SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-12
CELLSTAR CORPORATION
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO] CELL STAR CORPORATION
To CellStar Corporation Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of CellStar Corporation (the "Company") to be held at
the Doubletree Lincoln Center Hotel, 5410 LBJ Freeway, Dallas, Texas,
on May 9, 2002, at 10:00 a.m., Dallas time.
The attached Notice of Annual Meeting and Proxy Statement fully
describe the formal business to be transacted at the annual meeting,
which includes the election of Dale V. Kesler as a Class I director
of the Company.
Directors and officers of the Company will be present to help host
the annual meeting and to respond to any questions that our
stockholders may have. I hope you will be able to attend.
The Company's Board of Directors believes that the election of Mr.
Kesler is in the best interests of the Company and its stockholders
and recommends a vote "FOR" his election. Accordingly, we urge you to
review the accompanying material carefully and to return the enclosed
Proxy promptly.
Please sign, date and return the enclosed Proxy without delay. If
you attend the annual meeting, you may vote in person even if you
have previously mailed a Proxy.
I look forward to seeing you at the annual meeting.
Sincerely,
Terry S. Parker
Chief Executive Officer
[GRAPHIC]
Cellstar Corporation Banner
CELLSTAR CORPORATION
1730 Briercroft Court
Carrollton, Texas 75006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 9, 2002
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders (the
"Meeting") of CellStar Corporation, a Delaware corporation (the "Company"),
will be held at the Doubletree Lincoln Center Hotel, 5410 LBJ Freeway, Dallas,
Texas, on May 9, 2002, at 10:00 a.m., Dallas time, for the following purposes:
(1) To elect one Class I director for a term expiring in 2005; and
(2) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
The close of business on March 25, 2002, has been fixed by the Company's
Board of Directors as the record date for determining stockholders entitled to
notice of and to vote at the Meeting or any adjournment or adjournments
thereof. For a period of at least ten days prior to the Meeting, a complete
list of stockholders entitled to vote at the Meeting will be open for the
examination of any stockholder during ordinary business hours at the Company's
offices located at 1730 Briercroft Court, Carrollton, Texas 75006.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM.
By Order of the Board of Directors,
/s/ Elaine Flud Rodriguez
ELAINE FLUD RODRIGUEZ
Senior Vice President, Secretary and
General Counsel
Carrollton, Texas
April [__], 2002
CELLSTAR CORPORATION
1730 Briercroft Court
Carrollton, Texas 75006
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 9, 2002
This Proxy Statement is furnished in connection with the solicitation of
proxies ("Proxies") by the Board of Directors of CellStar Corporation (the
"Company" or "CellStar") for use at the 2001 Annual Meeting of Stockholders
(the "Meeting") of the Company to be held at the Doubletree Lincoln Center
Hotel, 5410 LBJ Freeway, Dallas, Texas, on May 9, 2002, at 10:00 a.m., Dallas
time, or at such other time and place to which the Meeting may be adjourned.
The date on which this Proxy Statement and accompanying Proxy are intended to
first be sent or given to stockholders is April 11, 2002.
All shares represented by valid Proxies, unless the stockholder specifies
otherwise, will be voted FOR the election of the person named under "Proposal
I--Election of Director" as a nominee for election as a Class I director. The
Board of Directors knows of no other business to be presented at the Meeting.
If any other business is properly presented, the persons named in the enclosed
Proxy have authority to vote on such matters in accordance with such persons'
discretion. Where a stockholder has appropriately specified how a Proxy is to
be voted, it will be voted accordingly.
A stockholder executing a Proxy retains the right to revoke it at any time
prior to exercise at the Meeting. A Proxy may be revoked by delivery of written
notice of revocation to the Secretary of the Company, by execution and delivery
of a later Proxy, or by voting the shares in person at the Meeting.
Record Date and Voting Securities
The record date for determining the stockholders entitled to notice of and
to vote at the Meeting and any postponements and adjournments thereof was the
close of business on March 25, 2002 (the "Record Date"), at which time the
Company had issued and outstanding 12,028,425 shares of common stock, par value
$0.01 per share ("Common Stock"). Common Stock is the only class of outstanding
voting securities of the Company.
Quorum and Voting
The presence at the Meeting, in person or by Proxy, of the holders of at
least a majority of the outstanding shares of Common Stock as of the Record
Date is necessary to constitute a quorum for the conduct of business at the
Meeting. Each share of Common Stock represented at the Meeting in person or by
Proxy will be counted toward a quorum. If a quorum is not present, the Meeting
may be adjourned from time to time until a quorum is obtained. Each share of
Common Stock is entitled to one vote with respect to all matters (including
election of directors) presented for stockholder vote at the Meeting.
To be elected, the nominee for election as a Class I Director must receive
the affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Meeting. Votes may be cast in favor of, or
withheld with respect to the nominee. Votes that are withheld will be counted
toward the determination of whether a quorum exists, but will be excluded
entirely from the tabulation of votes for election of the specified nominee
and, therefore, will not affect the outcome of the vote on such proposal.
1
"Broker non-votes" (i.e., shares held by brokers or nominees as to which the
brokers have no discretionary power to vote on a particular matter and have
received no instructions from the persons entitled to vote such shares), if
any, will be counted as present for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter as to
which the broker has indicated on the Proxy that it does not have discretionary
authority to vote, those shares will be treated as not entitled to vote with
respect to that matter. Broker non-votes will have no effect on Proposal I.
PROPOSAL I
ELECTION OF DIRECTOR
The Company's Certificate of Incorporation provides for a Board of Directors
divided into three classes, as nearly equal in number as possible, with the
term of office of one class expiring each year at the Company's Annual Meeting
of Stockholders. Each class of directors is elected for a term of three years,
except in the case of elections to fill vacancies or newly created
directorships.
There is one Class I director to be elected for a term expiring at the
Company's Annual Meeting of Stockholders in 2005 or until his successor has
been elected and qualified. It is intended that the name of the nominee
indicated below will be placed in nomination and that the persons named in the
Proxy will vote for his election. The nominee has indicated his willingness to
serve as a member of the Board of Directors if elected; however, in case the
nominee shall become unavailable for election to the Board of Directors for any
reason not currently known or contemplated, the persons named in the Proxy will
have discretionary authority to vote the Proxy for a substitute. Proxies cannot
be voted for more than one nominee.
Information concerning the nominee proposed by the Board of Directors for
election as a Class I director, along with information concerning the current
Class II and Class III directors, whose terms of office will continue after the
Meeting, is set forth below.
The nominee for election as a Class I director is as follows:
Class I Nominee--Term Expiring in 2005
Name Age Current Position
---- --- ----------------
Dale V. Kesler 63 Director
The current directors whose terms will expire after 2002 are as follows:
Class II Directors--Terms Expiring in 2003
Name Age Current Position
---- --- ----------------
James L. Johnson........ 74 Chairman of the Board
John L. ("J.L.") Jackson 70 Director
Jere W. Thompson........ 70 Director
Class III Director--Term Expiring in 2004
Name Age Current Position
---- --- ----------------
Terry S. Parker 57 Chief Executive Officer
2
Set forth below is a description of the backgrounds of each of the directors
of the Company.
Dale V. Kesler has served as a director of the Company since March 1999. Mr.
