Exhibit 10.5
DISTRIBUTION AND FULFILLMENT SERVICES AGREEMENT
1. Chase Telecommunications, Inc., doing business as Cricket Communications
in the state of Tennessee ("Cricket"), and CellStar, Ltd. ("CellStar") enter
into this Distribution and Fulfillment Services Agreement ("Agreement")
effective as of December 22, 1999. Cricket and CellStar are entering into this
Agreement to facilitate the sale and distribution of handsets and accessories to
Cricket and its customers. The parties generally anticipate that CellStar will
purchase phones from Cricket's suppliers as a purchasing agent for Cricket, and
will subsequently sell such phones to Cricket pursuant to this Agreement and/or
to Cricket's customers as a distribution agent for Cricket pursuant to the terms
of the sales agreements between Cricket and its customers. In furtherance of
such purposes, CellStar agrees to sell wireless handsets and accessories
(collectively, the "Products") as described in Exhibits C hereto which are
incorporated herein by this reference, and to provide to Cricket certain
distribution and fulfillment services (the "Services"), as more fully described
in the "Description of Services" attached hereto as Exhibits A and B and
incorporated herein by this reference.
2. During the term of this Agreement, CellStar will issue weekly reports
(the format and content of which shall be agreed upon by the parties) to Cricket
who will use such reports to monitor CellStar's compliance with this Agreement
and the terms and conditions set forth in the Description of Services. CellStar
shall meet all requirements set forth in the Description of Services within the
time frames stated in, and as more fully described in, the "Tactical Timeline"
attached hereto as Exhibit D and incorporated herein by this reference.
3. During the term of this Agreement, CellStar will perform the Services
for Cricket in a professional and workmanlike manner. Handsets sold by CellStar
to Cricket, or to customers of Cricket for an on behalf of Cricket, will be at
the prices set forth on Exhibit E hereto, as amended from time to time by mutual
agreement. Cricket shall pay CellStar the fees set forth on Exhibit A hereto for
CellStar's inventory management, kitting and fulfillment, shipping, and
return/repair services ("Inclusive Services Fee"). CellStar's standard carrier
pricing will apply to all accessory products packaged specifically for Cricket,
as described in Exhibits C attached hereto. All labels and collateral materials
to be affixed upon or included with Products shipped by CellStar shall be
procured by and provided to CellStar by Cricket. Cricket shall insure that
CellStar has an adequate supply of such labels and collateral materials at all
times during the term of this Agreement.
4. CellStar shall sell and ship Product to Cricket and, as a distribution
agent for Cricket, to customers of, or entities designated by, Cricket in
accordance with the written instructions of Cricket. Title to all Product shall
remain in CellStar until CellStar delivers such Product to a common carrier FOB
CellStar's distribution facility. CellStar shall ship all Product for delivery
in the continental United States via FedEx Express Saver, the cost of which is
included in the Inclusive Service Fees. Cricket may designate any other shipper
and any other shipping terms at its sole cost and expense. All shipping costs
for any Product shipped outside the continental U.S. (as well as all additional
costs incurred to ship Product outside of the United States such as export or
import fees, VAT, tariffs, etc.) shall be borne by Cricket. CellStar shall
THIS AGREEMENT HAS CONFIDENTIAL PORTIONS OMITTED, WHICH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE
INDICATED IN THIS AGREEMENT WITH BRACKETS ([*]).
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bear all risk of loss to any Product, whether or not CellStar has title thereto,
while such Product is under CellStar's dominion and control. Cricket and/or its
customers shall bear all risk of loss and the cost of any insurance for Product
shipments as of the FOB point. CellStar shall submit a CellStar invoice with
each shipment of Product to Cricket, or customers of or entities designated by
Cricket, as applicable, who shall pay or have previously paid all properly
invoiced amounts directly to CellStar. At the end of each week, CellStar shall
submit to Cricket a complete list of all Product shipped and Services performed
during such week. CellStar shall submit an invoice for the total amount due to
it from Cricket each calendar month. Cricket shall pay the amount properly
invoiced in full to CellStar within thirty (30) days of receipt of such invoice.
