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Motorola / Iridium - Network Development Contract



MOTOROLA CONFIDENTIAL PROPRIETARY



IRIDIUM(R)



TERRESTRIAL NETWORK

DEVELOPMENT CONTRACT



IRIDIUM LLC



MOTOROLA, INC.





CONTRACT EFFECTIVE DATE: JAN 01, 1993 (CONFORMED 1/14/97 TO INCLUDE AMENDMENTS TO NO. 1 AND 2)







IRIDIUM IS A REGISTERED TRADEMARK AND SERVICE MARK OF IRIDIUM LLC. MOTOROLA CONFIDENTIAL PROPRIETARY



TABLE OF CONTENTS



TITLE PAGE

TERRESTRIAL NETWORK DEVELOPMENT CONTRACT 1

RECITALS 1

ARTICLE 1. DEFINITIONS 2

ARTICLE 2. DESCRIPTION OF WORK 4

ARTICLE 3. INTEROPERABILITY 4

ARTICLE 4. DELIVERY SCHEDULE 4

ARTICLE 5. PRICE 4

ARTICLE 6. PAYMENT 5

ARTICLE 7. TITLE TRANSFER 6

ARTICLE 8. CHANGES 6

ARTICLE 9. IRIDIUM'S ACCESS 6

ARTICLE 10. WARRANTY 6

ARTICLE 11. INTELLECTUAL PROPERTY RIGHTS 7

ARTICLE 12. DEFAULT BY MOTOROLA 8

ARTICLE 13. DEFAULT BY IRIDIUM 9

ARTICLE 14. LIMITATION OF LIABILITY 10

ARTICLE 15. DISCLOSURE AND USE OF INFORMATION BY THE PARTIES 10

ARTICLE 16. ASSOCIATE CONTRACTOR REQUIREMENTS 11

ARTICLE 17. TAXES 12

ARTICLE 18. EXCUSABLE DELAYS 12

ARTICLE 19. EXPORT REGULATIONS 12

ARTICLE 20. ASSIGNMENT 13

ARTICLE 21. RELATIONSHIP WITH OTHER AGREEMENTS 13

ARTICLE 22. NOTICES 14

ARTICLE 23. AUTHORIZED REPRESENTATIVES 14

ARTICLE 24. EXHIBIT 15

ARTICLE 25. ORDER OF PRECEDENCE 15

ARTICLE 26. DISPUTES AND GOVERNING LAW 15

ARTICLE 27. ENTIRE AGREEMENT 17

ARTICLE 28. EFFECTIVE DATE 18

ATTACHMENT 1 FORM OF WARRANT







MOTOROLA CONFIDENTIAL PROPRIETARY



MOTOROLA CONFIDENTIAL PROPRIETARY



TERRESTRIAL NETWORK DEVELOPMENT CONTRACT





THIS TERRESTRIAL NETWORK DEVELOPMENT CONTRACT (hereinafter "Contract") is entered into between Motorola, Inc., acting
through the Satellite Communications Division of its Space and System Technology Group (hereinafter called "Motorola"), a corporation organized under the laws of the State of Delaware with its offices located at 2501 South Price Road, Chandler, Arizona 8
5
248-2899 and Iridium LLC (hereinafter called "Iridium"), a Delaware limited liability company with its principal office located at 1401 H Street, NW, Washington, D.C. 20005. Motorola and Iridium are hereafter sometimes individually referred to as "Party"
and collectively as the "Parties."



RECITALS



A. On June 26, 1990, Motorola formally announced that it intended to

develop a global communication system that would allow

communication via portable radio telephones - whether on land, at

sea or in the air. The new system, known as the IRIDIUM

Communications System ("System"), has at the heart of its

operation a Constellation of nominally sixty-six (66) satellites

in low-earth orbit working together as a digitally-switched

communications network in space. The System is intended to handle

both voice and data. One or more ground-based spacecraft control

facilities will maintain the satellite Constellation and overall

operation of the System.



B. A key component of the System will be a network of "Gateway"

surface facilities in various countries that will link the

satellites with the Public Switched Telephone Network. These

Gateways are expected to collect and forward, as required,

customer billing information and keep track of each user's



C. Other key components to the System are the Individual Subscriber

Units (ISUs) and Mobile Exchange Units (MXUs).



D. On June 14, 1991 Motorola incorporated Iridium, Inc. to become,

among other things, the owner of the Space System portion of the



E. A Space System Contract executed by Motorola and Iridium, as

amended, became effective on July 29, 1993. It is intended to

function as the mechanism whereby Motorola will sell to Iridium

the Space System portion of the System.



