time to time find necessary or desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed thereon the name
of the Corporation and may be in such form as the Board of Directors may
determine. Such seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
<PAGE>
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at the registered office
of the Corporation in the State of Delaware or at such other place as shall be
determined from time to time by the Board of Directors.
2. The annual meeting of stockholders shall be held on such day and at such
time as may be determined from time to time by resolution of the Board of
Directors. The election of Directors and any other proper business, as provided
by Section 7 of Article III of these By-laws, may be transacted at the annual
meeting.
3. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business, except as otherwise expressly provided by statute, by the Certificate
of Incorporation or by these By-laws. If, however, such majority shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting (except as otherwise provided by statute). At such adjourned meeting
at which the requisite amount of voting stock shall be represented any business
may be transacted which might have been transacted at the meeting as originally
notified.
4. At all meetings of the stockholders each stockholder having the right to
vote shall be entitled to vote in person, or by
-2-
<PAGE>
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting, unless such
instrument provides for a longer period.
5. At each meeting of the stockholders each stockholder shall have one vote
for each share of capital stock having voting power, registered in his name on
the books of the Corporation at the record date fixed in accordance with these
By-laws, or otherwise determined, with respect to such meeting. Except as
otherwise expressly provided by statute, by the Certificate of Incorporation or
by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Except as otherwise provided by law, written or printed notice of each
meeting of the stockholders, whether annual or special, shall be given not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting or, in the event that the stockholders are to
vote upon any proposal to merge or consolidate the corporation or to sell, lease
or exchange all or substantially all of its property and assets, not less than
20 nor more than 60 days before the date of such meeting. Such notice shall be
delivered either personally or by mail or at the direction of the Chairman of
the Board, the President or the Secretary. Each notice of meeting shall state
the place, date and hour of the meeting.
-3-
<PAGE>
7. At any meeting, only such business shall be conducted as shall have been
brought before the meeting (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the Board of Directors, or (iii) by any
stockholder who complies with the procedures set forth in this Section 5.
The only business which shall be conducted at any meeting of the
stockholders shall (i) have been specified in the written notice of the meeting
(or any supplement thereto) given as provided in the preceding Section, (ii) be
brought before the meeting at the direction of the Board of Directors or the
chairman of the meeting or (iii) have specified in a written notice (a
"Stockholder Meeting Notice") given to the corporation, in accordance with all
of the following requirements, by or on behalf of any stockholder who shall have
been a stockholder of record on the record date for such meeting and who shall
continue to be entitled to vote thereat. Each Stockholder Meeting notice must be
delivered personally to, or be mailed to and received by, the Secretary of the
Corporation, at the principal executive offices of the Corporation, not less
than 50 days nor more than 75 days prior to the meeting; provided, however, that
in the event that less than 65 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the day on which such notice of the date of the meeting was mailed
or such public nondisclosure was made. Each Stockholder Meeting Notice to the
Secretary shall set forth as to each matter the Stockholder proposes to bring
before the meeting: (i) a
-4-
<PAGE>
description of each item of business proposed to be brought before the meeting
and the reasons for conducting such business at the meeting; (ii) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
to bring such item of business before the meeting; (iii) the class and number of
shares of stock held of record, owned beneficially and represented by proxy by
such stockholder as of the record date for the meeting (if such date then shall
have been made publicly available) and as of the date of such Stockholder
Meeting Notice; and (iv) all other information which would be required to be
included in a proxy statement filed with the Securities and Exchange Commission
(the "Commission") if, with respect to any such item of business, such
stockholder were a participant in a solicitation subject to Section 14 of the
Securities Exchange Act of 1934.
Notwithstanding anything in these By-laws to the contrary, no business
shall be conducted at any meeting of the stockholders except in accordance with
the procedures set forth in these By-laws. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by these By-laws, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
When a meeting is adjourned to another time or place, notice of the
adjourned meeting need not be given if the time and place thereof are announced
at the meeting at which the adjournment is taken, unless the adjournment is for
more than 30 days, or
-5-
<PAGE>
unless after the adjournment a new record date is fixed for the adjourned
meeting, in which case notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At the adjourned meeting,
any business may be transacted that might have been transacted at the original
meeting.
8. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the President or by the
Board of Directors.
9. The order of business at each meeting of stockholders shall be
determined by the presiding officer.
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be managed under the
direction of a Board of Directors, which may exercise all such powers and
authority for and on behalf of the Corporation as shall be permitted by law, the
Certificate of Incorporation or these By-laws.
2. The Board of Directors may hold their meetings within or outside of the
State of Delaware, at such place or places as it may from time to time
determine.
3. The number of directors comprising the Board of Directors shall be such
number as may be from time to time fixed by resolution of the Board of
Directors. The directors shall be classified in respect to the time for which
they shall severally hold office, by dividing them into three classes. The
number of directors in each class shall be as nearly equal as possible. At
-6-
<PAGE>
each annual election, any vacancy in any class may be filled and the successors
to the directors of the class whose terms shall expire in that year shall be
elected to hold office for the term of three years, and the term of office of
one class of directors shall expire in each year. In the event the number of
directors is increased, election may be made to a class of directors with terms
expiring in three years or less in order to maintain proportionate equality
between the classes.
4. Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or any stockholder entitled
to vote in the election of directors generally. However, any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has been delivered
personally to, or been mailed to and received by the Secretary of the
Corporation at, the principal executive offices of the Corporation, not less
than 50 days nor more than 75 days prior to the meeting; provided, however,
that, in the event that less than 65 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Each such notice
-7-
<PAGE>
shall set forth: (i) the name and address of the stockholder, as they appear on
the Corporation's books, who intends to make the nomination and of the person or
persons to be nominated; (ii) the class and number of shares of stock held of
record, owned beneficially and represented by proxy by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available) and of the date of such notice; (iii) a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such stockholder; (v) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had each nominee been nominated, or
intended to be nominated by the Board of Directors; and (vi) the consent of each
nominee to serve as a director of the corporation if so elected.
No person shall be eligible to serve as a director of the corporation
unless nominated in accordance with the procedures set forth in this By-laws.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
prescribed by these By-laws, and if he should so determine, he
-8-
<PAGE>
shall so declare to the meeting and the defective nomination shall
be disregarded.
5. The directors shall be elected by the holders of shares of stock of the
Corporation entitled to vote on the election of directors, and directors shall
be elected by a plurality vote. The initial directors shall be divided into
three classes, designated as Class I, Class II and Class III as set forth in
Section 3 of this Article IV. The Class I initial director or directors shall
serve until the annual meeting of stockholders held in 1995, the Class II
initial director or directors until the annual meeting of stockholders held in
1996, and the Class III initial director or directors until the annual meeting
of stockholders held in 1997 and, in each case, until their successor(s) are
duly elected and qualified. At each annual meeting of stockholders commencing
with the annual meeting to be held during the calendar year 1995 each of the
successors to the Directors of the Class whose term shall have expired that year
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
the successor shall be elected and shall
-9-
<PAGE>
qualify, subject, however to prior death, resignation, retirement,
disqualification or removal from office.
6. Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, shall be filled for
the unexpired term by the concurring vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
7. Any director may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board, or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
8. Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares entitled to vote at an
election of directors.
ARTICLE V
COMMITTEES OF DIRECTORS
1. By resolutions adopted by a majority of the whole Board of Directors,
the Board may designate an Executive Committee and one or more other committees,
each such committee to consist of one or more directors of the Corporation. The
Executive Committee
-10-
<PAGE>
shall have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation (except as otherwise
expressly limited by statute), including the power and authority to declare
dividends and to authorize the issuance of stock, and may authorize the seal of
the corporation to be affixed to all papers which may require it. Each such
committee shall have such of the powers and authority of the Board as may be
provided from time to time in resolutions adopted by a majority of the whole
Board.
2. The requirements with respect to the manner in which the Executive
Committee and each such other committee shall hold meetings and take actions
shall be set forth in the resolutions of the Board of Directors designating the
Executive Committee or such other committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their services as may be
authorized by resolution of the Board of Directors, which compensation may
include an annual fee and a fixed sum for expense of attendance at regular or
special meetings of the Board or any committee thereof. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
-11-
<PAGE>
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held without notice at
such time and place, either within or without the State of Delaware, as may be
determined from time to time by resolution of the Board.
2. Special meetings of the Board of Directors shall be held whenever called
by the President of the Corporation or the Board of Directors on at least 24
hours' notice to each director. Except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these By-laws, the purpose
or purposes of any such special meeting need not be stated in such notice,
although the time and place of the meeting shall be stated.
3. At all meetings of the Board of Directors, the presence in person of a
majority of the members of the Board of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and, except
as otherwise provided by statute, by the Certificate of Incorporation or by
these By-laws, if a quorum shall be present the act of a majority of the
directors present shall be the act of the Board.
4. Any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting if all
the members of the Board or such committee, as the case may be, consent thereto
in writing and the writing or writings are filed with the minutes of proceedings
of the Board of committee. Any director may participate in a meeting of the
Board, or any committee designated by the Board, by means of
-12-
<PAGE>
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this sentence shall constitute presence in person at such
meeting.
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the Board of
Directors and shall be a Chairman of the Board, a Chief Operating Officer, a
President, one or more Executive Vice Presidents (including, without limitation,
an Executive Vice President to serve as General Counsel, Chief of Sales and
Chief Financial Officer), one or more Vice Presidents, a Secretary and a
Treasurer. The Board may also choose one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as it shall deem necessary. Any
number of offices may be held by the same person.
2. The salaries of all officers of the Corporation shall be fixed by the
Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until their successors
are elected and qualified, or until their earlier resignation or removal. Any
officer may be at any time removed from office by the Board of Directors, with
or without cause. If the office of any officer becomes vacant for any reason,
the vacancy may be filled by the Board of Directors.
-13-
<PAGE>
4. Any officer may resign at any time by giving written notice of his
resignation to the Board of Directors. Any such resignation shall take effect
upon receipt thereof by the Board or at such later date as may be specified
therein. Any such notice to the Board shall be addressed to it in care of the
Secretary.
ARTICLE IX
CHAIRMAN OF THE BOARD
The Chairman of the Board shall have general supervision and management of
the business of the Corporation and shall see that all orders and resolutions of
the Board are carried into effect. He shall preside at meetings of the
stockholders and of the Board of Directors.
-14-
<PAGE>
ARTICLE X
CHIEF OPERATING OFFICER
The Chief Operating Officer shall have general supervision and direction of
the business and affairs of the Corporation and shall have general and active
supervision and direction over the business operations and affairs of the
Corporation and over its several officers, agents and employees, subject,
however, to the direction and control of the Board. The Chief Operating Officer
may sign and execute in the name of the Corporation deeds, mortgages, bond,
contracts or other instruments. He shall perform all duties incident to the
office of the Chief Operating Officer and shall, when requested, counsel with
and advise the other officers of the Corporation and shall perform such other
duties as the Board may from time to time determine.
ARTICLE XI
PRESIDENT
The President shall be the chief executive officer of the Corporation.
Subject to the supervision and direction of the Board of Directors, he shall be
responsible for managing the affairs of the Corporation. He shall have
supervision and direction of all of the other officers of the Corporation and
shall have the powers and duties usually and customarily associated with the
office of the President. In the absence of the Chairman, he shall preside at
meetings of the stockholders.
ARTICLE XII
EXECUTIVE VICE PRESIDENTS
-15-
<PAGE>
Each Executive Vice President (including each General Counsel, Chief of
Sales and Chief Financial Officer, if any) shall have such powers and perform
such duties as may be delegated to him by the Board of Directors, the Chairman
of the Board, the President or the senior officer to whom he reports.
ARTICLE XIII
VICE PRESIDENTS
The Vice Presidents shall have such powers and duties as may
be delegated to them by the President.
ARTICLE XIV
SECRETARY AND ASSISTANT SECRETARY
1. The Secretary shall attend all meetings of the Board of Directors and of
the stockholders, and shall record the minutes of all proceedings in a book to
be kept for that purpose. He shall perform like duties for the committees of the
Board when required.
2. The Secretary shall give, or cause to be given, notice of meetings of
the stockholders, of the Board of Directors and of the committees of the Board.
He shall keep in safe custody the seal of the Corporation, and when authorized
by the President, an Executive Vice President or a Vice President, shall affix
the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. He
shall have such other powers and duties as may be delegated to him by the
President.
-16-
<PAGE>
3. The Assistant Secretary shall, in case of the absence of the Secretary,
perform the duties and exercise the powers of the Secretary, and shall have such
other powers and duties as may be delegated to them by the President.
ARTICLE XV
TREASURER AND ASSISTANT TREASURER
1. The Treasurer shall have the custody of the corporate funds and
securities, and shall deposit or cause to be deposited under his direction all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors
or pursuant to authority granted by it. He shall render to the President and the
Board whenever they may require it an account of all his transactions as
Treasurer and of the financial condition of the Corporation. He shall have such
other powers and duties as may be delegated to him by the President.
2. The Assistant Treasurer shall, in case of the absence of the Treasurer,
perform the duties and exercise the powers of the Treasurer, and shall have such
other powers and duties as may be delegated to them by the President.
ARTICLE XVI
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be numbered and shall be
entered in the books of the Corporation as they are issued. They shall exhibit
the holder's name and number
-17-
<PAGE>
of shares and shall be signed by the President or an Executive Vice President or
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary.
ARTICLE XVII
CHECKS
All checks, drafts and other orders for the payment of money and all
promissory notes and other evidences of indebtedness of the Corporation shall be
signed by such officer or officers or such other person as may be designated by
the Board of Directors or pursuant to authority granted by it.
ARTICLE XVIII
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to time
by resolution duly adopted by the Board of Directors.
ARTICLE XIX
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or by these
By-laws it is provided that notice shall be given to any director or
stockholder, such provision shall not be construed to require personal notice,
but such notice may be given in writing, by mail, by depositing the same in the
United States mail, postage prepaid, directed to such stockholder or director at
his address as it appears on the records of the Corporation, and
-18-
<PAGE>
such notice shall be deemed to be given at the time when the same shall be thus
deposited. Notice of regular or special meetings of the Board of Directors may
also be given to any director by telephone or by telex, telegraph or cable, and
in the latter event the notice shall be deemed to be given at the time such
notice, addressed to such director at the address hereinabove provided, is
transmitted by telex (with confirmed answerback), or delivered to and accepted
by an authorized telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation or by these
By-laws a notice is required to be given, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of any stockholder or director
at any meeting thereof shall constitute a waiver of notice of such meeting by
such stockholder or director, as the case may be, except as otherwise provided
by statute.
ARTICLE XX
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify pursuant to the
provisions of Section 145 of the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect) shall be indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be deemed to be
exclusive of any other such rights to which those seeking indemnification from
the Corporation may be entitled,
-19-
<PAGE>
including, but not limited to, any rights of indemnification to which they may
be entitled pursuant to any agreement, insurance policy, other by-law or charter
provision, vote of stockholders or directors, or otherwise. No repeal or
amendment of this Article XVIII shall adversely affect any rights of any person
pursuant to this Article XVIII which existed at the time of such repeal or
amendment with respect to acts or omissions occurring prior to such repeal or
amendment.
ARTICLE XXI
ALTERATION OF BY-LAWS
The By-laws of the Corporation may be altered, amended or
repealed, and new By-laws may be adopted, by the majority vote of the
stockholders or by the Board of Directors; provided, however, that the
provisions of Section 4 of Article IV of the By-Laws may be altered, amended or
repealed only by the affirmative vote of the holders of 66 2/3% of the voting
power of the Corporation's stock outstanding and entitled to vote thereon.
-20-
1996 STOCK OPTION PLAN
OF
Brightpoint, Inc.
1. Purpose
Brightpoint, Inc. (the "Company") desires to attract and retain the best
available talent and encourage the highest level of performance in order to
continue to serve the best interests of the Company and its stockholders. By
affording employees and other persons of the Company and its Subsidiaries the
opportunity to acquire proprietary interests in the Company and by providing
them incentives to put forth maximum efforts for the success of the business,
the 1996 Stock Option Plan of Brightpoint, Inc. (the "1996 Plan") is expected to
contribute to the attainment of those objectives.
2. Scope and Duration
Options granted under the 1996 Plan ("options") shall be nonqualified stock
options, and not "incentive stock options" as provided in the Internal Revenue
Code of 1986, as amended. The maximum aggregate number of shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), as to
which options may be granted from time to time under the 1996 Plan is 1,000,000
shares, which shares may be, in whole or in part, authorized but unissued shares
or shares reacquired by the Company. The maximum number of shares with respect
to which options may be granted to any employee during the term of the Plan is
500,000. If an option shall expire, terminate or be surrendered for cancellation
for any reason without having been exercised in full, the shares represented by
the option or portion thereof not so exercised shall (unless the 1996 Plan shall
have been terminated) become available for subsequent option grants under the
1996 Plan. As provided in paragraph 12, the 1996 Plan shall become effective on
July 16, 1996, and unless terminated sooner pursuant to paragraph 13, the 1996
Plan shall terminate on July 15, 2006, and no option shall be granted hereunder
after that date.
3. Administration
The 1996 Plan shall be administered by the Board of Directors of the
Company, or, at their discretion, by a committee which is appointed by the Board
of Directors to perform such function (the "Committee"). The Committee shall
consist of not less than two members of the Board of Directors, [each of whom
shall serve at the pleasure of the Board of Directors and shall be a
"Non-Employee Director" as defined in Rule l6b-3 promulgated
<PAGE>
pursuant to the Securities Exchange Act of 1934 (the "Act").] Vacancies
occurring in the membership of the Committee shall be filled by appointment by
the Board of Directors.
The Board of Directors or the Committee, as the case may be, shall have
plenary authority in its discretion, subject to and not inconsistent with the
express provisions of the 1996 Plan, to grant options, to determine the purchase
price of the Common Stock covered by each option, the term of each option, the
persons to whom, and the time or times at which, options shall be granted and
the number of shares to be covered by each option; to interpret the 1996 Plan;
to prescribe, amend and rescind rules and regulations relating to the 1996 Plan;
to determine the terms and provisions of the option agreements (which need not
be identical) entered into in connection with options under the 1996 Plan; and
to make all other determinations deemed necessary or advisable for the
administration of the 1996 Plan. The Board of Directors or the Committee, as the
case may be, may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Board of Directors
or the Committee, as the case may be, or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Board of Directors or the Committee, as the case may
be, or such person may have under the 1996 Plan.
4. Eligibility; Factors to be Considered in Granting Options
In determining the persons to whom options shall be granted and the number
of shares to be covered, the Board of Directors or the Committee, as the case
may be, shall take into account the nature of the persons' duties, their present
and potential contributions to the success of the Company and such other factors
as it shall deem relevant in connection with accomplishing the purposes of the
1996 Plan. A person who has been granted an option or options under the 1996
Plan may be granted an additional option or options, subject to such limitations
as may be imposed by the Board of Directors or the Committee, as the case may
be. An option may be granted to any person, including, but not limited to,
employees, independent agents, consultants and attorneys, who the Board of
Directors or the Committee, as the case may be, believes has contributed, or
will contribute, to the success of the Company.
5. Option Price
The purchase price of the Common Stock covered by each option shall be
determined by the Board of Directors or the Committee, as the case may be. Such
price shall be subject to
2
<PAGE>
adjustment as provided in paragraph 11 below. The Board of Directors or the
Committee, as the case may be, shall determine the date on which an option is
granted; in the absence of such a determination, the date on which the Board of
Directors or the Committee, as the case may be, adopts a resolution granting an
option shall be considered the date on which such option is granted.
6. Term of Options
The term of each option shall be not more then ten (10) years from the date
of grant, as the Board of Directors or the Committee, as the case may be, shall
determine, subject to earlier termination as provided in paragraphs 9 and 10
below.
7. Exercise of Options
(a) Subject to the provisions of the 1996 Plan and unless otherwise
provided in the option agreement, options granted under the 1996 Plan shall
become exercisable as determined by the Board of Directors or Committee, as the
case may be. In its discretion, the Board of Directors or the Committee, as the
case may be, may, in any case or cases, prescribe that options granted under the
1996 Plan become exercisable in installments or provide that an option may be
exercisable in full immediately upon the date of its grant. The Board of
Directors or the Committee, as the case may be, may, in its sole discretion,
also provide that an option granted pursuant to the 1996 Plan shall immediately
become exercisable in full upon the happening of any, including, but not limited
to, any of the following events: (i) the first purchase of shares of Common
Stock pursuant to a tender offer or exchange offer (other than an offer by the
Company) for all, or any part of, the Common Stock, (ii) the approval by the
shareholder(s) of the Company of an agreement for a merger in which the Company
will not survive as an independent, publicly owned corporation, a consolidation,
or a sale, exchange or other disposition of all or substantially all of the
Company's assets, (iii) with respect to an employee, on his 65th birthday, or
(iv) with respect to an employee, on the employee's involuntary termination from
employment, except as provided in Paragraph 9 herein. In the event of a question
or controversy as to whether or not any event has taken place, a determination
by the Board of Directors or the Committee, as the case may be, that such event
has or has not occurred shall be conclusive and binding upon the Company and
participants in the 1996 Plan.
(b) Any option at any time granted under the 1996 Plan may contain a
provision to the effect that the optionee (or any persons entitled to act under
Paragraph 10 hereof) may, at any time at which Fair Market Value is in excess of
the exercise price and
3
<PAGE>
prior to exercising the option, in whole or in part, request that the Company
purchase all or any portion of the option as shall then be exercisable at a
price equal to the difference between (i) an amount equal to the option price
multiplied by the number of shares subject to that portion of the option in
respect of which such request shall be made and (ii) an amount equal to such
number of shares multiplied by the Fair Market Value of the Company's Common
Stock (as defined in Paragraph 14 below) on the date of purchase. The Company
shall have no obligation to make any purchase pursuant to such request, but if
it elects to do so, such portion of the option as to which the request is made
shall be surrendered to the Company. The purchase price for the portion of the
option to be so surrendered shall be paid by the Company, less any applicable
withholding tax obligations imposed upon the Company by reason of the purchase,
at the election of the Board of Directors or the Committee, as the case may be,
either in cash or in shares of Common Stock (valued as of the date and in the
manner provided in clause (ii) above), or in any combination of cash and Common
Stock, which may consist, in whole or in part, of shares of authorized but
unissued Common Stock or shares of Common Stock held in the Company's treasury.
No fractional share of Common Stock shall be issued or transferred and any
fractional share shall be disregarded. Shares covered by that portion of any
option purchased by the Company pursuant hereto and surrendered to the Company
shall not be available for the granting of further options under the Plan. All
determinations to be made by the Company hereunder shall be made by the Board of
Directors or the Committee, as the case may be.
(c) An option may be exercised, at any time or from time to time, as to any
or all full shares as to which the option has become exercisable until the
expiration of the period set forth in Paragraph 6 hereof, by the delivery to the
Company, at its principal place of business, of (i) written notice of exercise
in the form specified by the Board of Directors or the Committee, as the case
may be, specifying the number of shares of Common Stock with respect to which
the option is being exercised and signed by the person exercising the option as
provided herein, (ii) payment of the purchase price; and (iii) payment in cash
of all withholding tax obligations imposed on the Company by reason of the
exercise of the option. Upon acceptance of such notice, receipt of payment in
full, and receipt of payment of all withholding tax obligations, the Company
shall cause to be issued a certificate representing the shares of Common Stock
purchased. In the event the person exercising the option delivers the items
specified in (i) and (ii) of this Subsection (c), but not the item specified in
(iii) hereof, if applicable, the option shall still be considered exercised upon
acceptance by the Company for the full number of shares of Common Stock
specified in the notice of exercise but the actual number of shares issued shall
be reduced by the smallest number of whole
4
<PAGE>
shares of Common Stock which, when multiplied by the Fair Market Value of the
Common Stock as of the date the option is exercised, is sufficient to satisfy
the required amount of withholding tax.
(d) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise. Payment shall be made in cash,
which may be paid by check or other instrument acceptable to the Company; in
addition, subject to compliance with applicable laws and regulations and such
conditions as the Board of Directors or the Committee, as the case may be, may
impose, the Board of Directors or the Committee, as the case may be, in its sole
discretion, may on a case-by-case basis elect to accept payment in shares of
Common Stock of the Company which are already owned by the option holder, valued
at the Fair Market Value thereof (as defined in paragraph 14 below) on the date
of exercise.
The purchase price of the shares as to which an option is exercised may
also be made by delivery to the Company by the optionee of an executed exercise
form together with irrevocable instructions to a broker-dealer to sell or margin
a sufficient portion of the shares sold or margined and deliver the sale or
margin loan proceeds directly to the Company to pay for the exercise price.
8. Non-Transferability of Options
Except as provided by the Board of Directors or Committee, as the case may
be, options granted under the 1996 Plan shall not be transferable otherwise than
by will or the laws of descent and distribution, and options may be exercised
during the lifetime of the optionee only by the optionee, as defined in such
employee's employment agreement. No transfer of an option by the optionee by
will or by the laws of descent and distribution shall be effective to bind the
Company unless the Company shall have been furnished with written notice thereof
and a copy of the will and such other evidence as the Company may deem necessary
to establish the validity of the transfer and the acceptance by the transferor
or transferees of the terms and conditions of such option.
9. Termination of Employment
In the event that the employment of an employee to whom an option has been
granted under the 1996 Plan shall be terminated (except as set forth in
paragraph 10 below), such option may be, subject to the provisions of the 1996
Plan, exercised (to the extent that the employee was entitled to do so at the
termination of his employment) at any time within three (3) months after such
termination or such longer time as provided in the employee's option agreement,
but not later than the date on which the option terminates; provided, however,
that any option which is held by an
5
<PAGE>
employee whose employment is terminated for cause shall, to the extent not
theretofore exercised, automatically terminate as of the date of termination of
employment. As used herein, "cause" shall (i) mean conduct amounting to fraud,
dishonesty, negligence, or engaging in competition or solicitations in
competition with the Company and breaches of any applicable employment policies
or (ii) be defined as set forth in the employment agreement between the Company
and the optionee. Options granted to employees under the 1996 Plan shall not be
affected by any change of duties or position so long as the holder continues to
be a regular employee of the Company or any of its current or future
Subsidiaries. Any option agreement or any rules and regulations relating to the
1996 Plan may contain such provisions as the Board of Directors or the
Committee, as the case may be, shall approve with reference to the determination
of the date employment terminates and the effect of leaves of absence. Nothing
in the 1996 Plan or in any option granted pursuant to the 1996 Plan shall confer
upon any employee any right to continue in the employ of the Company or any of
its Subsidiaries or parent or affiliated companies or interfere in any way with
the right of the Company or any such Subsidiary or parent or affiliated
companies to terminate such employment at any time.