Kesler retired as an active partner of the professional accounting firm of
Arthur Andersen LLP in 1996 and served as the Managing Partner of Arthur
Andersen's Dallas/Fort Worth office from 1983 to 1994. Mr. Kesler was
responsible for strategic planning on a world-wide basis for the Audit and
Business Advisory practices of Arthur Andersen in 1982 and 1983 and served as
the head of the Audit Practice in the firm's Dallas office from 1973 to 1982.
Mr. Kesler also serves on the Board of Directors of Elcor Corporation, New
Millennium Homes, Resource Services, Inc., and Triad Hospitals, Inc. Mr. Kesler
currently serves as Chairman of the Audit Committee of CellStar's Board of
Directors. Mr. Kesler served on the Nominating Committee from January 2000
until September 2001 and on the Compensation Committee of CellStar's Board of
Directors from March 1999 until January 2000.
James L. Johnson has served as the non-executive Chairman of the Board of
Directors since July 2001 and as a director of the Company since March 1994.
Mr. Johnson has been Chairman Emeritus of GTE Corporation since May 1992 and
served as GTE's Chairman and Chief Executive Officer from April 1988 to April
1992. Mr. Johnson began his career with Southwestern Associated Telephone
Company (the predecessor company of GTE Central) in 1949. He was a member of
GTE's Board of Directors from 1985 to May 1999 and a member of the Board of
Directors of Finova Group Incorporated (formerly GTE Financial) until 2001. He
is currently a director of Harte Hanks Communications, Inc., M.O.N.Y (Mutual of
New York, Inc.) and Walter Industries Incorporated. Mr. Johnson is also past
Chairman of the United States Telephone Association. Mr. Johnson currently
serves on the Audit, Nominating and Compensation Committees of CellStar's Board
of Directors.
John L. ("J.L.") Jackson has served as a director of the Company since March
1999. Mr. Jackson served as Chairman and Chief Executive Officer of Global
Industrial Technologies, Inc. (formerly, INDRESCO) from 1993 to 1998. Before
joining Global Industrial Technologies, Mr. Jackson was engaged in private
executive business consulting from 1987 to 1993. From 1983 to 1987, Mr. Jackson
served as a Director and as the President and Chief Operating Officer of
Diamond Shamrock Corporation and was Executive Vice President of Diamond
Shamrock and President of its then newly-formed coal unit from 1979 to 1983.
Mr. Jackson has served on numerous Boards of Directors, including the Fourth
District Federal Reserve Bank of Cleveland, First Republic Bank, American
Federal Bank, Hadsen Energy Resources and National Gypsum Company. Mr. Jackson
currently serves as Chairman of the Compensation Committee of CellStar's Board
of Directors and also serves on the Audit Committee of CellStar's Board of
Directors. Mr. Jackson served on the Nominating Committee of CellStar's Board
of Directors from January 2000 until September 2001.
Jere W. Thompson has served as a director of the Company since October 1999.
Mr. Thompson served as President and Chief Executive Officer of The Southland
Corporation from 1986 to 1991. Mr. Thompson joined Southland in 1954 and was
made Vice President of store operations in 1962. He became Southland's
President in 1973 and was elected to Southland's Board of Directors in 1961.
Mr. Thompson was engaged in private business consulting from 1991 to 1996 when
he became the President of The Williamsburg Corporation. Mr. Thompson serves on
the Board of Directors and is the former Chairman of The National Center for
Policy Analysis. He is also a member and former Chairman of The Development
Board and the College and Graduate School of Business Foundation Advisory
Council for The University of Texas at Austin. Mr. Thompson currently serves as
Chairman of the Nominating Committee of CellStar's Board of Directors and also
serves on the Compensation Committee of CellStar's Board of Directors.
Terry S. Parker has served as Chief Executive Officer of the Company since
July 2001, as a director of the Company since March 1995 and as President and
Chief Operating Officer of the Company from March 1995 through July 1996. Mr.
Parker served as Senior Vice President of GTE Corporation and President of
GTE's Personal Communications Services, GTE's wireless division, from October
1993 until he joined the Company. From 1991 to 1993, Mr. Parker served as
President of GTE Telecommunications Products and Services. Before 1991, Mr.
Parker served as President of GTE Mobile Communications. Mr. Parker served on
the Board of Directors for Nucentrix Corporation from 1998 until 2001, the
Board of Directors of Highway Master
3
Communications, Inc. from 1995 to 2000, the Board of Directors of Illinois
Superconductor Corporation from 1998 to 2000, the Board of Directors of
Equalnet Corporation from 1996 to 1999, and the Board of Directors of
Telenetics Corporation from May 2000 to March 2001. Mr Parker also served as
the President and Chief Executive Officer of Telenetics from September 2000
until March 2001. Mr. Parker served on the Audit Committee of CellStar's Board
of Directors until January 2000, when CellStar's Board of Directors
restructured the composition and duties of the Audit Committee.
The Board of Directors recommends a vote FOR the election of Dale V. Kesler
as a Class I Director.
MEETINGS OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board of
Directors. The Board meets on a regularly scheduled basis during the Company's
fiscal year to review significant developments affecting the Company and to act
on matters requiring Board approval. It also holds special meetings when an
important matter requires Board action between scheduled meetings. The Board of
Directors met 14 times and did not act by unanimous written consent during the
2001 fiscal year. During the 2001 fiscal year, each member of the Board
participated in at least 75% of all Board and applicable committee meetings
held during the period for which he was a director.
The Board of Directors has established Audit, Compensation and Nominating
Committees to devote attention to specific subjects and to assist it in the
discharge of its responsibilities. The functions of those committees, their
current members and the number of meetings held during the 2001 fiscal year are
described below.
Compensation Committee. The Board of Directors has a standing Compensation
Committee, which has the power to oversee and recommend to the Board the
compensation policies of the Company and the specific compensation of the
Company's executives. The Compensation Committee also has the power to
administer the 1993 Amended and Restated Long-Term Incentive Plan (the "1993
Plan"), the Amended and Restated Annual Incentive Compensation Plan (the
"Incentive Plan") and the 1994 Amended and Restated Non-Employee Director
Nonqualified Stock Option Plan (the "Directors' Plan"). Messrs. Jackson,
Johnson and Thompson are the current members of the Compensation Committee. Mr.
Jackson serves as Chairman of the Compensation Committee. The Compensation
Committee met two times and did not act by unanimous consent during the 2001
fiscal year.
In 2000, the Board of Directors established an arrangement for the granting
and issuance of stock options to non-executive officers of the Company under
the 1993 Plan. This arrangement provides for a specified number of options (as
recommended by the Compensation Committee to the Board) to be made available to
each of the Company's regions, which options may be dispensed at the discretion
of the regional management as approved by the Chief Executive Officer to
eligible non-executive employees within that region during the course of the
fiscal year. In the event the regional management dispenses its entire
allotment of options before the end of the fiscal year, the Compensation
Committee may, but is not obligated to, allocate an additional number of
options to the region for distribution to non-executive employees within that
region.
Nominating Committee. In fiscal 2001, the Board of Directors had a
Governance and Nominating Committee that was charged with the responsibility to
(i) evaluate and select candidates to fill vacancies on the Board of Directors,
(ii) consider director nominees presented by stockholders, (iii) review the
performance of current directors, and (iv) evaluate and seek to improve Board
processes, including the setting of agendas, the conduct of Board meetings and
the flow of information from Company officers to the directors. Messrs.
