EXHIBIT 10.36
CellStar, Ltd.
CellStar Telecom, Inc.
December 18, 1998
Xx. Xxxxx Xxxx
Xx. Xxxx Xxxx
Xx. Xxxxx Xxxx Wine
Xx. Xxxx Xxxx
Xx. Xxxxxxxxx X. Xxxxxx
Xxxx Telecom, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Re: Amendment to September 1st Letter Agreement
Dear F.J.:
This amendment ("Amendment") to the Letter of Agreement dated September 1,
1998, (together with each of the documents, instruments and agreements executed
and delivered in connection therewith, the "September 1st Letter Agreement") is
entered into by and among CellStar, Ltd. ("CellStar"), CellStar Telecom, Inc.
("CellStar Telecom") (CellStar and CellStar Telecom are hereinafter sometimes
collectively referred to as the "CellStar Parties"), Xxxx Telecom, Inc. ("Xxxx
Telecom"), Xxxxx Xxxx, Xxxx Xxxx, Xxxxx Xxxx Wine, Xxxx Xxxx and X. X. Xxxxxx
(Xxxx Telecom, Xxxxx Xxxx, Xxxx Xxxx, Xxxxx Xxxx Wine and Xxxx Xxxx and X. X.
Xxxxxx are hereinafter sometimes collectively referred to as the ("Xxxx
Parties"). The CellStar Parties and the Xxxx Parties hereinafter collectively
referred to as the "Amendment Parties"). Each capitalized term contained but
not defined herein shall have the meaning ascribed to it in the September 1st
Letter Agreement.
In consideration of the mutual promises contained herein, the execution of
a separate letter agreement of even date herewith executed by the Amendment
Parties and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each of the undersigned Amendment Parties
hereby agree as follows:
Amendment
December 18, 1998
Page 2 of 5
1. The Distribution and Fulfillment Agreement by and between CellStar and
Xxxx Telecom dated as of the 15th day of September 1997 (the "Distribution
Agreement") as amended by that certain Amendment to Distribution and Fulfillment
Agreement dated as of September 1, 1998 between CellStar and Xxxx Telecom (the
"Amendment to Distribution Agreement") is hereby further amended so as to permit
CellStar to sell cellular telephone products incorporating the Handset
Technology (as hereinafter defined), on a royalty free basis directly to any
purchasers or customers, including, without limitation, to customers to which
Xxxx Telecom has sold cellular telephone products in the past (the Distribution
Agreement, as amended by the Amendment to Distribution Agreement, hereinafter
referred to as the "Amended Distribution Agreement"). For purposes of this
Amendment, "Handset Technology" shall mean certain technology developed by Xxxx
Telecom by which cellular telephone handsets can be programmed with software for
operating the handset on a prepaid basis and Xxxx Telecom is the owner of all
copyrights and all other intellectual property rights in connection therewith.
CellStar agrees to provide Xxxx Telecom with copies of all customer invoices
within three (3) business days of date of invoice, identifying the purchase
order to which each invoice relates.
The sale price for each cellular telephone sold by CellStar pursuant to
this Section 1 shall be set solely by Xxxx Telecom and shall include a
guaranteed profit margin for CellStar of the greater of (i) eight percent of
CellStar's net cost after all rebates, mdf, co-op or other incentives that are
paid to CellStar by the manufacturer in connection with the purchase of each
such telephone, or (ii) $9.00 for each telephone (such profit margin hereinafter
referred to as the "CellStar Fee"). The CellStar Fee is compensation for the
costs of freight-in, freight-out, packaging, welcome kit insertion and labeling.