10. Death or Disability of Employee
If an employee to whom an option has been granted under the 1996 Plan shall
die while employed by the Company or a Subsidiary or within three (3) months
after the termination of such employment (other than termination for cause),
such option may be exercised, to the extent exercisable by the employee on the
date of death, by a legatee or legatees of the employee under the employee's
last will, or by the employee's personal representative or distributees, at any
time within one year after the date of the employee's death, but not later than
the date on which the option terminates. In the event that the employment of an
employee to whom an option has been granted under the 1996 Plan shall be
terminated as the result of a disability, such option may be exercised, to the
extent exercisable by the employee on the date of such termination, at any time
within one year after the date of such termination or such longer time as
provided in the employee's option agreement, but not later than the date on
which the option terminates.
11. Adjustments Upon Changes in Capitalization, Etc.
The number and class of shares issuable under the 1996 Plan and any
outstanding options shall be adjusted to prevent dilution or enlargement of
rights, including adjustments in the event of changes in the outstanding Common
Stock by reason of stock dividends, split-ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations,
6
<PAGE>
liquidations and the like. In the event of any offer to holders of Common Stock
generally relating to the acquisition of their shares, the Board of Directors or
the Committee, as the case may be, may make such adjustment as it deems
equitable in respect of outstanding options and rights, including in its
discretion revision of outstanding options and rights so that they may be
exercisable for the consideration payable in the acquisition transaction. Any
such determination by the Board of Directors or the Committee, as the case may
be, shall be conclusive. Any fractional shares resulting from such adjustments
shall be eliminated.
12. Effective Date
The 1996 Plan shall become effective on October 24, 1996, the date of
adoption by the Board of Directors of the Company.
13. Termination and Amendment
The Board of Directors of the Company may suspend, terminate, modify or
amend the 1996 Plan in accordance with applicable law. No suspension,
termination, modification or amendment of the 1996 Plan may, without the consent
of the employee to whom an option shall theretofore have been granted, adversely
affect the rights of such employee under such option.
14. Miscellaneous
As used in the 1996 Plan:
(i) The "Fair Market Value" of a share of Common Stock on any day means:
(a) if the principal market for the Common Stock is a national securities
exchange or the National Association of Securities Dealers Automated Quotations
System ("NASDAQ), the closing sales price of the Common Stock on such day as
reported by such exchange or market system, or on a consolidated tape reflecting
transactions on such exchange or market system, or (b) if the principal market
for the Common Stock is not a national securities exchange and the Common Stock
is not quoted on NASDAQ, the mean between the highest bid and lowest asked
prices for the Common Stock on such day as reported by the National Quotation
Bureau, Inc.; provided that if clauses (a) and (b) of this paragraph are both
inapplicable, or if no trades have been made or no quotes are available for such
day, the Fair Market Value of the Common Stock shall be determined by the Board
of Directors or the Committee, as the case may be, shall be conclusive as to the
Fair Market Value of the Common Stock.
7
<PAGE>
(ii) "Subsidiary" means any corporation, fifty (50%) percent or more of the
voting stock of which is owned by the Company.
(b) The Board of Directors or the Committee, as the case may be, may
require, as a condition to the exercise of any options granted under the 1996
Plan, that to the extent required at the time of exercise, (i) the shares of
Common Stock reserved for purposes of the 1996 Plan shall be duly listed, upon
official notice of issuance, upon stock exchange(s) on which the Common Stock is
listed, (ii) a Registration Statement under the Securities Act of 1933, as
amended, with respect to such shares shall be effective, and/or (iii) the person
exercising such option deliver to the Company such documents, agreements and
investment and other representations as the Board of Directors or the Committee,
as the case may be, shall determine to be in the best interests of the Company.
(c) During the term of the 1996 Plan, the Board of Directors or the
Committee, as the case may be, in its discretion, may offer one or more option
holders the opportunity to surrender any or all unexpired options for
cancellation or replacement. If any options are so surrendered, the Board of
Directors or the Committee, as the case may be, may then grant new options to
such holders for the same or different numbers of shares at higher or lower
exercise prices than the surrendered options. Such new options may have a
different term and shall be subject to the provisions of the 1996 Plan the same
as any other option.
(d) Anything herein to the contrary notwithstanding, the Board of Directors
or the Committee, as the case may be, may, in their sole discretion, impose more
restrictive conditions on the exercise of an option granted pursuant to the 1996
Plan; however, any and all such conditions shall be specified in the option
agreement limiting and defining such option.
15. Compliance with SEC Regulations.
It is the Company's intent that the 1996 Plan comply in all respects with
Rule 16b-3 of the Act and any regulations promulgated thereunder. If any
provision of the 1996 Plan is later found not to be in compliance with said
Rule, the provisions shall be deemed null and void. All grants and exercises of
options under the 1996 Plan shall be executed in accordance with the
requirements of Section 16 of the Act, as amended, and any regulations
promulgated thereunder.
8
EMPLOYMENT AGREEMENT
AGREEMENT dated as of _______________, 1996 between
BRIGHTPOINT, INC., a Delaware corporation (the "Employer" or the "Company"), and
____________________________________ (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its
____________________________________________________ and to be assured of his
services as such on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to serve Employer for a five-year period commencing effective as of the
date of this Agreement (the "Effective Date") (such period being herein referred
to as the "Initial Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year"). After the Initial Term, this Agreement shall be renewable
automatically for successive one year periods (each such period being referred
to as a "Renewal Term"), unless, more than thirty days prior to the expiration
of the Initial Term or any Renewal Term, either the Employee or the Company give
written notice that employment will not be renewed ("Notice of Non-Renewal"),
whereupon (i) if the Employee gives the Notice of Non-Renewal, the term of the
Employee's employment shall terminate upon the expiration of the Initial Term or
the then current Renewal Term, as the case may be, or (ii) if the Company gives
the Notice of Non-Renewal, the term of the Employee's employment shall be for a
final five (5) year period (the "Final Renewal Term"), commencing effective at
the date of the Notice of Non-Renewal, unless sooner terminated pursuant to
Section 6 hereof.
2. Employee Duties.
A. During the term of this Agreement, the Employee shall have the duties
and responsibilities of ___________________________________________________ of
the Employer, reporting directly to the Board of Directors of the Employer (the
"Board"). It is understood that such duties and
<PAGE>
responsibilities shall be reasonably related to the Employee's position.
B. The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability, in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices or such other place as the Board shall
determine, although the Employee may be required to travel outside of the area
where the Company's principal executive offices are located in connection with
the business of the Company.
3. Compensation.
A. During the term of this Agreement, the Employer shall pay the Employee a
salary (the "Salary") at a rate of $200,000 per annum in respect of each
Employment Year, payable in equal installments bi-weekly, or at such other times
as may mutually be agreed upon between the Employer and the Employee. Such
Salary may be increased from time to time at the discretion of the Board.
B. In addition to the foregoing, the Employee shall be entitled to such
other cash bonuses and such other compensation in the form of stock, stock
options or other property or rights as may from time to time be awarded to him
by the Board during or in respect of his employment hereunder.
4. Benefits.
A. During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company may from time
to time institute during such period for its employees and for which the
Employee is eligible. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary or any other obligation payable to the Employee pursuant to
this Agreement.
B. During the term of this Agreement, the Employee will be entitled to the
number of paid holidays, personal days off, vacation days and sick leave days in
each calendar year as are determined by the Company from time to time. Such
vacation may be taken in the Employee's discretion with the prior approval of
the Employee, and at such time or times as are not inconsistent with the
reasonable business needs of the Company.
5. Travel Expenses. All travel and other expenses incident to the rendering
of services reasonably incurred on behalf of the Company by the Employee during
the term of this
-2-
<PAGE>
Agreement shall be paid by the Employer provided that such expenses are
preapproved by the President of the Company. If any such expenses are paid in
the first instance by the Employee, the Employer shall reimburse him therefor on
presentation of appropriate receipts for any such expenses.
6. Termination. Employee's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
6.1. Death. The Employee's employment under this Agreement shall
terminate upon his death.
6.2. Disability. If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been absent from his
duties under this Agreement for 150 calendar days during any calendar year,
the Employer may terminate the Employee's employment under this Agreement.
6.3. Cause. The Employer may terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement, the Employer
shall have "Cause" to terminate the Employee's employment under this
Agreement upon (a) the willful and continued failure by the Employee to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness) after demand for substantial performance is delivered by the
Employer, in writing, specifically identifying the manner in which the
Employer believes the Employee has not substantially performed his duties
and the Employee fails to perform as required within 15 days after such
demand is made, (b) the willful engaging by the Employee in criminal
misconduct (including embezzlement and criminal fraud) which is materially
injurious to the Employer, monetarily or otherwise or (c) the conviction of
the Employee of a felony. For purposes of this paragraph, no act, or
failure to act, on the Employee's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of
the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Employee a copy of a resolution, duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board (other than the
Employee) at meeting of the Board called and held for such purpose (after
reasonable written notice to the Employee and an opportunity for him, together
with his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, the Employee was guilty of conduct set forth above in
-3-
<PAGE>
clause (a), (b) or (c), and specifying the particulars thereof in detail.
6.4. Termination by the Employee for Good Reason, Upon a Change of
Control or Because of Ill Health. The Employee may terminate his employment
under this Agreement (a) for Good Reason (as hereinafter defined), (b) at
any time within six months after a Change of Control, or (c) if his health
should become impaired to any extent that makes the continued performance
of his duties under this Agreement hazardous to his physical or mental
health or his life, provided that, in the latter case, the Employee shall
have furnished the Employer with a written statement from a qualified
doctor to such effect and provided, further, that at the Employer's request
and expense the Employee shall submit to an examination by a doctor
selected by the Employer and such doctor shall have concurred in the
conclusion of the Employee's doctor.
6.4.1. Good Reason. For purposes of this Agreement, "Good Reason"
shall mean (a) any assignment to the Employee of any duties or
reporting obligations other than those contemplated by, or any
limitation of the powers of the Employee in any respect not
contemplated by, this Agreement, (b) failure by the Employer to comply
with its material obligations and agreements contained in this
Agreement, or (c) failure of the Employer to obtain the assumption of
the agreement to perform this Agreement by any successor as
contemplated in Section 9(g) of this Agreement. With respect to the
matters set forth in clauses (a), (b) and (c) of this paragraph, the
Employee must give the Employer 30 days prior written notice of his
intent to terminate this Agreement as a result of any breach or
alleged breach of the applicable provision and the Employer shall have
the right to cure any such breach or alleged breach within such 30 day
period.
6.4.2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to occur, unless previously
consented to in writing by the Employee, upon (a) the actual
acquisition or the execution of an agreement to acquire 20% or more of
the voting securities of the Employer by any person or entity not
affiliated with the Employee (other than pursuant to a bona fide
underwriting agreement relating to a public distribution of securities
of the Employer), (b) the commencement of a tender or exchange offer
for more than 20% of the voting securities of the Employer by any
person or entity not affiliated with the Employee, (c) the
commencement of a proxy contest against the management for the
election of a majority of the Board of the Employer if the group
conducting the proxy contest owns, has or gains the power to vote at
least 20% of the voting securities of the Employer, (d) a vote by the
Board to merge, consolidate, sell all or substantially all of the
assets of the Employer to any person or entity not affiliated with the
Employee, or (e) the election of directors constituting a
-4-
<PAGE>
majority of the Board of Directors who have not been nominated or
approved by the Employee.
7. Notice of Termination.
Any termination of the Employee's employment by the Employer or by the
Employee (other than termination by reason of the Employee's death) shall be
communicated by written Notice of Termination to the other party of this
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
8. Date of Termination.
The "Date of Termination" shall mean (a) if the Employee's employment is
terminated by his death, the date of his death, (b) if the Employee's employment
is terminated pursuant to Section 6.2 above, the date on which the Notice of
Termination is given, (c) if the Employee's employment is terminated pursuant to
Section 6.3 above, the date specified on the Notice of Termination after the
expiration of any cure periods and (d) if the Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given after the expiration of any cure periods.
9. Compensation Upon Termination or During Disability.
(a) If the Employee's employment shall be terminated by reason of his
death, the Employer shall pay to such person as he shall designate in notice
filed with the Employer, or if no such person shall be designated, to his estate
as a lump sum benefit, his full Salary to the date of his death in addition to
any payments to the Employee's spouse, beneficiaries or estate may be entitled
to receive pursuant to any pension or employee benefit plan or life insurance
policy or similar plan or policy then maintained by the Employer, and such
payments shall, assuming the Employer is in compliance with the provisions of
this Agreement, fully discharge the Employer's obligations with respect to
Section 3 of this Agreement, but all other obligations of the Employer under
this Agreement, including the obligations to indemnify, defend and hold harmless
the Employee, shall remain in effect.
(b) During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Employee shall continue to receive his Salary until the Employee's employment is
terminated pursuant to Section 6.2 of this Agreement, or until the Employee
terminates his employment pursuant to Section 6.4(a) of this
-5-
<PAGE>
Agreement, whichever first occurs. After termination, the Employee shall be
paid, in equal monthly installments, 100% of his Salary, at the rate in effect
at the time Notice of Termination is given, for one year, and thereafter for one
additional year at an annual rate equal to 50% of the Salary which would have
been in effect under this Agreement, plus, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Employer. To the
extent physically and mentally capable of so doing without potentially impairing
or damaging his health, the Employee shall provide consulting services to the
Employer during the period that he is receiving payments pursuant to this
Section 9(b).
(c) If the Employee's employment shall be terminated for Cause, the
Employer shall pay the Employee his full Salary through the Date of Termination,
at the rate in effect at the time Notice of Termination is given, and the
Employer shall, assuming the Employer is in compliance with the provisions of
this Agreement, have no further obligations with respect to Section 3 of this
Agreement, but all other obligations of the Employer under this Agreement,
including the obligations to indemnify, defend and hold harmless the Employee,
shall remain in effect.
(d) If (A) in breach of this Agreement, the Employer shall terminate the
Employee's employment other than pursuant to Sections 6.2 or 6.3 hereof (it
being understood that a purported termination pursuant to Section 6.2 or 6.3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Employer in breach of this Agreement), including as a
result of a Change of Control, and/or (B) the Employee shall terminate his
employment for Good Reason or at any time within six months after a Change of
Control, then the Employer shall pay to the Employee:
(i) his full Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(ii) for periods subsequent to the Date of Termination (in lieu of any
further payments pursuant to Section 3 of this Agreement), Severance Pay
(as hereinafter defined), payable on the first day following the Date of
Termination, as follows:
(A) if the Employee, without Good Reason, terminates his
employment at any time within six months after a Change of Control, or
if, prior to and not as a result of a Change of Control, the
Employee's employment is terminated either by the Employee for Good
Reason or by the Employer other than pursuant to Sections 6.2 or 6.3
hereof, a lump sum amount equal to the highest of (a) $1,000,000 or
(b) total compensation (including the value of all perquisites, such
as health and life
-6-
<PAGE>
insurance and car allowance, etc.) received or earned by the Employee
from the Employer during the twelve months prior to the Termination
Date, multiplied by the fraction the numerator of which is the number
of months remaining in the unexpired of this Agreement and the
denominator of which is 12, or
(B) if after or as a result of a Change of Control, the
Employee's employment is terminated either by the Employee for Good
Reason or by the Employer other than pursuant to Sections 6.2 or 6.3
hereof, a lump sum amount equal to ten (10) times the total
compensation, (including the value of all perquisites, such as health
and life insurance and car allowance, etc.) and the value of all stock
options, received or earned by the Employee during the twelve (12)
months prior to such Date of Termination (in case of either (ii)(A) or
(ii)(B), "Severance Pay"); and
(iii) all other damages to which the Employee may be entitled as
result of the termination of his employment under this Agreement, including
all legal fees and expenses incurred by him in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement.
(e) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 9 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 9 be reduced by
any compensation earned by the Employee as the result of employment by another
employer or business or by profits earned by the Employee from any other source
at any time before and after the Date of Termination.
(f) The Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Employer, by agreement in form and substance
satisfactory to the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would be
required to perform it if no such succession had taken place. Failure of the
Employer to obtain such Agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Employer in the same amount and on the same terms as he
would be entitled to hereunder if he terminated his employment for Good Reason,
except for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Employer" shall mean the Employer and any successor to its
business and/or assets which executes the Agreement or which otherwise becomes
bound by the terms and conditions of this Agreement by operation of law.
-7-
<PAGE>
10. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company. The
term "confidential information" shall mean any and all information (verbal and
written) relating to the Company or any of its affiliates, or any of their
respective activities, other than such information which can be shown by the
Employee to be in the public domain (such information not being deemed to be in
the public domain merely because it is embraced by more general information
which is in the public domain) other than as the result of breach of the
provisions of this Section 10(a), including, but not limited to, information
relating to: trade secrets, personnel lists, financial information, research
projects, services used, pricing, customers, customer lists and prospects,
product sourcing, marketing and selling and servicing. The Employee agrees that
he will not, during or for a period of two years after the termination of
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Company acquired by the Employee
during his employment by Employer, without the prior written consent of
Employer; provided, however, that the Employee understands that Employee will be
prohibited from misappropriating any trade secret (as defined for purposes of
Indiana law) at any time during or after the termination of employment.
(b) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of two (2) years following such employment, directly
or indirectly, within any county (or adjacent county) in any State within the
United States or territory outside the United States in which the Company is
engaged in business during the period of the Employee's employment or on the
date of termination of the Employee's employment, engage, have an interest in or
render any services to any business (whether as owner, manager, operator,
licensor, licensee, lender, partner, stockholder, joint venturer, employee,
consultant or otherwise) competitive with the Company's business activities.
(c) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of two (2) years following such employment, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Company's business activities including, without
limitation, the solicitations of the Company's customers, or persons listed on
the personnel lists of the Company. At no time during the term of this
Agreement, or thereafter shall the
-8-
<PAGE>
Employee directly or indirectly, disparage the commercial, business or financial
reputation of the Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 10(b) and
(c) above shall serve as a prohibition against him, during the period referred
to therein, directly or indirectly, hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee or customer who has
been previously contacted by either a representative of the Company, including
the Employee, (but only those suppliers existing during the time of the
Employee's employment by the Company, or at the termination of his employment),
to discontinue or alter his, her or its relationship with the Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company
which are in the possession of the Employee including all copies thereof, shall
be promptly returned to the Company.
(f) (i) The Employee agrees that all processes, technologies and inventions
("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, conceived, developed, invented or made
by him during his employment by Employer shall belong to the Company, provided
that such Inventions grew out of the Employee's work with the Company are
related in any manner to the business (commercial or experimental) of the
Company or are conceived or made on the Company's time or with the use of the
Company's facilities or materials. The Employee shall further: (a) promptly
disclose such Inventions to the Company; (b) assign to the Company, without
additional compensation, all patent and other rights to such Inventions for the
United States and foreign countries; (c) sign all papers necessary to carry out
the foregoing; and (d) give testimony in support of his inventorship;
(ii) If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Employee within
two years after the termination of his employment by the Company, it is to
be presumed that the Invention was conceived or made during the period of
the Employee's employment by the Company; and
(iii) The Employee agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Company in
writing prior to the date hereof.
-9-
<PAGE>
(g) The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and during the term of the
Employee's employment hereunder, free and clear of any claims by the Employee
(or anyone claiming under the Employee) of any kind or character whatsoever
(other than the Employee's right to receive payments hereunder). The Employee
shall, at the request of the Company, execute such assignments, certificates or
other instruments as the Company may from time to time deem necessary or
desirable to evidence, establish, maintain, perfect, protect, enforce or defend
its right, or title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 10, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
(i) The parties hereto hereby acknowledge that, in addition to any other
remedies the Company may have under Section 7(h) hereof, the Company shall have
the right and remedy to require the Employee to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the Employee as the
result of any transactions constituting a breach of any of the provisions of
Section 10, and the Employee hereby agrees to account for any pay over such
Benefits to the Company.
(j) Each of the rights and remedies enumerated in Section 10(h) and 10(i)
shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
(k) If any provision contained in this Section 10 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
(l) If any provision contained in this Section 10 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
-10-
<PAGE>
restriction shall thereafter be enforceable as contemplated hereby.
(m) It is the intent of the parties hereto that the covenants contained in
this Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Company). Accordingly, it is hereby agreed
that if any of the provisions of this Section 10 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
11. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an employee,
officer or director of the Company, whether or not he continues to be such an
employee, officer or director at the time of incurring such expenses, except
insofar as such indemnification is prohibited by law. Such expenses shall
include, without limitation, the fees and disbursements of attorneys, amounts of
judgments and amounts of any settlements, provided that such expenses are agreed
to in advance by the Employer. The foregoing indemnification obligation is
independent of any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws, and shall apply with respect to any matters
attributable to periods prior to the Effective Date, and to matters attributable
to his employment hereunder, without regard to when asserted.
12. General. This Agreement is further governed by the following
provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, sent by telecopy (receipt
confirmed) or mailed by certified mail, return receipt requested, to be
delivered at such address as is indicated below, or at such other address
or to the attention of such other person as the recipient has specified by
prior written notice to the sending party. Notice shall be
-11-
<PAGE>
effective when so personally delivered, one business day after being sent
by telecopy or five days after being mailed.
To the Employer:
Brightpoint, Inc.
6402 Corporate Drive
Indianapolis, IN 46278
Attention: J. Mark Howell
To the Employee:
------------------------
------------------------
------------------------
With, in either case, a copy in the same manner to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification or termination of
this Agreement will be effective only if it is in writing signed by the
party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana. Employee agrees to and
hereby does submit to jurisdiction before any state or federal court of
record in Marion County, Indiana, or in the state and county in which such
violation may occur, at Employer's election.
-12-
<PAGE>
(e) Warranty. Employee hereby warrants and represents as follows:
(i) That the execution of this Agreement and the discharge of
Employee's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between Employee and any
other party or parties.
(ii) Employee has ideas, information and know-how relating to the
type of business conducted by Employer, and Employee's disclosure of
such ideas, information and know-how to Employer will not conflict
with or violate the rights of any third party or parties.
(f) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
(g) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
BRIGHTPOINT, INC.
By:
-------------------------
Name: J. Mark Howell
Title: President
-------------------------
-13-
EMPLOYMENT AGREEMENT
AGREEMENT dated as of _______ ___, 199_ between BRIGHTPOINT, INC., a
Delaware corporation (the "Employer" or the "Company"), and
______________________________ (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its
_____________________________________________ to be assured of his services as
such on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
I. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to serve Employer for a three-year period commencing effective as of the
date of this Agreement (the "Effective Date") (such period being herein referred
to as the "Initial Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year"). After the Initial Term and on the last day of any Employment
Year thereafter, this Agreement shall be automatically renewed for successive
one year periods (each such period being referred to as a "Renewal Term"),
unless, more than ninety (90) days prior to the expiration of the Initial Term
or any Renewal Term, either the Executive or the Company gives written notice
that employment will not be renewed ("Notice of Non-Renewal"), whereupon (i) if
the Executive gives the Notice of Non-Renewal, the term of the Executive's
employment shall terminate upon the expiration of the Initial Term or the then
current Renewal Term, as the case may be, or (ii) if the Company gives the
Notice of Non-Renewal or terminates this Agreement without Cause, the term of
the Executive's employment shall be for a final three (3) year period (the
"Final Renewal Term"), commencing effective at the date of the Notice of
Non-Renewal, unless sooner terminated pursuant to Section 6 hereof.
<PAGE>
II. Employee Duties.
A. During the term of this Agreement, the Employee shall have the duties
and responsibilities of attached hereto as Exhibit A, reporting directly to the
President of Employer and the Board of Directors of the Employer (the "Board").
It is understood that such duties and responsibilities shall be reasonably
related to the Employee's position.
B. The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability, in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices, although the Employee may be required
to travel outside of the area where the Company's principal executive offices
are located in connection with the business of the Company.
III. Compensation.
A. During the term of this Agreement, the Employer shall pay the Employee a
salary (the "Salary") at a rate of $125,000 per annum in respect of each
Employment Year, payable in equal installments bi-weekly, or at such other times
as may mutually be agreed upon between the Employer and the Employee. Such
Salary may be increased from time to time at the discretion of the Board.
B. In addition to the foregoing, the Employee shall be entitled to such
other cash bonuses and such other compensation in the form of stock, stock
options or other property or rights as may from time to time be awarded to him
by the Board during or in respect of his employment hereunder.
IV. Benefits.
A. During the term of this Agreement, the Employee shall have the right to
receive or participate in all existing and future benefits and plans which the
Company may from time to time institute during such period for its executive
officers (the "Executive Officers") and for which the Employee is eligible.
Nothing paid to the Employee under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary or
any other obligation payable to the Employee pursuant to this Agreement.
B. During the term of this Agreement, the Employee will be entitled to the
number of paid holidays, personal days off, paid vacation days and sick leave
days in each calendar year as are determined by the Company from time to time.
Such paid vacation may be taken in the Employee's discretion with the prior
approval of the Employer, and at such time or times as
-2-
<PAGE>
are not inconsistent with the reasonable business needs of the Company.
V. Travel Expenses. All travel and other expenses incident to the rendering
of services reasonably incurred on behalf of the Company by the Employee during
the term of this Agreement shall be paid by the Employer provided that such
expenses are incurred in accordance with the Company's policies. If any such
expenses are paid in the first instance by the Employee, the Employer shall
reimburse him therefor on presentation of appropriate receipts for any such
expenses.
VI. Termination. Employee's employment under this Agreement may be
terminated without any breach of this Agreement only on the following
circumstances:
6.1. Death. The Employee's employment under this Agreement shall
terminate upon his death.
6.2. Disability. If, as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have been absent from his
duties under this Agreement for 180 consecutive calendar days during any
calendar year, the Employer may terminate the Employee's employment under
this Agreement.
