Exhibit 10.2
EXECUTION
COPY
T
RANSITION
S
ERVICES
, P
RODUCTS
AND A SSET A GREEMENT
This Iridium Transition
Services, Products and Asset Agreement (the “Transition
Agreement” or the “Agreement”) is entered into as
of December 11, 2000, by and among Motorola, Inc., a Delaware
corporation (“Motorola”), Iridium Holdings LLC, a
Delaware limited liability company (“Iridium
Holdings”), and Iridium Satellite LLC, a Delaware limited
liability company (“NewCo”). Motorola, Iridium Holdings
and NewCo are referred to collectively in this Agreement as the
“Parties” and individually as a
“Party.”
RECITALS:
WHEREAS, NewCo has
submitted a bid to Iridium LLC (“Iridium”) for NewCo to
acquire substantially all of the assets of Iridium LLC and its
subsidiaries (the “Assets”), including, but not limited
to, the Satellite Network and Operations Center
(“SNOC”), the three Telemetry, Tracking and Control
centers, as well as the TTS (as defined in Section 6.A) (with these
three centers and the TTS being the “TTACs”) and the
on-orbit satellites now owned by Iridium Operating LLC (with the
SNOC, TTACs, these satellites and related devices referred to as
the “Iridium System”); and
WHEREAS, NewCo has
requested that Motorola provide, or offer to provide, certain
services, products and assets to NewCo, as more fully described in
this Agreement; and
WHEREAS, Motorola, as a
condition to entering into this Agreement, requires that NewCo and
Boeing perform specified undertakings related to the Assets, prior
to and after consummation of the acquisition of the Assets (the
“Acquisition”), all as more fully described in this
Agreement.
NOW, THEREFORE, in
consideration of the agreements made herein and subject to the
satisfaction of the conditions described in this Agreement prior to
or on the date that this Agreement becomes effective (the
“Effective Date”), which shall be the same date that
the Acquisition is consummated, the Parties hereby agree as follows
(with the agreements set forth in Sections 1.F, 1.G, 1.H and 1.1
being effective as of the execution of this Agreement, and all
other agreements and obligations being effective as of the
Effective Date):
1.
Re-orbit and
operational responsibility
A.
Prior to, and as a
condition of, the Effective Date, all of the conditions precedent
to the effectiveness of the agreement between Iridium Constellation
LLC, a wholly-owned subsidiary of NewCo (“Iridium
Constellation”) and Boeing (the “Boeing
Agreement”), pursuant to which Boeing has agreed to take full
responsibility for operation of the Iridium System (including
Re-orbiting (as defined below), if necessary), shall have been
satisfied, or waived by Boeing and NewCo, and the Boeing Agreement
shall have become effective. A copy of the Boeing Agreement is
attached hereto as Annex A.
As used in this
Agreement, “Re-orbit” shall mean the removal of
functional Iridium System satellites from operational or storage
orbits, and preparation of the satellites for re-entry
into the earth’s
atmosphere, including, without limitation, venting of all remaining
fuel, depressurizing the batteries and turning off the electronics,
all in a professionally competent manner and as described in Annex
4 of the Boeing Agreement.
As used in this
Agreement, “De-orbit” shall mean the removal (whether
in a controlled, uncontrolled, natural or spontaneous manner) of
Iridium System satellites (both functional and non-functional) and
related devices (such as mass frequency simulators), including, but
not limited to, the orbit, Re-orbit, descent and re-entry through
low earth orbit and the earth’s atmosphere, and landing or
falling on or near any part, surface, structure or other object,
animate or inanimate, above, on, at, near, or below the
earth’s surface.
B.
Re-orbit
. Upon the occurrence of
any of the following events, NewCo acknowledges that Boeing shall,
and agrees to cause Iridium Constellation to direct Boeing to,
immediately perform the tasks and activities set forth in Annex 4
to the Boeing Agreement and shall cause Iridium Constellation to
cooperate fully with Boeing in that respect:
(1)
Iridium
Constellation’s failure to make the payment required by
Section 4.A(2)(b);
(2)
the commencement of (x)
a voluntary bankruptcy proceeding or (y) an involuntary bankruptcy
proceeding that is not dismissed within 20 days of its filing, in
each case against Iridium Holdings, Iridium Constellation or
NewCo;
(3)
prior to the transfer
of the FCC Licenses, written notice from Motorola of reasonable
g rounds to believe that Iridium Constellation or NewCo
is insolvent or generally unable to pay its debts;
(4)
the failure of the FCC
to approve the transfer of the FCC Licenses to an acceptable
licensee within twelve months of the Effective Date;
(5)
a material breach by
NewCo of this Agreement which has not been cured within 20 days of
such breach;
(6)
a material breach by
Boeing of the Boeing Agreement or the Boeing Side Letter which has
not been cured within 20 days of such breach;
(7)
an order from the U.S.
government ordering NewCo or Iridium Constellation to direct Boeing
to commence Re-orbiting;
(8)
upon written notice
from Motorola that it has concluded that there are reasonable
grounds to believe that an imminent change in law or regulation is
reasonably likely to result in material claims, damages,
obligations, costs, liabilities, penalties or expenses to Motorola
in connection with or arising from the operation, maintenance,
Re-orbiting and De-orbiting of the Iridium System, including any
terrestrial-based portion of the Iridium System; provided,
however, that there are reasonable grounds to believe
that
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the prompt Re-orbit and
De-orbit of the Iridium System will mitigate such claims, damages,
obligations, costs, liabilities, penalties or expenses;
and
(9)
upon written notice
from Motorola that (i) it is unable to obtain on commercially
reasonable terms aviation product liability insurance sufficient to
protect it from potential claims, damages, obligations, costs,
liabilities, penalties or expenses in connection with the Iridium
System, and (ii) the U.S. Government, pursuant to the U.S.