Jackson, Kesler and Johnson served as the members of the Governance and
Nominating Committee until September 2001. In September 2001, the Governance
and Nominating Committee's responsibilities were reduced to (i) evaluating and
selecting candidates to fill vacancies on the Board of Directors and (ii)
considering director nominees
4
presented by stockholders, and the name of the committee was changed to the
Nominating Committee to reflect this change in responsibility. At that time,
the composition of the Governance and Nominating Committee was reduced to two
members, Messrs. Thompson and Johnson, and Mr. Thompson was made the Chairman
of the Governance and Nominating Committee. The Governance and Nominating
Committee did not meet and did not act by unanimous written consent in fiscal
2001.
The Company's Certificate of Incorporation provides that a stockholder may
nominate a person for election to the Board of Directors at a meeting of the
Company's stockholders only if written notice of such nomination(s) (a
"Stockholder's Notice") is received by the Secretary of the Company no less
than 60 days prior to the meeting; provided, however, that, in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, the Stockholder's Notice must be received by
the Company no later than the close of business on the tenth day following the
first to occur of the date on which such notice was mailed or the date that
public disclosure of the date of the meeting was made. The Certificate of
Incorporation requires that the Stockholder's Notice include: (i) the name,
business address, and residence address of the nominating stockholder; (ii) a
representation that the nominating stockholder is a holder of record of shares
of the Company entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) the name, age, business address, residence address and principal
occupation of the nominee; (iv) a description of all arrangements or
understandings between the nominating stockholder and such nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination is being made by the nominating stockholder; (v) any other
information relating to the nominating stockholder and such nominee that is
required to be disclosed in a proxy statement or Schedule 13D filing; and (vi)
the consent of such nominee to serve as a director of the Company if elected.
Audit Committee. The Board of Directors has a standing Audit Committee,
which has been charged with certain powers and duties including, among others,
authority to (i) recommend to the Board the appointment of the firm selected to
be independent certified public accountants for the Company and monitor the
performance of such firm; (ii) review and approve the scope of the annual audit
and evaluate with the independent certified public accountants the Company's
annual audit and annual consolidated financial statements; (iii) review with
management the status of internal accounting controls and internal audit
procedures and results; (iv) evaluate problem areas having a potential
financial impact on the Company that may be brought to the Committee's
attention by management, the independent certified public accountants or the
Board; and (v) evaluate the public financial reporting documents of the
Company. The Audit Committee is required to have at least three members.
Messrs. Kesler, Johnson and Jackson are the current members of the Audit
Committee. Mr. Kesler was appointed to serve as Chairman of the Audit Committee
in September 2001. Mr. Johnson served as Chairman of the Audit Committee in
fiscal 2001 until Mr. Kesler became Chairman of the Audit Committee. The Audit
Committee met eight times during the 2001 fiscal year.
Report of the Audit Committee of the Board of Directors
The Board of Directors adopted a formal written charter for the Audit
Committee on September 27, 1999, and subsequently amended and restated the
Audit Committee charter on January 21, 2000, and again on September 5, 2001, in
accordance with the listing standards of the National Association of Securities
Dealers and the regulations of the Securities and Exchange Commission regarding
audit committees.
In fulfilling its responsibilities as set forth in its charter, the Audit
Committee reviewed and discussed with management the Company's audited
financial statements for the fiscal year ended November 30, 2001. The Audit
Committee also discussed with the Company's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended by Statement on Auditing
Standards No. 90, Audit Committee Communications.
The Audit Committee received the written disclosures and the letter from the
Company's independent accountants required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, and discussed
with the independent accountants their independence from the Company.
5
The Audit Committee reviewed and discussed with internal audit services the
audit scope and plan for fiscal 2002, significant audit findings during the
year and management's response thereto.
Based on these reviews and discussions and in reliance thereon, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for the fiscal year ended November 30, 2001 be included in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
2001 as filed with the Securities and Exchange Commission on February 28, 2002,
and the Board of Directors approved the recommendation.
Dale V. Kesler
John L. ("J.L.") Jackson
James L. Johnson
Principal Accountant Fees
The following table summarizes the fees paid or payable to KPMG LLP for
services rendered for the fiscal year ended November 30, 2001 (in thousands).
Audit Fees.................................................. $1,376
Financial Information Systems Design and Implementation Fees --
All Other Fees:
Tax Fees................................................. $651
Other Fees............................................... -- 651
---- ------
$2,027
======
The Audit Committee has considered whether the provision of financial
information systems design and implementation services and other non-audit
services is compatible with maintaining the principal accountant's independence.
6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number of
shares of Common Stock beneficially owned as of March 20, 2002, by (i) each
person known by the Company to beneficially own more than five percent (5%) of
the outstanding shares of Common Stock; (ii) the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers who were serving as such on November 30, 2001 (based on salary and
bonus earned during fiscal 2001) (collectively, the "Named Executive
Officers"); (iii) each director and nominee for director of the Company; and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise noted, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them.
Amount and
Nature of Percent
Beneficial of
Name of Beneficial Owner or Group Ownership Class
--------------------------------- ---------- -------
Alan H. Goldfield(1)............................... 4,215,222(2) 34.4
Michael A. Roth and Brian J. Stark(3).............. 5,594,959(4) 32.0
Lord, Abbett & Co.(5).............................. 930,206(6) 7.7
Fuller & Thaler Asset Management, Inc.(7)(8)....... 731,340(9)(10) 6.1
Terry S. Parker(11)(12)............................ 55,750(13)(14) *
A.S. Horng(11)..................................... 600,142(15) 4.9
Dale H. Allardyce(11).............................. 59,333(16) *
Austin P. Young(17)................................ 2,000 *
Elaine Flud Rodriguez(11).......................... 34,206(18) *
James L. Johnson(11)............................... 10,250(13)(19) *
Dale V. Kesler(11)................................. 3,200(13)(20) *
John L. ("J.L.") Jackson(11)....................... 5,000(13)(20) *
Jere W. Thompson(11)............................... 3,440(13)(20) *
Current Directors and Executive Officers as a Group 780,571(21) 6.3
--------
* Less than 1%.
(1) The address for Mr. Goldfield is 1850 Turbeville Road, Denton, Texas
76210. Mr. Goldfield retired from his services as a director and officer
of the Company in July 2001.
(2) Includes 3,541,222 shares held jointly with Mr. Goldfield's wife. Also
includes 474,000 shares that are subject to a revocable (upon 90 days
written notice) proxy granted to Mr. Goldfield by Mr. A.S. Horng, which
proxy gives Mr. Goldfield the right to vote such shares. Also includes
200,000 shares subject to options granted under the 1993 Plan, which
options are exercisable within 60 days.
(3) The address for Messrs. Roth and Stark is 1500 West Market Street, Suite
200, Mequon, WI 53092.
(4) Based on a Schedule 13D filed with the Securities and Exchange Commission
on February 21, 2002, by Michael A. Roth and Brian J. Stark, filing as
joint filers pursuant to Rule 13D-1(k). Messrs. Roth and Stark reported
sole dispositive and sole voting power with respect to 5,594,959 shares as
a result of electing to exchange their 5% Convertible Subordinated Notes
due October 2002 for cash and 5% Senior Subordinated Convertible Notes due
November 2002 (the "Notes") pursuant to the Company's exchange offer.