F. An Operations and Maintenance Contract executed by Motorola and

Iridium, as amended, became effective on July 29, 1993. It is

intended to function as the mechanism whereby Motorola will

operate and maintain the Space System for a period of five years

upon completion of the Space System Contract.



G. Separate contracts between Motorola and other appropriate parties

will provide for the production and sale of the Gateways, ISUs,

MXUs and other components of the System.



H. The Space System Contract, as amended, requires Motorola to

develop and sell Gateways and to license certain intellectual

property to third party manufacturers,













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acceptable to Motorola, the rights to use such certain

intellectual property to manufacture and sell Gateways.



I. Under the terms of this Terrestrial Network Development Contract,

Iridium will receive a license to use certain intellectual

property associated with the Gateway as developed by Motorola.

Such intellectual property may be used by Iridium to procure the

development and manufacture of Gateways from sources other than

Motorola. This license is in addition to the license provided to

Iridium under the Space System Contract, as amended. However,

this Contract does not include a license to the Voice Encoding

Algorithm which is necessary for Gateway interoperability with the

Space System.



J. In consideration of the amounts to be paid by Iridium to Motorola

under the terms of this Terrestrial Network Development Contract,

Motorola will be substantially reducing the base prices for the

Gateway Equipment it will be offering to sell to prospective

Gateway purchasers.



ARTICLE 1. DEFINITIONS



Capitalized terms used and not otherwise defined herein shall have the

following meanings:



A. Constellation or Space Segment: That part of the complete IRIDIUM

Communications System consisting solely of the space vehicles

(also referred to as spacecraft or satellites) in low-earth orbit.

It does not include the System Control Segment, Gateways, ISUs,

MXUs or other components necessary for complete utilization of the

IRIDIUM Communications System.



B. Gateway: The Gateways encompass the ground-based facilities

constructed in accordance with the Gateway Interface Specification

supporting the subscriber billing/information functions in

addition to call processing operations and the connection of the

IRIDIUM subscriber communications to the Public Switched Telephone

Network (PSTN).



C. Gateway Design Package: The documents being delivered hereunder

which provide data usable for other Gateway design and development

efforts. These documents are specified in Section 4.3 of Exhibit

A of this contract.



D. Gateway Interface Specification: The functional specification

prepared by Motorola that defines the radio frequency interface,

logical and physical protocols, and functionality necessary for

Gateway Interoperability with the Space System. It does not

include the Voice Encoding Algorithm necessary for complete

interoperability with the IRIDIUM Communications System.



E. Interoperable or interoperate: The terms "interoperable" and

"interoperate" shall mean, in this Contract, that these components

will be designed to function individually and collectively to

provide IRIDIUM communications services, and that where necessary

in such interoperation, will be interconnectable in accordance

with the













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applicable interface specifications and the applicable

specifications contained in the Space System Contract, as amended.



F. IRIDIUM Communications System: The complete integrated

satellite-based digitally-switched communication system. This

term refers collectively to the Space Segment, System Control

Segment, Gateways and Subscriber Unit Segment.



G. MILESTONES: The term "Milestone" or "Milestones" refer to the

specific milestones described in the Statement of Work (Exhibit

A).



H. Mobile Exchange Units (MXUs): The equipment designed to

interconnect multiple voice or data channels to the IRIDIUM

Communications System using the subscriber unit radio frequency

interface to the Space System.



I. PSTN-interconnectable: The term "PSTN-interconnectable" shall

mean, in this Contract, that the Gateway's Switching Center will

operate with PSTNs which use either the common industry standard

international Multi-Frequency Compelled ("MFC-R2 International")

or Signaling System Seven Integrated Services User Part

("SS7/ISUP") signaling and addressing protocols. For the

end-to-end message signaling, the Gateway's Switching Center will

use the Dual Tone Multi-Frequency ("DTMF") signaling protocols of

the International Telecommunications Union (formerly CCITT).



J. Space System: This term refers to the integrated combination of

the Space Segment and System Control Segment.



K. Space Vehicles: The terms space vehicle, satellite, or spacecraft

all have the same meaning throughout this Contract and refer to

the individual or multiple satellites of the Constellation.



L. Subscriber Unit Segment: The Subscriber Unit Segment refers

collectively to the individual equipment units generally referred

to as Individual Subscriber Units (ISUs) to be used by subscribers

and capable of initiating and receiving communications through the

IRIDIUM Communications System. These may include, for example,

hand-held portable units, aircraft units, marine units, portable

office units, and pay phone units. As used herein, this term also

includes paging units.