Government Indemnification Contract, has not agreed to cover the
amount that would otherwise have been paid by the Aviation Policy,
despite Motorola’s good faith efforts to comply with
Paragraph 5(c)(2) of the U.S. Government Indemnification Contract.
Motorola will not object to NewCo’s participation in
discussions with the U.S. Government.
C.
Prior to, and as a
condition of, the Effective Date, NewCo will obtain (and pay the
premium for) an in-orbit liability insurance policy (including the
de-orbiting endorsement) in the amount of $500 million per
occurrence, and $1 billion annually (the “Insurance
Policy”). Motorola and all of its subsidiaries, the United
States of America, the People’s Republic of China, the
Russian Federation and all contractors and subcontractors (at any
tier), including suppliers of any kind, of Motorola will be named
as additional insureds on the Insurance Policy. The Insurance
Policy shall initially provide three years of coverage beginning on
the Effective Date and shall be substantially in the form of the
policy attached hereto as Annex B. NewCo agrees to prepay annually
the full premium on the Insurance Policy, in order to always have
one year of fully paid coverage under the Insurance Policy, and to
maintain the Insurance Policy through the period ending eighteen
months after the commencement of Re-orbit and thereafter, for as
long as NewCo or a successor entity (either directly or indirectly
through one or more of its subsidiaries, or one or more of its
affiliates which operate a satellite communications system) are
actively engaged in a business, until the completion of De-orbit of
all Iridium System satellites and related devices (including, but
not limited to, non-functional satellites and mass frequency
simulators). Notwithstanding the foregoing, NewCo shall not adopt
any plan of liquidation, dissolution or winding up of its business
in any manner prior to the tenth anniversary of the Effective Date
unless as part of such plan NewCo transfers to Motorola an amount
equal to the premium necessary to maintain the Insurance Policy or
a similar policy for the period from the date of the liquidation,
dissolution or winding up to the tenth anniversary of the Effective
Date.
D.
Prior to, and as a
condition of, the Effective Date:
(1)
Motorola shall obtain an
aviation products insurance policy which includes policy language
and is in a form acceptable to Motorola (the “Aviation
Policy”) and in the amount of $1 billion per occurrence and
annually.
(2)
NewCo shall pay to
Motorola (i) the first annual premium for the Aviation Policy and
(ii) a sum (the “Aviation Policy Initial Deposit”)
equal to one hundred fifty percent (150%) of the first annual
premium for the Aviation Policy.
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On each anniversary of
the Effective Date prior to the earlier of (x) the completion of
Re-orbit and De-orbit of all Iridium System satellites and related
devices (including, but not limited to, non-functional satellites
and mass frequency simulators) and (y) the date on which NewCo and
all successor entities (directly or indirectly through their
subsidiaries, and their affiliates which operate satellite
communication systems) cease to be actively engaged in a business
(the “Aviation Policy Period”), NewCo will pay to
Motorola an amount equal to (i) the annual premium for the Aviation
Policy for the current annual period plus or minus, as the case may
be, (ii) any Deposit Adjustment for such annual period.
“Deposit Adjustment” for any annual period means the
excess or deficiency, as the case may be, determined by subtracting
(A) the sum of (x) the Aviation Policy Initial Deposit and (y) all
Deposit Adjustments made for prior annual periods from (B) one
hundred fifty percent (150%) of the annual premium for the Aviation
Policy for the current annual period. Motorola will use the amount
paid by NewCo under this Section 1.D to pay the annual premiums for
the Aviation Policy during the Aviation Policy Period. Upon the
completion of Re-orbit and De-orbit of all Iridium System
satellites and related devices (including, but not limited to,
non-functional satellites and mass frequency simulators): (a)
Motorola will refund to NewCo the amount, if any, by which the sum
of (i) the Aviation Policy Initial Deposit and (ii) all Deposit
Adjustments made for prior annual periods exceeds the annual
premium for the current annual period, if any, or (b) NewCo will
pay to Motorola the amount, if any, by which the annual premium for
the current annual period, if any, exceeds the sum of (i) the
Aviation Policy Initial Deposit and (ii) all Deposit Adjustments
made for prior annual periods. Notwithstanding the foregoing, NewCo
shall not adopt any plan of liquidation, dissolution or winding up
of its business in any manner prior to the tenth anniversary of the
Effective Date unless as part of such plan NewCo transfers to
Motorola an amount equal to the premium necessary to maintain the
Aviation Policy for the period from the date of the liquidation,
dissolution or winding up to the tenth anniversary of the Effective
Date.
E.
Prior to the launch of
any additional satellites pursuant to Section 4 below, (1) NewCo
shall cause such additional satellites to be included under the
Insurance Policy and (2) Motorola shall cause such additional
satellites to be included under the Aviation Policy.
F.
As soon as this
Agreement is mutually executed, NewCo shall promptly prepare and
file an application to the FCC for authorization for Motorola (or a
subsidiary) to transfer the space segment and the related U.S.
system control segment licenses of the Iridium System (the
“FCC Licenses”) to NewCo (contingent on the
consummation of the Acquisition), with NewCo being responsible for
paying any regulatory and related fees and expenses due and payable
from the date this application is filed. The FCC license held by
Motorola Pacific Communications, Inc. for INA-Hawaii, any common
carrier authorizations held by Motorola (or a subsidiary) and any
licenses held by Iridium North America or a subsidiary will not be
transferred under this Section 1.F. NewCo will aggressively pursue
and prosecute this application (including, without limitation,
executing and filing any additional documents which are advisable,
requested or required) until approval is received. The Effective
Date hereunder and consummation of the Acquisition will occur even
if FCC authorization for transfer of the FCC Licenses has not been
received. Until such transfer has occurred, NewCo agrees that
Motorola retains the right of full access to, and use of, at no
cost to Motorola, the SNOC and TTACs and the Iridium System in
order to comply with its obligations as FCC licensee.