5. Cricket shall provide CellStar on a monthly basis at least ten (10) days
prior to the end of each calendar month, a three (3) month rolling forecast (the
"Forecast") to assist CellStar in maintaining an orderly production flow for the
purpose of meeting Cricket's demand for Product and Services and Product
delivery requirements. Cricket shall state the Product model number or SKU and
projected shipment volume for each model number or SKU for each calendar month
included in the Forecast, all in a mutually agreed upon format. The projected
Product volume for the first month of each Forecast shall constitute a firm
commitment by Cricket to purchase such Products. Except in shortage situations,
if the total number of Products included in purchase orders submitted by Cricket
and/or its customers or designated entities in any calendar month exceeds the
amount forecasted by Cricket for such month, CellStar shall make commercially
reasonable efforts to ship any excess Products ordered in accordance with the
requested time frame of Cricket and/or its customers, as applicable; however,
CellStar shall not be obligated to meet such deadline.
6. If Cricket and/or its customers or designated entities do not issue one
or more purchase orders for an amount of Product equal to or greater than the
first month of forecasted volume of Products during such one month period, any
remaining Products will be purchased by Cricket at a price equal to the
Acquisition Cost (as hereinafter defined), plus any Inclusive Service Fees.
CellStar shall ship such Product to the locations Cricket designates in writing.
CellStar shall invoice Cricket for such Product and Cricket shall make payment
therefor within thirty (30) days of receipt thereof.
7. Any return of Product to CellStar by Cricket or any customer of, or
entities designated by, Cricket shall be performed by CellStar for Cricket in
accordance with CellStar's standard return policies and procedures as agreed
upon by Cricket and CellStar and as more fully described in Exhibit A attached
hereto.
8. CellStar and Cricket shall work together in good faith to develop
mutually acceptable daily, weekly and/or monthly reporting requirements.
CellStar agrees to provide Cricket with such reports in a format and transfer
method as may be agreed by Cricket and CellStar. Cricket may designate one or
more affiliated entities to which such reports may be delivered.
9. CellStar shall purchase Product in accordance with the Forecast from
manufacturers designated by Cricket ("Manufacturers"). CellStar shall pay
Manufacturers in full for the Product within thirty (30) days of receipt and
acceptance thereof. CellStar will establish with Cricket credit and billing
requirements to facilitate the shipping of Product to, and fulfillment of
Services for, Cricket, or customers of or entities designated by Cricket.
Cricket
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shall pay CellStar the following amounts (i) in the event any sale of any
Product by CellStar is for a price less than the Acquisition Cost, the
difference between the sales price and the Acquisition Cost, plus (ii) the fees
set forth in Exhibit A as applicable. For purposes of this Agreement, the
"Acquisition Cost" of any Product shall be the lower of (a) CellStar's
negotiated pricing with the Manufacturer for such Product, or (b) Cricket's
negotiated pricing with the Manufacturer for such Product, provided that,
Cricket has taken all action necessary for CellStar to purchase Product from the
Manufacturer at Cricket's negotiated pricing.
10. CellStar will establish with Cricket a system for the receipt and
processing of orders for Product from customers of Cricket who meet the
applicable credit standards of CellStar. Until such a system is established,
CellStar will not accept or process orders for Cricket customers. Once such a
system is established, CellStar shall be responsible for the submission of
appropriate invoices to such customers in accordance with such system. CellStar
shall retain sole responsibility for the processing and collection of all
customer payments and shall retain all risk of loss associated therewith.
CellStar shall not be required to fulfill any order, provide any Services or
ship any Product to any customer that does not meet CellStar's credit criteria
unless Cricket undertakes in writing to guarantee the prompt payment of amounts
due pursuant to any such rejected order.