Stark Investments Limited Partnership ("Stark") currently holds 82,459
shares of Common Stock, and a face amount of $15,715,000 in Notes, which
are convertible into 3,143,000 shares (18.0%) of Common Stock. Shepherd
Trading ("Shepherd") currently holds 60,300 shares of Common Stock, and a
face amount of $11,546,000 in Notes, which are convertible into 2,309,200
shares (13.2%) of Common Stock. Therefore, Messrs. Roth and Stark, in
their capacity as the founding members of Staro Asset Management, L.L.C.,
a Wisconsin limited liability company, which serves as (a) the managing
general partner of Stark, and (b) the investment manager of Shepherd,
beneficially own an aggregate of 5,594,959 shares, or approximately 32% of
the Common Stock.
(5) The address for Lord, Abbett & Co. is 90 Hudson Street, Jersey City, New
Jersey 07302.
7
(6) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission on January 28, 2002, by Lord, Abbett & Co., Lord, Abbett& Co.
reported sole voting power and sole dispositive power with respect to all
722,578 shares.
(7) The address for Fuller & Thaler Asset Management, Inc., is 411 Borel
Avenue, Suite 402, San Mateo, California 94402.
(8) The address for Mr. Russell J. Fuller is 411 Borel Avenue, Suite 402, San
Mateo, California 94402.
(9) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission on February 15, 2002, by Fuller & Thaler Asset Management, Inc.
and Russell J. Fuller, Fuller & Thaler Asset Management, Inc. reported
sole voting power with respect to 704,796 shares and sole dispositive
power with respect to all 956,296 shares.
(10) Russell J. Fuller has investment authority over assets held by Fuller &
Thaler Asset Management, Inc.
(11) The address for such individual is 1730 Briercroft Court, Carrollton,
Texas 75006.
(12) Mr. Parker was appointed as Chief Executive Officer of the Company in July
2001.
(13) Includes 1,500 shares subject to options granted under the Directors'
Plan, which options are exercisable within 60 days.
(14) Includes 54,250 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(15) Includes 474,000 shares that are subject to a revocable (upon 90 days
written notice) proxy to vote such shares held by Alan H. Goldfield. Also
includes 126,142 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(16) Includes 53,333 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(17) The address for Mr. Young is 6200 Arnot, Houston, Texas 77007. Mr. Young
retired from the Company as of December 31, 2001.
(18) Includes 33,086 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(19) Includes 5,750 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(20) Includes 1,500 shares subject to options granted under the 1993 Plan,
which options are exercisable within 60 days.
(21) Includes shares subject to options held by directors and executive
officers named in the table and more fully described in footnotes 13
through 20 above, and 7,250 shares subject to options granted under the
1993 Plan to executive officers not named in the table, which options are
exercisable within 60 days.
8
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid to the Named Executive Officers and one former executive officer for each
of the Company's last three fiscal years.
Long Term Compensation
Annual Compensation Awards
------------------------- -----------------------
Restricted Securities
Other Annual Stock Underlying All Other
Salary Bonus Compensation Award(s) Options/SARs Compensation
Name and Principal Position Year ($) ($) ($) ($) (#)(1)(2) ($)
--------------------------- ---- ------- ------- ------------ ---------- ------------ ------------
Alan H. Goldfield(3)........... 2001 634,770 -- 342,364(4) -- -- 4,312,090(5)
Chairman of the Board 2000 850,000 -- -- -- 20,000 50,975(6)
and Chief Executive Officer 1999 850,000 -- -- -- -- 32,461(6)
Terry S. Parker(7)............. 2001 416,015 200,000 -- -- 204,000 --
Chief Executive Officer 2000 -- -- -- -- 1,000 --
1999 -- -- -- -- 1,000 --
A.S. Horng..................... 2001 800,133 300,000 -- -- -- 1,539(8)
Chairman, Chief Executive 2000 800,103 66,675 -- -- 90,283 --
Officer and General 1999 796,897 66,162 25,388(9) -- 20,000 --
Manager of CellStar (Asia)
Corporation Ltd.
Dale H. Allardyce.............. 2001 400,000 -- 44,837(10) -- 100,000 2,070(6)
President and Chief 2000 400,000 -- 172,674(10) -- -- 2,070(6)
Operating Officer 1999(11) 17,375 -- -- -- 40,000 --
Austin P. Young(12)............ 2001 350,000 47,248 14,955(10) -- 75,000 5,148(6)
Senior Vice President, 2000 350,000 -- 1,913(10) -- -- 4,999(6)
Chief Financial Officer and 1999 24,006 -- -- -- 30,000 --
Treasurer
Elaine Flud Rodriguez.......... 2001 265,000 35,774 -- -- 15,000 835(6)
Senior Vice President, 2000 250,000 10,000 -- -- 11,272 500(6)
Secretary and General 1999 150,000 -- -- -- 2,000 410(6)
Counsel
--------
(1) Reflects options to acquire shares of Common Stock. The Company has not
granted stock appreciation rights.
(2) All figures in this column reflect an adjustment for the Company's
one-for-five reverse stock split that was effected on February 22, 2002
(the "Reverse Split").
(3) Mr. Goldfield retired from his services as a director and officer of the
Company in July 2001.
(4) Consists of a consulting payment paid by the Company.
(5) Consists of a $4,250,000 severance payment and $62,090 in insurance
premiums paid by the Company to Mr. Goldfield.
(6) Consists of insurance premiums paid by the Company.
(7) Mr. Parker was appointed Chief Executive Officer of the Company in July
2001.
(8) Consists of a Company matching contribution to its Hong Kong retirement
plan.
(9) Represents amounts paid or reimbursed by the Company to Mr. Horng as an
annual housing allowance. See "Executive Compensation--Employment
Contracts and Termination of Employment and Change in Control
Arrangements."
(10) Consists of relocation expenses paid or reimbursed by the Company.
(11) Mr. Allardyce became the Company's President and Chief Operating Officer
in November 1999.
9
(12) Mr. Young resigned as the Company's Senior Vice President, Chief Financial
Officer as of December 11, 2001 and retired from the Company as of
December 31, 2001. Robert Kaiser became the Company's Senior Vice
President, Chief Financial Officer and Treasurer as of December 12, 2001.
Option Grants During 2001 Fiscal Year
The following table provides information related to options granted to the
Named Executive Officers and one former highly compensated executive officer
during the fiscal year ended November 30, 2001.
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term(1)
----------------------------------------------------------- -----------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price
Name Granted(#)(2)(3) Fiscal Year ($/Sh)(3)(4) Expiration Date 5% ($) 10% ($)
---- ---------------- ------------ ------------ ---------------- --------- ---------
Alan H. Goldfield(5). -- -- -- -- -- --
Terry S. Parker(6)... 204,000 34.94 (7) (7) 1,310,597 3,321,047
A.S. Horng........... -- -- -- -- -- --
Dale H. Allardyce.... 100,000 17.13 9.375 January 25, 2011 589,385 1,493,499
Austin P. Young(8)... 75,000 12.84 9.375 January 30, 2002(9) 442,038 1,120,124
Elaine Flud Rodriguez 15,000 2.57 9.375 January 25, 2011 88,408 224,025
--------
(1) The potential realizable value portion of the table illustrates value that
might be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation on the Common Stock over the term of the options. These
numbers do not take into account provisions of certain options providing
for termination of the option following termination of employment,
nontransferability or vesting over periods of up to ten years.