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G.
Within five (5) days
after the Effective Date, NewCo shall file an application with the
Canadian regulatory authorities to assign to a Canadian affiliate
or designee of NewCo the RF licenses held by a subcontractor for
Motorola for the TTACs in Canada and, if NewCo or one of its
affiliates may hold the RF license for the TTS, shall file an
application with the regulatory authorities in Iceland for the
transfer of such license to NewCo or such affiliate. NewCo will
aggressively pursue these applications (including, without
limitation, executing and filing any additional documents which are
advisable, requested or required) until approval is received. The
receipt of these approvals shall not be a condition to the
Effective Date or consummation of the Acquisition.
H.
Until the transfer of
the FCC Licenses from Motorola, Motorola shall ultimately be
responsible for the operation of the Iridium System and shall
operate and maintain it for the exclusive and beneficial use of
Iridium or NewCo, as applicable.
I.
NewCo hereby agrees to
structure itself, as the applicant for the FCC Licenses, so as to
be, and remain in, compliance with the Communications Act of 1934,
as amended, the FCC’s rules and regulations and the
Communications Assistance for Law Enforcement Act, including, but
not limited to, the applicable restrictions on foreign ownership
(government and non-government), and the relevant FCC financial and
technical qualifications requirements. Such compliance shall
include any reasonably foreseeable changes in the law and policies
at the time said applications are filed with the FCC, including,
but not limited to, any changes in the foreign ownership
restrictions being debated in the U.S. Congress.
2.
Secure Voice
Capability and Relationship with U.S. Government
A.
Under and subject to
the terms of this Agreement and Motorola’s agreement with the
U.S. Department of Defense (the “U.S. Government”),
Motorola will use commercially reasonable efforts to complete
development of secure voice capability for the Iridium System,
which provides the ability to place secure two-party calls from
subscriber unit to subscriber unit, or to/from subscriber unit
to/from STU-III (but excluding the ability to place secure
conference calls), as follows:
(i)
making available to the
U.S. Government for demonstration purposes samples of the secure
cassette for the Phase II units (which are Satellite Series Model
9505 portable units, modified as required for use by the U.S.
Government) and Phase II units by the end of October,
2000;
(ii)
being prepared for
production of the secure cassette for the Phase II units within six
(6) months following the U.S. Government’s resumption of
funding, recognizing the availability of long lead material may
affect actual production; and
(iii)
completing installation
and testing of the interworking function (which would allow, at
that point, for only approximately 30 concurrent calls and which
would require additional software and upgrades to be made available
by Motorola after that date for final capability) for secure voice
capability in the Iridium North
5
America-Hawaii (INA-H)
gateway within ninety (90) days following the U.S.
Government’s authorization to resume installation.
The completion of
development of the secure voice capability for the Iridium System
discussed above is subject to, among other things, the U.S.
Government’s continued funding of this development, the U.S.
Government’s completion of all testing and evaluation
according to Motorola’s internal schedule, the U.S.
Government’s acceptance of any items according to
Motorola’s internal schedule, the U.S. Government’s not
issuing any stop or change orders affecting these items and the
U.S. Government’s cooperating with Motorola and timely
providing to Motorola all required access to the Iridium North
America-Hawaii site.
B.
NewCo understands that
Motorola can only sell the secure cassette to the U.S. Government
at this time. If the U.S. Government and the law subsequently
permit sales to others (NATO, etc.), Motorola agrees that it will
(through its Space Systems and Services Division) pursue such sales
to the extent commercially reasonable. NewCo also understands that
it will be responsible, at its expense, for developing and
implementing command authentication on the satellites after the
Effective Date.
C.
The Parties understand
that, as of the execution date of this Agreement, Motorola acts as
the exclusive Iridium service provider to DISA/DITCO. NewCo desires
to act in such capacity either on its own or through the
appointment of a third party, and Motorola is willing to relinquish
its role as a service provider to DISA/DITCO. However, the Parties
recognize that a change to Motorola’s contract with
DISA/DITCO and a new contract from DISA/DITCO to NewCo or its
appointed third party would be necessary prior to Motorola’s
relinquishment, and NewCo’s assumption, of service provider
responsibilities to DISA/DITCO. To that extent, the Parties will
request that DISA/DITCO modify Motorola’s contract by
removing Motorola’s service provider responsibilities and
that DISA/DITCO award a new contract to NewCo or its appointee to
act as an exclusive service provider to DISA/DITCO. If DISA/DITCO
takes such contractual action and NewCo or its appointee becomes
the exclusive Iridium service provider to DISA/DITCO, NewCo
acknowledges that neither it nor its appointee will be in a
position to provide immediately certain service provider functions
(e.g. call care, customer support, SIM provisioning, and database
maintenance). Therefore, it intends to subcontract, subject to
government approval, call care, customer support, SIM provisioning
and database maintenance responsibilities to Motorola at $265,000
per month for a period of three months. This figure shall be
reduced to $183,000 per month if billing and call record submittals
are not required by DISA/DITCO.
D.
The Parties understand
that, as of the execution date of this Agreement, Motorola sells
Iridium equipment to DISA/DITCO. NewCo desires to act in such
capacity either on its own or through the appointment of a third
party, and Motorola is willing to relinquish its role as a reseller
of such equipment to DISA/DITCO (except for the secure cassette
which the Parties recognize can only be sold by Motorola and for
any government specific modifications that are required of Motorola
to the Satellite Model 9505 to facilitate use with the secure
cassette). However, the Parties recognize that a modification to
Motorola’s contract with DISA/DITCO and a new contract from
DISA/DITCO to NewCo or its appointed third party would be
necessary
6
prior to
Motorola’s relinquishment, and NewCo’s assumption, of
Iridium equipment sales (except for the secure cassette and
required changes to Model 9505) to DISA/DITCO. To that extent, the
Parties will request that DISA/DITCO modify Motorola’s
contract by removing, from Motorola’s contract, line items
corresponding to Iridium equipment and that DISA/DITCO award a new
contract to NewCo or its appointee to sell Iridium equipment to
DISA/DITCO. Until such time as DISA/DITCO takes the appropriate
contractual action in response to the Parties’ request, the
Parties recognize that Motorola’s current contract may be the
only vehicle for DISA/DITCO to purchase Iridium equipment.