11. During the term of this Agreement, CellStar shall not sell or
distribute Products purchased under contracts negotiated between Cricket and any
third party manufacturer to any entity other than customers of, or other
entities designated by, Cricket unless Cricket specifically consents thereto in
writing.
12. This Agreement shall terminate upon the earlier of (i) nine (9) months
from the effective date set forth in Section 1 of this Agreement, or (ii) upon
the provision of thirty (30) days advance written notice by one party to the
other of its intention to terminate this Agreement, or (iii) upon the execution
of a follow-on agreement between the parties hereto in respect of the subject
matter hereof. If not terminated within the initial nine (9) month period, this
Agreement shall be automatically extended for a fifteen (15) month period.
Thereafter, the parties may, by mutual agreement, extend this Agreement for an
additional twelve (12) months. Upon termination of this Agreement, Cricket shall
(i) repurchase from CellStar any Product then in CellStar's inventory (other
than any Product sold by CellStar but not yet shipped from its inventory) at a
purchase price equal to the Acquisition Cost of such Product plus the applicable
Inclusive Service Fees described in Exhibit A; provided that, such Product was
purchased by CellStar in accordance with the Forecast or at the written
direction of Cricket, or (ii) enter into an extension of this Agreement on terms
mutually acceptable to the parties hereto.
13. Cricket may, at any time during the term of this Agreement, submit
written instructions to CellStar to deliver all or any portion of Product then
in CellStar's possession to Cricket or any designee of Cricket. CellStar shall
insure and ship, at the sole expense of Cricket, such Product in accordance with
the written instructions of Cricket. CellStar shall promptly submit an invoice
to Cricket for the Product shipped, including any applicable Inclusive Services
Fees and insurance costs, and any other pre-agreed upon extraordinary expense
incurred in connection therewith. Cricket shall pay CellStar the invoiced amount
in full within thirty (30) days of receipt thereof.
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14. Any information disclosed by either party to the other that the
disclosing party labels or designates as confidential or proprietary shall be
maintained in strict confidence by the receiving party and shall not be
disclosed to any third party without the disclosing party's prior written
consent. Any such information shall not be disclosed to any person within the
receiving party's organization except on a strict need-to-know basis and any
such recipient shall understand the receiving party's confidentiality
obligations with respect to such information. Notwithstanding the provisions of
Section 16 hereof, a disclosing party shall have the right to seek and obtain
injunctive relief from a court of competent jurisdiction in the event of any
actual or threatened breach of this provision. This Agreement shall not apply to
any information that (a) is publicly available or has become publicly available
without a breach of this Agreement; (b) was known to the receiving party prior
to the time of disclosure by the disclosing party; or (c) was disclosed to the
receiving party by a third person legally entitled to disclose it.
15. NEITHER CELLSTAR NOR CRICKET MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE PRODUCTS PURCHASED AND SOLD
HEREUNDER, INCLUDING ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT CELLSTAR WARRANTS THAT ALL PRODUCT SOLD
UNDER THIS AGREEMENT SHALL BE FREE OF ANY LIENS OR ENCUMBRANCES. IN ADDITION,
CELLSTAR MAKES NO REPRESENTATION OR WARRANTY REGARDING ANY INTELLECTUAL PROPERTY
LICENSES OR RIGHTS IN CONNECTION WITH SUCH PRODUCTS AND SHALL NOT BEAR ANY
LIABILITY IN THE EVENT ANY PRODUCT VIOLATES OR INFRINGES UPON THE INTELLECTUAL
PROPERTY RIGHTS OF ANY THIRD PARTY.
16. Each party hereto will indemnify and hold harmless the other with
respect to any claim, action, cost, expense, judgment or assessment, including
reasonable attorneys' fees, imposed or incurred as a result of the other party's
breach of any provision of this Agreement or such party's negligence, gross
negligence or willful misconduct.