(2) Reflects options to acquire shares of Common Stock. The Company has not
granted stock appreciation rights. The options become exercisable with
respect to 25% of the shares covered thereby on each of the first four
anniversaries of the date of grant. In the event of a "change of control"
(as defined in the 1993 Plan), any unexercisable portion of the options
will become immediately exercisable.
(3) All figures in this column reflect an adjustment for the Reverse Split.
(4) The exercise price is equal to the fair market value of the Common Stock
on the date of grant. The option exercise price may be paid as follows:
(a) in cash or by certified check, bank draft or money order payable to
the order of the Company; (b) in Common Stock (including restricted
stock), valued at its fair market value on the date of exercise; (c) by
delivery to the Company or its designated agent of an executed irrevocable
option exercise form together with irrevocable instructions from the
optionee to a broker or dealer, reasonably acceptable to the Company, to
sell certain of the shares of Common Stock purchased upon exercise of the
stock option or to pledge such shares as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price; and/or (d) in any other form of
valid consideration that is acceptable to the Compensation Committee in
its sole discretion.
(5) Mr. Goldfield retired from his services as a director and officer of the
Company in July 2001.
(6) Mr. Parker was appointed Chief Executive Officer of the Company in July
2001.
(7) The number, exercise price and expiration date of Mr. Parker's options are
as follows:
Number Exercise Price Exercise Date
------ -------------- ----------------
1,000 $ 6.565 December 6, 2010
3,000 $ 9.375 January 25, 2011
200,000 $10.250 July 4, 2011
(8) Mr. Young retired from the Company as of December 31, 2001.
(9) Pursuant to their terms, Mr. Young's options expired 30 days after his
retirement, which date was January 30, 2002.
10
Option Exercises During 2001 Fiscal Year and Fiscal Year End Option Values
The following table provides information related to options exercised by the
Named Executive Officers and one former highly compensated executive officer
during the fiscal year ended November 30, 2001 and the number and value of
options held on November 30, 2001. The Company does not have any outstanding
stock appreciation rights.
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options/SARs at the-Money Options/SARs at
FY-End (#)(1) FY-End ($)(2)
------------------------- -------------------------
Shares Value
Acquired on Realized
Name Exercise (#)(1) ($)(3) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
Alan H. Goldfield(4). -- -- 185,000 25,000 -- --
Terry S. Parker(5)... -- -- 53,750 209,500 -- --
A.S. Horng........... -- -- 103,571 171,283 -- --
Dale H. Allardyce.... -- -- 20,000 140,000 -- --
Austin P. Young(6)... -- -- 15,000 105,000 -- --
Elaine Flud Rodriguez -- -- 25,269 50,472 -- --
--------
(1) All figures in this column reflect an adjustment for the Reverse Split.
(2) The closing price for the Common Stock as reported by the NASDAQ/National
Market System on November 31, 2001 (the last trading day of fiscal 2001)
was $4.40. Value is calculated on the basis of the difference between the
option exercise price and $4.40 multiplied by the number of shares of
Common Stock underlying the option.
(3) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise related.
(4) Mr. Goldfield retired from his services as a director and officer of the
Company in July 2001. Because Mr. Goldfield continued to serve the Company
as a consultant after his retirement, his stock options did not expire in
connection with his retirement.
(5) Mr. Parker was appointed Chief Executive Officer of the Company in July
2001.
(6) Mr. Young retired from the Company as of December 31, 2001.
Compensation of Directors
During the fiscal year ended November 30, 2001, each director of the Company
who was not an officer or other employee of the Company (an "Independent
Director") received an annual retainer fee of $25,000, plus $1,500 for each
meeting of the Board of Directors or committee of the Board of Directors that
he attended and $750 for each telephonic Board of Directors or committee
meeting that he attended. In addition, to the extent that any committee meeting
is held on the same day as a full Board of Directors meeting or another
committee meeting, only one $1,500 or $750 fee (as applicable) was paid.
Beginning in January 2000, the Company began paying a per diem fee of $1,500 to
each Independent Director for each day such director performs additional
services for the Company at the request of the Chief Executive Officer. The
Company paid $15,000 in per diem fees to Mr. Kesler for the fiscal year ended
November 30, 2001.
In July 2001, Mr. Johnson was elected Chairman of the Board of Directors and
the Company entered into an agreement with Mr. Johnson whereby he would receive
annual compensation of $250,000 for serving as non-executive Chairman of the
Board of Directors, in addition to whatever compensation and expense
reimbursement he is entitled to as an Independent Director. Mr. Johnson
received $101,042 for his services as Chairman during fiscal 2001.
Pursuant to the Directors' Plan, each Independent Director automatically
receives an option (the "Initial Option") to purchase 1500 shares of Common
Stock upon becoming an Independent Director. Also beginning in fiscal 1998, in
addition to the Initial Option, each Independent Director receives an annual
grant pursuant to the
11
1993 Plan of an option (the "Annual Option") to purchase 1000 shares of Common
Stock, which option will be automatically granted on the date of the first full
Board of Directors meeting following the end of each fiscal year. The Annual
Option will vest with respect to 25% of the shares covered thereby on each
anniversary of the date of grant and will expire ten years following the date
of grant. The exercise price of all options granted to Independent Directors
must be equal to the fair market value of the Common Stock on the date of grant.
Directors who are also employees of the Company receive no additional
compensation for serving as directors. All directors of the Company are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to, and attendance at, meetings of the Board of
Directors or committees thereof.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Company has entered into employment agreements (collectively, the
"Employment Agreements" or individually, an "Employment Agreement") with Mr.
Parker, Mr. Horng, Mr. Kaiser, Mr. Allardyce, Mr. Young and Ms. Rodriguez
(collectively, the "Executives" and individually, an "Executive"), effective
July 5, 2001, January 22, 1998, December 12, 2001, November 12, 1999, November
5, 1999 and January 21, 2000, respectively. Mr. Goldfield's Employment
Agreement was terminated in July 2001 in connection with Mr. Goldfield's
retirement, and a separation agreement and a consulting agreement were entered
into by the Company and Mr. Goldfield. See "Executive Compensation--Separation
Agreement and Release and Consulting Agreement with Mr. Goldfield" below. Mr.
Young's Employment Agreement was terminated as of December 31, 2001 and a
separation agreement and release were entered into by the Company and Mr. Young
providing for Mr. Young to receive the severance payments required by his
employment agreement. The Employment Agreements of Messrs. Parker, Horng,
Kaiser, Allardyce, and Young and Ms. Rodriguez provide for annual base salaries
of $850,000, $800,000, $450,000, $400,000, $350,000 and $250,000, respectively,
subject to increase by recommendation of the Compensation Committee and
approval of the Board of Directors. Mr. Kaiser also received a signing bonus of
$300,000. Each of the Employment Agreements also provides that the Executive is
eligible to receive an annual bonus.
The Company is obligated under the Employment Agreements to provide to
Messrs. Horng and Kaiser (i) life insurance policies with face amounts of
$4,000,000 and $1,500,000, respectively, and (ii) disability insurance policies
with annual disability benefits of $300,000 and $200,000, respectively, until
attainment of age 65. In addition, the Company is obligated to pay or reimburse
Mr. Horng for all medical and dental expenses incurred by him or his spouse or
dependents. The Company has in place insurance to cover a portion of such
expenses. Each Executive is eligible to participate in the life, health and
disability insurance programs customarily made available to employees of the
Company.