Therefore, rather than delay equipment sales pending a new
DISA/DITCO contract to NewCo or its appointee, Motorola is willing
to continue selling Iridium equipment to DISA/DITCO as
NewCo’s consignee, subject to U.S. Government approval. By
consignee it is meant that Motorola will not purchase Iridium
equipment from NewCo for resale to the U.S. Government. Rather,
NewCo will transfer Iridium equipment to Motorola at no cost to
Motorola and upon payment from DISA/DITCO Motorola will transfer
such payment to NewCo minus a mutually agreed to sum for Motorola
value added activities. For example, in regards to the Satellite
Model 9505, Motorola would retain $200 for value added activities
such as software revision, disabling, tamper seal application, and
shipping/handling.
3.
Sale of Transition
Services
A.
Subject to the terms of
this Agreement and for a portion of the amount specified in Section
10.A(1), Motorola shall sell, and provide for the benefit of NewCo
and Boeing for a period of thirty (30) days following the Effective
Date, the services of Motorola’s then-existing employees at
the SNOC to assist in the transition of the responsibilities for
the operation and maintenance of the Iridium System to Boeing, as
more fully described in Annex C hereto. Motorola makes no
warranties of any kind related to these services, including, but
not limited to, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
B.
Except as set forth in
Section 3.D, Motorola shall pay the subcontractor and supplier
costs related to the SNOC, the TTACs and the operation of the
Iridium System at the Chandler, AZ GTSS facility (the
“Subcontract Costs”), or reimburse NewCo for payments
by NewCo of the Subcontract Costs, for the period from the
Effective Date to the date that is sixty (60) days following the
Effective Date. Any reimbursement of NewCo is subject to
Motorola’s receipt of proper invoices for the Subcontract
Costs and a record of their payment by NewCo, up to a maximum total
of $4.0 million. After the date that is sixty (60) days following
the Effective Date, NewCo agrees that it, rather than Motorola,
shall be responsible for, and shall timely pay, all Subcontract
Costs. Motorola makes no warranties of any kind related to the
performance of any subcontractor or supplier, including, but not
limited to, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
C.
Subject to the terms of
this Agreement, and for a portion of the amount specified in
Section 10.A(1), Motorola agrees to sell and provide to Boeing and
NewCo for a period of ninety (90) days following the Effective
Date, the training services and engineering support described in
the attached Annex D with Motorola’s then-existing staff at
Motorola’s Chandler,
7
AZ GTSS facility, as
more specifically described in Annex D. NewCo agrees that it,
rather than Motorola, shall be solely responsible for, and shall
timely perform and pay, any costs and expenses described in Annex D
hereto after the date that is ninety (90) days following the
Effective Date. Motorola makes no warranties of any kind related
to these services and support, including but not limited to,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
D.
Except as provided
above, as of the Effective Date, NewCo shall be responsible for (i)
all costs related to the operation and maintenance of the Iridium
System, and (ii) any costs for which Motorola is currently
responsible related to operation and maintenance of the gateways,
including, without limitation, any such costs included in the
Subcontract Costs. To the extent that any such costs are paid by
Motorola, NewCo shall promptly reimburse Motorola for such
payments.
4.
Satellites / Launch Services
A.
Transfer of
Satellite/Launch Services.
(1)
On-Orbit
Satellites .
Subject to the terms of this Agreement, Motorola transfers to
NewCo, and NewCo accepts without reservation, as of the Effective
Date, all rights which Motorola has in any Iridium System
satellites and mass frequency simulators in orbit irrespective of
their condition (including but not limited to satellites which are
fully or partially defective or which otherwise have fully or
partially failed), which satellites and mass frequency simulators
shall be transferred in orbit, AS IS, without any warranties of
any sort, whether express, statutory or implied, including but not
limited to, any WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. The Parties agree that title and risk of
loss to or from all such satellites and mass frequency simulators,
and all responsibility for all such satellites and mass frequency
simulators, shall pass to NewCo on the Effective Date.
(2)
Assignment of
O&M Launch Service No. 4 Under Boeing Launch
Services Agreement;
NewCo Payment Agreement and Provision of Investor Guaranties
.
(a)
Prior to and as a
condition of the Effective Date, the Parties and Boeing will have
executed and delivered a partial assignment and consent (the
“LSA Assignment ” ) to Contract No. C450th
(as amended from time to time, the “Launch Services
Agreement”) between Motorola and Boeing, as successor to
McDonnell Douglas Corporation. The LSA Assignment will be in form
and substance acceptable to the Parties and Boeing and shall
provide that: (i) Motorola assigns and delegates to NewCo, and
NewCo accepts, AS IS and without warranties of any sort, whether
express, statutory or implied, including but not limited to, any
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
Motorola’s rights and liabilities related to O&M Launch
Service No. 4 (as such term is used in the Launch Services
Agreement) under the Launch Services Agreement except as may
otherwise be provided in the LSA Assignment; and (ii) Boeing
consents to the assignment and
8
delegation and the
novation of Motorola’s obligations related to O&M Launch
Service No. 4 (except as may be specified in the LSA Assignment).
The Parties understand that Boeing and Motorola will not provide
any launch vehicle or launch insurance or relaunches related to
O&M Launch Service No. 4.