17. The construction and interpretation of this Agreement shall be governed
by the laws of the State of Texas, without regard to its rules concerning
conflicts of laws. This Agreement, together with the Exhibits attached hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior oral or written negotiations and
agreements between the parties with respect to the subject matter hereof. No
modification, variation or amendment of this Agreement shall be effective unless
made in writing and signed by an authorized officer of each of the parties.
18. Any dispute that may arise between the parties hereto under or relating
to their respective rights, duties and responsibilities hereunder shall be
resolved by good faith negotiation. If such dispute cannot be resolved within
sixty (60) days, it shall be submitted to binding arbitration in Dallas, Texas
and governed by the rules of the American Arbitration Association for the
resolution of commercial disputes.
19. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original hereof, but together shall constitute
but one and the same instrument. This Agreement may be executed by facsimile and
the parties agree that such facsimile signatures shall have the same force and
effect as original signatures.
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20. Any delay or failure to enforce at any time any provision of this
Agreement shall not constitute a waiver of the right thereafter to enforce each
and every provision thereof. If any of the provisions of this Agreement is
determined to be invalid, illegal, or otherwise unenforceable, the remaining
provisions hereof shall remain in full force and effect and the parties shall
amend this Agreement by replacing such provision with an enforceable substitute
provision or provisions to maintain the commercial and/or technical substance of
the previous provision(s) as closely as possible.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers.
CHASE TELECOMMUNICATIONS, INC.
Doing Business As
CRICKET COMMUNICATIONS
in the state of Tennessee
By: /s/ Xxxxxxx X. XxXxxxxx
--------------------------
Name: Xxxxxxx X. XxXxxxxx
Title: Executive Vice President
Date: 1/5/00
CELLSTAR, LTD.
By: National Auto Center, Inc.,
Its General Partner
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
Date: 1/10/00
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EXHIBIT A
Description of Services
INCLUSIVE SERVICES FEE (per handset) $ [*]
Includes:
1) INVENTORY MANAGEMENT
. Purchasing, per Cricket forecast (based
upon the first month of rolling three
month forecast)
. Freight in, from manufacturer
. Cricket to provide ESN/sublock
information upon each shipment from
manufacturer (856 EDI transmission
preferred)
. Order processing
. Receiving
. Put away
. Order entry
. Credit management, finance
. Pick, pack, and stage to ship
2) KITTING & FULFILLMENT SERVICES
. Managing products by item (WIP) including
literature and packaging materials
. Assign part numbers
. Manage xxxx of materials for
each customer
Perform assembly function:
. Sleeve handset box
. Apply tamperproof sticker
. Apply UPC labels (if
necessary)
. Apply Cricket stickers to box
and/or sleeve (if necessary)
. Includes up to three pieces of
collateral
. Product is placed in master cartons for
shipping
Programming :
. Cricket to supply MIN file, based upon forecast for
each market
. Utilization of "CDMA Workbench" to manage
activation information such as:
. Cricket PRI/PRL
Brackets ([*]) indicate portions of this document have been deleted and have
been separately filed with the Securities and Exchange Commission.
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. Dual subsidy lock codes
. MIN programming
. ESN capture and management
. (Add $ [*] if software flash needed)
. New label generated with customer specific
information
. Product is placed in master cartons for
shipping
. Includes up to three pieces of
collateral
. Handset labels
. Creation, maintenance and
distribution of electronic files,
including
. ESN
. MIN, and
. Random sublock
3) RETURNS and REPAIR
. EXCEPTION: Shipping (freight-in) to CellStar for returns or
repair not included
. New returns
. RMA creation and tracking
. Handset, back to Cricket inventory
. Must be new, in box,
tamperproof seal in
tact
. Accessory returns: 1 for 1 stock swap
REPAIR/REFURBISH FEES
LEVEL CATEGORY DESCRIPTION PRICE
-------------- ----------- -----
. XXXXX 0 Xxxxxxxxxx Xxxxxx, test, disposition Included
. LEVEL 2 Minor Reconditioning Buff & puff, test, software flash Included
. LEVEL 3 Major Reconditioning Plastics (if needed) Included*
Does not include parts needed for repair, such as: *labor only
. Lens
. Front cover
. Antenna
. Keypad
. LEVEL 4 Major Repair Non-warranty, board-level repair $ [*]
. LEVEL 5 Module Replacement LCD & Keyboard $ [*]
Brackets ([*]) indicate portions of this document have been deleted and have
been separately filed with the Securities and Exchange Commission.
