U.S. Cellular deal with SCON is now worth $86,000,000 for U.S. Cellular.
E. LONG-TERM SALES AGREEMENT
On August 27, 1999, the Company signed a five-year agreement with United
States Cellular Corporation ("U.S. Cellular"), one of the nation's ten largest
cellular service providers. Under the terms of the agreement, U.S. Cellular will
purchase a minimum of 100 SuperFilter(R) systems by December 31, 2000 and
anticipates purchasing a minimum of an additional 400 SuperFilter(R) systems by
August 27, 2004. As part of the agreement the Company issued a warrant to U.S.
Cellular providing for the purchase of up to one million shares of common stock
at a price of $4.00 per share, under which one share vests for every $25 worth
of SuperFilter(R) system purchases made by U.S. Cellular. In each period in
which the warrant shares are earned, a non-cash sales discount will be recorded.
The amount of the non-cash sales discount will be the fair value of the warrant
shares that are earned in the period. Fair value of the warrant shares will be
calculated by using the Black-Scholes option pricing model. The amount of
warrant shares earned during the three-month and nine-month periods ended
October 2, 1999 was $70,000. At October 2, 1999, there remain 966,800 shares of
common stock available under the warrant that may result in future charges as
each warrant is earned. |