Xxxx Telecom shall pay to CellStar a separate reasonable compensation for any
other services CellStar performs with respect to each such telephone as may be
mutually agreed to by Xxxx Telecom and CellStar. CellStar shall receive and
process cellular telephones returned by Xxxx Telecom customers for no additional
charge to Xxxx Telecom; provided, however that any costs incurred by CellStar
for disposal or return to the manufacturer (including, but not limited to
freight costs) which are not otherwise reimbursed by the manufacturer shall be
reimbursed by Xxxx Telecom promptly upon presentation by CellStar to Xxxx
Telecom of an invoice therefor. CellStar and Xxxx agree to use reasonable
efforts to obtain reimbursement from the manufacturer for all such costs. If
the number of returned telephones exceeds fifteen percent (15%) of the total
number of telephones sold by CellStar to Xxxx customers during any calendar
quarter, CellStar and Xxxx will meet to discuss returns and both parties agree
to work in good faith to either reduce the number of returns to a mutually
acceptable level or agree on a new CellStar Fee to reflect the increased receipt
and processing costs. CellStar and Xxxx agree to jointly define and execute a
process to notify Xxxx of returned phones.
Upon reasonable notice from Xxxx Telecom, CellStar shall make available to
Xxxx Telecom for inspection CellStar's invoices from its suppliers of the
telephones sold under this Section. Xxxx Telecom agrees that any such
disclosure of CellStar's suppliers' invoices shall be maintained by it in the
strictest confidence and that it shall not disseminate any of such information
to anyone at any time, unless otherwise required by law. Any amount received by
CellStar from the customer which exceeds CellStar's net cost for such telephone
plus the CellStar Fee shall be for Xxxx Telecom's credit and shall be credited
once a month, but only for those sales for which CellStar actually receives
payment from the telephone purchaser. In the event the amount received by
CellStar from the customer is less than CellStar's net cost plus the CellStar
Fee, CellStar shall debit Xxxx Telecom for the difference between the amount
received and CellStar's net cost plus the CellStar Fee. CellStar shall send
Xxxx Telecom a detailed invoice after the close of each calendar month,
providing all credits and debits related to this Section and if the net result
is a credit to Xxxx, then
Amendment
December 18, 1998
Page 3 of 5
CellStar shall send Xxxx Telecom a check for the amount of such credit by the
end of the calendar month in which such detailed invoice is rendered. In the
event the net result is a debit, then Xxxx Telecom shall pay such amount by the
end of the calendar month in which such detailed invoice is rendered.
The Amendment Parties agree that in consideration of CellStar's agreement
to sell cellular telephone products incorporating the Handset Technology
directly to purchasers and thereby conserve Xxxx Telecom's cash, Xxxx Telecom
agrees that, during the term of the Distribution Agreement, all telephones that
will be activated on its Tracfone program will originate from shipments by
CellStar, excluding Motorola and Nokia OEM cellular or PCS telephones that are
sold by Radio Shack. CellStar and Xxxx agree to adjust the CellStar Fee from
time to time to reflect competitive rates provided by comparable distributors in
the marketplace for comparable services.
2. The Amendment Parties agree to settle any and all disputes relating to
pricing adjustments on sales of cellular telephone products through November 30,
1998 made by CellStar to Xxxx pursuant to the Amended Distribution Agreement,
including, without limitation, the Outstanding Claims (as that term is defined
in that certain Amendment to Distribution Agreement), by CellStar crediting the
sum of US$1,647,000 against the outstanding principal under the Note. The
Amendment Parties hereby agree that this principal reduction shall be credited
retroactively against the principal balance as of September 1, 1998. CellStar
also agrees to credit US$100,000 against interest due as of November 15, 1998.
3. Xxxx Telecom acknowledges that CellStar is currently holding in
inventory certain pre-paid pagers having a cost of approximately $554,000 and
certain pre-paid re-charge cards having a cost of approximately $191,000 which
were ordered by CellStar as dedicated inventory for Xxxx Telecom (the
"Dedicated Inventory"). Xxxx Telecom hereby agrees to use its best reasonable
efforts to assist CellStar in obtaining a purchaser for the Dedicated Inventory.
In the event CellStar is unable to sell the Dedicated Inventory or return such
Dedicated Inventory to the manufacturer for a refund in an amount equal to its
cost for such product within 120 days following the date of this Amendment, Xxxx
agrees to reimburse CellStar for fifty percent (50%) of the loss incurred by
CellStar on such sale or return within fifteen (15) days following such sale or
return.