Each of the Employment Agreements has an initial term of four years, except
that of Mr. Horng, which has a term of five years. All of the Employment
Agreements are subject to earlier termination as follows: (i) by the Company
(a) due to the disability of the Executive, (b) for "cause" or (c) "without
cause"; or (ii) by the Executive (a) upon a material breach by the Company of
the Employment Agreement ("Company Breach"), (b) within twelve months of a
"change in control" or (c) without "good reason" (i.e., for any reason other
than Company Breach). If any of the Executives terminates his or her employment
due to Company Breach or if any of them is terminated by the Company "without
cause," he or she will be entitled to receive his or her accrued but unpaid
base salary and annual incentive payments through the date of termination plus
an amount equal to the product of (i)(a) his or her base salary plus (b) the
amount of his or her annual incentive payments for the preceding year divided
by 365 and (ii) multiplied by (a) with respect to the employees other than Mr.
Horng, the lesser of (x) 720 or (y) the greater of the number of days remaining
in the term of his or her employment or 365 or (b) with respect to Mr. Horng
only, the number of days remaining in the term of his Employment Agreement. In
the event of termination of employment after a "change in control," each of the
Executives will be entitled to receive an amount equal to $100 less than three
times his or her "annualized includable compensation for the base period" (as
defined in Section 280G of the Internal Revenue Code) or such lesser amount
that is the maximum payment permitted by the Internal Revenue Code that does
not constitute an "excess parachute payment."
12
Under the Employment Agreements, a termination will be deemed to be "without
cause" if it is for any reason other than due to the disability of the
Executive or for "cause." Under the Employment Agreements, a termination will
generally be considered to be for "cause" if it is due to the Executive's (i)
continued unsatisfactory job performance after written warning or, in the cases
of Messrs. Horng and Kaiser, gross incompetence or, in the cases of Messrs.
Parker and Allardyce, willful failure to perform his duties, (ii) misconduct
(gross misconduct in the case of Mr. Horng) that causes or is likely to cause
material economic harm to, or material discredit to the reputation of, the
Company or its affiliated entities, (iii) failure to follow the directions of
senior management or the Board of Directors of the Company, (iv) conviction of
or a plea of nolo contendre to a felony involving moral turpitude or the entry
of an order by any federal or state regulatory agency prohibiting the Executive
from participating in the affairs of the Company, or (v) any other material
breach of his Employment Agreement that is not cured within thirty days (sixty
days in the case of Mr. Horng) after receipt of written notice from the Company
specifying the breach.
For purposes of the Employment Agreements, a "change in control" will be
deemed to occur upon the occurrence of any of the following: (1) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger; (2) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company; (3) any approval by the
stockholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company; (4) the cessation of control (by virtue of their
not constituting a majority of directors) of the Board of Directors by the
Continuing Directors (as defined in the Employment Agreements); (5) except with
respect to the Employment Agreements of Messrs. Parker and Kaiser, the
acquisition of beneficial ownership of 15% of the voting power of the Company's
outstanding voting securities by any person or group who beneficially owned
less than 10% of such voting power on the date of the Employment Agreement, the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least 10% of such voting power on the date of the
Employment Agreement, in each case subject to certain exceptions; or (6)
subject to applicable law, in a Chapter 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7 of the United States Bankruptcy Code. In addition, the
Employment Agreements of Messrs. Horng, Allardyce and Young and Ms. Rodriguez
each provides that a "change in control" will be deemed to occur (subject to
certain exceptions) upon the execution by the Company and a stockholder of a
contract that by its terms grants such stockholder (in its, his or her capacity
as a stockholder) or such stockholder's affiliate, including, without
limitation, such stockholder's nominee to the Board of Directors (in its, his
or her capacity as an affiliate of such stockholder), the right to veto or
block decisions or actions of the Board of Directors.
The Employment Agreements also provide that the Executives will be
indemnified by the Company to the extent provided in the Company's Certificate
of Incorporation or bylaws as of the date of the Employment Agreement and to
the fullest extent permitted by changes to Delaware law, except that the rights
of Mr. Horng to indemnification are to the fullest extent permitted by law. The
Employment Agreements of all Executives include non-competition and
confidentiality provisions.
Separation Agreement and Release and Consulting Agreement with Mr. Goldfield
Separation Agreement and Release. The Company has entered into a Separation
Agreement and Release (the "Separation Agreement") with Mr. Goldfield effective
July 5, 2001 (the "Termination Date"). Under the Separation Agreement, Mr.
Goldfield resigned all of his director and officer positions with the Company
and its affiliates effective as of the Termination Date. The Separation
Agreement also terminated the employment agreement between Mr. Goldfield and
the Company. Mr. Goldfield waived all of his rights to further employment,
compensation, benefits, and other remuneration from the Company, other than
under the Separation Agreement and the consulting agreement (the "Consulting
Agreement") entered into between the Company and
13
Mr. Goldfield as of the Termination Date. See "Executive
Compensation-Separation Agreement and Release and Consulting Agreement with Mr.
Goldfield-Consulting Agreement" below. Mr. Goldfield also released the Company
and its affiliates, representatives, employees, and agents from liability
existing on the Termination Date arising out of Mr. Goldfield's employment
agreement, employment or separation of employment with the Company. Mr.
Goldfield also agreed to cooperate with reasonable requests by the Company for
his assistance at the Company's expense. To the extent Mr. Goldfield's
cooperation relates to matters other than those services to be provided by Mr.
Goldfield under the Consulting Agreement and litigation or proceedings to which
Mr. Goldfield is a named party, the Company agreed to pay Mr. Goldfield the
greater of $1,000 per day or the highest per day amount then being paid to
directors of the Company for services other than services provided as a
director of the Company, plus expenses.
In return, the Company agreed to the following:
. To pay Mr. Goldfield $4,250,000.
. To pay Mr. Goldfield any amount due to Mr. Goldfield under the Company's
annual incentive plan, prorated through the Termination Date.
. To provide medical and dental benefits equivalent to the greatest of
such benefits afforded by the Company to any of its employees based in
the United States, such benefits to extend to Mr. and Mrs. Goldfield for
their lives.
. To allow Mr. Goldfield the use of, and all rights of the Company
pertaining to, the suite at Texas Stadium owned by the Company. All
rights to renew the lease of or purchase the Texas Stadium suite are not
transferable by Mr. Goldfield and will revert to the Company if not
exercised by Mr. Goldfield. Mr. Goldfield is responsible for all
expenses related to the suite after the Termination Date.
. To transfer to Mr. Goldfield all tickets to Dallas Cowboys games at
Texas Stadium purchased by the Company prior to the Termination Date.
. The separation of Mr. Goldfield from the Company will not constitute a
"Termination of Service" under the 1993 Plan until the Consulting
Agreement is no longer in effect.
. The Company would reimburse to Mr. Goldfield the reasonable fees and
expenses of one counsel to Mr. Goldfield in connection with Mr.
Goldfield's entry into the Separation Agreement.
. Until July 5, 2006, the Company will provide Mr. Goldfield with a term
life insurance policy in a face amount of $5,000,000 if he qualifies
under normal insurance underwriting standards.
. Until July 5, 2006, the Company will provide Mr. Goldfield with a
disability insurance policy that will pay Mr. Goldfield a $300,000
annual disability benefit until age 65 if he qualifies under normal
insurance underwriting standards.