(b)
NewCo hereby agrees
that, in the event that O&M Launch Service No. 4 is cancelled
or terminated for any reason, then NewCo will thereupon promptly
pay Motorola U.S. $25.59 million.
(c)
In addition, NewCo
hereby acknowledges that it has agreed with Boeing to make the U.S.
$22.0 million prepayment described in Article 9.2.1 of the Boeing
Agreement on the date which is two months before the scheduled
launch date for O&M Launch Service No. 4. The Boeing Agreement
and the letter agreement between Motorola and Boeing (the
“Boeing Side Letter”) shall provide that NewCo’s
failure to promptly make this prepayment will be an event requiring
Boeing to promptly Re-orbit the Iridium System, notwithstanding any
subsequent payment by the Investors.
B.
Initial Satellites
Manufacture and Final Processing. Subject to the terms of this
Agreement and to the transfer of the FCC Licenses as provided for
in Section 1.F above, and for a portion of the amount specified in
Section 10.A.(l), Motorola hereby agrees to (i) build and test (to
existing specifications) five satellites for NewCo, for its use in
connection with the Iridium System and (ii) support the O&M
Launch Service No. 4 described in Section 4.A above, which consists
of one launch by Boeing of those satellites on a Delta II launch
vehicle from Vandenberg Air Force base in California during a
launch period of July through October of 2001, as more fully
described in Annex E to this Agreement. Subject to the terms of
this Agreement and to the transfer of the FCC Licenses as provided
for in Section 1.F above, Motorola and NewCo shall also perform the
other activities described in Annex E. Motorola has no obligation
to provide any satellite insurance related to such satellites or
any replacement satellites if the launch is unsuccessful for any
reason (but will provide customary third-party in-transit and
pre-launch insurance covering the satellites after they leave
Motorola’s plant and ending at the intentional ignition of
the launch vehicle), and Motorola will have no responsibility for
any loss or damage to any such satellite after it leaves
Motorola’s plant, except if the damage results from
Motorola’s active negligence during the loading of the launch
software on a satellite or during the conduct of the final
processing of the satellites. Acceptance of delivery of the
satellites and the launch, and passing of title and any remaining
risk of loss, will occur upon intentional ignition of the launch
vehicle. Motorola makes no warranties about the satellites or the
support, which are transferred or provided AS IS, without any
warranties of any sort, whether express, statutory or implied,
including but not limited to, any WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. Motorola (subject to
NewCo’s performance of its activities in Annex E) will test
the satellites against Motorola’s internal satellite system
specifications and will provide the results of such test in
connection with the conduct of the consent to ship activity
described in Annex E. Notwithstanding the foregoing, the preceding
sentence is not an express warranty nor an expansion in any manner
of the agreement by the Parties that the satellites and services
will be provided “AS IS.” However, Motorola will assist
NewCo to identify suppliers with which
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NewCo can contract
directly to correct defects that may be identified during testing.
NewCo shall provide Motorola with full access to its facilities for
Motorola to perform the obligations described in this Section
4.B.
C.
Option
.
(1)
Phase A
. Subject to the work
described in Section 4.B being in process and subject to
NewCo’s providing Motorola with irrevocable written notice of
its exercise received on or before March 1, 2001 of this option for
Motorola to perform the Phase A activities under this Option, which
are described below and in Annex F attached hereto (which option
can be exercised only in full), Motorola hereby agrees to initiate
actions to build (using only existing materials at Motorola’s
Chandler, AZ GTSS facility), test (to existing specifications) and
integrate two satellites for NewCo (but not to complete those
satellites or to transfer those satellites to anyone), subject to
the terms of this Agreement. Subject to the terms of this
Agreement, Motorola and NewCo shall also perform the other
activities described in Annex F as appropriate for this phase. The
price of the activities described in this Section 4.C.(1) is U.S.
Six Hundred Thousand Dollars (US. $600,000), payable as described
in Annex F and Section 10, with NewCo also providing Motorola, upon
and as a condition to the option exercise, with the letter of
credit described in Section 10.D.(5) and with NewCo also promptly
paying (or reimbursing Motorola for) those other amounts described
in Annex F. Motorola has no obligation to provide any satellite or
launch vehicle insurance related to such satellites or activities
or any replacement satellites for any reason. Motorola makes no
warranties about the satellites or services, which are provided AS
IS, without any warranties of any sort, whether express,
statutory or implied, including but not limited to, any WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Motorola has no responsibility to initiate or perform the actions
above with respect to such satellites if they cannot be built
solely using Motorola’s existing materials at its Chandler,
AZ GTSS facility. Motorola (subject to NewCo’s performance of
its activities in Annex F) will test the satellites against
Motorola’s internal satellite system specifications and will
provide the results of such test in connection with the conducting
of the consent to ship activity described in Annex F.
Notwithstanding the foregoing, the preceding sentence is not an
express warranty nor an expansion in any manner of the agreement by
the Parties that the satellites and services will be provided
“AS IS.” However, Motorola will assist NewCo to
identify suppliers with which NewCo can contract directly to
correct defects that may be identified during testing. Motorola has
no responsibility if any approvals or licenses needed for these
activities are not obtained timely or at all. NewCo shall provide
Motorola with full access to its facilities for Motorola to perform
the obligations described in this Section 4.C.