6.3. Cause. The Employer may terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement, the Employer
shall have "Cause" to terminate the Employee's employment under this
Agreement upon (a) the willful and continued failure by the Employee to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness) after demand for substantial performance is delivered by the
Employer, in writing, specifically identifying the manner in which the
Employer believes the Employee has not substantially performed his duties
and the Employee fails to perform as required within 30 days after such
demand is made, (b) the willful engaging by the Employee in criminal
misconduct (including embezzlement and criminal fraud) which is materially
injurious to the Employer, monetarily or otherwise or (c) the conviction of
the Employee of a felony and the expiration of our time to appeal such
conviction. For purposes of this paragraph, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done, or omitted
to be done, by him not in good faith and without reasonable belief that his
action or omission was in the best interest of the Employer.
Notwithstanding the foregoing, the Employee shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Employee a copy of a resolution, duly adopted by the affirmative vote of not
less than
-3-
<PAGE>
three-quarters of the entire membership of the Board (other than the Employee)
at meeting of the Board called and held for such purpose (after reasonable
written notice to the Employee and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, the Employee was guilty of conduct set forth above in clause (a),
(b) or (c), and specifying the particulars thereof in detail.
6.4. Termination by the Employee for Good Reason, Upon a Change of
Control or Because of Ill Health. The Employee may terminate his employment
under this Agreement (a) for Good Reason (as hereinafter defined), (b) at
any time within twelve months after a Change of Control, or (c) if his
health should become impaired to any extent that makes the continued
performance of his duties under this Agreement hazardous to his physical or
mental health or his life, provided that, in the latter case, the Employee
shall have furnished the Employer with a written statement from a qualified
doctor to such effect and provided, further, that at the Employer's request
and expense the Employee shall submit to an examination by a doctor
selected by the Employer and such doctor shall have concurred in the
conclusion of the Employee's doctor; provided if the Employer's doctor does
not concur, the Employee's and Employer's doctors shall select a third
physician whose determination shall be binding.
6.4.1. Good Reason. For purposes of this Agreement, "Good Reason"
shall mean (a) any assignment to the Employee of any duties or
reporting obligations other than those contemplated by, or any
limitation of the powers of the Employee in any respect not
contemplated by, this Agreement, (b) failure by the Employer to comply
with its obligations and agreements contained in this Agreement, (c)
failure of the Employer to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in Section
9(g) of this Agreement. With respect to the matters set forth in
clauses (a), (b) and (c) of this paragraph, the Employee must give the
Employer 30 days prior written notice of his intent to terminate this
Agreement as a result of any breach or alleged breach of the
applicable provision and the Employer shall have the right to cure any
such breach or alleged breach within such 30 day period.
6.4.2. Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to occur, unless previously
consented to in writing by the Employee, upon (a) the actual
acquisition or the execution of an agreement to acquire 15% or more of
the voting securities of the Employer by any person or entity not
affiliated with the Employee (other than pursuant to a bona fide
underwriting agreement relating to a public distribution of securities
of the Employer), (b) the commencement of a tender or exchange offer
for more than 15% of the voting securities of the Employer by any
person or entity not
-4-
<PAGE>
affiliated with the Employee, (c) the commencement of a proxy contest
against the management for the election of a majority of the Board of
the Employer if the group conducting the proxy contest owns, has or
gains the power to vote at least 15% of the voting securities of the
Employer, (d) a vote by the Board to merge, consolidate, sell all or
substantially all of the assets of the Employer to any person or
entity not affiliated with the Employee, or (e) the election of
directors constituting a majority of the Board of Directors who have
not been nominated or approved by the Employer.
VII. Notice of Termination.
Any termination of the Employee's employment by the Employer or by the
Employee (other than termination by reason of the Employee's death) shall be
communicated by written Notice of Termination to the other party of this
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
VIII. Date of Termination.
The "Date of Termination" shall mean (a) if the Employee's employment is
terminated by his death, the date of his death, (b) if the Employee's employment
is terminated pursuant to Section 6.2 above, the date on which the Notice of
Termination is given, (c) if the Employee's employment is terminated pursuant to
Section 6.3 above, the date specified on the Notice of Termination after the
expiration of any cure periods and (d) if the Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given after the expiration of any cure periods.
IX. Compensation Upon Termination or During Disability.
(a) If the Employee's employment shall be terminated by reason of his
death, the Employer shall pay to such person as he shall designate in writing
filed with the Employer, or if no such person shall be designated, to his estate
as a lump sum benefit, his full Salary to the date of his death in addition to
any payments to the Employee's spouse, beneficiaries or estate may be entitled
to receive pursuant to any pension or employee benefit plan or life insurance
policy or similar plan or policy then maintained by the Employer, and such
payments shall, assuming the Employer is in compliance with the provisions of
this Agreement, fully discharge the Employer's obligations with respect to
Section 3 of this Agreement, but all other obligations of the Employer under
this Agreement, including the obligations
-5-
<PAGE>
to indemnify, defend and hold harmless the Employee, shall remain in effect.
(b) During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Employee shall continue to receive his Salary until the Employee's employment is
terminated pursuant to Section 6.2 of this Agreement, or until the Employee
terminates his employment pursuant to Section 6.4(a) of this Agreement,
whichever first occurs. After termination, the Employee shall be paid, in equal
monthly installments, 100% of his Salary, at the rate in effect at the time
Notice of Termination is given, for one year, and thereafter for one additional
year at an annual rate equal to 50% of the Salary which would have been in
effect under this Agreement, plus, in each case, any disability payments
otherwise payable by or pursuant to plans provided by the Employer to its
executive officers. To the extent physically and mentally capable of so doing
without potentially impairing or damaging his health, the Employee shall provide
consulting services to the Employer during the period that he is receiving
payments pursuant to this Section 9(b).
(c) If the Employee's employment shall be terminated for Cause or
terminated by the Employee without Good Reason prior to or more than twelve
months after, a Change of Control, the Employer shall pay the Employee his full
Salary through the Date of Termination, at the rate in effect at the time Notice
of Termination is given, and the Employer shall, assuming the Employer is in
compliance with the provisions of this Agreement, have no further obligations
with respect to Section 3 of this Agreement, but all other obligations of the
Employer under this Agreement, including the obligations to indemnify, defend
and hold harmless the Employee, shall remain in effect.
(d) If (A) in breach of this Agreement, the Employer shall terminate the
Employee's employment other than pursuant to Sections 6.2 or 6.3 hereof (it
being understood that a purported termination pursuant to Section 6.2 or 6.3
hereof which is disputed and finally determined not to have been proper shall be
a termination by the Employer in breach of this Agreement), including as a
result of a Change of Control, and/or (B) the Employee shall terminate his
employment for Good Reason or at any time within twelve months after a Change of
Control, then the Employer shall pay to the Employee:
(i) his full Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(ii) for periods subsequent to the Date of Termination (in lieu of any
further payments pursuant to Section 3 of this Agreement), Severance Pay
(as hereinafter defined),
-6-
<PAGE>
payable on the first day following the Date of Termination, as follows:
(A) if (i) the Employee, with or without Good Reason, terminates
his employment at any time within twelve months after a Change of
Control; or (ii) the Employee's employment is terminated either by the
Employee for Good Reason or by the Employer other than pursuant to
Sections 6.2 or 6.3 hereof, a lump sum amount equal to the highest of
(x) $375,000 or (y) three (3) time total compensation (including value
of the stock options granted during such period) earned by the
Employee during the twelve month period prior to such Date of
Termination ("Severance Pay"); and
(iii) all other damages to which the Employee may be entitled as a
matter of law or equity as result of the termination of his employment
under this Agreement, including all costs and expense and expenses incurred
by him (including attorneys fees) in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement.
(e) In the event of a termination of this Agreement by the Employee as a
result of a Change of Control pursuant to which the Severance Pay is as set
forth above in Section 9(d), the Severance Pay shall be the average taxable
compensation of the Employee for the five taxable years prior to such
termination or such higher amount as may be permitted by the Internal Revenue
Service to compute "base amount" for purposes of Section 280G of the Internal
Revenue Code of 1986 (as amended) multiplied by three (but in no event may this
amount exceed Severance Pay as provided by Section 9(d) of this Agreement unless
agreed to by the Employee). In the event of a termination of this Agreement by
the Employee as a result of a Change of Control the amount payable pursuant to
Section 9(d) shall be increased so that after payment of any excise tax the
Employee shall receive the amount specified in Section 9(d). The Employee shall
be entitled to initially receive the entire amount provided for in Section 9(d)
and shall not be required to repay to the Employer any amount which is
ultimately and finally determined by the Internal Revenue Service (or an
appropriate court) to have been in excess of the permitted amount and the
Employer agrees to use its best efforts to support the Employee's position that
such payments are not subject to excise tax in any dealings with the Internal
Revenue Service any in any appropriate legal proceedings.
(f) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 9 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 9 be reduced by
any compensation earned by the Employee as the result of employment by another
employer or business or by profits earned by the
-7-
<PAGE>
Employee from any other source at any time before and after the Date of
Termination.
(g) The Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Employer, by agreement in form and substance
satisfactory to the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would be
required to perform it if no such succession had taken place. Failure of the
Employer to obtain such Agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Employer in the same amount and on the same terms as he
would be entitled to under Section 9(d)(ii)(B) if he terminated his employment
for Good Reason, except for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Employer" shall mean the Employer and
any successor to its business and/or assets which executes the Agreement or
which otherwise becomes bound by the terms and conditions of this Agreement by
operation of law.
X. Confidentiality; Noncompetition.
A. The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company. The
term "confidential information" shall mean any and all information (verbal and
written) relating to the Company or any of its affiliates, or any of their
respective activities, other than such information which can be shown by the
Employee to be in the public domain (such information not being deemed to be in
the public domain merely because it is embraced by more general information
which is in the public domain) other than as the result of breach of the
provisions of this Section 10(a), including, but not limited to, information
relating to: trade secrets, personnel lists, financial information, research
projects, services used, pricing, customers, customer lists and prospects,
product sourcing, marketing and selling and servicing. The Employee agrees that
he will not, during or for a period of two years after the termination of
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Company acquired by the Employee
during his employment by Employer, without the prior written consent of
Employer; provided, however, that the Employee understands that Employee will be
prohibited from misappropriating any trade secret (as defined for purposes of
Indiana law) at any time during or after the termination of employment.
-8-
<PAGE>
B. The Employee hereby agrees that he shall not, during the period of his
employment and for a period of two (2) years following such employment, directly
or indirectly, within any county (or adjacent county) in any State within the
United States or territory outside the United States in which the Company is
engaged in business during the period of the Employee's employment or on the
date of termination of the Employee's employment, engage, have an interest in or
render any services to any business (whether as owner, manager, operator,
licensor, licensee, lender, partner, stockholder, joint venturer, employee,
consultant or otherwise) competitive with the Company's principal business
activities. Notwithstanding the foregoing, Employee shall be permitted to own
(as a passive investment) not more than 5% of any class of securities which is
publicly traded; provided, however that said 5% limitation shall apply to the
aggregate holdings or Employee and those of all other persons and entities with
whom Employee has agreed to act for the purpose of acquiring, holding, voting or
disposing of such securities.
C. The Employee hereby agrees that he shall not, during the period of his
employment and for a period of two (2) years following such employment, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Company's business activities including, without
limitation, the solicitations of the Company's customers, or persons listed on
the personnel lists of the Company. At no time during the term of this
Agreement, or thereafter shall the Employee directly or indirectly, disparage
the commercial, business or financial reputation of the Company.
D. For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 10(b) and
(c) above shall serve as a prohibition against him, during the period referred
to therein, directly or indirectly, hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee or customer who has
been previously contacted by either a representative of the Company, including
the Employee, (but only those suppliers existing during the time of the
Employee's employment by the Company, or at the termination of his employment),
to discontinue or alter his, her or its relationship with the Company.
E. Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company
which are in the possession of the Employee including all copies thereof, shall
be promptly returned to the Company.
-9-
<PAGE>
F. 1. The Employee agrees that all processes, technologies and inventions
("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, conceived, developed, invented or made
by him during his employment by Employer shall belong to the Company, provided
that such Inventions grew out of the Employee's work with the Company are
related in any manner to the business (commercial or experimental) of the
Company or are conceived or made on the Company's time or with the use of the
Company's facilities or materials. The Employee shall further: (a) promptly
disclose such Inventions to the Company; (b) assign to the Company, without
additional compensation, all patent and other rights to such Inventions for the
United States and foreign countries; (c) sign all papers necessary to carry out
the foregoing; and (d) give testimony in support of his inventorship;
2. If any Invention is described in a patent application or is disclosed to
third parties, directly or indirectly, by the Employee within two years after
the termination of his employment by the Company, it is to be presumed that the
Invention was conceived or made during the period of the Employee's employment
by the Company; and
3. The Employee agrees that he will not assert any rights to any Invention
as having been made or acquired by him prior to the date of this Agreement,
except for Inventions, if any, disclosed to the Company in writing prior to the
date hereof.
G. The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and during the term of the
Employee's employment hereunder, free and clear of any claims by the Employee
(or anyone claiming under the Employee) of any kind or character whatsoever
(other than the Employee's right to receive payments hereunder). The Employee
shall, at the request of the Company, execute such assignments, certificates or
other instruments as the Company may from time to time deem necessary or
desirable to evidence, establish, maintain, perfect, protect, enforce or defend
its right, or title and interest in or to any such properties.
H. The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 10, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
-10-
<PAGE>
I. The parties hereto hereby acknowledge that, in addition to any other
remedies the Company may have under Section 7(h) hereof, the Company shall have
the right and remedy to require the Employee to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the Employee as the
result of any transactions constituting a breach of any of the provisions of
Section 10, and the Employee hereby agrees to account for any pay over such
Benefits to the Company.
J. Each of the rights and remedies enumerated in Section 10(h) and 10(i)
shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
K. If any provision contained in this Section 10 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
L. If any provision contained in this Section 10 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
restriction shall thereafter be enforceable as contemplated hereby.
M. It is the intent of the parties hereto that the covenants contained in
this Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Company). Accordingly, it is hereby agreed
that if any of the provisions of this Section 10 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
XI. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reason- ably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either
-11-
<PAGE>
case by reason of or relating to his being or having been an employee, officer
or director of the Company, whether or not he continues to be such an employee,
officer or director at the time of incurring such expenses, except insofar as
such indemnification is prohibited by law. Such expenses shall include, without
limitation, the fees and disbursements of attorneys, amounts of judgments and
amounts of any settlements, provided that such expenses are agreed to in advance
by the Employer. The foregoing indemnification obligation is independent of any
similar obligation provided in the Employer's Certificate of Incorporation or
Bylaws, and shall apply with respect to any matters attributable to periods
prior to the Effective Date, and to matters attributable to his employment
hereunder, without regard to when asserted.
XII. General. This Agreement is further governed by the following
provisions:
A. Notices. All notices relating to this Agreement shall be in writing
and shall be either personally delivered, sent by telecopy (receipt
confirmed) or mailed by certified mail, return receipt requested, to be
delivered at such address as is indicated below, or at such other address
or to the attention of such other person as the recipient has specified by
prior written notice to the sending party. Notice shall be effective when
so personally delivered, one business day after being sent by telecopy or
five days after being mailed.
To the Employer:
Brightpoint, Inc.
6402 Corporate Drive
Indianapolis, Indiana 46278
To the Employee:
----------------------
With, in either case, a copy in the same manner to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
B. Parties in Interest. Employee may not delegate his duties or assign
his rights hereunder. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
C. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee
-12-
<PAGE>
by the Employer and contains all of the covenants and agreements between
the parties with respect to such employment in any manner whatsoever. Any
modification or termination of this Agreement will be effective only if it
is in writing signed by the party to be charged.
D. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana. Employee agrees to and
hereby does submit to jurisdiction before any state or federal court of
record in Marion County, Indiana, or in the state and county in which such
violation may occur, at Employer's election.
E. Warranty. Employee hereby warrants and represents as follows:
1. That the execution of this Agreement and the discharge of
Employee's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between Employee and any
other party or parties.
2. Employee has ideas, information and know-how relating to the
type of business conducted by Employer, and Employee's disclosure of
such ideas, information and know-how to Employer will not conflict
with or violate the rights of any third party or parties.
F. Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
G. Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
BRIGHTPOINT, INC.
By:
--------------------------------
Name: J. Mark Howell
Title: President
--------------------------------
-14-
THIRD AMENDMENT TO CREDIT AGREEMENT
BRIGHTPOINT, INC., a Delaware corporation, (the "Company"), the banks
listed on the signature pages hereof (each individually a "Bank" and
collectively the "Banks") and BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a
national banking association with its principal office in Indianapolis, Indiana,
as agent for the Banks (in such capacity the "Agent" and in its individual
capacity "Bank One") agree as follows:
1. CONTEXT. This agreement is made in the context of the following
agreed state of facts:
a. The Company, the Banks and the Agent are parties to a Credit
Agreement dated June 13, 1995, as amended by First Amendment to
Credit Agreement dated as of September 15, 1995, and Second
Amendment to Credit Agreement dated as of January 19, 1996
(collectively, the Agreement").
b. The Company has requested that the Banks increase to
$75,000,000.00 the maximum amount available to the Company under
the terms of the Agreement and extend the Revolving Loan Maturity
Date from May 29, 1998, to May 28, 1999.
c. The Company has further requested that the Banks waive the
Company's noncompliance with the terms of the Agreement related
to the creation of a wholly-owned Subsidiary, Brightpoint
Acquisition, Inc., a Delaware corporation ("Acquisition"), as an
incident of the acquisition to which the Banks consented in that
certain letter dated February 1, 1996 (the "Allied transaction."
d. The Company has further requested that the Banks waive the
Company's noncompliance with the provisions of the Agreement
including, but not limited to Section 6.e, related to the
creation of a wholly-owned Subsidiary, Brightpoint International
Ltd., a Delaware corporation ("International"), and that the
Banks consent to the acquisition of certain assets and properties
of Marriott Investment & Trade Inc., a British Virgin Island
company, Safkong Holdings Limited, a private company limited by
shares organized in Hong Kong under The Companies Ordinance,
Technology Resources International Limited, a private company
limited by shares organized in Hong Kong under The Companies
Ordinance, and each of Dana Marlin and John Michael
Maclean-Arnott, individuals residing in Hong Kong, pursuant to
the terms of the Shareholder and Asset Purchase Agreement, a copy
of which agreement is attached as Exhibit "A" to this Third
Amendment.
e. The Banks have agreed to such requests, subject to certain terms
and conditions, and the parties have executed this document (this
"Third Amendment") to give effect to their agreement.
2. DEFINITIONS. Terms used in this Third Amendment with their initial
letters capitalized are used as defined in the Agreement, unless otherwise
defined herein. Section 1 of the Agreement is amended, as follows:
a. Amended Definitions. The definitions of the following terms set
out in Section 1 are hereby amended and restated in their
entireties as follows:
o "Applicable Rate" means any of the Applicable Unused Fee
Rate, the Applicable Commission Rate, the Applicable Prime
Spread or the Applicable LIBOR Spread, as the context
requires, and when used in the plural form refers
collectively to all of the Applicable Unused Fee Rate, the
Applicable Commission Rate, the Applicable Prime Spread and
the Applicable LIBOR Spread. The Applicable Rate shall be
determined by reference to the ratio of the Company's Funded
Debt to Capital in accordance with the following tables:
Ratio of Funded Applicable Applicable
Debt to Capital Prime Spread LIBOR Spread
--------------- ------------ ------------
.55 to 1.0 or greater 0.00% 1.75%
.45 to 1.0 or
greater but less
than .55 to 1.0 (.25%) 1.50%
.40 to 1.0 or
greater but less
than .45 to 1.0 (.50%) 1.25%
.35 to 1.0 or
greater but less
than .40 to 1.0 (.75%) 1.00%
less than .35 to 1.0 (1.00%) .75%
1
<PAGE>
Applicable
Ratio of Funded Applicable Commission
Debt to Capital Unused Fee Rate Rate
--------------- --------------- -----------
.55 to 1.0 or greater .25% 1.00%
.45 to 1.0 or
greater but less
than .55 to 1.0 .20% .875%
.40 to 1.0 or
greater but less
than .45 to 1.0 .15% .75%
.35 to 1.0 or
greater but less
than .40 to 1.0 .15% .75%
less than .35 to 1.0 .125% .75%
The initial Applicable Rates shall be as shown in the bottom
spread of the foregoing tables. Hereafter, the Applicable
Rates shall be determined on the basis of the financial
statements of the Company dated as of the month ending each
fiscal quarter furnished to the Banks pursuant to the
requirements of Section 5.b(ii), with prospective effect for
the following fiscal quarter. Interest will accrue and be
payable, and fees and commissions will be calculated and be
payable, in any fiscal quarter on the basis of the
Applicable Rates in effect during the preceding fiscal
quarter until an adjustment is made under the provisions of
this subsection. The Applicable Rates shall be adjusted on
the first interest payment date which follows receipt by the
Banks of the financial statements upon which such adjustment
is based, but such adjustment shall not be effective as to
any LIBOR-based Rate elected prior to the date of such
adjustment until the expiration of the period of time for
which such LIBOR-based Rate shall have been elected by the
Company. In the event that the Company fails to deliver the
financial statements required under Section 5.b(ii) for any
month which ends a fiscal quarter, interest shall accrue on
the Loan at the Prime Rate and the Applicable Commission
Rate and the Applicable Unused Fee shall be at the highest
level shown in the foregoing tables from the date such
financial statements were required to be delivered until the
first interest payment date which follows receipt by the
Banks of such financial statements. For the avoidance of
doubt, it is noted that it is the intent of the parties that
the Banks shall be free to exercise all remedies otherwise
provided in this Agreement in the event of the violation by
the Company of the covenants stated in Section 5.b(ii) or
5.g(ii) notwithstanding the accrual of interest upon any
Loan or the calculation of fees and commissions at a rate
determined in accordance with this definition.
o "Funded Debt" means (a) all consolidated obligations of the
Company and its Subsidiaries (including without limitation,
all fees, costs or unpaid accrued interest) for or with
respect to borrowed money or for the deferred purchase price
of property or services except current accounts payable
arising in the ordinary course of business, (b) all
consolidated obligations of the Company and its Subsidiaries
created or arising under any conditional sale or other title
retention agreement with respect to any property acquired by
the Company and its Subsidiaries and all consolidated
obligations created or arising under such agreement even
though the rights and remedies of the seller or lender
thereunder are limited to repossession or sale of such
property in the event of default, (c) all consolidated
obligations of the Company and its Subsidiaries under leases
which shall have been or should be recorded as capitalized
leases in accordance with generally accepted accounting
principles, (d) all guarantees and other obligations
(contingent or otherwise) of the Company and its
Subsidiaries, calculated on a consolidated basis, to assure
a creditor against loss (including, without limitation,
letters of responsibility or comfort letters, arrangements
to purchase or repurchase property or obligations, to pay
for property, goods or services whether or not delivered or
rendered, to maintain working capital, equity capital or
other financial statement condition of, or to lend or
contribute to or invest in a third party) in respect of
obligations of such third party, (e) all consolidated
obligations of the Company and its Subsidiaries for
extensions of credit including the face amount of letters of
credit issued for the account of the Company or any
Subsidiary, whether or not representing obligations for
borrowed money, (f) consolidated Rate Hedging Obligations of
the Company and its Subsidiaries, and (g) all consolidated
obligations or indebtedness described in clauses (a) through
(f) secured by a lien on any property owned by the Company
or any Subsidiary, whether or not the Company or such
Subsidiary has assumed or become liable for the payment
thereof except, with respect to this clause (g), obligations
or indebtedness secured by a lien which has been
subordinated to the lien of the Agent under the terms of a
Subordination Agreement satisfactory to the Agent and
substantially in the form of Exhibit "G" attached to the
Credit Agreement.
2
<PAGE>
o "Loan Document" means any of this Agreement, any of the
Revolving Notes, the Security Agreement, the Pledge
Agreement, the Guaranty Agreements, the Guarantor
Security Agreement, any and all Subordination
Agreements, any and all Reimbursement Agreements and any
other instrument or document which evidences or secures
the Loan or which expresses an agreement as to terms
applicable to the Loan, and when used in the plural form
means any two or more of the Loan Documents, as the
context requires.
o "Note" means any of the Revolving Notes and when used in
the plural form means all of the Revolving Notes.
o "Revolving Loan Maturity Date" means initially May 28,
1999, and hereafter any other date to which the
Aggregate Commitment may be extended by the Banks
pursuant to the terms of Section 2.a(iv).
o "Subsidiary" means any corporation, partnership, joint
venture or other business entity over which the Company
exercises control; provided that it shall be
conclusively presumed that the Company exercises control
over any such entity 51% or more of the equity interest
in which is owned by the Company, directly or
indirectly, and provided further that International
shall be deemed a Subsidiary of the Company for all
purposes under this Agreement, but any and all
subsidiaries of International shall not be deemed
Subsidiaries of the Company for purposes of this
Agreement.
o "Tangible Net Worth" means the consolidated
shareholders' equity of the Company and its Subsidiaries
less any allowance for goodwill, patents, trademarks,
trade secrets, officer or employee loans or advances and
any other assets which would be classified as intangible
assets under generally accepted accounting principles.
b. New Definition. A new definition is added to Section 1 of the
Agreement to read as follows:
o Acquisition. "Acquisition" means Brightpoint Acquisition,
Inc., a Delaware corporation.
o International. "International means Brightpoint
International, Ltd., a Delaware corporation.
o Third Amendment. "Third Amendment" means the written
amendment to this Agreement entitled "Third Amendment to
Credit Agreement" and dated with effect as of May 31, 1996.
c. Deleted Definitions. The definitions of the following terms are
deleted from Section 1 of the Agreement: Borrowing Base and Borrowing
Base Certificate.
3. THE REVOLVING LOAN. Section 2.a(i) and the first sentence of Section
2.a(ii) of the Agreement are amended and restated in their respective entireties
as follows:
(i) The Aggregate Commitment -- Use of Proceeds. From the date
of the Third Amendment and until the Revolving Loan Maturity
Date, each Bank agrees to make its Percentage of Advances
(all such Advances by all such Banks are collectively
referred to as the "Revolving Loan") under a revolving line
of credit from time to time to the Company of an aggregate
amount not in excess at any time outstanding of Seventy-Five
Million and 00/100 Dollars ($75,000,000.00), provided that
all of the conditions of lending stated in Section 7 of this
Agreement as being applicable to Advances have been
fulfilled at the time of each Advance. Proceeds of the
Revolving Loan may be used by the Company only to fund
working capital requirements and for general corporate
purposes of the Company, Acquisition and International,
provided, however, that portion of the proceeds used for
International shall not exceed the aggregate principal
amount of Twenty Million Dollars ($20,000,000.00).