. The Company released Mr. Goldfield from all claims arising out of his
job performance for the Company, so long as he acted in good faith and
in a manner he reasonably thought to be in, or not opposed to, the best
interests of the Company and he had no reasonable cause to believe his
conduct was illegal.
. The Company agreed to continue to indemnify Mr. Goldfield against claims
based on his service to the Company to the maximum extent of coverage
available to any former employee. This indemnification is in addition to
any other rights of indemnification available to Mr. Goldfield.
Consulting Agreement. The Company has entered into the Consulting Agreement
with Mr. Goldfield under which the Company has engaged Mr. Goldfield to perform
such services for the Company as are mutually agreeable to Mr. Goldfield and
the Chief Executive Officer of the Company. Under the Consulting Agreement, Mr.
Goldfield has the honorary title of "Chairman Emeritus" of the Company but is
not a director, officer or employee of the Company and has no authority to act
on behalf of the Company. The Company was obligated to pay Mr. Goldfield
$35,147 twice per month through November 2001. The Company will also pay Mr.
Goldfield 5% of net earnings from specified new lines of business conducted by
the Company in the People's Republic of China, Hong Kong, Korea, Japan, Taiwan,
Singapore, Malaysia and the Philippines (the "Earnout") through November 30,
2006 if not earlier terminated but not to exceed $15,000,000. The new business
lines covered by the Earnout include the sale of prepaid calling cards, the
sale of specified paging and long distance services, the sale of "Tai Chi box"
services and products and the sale of personal digital assistants and digital
cameras.
14
The Consulting Agreement terminates on the earlier of November 30, 2006, a
termination of Mr. Goldfield for cause by the Company, the death of Mr.
Goldfield, written notice of termination by either party as a result of the
disability of Mr. Goldfield or voluntary termination by Mr. Goldfield upon not
less than 30 days prior written notice. Under the Consulting Agreement, a
termination will generally be considered for "cause" if it is due to
Mr. Goldfield's (i) willful gross misconduct, (ii) conviction of a felony,
(iii) breach of his covenants of confidentiality and non-competition set forth
in the Consulting Agreement or (iv) violation of the Foreign Corrupt Practices
Act. In the event of termination due to the death or disability of Mr.
Goldfield, the Company must still pay the Earnout through November 30, 2006.
The Consulting Agreement also includes non-competition and confidentiality
provisions. The non-competition provision is effective until the later of July
5, 2003 or the date the Consulting Agreement is terminated.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
General. Subject to existing contractual obligations, the Compensation
Committee of the Board of Directors is primarily responsible for evaluating and
recommending the Company's executive compensation policies and practices, and
administers executive awards under the 1993 Plan and the Incentive Plan. The
Compensation Committee is currently composed of Messrs. J.L. Jackson
(Chairman), James L. Johnson and Jere W. Thompson.
Compensation Philosophy. The Company's philosophy of rewarding stockholders
through executive compensation reflects its belief that the compensation of
executives (i) should be linked to achievement of the Company's business and
strategic goals; (ii) should be aligned with the interests of stockholders
through awards of stock options and other stock-based compensation; (iii)
should recognize individual contributions, as well as overall business results;
and (iv) should have the ultimate result of attracting, motivating and
retaining highly-talented executives for the Company. To achieve these
objectives, the Company's current compensation program consists of the
following elements:
. Base salary.
. Annual incentive compensation, the receipt of which is based on (i) the
financial performance of the Company and its divisions from year to year
and/or (ii) significant individual contributions.
. Long-term incentive compensation, primarily in the form of stock options.
Chief Executive Officer's Fiscal 2001 Compensation. Mr. Parker was
appointed Chief Executive Officer of the Company in July 2001. The Company
entered into an Employment Agreement with Mr. Parker effective July 5, 2001
providing for an annual base salary of $850,000 with a guaranteed bonus of
$200,000 for 2001 and a potential annual incentive bonus as approved by the
Board. In addition, Mr. Parker was awarded a grant of options to purchase
200,000 shares of Common Stock at the time of his appointment, 25% of which
vested on the date of grant and the remainder of which will vest 25% on each of
the three subsequent anniversary dates, with a term of ten years. The structure
of Mr. Parker's compensation was based on competitive and comparable
compensation for the position of responsibility as reviewed and recommended by
an outside consulting firm hired by the Company.
Although Mr. Goldfield retired as the Company's Chairman and Chief Executive
Officer in July 2001, his compensation is addressed below because Mr. Goldfield
served as the Company's Chief Executive Officer during part of fiscal 2001. The
structure of Mr. Goldfield's fiscal 2001 compensation was based in large part
on competitive and comparable compensation for the position of responsibility
as reviewed and recommended by an outside consulting firm hired by the Company.
In accordance with such recommendations, the Company entered into an employment
agreement with Mr. Goldfield, effective December 1, 1994, which provided for an
annual base salary of $850,000 or such greater amount as may be recommended by
the Compensation Committee and approved by the Board. Mr. Goldfield's base
salary was not raised from the $850,000 amount provided for in
15
1994. In addition, such agreement provided that Mr. Goldfield was eligible for
an annual bonus pursuant to an incentive plan. Because the Company did not
achieve the specified earnings targets, Mr. Goldfield did not receive a bonus
in fiscal 2001. The Compensation Committee believes that the structure of Mr.
Goldfield's compensation, with its strong emphasis on Company performance, was
in the best interests of the Company's stockholders because it more closely
aligned the interests of Mr. Goldfield and the Company's stockholders.
Compensation of Other Executive Officers. In the fiscal year ended November
30, 2001, the compensation package received by the other executives of the
Company consisted of base salary, stock options and bonus awards. Each element
is consistent with the compensation philosophy set forth above, and the
determinations regarding the appropriate form and level of executive
compensation were based in part on the recommendations of management. Such
recommendations reflected each individual's level of responsibility and
experience and the assessment of the individual's contribution to the success
of the Company's business.
The Company continues to place its emphasis on compensation that would more
closely align the executives' interests with the stockholders' interests.
Therefore, as with the Chief Executive Officer, a significant percentage of
each executive's total compensation opportunity was tied to performance of the
Company and individual achievement through bonus eligibility, based on a
combination of (i) individual performance and (ii) Company performance, and
stock option awards.
Subject to achievement by the Company of a specified performance target,
certain of the Company's executives are eligible to receive incentive bonuses
under the Incentive Plan ranging from 33% to 100% of their base salaries. The
percentage of the bonus amount awarded is based in part on a range of targets
involving the Company's earnings per share, return on capital employed and
operating income generated.
In considering stock option grants to the Company's executives, the
Compensation Committee reviewed recommendations of executive management,
considering each executive's current and future ability to impact achievement
of strategic goals and objectives. This emphasis on equity compensation is in
the best interests of the Company's stockholders because it more closely aligns
the interests of the executives and the Company's stockholders for both near
and long-term. All options granted during fiscal 2001 to the Company's
executives were granted at the fair market value on the date of grant. All of
such options vest at a rate of 25% per year, beginning on the first anniversary
of the date of grant. See "Executive Compensation--Option Grants During 2001
Fiscal Year." An executive will receive full benefits from the option grant
only if the Company's stock price appreciates and only if the executive remains
with the Company for the full term of vesting.