(2)
Phase B
. Subject to
NewCo’s exercising the option in Section 4.C.(1) in full on a
timely basis, and subject to NewCo’s providing Motorola with
irrevocable written notice of its exercise received on or before
July 1, 2001 of this option for Motorola to perform the Phase B
activities under this Option, which are described below and in
Annex F attached hereto (which option can be exercised only in
full), Motorola
10
hereby agrees to
complete the production of the two satellites described in Section
4.C.(1) for NewCo, and to enter into a contract with Eurockot or
China Great Wall Industries for one launch of those satellites from
a site in Russia or China during the launch period of April, 2002
through June, 2002 and to transport those two satellites to
Eurockot or China Great Wall Industries launch site, as applicable,
as more fully described in Annex F to this Agreement. Subject to
the terms of this Agreement, Motorola and NewCo shall also perform
the other activities described in Annex F. The price of the
activities described in this Section 4.C.(2) is U.S. Thirteen
Million One Hundred Thousand Dollars (U.S. $13.1 million), payable
as described in Annex F and Section 10, with NewCo also providing
Motorola, upon and as a condition to the option exercise, with the
letter of credit described in Section 10.D.(5) and NewCo also
promptly paying (or reimbursing Motorola for) those other amounts
described in Annex F. Motorola has no obligation to provide any
satellite or launch vehicle insurance related to such satellites or
any relaunch or any replacement satellites if the launch is
unsuccessful for any reason (but will provide customary third-party
in-transit and pre-launch insurance covering the satellites after
they leave Motorola’s plant and ending at the intentional
ignition of the launch vehicle), and Motorola will have no
responsibility for any loss or damage to any such satellite after
it leaves Motorola’s plant, except if the damage results from
Motorola’s active negligence during the loading of the launch
software on a satellite or during the conduct of the final
processing of the satellites. Motorola will also have no
responsibility to provide storage for the satellites after they
leave Motorola’s plant except for normal storage associated
with routine processing. Acceptance of delivery of the satellites
and the launch service, and passing of title and any remaining risk
of loss, will occur upon intentional ignition of the launch
vehicle. Motorola makes no warranties about the satellites,
launch or services, which are transferred or provided AS IS,
without any warranties of any sort, whether express, statutory or
implied, including but not limited to, any WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Motorola
has no responsibility to initiate or perform the actions above with
respect to such satellites, or to deliver such satellites, if they
cannot be built to Motorola’s existing specifications solely
using Motorola’s existing materials at its Chandler, AZ GTSS
facility and has no responsibility under Section 4.C(l) or this
Section 4.C(2) if any approvals or licenses needed for these
activities are not obtained timely or at all or if the launch
services are not performed timely or at all for any reason beyond
Motorola’s control. If requested by NewCo, Motorola will, at
NewCo’s sole expense, use commercially reasonable efforts to
obtain Eurockot’s or China Great Wall Industries’, as
the case may be, compliance with its obligations under the launch
contract; provided, however, that Motorola shall not be
required to institute legal proceedings or to engage in any formal
mediation or arbitration process. NewCo shall provide Motorola with
full access to its facilities for Motorola to perform the
obligations described in this Section 4.C. NewCo shall also execute
and deliver, and shall require its subcontractors to execute and
deliver, waivers of liability for claims arising out of launch
activities, to the extent required by Eurockot or China Great Wall
Industries or applicable law.
11
D.
Notwithstanding any
provision herein to the contrary, Motorola shall have no obligation
to provide launch services pursuant to this Section 4 after
December 31, 2002 Notwithstanding the release of Motorola’s
obligation pursuant to this Section 4.D to provide launch services,
NewCo shall remain liable for any payments due pursuant to this
Section 4 and Motorola shall be under no obligation to reimburse
payments previously made pursuant to this Section 4 provided that
the reason for the failure to provide such launch services was
beyond the reasonable control of Motorola. Furthermore, NewCo shall
be entitled as liquidated damages to reimbursement of the portion
of the $13.7 million paid by it pursuant to Section 4.C above in
the event that (1) Motorola has not provided the launch services
described in Section 4.C above on or before December 31, 2002 and
(2) such failure to provide launch services is a direct result of
an event within Motorola’s reasonable control.
5.
Subscriber
Equipment
A.
Motorola shall provide
or sell any existing or newly-manufactured Satellite Series
portable or mobile units, docking stations, MXUs, L-band
transceivers (“LBTs”) or accessories (“
Subscriber Equipment”) at the prices listed in Annexes H-1
and I-1 and pursuant to Existing Subscriber Equipment Agreements
and Newly Manufactured Subscriber Equipment Agreements, which shall
be substantially in the forms attached hereto as Annex H-2 and
Annex 1-2, respectively (except for LBTs, which will be sold
pursuant to a VAM-specific agreement). Notwithstanding the
foregoing, the Newly Manufactured Subscriber Equipment Agreement
with NewCo shall provide that the first 5,000 Satellite Series
Model 9505 portable units sold in each of (i) the Production Period
(as defined below) and (ii) the twelve-month period following the
Production Period will be sold at a discount of $250 per unit to
the then current price of such units as specified in the Newly
Manufactured Subscriber Equipment Agreement with NewCo.
B.
Subject to the
conditions in this Agreement and the applicable Newly Manufactured
Subscriber Equipment Agreement, and so long as the Newly
Manufactured Subscriber Equipment Agreement with NewCo is executed
and binding by the Effective Date, Motorola shall provide the
following items of Subscriber Equipment to NewCo, service
providers, value added manufacturers (“VAMs”),
distributors and other third parties acceptable to Motorola, except
as indicated. Such items shall be ordered for delivery during the
periods indicated, and with a minimum of one hundred twenty (120)
days lead time before delivery (except for any data capable
products, for which NewCo must successfully complete all data
trials before such products or their software can be produced).
NewCo must additionally provide Motorola with (i) Firm Orders
satisfying any applicable minimum quantity commitment and (ii) the
Subscriber Equipment L/C (as defined in Section 10.D) before
Motorola shall have any obligation to provide the following items
of Subscriber Equipment (with the Model 9505 and 9520 transceivers
being the “New Products”):
·
The Satellite Series
Model 9505 version of the LBT with data capable software for sale
and delivery only to VAMs and NewCo during the 12month period
beginning 120 days from the Effective Date (the “Production
Period”).