(ii) The Revolving Notes. The obligation of the Company to repay
the Revolving Loan shall be evidenced by the promissory
notes (the "Revolving Notes") of the Company payable to the
order of each Bank and in an amount equal to each Bank's
Percentage of the Aggregate Commitment, which Revolving
Notes shall be in the form of Exhibit "B" attached to the
Third Amendment.
4. SUBLIMIT FOR LETTERS OF CREDIT. To evidence an increase in the amount
available for the issuance of standby letters of credit under the Agreement, the
first sentence of Section 2.a(v) is hereby amended in its entirety to read as
follows:
(v) Standby Letters of Credit. At any time that the Company is
entitled to an Advance under the Revolving Loan, Bank One
shall, upon the application of the Company and after notice
to the Banks, issue for the account of the Company, a
standby letter of credit (each a "Letter of Credit") in an
amount not in excess of the maximum Advance that the Company
would then be entitled to obtain under the Revolving Loan,
provided that (A) the total amount of Letters of Credit
which are outstanding at any time shall not exceed Thirty
Million and 00/100 Dollars ($30,000,000.00), (B) the
issuance of any Letter of Credit with a maturity date beyond
the Revolving Loan Maturity Date shall be entirely at the
3
<PAGE>
discretion of the Banks, (C) the form of the requested
Letter of Credit shall be satisfactory to Bank One in the
reasonable exercise of Bank One's discretion, and (D) the
Company shall have executed an application and reimbursement
agreement for the Letter of Credit (a "Reimbursement
Agreement") in Bank One's standard form.
5. COLLATERAL. New Sections 4.c, 4.d and 4.e are added to the Agreement to
read as follows:
c. Pledge Agreement. The Obligations will be further secured by a pledge
of fifty percent (50%) of the stock owned by the Company of
International, which pledge shall be evidenced by a Pledge Agreement
(the "Pledge Agreement") in the form of Exhibit "C" to the Third
Amendment.
d. Guaranty. The Obligations will be further supported by the
unconditional guaranty of prompt payment of all of the Company's U. S.
Subsidiaries (collectively, the "Guarantors"), each of which guaranty
shall be evidenced by a Guaranty Agreement (each a "Guaranty
Agreement" and collectively, the "Guaranty Agreements") substantially
in the form of Exhibit "D" to the Third Amendment.
e. Guarantor Security Agreements. The obligations of Acquisition under
its Guaranty Agreement will be secured by a security interest in all
equipment, inventory, accounts receivable, chattel paper and general
intangibles of Acquisition now owned and hereafter acquired and in the
proceeds thereof, which security interest will be created by a
Security Agreement (a "Guarantor Security Agreement") in the form
attached as Exhibit "E" to the Third Amendment. Each Guarantor
Security Agreement will provide a first-priority security interest in
the collateral described therein, subject only to liens and security
interests of the type described in the exceptions enumerated in
Section 6.b.
6. AMENDMENTS TO FINANCIAL COVENANTS. The Company acknowledges that
compliance with the financial covenants set forth in Section 5.g shall be
computed on the basis of the consolidated financial statements of the Company
and its Subsidiaries. Section 5.b(i), Section 5.b(ii), Section 5.b(vii), Section
5.g, 5.g(i) and Section 5.g(iii) of the Agreement are amended and restated in
their respective entireties to read as follows:
b. (i) Annual Statements. As soon as available and in any event within
ninety (90) days after the close of each fiscal year, consolidated
financial statements of the Company and its Subsidiaries, including a
statement of income, a balance sheet as of the end of such fiscal
year, a statement of cash flows and a reconciliation of shareholders'
equity, for such fiscal year prepared and presented in accordance with
generally accepted accounting principles, applied in a manner
consistent with that used in preparing the financial statements
referred to in Section 3.d (except for changes in which the
independent accountants of the Company concur), in each case setting
forth in comparative form corresponding figures for the preceding
fiscal year, together with the audit report, unqualified as to scope,
of independent certified public accountants approved by the Agent,
which approval shall not be unreasonably withheld, and similarly
presented consolidating financial statements for the same period
prepared by the Company all in reasonable detail and accompanied by
the written representation of the chief financial officer of the
Company that such financial statements have been prepared in
accordance with generally accepted accounting principles (except that
they need not include footnotes and need not reflect adjustments
normally made at year end, if such adjustments are not material in
amount), consistently applied, (except for changes in which the
independent accountants of the Company concur) and present fairly the
financial position of the Company and the results of its operation as
of the dates of such statements and for the fiscal periods then ended.
(ii) Interim Statements. As soon as available and in any event within
thirty (30) days after the end of each month, a copy of the interim
consolidated and consolidating financial statements of the Company and
its Subsidiaries, consisting at a minimum of:
A. the balance sheet as of the end of the month,
B. a statement of income for the month and for the partial or full
fiscal year ended as of the end of the month, and
C. a statement of cash flows,
all in reasonable detail and accompanied by the written
representation of the chief financial officer of the Company that
such financial statements have been prepared in accordance with
generally accepted accounting principles (except that they need
not include footnotes and need not reflect adjustments normally
made at year end, if such adjustments are not material in
amount), consistently applied, (except for changes in which the
independent accountants of the Company concur) and present fairly
the financial position of the Company and the results of its
operation as of the dates of such statements and for the fiscal
periods then ended.
(vii) Compliance Certificates. Within thirty (30) days following each month
end and within ninety (90) days following each fiscal year end, a
certificate of the Chief Financial
4
<PAGE>
Officer or other appropriate officer of the Company demonstrating
compliance with the financial covenants stated in Section 5.g and with
the purchase-money lien covenant stated in Section 6.b(viii). Such
certificate shall relate the covenants to the month-end figures and
shall otherwise be in such form and provide such detail as may be
reasonably satisfactory to the Agent.
g. Financial Covenants. The Company shall observe, on a consolidated
basis, each of the following financial covenants:
(i) Tangible Net Worth. The Company shall maintain its Tangible Net
Worth as of the date of execution of the Third Amendment and at
all times until June 30, 1996, at a level not less than
$60,000,000.00; at June 30, 1996, and at all times until December
30, 1996, at a level not less than $70,000,000.00; at December
31, 1996, and at all times until December 30, 1997, at a level
not less than the sum of $70,000,000.00 plus 50% of the net
income reported during the fiscal period July 1, 1996, through
December 31, 1996; and at each fiscal year end thereafter, and at
all times during the fiscal year immediately following, at a
level equal to the sum of 50% of the net income reported during
the fiscal year for which the Tangible Net Worth is being
determined (exclusive of any loss) plus the Tangible Net Worth
reported at the immediately preceding fiscal year end.
(ii) Ratio of Liabilities to Tangible Net Worth. At the end of each
month, the Company shall maintain the ratio of its consolidated
total liabilities to the Tangible Net Worth at a level not
greater than 2.0 to 1.0. For purposes of testing compliance with
this covenant, the term "liabilities" shall include the present
value of all consolidated capital lease obligations of the
Company and its Subsidiaries, determined as of any date the ratio
is to be tested.
(iii)Fixed Charge Coverage. At the end of each fiscal quarter, for
the four consecutive fiscal quarters ending as of such fiscal
quarter end, from the date of the Third Amendment and until
December 30, 1996, the Company shall maintain a fixed charge
coverage ratio of not less than 1.25 to 1.0. At December 31,
1996, and at each fiscal quarter thereafter, the Company shall
maintain a fixed charge coverage ratio of not less than 1.50 to
1.0. For purposes of this covenant, the phrase "fixed charge
coverage ratio" means, for any relevant period, the ratio of the
sum of net income plus depreciation, amortization and interest
expense plus cash taxes paid over the sum of payments made on
term debt during the period for which the ratio is being
calculated, including current capital lease payments but
excluding any payments made on account of the Loan, plus interest
expense, plus expenditures for fixed assets not funded with
borrowed funds, plus dividends paid, plus cash taxes paid.
7. AMENDMENTS TO NEGATIVE COVENANTS. Section 6 of the Agreement is amended
as follows:
a. Restricted Payments. The last sentence of Section 6.a of the Agreement
is amended and restated in its entirety to read as follows:
The Company shall not permit any Subsidiary to purchase or redeem
any shares of the capital stock of such Subsidiary, declare or
pay any dividends thereon except for dividends payable entirely
in capital stock and dividends and distributions payable to the
Company or make any distribution to shareholders or redeem any
subordinated indebtedness of such Subsidiary; provided, however
that International may pay dividends or distributions to its
shareholders so long as International has retained earnings in
excess of $2,000.000.00 and so long as such dividends or
distributions do not exceed 25% of net income computed on a
cumulative basis for any period for which such dividend or
distribution is being determined and provided that such
cumulative amount is first reduced by any net losses incurred
during such period.
b. Liens. Subsection (viii) of Section 6.b is amended and restated in its
entirety and a new subsection (ix) is added to Section 6.b as follows:
(viii) purchase-money liens on any inventory hereafter acquired;
provided that (A) any such inventory is acquired by the
Company or any Subsidiary in the ordinary course of its
business, (B) the lien attaches only to the inventory so
acquired, and (C) the total amount of outstanding
indebtedness secured by all such liens shall not exceed the
aggregate sum of $5,000,000.00; and
(ix) those specific liens now existing described on the "Schedule
of Exceptions" attached as Exhibit "D."
c. Guaranties. Subsection (iii) of Section 6.c is amended and restated in
its entirety and a new subsection (iv) is added to Section 6.c as
follows:
(iii) guaranties by International in favor of its subsidiaries;
and
(iv) those specific existing guaranties listed in the "Schedule
of Exceptions" attached
5
<PAGE>
as Exhibit "D."
d. Loans or Advances. Subsection (iv) of Section 6.d is amended and
restated in its entirety and new subsections (v), (vi) and (vii) are
added to the Agreement as follows:
(iv) loans and advances from the Company to International not in
excess of the aggregate principal amount of $20,000,000.00,
provided that any Letters of Credit issued for the account of the
Company but on behalf of International shall be included in the
amount of loans or advances for purposes of this subsection;
(v) loans and advances from any Subsidiary to the Company;
(vi) loans and advances from International to any of the subsidiaries
of International; and
(vii)the specific items listed in the "Schedule of Exceptions"
attached as Exhibit "D."
e. Merger, Consolidations, Sales, Acquisition or Formation of
Subsidiaries. Section 6.e of the Agreement is amended and restated in
its entirety to read as follows:
e. Merger, Consolidations, Sales, Acquisition or Formation of
Subsidiaries. The Company shall not be, and shall not permit any
Subsidiary to be, a party to any consolidation or to any merger and
shall not purchase the capital stock of or otherwise acquire any
equity interest in any other business entity; provided, however that,
upon prior written notice to the Banks, a Subsidiary of the Company
may merge into the Company so long as the Company is the surviving
entity. The Company shall not acquire, and shall not permit any
Subsidiary to acquire, any material part of the assets of any other
business entity which exceed the aggregate amount of Two Million
Dollars ($2,000,000.00). Except as provided in the Security Agreement,
the Company shall not, and shall not permit any Subsidiary to, sell,
transfer, convey or lease all or a Substantial Portion of the
consolidated assets of the Company and its Subsidiaries, except in the
ordinary course of business, or sell or assign with or without
recourse any receivables. The Company shall not cause to be created or
otherwise acquire any Subsidiaries nor permit any Subsidiary to cause
to be created or otherwise acquire any Subsidiaries; provided,
however, that International may create subsidiaries of International
so long as the Company provides written notice to the Banks.
8. MODIFICATIONS TO EVENTS OF DEFAULT. Section 8.c of the Agreement is
amended to include "or any Subsidiary" in the last line and new Sections 8.h and
8.i are added to the Agreement, as follows:
c. Bankruptcy, Insolvency, etc. The Company or any Subsidiary admitting
in writing its inability to pay its debts as they mature or an
administrative or judicial order of dissolution or determination of
insolvency being entered against the Company or any Subsidiary; or the
Company or any Subsidiary applying for, consenting to, or acquiescing
in the appointment of a trustee or receiver for the Company or any
Subsidiary or any property thereof, or the Company or any Subsidiary
making a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee or
receiver being appointed for the Company or any Subsidiary or for a
substantial part of its property and not being discharged within sixty
(60) days; or any bankruptcy, reorganization, debt arrangement, or
other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding being instituted by or against
the Company or any Subsidiary, and, if involuntary, being consented to
or acquiesced in by the Company or any Subsidiary or remaining for
sixty (60) days undismissed.
h. Guaranty Agreement. Any Guaranty Agreement shall fail to remain in
full force and effect or any action shall be taken to discontinue or
to assert the invalidity or unenforceability of any Guaranty
Agreement, or any Guarantor shall fail to comply with any of the terms
or provisions of any Guaranty Agreement to which it is a party, or any
Guarantor denies that it has any further liability, except as
otherwise provided in such Guaranty Agreement, under any Guaranty
Agreement to which it is a party, or gives notice to such effect.
i. Collateral Document. Any Security Agreement or Pledge Agreement or
other document purporting to grant a security interest to the Agent or
the Banks (each a "Collateral Document") shall for any reason (other
than action or inaction by the Banks) fail to create a valid and
perfected first priority security interest in any collateral purported
to be covered thereby, except as otherwise permitted under the
Agreement or any Loan Document, or any Collateral Document shall fail
to remain in full force or effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of any
Collateral Document, or the Company or any Subsidiary shall fail to
comply with any of the terms or provisions of any Collateral Document.
6
<PAGE>
9. BORROWING BASE. The Banks agree that the Aggregate Commitment will not
be limited by a Borrowing Base after the date of this Third Amendment. Section
2.c(iii), Section 5.b(iv), Section 8.f and Section 10.s(xi) are hereby deleted
from the Agreement. All other references in the Agreement to the term "Borrowing
Base" and "Borrowing Base Certificate" shall be deemed void and of no effect.
10. FORBEARANCE FOR LIENS ACQUIRED IN THE ALLIED TRANSACTION. The Banks
agree to forbear from exercising any remedies available under the Agreement with
respect to liens of creditors on the assets acquired in the Allied transaction
which liens have priority over the liens granted to the Agent on behalf of the
Banks under the Loan Documents so long as such liens are terminated or released
on or before July 8, 1996. The Company acknowledges that if such liens are not
terminated or released by July 8, 1996, the Company will not be in compliance
with the terms of the Agreement and the Agent on behalf of the Banks may
exercise any rights or remedies available under the Agreement for such
noncompliance.
11. CONSENT TO CREATION OF INTERNATIONAL AND THE ACQUISITION OF CERTAIN
ASSETS. The Banks waive the remedies available under the Agreement for the
failure of the Company to comply with the provisions of Section 6.e in the
creation of Brightpoint International, Ltd. The Banks consent to the acquisition
by International of certain assets and properties as more particularly set forth
in the copy of the Shareholder and Asset Purchase Agreement attached to this
Third Amendment as Exhibit "A," (the "Purchase Agreement"). The consent provided
in this Third Amendment does not constitute a waiver of or a consent to any
violation of or noncompliance by the Company or any of its Subsidiaries with any
financial or other covenants, representations or warranties contained in the
Agreement or in any other Loan Document to which the Company or any Subsidiary
is a party, except the provisions of Section 6.e of the Agreement as applied to
International. This consent is subject to the condition that immediately after
giving effect to the acquisition, no event shall occur or shall have occurred
and be continuing which constitutes an Event of Default or Unmatured Event of
Default under the Agreement, except the provisions of Section 6.e of the
Agreement as applied to International and except as otherwise provided herein.
The Company agrees to advise the Agent prior to finalizing the acquisition if
the terms thereof differ materially from those set forth in the Purchase
Agreement. In such event, the Banks reserve the right to revoke this consent in
their discretion.
12. NONCOMPLIANCE WITH SECTION 5. The Banks waive the remedies available
under the Agreement for the failure of the Company to comply with the provisions
of Section 5.g(iii) of the Agreement with respect to the required fixed charge
coverage ratio at April 30, 1996. This waiver shall not be construed as a
commitment on the part of the Banks to grant any similar or other waiver in the
future.
13. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of
this Third Amendment, the Agent shall have received, each duly executed and in
form and substance satisfactory to the Banks the following:
a. This Third Amendment.
b. The Revolving Notes.
c. The Guaranty Agreements.
d. The Guarantor Security Agreements.
e. A certified copy of resolutions of the Board of Directors of the
Company authorizing the execution and delivery of this Third Amendment
and any other document required under this Third Amendment.
f. A certificate signed by the Secretary of the Company certifying the
name of the officer or officers authorized to sign this Third
Amendment and any other document required under this Third Amendment,
together with a sample of the true signature of each such officer.
g. A certified copy of resolutions of the Board of Directors of each of
the Guarantors authorizing the execution and delivery of its
respective Guaranty Agreement, its respective Guarantor Security
Agreement and any other document required under this Third Amendment
to which such Guarantor may be a party.
h. A certificate signed by the Secretary of each Guarantor certifying the
name of the officer or officers authorized to sign the documents to
which such Guarantor is to be a party as required under this Third
Amendment, together with a sample of the true signature of each such
officer.
i. The opinion or opinions of counsel for the Company and each Guarantor
addressed to the Banks to the effect that the representations stated
in Sections 3.a, 3.b and 3.c and 3.l of the Agreement with respect to
the Company, and in Sections 11.a, 11.b, 11,c and 11.k of each
Guaranty Agreement with respect to the Guarantors, are correct. Such
opinion or opinions shall be in such form as may be reasonably
acceptable to the Banks.
j. A copy of the file-marked Articles of Incorporation of each of the
Subsidiaries, certified as complete and correct by the Secretary of
State of the state of each such Subsidiary's incorporation, and a copy
of the By-Laws of each such Subsidiary, certified as complete and
correct by the Secretary of such Subsidiary.
k. A currently dated certificate of existence or certificate of good
standing, as applicable, of each of the Subsidiaries issued by the
Secretary of State each such Subsidiary's incorporation.
7
<PAGE>
l. Such other documents as may be reasonably required by the Agent or the
Banks.
14. REPRESENTATIONS AND WARRANTIES. To induce the Banks and the Agent to
enter into this Third Amendment, the Company represents and warrants, as of the
date of this Third Amendment and except as otherwise provided in this Third
Amendment, that no Event of Default or Unmatured Event of Default has occurred
and is continuing and that the representations and warranties contained in
Section 3 of the Agreement are true and correct, except that the representations
contained in Section 3.d refer to the latest financial statements furnished to
the Banks by the Company pursuant to the requirements of the Agreement and the
representation contained in Section 3.l is amended and restated in its entirety
to read as follows:
l. Subsidiaries. The only Subsidiaries of the Company as of the date of
the Third Amendment are Brightpoint Acquisition, Inc., a Delaware
corporation which is wholly owned by the Company, Brightpoint FSC,
Inc., a foreign sales corporation organized under the laws of Barbados
which is wholly owned by the Company, and Brightpoint International,
Ltd., a Delaware corporation, which is wholly owned by the Company as
of the date of the Third Amendment, but will be fifty percent (50%)
owned after execution of the Purchase Agreement, but which shall be
deemed a Subsidiary for all purposes under the terms of this Agreement
and the other Loan Documents.
15. REAFFIRMATION OF THE AGREEMENT. Except as amended by this Third
Amendment, all terms and conditions of the Agreement shall continue unchanged
and in full force and effect and the Obligations of the Company shall continue
to be secured and guaranteed as therein provided until payment and performance
in full of all Obligations.
16. COUNTERPARTS. This Third Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Agent and the Banks, by their
respective duly authorized officers, have executed this Third Amendment to
Credit Agreement with effect as of June 7, 1996.
BRIGHTPOINT, INC.
By: /s/J. Mark Howell
-------------------------------------------
J. Mark Howell, Executive Vice President
and Chief Financial Officer
Address: 6402 Corporate Drive
Indianapolis, Indiana 46278
Attention: Executive Vice President
and Chief Financial Officer
Fax: (317) 297-6191
BANK ONE, INDIANAPOLIS,
NATIONAL ASSOCIATION
Individually and as Agent
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 41.5%
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P. O. Box 7700
Indianapolis, Indiana 46277-0119
Attention: Manager, Metropolitan Department B
Fax: (317) 321-8079
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------------------
-------------------------------------------
PERCENTAGE: 26.0%
8
<PAGE>
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attention: Cory M. Olson
Fax: (312) 732-5161
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 19.0%
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attention:
------------------------------------
Fax: (407) 237-6894
CORESTATES BANK, N.A.
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 13.5%
Address: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attention:
------------------------------------
Fax: (610) 834-2069
9
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
BRIGHTPOINT, INC., a Delaware corporation, (the "Company"), the banks
listed on the signature pages hereof (each individually a "Bank" and
collectively the "Banks") and BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a
national banking association with its principal office in Indianapolis, Indiana,
as agent for the Banks (in such capacity the "Agent" and in its individual
capacity "Bank One") agree as follows:
1. CONTEXT. This agreement is made in the context of the following agreed
state of facts:
a. The Company, the Banks and the Agent are parties to a Credit Agreement
dated June 13, 1995, as amended by First Amendment to Credit Agreement
dated as of September 15, 1995, Second Amendment to Credit Agreement
dated as of January 19, 1996, and the Third Amendment to Credit
Agreement dated as of June 7, 1996 (collectively, the Agreement").
b. The Company has requested that the Banks (i) modify certain financial
covenants on account of adjustments related to the Allied transaction
and (ii) waive the requirement for the consolidating financial
statements of Brightpoint Acquisition, Inc.
c. The Banks have agreed to such requests, subject to certain terms and
conditions, and the parties have executed this document (this "Fourth
Amendment") to give effect to their agreement.
2. DEFINITIONS. Terms used in this Fourth Amendment with their initial
letters capitalized are used as defined in the Agreement, unless otherwise
defined herein. A new definition is added to Section 1 of the Agreement to read
as follows:
o Fourth Amendment. "Fourth Amendment" means the written amendment
to this Agreement entitled "Fourth Amendment to Credit Agreement"
and dated with effect as of June 28, 1996.
3. AMENDMENTS TO FINANCIAL COVENANTS. Section 5.g(i) and Section 5.g(iii)
of the Agreement are amended and restated in their entireties to read as
follows:
(i) Tangible Net Worth. The Company shall maintain its Tangible Net
Worth as of the date of execution of the Fourth Amendment and at
all times until December 30, 1996, at a level not less than
$67,500,000.00; at December 31, 1996, and at all times until
December 30, 1997, at a level not less than the sum of
$67,500,000.00 plus 50% of the net income reported during the
fiscal period July 1, 1996, through December 31, 1996; and at
each fiscal year end thereafter, and at all times during the
fiscal year immediately following, at a level equal to the sum of
50% of the net income reported during the fiscal year for which
the Tangible Net Worth is being determined (exclusive of any
loss) plus the Tangible Net Worth reported at the
1
<PAGE>
immediately preceding fiscal year end.
(iii)Fixed Charge Coverage. At the end of each fiscal quarter, for
the four consecutive fiscal quarters ending as of such fiscal
quarter end, from the date of the Fourth Amendment and until
December 30, 1996, the Company shall maintain a fixed charge
coverage ratio of not less than 1.25 to 1.0. At December 31,
1996, and at each fiscal quarter thereafter, the Company shall
maintain a fixed charge coverage ratio of not less than 1.50 to
1.0. For purposes of this covenant, the phrase "fixed charge
coverage ratio" means, for any relevant period, the ratio of the
sum of net income plus depreciation, amortization and interest
expense plus cash taxes paid over the sum of payments made on
term debt during the period for which the ratio is being
calculated, including current capital lease payments but
excluding any payments made on account of the Loan, plus interest
expense, plus expenditures for fixed assets not funded with
borrowed funds, plus dividends paid, plus cash taxes paid;
provided that for purposes of this covenant, net income shall not
be reduced by the expenses of the Company related to the Allied
transaction in a maximum sum of $2,500,000.00.
4. WAIVER OF CONSOLIDATING FINANCIAL STATEMENTS OF ACQUISITION. The Company
has informed the Banks that the assets and liabilities of Acquisition have been
or will be transferred to the books and records of the Company and that, as of
June 30, 1996, there will be no separate books and records of Acquisition. The
Banks waive the remedies available under the Agreement for the failure of the
Company to comply with the provisions of Section 5.b(ii) with respect to
furnishing the consolidating financial statements of Acquisition for the months
ending June 30, 1996, July 31, 1996, and August 31, 1996; provided that the
Company agrees to take all action necessary to effect the merger of Acquisition
into the Company on or before September 30, 1996, and provided further that the
Company will provide (A) a written certification to the Banks that Acquisition
has no assets or business operations which are not reflected in the financial
statements of the Company, which certification will accompany each of the
financial statements furnished to the Banks pursuant to the Agreement prior to
the merger of Acquisition into the Company, and (B) written notice to the Banks
when the merger has been completed accompanied by copies of the Articles of
Merger, or comparable appropriate documents, certified by the Secretary of State
of Delaware. The Company acknowledges that if the merger of Acquisition into the
Company is not completed by September 30, 1996, the Company shall comply with
the provisions of Section 5.b(ii) which provisions require the consolidating
financial statements of Acquisition.
5. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of
this Fourth Amendment, the Agent shall have received, each duly executed and in
form and substance satisfactory to the Banks the following:
2
<PAGE>
a. This Fourth Amendment.
b. Such other documents as may be reasonably required by the Agent or the
Banks.
6. REPRESENTATIONS AND WARRANTIES. To induce the Banks and the Agent to
enter into this Fourth Amendment, the Company represents and warrants, as of the
date of this Fourth Amendment and except as otherwise provided in this Fourth
Amendment, that no Event of Default or Unmatured Event of Default has occurred
and is continuing and that the representations and warranties contained in
Section 3 of the Agreement are true and correct, except that the representations
contained in Section 3.d refer to the latest financial statements furnished to
the Banks by the Company pursuant to the requirements of the Agreement.
7. REAFFIRMATION OF THE AGREEMENT. Except as amended by this Fourth
Amendment, all terms and conditions of the Agreement shall continue unchanged
and in full force and effect and the Obligations of the Company shall continue
to be secured and guaranteed as therein provided until payment and performance
in full of all Obligations.