In fiscal 1999, the Company commissioned a new compensation survey to review
its compensation practices in light of the practices of certain of its
competitors and industry peers. The report, delivered in January 2000,
confirmed that the range of cash compensation, bonus awards and option grants
to executives and managers of the Company are competitive and that the
thresholds and performance targets set by management of the Company are
appropriate and generally consistent with those of its peers and competitors.
Internal Revenue Code Section 162(m). Section 162(m) of the Internal
Revenue Code provides for an annual $1,000,000 limitation (the "Deduction
Limitation") on the deduction that an employer may claim for compensation of
certain executives but also provides an exception to the Deduction Limitation
for certain performance-based compensation. It is the intent of the
Compensation Committee to ensure that executive compensation is deductible
through such exception or otherwise, provided that qualification for such
deduction is in the best interests of the Company.
John L. ("J.L.") Jackson
James L. Johnson
Jere W. Thompson
16
Comparative Performance Graph
The following chart compares the cumulative total stockholder return on the
Common Stock with the cumulative total return on the stocks comprising The
Nasdaq Market Value Index (the "Nasdaq Index") and the Electronics Wholesale
Index over the period commencing November 29, 1997 and ending November 30,
2001. The comparison assumes $100 was invested on November 29, 1997 in the
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends. The stock performance graph is not necessarily indicative of future
price performance.
Comparison of Cumulative Total Return
of CellStar Corporation, Nasdaq Index and Electronics Wholesale Index
[CHART]
CellStar Corp NASDAQ Market Index Electronics Wholesale
1996 100 100 100
1997 331.92 124.21 113.97
1998 165.16 153.54 94.00
1999 247.74 251.47 105.83
2000 42.49 208.84 86.58
2001 22.58 156.28 82.03
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("SEC"). Such persons are required by
regulations of the SEC to furnish the Company with copies of all Section 16(a)
reports that they file.
To the Company's knowledge, based solely on its review of the copies of such
reports received by it with respect to fiscal 2001, or written representations
from certain reporting persons, all of the Company's directors, officers and
holders of more than 10% of a registered class of the Company's equity
securities have, with respect to fiscal 2001, timely filed all reports required
by Section 16(a) of the Exchange Act.
17
CERTAIN TRANSACTIONS
In connection with its initial public offering in December 1993, the Company
bought from Mr. Goldfield, its then Chief Executive Officer, a jet aircraft at
book value and agreed that he would have the right to buy the aircraft back at
its then current book value if the Company decided to sell it. In January 2001,
the Company sold the aircraft to Mr. Goldfield for its book value, which was
$2,236,718.
In July 2001, the Company entered into the Separation Agreement and the
Consulting Agreement with Mr. Goldfield. See "Executive Compensation-Separation
Agreement and Release and Consulting Agreement with Mr. Goldfield."
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed KPMG LLP as the independent auditors of the Company for the fiscal
year ending November 30, 2002. KPMG LLP served as the Company's independent
certified public accountants for the fiscal year ended November 30, 2001, and
has reported on the Company's consolidated financial statements for such year.
Representatives of KPMG LLP are expected to be present at the Meeting with the
opportunity to make a statement if they so desire and to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders of the Company may submit proposals on matters appropriate for
stockholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Exchange Act and the Company's Certificate of
Incorporation. Under SEC proxy rules, the Company is required to provide the
following information based on the assumption that the date for the Company's
next annual meeting after the Meeting will be within thirty (30) days of the
first anniversary of the date of the Meeting: any appropriate proposal
submitted by a stockholder of the Company and intended to be presented at the
2002 annual meeting of stockholders to be held after the Meeting must be
received by the Company by January 8, 2003, to be considered for inclusion in
the Company's proxy statement and related proxy for the 2002 annual meeting.
The Company anticipates that it will have its next annual meeting after the
Meeting no later than May 9, 2003. If that annual meeting is outside the 30 day
period referred to above, then proposals submitted by a stockholder for
inclusion in the Company's proxy statement and related proxy must be received a
reasonable time before the Company prints and mails its proxy materials.
Also, a stockholder proposal intended to be presented at the next annual
meeting after the Meeting but not included in the Company's proxy statement for
such meeting, must be received by the Company at least 60 days in advance of
the date of that meeting or, if the public announcement of the meeting is less
than 70 days before the date of the meeting, on or before the tenth day
following the date on which the meeting is first publicly announced. According
to the Company's Certificate of Incorporation, a stockholder proposal received
outside of this time period will be considered untimely. Management named in
the Company's proxy form for the annual meeting will then have discretionary
authority to vote shares represented by such proxies on the stockholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials. Even if a stockholder makes a timely
notification, management named in the Company's proxy form for the annual
meeting may still exercise discretionary voting authority under circumstances
consistent with the proxy rules of the SEC.
The Company will inform the stockholders of any changes of the dates above
in a timely manner and will provide notice of the new dates in a quarterly
report on Form 10-Q.
18
The procedure for nominating a person for election to serve as a director is
set forth under "Meetings of Directors and Committees--Nominating Committee."
Any stockholder proposal must provide the information required by the Company's
bylaws and Certificate of Incorporation and comply with any applicable laws and
regulations. All submissions should be made to the Secretary of the Company at
the Company's principal offices at 1730 Briercroft Court, Carrollton, Texas
75006.
OTHER BUSINESS
The Board of Directors knows of no matters other than those described herein
that will be presented for consideration at the Meeting. However, should any
other matter properly come before the Meeting or any adjournment thereof, it is
the intention of the persons named in the accompanying Proxy to exercise their
discretionary authority to vote in accordance with their best judgment.
MISCELLANEOUS
Accompanying this Proxy Statement is a copy of the Company's Annual Report
to Stockholders for the fiscal year ended November 30, 2001 (the "Annual
Report"). The Annual Report is not to be deemed a part of this Proxy Statement
and does not form any part of the material for the solicitation of Proxies.
The entire cost of soliciting Proxies, including the costs of preparing,
printing and mailing this Proxy Statement and accompanying materials to
stockholders, will be borne by the Company. In addition to solicitation by
mail, directors, officers and employees of the Company may solicit Proxies
personally or by telephone or otherwise, without additional compensation. The
Company may also make arrangements with brokerage houses and other custodians,
nominees and fiduciaries for forwarding of solicitation materials to the
beneficial owners of shares of Common Stock held by such persons, and the
Company may reimburse such brokerage houses and other custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
By Order of the Board of Directors,
/s/ Elaine Flud Rodriguez
Elaine Flud Rodriguez
Senior Vice President, Secretary and
General Counsel
April [__], 2002
19
APPENDIX A
PROXY
CELLSTAR CORPORATION
1730 Briercroft Court
Carrollton, Texas 75006
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Terry S. Parker and Elaine Flud
Rodriguez as Proxies, each with the power to act without the other and
to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated on the other side, all the shares
of common stock of CellStar Corporation held of record by the
undersigned on March 25, 2002 at the Annual Meeting of Stockholders of
the Company to be held on May 9, 2002 or any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposal Number 1. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on other side)
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[X] Indicate
your vote
as shown
in this
example
Statement delivered with this Proxy.
1. Proposal to elect Dale V. Kesler as a director for a term expiring in 2005
or until his successor is elected and qualified.
FOR WITHHOLD
[ ] [ ] The Proxies are authorized to vote,
in their discretion, upon such
other business as may properly come
before the meeting.
Dated:_______________________, 2002
Signature
Signature if held jointly
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the
President or other authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
A-2