M. System Control Segment (SCS): This term refers to the various

ground-based sites, equipment, and facilities to manage and

control the individual space vehicles of the Constellation, and

the communication links of the IRIDIUM Communications System in

accordance with the performance levels specified in the Space

System and Operations and Maintenance Contracts. The System

Control Segment is composed of a Master Control Facility (MCF),

and Backup Control Facility (BCF), and associated Telemetry,

Tracking and Command Facilities (TTACs).



N. Terrestrial Network: As used herein, this term refers to the

IRIDIUM Communications System's Gateways.













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O. Voice Encoding Algorithm: As this term is used in this Contract it

refers to the algorithm used to encode and decode analog voice to

and from compressed digital speech.



P. Gateway Equipment: The hardware and software for the IRIDIUM

Gateway necessary to perform the functions specified in Section

3.1 of Exhibit A of this document.



Q. Initial GEPAs: GEPAs for the installation of Gateway Equipment for

the following IRIDIUM Investors, provided the installation of such

Gateway Equipment is scheduled to occur prior to the Commercial

Activation Date:



1. Iridium U.S., L.P.



2. Iridium SudAmerica



3. Nippon Iridium Corp.



4. United Communication Industry Public Company Limited

[Thai Satellite Telecommunications Co., Ltd.]



5. Pacific Communications Co., Ltd. - #1 [Taiwan]



6. Pacific Communications Co., Ltd. - #2 [Indonesia]



7. Iridium Services Deutschland and STET



8. Khrunichev State Research and Production Space Center



9. Iridium China (Hong Kong), Ltd.



10. Iridium India Telecom, Ltd.



11. Korea Mobile Telecommunications Corp.



R. Pre-Commercial Service Warranty: The services described in

Paragraph 6.0 of Exhibit A hereto.



U. GTAC Services: The services described in Paragraph 7.0 of Exhibit

A hereto.



V. Commercial Activation Activities: The activities set forth in

Paragraph 8.0 of Exhibit A hereto.



W. Commercial Activation Date: The date of the first "Revenue

Producing Communication Message," as that term is defined in the

Space System Contract.



X. GEPA: A Gateway Equipment Purchase Agreement between Motorola and

a Gateway Equipment purchaser.



ARTICLE 2. DESCRIPTION OF WORK



A. Motorola shall design the hardware and software of the generic

IRIDIUM Gateway in accordance with the Statement of Work, Exhibit

A, and the Milestone Schedule contained therein.













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B. Motorola shall deliver to Iridium, in accordance with the

provisions of this Contract, the then-current Gateway Design

Package, as defined herein, and the license to use the data

contained therein as provided by the Article herein entitled,

INTELLECTUAL PROPERTY RIGHTS.



C. Motorola shall permit Iridium, subject to the Article herein

entitled IRIDIUM'S ACCESS, opportunities to review Motorola's

progress in performing the work under this Contract. Such reviews

may be a part of the Milestones described in Exhibit A, hereto.



D. Motorola shall provide the Pre-Commercial Service Warranty for

Gateway Equipment systems for which Conditional Acceptance occurs,

pursuant to the terms of the GEPA under which such Gateway

Equipment has been purchased, prior to the Commercial Activation



E. Motorola shall provide the GTAC Services starting upon the later

to occur of the commencement by Iridium of the Commercial

Activation Activities or April 1, 1998, and ending on the

Commercial Activation Date.



F. Motorola shall provide the Commercial Activation Activities

support as set forth in Section 8.0 of Exhibit A hereto.



ARTICLE 3. INTEROPERABILITY



Motorola will use its reasonable best efforts to design and develop the

various ground components of the IRIDIUM Communications System, for

example, Gateways, Subscriber Units and Mobile Exchange Units, to be sold

by Motorola to third parties under mutually acceptable conditions such

that these components will be interoperable with the IRIDIUM Space

System, and, as appropriate, through the IRIDIUM Space System, and with

each other, and, that, collectively, they will interoperate with the

IRIDIUM Space System to, as appropriate, provide IRIDIUM communications

service of the quality specified in Section 3.2 of Exhibit B of the Space

System contract and Section 3.2 of the Statement of Work of this

Contract, and be PSTN-interconnectable.



ARTICLE 4. DELIVERY SCHEDULE



Motorola shall perform the work required under Paragraphs A, B and C of

ARTICLE 2, DESCRIPTION OR WORK, and deliver the then-current Gateway

Design Package to Iridium in accordance with the Milestone Performance

Schedule contained in Exhibit A hereto (as it may be amended in

accordance with the terms of this Contract). Motorola shall perform the

work required pursuant to Paragraphs D, E and F of ARTICLE 2, DESCRIPTION

OF WORK as set forth in this Contract.