8. COUNTERPARTS. This Fourth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Agent and the Banks, by their
respective duly authorized officers, have executed this Fourth Amendment to
Credit Agreement with effect as of June 28, 1996.
BRIGHTPOINT, INC.
By: /s/J. Mark Howell
-----------------------------------------
J. Mark Howell, Executive Vice
President and Chief Financial Officer
Address: 6402 Corporate Drive
Indianapolis, Indiana 46278
Attention: Executive Vice President
and Chief Financial Officer
Fax: (317) 387-5493
BALANCE OF PAGE LEFT INTENTIONALLY BLANK
3
<PAGE>
BANK ONE, INDIANAPOLIS,
NATIONAL ASSOCIATION
Individually and as Agent
By: /s/Brian D. Smith
-------------------------------------------
Brian D. Smith, Vice President and Senior
Relationship Manager
PERCENTAGE: 41.5%
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P. O. Box 7700
Indianapolis, Indiana 46277-0119
Attention: Manager, Metropolitan Department B
Fax: (317) 321-8079
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 26.0%
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attention: Cory M. Olson
Fax: (312) 732-5161
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 19.0%
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attention: Chris Black, Vice President
Fax: (407) 237-6894
4
<PAGE>
CORESTATES BANK, N.A.
By:
-------------------------------------------
-------------------------------------------
(printed name and title)
PERCENTAGE: 13.5%
Address: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attention: William Johnston
Fax: (610) 834-2069
5
<PAGE>
FIFTH AMENDMENT TO CREDIT AGREEMENT
BRIGHTPOINT, INC., a Delaware corporation (the "Company"), the banks listed
on the signature pages hereof (each individually a "Bank" and collectively the
"Banks") and BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a national banking
association with its principal office in Indianapolis, Indiana, as agent for the
Banks (in such capacity the "Agent" and in its individual capacity "Bank One")
agree as follows:
1. CONTEXT. This Fifth Amendment is made in the context of the following agreed
statement of facts:
a. The Company, the Banks and the Agent are parties to a Credit
Agreement dated June 13, 1995, as amended by a First Amendment to
Credit Agreement dated as of September 15, 1995, a Second Amendment to
Credit Agreement dated as of January 19, 1996, a Third Amendment to
Credit Agreement dated as of June 7, 1996, and a Fourth Amendment to
Credit Agreement dated as of June 28, 1996 (collectively, the
"Agreement").
b. The Company has requested that the Banks (i) modify certain
affirmative and negative covenants to permit the Company to guarantee
certain indebtedness and to permit the Company's Subsidiary,
International, to enter into certain indebtedness, and (ii) to waive
the Company's noncompliance with its Fixed Charge Coverage Covenant,
and other covenants, as of September 30, 1996.
c. The Banks have agreed to such requests, subject to certain terms and
conditions, and the parties have executed this document (this "Fifth
Amendment") to give effect to their agreement.
2. DEFINITIONS. Terms used in this Fifth Amendment with their initial letters
capitalized are used as defined in the Agreement, unless otherwise defined
herein.
a. Amended Definition. The definition of "Funded Debt" in Section 1 of
the Agreement is hereby amended to restate clauses (d) and (e) of such
definition as follows:
"(d) to the extent not already included in clause (a) above,
all guaranties and other obligations (contingent or otherwise)
of the Company and its Subsidiaries, calculated on a
consolidated basis, to assure a creditor against loss
(including, without limitation, letters of responsibility or
comfort letters, arrangements to purchase or repurchase
property or obligations, to pay for
<PAGE>
property, goods or services whether or not delivered or
rendered, to maintain working capital, equity capital or other
financial statement condition of, or to lend or contribute to
or invest in a third party) in respect of obligations of such
third party, provided however, that the guaranty by the
Company of the line of credit obligations of International
shall be included in the calculation of Funded Debt at the
principal amount of the debt outstanding on the date of
calculation and not at the face amount of the guaranty; (e) to
the extent not already included in clauses (a) or (d) above,
all consolidated obligations of the Company and its
Subsidiaries for extensions of credit including the face
amount of letters of credit issued for the account of the
Company or any Subsidiary, whether or not representing
obligations for borrowed money (for purposes of this clause
(e), Subsidiary shall include subsidiaries of International),"
b. New Definition. A new definition is added to Section 1 of the
Agreement to read as follows:
o Fifth Amendment. "Fifth Amendment" means the written
amendment to this Agreement entitled "Fifth Amendment to
Credit Agreement" and dated effective as of October 11,
1996.
3. AMENDMENT TO FINANCIAL COVENANTS. Section 5.g(iii) of the Agreement
is hereby amended and restated in its entirety as follows:
(iii) Fixed Charge Coverage. At the end of each fiscal quarter, for the
four consecutive fiscal quarters ending as of such fiscal quarter end,
from the date of the Fifth Amendment and until December 30, 1996, the
Company shall maintain a fixed charge coverage ratio of not less than
1.25 to 1.0. At December 31, 1996, and at each fiscal quarter
thereafter until December 30, 1997, the Company shall maintain a fixed
charge coverage ratio of not less than 1.35 to 1.0. At December 31,
1997, and at each fiscal quarter thereafter, the Company shall maintain
a fixed charge coverage ratio of not less than 1.50 to 1.0. For
purposes of this covenant, the phrase "fixed charge coverage ratio"
means, for any relevant period, the ratio of the sum of net income plus
depreciation, amortization and interest expense plus cash taxes paid
over the sum of payments made on term debt during the period for which
the ratio is being calculated, including current capital lease payments
but excluding any payments made on account of the Loan, plus interest
expense, plus expenditures for fixed assets not funded with borrowed
funds, plus dividends paid, plus cash taxes paid; provided that for
purposes of this covenant, net income shall not be reduced by the
expenses incurred by the Company related to the Allied transaction in a
maximum sum of $2,500,000.00.
-2-
<PAGE>
4. AMENDMENTS TO NEGATIVE COVENANTS. Section 6 of the Agreement is
amended as follows:
a. Section 6.c. of the Agreement is hereby amended and restated in its
entirety as follows:
c. Guaranties. The Company shall not be, and shall not permit
any Subsidiary to be, a guarantor or surety of, or otherwise
be responsible in any manner with respect to any undertaking
of any other person or entity, whether by guaranty agreement
or by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or advance any funds, assets,
goods or services or otherwise except for:
(i) guaranties in favor of the Banks or the Agent on behalf
of the Banks;
(ii) the guaranty by the Company of certain debt of
International or a subsidiary of International, in an
aggregate amount not to exceed $25,000,000 plus
interest and costs of collection;
(iii) guaranties by endorsement of instruments for deposit
made in the ordinary course of business;
(iv) guaranties by International in favor of its
subsidiaries; and
(v) those specific existing guaranties listed on the
"Schedule of Exceptions" attached as Exhibit "D".
b. Subsections (iv) and (vi) of Section 6.d. of the Agreement are
amended and restated in their entirety as follows:
(iv) loans, advances or guaranties from the Company to or
on behalf of International not in excess of the
aggregate principal amount of $30,000,000.00,
including any guaranty by the Company for
indebtedness of any subsidiary of International and
provided that any Letters of Credit issued for the
account of the Company but on behalf of International
shall be included in the amount of loans, advances or
guaranties for purposes of this subsection;
(vi) loans and advances from International to any
subsidiaries of International and a Shareholder Note
dated July 1, 1996 owed to International from Dana
Marlin and John M. Maclean-Arnott, with a present
principal balance of $1,106,000.00;
-3-
<PAGE>
c. Section 6.e. of the Agreement is hereby amended to increase the
amount of Two Million Dollars in the second sentence of such
Subsection to "Five Million Dollars ($5,000,000.00)", which amount
shall exclude the acquisition of Hatadicorp Pty. Ltd of Australia by a
subsidiary of International, which acquisition is specifically
consented to by the Banks.
d. Section 6.k. of the Agreement is hereby amended and restated in its
entirety as follows:
k. Lease Obligations. The Company shall not incur, and shall
not permit any Subsidiary to incur, obligations under any
operating leases if as a result, the aggregate payment
obligations of the Company and its Subsidiaries under all such
leases in any fiscal year would exceed $1,000,000; except:
(i) an operating lease for computer equipment, software,
and certain furniture and fixtures in a total
aggregate amount not to exceed $5,000,000 to be
entered into prior to December 31, 1996; and
(ii) those existing obligations disclosed on the "Schedule
of Exceptions" attached as Exhibit "D".
e. Section 6.l. of the Agreement is hereby amended and restated in its
entirety as follows:
l. Debt. The Company shall not incur or permit to exist, and
shall not permit any Subsidiary to incur or permit to exist, any
Indebtedness in excess of the aggregate amount of $2,000,000.00
at any time outstanding, except for:
(i) Indebtedness owed to the Banks under this Agreement;
(ii) Rate Hedging Obligations with any Bank;
(iii) Indebtedness of International or a subsidiary of
International in an aggregate amount not to exceed
$25,000,000.00 under a revolving line of credit or
for the purchase of Hatadicorp Pty. Ltd;
(iv) the Company's guaranties of the Indebtedness of
International or a subsidiary of International, which
guaranties shall not exceed in the aggregate
$25,000,000.00 plus interest and costs of collection;
(v) the operating lease obligations permitted to be
incurred under Section 6.k. hereof;
-4-
<PAGE>
(vi) to the extent not already included above, the
Indebtedness permitted under Section 6.d. hereof; and
(vii) those existing obligations disclosed on the "Schedule
of Exceptions" attached as Exhibit "D".
5. WAIVER OF NONCOMPLIANCE WITH FINANCIAL COVENANT. The Banks acknowledge that
the Company was not in compliance with the Fixed Charge Coverage Ratio set forth
in Section 5.g.(iii) at September 30, 1996. The Banks hereby waive such
noncompliance at such date and waive their right to exercise remedies available
under the Agreement as the result of the Company's failure to maintain its Fixed
Charge Coverage Ratio at required levels. Such waiver shall not constitute any
agreement or waiver on the part of the Banks to any further or other default or
noncompliance on the part of the Company or any Subsidiary.
6. WAIVER OF CONSOLIDATING FINANCIAL STATEMENTS OF ACQUISITION.
The Company has informed the Banks that the assets and liabilities of
Acquisition have been or will be transferred to the books and records of the
Company and that, as of September 30, 1996, there will be no separate books and
records of Acquisition. The Banks waive the remedies available under the
Agreement for the failure of the Company to comply with the provisions of
Section 5.b(ii) with respect to furnishing the consolidating financial
statements of Acquisition for the months ending September 30, 1996, October 31,
1996 and November 30, 1996; provided that the Company agrees to take all action
necessary to effect the merger of Acquisition into the Company on or before
December 31, 1996, and provided further that the Company will provide (A) a
written certification to the Banks that Acquisition has no assets or business
operations which are not reflected in the financial statements of the Company,
which certification will accompany each of the financial statements furnished to
the Banks pursuant to the Agreement prior to the merger of Acquisition into the
Company, and (B) written notice to the Banks when the merger has been completed
accompanied by copies of the Articles of Merger, or comparable appropriate
documents, certified by the Secretary of State of Delaware. The Company
acknowledges that if the merger of Acquisition into the Company is not completed
by December 31, 1996, the Company shall comply with the provisions of Section
5.b(ii) which provisions require the consolidating financial statements of
Acquisition.
7. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of this
Fifth Amendment, the Agent shall have received, each duly executed and in form
and substance satisfactory to the Banks, the following:
a. This Fifth Amendment, and
-5-
<PAGE>
b. Such other documents as may be reasonably required by the
Agent or the Banks.
8. REPRESENTATIONS AND WARRANTIES. To induce the Banks and the Agent to enter
into this Fifth Amendment, the Company represents and warrants, as of the date
of this Fifth Amendment, and except as otherwise provided in this Fifth
Amendment, that no Event of Default or Unmatured Event of Default has occurred
or is continuing and that the representations and warranties contained in
Section 3 of the Agreement are true and correct, except that the representations
contained in Section 3.d. refer to the latest financial statements furnished to
the Banks by the Company pursuant to the requirements of the Agreement.
9. REAFFIRMATION OF THE AGREEMENT. Except as amended by this Fifth Amendment,
all terms and conditions of the Agreement shall remain unchanged and in full
force and effect and the Obligations of the Company shall continue to be secured
and guaranteed as therein provided until payment and performance in full of all
Obligations.
10. COUNTERPARTS. This Fifth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company, the Agent and the Banks, by their
respective duly authorized officers, have executed this Fifth Amendment to
Credit Agreement with effect as of October 11, 1996.
BRIGHTPOINT, INC.
By
-------------------------------------------
J. Mark Howell, President and
Chief Operating Officer
Address: 6402 Corporate Drive
Indianapolis, Indiana 46278
Attn: President and Chief Operating
Officer
Fax: (317) 387-5493
-6-
<PAGE>
[BALANCE OF PAGE INTENTIONALLY BLANK]
-7-
<PAGE>
BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION Individually and as Agent
By _________________________________________
Brian D. Smith, Vice President and
Senior Relationship Manager
PERCENTAGE: 41.5%
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attn: Manager, Metropolitan Department
Fax: (317) 321-8079
THE FIRST NATIONAL BANK OF CHICAGO
By _________________________________________
_________________________________________
Printed Name & Title
PERCENTAGE: 26.0%
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attn: Cory M. Olson
Fax: (312) 732-5161
-8-
<PAGE>
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By _________________________________________
_________________________________________
Printed Name & Title
PERCENTAGE: 19.0%
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Black, Vice President
Fax: (407) 237-6894
CORESTATES BANK, N.A.
By _________________________________________
_________________________________________
Printed Name & Title
PERCENTAGE: 13.5%
Address: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attn: William Johnston
Fax: (610) 834-2069
-9-
<PAGE>
SIXTH AMENDMENT TO CREDIT AGREEMENT
BRIGHTPOINT, INC., a Delaware corporation (the "Company"), the banks listed
on the signature pages hereof (each individually, a "Bank" and collectively, the
"Banks") and BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a national banking
association with its principal office in Indianapolis, Indiana, as agent for the
Banks (in such capacity, the "Agent" and in its individual capacity, "Bank One")
agree as follows:
1. CONTEXT. This Sixth Amendment is made in the context of the following
agreed statement of facts:
a. The Company, the Banks and the Agent are parties to a Credit
Agreement dated June 13, 1995, as amended by a First Amendment to
Credit Agreement dated as of September 15, 1995, a Second Amendment to
Credit Agreement dated as of January 19, 1996, a Third Amendment to
Credit Agreement dated as of June 7, 1996, a Fourth Amendment to Credit
Agreement dated as of June 28, 1996 and a Fifth Amendment to Credit
Agreement dated effective as of October 11, 1996 (collectively, the
"Agreement").
b. The Company has requested that the Banks (i) increase the Company's
line of credit from $75,000,000 to $100,000,000 until April 30, 1997;
(ii) modify certain financial covenants of the Company to permit the
additional indebtedness, and (iii) to waive the Company's noncompliance
with its Ratio of Liabilities to Tangible Net Worth Covenant and its
Lease Obligations Covenant.
c. The Banks have agreed to such requests, subject to certain terms and
conditions, and the parties have executed this Sixth Amendment (the
"Sixth Amendment") to give effect to their agreement.
2. DEFINITIONS. Terms used in this Sixth Amendment with their initial
letters capitalized are used as defined in the Agreement, unless otherwise
specifically defined herein. The definition of "Applicable Rate" in Section
1 of the Agreement is hereby amended and restated in its entirety as
follows:
"Applicable Rate" means any of the Applicable Unused Fee Rate, the
Applicable Commission Rate, the Applicable Prime Spread or the
Applicable LIBOR Spread, as the context requires, and when used in the
plural form refers collectively to all of the Applicable Unused Fee
Rate, the Applicable Commission Rate, the Applicable Prime Spread and
the Applicable LIBOR Spread. The Applicable Rate shall be determined by
reference to the ratio of the Company's Funded Debt to Capital in
accordance with the following tables:
<PAGE>
<TABLE>
<CAPTION>
Applicable Applicable LIBOR
Ratio of Funded Debt to Capital Prime Spread Spread
- ------------------------------- ------------ ------
<S> <C> <C>
.60 to 1.0 or greater .25% 2.00%
.55 to 1.0 or greater but less than .60 to 1.0 0.00% 1.75%
.45 to 1.0 or greater but less than .55 to 1.0 (.25%) 1.50%
.40 to 1.0 or greater but less than .45 to 1.0 (.50%) 1.25%
.35 to 1.0 or greater but less than .40 to 1.0 (.75%) 1.00%
less than .35 to 1.0 (1.00%) .75%
</TABLE>
<TABLE>
<CAPTION>
Applicable
Unused Fee Applicable
Ratio of Funded Debt to Capital Rate Commission Rate
- ------------------------------- ---- ---------------
<S> <C> <C>
.60 to 1.0 or greater .30% 1.125%
.55 to 1.0 or greater but less than .60 to 1.0 .25% 1.00%
.45 to 1.0 or greater but less than .55 to 1.0 .20% .875%
.40 to 1.0 or greater but less than .45 to 1.0 .15% .75%
.35 to 1.0 or greater but less than .40 to 1.0 .15% .75%
.35 to 1.0 .125% .75%
</TABLE>
Effective with the date of closing, the Applicable Rates shall be
determined on the basis of the financial statements of the Company
dated as of the month ending each fiscal quarter furnished to the Banks
pursuant to the requirements of Section 5.b(ii), with prospective
effect for the following fiscal quarter. Interest will accrue and be
payable, and fees and commissions will be calculated and be payable, in
any fiscal quarter on the basis of the Applicable Rates in effect
during the preceding fiscal quarter until an adjustment is made under
the provisions of this subsection. The Applicable Rates shall be
adjusted on the first interest payment date which follows receipt by
the Banks of the financial statements upon which such adjustment is
based, but such adjustment shall not be effective as to any LIBOR-based
Rate elected prior to the date of such adjustment until the expiration
of the period of time for which such LIBOR-based Rate shall have been
elected by the Company. In the event that the Company fails to deliver
the financial statements required under Section 5.b(ii) for any month
which ends a fiscal quarter, interest shall accrue on the Loan at the
Prime Rate and the Applicable Commission Rate and the Applicable Unused
Fee shall be at the highest level shown in the foregoing tables
2
<PAGE>
from the date such financial statements were required to be delivered
until the first interest payment date which follows receipt by the
Banks of such financial statements. For the avoidance of doubt, it is
noted that it is the intent of the parties that the Banks shall be free
to exercise all remedies otherwise provided in this Agreement in the
event of the violation by the Company of the covenants stated in
Section 5.b(ii) or 5.g(ii) notwithstanding the accrual of interest upon
any Loan or the calculation of fees and commissions at a rate
determined in accordance with this definition.
3. REVOLVING LOAN INCREASE. (a) From the date of this Sixth Amendment, and until
April 30, 1997, each Bank agrees to make its Percentage of Advances (all such
Advances by all such Banks are collectively referred to as the "Revolving Loan")
under a revolving line of credit from time to time to the Company of an
aggregate amount not exceeding One Hundred Million and No/100 Dollars
($100,000,000.00), provided that all of the conditions of lending stated in
Section 7 of the Agreement as being applicable to Advances have been fulfilled
at the time of each Advance. On April 30, 1997, the Aggregate Commitment shall
automatically reduce to Seventy-Five Million and No/100 Dollars ($75,000,000.00)
and the Company shall repay to the Banks the principal outstanding in excess of
such amount in accordance with each Bank's Percentage, immediately and without
demand. Each Bank's Percentage of Advances for the temporary increase in the
Aggregate Commitment and after reduction on April 30, 1997 shall be as set forth
in Schedule "A" attached hereto.
(b) The obligation of the Company to repay the Revolving Loan shall be
evidenced by the promissory notes (the "Revolving Notes") of the Company payable
to the order of each Bank and in an amount equal to each Bank's Percentage of
the Aggregate Commitment, which Revolving Notes shall be in the form of Exhibit
"A" attached to this Sixth Amendment.
4. AMENDMENTS TO FINANCIAL COVENANTS. Sections 5.g.(ii) and (iv) of the
Agreement are hereby amended and restated in their entirety as follows:
(ii) Ratio of Liabilities to Tangible Net Worth. At the end of each
month, and through February 27, 1997, the Company shall maintain the
ratio of its consolidated total liabilities to its Tangible Net Worth
at a level not greater than 2.75 to 1.0, at a level not greater than
2.50 on February 28, 1997 through April 30, 1997, and after April 30,
1997, at a level not greater than 2.0 to 1.0. For purposes of testing
compliance with this covenant, the term "liabilities" shall include the
present value of all consolidated capital lease obligations of the
Company and its Subsidiaries, determined as of any date the ratio is to
be tested.
(iv) Ratio of Funded Debt to Capital. The Company shall maintain the
ratio of its Funded Debt to Capital at a level not greater than .625 to
1.0 from the date hereof through April 30, 1997 and at not greater than
.55 to 1.0 at May 1, 1997 and at all times thereafter.
3
<PAGE>
5. AMENDMENT TO NEGATIVE COVENANTS. Section 6.k. of the Agreement is
hereby amended and restated in its entirety as follows:
k. Lease Obligations. The Company shall not incur, and shall not permit
any Subsidiary to incur, obligations under any operating leases if as
a result, the aggregate payment obligations of the Company and its
Subsidiaries under all such leases in any fiscal year would exceed
$2,500,000.00; except:
(i) The existing operating lease for computer equipment and other
items entered into with Banc One Leasing Corp. not to exceed
$5,000,000.00; and
(ii) Those existing obligations disclosed in the "Schedule of
Exceptions" attached as Exhibit "D" to the Agreement.
6. WAIVER OF NONCOMPLIANCE WITH CERTAIN COVENANTS. The Banks
acknowledge that the Company was not in compliance with the Ratio of Liabilities
to Tangible Net Worth covenant set forth in Section 5.g.(ii) of the Agreement or
the Lease Obligations covenant set forth in Section 6.k. of the Agreement at
December 31, 1996. The Banks hereby waive their right to exercise remedies
available under the Agreement as a result of the Company's failure to maintain
its Ratio of Liabilities to Tangible Net Worth or its Lease Obligations at
required levels. Such waiver shall not constitute any agreement or waiver on the
part of the Banks to any further or other default or noncompliance on the part
of the Company or any Subsidiary.
7. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of this
Sixth Amendment, the Agent shall have received, each duly executed and in form
and substance satisfactory to the Banks, the following:
a. This Sixth Amendment;
b. The Revolving Notes;
c. Certified Resolutions of the Board of Directors authorizing the
execution and delivery of the Sixth Amendment, together with an
Officers' Certificate, in form and substance acceptable to the Banks;
and
d. Such other documents as may be reasonably required by the Agent or the
Bank.
8. REPRESENTATIONS AND WARRANTIES. To induce the Banks and the Agent to enter
into this Sixth Amendment, the Company represents and warrants, as of the date
of this Sixth Amendment, and except as otherwise provided in this Sixth
Amendment, that no Event of Default or Unmatured Event of Default has occurred
or is continuing and that the representations and warranties contained in
Section 3 of the Agreement are true and correct, except that the
4
<PAGE>
representations contained in Section 3.d. refer to the latest financial
statements furnished to the Banks by the Company pursuant to the requirements of
the Agreement.
9. REAFFIRMATION OF THE AGREEMENT. Except as amended by this Sixth Amendment,
all terms and conditions of the Agreement shall remain unchanged and in full
force and effect and the Obligations of the Company shall continue to be secured
and guaranteed as therein provided until payment and performance in full of all
Obligations.
10. COUNTERPARTS. This Sixth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[The remainder of this page intentionally left blank.]
5
<PAGE>
IN WITNESS WHEREOF, the Company, the Agent and the Banks, by their
respective duly authorized officers, have executed this Sixth Amendment to
Credit Agreement with effect as of January 29, 1997.
BRIGHTPOINT, INC.
By _____________________________________________
Phillip A. Bounsall, Executive Vice President
and Chief Financial Officer
Address: 6402 Corporate Drive
Indianapolis, Indiana 46278
Attn: Executive Vice President and Chief
Financial Officer
Fax: (317) 387-5493
BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION Individually and as Agent
By _____________________________________________
Brian D. Smith, Vice President and
Senior Relationship Manager
Address: Bank One Center/Tower
111 Monument Circle, Suite 1921
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attn: Manager, Metropolitan Department B
Fax: (317) 321-8079
6
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By _____________________________________________
_____________________________________________
Printed Name & Title
Address: One First National Plaza
Mail Suite 0088
Chicago, Illinois 60670-0088
Attn: Cory M. Olson
Fax: (312) 732-5161
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By _____________________________________________
_____________________________________________
Printed Name & Title
Address: SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Black, Vice President
Fax: (407) 237-6894
CORESTATES BANK, N.A.
By _____________________________________________
_____________________________________________
Printed Name & Title
Address: CoreStates Bank, N.A.
1339 Chestnut Street
Widener Building, 3rd Floor
Philadelphia, Pennsylvania 19101
Attn: Joseph N. Finley
Fax: (215) 973-6745
7
Brightpoint, Inc.
Statement Re: Computation Of Per Share Earnings
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
1994 1995 1996
------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C>
Primary:
Average shares outstanding 13,727 16,438 20,372
Net effect of dilutive stock options and warrants issued after April 7, 1994 -
based on the treasury stock method using average market
price 197 666 768
------- ------- -------
Total 13,924 17,104 21,140
======= ======= =======
Historical income before income taxes $ 7,505 $12,003 $20,123
Deduct pro forma income taxes 2,950 4,696 7,804
Deduct minority interest in subsidiaries' earnings -- -- 1,758
------- ------- -------
Pro forma net income $ 4,555 $ 7,307 $10,561
======= ======= =======
Per share amount $ 0.33 $ 0.43 $ 0.50
======= ======= =======
Fully diluted:
Average shares outstanding 13,727 16,438 20,372
Net effect of dilutive stock options and warrants issued after April 7, 1994 -
based on the treasury stock method using the greater of the year end
market price or the average market
price 549 788 1,222
------- ------- -------
Total 14,276 17,226 21,594
======= ======= =======
Historical income before taxes $ 7,505 $12,003 $20,123
Deduct pro forma income taxes 2,950 4,696 7,804
Deduct minority interest in subsidiaries' earnings -- -- 1,758
------- ------- -------
Pro forma net income $ 4,555 $ 7,307 $10,561
======= ======= =======
Per share amount $ 0.32 $ 0.42 $ 0.49
======= ======= =======
</TABLE>
COMMUNICATING GLOBALLY BRIGHTPOINT, INC. 1996 ANNUAL REPORT
[GRAPHIC]
[LOGO] BRIGHTPOINT, INC. (TM)
WIRELESS LOGISTICS SERVICES
<PAGE>
[GRAPHIC]
CONTENTS
COMMUNICATING GLOBALLY 1
LETTER TO STOCKHOLDERS 2
CAPITALIZING ON GLOBAL OPPORTUNITIES 4
COMMUNICATING GLOBALLY. . .