12
·
The Satellite Series
Model 9505 portable unit with data capable software for delivery
during the Production Period.
·
The Satellite Series
Model 9520 mobile unit with data capable software for delivery
during the Production Period.
·
The Satellite Series
Model 9500 or 9505 ultra high-cap battery for delivery during the
Production Period.
·
The Solar Charger for
delivery during the Production Period.
·
The Portable Docking
Station for the Satellite Series Model 9500 for delivery during the
Production Period.
·
The Portable Docking
Station for the Satellite Series Model 9505 for delivery once
Motorola provides notice that its development has been completed,
which is estimated to be approximately four months after the
Effective Date.
·
The Satellite Series
Data Kit Accessory for a price to be established by Motorola and
for delivery once Motorola provides notice that its development has
been completed, which is estimated to be approximately four months
after the Effective Date subject to NewCo’s successful
completion of the data trials.
C.
Subject to the
applicable conditions in this Agreement and the applicable Existing
Subscriber Equipment Agreement, and so long as the Existing
Subscriber Equipment Agreement with NewCo is executed and binding
by the Effective Date, Motorola shall provide the following items
of Subscriber Equipment to NewCo, service providers, VAMs,
distributors and other third parties acceptable to Motorola, except
as indicated. All orders for such products by NewCo, service
providers, VAMs, distributors or other third parties must be placed
with Motorola within three months after the Effective Date, for
delivery within 180 days after the Effective Date, and with a
minimum of 90 days lead time before delivery (except as otherwise
provided and except in the case of any data capable products, for
which NewCo must successfully complete all data trials before such
products or their software can be produced). NewCo must
additionally provide Motorola with the Subscriber Equipment L/C
before Motorola shall have any obligation to provide the following
items of Subscriber Equipment (with such items being the
“Existing Products”):
·
An estimated 7,500 new,
unsold Satellite Series Model 9500 portable units for sale as new
portable units, with their L-band transceivers (“LBTs”)
upgraded with data capable software (but with those units not being
compatible with the Iridium secure cassette).
13
·
An estimated 7,500 new,
unsold Satellite Series Model 9500 portable units (after conversion
to L-band transceivers with data capable software) for sale only to
NewCo and VAMs as new L-band transceivers (but with those units not
being compatible with the Iridium secure cassette).
·
An estimated 2,500
‘used’ Satellite Series Model 9500 portable units
(after conversion to L-band transceivers with data capable
software) for sale only to NewCo and VAMs as used L-band
transceivers (but with those units not being compatible with the
Iridium secure cassette), so long as those transceivers pass
Motorola’s internal quality control, approval and screening
standards (but with those units not being compatible with the
Iridium secure cassette).
·
An estimated 2,500
‘used’ Satellite Series Model 9500 portable units in
Motorola’s inventory for sale only to NewCo (and not any
service providers, VAMs, distributors or other third parties) as
used, AS IS, portable units (without refurbishing or warranty of
any type, other than the limited out-of-box warranty described in
the applicable Existing Subscriber Equipment Agreement), so long as
those units pass Motorola’s internal quality control,
approval and screening standards (but with those units not being
compatible with the Iridium secure cassette).
·
An estimated 3,000 new,
unsold Satellite Series Model 9505 units in Motorola’s
existing inventory for sale as new units, with those units having
been upgraded with data capable software and re-tested by Motorola
(but with those units not being compatible with the Iridium secure
cassette without additional modifications).
·
An estimated 1,000 new,
unsold Satellite Series Model 9520 mobile units in Motorola’s
existing inventory with data capable software for sale as new units
(but with those units not being compatible with the Iridium secure
cassette).
The quantities listed
above are only estimates and the actual quantities may be different
depending on the number and usability of units actually collected
by Motorola.
D.
Subject to the
applicable conditions described below, NewCo hereby irrevocably
commits to purchase from Motorola, as of the Effective Date, all of
the Existing Products listed in Section 5.C above that are
remaining in Motorola’s inventory for sale (as defined
below), at the prices listed in Annex H-1. On or before the
Effective Date, and as a condition to the Effective Date, as more
fully described in Section 10.D, NewCo shall provide Motorola with
the Subscriber Equipment L/C described in Section 10.D(2) below.
Subject to the applicable conditions in, and NewCo’s full
compliance with, this Agreement and the Existing Subscriber
Equipment Agreement (which conditions Motorola may waive in its
sole discretion), Motorola
14
hereby agrees to sell
to NewCo all of the Existing Products listed in Section 5.C above
at the prices and with the lead times listed in Section 5.C
above.
For purposes of this
Section 5.D, the term “remaining in Motorola’s
inventory for sale” shall mean all units originally
manufactured before the Effective Date that currently are, or
subsequently come into, Motorola’s possession or control
whether or not such units were included in the estimates provided
in Section 5.C above. Effective 180 days after the Effective Date,
payment in full from NewCo for all Existing Products remaining in
Motorola’s inventory for sale shall be due and payable,
except that the amount owed by NewCo shall be reduced to the extent
that service providers, VAMs, distributors and other third parties
have already purchased and paid for such items on the terms and
conditions described in Section 5.C.
E.
Motorola will not
begin, and once it has begun may subsequently cease, its
manufacturing, production, and delivery of any or all of the
products described in this Section 5 at any time without penalty
and draw upon the letter(s) of credit as described in Section 10.D
below unless it has received Firm Orders for at least the Period
Minimum volume of New Products for delivery during the then current
Measurement Period. Further, in the event that Motorola has not
received Firm Orders for at least the Period Minimum volume of New
Products for delivery during the then current Measurement Period,
then NewCo will, within ten (10) days after written demand from
Motorola, book a Firm Order for the Period Shortfall, accompanied
by a satisfactory Order L/C for the full amount of that order at
invoice price(s). Aftermarket accessories will not count for
purposes of calculating whether the 15,000 or 10,000 unit minimum
order backlog requirement described in Section 10.D has been
met.