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EXHIBIT B
Description of Services
ACCESSORY FULFILLMENT SERVICES
. Sold at CellStar current "Carrier Pricing" (shipping costs not
included)
. Cricket to supply/agree upon artwork for backer cards
. Create/print Cricket-labeled backer cards
. Package Cricket-labeled accessories based upon Cricket
Accessory forecast (rolling three month forecast)
. Pick, pack, stage to ship
NOTE: See Exhibit C for current accessory availability and pricing.
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EXHIBIT C
Accessories Available
[*]
Brackets ([*]) indicate portions of this document have been deleted and have
been separately filed with the Securities and Exchange Commission.
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EXHIBIT D
Tactical Timeline
Finish times and duration listed below are estimated based upon completion-date
requirements, and are dependent upon the cooperation of Cricket regarding
requested information and/or tasks; Duration and Finish times may be adjusted as
needed.
Task Name Duration Finish
Project Meetings 34 days 1/4/00 17:00
Project Kick-Off 1 day 11/18/99 17:00
Status Meetings 34 days 1/4/00 17:00
Status Meetings 1 1 day 11/18/99 17:00
Status Meetings 2 1 day 12/7/99 17:00
Status Meetings 3 1 day 12/17/99 17:00
Status Meetings 4 1 day 1/4/00 17:00
Agreements 20 days 12/10/99 17:00
Contract Signature 20 days 12/10/99 17:00
Establish Customer 22 days 12/17/99 17:00
Credit Apps to Indirects 22 days 12/17/99 17:00
Address Book 22 days 12/17/99 17:00
Cricket 1 day 11/18/99 17:00
Ship-To ABs (include 22 days 12/17/99 17:00
Carrier Code)
Indirect ABs (include 22 days 12/17/99 17:00
Carrier Code)
SKU Management 20 days 12/15/99 17:00
Handsets Required 17 days 12/10/99 17:00
Accessories Required 17 days 12/10/99 17:00
Collateral Required 17 days 12/10/99 17:00
Backers, etc Required for 17 days 12/10/99 17:00
Accessories
Pricing 1 day 12/10/99 17:00
Determine Subsidy 1 day 12/10/99 17:00
Discount
Item Master Set Up 20 days 12/15/99 17:00
Handsets - Cricket 3 days 12/15/99 17:00
Generic SKUs
Accessory SKUs 3 days 12/15/99 17:00
Cricket Kitted Accessory 3 days 12/15/99 17:00
SKUs
Sleeve and Coverage Map 3 days 12/15/99 17:00
SKUs
FRU Stock 20 days 12/15/99 17:00
Inventory Management 25 days 12/22/99 17:00
Warehouse Locations 5 days 12/22/99 17:00
BOM Management - 25 days 12/22/99 17:00
Accessories
Handset Forecast 17 days 12/10/99 17:00
Accessory Forecast 17 days 12/10/99 17:00
POs for Handsets and 2 days 12/17/99 17:00
Accessories
Pick Ticket Print Location - 17 days 12/10/99 17:00
A1 BP
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Set up Name on FedEx Label - 17 days 12/10/99 17:00
CellStar
Set up name on Pick Ticket 17 days 12/10/99 17:00
- CellStar
Non-Standard Information 22 days 12/17/99 17:00
Exchange
MIN/Sublock File Receipt 22 days 12/17/99 17:00
from Cricket
ESN/MIN/Sublock File to 22 days 12/17/99 17:00
Cricket
Accounting 25 days 12/22/99 17:00