ONE COUNTRY AT A TIME 6
BRIGHTPOINT, A LEADING VIEW OF THE INDUSTRY 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
CONSOLIDATED FINANCIAL STATEMENTS 14
CORPORATE INFORMATION 24
BRIGHTPOINT, INC.
CORPORATE HEADQUARTERS
INDIANAPOLIS, INDIANA USA
[GRAPHIC]
<PAGE>
COMMUNICATING GLOBALLY
[GRAPHIC]
Brightpoint, Inc. serves the global telecommunications industry as a distributor
of personal wireless equipment and related products and as a leading provider of
integrated logistics services. These services include inventory management,
fulfillment, packaging, programming and a variety of other innovative processes.
Brightpoint's customer base includes wireless carriers, agents, resellers,
dealers and retailers conducting business on six continents and in over 75
countries.
Brightpoint's primary mission is to always be the most efficient market channel
for vendors and the low cost/high service provider for customers. The ultimate
goal is to create a mutually beneficial partnership by serving the industry as
the best total value provider in terms of price, time and reliability.
Brightpoint, Inc., headquartered in Indianapolis, Indiana USA, is publicly
traded on the NASDAQ National Market System under the symbol CELL. All dollar
amounts within this Annual Report refer to U.S. Dollars.
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]
Net Sales
(000s)
---------
1992 $ 96,403
1993 $151,315
1994 $309,227
1995 $419,149
1996 $589,718
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Year ended December 31
(Amounts in thousands, except per share data) 1992 1993 1994 1995 1996
========================================================================
<S> <C> <C> <C> <C> <C>
Net sales $ 96,403 $151,315 $309,227 $419,149 $589,718
Cost of sales 89,580 140,617 290,463 390,950 543,878
Gross profit 6,823 10,698 18,764 28,199 45,840
Selling, general and
administrative expenses 4,944 7,418 11,095 14,813 20,849
------------------------------------------------------------------------
Income from operations 1,879 3,280 7,669 13,386 24,991
Merger expenses -- -- -- -- 2,750
Interest expense, net 38 103 164 1,383 2,118
------------------------------------------------------------------------
Income before income taxes and
minority interest 1,841 3,177 7,505 12,003 20,123
Income taxes (1) -- -- 1,623 3,838 7,328
------------------------------------------------------------------------
Income before minority interest 1,841 3,177 5,882 8,165 12,795
Minority interest in subsidiaries'
earnings -- -- -- -- 1,758
------------------------------------------------------------------------
Net income $ 1,841 $ 3,177 $ 5,882 $ 8,165 $ 11,037
========================================================================
Pro forma net income (1), (2) $ 1,114 $ 1,928 $ 4,555 $ 7,307 $ 12,622
========================================================================
Pro forma net income
per share (2) $ 0.11 $ 0.19 $ 0.32 $ 0.42 $ 0.58
========================================================================
Weighted average common
shares outstanding 9,891 9,891 14,276 17,226 21,594
========================================================================
<CAPTION>
December 31
1992 1993 1994 1995 1996
========================================================================
<S> <C> <C> <C> <C> <C>
Working capital $ 3,072 $ 7,039 $ 20,960 $ 62,219 $143,481
Total assets 18,365 31,283 82,845 119,787 299,045
Long-term obligations -- -- 1,346 602 79,894
Total liabilities 16,029 27,798 62,562 54,930 203,125
Stockholders' equity 2,336 3,485 20,283 64,857 94,982
</TABLE>
(1) See Note 1 to Consolidated Financial Statements.
(2) Excluding the after-tax effect of one-time merger expenses of $2,061 in
1996.
1
<PAGE>
[GRAPHIC]
LETTER TO STOCKHOLDERS
[PHOTO] ROBERT J. LAIKIN
Chairman & Chief Executive Officer
Dear Fellow Stockholders,
I am pleased to report that 1996 was a year of significant accomplishments
for our Company. Record sales and profits share the spotlight with the great
strides we have taken to improve our strategic position toward our ultimate goal
of building value for our stockholders. It is especially gratifying to see that
our dedicated efforts in long-range planning are already producing such
rewarding results. It is also these planning efforts that enable us to create
value in a rapidly growing and changing environment. It would not at all
surprise me that at some point in the not-too-distant future, Brightpoint will
be known as much for its planning abilities as for its leadership in the field
of global wireless logistics services.
The employees of our Company can take pride in their accomplishments of the
last year. They have worked hard to execute the plans that have been derived
from a vision that challenged all to reach out beyond the usual expectations.
Their efforts have kept our Company ahead of the curve during a time of rapid
technological change in the wireless marketplace. They have responded to the
opportunity of transformation, quickly integrating the shifts in process
requirements as the balance moved - as we forecasted - from pure distribution to
a mix of distribution and value-added services.
In 1996 we progressed along four key strategic paths, all designed to
create value for our stockholders: value enhancement, industry positioning,
globalization, and new products and services.
Our value premise is to always be the most efficient channel of
distribution to our vendors and the low cost/high service provider to our
customers, thereby being the best total value provider in terms of price, time
and reliability. Leading manufacturers, including Ericsson, Nokia and, most
recently, Philips Electronics, have entered into expanded vendor relationships
with Brightpoint, recognizing that our Company offers the channel capabilities
that best deliver their products to the market. Efficiencies of operation are
further evidenced in higher gross margins that reflect the dual effort of
product cost reductions and pricing that recognizes the value of timely delivery
and the reliability of transaction execution.
Most exciting perhaps have been our gains in industry positioning. During
the past year we announced strategic relationships with major PCS (Personal
Communications Services) and cellular service providers: Bell South Mobility
DCS; Omnipoint Communications, Inc.; Pocket Communications, Inc.; Powertel,
Inc.; Aerial Communications, Inc.; and MCI Telecommunications Corporation. By
integrating into the carriers' business model via the efficient delivery of
various distribution, fulfillment and inventory management services, our Company
has aligned itself more strongly with the important carrier segment. In
addition, the Company has developed relationships with national retailers, such
as Office Depot and Service Merchandise, to create additional points-of-sale for
our vendors.
The effort to globalize has also been successful. In 1996, our merger with
Allied Communications brought new relationships in Latin America; the formation
of Brightpoint International Ltd. through our joint venture with Technology
Resources International Limited provided ongoing business in Europe, the Middle
East, Africa and Asia along with facilities in the
2
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Market Valuation
(000s)
----------------
Apr-94 $ 28,750
Dec-94 $ 75,154
Dec-95 $120,015
Dec-96 $514,943
United Kingdom and Hong Kong; and the acquisition of Hatadicorp Pty Ltd. gave us
a presence in Australia. As a result of these moves and other global market
developments, sales outside of North America represented more than 50% of
Brightpoint's 1996 annual sales.
Our new products and services in 1996 included a wireless prepaid program
first introduced in the South Africa market, a technology that offers carriers a
new way to market airtime services to a broader demographic customer base. This
and other programs promise continuing downstream revenues and are appropriate
for many other markets. At the same time, our menu of value-added services
continues to expand and the number of new handset models being shipped to the
emerging PCS markets is growing rapidly.
The intersection of these strategic initiatives with certain key
capabilities has produced a model for success that we will continue to refine
and follow into the future. While plans provide vision as well as discipline and
direction, it is our capabilities - our key success factors - that provide the
means of achieving our goals.
The ability to recognize and capitalize on the right opportunities is
considered essential if we are to limit our investments of time, money and
effort to those opportunities that pose the best chances for success.
Attracting, retaining and maximizing our talent has always been a top
priority. To this end, former Chief Financial Officer J. Mark Howell was
appointed President and Chief Operating Officer. This created an opportunity at
the presidential level to closely monitor the development of the Company as it
relates to the strategic plan and marketplace dynamics. I remained as Chairman
and Chief Executive Officer with my continuing focus on the creation and
development of new opportunities and strategic alliances that will continue to
enhance Brightpoint's position as a leader in the wireless industry. Also in
1996, Executive Vice President T. Scott Housefield accepted the position as
President of Brightpoint International Ltd. His depth of knowledge and
commitment to the international marketplace are among the strongest in the
industry. This desire to maximize our human resource potential can be seen in
all levels of Brightpoint and has facilitated the creation of a culture and
attitude that allows us to perform at the highest levels in the wireless
industry.
The maintenance of and access to adequate capital has allowed us to
effectively drive growth. We were able to capitalize on opportunities as they
presented themselves through mergers and acquisitions. This position of capital
strength also helped in attracting new wireless vendors such as Philips and new
wireless service providers such as MCI.
Developing the best infrastructure to provide solutions for our customers
was addressed through investment in a state-of-the-art Informix-based Fourgen
Supply Chain Management Information System that supports our operation and
provides essential EDI links to vendors and customers and a production facility
that is at the cutting edge of fulfillment and packaging capabilities.
We sincerely thank our stockholders for their continued support as we look
forward to the challenges of 1997. We believe that we have the vision, the plan
and the capability to continue to create value for you, our stockholders.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Stockholders' Equity
(000s)
--------------------
1992 $ 2,336
1993 $ 3,485
1994 $20,283
1995 $64,857
1996 $94,982
Sincerely,
/s/ Robert J. Laikin
Robert J. Laikin
Chairman & Chief Executive Officer
3
<PAGE>
[GRAPHIC]
CAPITALIZING ON GLOBAL OPPORTUNITIES
Brightpoint's approach to building stockholder value is evidenced by the
Company's focus on enhancing value, establishing and maintaining industry
position, expanding globally and developing and integrating new products and
services.
SUSTAINING VALUE
Achieving the goal of being the industry's best total value provider in terms of
price, time and reliability through innovative solutions is how Brightpoint is
creating a sustainable competitive advantage in all aspects of wireless
logistics services. In 1996, we strengthened these advantages and enhanced our
ability to serve rapidly increasing demands.
REDEFINING PROACTIVITY
Managing the caliber of growth necessary to outpace a dynamic industry continued
to require a highly aggressive posture on many strategic levels. In 1996, this
was facilitated by redefining proactivity in approaching many mission critical,
long-range goals designed to create a sustainable competitive environment. Our
planning efforts enabled us to forecast and meet demand through systems
development, capacity enhancement and management, continued international
expansion and resource maximization throughout the expanding global network.
Many important infrastructure strides were made that will play a critical role
in maintaining a leadership position in the international wireless marketplace.
MANAGING THE GLOBAL PROCESS
At the forefront of efforts in systems development came Brightpoint's largest
financial and human resource commitment ever in the area of information systems.
This commitment allows better control through standardization of global
activities, while anticipating and managing customer inventories and profiting
from the growing logistics needs of various constituencies. These constituencies
include carriers and service providers around the world, the largest wireless
product manufacturers and a wide variety of diverse retail channels.
While this focus on the
management of and access to global information is an investment in our control
structure, its value in customer attraction, satisfaction and enhancement is
already contributing significantly to growth. It allows for aggressive
commitments to be made that meet customer demands with the industry's highest
level of confidence and satisfaction.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Worldwide Cellular Subscribers
(000s)
------------------------------
1992 22,652
1993 33,922
1994 54,467
1995 86,596
1996 123,237
4
<PAGE>
[PHOTO]
(Left to right)
T. SCOTT HOUSEFIELD, President,
Brightpoint International Ltd.
J. MARK HOWELL, President & COO
ROBERT J. LAIKIN, Chairman & CEO
-------------------------------------------
ENHANCING CAPACITIES
Another customer focused commitment came with the opening of a new 145,000
square foot distribution-fulfillment center in Indianapolis. It was designed
from the ground up to provide every tool necessary to continue to enhance the
Company's position as the industry's most efficient distribution channel.
Additional facilities throughout the world, including our newest distribution
center in Sparks, Nevada, enable us to provide responsive service on a global
basis.
A LEADING POSITION
While many vendors compete within the wireless industry, Brightpoint's strength
lies in a position of partnership and leadership. This position was created
through a thorough understanding of the needs within each distribution channel
and development of the knowledge and resources necessary to create successful
solutions.
A TRUE INDUSTRY PARTNERSHIP
Our success in 1996 is the result of global efforts that have created a
distribution channel setting new levels of efficiency with innovative
value-added services. This has been in response to a changing environment that
has carriers, manufacturers, agents and retailers focusing on their core
competencies while finding the true value of outsourcing everything from basic
distribution to sophisticated wireless logistics services including inventory
management, end-user fulfillment, handset programming, and custom packaging and
accessory programs.
This needs-based philosophy keeps Brightpoint in front of the international
wireless community as a leader, an innovator and a true partner.
[GRAPHIC] 5
<PAGE>
COMMUNICATING GLOBALLY . . . ONE COUNTRY AT A TIME
[PHOTOS]
Brightpoint serves the global wireless community through facilities
in the United States, China, Hong Kong, the United Kingdom,
Australia, South Africa and Singapore.
Brightpoint recognizes that by the year 2000 as many as 250 million new
subscribers will be added to the global wireless subscriber base. The Company
has responded to this growth potential with a dynamic expansion and the
capitalization on opportunities throughout the world.
In 1993, Brightpoint's sales outside of the United States accounted for less
than 3% of total sales. In 1996, the total is over 50% and is on an upward
trend.
While some of the success is due to the expanding marketplace, the majority
comes from our philosophy of matching our areas of expertise with the needs of a
given country allowing for continued growth.
SIX CONTINENTS, 37 LANGUAGES, WORLDWIDE OPPORTUNITIES
Brightpoint's philosophy of in-country partnering continues to create an
atmosphere conducive to capitalizing on the phenomenal global demand for
wireless products and sophisticated value-added logistics services. Global
wireless penetration is currently less than 2%. But the demand is solid and
growing. In fact, many countries are foregoing creating or expanding their
traditional landline systems for the efficiencies provided by the new wireless
technologies.
Brightpoint's involvement in these countries goes beyond simply recognizing
demand, and into creating solutions that best meet the needs of the marketplace.
This is evidenced by the success of the first-ever prepaid wireless venture in
South Africa. Brightpoint's willingness to establish a solid in-country
presence, partnership and cultural understanding contributed significantly to
the solutions that led to the outstanding success of this program. This program
is designed to be replicable, and with modifications, can be utilized as a
marketing program in centers of high wireless demand throughout the world.
EXPANDING POTENTIAL
On the North and Latin America fronts, expansion was expedited by the
acquisition of Allied Communications, which significantly enhanced sales and
distribution capabilities while facilitating ongoing penetration in many areas
vital to strategic directions in the North and Latin America markets.
6
<PAGE>
The ability to serve the demand in a wide variety of countries in Europe, the
Middle East, Africa and Asia-Pacific was reinforced by the formation of
Brightpoint International Ltd., a 50-50 joint venture with Technology Resources
International Limited. The joint venture proved to be an efficient and effective
means of creating and capitalizing on a diverse multi-continent presence.
Effective November 1996, Brightpoint acquired complete ownership of the venture.
Also of note was Brightpoint's entry into the Australian continent through the
acquisition of Hatadicorp Pty Ltd. (Hatadi). This acquisition strengthens
Brightpoint's existing position in the Asia-Pacific market, while figuring
prominently in Brightpoint's strategic expansion plans.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Operating Income
(000s)
----------------
1992 $ 1,879
1993 $ 3,280
1994 $ 7,669
1995 $13,386
1996 $24,991
MAXIMIZING MANAGEMENT LEADERSHIP
With acquisitions and expansion came the need for a positive realignment and
enhancement of the management team. The goal was to maximize individual talents
to best manage a high level of continuous growth by allowing mission critical
functions to be performed at the most effective level anywhere in the world.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Operating Income Margin
-----------------------
1992 1.95%
1993 2.17%
1994 2.48%
1995 3.19%
1996 4.24%
CREATING OPPORTUNITIES THROUGH INNOVATION
The wireless industry is rapidly evolving in terms of product offerings,
marketing needs and technological advances. Each of these areas presents
opportunities for growth and leadership. The migration to new technologies and
the introduction of new services will continue to open opportunities for those
willing to create a vision based on market dynamics.
NEW PRODUCTS, NEW SERVICES
While consumers are attracted to new, more advanced handsets, they are also
being heavily targeted by Personal Communications Services (PCS) carriers with
promises of enhanced performance. Brightpoint is solidly in position to
capitalize on these market dynamics with both vendor and carrier-focused
programs and services.
Brightpoint also continues to lead the way in offering the value-added services
that accomplish the goal of moving handsets while creating substantial income
streams.
The Brightpoint management team is committed to maintaining a leadership
position in these and other areas of growth and opportunity throughout the
global wireless market.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Pro Forma Net Income Per Share
------------------------------
1992 $0.11
1993 $0.19
1994 $0.32
1995 $0.42
1996 $0.58
[GRAPHIC] 7
<PAGE>
BRIGHTPOINT, A LEADING VIEW OF THE INDUSTRY
[PHOTO]
CREATING VALUE
Opportunities for Brightpoint to grow revenues and create stockholder value will
abound as global wireless telecommunications expands. Guided by the Company's
ongoing strategic planning effort, Brightpoint will focus only on those
opportunities that support its key value discipline of being the industry's most
efficient channel of distribution and best total value supplier to its customers
in terms of price, time and reliability.
NEW TECHNOLOGIES, NEW OPPORTUNITIES
Marketing of the new Personal Communications Services in the United States
combined with the continued global proliferation of wireless standards and
platforms represents a new era of incremental growth in wireless penetration.
However, there are sound reasons to believe that Brightpoint's participation in
this new growth will outstrip the rates of mere penetration growth.
Since Brightpoint's core activities are closely linked to handset movement and
placement, the Company will share in all aspects of the booming replacement
market. As consumers, motivated by digital conversion by carriers and other
market and technological factors, migrate from one service provider to another,
a significant number of handset sales will be generated. Likewise, as newer,
smaller, better featured units are introduced, consumers will continue to
upgrade. While these activities do not impact penetration rates, they do have a
positive effect on handset movement.
PROVIDING SERVICES THAT CREATE RELATIONSHIPS
The evolving role of the service provider also bodes well for Brightpoint. More
and more, carriers are realizing the value of focusing on their primary business
of providing airtime access while outsourcing services not directly related to
this function. Such services include handset and accessory procurement and
distribution, marketing plan implementation, inventory management, programming,
packaging, fulfillment and other related activities. Brightpoint is clearly an
industry leader, providing a wide range of these services to carriers throughout
the world. Our success in these endeavors has necessitated the rapid expansion
of distribution and fulfillment capabilities in Indianapolis and the addition of
distribution centers serving global markets.
8
<PAGE>
PROVIDING INTERNATIONAL SOLUTIONS
The international market will continue to offer exciting growth potential. With
average penetration rates still under 2%, sales of wireless devices and services
should be strong for many years to come. The absence or inadequacy of wired
systems in many parts of the world also suggests rapid future acceptance of
wireless communications solutions. The ongoing global trend toward privatization
and reduced regulation of telecommunications should accelerate the deployment of
the capital, resources and infrastructure needed to support wireless services in
many parts of the world where the economic and political climate is receptive.
REALIZING THE WIRELESS DATA POTENTIAL
One of the more challenging future product opportunities is wireless data, a
part of the industry that to date has been long on promise and short on
delivery. Certain developments now suggest that the heretofore unrealized
forecasts may soon come to fruition. Key to the resurgent interest in wireless
data is the deployment of digital PCS systems along with their two-way messaging
capability. This seems to be spurring cellular providers to upgrade their
existing analog systems and to take new interest in CDPD (Cellular Digital
Packet Data) as a viable wireless data platform. Handset manufacturers are
responding with integrated voice-centric/data-capable devices. Computer
manufacturers are answering with data-centric/voice-capable computing devices.
It's quite possible that the market might consider other options still as the
trend toward smaller, lighter, more user friendly devices might actually
outweigh all other influences.
Brightpoint is pursuing vendor and channel relationships that will allow the
Company to best participate in this emerging industry segment.
The advent of wireless data also opens the doors to other intriguing new product
possibilities. Monitoring devices operating on wireless frequencies can offer an
automated, accurate and cost-efficient means of collecting data from utility
meters, security systems, industrial sites, vending and office machines.
Wireless local area networks will challenge traditional LANs in hard-to-wire
environments. Paging capabilities will expand to include two-way messaging and
data retrieval from information services, the internet and corporate intranets.
Like other data features, some paging capabilities will converge with
voice-centric devices resulting into combined wireless pager-phones. It is
likely that many of these opportunities will play to Brightpoint's strengths,
offering the prospect of fast incremental growth and product diversity.
CAPITALIZING ON NEW EFFICIENCIES
Wireless local loop is another future development that could have enormous
impact on Brightpoint's future. As wireless technology improves spectrum
efficiencies, and as the cost of delivery platforms declines, it is becoming
increasingly apparent that wireless local loop could challenge traditional wired
access networks. The prospects in many third world nations and in certain rural
areas of developed nations look particularly promising.
SEAMLESS GLOBAL POTENTIAL
Satellite-based communications will also grow in importance over the next
several years. Operational systems have already been deployed and others are in
various stages of development. Satellite-based telecommunications offer the best
potential total solution for seamless, global access. Brightpoint's product
management and value-added service capabilities should integrate well with the
needs of this emerging product category.
DEFINING FUTURE OPPORTUNITIES
As Brightpoint's sales mix includes increasingly more value-added services, it
becomes necessary to assess the future potential of technology as it affects
products, and to prepare for the impact on the Company's production and service
processes. Information systems and their integration with our customers and
vendors will play a key role in defining future business opportunities.
Similarly, the continued employment of automated processes to reduce cost,
increase timeliness and insure quality will do much to strengthen Brightpoint's
value proposition to the industry.
AHEAD OF THE CURVE
Brightpoint finds itself engaged in one of the world's fastest growing
industries, one marked by sweeping and constant change. Committed to an ongoing,
high-level effort of strategic planning, the Company has dedicated considerable
resources to constantly evaluate and adapt to the evolving landscape.
Brightpoint's executive management team believes that the Company is positioned
ahead of the curve to fully capitalize on many of the technological and market
developments on the horizon.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
================================================================================
OVERVIEW
This discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and accompanying notes. Effective June 7, 1996,
Brightpoint, Inc. merged with Allied Communications in a pooling-of-interests
transaction. Consistent with pooling-of-interests accounting treatment,
financial information presented for all periods reflects the combined financial
condition and results of operations. Also in 1996, the Company formed
Brightpoint International Ltd. and acquired Hatadicorp Pty Ltd. to form
Brightpoint Australia. See Note 2 to the Consolidated Financial Statements for
additional information on these transactions.
RESULTS OF OPERATIONS
Net Sales
1994 1995 Change 1996 Change
- --------------------------------------------------------------------------------
Net sales $309,227 $419,149 36% $589,718 41%
- --------------------------------------------------------------------------------
Net sales for 1996 increased significantly from the prior year as worldwide
demand for wireless handsets and related accessories continued to accelerate.
The increased demand for wireless products was fueled by increasing penetration
of wireless handsets in many world markets and by increased demand for
replacement or upgraded equipment. The Company formed Brightpoint International
Ltd. in August 1996. This commitment to the Europe, Middle East and Africa;
Asia-Pacific; and Latin America markets, resulted in significant sales growth in
markets outside of the United States. Total units handled by the Company in 1996
increased by 52% over units handled in 1995. Units handled represent units sold
or fulfilled for customers.
1994 1995 1996
- --------------------------------------------------------------------------------
Net sales by division:
North America 81% 64% 49%
Asia-Pacific -- 2% 21%
Latin America 13% 23% 17%
Europe, Middle East and Africa 6% 11% 13%
- --------------------------------------------------------------------------------
Historically, period-to-period unit prices for wireless handsets have declined
significantly, however, in 1996 the average selling price of products sold by
the Company increased by approximately 3% due to an increase in sales of higher
priced digital wireless phones and a slowing of the price degradation for analog
products experienced in prior years.
Net sales in 1996 were comprised of sales of wireless handsets (88% of net
sales), sales of wireless accessories (11%) and fees generated from the
provision of value-added logistics services (1%).
Net sales for 1995 increased from 1994 as a result of increased demand primarily
in the North and Latin America markets. Unit sales increased by 119% in 1995
compared to 1994. This increase was partly offset by a 28% decline in average
sales prices from 1994.
Gross Profit
1994 1995 Change 1996 Change
- --------------------------------------------------------------------------------
Gross profit $18,764 $28,199 50% $45,840 63%
Gross margin percentage 6.07% 6.73% 7.77%
- --------------------------------------------------------------------------------
The 1996 increase in gross profit is due to the increase in unit sales and the
increase in the gross margin percentage. The gross margin percentage increase is
due to the execution of the Company's strategy to provide higher margin
value-added logistics services, as well as increased unit sales in which the
Company earns higher margins. In addition, the Company made a concerted effort
to reduce lower margin sales to other distributors in the North and Latin
America markets. Although this disciplined change in the North and Latin America
sales mix accounted for slower growth in those markets, the result was an
enhancement in the Company's gross margin.
The Company provides value-added logistics services to wireless carriers and
wireless handset and accessory manufacturers. These services consist of
inventory procurement and management, fulfillment, programming, light assembly,
kitting and packaging and various other services to assist the carriers and
manufacturers in
10
<PAGE>
developing efficient processes and channels for their products and services.
Although these services represent a relatively small percentage of net sales,
the impact on gross profit is much greater.
The 1995 increase in gross profit is due primarily to an increase in unit sales.
In addition, an increase in the unit sales of higher margin accessories helped
to enhance the gross margin percentage.