NewCo hereby
irrevocably commits to purchase from Motorola a minimum of 50,000
units of New Products for delivery during the Production Period, as
more fully described in Section 10 (“NewCo’s Minimum
Annual Volume Purchase Commitment”). Further, in the event
that by the end of the eighth month of the Production Period
Motorola has not received Firm Orders for at least NewCo’s
Minimum Annual Volume Purchase Commitment, then NewCo will, within
ten (10) days after written demand from Motorola, book a Firm Order
for the Annual Shortfall (as described in Section 10.D below),
accompanied by a satisfactory Order L/C for the full amount of that
order at invoice price(s). Aftermarket accessories will not count
for purposes of calculating whether NewCo’s Minimum Annual
Volume Purchase Commitment has been met. If Motorola does not
receive by the end of the eighth month of the Production Period
Firm Orders for at least NewCo’s Minimum Annual Volume
Purchase Commitment and NewCo does not fulfill its obligation to
place Firm Orders for the Annual Shortfall, Motorola may cease its
manufacturing, production, and delivery of the products described
in this Section 5 at any time without penalty and draw on the
letter(s) of credit as described in Section 10.D below. All
capitalized terms not otherwise defined in this Section 5.E shall
have the meaning defined in Section 10.D below.
F.
Motorola shall also
allow NewCo to pick up, at NewCo’s expense, from
Motorola’s Chandler, AZ GTSS facility at no charge (and
F.O.B. such facility), during a mutually acceptable date within
sixty calendar days after the Effective Date, (a) all existing MXUs
(or existing portions of such MXUs), currently estimated at 486, in
whatever form and
15
condition (working or
not) that such items are then in; (b) four LBT simulators, in
whatever form and condition (working or not) that such items are
then in; and (c) currently available design information about the
MXU, updated to take account (to the extent of readily available
published information, but without any verification or testing of
the updated information) of part obsolescence, and currently
available proof of concept hardware platform design information for
a Data Unit/Asset Manager, updated to allow for full scale
manufacturing (to the extent of readily available published
information, but without any verification or testing of the updated
information) but otherwise in whatever form or condition that such
items are then in. Motorola may, however, remove from such MXUs or
portions any identifying marking, statement or other item which
identifies or pertains to Motorola. MOTOROLA MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, OF ANY TYPE RELATED TO THE ITEMS OR
INFORMATION IN THIS SECTION 5.F, INCLUDING BUT NOT LIMITED TO,
THOSE OF MERCHANTABILITY OR SUITABILITY FOR A PARTICULAR PURPOSE,
ALL OF WHICH ARE TAKEN ‘AS IS’, ‘WHERE
IS’.
G.
Notwithstanding
anything to the contrary in this Agreement or any related
agreement(s), Motorola shall have no obligation to manufacture,
provide or sell any New Products or Existing Products under
Sections 5.A, 5.B, 5.C, or 5.D unless and until it receives
non-cancelable Firm Orders (in acceptable minimum order quantities)
accompanied by satisfactory Order L/Cs (as defined in Section
10.D(1)).
H.
Notwithstanding
anything to the contrary in this Agreement or any related
agreement(s), NewCo is responsible for collecting and aggregating
all orders and Order L/Cs from service providers, VAMs,
distributors and other third parties for the purchase of Subscriber
Equipment under this Section 5, and for providing such orders and
Order L/Cs to Motorola. Motorola will fulfill such orders solely on
behalf of, and as an accommodation to, NewCo and shall have no
further obligations with respect to such Subscriber Equipment
except as expressly provided in this Agreement.
I.
Notwithstanding
anything to the contrary in this Agreement or any related
agreements(s), all prices referenced in Annexes H-1 and 1-1 are
wholesale prices (Ex Works Motorola’s U.S. plant, in minimum
order quantities), and do not include shipping, customs and
insurance costs or taxes of any kind (among other items). These
prices are subject to adjustment at any time if Motorola incurs
unexpected non-recurring expenses or price increases by its
component vendors, or if Motorola incurs additional costs and
penalties in transacting business with service providers, VAMs,
distributors or other third parties, or for prices listed in Annex
I1, if Motorola incurs any additional product cost increases.
The availability of any of the items in Sections 5.A, 5.B, 5.C, and
5.D is also subject to the ability of Motorola to reach a
satisfactory agreement (in Motorola’s good faith opinion)
with its component vendors. Motorola is willing to ship the
Subscriber Equipment listed in Sections 5.A, 5.B, 5.C and 5.D to
different locations at NewCo’s direction, but the shipping,
customs, handling and insurance costs (among other items) for any
equipment would be at NewCo’s expense.
J.
MOTOROLA MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, RELATED TO THE PRODUCTS IN SECTIONS
5.A, 5.B., 5.C or 5.D, INCLUDING,
16
WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR SUITABILITY FOR A PARTICULAR
PURPOSE, OTHER THAN THOSE WARRANTIES CONTAINED IN THE EXISTING
SUBSCRIBER EQUIPMENT AGREEMENTS OR THE NEWLY MANUFACTURED
SUBSCRIBER EQUIPMENT AGREEMENTS, AS APPLICABLE, AND THE LIMITED
WARRANTY THAT MOTOROLA SHIPS WITH THE PRODUCTS (WHICH SHALL BE
SUBSTANTIALLY SIMILAR TO THOSE SET FORTH IN ANNEX 1-3 EXCEPT THAT
LBTs ARE WARRANTED PURSUANT TO A VAM-SPECIFIC AGREEMENT). ALL
SUBSCRIBER EQUIPMENT IN SECTIONS 5.A, 5.B, 5.C AND 5.D IS SOLD
“AS IS,”