Associated Items Required 7.33 days 11/29/99 10:40
Establish Handling Fee 7.33 days 11/29/99 10:40
Establish Subsidy 7.33 days 11/29/99 10:40
Discount
COD Process for Small 25 days 12/22/99 17:00
Indirects
EOM Subsidy 25 days 12/22/99 17:00
Reconciliation
Account Management / 30 days 12/29/99 17:00
Reporting
Establish Returns Process 17 days 12/10/99 17:00
RA Request Process 17 days 12/10/99 17:00
Returns Process Flow 17 days 12/10/99 17:00
AOS 18 days 12/29/99 17:00
AOS Request Form 6 days 12/13/99 17:00
Storefront/Catalogue 12 days 12/29/99 17:00
Set-up
Membership Set up - 12 days 12/29/99 17:00
Logins/Pswds
NetXtreme 18 days 12/29/99 17:00
NetXtreme Request Form 6 days 12/13/99 17:00
Datamart 14 days 12/23/99 17:00
Determine Plans 6 days 12/13/99 17:00
Required / Data Needed
Plan Generation 8 days 12/23/99 17:00
Business Intelligence 6 days 12/13/99 17:00
Include data 6 days 12/13/99 17:00
required by Cricket
NetXtreme Completion 12 days 12/29/99 17:00
Handset Programming & Kitting 25 days 12/22/99 17:00
Establish Order Minimums, 17 days 12/10/99 17:00
if any
Workbench / PST 25 days 12/22/99 17:00
Load Profiles 25 days 12/22/99 17:00
Program MIN, PRL and 25 days 12/22/99 17:00
Sublock
Verify Label Content - 25 days 12/22/99 17:00
ESN & MIN
Accessory Kitting 25 days 12/22/99 17:00
Verify Materials Required 25 days 12/22/99 17:00
(stickers, shells, etc)
Shipment Commitment to 17 days 12/10/99 17:00
Cricket
Order Drop by 3PM CT to 17 days 12/10/99 17:00
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Ship-24 Hrs
Internal QA 8 days 1/5/00 17:00
Verify all Account Set-up 8 days 1/5/00 17:00
completed
AOS Approval (with required 3 days 1/5/00 17:00
logins)
NetXtreme Approval 3 days 1/5/00 17:00
Personnel Training 3 days 1/5/00 17:00
Handset Kitting (Workbench / 3 days 1/5/00 17:00
PST)
Accessory Kitting 3 days 1/5/00 17:00
Warehouse Receipt and Stocking 3 days 1/5/00 17:00
Order Fulfillment 3 days 1/5/00 17:00
Pilot - Soft Market Launch 4 days 1/11/00 17:00
Receive kitting forecast from 1 day 1/6/00 17:00
Cricket
Kit Accessories 1 day 1/7/00 17:00
Receive limited order from 1 day 1/7/00 17:00
Cricket
Fulfill Order (w/programming) 1 day 1/7/00 17:00
and ship
Verification of ESN/MIN file 1 day 1/7/00 17:00
receipt by Cricket
Verification of Data 1 day 1/10/00 17:00
Retrieval from NetXtreme
Approval of Fulfillment 1 day 1/11/00 17:00
process - Packaging
Hard Market Launch 0.67 days 1/12/00 14:20
"GO" Decision 0.67 days 1/12/00 14:20
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EXHIBIT E
Handset Sale Price
CellStar will sell handsets designated from time to time by Cricket to Cricket
and its customers at the following prices:
Handsets sold to Cricket shall be sold at the applicable Acquisition Cost.
Handsets sold to Cricket's customers (or entities designated by Cricket) at
a price designated in writing from time to time by Cricket to CellStar.
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