Selling, General And Administrative Expenses
1994 1995 Change 1996 Change
- --------------------------------------------------------------------------------
Selling, general and
administrative
expenses $11,095 $14,813 34% $20,849 41%
As a percent
of net sales 3.59% 3.53% 3.54%
- --------------------------------------------------------------------------------
The 1996 increase in selling, general and administrative expenses is due
primarily to the increased business activities of the Company and acquisitions
which opened new markets to the Company. The Company increased its staff in
several areas during the year, including management, operations, sales and
marketing, and information systems. These staff enhancements were necessary to
support the expanded level of business generated by the Company. The increase is
also due to increases in depreciation expense related to investments in
information systems and leasehold improvements, rent expense due to expanded
facilities and various marketing costs including travel, promotions and
commissions.
The 1995 increase in selling, general and administrative expenses is due
primarily to the increased level of business activity generated by the Company.
Expanded operations were supported by increases in compensation expense, rent
expense, travel costs and an increase in the allowance for doubtful accounts.
Income From Operations
1994 1995 Change 1996 Change
- --------------------------------------------------------------------------------
Income from
operations $ 7,669 $ 13,386 75% $24,991 87%
As a percent
of net sales 2.48% 3.19% 4.24%
- --------------------------------------------------------------------------------
The 1996 and 1995 increases in income from operations are due primarily to
increases in unit sales and the Company's ability to enhance its gross margin
and hold selling, general and administrative expenses relatively constant as a
percent of net sales.
Net Income And Pro Forma Net Income
1994 1995 Change 1996 Change
- --------------------------------------------------------------------------------
Net income $ 5,882 $ 8,165 39% $11,037 35%
Pro forma
net income $ 4,555 $ 7,307 60% $12,622 73%
As a percent
of net sales 1.47% 1.74% 2.14%
Pro forma
net income
per share $ 0.32 $ 0.42 31% $ 0.58 38%
Weighted average
shares
outstanding
(000s) 14,276 17,226 21,594
- --------------------------------------------------------------------------------
The 1996 increase in net income and pro forma net income is a result of
increased income from operations partially offset by interest expense relating
primarily to bank debt obtained for working capital purposes and by the income
attributable to minority interests.
Generally accepted accounting principles require that certain charges related to
pooling-of-interests transactions be expensed in the period in which the
transaction is consummated. Such charges related to the Allied Communications
merger, in the amount of $2.1 million net of applicable taxes, were recognized
as expense in the quarter ended June 30, 1996. Pro forma amounts exclude the
effect of this one-time charge.
Prior to the merger between Brightpoint, Inc. and Allied Communications, Allied
Communications had elected to be treated as a Subchapter S corporation and was,
therefore, not subject to federal and state income taxes. Prior to its April
1994 initial public offering, Brightpoint was also treated as a Subchapter S
corporation. Pro forma amounts provide for income taxes on the income not
previously taxed at the corporate level.
The increase in weighted average shares outstanding is due primarily to an
October 1995 equity offering of 3,615,000 Company shares, 750,000 shares used in
the acquisition of Brightpoint International Ltd. in the fourth quarter of 1996,
and the dilutive impact of stock options and warrants outstanding.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
1994 1995 1996
- --------------------------------------------------------------------------------
Cash, cash equivalents and
marketable securities $ 441 $ 726 $ 32,255
Working capital $ 20,960 $ 62,219 $ 143,481
Current ratio 1.34:1 2.15:1 2.16:1
Average days sales
in accounts receivable 40 46 48
Average inventory turnover 12 9 8
Cash used by operating activities $ (10,978) $ (33,200) $ (31,525)
Cash used by investing activities $ (468) $ (2,780) $ (30,634)
Cash provided by financing activities $ 11,295 $ 36,265 $ 75,984
- --------------------------------------------------------------------------------
The Company's primary cash requirements have been to fund increased levels of
accounts receivable and inventories. The Company has historically satisfied its
working capital requirements principally through operations, vendor financing,
bank borrowings and the issuance of equity securities.
Increases in working capital were primarily attributable to increased business
activity resulting in increased levels of accounts receivable and inventories.
These increases were partly financed by increases in accounts payable and bank
lines of credit. The Company has also generated working capital through the
exercise of stock options and warrants and, in 1995, through a public offering
of common stock.
The increases in cash used by operating activities were primarily attributable
to increases in accounts receivable and inventories. The increases in cash used
by investing activities were primarily attributable to capital expenditures
relating to the purchase of information systems equipment and software, and
furniture and fixtures. In 1996, investing activities also included cash paid in
connection with the acquisition of Brightpoint International, and investments in
certain marketable and other securities. The increases in net cash provided by
financing activities are primarily attributable to advances against the line of
credit agreements, proceeds from the Company's public offering of Common Stock
in October 1995 and exercises of options and warrants.
The Company borrows funds under a credit agreement with Bank One, Indianapolis,
NA, as agent for a group of banks (the bank), which provides for borrowings
under a line of credit up to $100 million. The Company also has an additional
$25 million credit facility specifically for Brightpoint International Ltd. and
its subsidiaries under an agreement with First National Bank of Chicago, as
agent for a group of banks. Borrowings on the lines of credit bear interest at
the bank's prime rate less up to 100 basis points or at LIBOR plus 75 to 175
basis points depending upon the ratio of the Company's funded debt to capital.
At December 31, 1996, the Company was in compliance with the covenants of the
credit agreements. See Note 5 to the Consolidated Financial Statements for
additional information on the credit agreements.
Substantially all of the Company's assets, including its inventories and
receivables, are pledged to the bank as collateral and the Company is prohibited
from incurring additional indebtedness, except for trade indebtedness, certain
of which is subordinated to the Company's indebtedness to the banks. The
Company's inability to incur additional indebtedness could, under certain
circumstances, limit the Company's ability to expand its operations. In addition
to covenants requiring the maintenance of certain financial ratios, the
Company's credit agreements limit or prohibit the Company, subject to certain
exceptions, from declaring or paying cash dividends, making capital
distributions or other payments to stockholders, merging or consolidating with
other corporations, forming subsidiaries, selling all or substantially all of
its assets, creating liens or security interests on the Company's assets,
entering into transactions with affiliates and making payments on subordinated
indebtedness without the bank's prior consent.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Working Capital
(000s)
---------------
1992 $ 3,072
1993 $ 7,039
1994 $ 20,960
1995 $ 62,219
1996 $143,481
12
<PAGE>
The Company has increasingly emphasized the sale of products on open account
terms and has purchased increased levels of inventories to support an expanding
customer base, which has resulted in increased accounts receivable days
outstanding and a decrease in inventory turns. The Company believes that the
ability to offer these credit terms provides it with a competitive advantage.
The Company seeks to maintain an average of approximately 30 days of inventory
on hand in addition to making opportunistic spot buys. These spot buys occur
frequently at year end and cause inventories at the end of the year to be higher
on a relative basis than at other times during the year.
At December 31, 1996, the Company's allowance for doubtful accounts was $1.1
million, which the Company believes is currently adequate for the size and
nature of its receivables. Bad debt expense accounted for less than 1.0% of the
Company's net sales for 1994, 1995 and 1996. Nevertheless, delays in collection
or the uncollectibility of accounts receivable could have an adverse effect on
the Company's liquidity and working capital position. In connection with the
Company's expanded operations, the Company has offered open account terms to
additional customers, which subjects the Company to increased credit risk,
particularly in foreign markets. The Company seeks to minimize losses on credit
sales by closely monitoring its customers' credit worthiness and by seeking to
obtain letters of credit or similar security in connection with certain open
account sales to customers located in foreign markets.
The Company has no material commitments for capital expenditures.
INFLATION AND FOREIGN CURRENCY
Inflation has historically not had a material effect on the Company's
operations. The Company frequently transacts business in currencies other than
its functional currency and, therefore, is exposed to some risk to exchange rate
fluctuations. The Company has not experienced significant exchange rate gains or
losses historically, however, increasing trade activity in foreign markets or
large fluctuations in exchange rates could generate more significant gains or
losses from these arrangements. The Company periodically uses forward, futures
or option contracts to hedge identifiable positions.
The Company does not enter into forward, futures or option contracts for
speculative purposes, however, the hedge transactions could subject the Company
to additional risks.
FUTURE OPERATING RESULTS
The following discussion and analysis, and other statements throughout this
Annual Report which are not based on historical fact, contain forward-looking
statements, and actual results may differ materially. Future trends for net
sales and profitability are difficult to predict due to a variety of risks and
uncertainties, including among others i) business conditions and growth in the
Company's markets, including currency and political risks in markets in which
the Company operates, ii) availability and prices of wireless products, iii)
successful integration of any future acquisitions, iv) numerous competitive
factors, v) the highly dynamic nature of the industry in which the Company
participates, and vi) market trends such as the rollout of new technologies,
including but not limited to Personal Communications Services (PCS), and changes
in the demand for value-added services.
The Company expects net sales to continue to grow in all of its divisions and to
price its products and services to obtain reasonable operating margins. Because
of the dynamic nature of the industry in which the Company operates, future
growth rates are difficult to estimate with precision.
The Company anticipates gross margin percentages to increase as the impact of
the improved sales mix and value-added services continues to enhance gross
profit. Gross profit and margins may be affected by product, freight and other
costs, price competition and by changes in the mix of the Company's products,
services and customers.
The Company expects that selling, general and administrative expenses will
continue to increase in absolute dollars in connection with higher levels of
sales. These costs should remain relatively constant as a percentage of net
sales.
Because of the aforementioned uncertainties affecting the Company's future
operating results, past performance should not be considered to be a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Brightpoint, Inc.
We have audited the accompanying consolidated balance sheets of Brightpoint,
Inc. as of December 31, 1996 and 1995, and the related consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
1995 and 1994 financial statements of Allied Communications, which are included
in the consolidated financial statements, which statements reflect total assets
constituting 33% in 1995, and net sales constituting 36% in 1995 and 45% in 1994
of the related consolidated totals. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to data included for Allied Communications, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Brightpoint, Inc. at December 31, 1996
and 1995, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Indianapolis, Indiana
January 28, 1997
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Brightpoint, Inc. is responsible for the preparation and
integrity of the Company's consolidated financial statements and all related
information appearing in this Annual Report. The Company maintains accounting
and internal control systems which are intended to provide reasonable assurances
that assets are safeguarded against loss from unauthorized use or disposition,
that transactions are executed in accordance with management's authorization and
that accounting records are reliable for preparing financial statements in
accordance with generally accepted accounting principles.
The financial statements for each of the years covered in this Annual Report
have been audited by independent auditors, who have provided an independent
assessment as to the fairness of the financial statements.
The Board of Directors has appointed an Audit Committee whose members are not
employees of the Company. The Committee meets with management and the
independent auditors to review the results of their work and to satisfy itself
that their responsibilities are being properly discharged. The independent
auditors have full and free access to the Audit Committee and have discussions
with the Committee regarding appropriate matters, with and without management
present.
/s/ Robert J. Laikin /s/ J. Mark Howell /s/ Phillip A. Bounsall
Robert J. Laikin J. Mark Howell Phillip A. Bounsall
Chairman & CEO President & COO Executive Vice President & CFO
14
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31
1994 1995 1996
------------------------------------------------
<S> <C> <C> <C>
Net sales $309,227 $419,149 $589,718
Cost of sales 290,463 390,950 543,878
------------------------------------------------
Gross profit 18,764 28,199 45,840
Selling, general and administrative expenses 11,095 14,813 20,849
------------------------------------------------
Income from operations 7,669 13,386 24,991
Merger expenses -- -- 2,750
Interest expense, net 164 1,383 2,118
------------------------------------------------
Income before income taxes and
minority interest 7,505 12,003 20,123
Income taxes 1,623 3,838 7,328
Income before minority interest 5,882 8,165 12,795
Minority interest in subsidiaries' earnings -- -- 1,758
------------------------------------------------
Net income $ 5,882 $ 8,165 $ 11,037
================================================
Pro forma data (unaudited):
Historical income before income taxes $ 7,505 $ 12,003 $ 20,123
Pro forma income taxes 2,950 4,696 7,804
Minority interest in subsidiaries' earnings -- -- 1,758
Pro forma net income $ 4,555 $ 7,307 $ 10,561
================================================
Pro forma net income excluding
the after-tax effect of one-time
merger expenses $ 4,555 $ 7,307 $ 12,622
================================================
Net income per share:
Pro forma $ 0.32 $ 0.42 $ 0.49
================================================
Pro forma excluding the
after-tax effect of one-time
merger expenses $ 0.32 $ 0.42 $ 0.58
================================================
Weighted average common shares outstanding 14,276 17,226 21,594
================================================
</TABLE>
See accompanying notes.
15
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
================================================================================
December 31
1995 1996
--------------------
Assets
Current assets:
Cash and cash equivalents $ 726 $ 14,255
Marketable securities -- 18,000
Accounts receivable (less allowance for doubtful
accounts of $691 in 1995 and $1,115 in 1996) 57,288 113,119
Inventories 56,313 112,916
Other current assets 2,220 8,422
--------------------
Total current assets 116,547 266,712
Property and equipment, net 2,934 8,207
Goodwill -- 15,232
Other assets 306 8,894
--------------------
Total assets $119,787 $299,045
====================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 48,665 $123,231
Notes payable 5,663 --
--------------------
Total current liabilities 54,328 123,231
Notes payable -- 79,564
Deferred taxes 48 330
Stockholder loans 554 --
Minority interest -- 938
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 1,000
No shares issued or outstanding -- --
Common stock, $.01 par value:
Authorized shares - 25,000
Issued and outstanding shares - 19,894 in 1995
and 21,636 in 1996 199 216
Additional paid-in capital 50,757 73,206
Foreign currency translation adjustment -- 97
Unrealized gain on marketable securities, net of tax -- 3,929
Retained earnings 13,901 17,534
--------------------
Total stockholders' equity 64,857 94,982
--------------------
Total liabilities and stockholders' equity $119,787 $299,045
====================
See accompanying notes.
16
<PAGE>
Consolidated Statements of Stockholders' Equity
(Amounts in thousands)
================================================================================
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Other Earnings Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 9,891 $ 99 $ -- $ -- $ 3,386 $ 3,485
S corporation dividends -- -- -- -- (1,161) (1,161)
Transfer of Brightpoint, Inc.
undistributed S corporation
earnings -- -- 1,006 -- (1,006) --
Issuance of common stock 5,390 54 12,023 -- -- 12,077
Net income -- -- -- -- 5,882 5,882
-----------------------------------------------------------------------------
Balance at December 31, 1994m 15,281 153 13,029 -- 7,101 20,283
S corporation dividends -- -- -- -- (1,365) (1,365)
Issuance of common stock 3,615 36 33,510 -- -- 33,546
Exercise of stock
options and warrants 998 10 2,942 -- -- 2,952
Tax benefit of exercise
of stock options -- -- 1,276 -- -- 1,276
Net income -- -- -- -- 8,165 8,165
-----------------------------------------------------------------------------
Balance at December 31, 1995 19,894 199 50,757 -- 13,901 64,857
S corporation dividends -- -- -- -- (289) (289)
Transfer of Allied Companies
undistributed S corporation
earnings -- -- 7,115 -- (7,115) --
Exercise of stock options
and warrants 992 10 5,939 -- -- 5,949
Tax benefit of exercise
of stock options -- -- 1,302 -- -- 1,302
Common stock issued in
connection with the purchase of
Brightpoint International Ltd. 750 7 8,093 -- -- 8,100
Foreign currency
translation adjustment -- -- -- 97 -- 97
Unrealized gain on marketable
securities, net of tax -- -- -- 3,929 -- 3,929
Net income -- -- -- -- 11,037 11,037
-----------------------------------------------------------------------------
Balance at December 31, 1996 21,636 $ 216 $ 73,206 $ 4,026 $ 17,534 $ 94,982
=============================================================================
</TABLE>
17
<PAGE>
Consolidated Statements of Cash Flows
(Amounts in thousands)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31
1994 1995 1996
-----------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 5,882 $ 8,165 $ 11,037
Adjustments to reconcile net income
to net cash used by operating
activities:
Minority interest -- -- 1,758
Depreciation and amortization 151 217 1,069
Merger expenses -- -- 2,750
Deferred taxes -- -- 282
Changes in operating assets
and liabilities:
Accounts receivable (21,648) (15,776) (43,989)
Inventories (28,993) (17,094) (45,771)
Other current assets (867) (1,176) (5,180)
Accounts payable and accrued expenses 34,497 (7,536) 46,519
-----------------------------------------------
Net cash used by operating activities (10,978) (33,200) (31,525)
Investing activities
Capital expenditures (468) (2,521) (5,965)
Aquisition of marketable securities -- -- (11,431)
Aquisition of Brightpoint International Ltd. -- -- (5,000)
Aquisition of Hatadicorp Pty Ltd. -- -- (912)
Cash acquired in formation of Brightpoint
International Ltd. -- -- 352
Increase in other assets -- (259) (7,678)
-----------------------------------------------
Net cash used by investing activities (468) (2,780) (30,634)
Financing activities
Net proceeds from notes payable 3,448 648 71,740
Proceeds from stock offerings 12,189 33,546 --
Proceeds and tax benefit from exercise of stock options
and warrants -- 4,228 7,255
Payments on long-term debt (4,015) -- --
Proceeds from (payments on) stockholder loans 842 (792) (554)
Merger expenses -- -- (2,168)
S corporation distributions (1,169) (1,365) (289)
-----------------------------------------------
Net cash provided by financing activities 11,295 36,265 75,984
Effect of exchange rate changes on cash
and cash equivalents -- -- (296)
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents (151) 285 13,529
Cash and cash equivalents at beginning of year 592 441 726
-----------------------------------------------
Cash and cash equivalents at end of year $ 441 $ 726 $ 14,255
===============================================
</TABLE>
See accompanying notes.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Brightpoint, Inc. (the Company) distributes wireless communications equipment
and related products globally and provides related services including inventory
management, fulfillment, packaging and programming. The Company distributes its
products through a global customer network of wireless carriers, agents,
resellers, dealers and retailers throughout the world.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary, Brightpoint International Ltd. (see Note 2 -- Merger
And Acquisitions), and Brightpoint International Ltd.'s majority-owned foreign
subsidiaries. Significant intercompany accounts and transactions have been
eliminated in consolidation.
On June 7, 1996, the Company completed a merger with Allied Communications,
Inc., Allied Communications of Florida, Inc., Allied Communications of Georgia,
Inc., Allied Communications of Illinois, Inc., and Allied Communications of
Puerto Rico, Inc. (Allied Communications), which were engaged in substantially
the same business as the Company. The transaction was accounted for using the
pooling-of-interests method and accordingly, the Company's financial statements
have been restated to reflect the consolidated balance sheets and consolidated
results of operations of both entities as if the merger had been in effect for
all periods presented.
Pro forma net income per share for all periods presented is computed after
taking into consideration the 3,796,875 shares of the Company's common stock
that was exchanged for all of the outstanding common stock of Allied
Communications. Further information pertaining to the merger is presented in
Note 2 -- Merger And Acquisitions.
There were no material differences between the accounting policies of the
Company and Allied Communications. Certain amounts in Allied Communications'
historical combined financial statements were reclassified to conform with the
presentation used by the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized when wireless communications equipment is shipped and sold
or when services have been rendered to customers.
CASH AND CASH EQUIVALENTS
All highly liquid investments with maturities of three months or less when
purchased are considered to be cash equivalents. The carrying amount of cash and
cash equivalents approximates fair value because of the short maturity of those
investments.
CONCENTRATIONS OF RISK
Financial instruments which potentially expose the Company to concentrations of
credit risk consist primarily of trade accounts receivable. The accounts
receivable balance, reflecting the Company's sources of revenue from wireless
service providers, national retailers and agent dealers, is dispersed throughout
the world, including the United States, Latin America, Europe, the Middle East,
Africa, Asia and the Pacific Rim. The Company has no customer which exceeded 10%
of the Company's accounts receivable balance at December 31, 1996. The Company
performs ongoing credit evaluations of its customers and provides credit in the
normal course of business to a large number of its customers. However,
consistent with industry practice, the Company generally requires no collateral
from its customers. The Company maintains allowances for potential credit
losses; such losses have not been significant and have been within management's
expectations.
The Company is dependent on third-party equipment manufacturers, distributors
and dealers for all of its supply of wireless communications equipment. For
1996, the Company's three largest suppliers accounted for 62% of product
purchases. The Company is dependent on the ability of its suppliers to provide
adequate products on a timely basis and on favorable pricing terms. Although the
Company believes that its relationships with its suppliers are satisfactory, the
loss of certain principal suppliers could have a material adverse effect on the
Company.
INVENTORIES
Inventories consist of wireless telephones and accessories and are stated at the
lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciation is computed by the
straight-line method using the estimated useful lives of the assets, generally
five to fifteen years. Leasehold improvements are stated at cost and amortized
over the lease term of the associated property. Maintenance and repairs are
charged to expense as incurred.
GOODWILL
Goodwill represents the unamortized cost in excess of the fair value of the net
assets acquired in business combinations, and is amortized on a straight-line
basis over 30 years. The Company continually reviews the valuation and
amortization of goodwill.
IMPAIRMENT OF LONG-LIVED ASSETS
The FASB issued Statement of Financial Accounting Standards No. 121, Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which the Company adopted effective January 1, 1996. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for possible impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
SFAS No. 121 also requires that long-lived assets and certain identifiable
intangibles held for sale, other than those related to discontinued operations,
be reported at the lower of carrying amount or fair value less cost of disposal.
Adoption of the Statement and its application during 1996 did not have an impact
on the Company's financial position or results of operations.
INCOME TAXES
Prior to April 14, 1994, the stockholders of the Company had elected under
Subchapter S of the Internal Revenue Code to include the
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
income of the Company in their own income for tax purposes. Accordingly, the
Company was not subject to federal and state income taxes until that date.
Effective April 14, 1994, the Company's election under Subchapter S was
terminated. Concurrent with the termination, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax assets and liabilities based on the
difference between the financial statement and tax bases of assets and
liabilities. These deferred taxes are measured by applying current tax laws. The
effect on 1994 net income of adopting the Statement was not material.
Prior to June 7, 1996, the stockholders of Allied Communications had also
elected treatment under Subchapter S of the Internal Revenue Code. Concurrent
with the merger with Allied Communications on June 7, 1996, Allied
Communications' election under Subchapter S was terminated. At that time, the
Company adopted Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, for the Allied Communications' accounts. The effect on 1996
net income of adopting the Statement was not material.
FOREIGN CURRENCY TRANSLATION
Financial statements of Brightpoint International Ltd.'s subsidiaries are
translated into U.S. dollars using the exchange rate at each balance sheet date
for assets and liabilities and an average exchange rate for each period for
revenues, expenses, gains and losses. Translation adjustments are recorded as a
separate component of stockholders' equity since the local currency for each
subsidiary is, in all cases, its functional currency. Translation adjustments
have not been significant.
PRO FORMA INCOME TAXES
The pro forma income tax amounts presented in the statements of income represent
an estimate of the income taxes that the Company and Allied Communications would
have incurred had they been tax paying entities for all periods presented.
NET INCOME PER SHARE AMOUNTS
Pro forma net income per share amounts are based on the weighted average number
of common shares and dilutive common share equivalents outstanding during each
year. Common share equivalents consist of shares of common stock issuable upon
exercise of outstanding stock options and stock warrants (see Note 7 --
Stockholders' Equity).
Historical net income per share amounts are not presented because such
information is not meaningful.
STOCK OPTIONS
In 1996, the Company adopted Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation. In accordance with SFAS No. 123,
the Company uses the intrinsic value method to account for stock options,
consistent with the existing rules established by Accounting Principles Board
No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation
expense has been recognized for stock options granted to employees.
2. MERGER AND ACQUISITIONS
On June 7, 1996, the Company completed a merger with Allied Communications
through the exchange of 3,796,875 shares of newly-issued Company common stock in
exchange for all of the outstanding shares of Allied Communications' common
stock. The merger was structured as a tax-free reorganization and was accounted
for using the pooling-of-interests method of accounting. In connection with the
merger, the Company recorded a nonrecurring charge of $2.7 million ($2.1 million
net of tax) in the quarter ended June 30, 1996, for transaction costs, including
investment banking, legal, and accounting fees, and for estimated costs
associated with the merger. Net sales and net income for the Company and Allied
Communications prior to the combination are as follows (in thousands):
Three months
Year ended ended
December 31 March 31
1994 1995 1996
-------- -------- --------
Net sales
Brightpoint, Inc. $169,268 $269,359 $ 87,662
Allied Communications 139,959 149,790 25,298
-------- -------- --------
Combined $309,227 $419,149 $112,960
======== ======== ========
Net income, giving effect
to pro forma income taxes
Brightpoint, Inc. $ 2,843 $ 5,706 $ 2,023
Allied Communications 1,712 1,601 454
-------- -------- --------
Combined $ 4,555 $ 7,307 $ 2,477
======== ======== ========
On August 1, 1996, the Company completed the formation of Brightpoint
International Ltd., a joint venture with Technology Resources International
Limited. The Company maintained effective controlling interest in Brightpoint
International Ltd., and therefore the operations were consolidated for financial
reporting purposes.
The Company owned 50% of Brightpoint International Ltd. until November 1996,
when the Company acquired the remaining 50% of the subsidiary. The combination
was accounted for using the purchase method. The purchase price for the
remaining equity interest consisted of 750,000 unregistered shares of the
Company's common stock, valued at $8.1 million, and $5.0 million of cash. The
resulting goodwill of $12.6 million is being amortized over 30 years.
On October 18, 1996, Brightpoint International Ltd. acquired the business and
operations of Hatadicorp Pty Ltd. (Hatadi) based in Sydney, Australia. The
newly-formed Brightpoint Australia Pty Ltd. is owned 80 percent by Brightpoint
International Ltd. and 20 percent by the former shareholders of Hatadi. The
combination was accounted for using the purchase method and the operations of
Brightpoint Australia Pty Ltd. are consolidated for financial reporting
purposes. The purchase price of $2.8 million was allocated principally to
goodwill which is being amortized over 30 years.
The impact of these acquisitions was not material in relation to the Company's
results of operations. Consequently, pro forma information is not presented.
3. INVESTMENTS
During the fourth quarter of 1996, the Company acquired 1,000,000 shares of
common stock of Cellstar, Inc. for investment purposes. Cellstar, Inc. is
engaged in substantially the same business as the Company. The cost basis of
this investment is $11.4 million and the fair value at December 31, 1996 (based
on quoted market price) was $18.0 million. In accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Debt and Equity
Securities, the Company has classified the available-for-sale investment as a
current asset and reported it at fair value with the unrealized gain, net of
tax, classified as a separate component of stockholders' equity.