4. CellStar hereby agrees that, to the extent that a Performance Event (as
such term is defined in the Promissory Note (the "Note") dated as of September
1, 1998 executed by Xxxx Telecom and payable to CellStar) has or may be deemed
to have occurred, or may occur prior to February 15, 1999, it shall waive its
right to act upon any such Performance Event until February 15, 1999.
CellStar's agreement herein shall not be deemed to constitute a waiver of any
such Performance Event or other default under the terms of the Note.
5. The Xxxx Parties agree that Xxxx Telecom and its operations and
business may be reviewed and audited from time to time by CellStar's internal
auditors and by independent certified public accountants appointed by CellStar,
whether in complete or partial audits or reviews, upon five (5) days written
notice to Xxxx Telecom, and the Xxxx Parties agree to cooperate fully with any
such audits and provide any documents, records, personnel and other information
and cooperation as may be reasonably requested by CellStar to effect such
reviews and audits.
Amendment
December 18, 1998
Page 4 of 5
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of Florida, without regard to the principles of conflicts
of laws thereunder.
7. Except as expressly modified or amended hereby, the September 1st
Letter Agreement and each of the agreements, instruments and documents executed
in connection therewith, are hereby ratified and reaffirmed, and remain in full
force and effect. To the fullest extent possible, this Amendment shall be
interpreted to be consistent with the September 1st Letter Agreement; however,
to the extent they are in conflict, the provisions of this Amendment shall
control.
8. This Amendment shall be binding upon and inure to the benefit of each
of the parties hereto and each of their respective successors and permitted
assigns.
9. This Amendment may be executed in any number of counterparts, with each
counterpart constituting an original, but altogether constituting but one and
the same agreement.
10. In the event that there shall be any dispute relating to or arising
out of or in connection with this Amendment, the prevailing party shall be
entitled to recover from each of the other adverse parties thereto, jointly and
severally, attorneys fees and costs incurred, at all levels.
11. This Amendment has been drafted with the suggestions and revisions of
all parties hereto and should not be construed more strictly against one party
than against any other.
12. Each party hereto agrees to execute and deliver, upon the request of
any other party hereto and in addition to the documents to be delivered pursuant
hereto, such documents as may be reasonably necessary to evidence or effectuate
the terms and conditions of this Amendment and to comply with applicable law.
13. This writing recites the Amendment Parties' entire understanding of
all of the terms of their agreement to amend the September 1st Letter Agreement.
14. This Amendment may not be amended or modified except pursuant to a
written instrument executed by all parties hereto.
15. CellStar and Xxxx Telecom have executed this Amendment on the date
first set forth above. The Amendment Parties agree that each of the Xxxx Parties
shall execute and deliver fully executed counterpart originals of this Amendment
to CellStar within three (3) business days from the date hereof, failing which
this Amendment shall be null and void and of no further effect.
Amendment
December 18, 1998
Page 5 of 5
If the foregoing terms and conditions are acceptable to you, please
indicate your acknowledgment and agreement by executing this Amendment in the
space provided therefor below.
Very truly yours,
CellStar, Ltd. CellStar Telecom, Inc.
By: National Auto Center, Inc.
Its: General Partner
/s/ XXXXXXX X. XXXXX /s/ XXXXXXX X. XXXXX
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By: Xxxxxxx X. Xxxxx By: Xxxxxxx X. Xxxxx
Its: President Its: President
Accepted and Agreed to this
18th day of December, 1998, by:
Xxxx Telecom, Inc.
/s/ X. X. XXXXXX
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By: X. X. Xxxxxx
Its: President and CEO
/s/ XXXXX XXXX
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Xxxxx Xxxx
/s/ XXXX XXXX
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Xxxx Xxxx
/s/ XXXXX XXXX WINE
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Xxxxx Xxxx Wine
/s/ XXXX XXXX
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Xxxx Xxxx
/s/ X. X. XXXXXX
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X. X. Xxxxxx
