From the 8K dated March 9, 1998:
edgar-online.com
<<NEW CUSTOMER CONTRACTS [4Q 1997]
During the fourth quarter of 1997, ARDIS executed significant new customer contracts with Enron, Schindler, and UPS. Pursuant to the contract with Enron, ARDIS provides network access for Enron's wireless utility monitoring service. Enron has committed to deploy a minimum of 55,000 units over the next three years. The Company believes that Schindler Elevator may deploy over 2,000 units
by mid-1999 to support its field service operations. The Company believes that the contract with UPS (the "UPS Contract") will lead to the addition of approximately 50,000 UPS units to the ARDIS network by the end of the year 2000. Pursuant to the UPS Contract, the Company will be responsible for increasing capacity of its terrestrial network, among other obligations. See "Risk Factors--UPS Contract." American Mobile recently reached agreements with several other customers, including Cannon Express, Dart Transit and The
Williams Companies, for satellite mobile messaging and nationwide dispatch services in 1998, which in aggregate represent a minimum of 2,200 contracted units.
UPS CONTRACT
ARDIS has entered into a contract with UPS for the use of the ARDIS network
pursuant to which the Company anticipates providing communication services for
approximately 50,000 UPS units by the end of 2000. However, performance under
the UPS Contract is subject to certain significant conditions, including,
among others, (i) required capital expenditures by the Company to expand
capacity of the ARDIS network in certain areas, (ii) successful development of
the DIAD III device by Motorola and (iii) successful deployment of the DIAD
III devices on the ARDIS network within strict guaranteed operational
performance levels. Management believes that the Company will be required to
incur capital spending of approximately $17.4 million in connection with the
UPS Contract over the next three years. In addition, the contract represents a
significant implementation effort of a magnitude in excess of that of any
existing ARDIS customer. Failure to meet the requirements under the UPS
Contract could result in a loss of the contract as well as monetary penalties
that could materially adversely affect the Company. See "Business--Customers.">>
<< Under the UPS Contract, the Company also has significant warranties of
performance, both during the implementation phase and for ongoing network
performance. During the implementation phase, the Company must meet key
checkpoints and milestones culminating in an acceptance test. Failure of the
acceptance test could result, after a cure period, in the loss of the
contract. In addition, the Company will have to construct network
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capacity in several key cities. Failure to complete such construction by the
committed dates would subject the Company to monthly penalties until
compliance is achieved.
On an ongoing basis, the UPS Contract requires that the Company guarantee
network performance levels. If network availability drops below 99%, the
Company will be subject to an initial penalty of 2% of the average monthly use
of the service, calculated as the average of the last three months in the
affected area. The penalty increases if performance levels further drop.
As a part of the negotiations leading to the signing of the UPS Contract,
Motorola issued a performance guarantee regarding the network's performance.
In connection with the Acquisition, the Company agreed to indemnify Motorola
for up to $10.0 million in connection with such performance guarantee (the
"UPS Guarantee"). The Company intends to satisfy any such obligation by
depositing $10.0 million of the proceeds from the Offering into an escrow
account, such escrow account having the same three-year term (with two
possible one-year renewals) as the UPS Contract.>> |