20
<PAGE>
In December, 1996, the Company acquired 25 Series E convertible debentures of
Pocket Communications, Inc. (Pocket). Pocket is a privately-held company
offering wireless telecommunications services, specifically in the area of
Personal Communications Services (PCS). The price of each debenture was $200,000
resulting in a total investment of $5 million. Each debenture is convertible
into 25,000 shares of common stock of Pocket, resulting in 625,000 total
convertible shares. The debentures earn interest at a rate of 2 1/2% above Prime
Rate (10.75% at December 31, 1996) and have a maturity date of December 12,
1998, at which time the Company can demand repayment or exercise its conversion
rights. Assuming conversion, the Company's ownership interest in Pocket would
approximate 1%. This investment is carried at cost and classified in other
assets at December 31, 1996. There is no quoted market price for this
investment. However, because the instrument was acquired in late 1996 and no
events have occurred that would significantly impact the value of the
instrument, the cost of the investment is considered to approximate fair value.
4. PROPERTY AND EQUIPMENT
The components of property and equipment at December 31, 1995 and 1996, are as
follows (in thousands):
1995 1996
---------------------
Furniture and equipment $ 964 $2,065
Information systems equipment and
software 1,985 5,917
Leasehold improvements 495 1,450
---------------------
3,444 9,432
Less accumulated depreciation 510 1,225
Net property and equipment $2,934 $8,207
=====================
5. NOTES PAYABLE
At December 31, 1996, the Company had a $75 million credit agreement (line of
credit) with Bank One, Indianapolis, NA, as agent bank for a group of banks.
Borrowings on the line of credit ($56 million at December 31, 1996) bear
interest at the bank's prime rate (8.25% at December 31, 1996) less up to 100
basis points or at LIBOR (5.60% at December 31, 1996) plus 75 to 175 basis
points dependent upon the ratio of the Company's funded debt to capital. The
agreement also includes a provision to allow the Company to guarantee bank debt
of Brightpoint International Ltd. in an amount not to exceed $25 million. The
line of credit agreement matures on May 28, 1999.
Substantially all of the Company's assets, including its inventories and
receivables, are pledged to the bank as collateral. In addition to covenants
requiring the maintenance of certain financial ratios, the Company's agreement
with the bank limits or prohibits the Company, subject to certain exceptions,
from among other things, incurring additional indebtedness, declaring or paying
cash dividends, making capital distributions or other payments to stockholders,
merging or consolidating with another corporation, forming subsidiaries, selling
all or substantially all of its assets, creating liens or security interests on
the Company's assets and entering into transactions with affiliates.
During the fourth quarter of 1996, Brightpoint International Ltd. entered into a
$25 million line of credit agreement with First National Bank of Chicago to
provide capital for the Company's international operating divisions. Borrowings
on the credit agreement were $21.6 million at December 31, 1996, and bear
interest consistent with rates charged on the Company's line of credit
agreement. The credit agreement matures in February 1998.
At December 31, 1995, outstanding debt of $5.7 million was classified as a
current liability and consisted primarily of a note payable with Bank One that
had a current maturity schedule.
At December 31, 1996, the Company was in compliance with the covenants in its
credit agreements. Interest payments for 1994, 1995 and 1996 were approximately
$277,000, $1,525,000 and $1,556,000, respectively. The carrying amount of the
Company's borrowings under its variable-rate lines of credit approximates fair
value.
On January 28, 1997, the Company amended its line of credit agreement with Bank
One to increase available borrowings to $100 million. The additional $25 million
of credit matures April 30, 1997, at which time the additional credit will be
renegotiated.
6. INCOME TAXES
For financial reporting purposes, income before income taxes and minority
interest, by tax jurisdiction, is comprised of the following (in thousands):
Year Ended December 31
1994 1995 1996
---------------------------------------
United States $ 7,505 $12,003 $13,706
Foreign -- -- 6,417
$ 7,505 $12,003 $20,123
=======================================
The pro forma provision for income taxes represents the estimated income taxes
that would have been reported had the Company been subject to income taxes for
each of the years presented. In 1994 and 1995, the pro forma income tax expense
is comprised of a provision for federal income taxes at the statutory rate plus
a state income tax provision, net of federal income tax benefit. No other items
materially impact the pro forma income tax expense during those two years. Due
to the significance of the Subchapter S earnings (of both the Company and Allied
Communications) during 1994 and 1995, a reconciliation of historical income tax
expense is not presented as it would not be meaningful.
The reconciliation of income tax expense for 1996 computed at the U.S. federal
statutory tax rate to the Company's effective income tax rate is as follows:
Historical Pro Forma
----------------------
Tax at U.S. federal statutory rate 35.0% 35.0%
State and local income taxes, net of U.S.
federal benefit 3.7 3.7
Allied Communications' Subchapter S earnings (2.5) --
Non-deductible merger expenses 1.7 1.7
Foreign sales corporation and foreign rates (1.5) (1.6)
----------------------
36.4% 38.8%
======================
Significant components of the historical and pro forma provision for income
taxes are as follows (in thousands):
Pro forma (Unaudited) Historical
---------------------------------------------------------------
1994 1995 1996 1994 1995 1996
----------------------------- -------------------------------
Current:
Federal $ 2,590 $ 3,763 $ 4,758 $ 1,357 $ 3,028 $ 4,340
State 642 1,017 1,131 410 978 1,035
Foreign -- -- 2,184 -- -- 2,184
----------------------------- -------------------------------
3,232 4,780 8,073 1,767 4,006 7,559
Deferred:
Federal (227) (73) (237) (116) (146) (203)
State (55) (11) (32) (28) (22) (28)
(282) (84) (269) (144) (168) (231)
----------------------------- -------------------------------
$ 2,950 $ 4,696 $ 7,804 $ 1,623 $ 3,838 $ 7,328
============================= ===============================
21
<PAGE>
NOTES TO CONSOLIDATRED STATEMENTS (CONTINUED)
Components of the Company's deferred taxes are as follows (in thousands):
December 31
1995 1996
-----------------------
Deferred tax assets:
Capitalization of inventory costs $ 204 $ 612
Allowance for doubtful accounts 156 372
---------- -----------
360 984
Deferred tax liabilities:
Depreciation (48) (330)
Unrealized gain on marketable
securities -- (2,640)
---------- -----------
(48) (2,970)
---------- -----------
$ 312 $(1,986)
========== ===========
Income tax payments were $1,976,000, $1,931,000 and $6,199,000 for 1994, 1995
and 1996, respectively.
Undistributed earnings of the Company's foreign operations were approximately
$6.0 million at December 31, 1996. Those earnings are considered to be
indefinitely reinvested and accordingly, no provision for U.S. federal and state
income taxes or foreign withholding taxes has been made. Upon distribution of
those earnings, the Company would be subject to U.S. income taxes (subject to a
reduction for foreign tax credits) and withholding taxes payable to the various
foreign countries. Determination of the amount of unrecognized deferred U.S.
income tax liability is not practicable; however, unrecognized foreign tax
credit carryovers would be available to reduce some portion of the U.S.
liability.
7. STOCKHOLDERS' EQUITY
The Company has declared the following stock splits which were effected in the
form of stock dividends:
Declaration date Dividend payment date Split ratio
- --------------------------------------------------------------------------------
August 31, 1995 September 20, 1995 5 for 4
November 12, 1996 December 17, 1996 3 for 2
January 28, 1997 March 3, 1997 5 for 4
Accordingly, all references in the financial statements related to share
amounts, per share amounts, average shares outstanding and information
concerning stock option plans have been adjusted retroactively to reflect these
stock splits.
In April 1994, the Company consummated the sale of 5.4 million shares (including
the underwriters' over-allotment option) of common stock for $2.67 per share in
an initial public offering. In connection with the initial public offering and
the conversion of the Company from an S corporation to a C corporation, the
undistributed retained earnings generated while an S corporation were
transferred to additional paid-in capital.
In October 1995, the Company consummated the sale of 3.6 million shares of
common stock (including the sale of 520,000 shares pursuant to the underwriters'
over-allotment option) at a price of $10.14 per share in a public offering. The
net proceeds were used to repay $10.3 million outstanding under its line of
credit and for working capital and general corporate purposes.
In connection with the Allied merger completed in June 1996, Allied
Communications' Subchapter S election was terminated. Accordingly, the
undistributed retained earnings generated while Allied Communications were
Subchapter S corporations were transferred to additional paid-in capital.
The Company has authorized 1,000,000 shares of preferred stock which remain
unissued. The Board of Directors has not yet determined the preferences,
qualifications, relative voting or other rights of the authorized shares of
preferred stock.
STOCK OPTION PLANS
The Company has three fixed stock option plans which reserve shares of common
stock for issuance to key employees and directors.
In March 1994, the Company adopted the 1994 Stock Option Plan whereby employees
of the Company and others are eligible to be granted incentive stock options or
non-qualified stock options. A total of 938,000 common shares were originally
reserved for grant under the Plan. During 1995, an amendment was approved which
authorized an increase in shares reserved for issuance to 2,110,000 shares.
Also, in October 1996, the Company adopted the 1996 Stock Option Plan whereby
employees of the Company and others are eligible to be granted non-qualified
stock options. A total of 1,875,000 common shares were reserved for grant under
the Plan. For both Plans, a committee of the Board of Directors determines the
time or times at which the options will be granted, selects the employees or
others to whom options will be granted and determines the number of shares
covered by each option, purchase price, time of exercise (not to exceed ten
years from the date of the grant) and other terms.
In March 1994, the Company adopted the Non-employee Directors Stock Option Plan
whereby non-employee directors are eligible to be granted non-qualified stock
options. A total of 234,375 shares were reserved for grant under the plan.
During 1995, an amendment was approved which authorized an increase in shares
reserved for issuance under the plan to 468,750 shares. Options to purchase
10,000 shares of common stock are granted to each newly elected non-employee
director and, on the first day of each year, each individual elected and
continuing as a non-employee director receives an option to purchase 4,000
shares of common stock.
The exercise price of stock options granted may not be less than the fair market
value of a share of common stock on the date of the grant. Options become
exercisable in periods ranging from one to three years. Information regarding
these option plans for 1995 and 1996 is as follows:
1995 1996
-------------- ---------------------
Weighted
Average
Exercise
Shares Shares Price
-------------- ---------------------
Options outstanding,
beginning of year 1,034,767 1,247,179 $ 5.71
Options granted 814,454 1,705,366 12.31
Options exercised 594,228 344,183 4.76
Options canceled 7,814 32,422 11.30
-------------- -------------
Options outstanding, end of year 1,247,179 2,575,940 10.13
============== =============
Option price range at end of year $12.67-$8.90 $2.67-$19.20
Option price range for
exercised shares $12.67-$5.28 $2.67-$18.90
Options available for grant
at year end 927,028
Weighted average fair value
of options granted during the year $14.23
22
<PAGE>
The following table summarizes information about the fixed price stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------- --------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at December Contractual Exercise at December Exercise
Prices 31, 1996 Life Price 31, 1996 Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.67-$ 6.02 270,937 3 years $ 3.15 194,565 $ 2.67
$ 6.46-$ 8.90 656,253 3 years $ 7.37 375,002 $ 7.10
$10.00-$12.46 1,565,625 5 years $12.23 -- --
$14.66-$19.20 83,125 5 years $15.27 -- --
</TABLE>
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method as defined by that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996: risk-free interest rate of 5.5%; a dividend yield
of 0.0%; volatility factor of the expected market price of the Company's common
stock of .51; and an expected life of the options of 1.99 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
and stock warrants discussed below, are amortized to expense over the related
vesting period. Because compensation expense is recognized over the vesting
period, the initial impact on pro forma net income may not be representative of
compensation expense in future years, when the effect of the amortization of
multiple awards would be reflected in the consolidated statements of income. The
Company's pro forma information giving effect to the estimated compensation
expense related to stock options and warrants is as follows (in thousands,
except per share data):
1995 1996
- ----------------------------------------------------------------------------
Pro forma net income (1) $ 6,336 $ 11,638
Pro forma net income per share $ 0.37 $ 0.55
(1) Excluding the after-tax effect of one-time merger expenses in 1996.
STOCK WARRANTS
In connection with the initial public offering, the Company issued warrants to
purchase up to 468,750 shares of common stock initially exercisable at $3.30 per
share. During 1995 and 1996, substantially all of the warrants were exercised.
In January 1995, the Company issued warrants to purchase up to 596,430 shares of
common stock at $6.96 per share in connection with an agreement with HSN Direct
Joint Venture. During 1996, 573,461 of the warrants were exercised. The
remaining outstanding warrants are exercisable by the holders at any time until
January 16, 2000.
8. LEASE ARRANGEMENTS
The Company leases certain furniture and equipment as well as its office and
warehouse/distribution space under operating leases.
Total rent expense under all operating leases was $446,000, $540,000 and
$1,469,000 for 1994, 1995 and 1996, respectively.
The aggregate future minimum payments on the above leases are as follows (in
thousands):
Year ending December 31
- -----------------------
1997 $ 1,828
1998 1,693
1999 1,628
2000 1,506
2001 1,448
Thereafter 7,075
---------
$ 15,178
=========
9. GEOGRAPHIC OPERATIONS
The Company operates in worldwide markets. Its business activities are conducted
in four divisions: North America; Latin America; Europe, Middle East and Africa;
and Asia-Pacific. A summary of the Company's operations by division is presented
below (in thousands):
1994 1995 1996
------------------------------------
Net sales:
North America $252,262 $269,730 $287,377
Latin America 40,038 95,602 98,420
Europe, Middle East
and Africa 16,927 46,284 76,292
Asia-Pacific -- 7,533 127,629
------------------------------------
$309,227 $419,149 $589,718
====================================
Income before income taxes
and minority interest:
North America $ 6,533 $ 9,265 $ 7,113
Latin America 972 2,738 4,268
Europe, Middle East
and Africa -- -- 3,607
Asia-Pacific -- -- 5,135
------------------------------------
$ 7,505 $ 12,003 $ 20,123
====================================
Identifiable assets:
North America $ 72,118 $ 92,465 $126,003
Latin America 10,727 27,322 73,633
Europe, Middle East
and Africa -- -- 44,451
Asia-Pacific -- -- 54,958
------------------------------------
$ 82,845 $119,787 $299,045
====================================
For geographic reporting purposes only, net sales are recorded in the region in
which the customer is located. In 1994 and 1995, sales in the Europe, Middle
East and Africa, and Asia-Pacific divisions were export sales from North America
operations. As a result, the Company has not allocated income before income
taxes and minority interest and identifiable assets to those divisions in 1994
and 1995.
10. EMPLOYEE BENEFIT PLAN
On January 1, 1996, the Company adopted an employee savings plan which permits
employees with at least one year of service to make contributions by salary
reduction pursuant to section 401(k) of the Internal Revenue Code. The Company
matches 25% of employee contributions, up to 6%, in Company common stock. In
connection with the required match, the Company's contribution to the Plan was
$56,400 in 1996.
23
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations are as follows (in thousands,
except per share data):
1996 First Second Third Fourth
- --------------------------------------------------------------------------------
Net sales $112,960 $119,896 $145,290 $211,572
Gross profit 7,928 8,482 12,254 17,176
Pro forma net income (1), (2) 2,477 2,407 3,209 4,529
Pro forma net income per share 0.12 0.11 0.15 0.20
1995 First Second Third Fourth
- --------------------------------------------------------------------------------
Net sales $ 97,181 $ 91,921 $100,915 $129,132
Gross profit 6,205 6,036 6,822 9,136
Pro forma net income (1) 1,631 1,724 1,583 2,369
Pro forma net income per share 0.10 0.10 0.10 0.12
(1) See Note 1 to Consolidated Financial Statements.
(2) Excluding the after-tax effect of one-time merger expenses of $2,061 in the
second quarter.
COMMON STOCK INFORMATION
The Common Stock is listed on the NASDAQ National Market System under the symbol
CELL. The following tables set forth, for the periods indicated, the high and
low sale price for the Common Stock as reported by the NASDAQ National Market
System.
1996 High Low
- ------------------------------------------------------
First Quarter $10.67 $ 7.20
Second Quarter 16.27 9.07
Third Quarter 13.93 10.33
Fourth Quarter 24.20 12.27
1995 High Low
- ------------------------------------------------------
First Quarter $ 7.63 $ 5.76
Second Quarter 9.92 7.09
Third Quarter 9.73 8.05
Fourth Quarter 11.00 6.74
The Company has paid no cash dividends on its common shares and has no intention
of doing so in the foreseeable future. The Company currently intends to retain
future earnings for use in financing its growth. The Company had 113
stockholders of record as of February 14, 1997, and believes that it has in
excess of 1,000 beneficial holders.
ANNUAL MEETING
Brightpoint, Inc. will hold its annual meeting of stockholders at the Conference
Center located at Bank One, Indianapolis, Indiana, at 10:00 a.m. on April 24,
1997.
STOCKHOLDERS' SERVICES
The Company's stockholder information may be obtained at no charge by contacting
the Company through:
Investor Relations
Brightpoint, Inc.
6402 Corporate Drive
Indianapolis, Indiana 46278
(317) 297-6100
INDEPENDENT AUDITORS
Ernst & Young LLP
Indianapolis, Indiana
LEGAL COUNSEL
Tenzer Greenblatt LLP
New York, New York
TRANSFER AGENT
Continental Stock Transfer & Trust Company
New York, New York
24
<PAGE>
BRIGHTPOINT, INC. OFFICERS
ROBERT J. LAIKIN Director,
Chairman of the Board
and Chief Executive Officer
J. MARK HOWELL Director,
President
and Chief Operating Officer
T. SCOTT HOUSEFIELD Director,
Executive Vice President
PHILLIP A. BOUNSALL Executive Vice President,
Chief Financial Officer
and Treasurer
DAVID H. BROWN Executive Vice President,
North America Marketing
and Sales
GARY D. BUTTS Executive Vice President,
North America
Business Development
STEVEN E. FIVEL Executive Vice President,
General Counsel
and Secretary
JOHN R. SULLIVAN Executive Vice President,
Operations
JOHN P. DELANEY Vice President,
Corporate Controller
and Assistant Secretary
BRIGHTPOINT INTERNATIONAL LTD. OFFICERS
T. SCOTT HOUSEFIELD President
JOHN M. MACLEAN-ARNOTT Managing Director,
Brightpoint Europe,
Middle East and Africa
DANA E. MARLIN Managing Director,
Brightpoint Asia-Pacific
JOSEPH S. FORER Director,
Managing Director,
Brightpoint Latin America
JOHN J. LUDWIG Chief Financial Officer
and Director of Finance
BRIGHTPOINT NON-EMPLOYEE DIRECTORS
JOHN W. ADAMS (1) Vice President
Browning Investments, Inc.
ROLLIN M. DICK (2) Executive Vice President
and Chief Financial Officer
Conseco, Inc.
ROBERT W. PICOW Vice Chairman of the Board,
Private Investor
STEVEN B. SANDS Co-Chairman and
Chief Executive Officer
Sands Brothers & Co., Ltd.
STEPHEN H. SIMON (2) President
Melvin Simon & Associates, Inc.
ROBERT F. WAGNER (1) Partner
Lewis & Wagner
(1) Compensation Committee
(2) Audit Committee
LOCATIONS
BRIGHTPOINT, INC.
Corporate Headquarters
6402 Corporate Drive
Indianapolis, IN 46278
http://www.brightpoint.com
NASDAQ: CELL
BRIGHTPOINT NORTH AMERICA
Central North America Distribution and Fulfillment Center
6402 Corporate Drive
Indianapolis, IN 46278
Eastern North America Distribution Center
1705 Winchester Road
Bensalem, PA 19020
Western North America Distribution Center
1450 East Greg Street, Unit B
Sparks, NV 89431
BRIGHTPOINT ASIA-PACIFIC
Suite 1502
23 Leonie Hill
Singapore 239 224
Brightpoint China
Hong Kong Office
Suite 912
Eight Commercial Tower
8 Sun Yip Street
Chai Wan
Hong Kong
Beijing Office
Capital Mansion, High Rise 3507
No. 6 Xin Yuan Nan Road
Beijing 100004, China
Brightpoint/RPS Industries
I/F Toi Shan Centre
128 Johnston Road, Wanchai
Hong Kong
Brightpoint Australia
5 Appollo Street
Warriewood
NSW 2102
Australia
BRIGHTPOINT EUROPE,
MIDDLE EAST AND AFRICA
79 Cadogan Lane
London, England
SW1 X9 DU
Brightpoint UK
Century Road
High Carr Business Park
Talke Road
Newcastle-Under-Lyme
Staffs, ST5 7UG, UK
Brightpoint South Africa
Unit 5, Stanford Business Park
16th Street, Randjes Park
Midrand P.O. Box 6977
Halfway House, 1685
Republic of South Africa
BRIGHTPOINT LATIN AMERICA
1573 NW 82nd Avenue
Miami, FL 33126
<PAGE>
[LOGO]
BRIGHTPOINT, INC. (TM)
WIRELESS LOGISTICS SERVICES
Brightpoint, Inc.
Corporate Headquarters
6402 Corporate Drive
Indianapolis, IN 46278
USA
(317) 297-6100 (800)952-2355 Fax: (317) 387-5479
http://www.brightpoint.com
NASDAQ: CELL
BRIGHTPOINT, INC. SUBSIDIARIES
Jurisdiction
of
Name Incorporation
---- -------------
Brightpoint International Ltd. Delaware
Brightpoint EMA Ltd. United
Kingdom
RPS Industries Company Ltd. Hong Kong
Brightpoint Australasia Pty Ltd. Australia
Brightpoint International Asia Singapore
Pacific Pte Ltd.
Brightpoint (UK) Ltd. United
Kingdom
Brightpoint South Africa (Pty) South Africa
Ltd.
Brightpoint Australia Pty Ltd. Australia
Brightpoint China Ltd. Hong Kong
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Brightpoint, Inc. of our report dated January 28, 1997, included in the 1996
Annual Report to Shareholders of Brightpoint, Inc.
Our audit also included the financial statement schedule of Brightpoint, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, based on our audits and the report of other auditors, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-90988) pertaining to the Brightpoint, Inc. 1994 Stock Option
Plan and Nonemployee Director Stock Option Plan and in the Registration
Statement (Form S-3 No. 33-91112) pertaining to certain options and warrants of
Brightpoint, Inc. of our report dated January 28, 1997, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceeding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Brightpoint,
Inc.
March 24, 1997
[LETTERHEAD OF COOPERS & LYBRAND]
Report of Independent Accountants
To the Shareholders
Allied Communications, Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Allied
Communications, Inc. and Affiliates as of December 31, 1995, and the related
combined statements of income, stockholders' equity and cash flows for the years
ended December 31, 1994 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects the combined financial position of Allied
Communications, Inc. and Affiliates as of December 31, 1995 and the combined
results of their operations and their cash flows for the years ended December
31, 1994 and 1995 in conformity with generally accepted accounting principles.
As described in Note 12, the 1995 combined financial statements were restated
to reflect an increase in cost of sales and accounts payable.
/s/ Coopers & Lybrand LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 23, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (File No. 33-90988) of Brightpoint, Inc.'s 1994 Stock Option Plan and
Non-Employee Director Stock Option Plan of our report on Allied Communications,
Inc. and Affiliates dated February 23, 1996 on our audits of the financial
statements of Allied Communications, Inc. and Affiliates, which report is
included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand LLP
Philadelphia, Pennsylvania
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Restated Schedule contains summary financial information extracted from the
consolidated financial statements included in the registrant's Annual Report on
Form 10-K of which this schedule is an exhibit thereto and is qualified in its
entirety by reference to such consolidated financial statements.<F1>
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<CASH> 0 726 14,255
<SECURITIES> 0 0 18,000
<RECEIVABLES> 0 57,979 114,234
<ALLOWANCES> 0 691 1,115
<INVENTORY> 0 56,313 112,916
<CURRENT-ASSETS> 0 116,547 266,712
<PP&E> 0 3,444 9,432
<DEPRECIATION> 0 510 1,225
<TOTAL-ASSETS> 0 119,787 299,045
<CURRENT-LIABILITIES> 0 54,328 123,231
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 199 216
<OTHER-SE> 0 64,658 94,766
<TOTAL-LIABILITY-AND-EQUITY> 0 119,787 299,045
<SALES> 309,227 419,149 589,718
<TOTAL-REVENUES> 309,227 419,149 589,718
<CGS> 290,463 390,950 543,878
<TOTAL-COSTS> 290,463 390,950 543,878
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 164 1,383 2,118
<INCOME-PRETAX> 7,505 12,003 20,123
<INCOME-TAX> 1,623 3,838 7,328
<INCOME-CONTINUING> 5,882 8,165 11,037
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 5,882 8,165 11,037
<EPS-PRIMARY> 0<F2> 0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 0<F2> 0<F2>
<FN>
<F1>
The data included in this Schedule includes information derived from the
Consolidated Balance Sheets and the Consolidated Statements of Income for all
financial statement periods presented in the accompanying Annual Report. The
consolidated financial statements included in the Annual Report have been
restated to reflect the acquisition by the registrant of the Allied Companies in
June 1996 pursuant to a business combination accounted for using the pooling of
interests method of accounting. Historical balance sheet information as of
December 31, 1994 is not included in this Schedule since a balance sheet as of
such date is not presented in the accompanying Annual Report. The consolidated
financial statements have also been adjusted retroactively, where applicable, to
give effect to the Company's 5-4 stock split of its Common Stock to be effected
in the form of a 25% stock dividend paid on March 3, 1997 to stockholders of
record on February 11, 1997.
<F2>
Historical net income per share amounts are not presented because such
information is not meaningful as the Company was not a tax paying entity on a
consolidated basis for all periods presented. Pro forma primary earnings per
share amounts that include estimates of income tax amounts that the Company
would have incurred had they been a tax paying entity are $0.33, $0.43 and $0.50
for the three years ended December 31, 1994, 1995 and 1996, respectively. Fully
diluted earnings per share amounts are $0.32, $0.42 and $0.49 for the three
years ended December 31, 1994, 1995 and 1996, respectively.
</FN>
</TABLE>