ARTICLE 5. PRICE



A. For performance of this Contract, exclusive of the work required

pursuant to Paragraphs D, E and F of ARTICLE 2 hereof, entitled,

"DESCRIPTION OF WORK",













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Iridium shall pay Motorola the fixed price of one hundred sixty

million dollars ($160,000,000 U.S.).



B. For performance of the work required pursuant to Paragraphs D, E

and F of ARTICLE 2 hereof, entitled "DESCRIPTION OF WORK", Iridium

shall either (i) transfer to Motorola five thousand five hundred

forty five (5,545) warrants, in substantially the form attached

hereto as Attachment 1, relating to Class 1 Interests in Iridium,

or (ii) pay to Motorola the fixed price of eighteen million nine

hundred thousand dollars ($18,900,000 U.S.).



ARTICLE 6. PAYMENT



A. The fixed price of $160,000,000 shall be paid in accordance with

the Milestone schedule contained in Exhibit A, hereto.



B. The Milestone prices specified in Exhibit A shall, in each case,

be paid by Iridium to Motorola within thirty (30) calendar days

following completion of each Milestone and receipt of Motorola's

invoice for these payments. Payment to Motorola shall be made by

cable/wire transfer to a banking institution as Motorola

designates or by such other means as Motorola may designate from

time to time.



C. In the event Motorola completes a specific Milestone prior to the

scheduled completion date in Exhibit A (as such dates may be

adjusted pursuant to the terms of this Contract), Iridium shall

not be obligated to make the payment associated with such

Milestone until thirty (30) days after such scheduled completion



D. Iridium shall have the right to challenge the assertion of

Motorola that any Milestone has been completed in accordance with

the Milestone completion Criteria by providing Motorola with

written notice to such effect within twenty (20) days following

receipt of Motorola's invoice. Such notice shall summarize the

reasons for such challenge and Motorola shall respond thereto in

writing or orally within five (5) days of receipt of such

challenge. Failure to resolve any dispute between Motorola and

Iridium with respect to any such challenge shall be resolved in

accordance with the Article herein entitled, DISPUTES AND

GOVERNING LAW. Nothing herein shall be construed to limit

Iridium's rights under the Article herein entitled DEFAULT BY

MOTOROLA, nor Motorola's rights under the Article herein entitled

DEFAULT BY IRIDIUM.



E. Notwithstanding Motorola's inability to demonstrate compliance

with the criteria of the Statement of Work as required by

Milestones 5 or 6 or 7 or 8, if, 1) Iridium chooses to use or

permits others to use the Space System using the Gateway Equipment

design developed hereunder after the scheduled completion date of

Milestone Number 7; or, 2) if Motorola successfully performs the

Acceptance Test Plan under a Gateway Equipment Purchase Agreement,

the earlier of: a) the date of the first Revenue Producing

Communication Message transmitted through the Space System using

the Gateway Equipment design developed hereunder or any component

thereof; or, b) the date of completion of a Release 2 Acceptance

Test Plan under a Gateway Equipment













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MOTOROLA CONFIDENTIAL PROPRIETARY



Purchase Agreement shall be deemed the date of completion and

acceptance by Iridium of all items required to be delivered by

Motorola under this Contract. Iridium shall pay to Motorola all

remaining amounts not yet paid by Iridium to Motorola under this

Contract on the date or dates payment would have been due in

accordance with the Milestone Schedule contained in Exhibit A.

Motorola shall, upon receipt of such payments as may be due for

Milestones 9 and 10, promptly deliver to Iridium the then-current

version of the Gateway Design Package and the license to use the

data contained therein as provided by the Article herein entitled

INTELLECTUAL PROPERTY RIGHTS.



F. The amount to be under Paragraphs B of ARTICLE 5, PRICE shall be

due and payable not later than five (5) business days after the

Commercial Activation Date.



ARTICLE 7. TITLE TRANSFER



Title to the Gateway Design Package delivered hereunder shall not pass to

Iridium. Motorola and its subcontractors shall retain title to such

documents and Iridium shall only receive the limited rights to use such

documents as such rights are specified in the Article herein entitled,

INTELLECTUAL PROPERTY RIGHTS.



ARTICLE 8. CHANGES



Changes to this Contract may be made only by mutual agreement of the

parties hereto. Such changes shall be evidenced by a written agreement

executed by authorized representatives of both parties. No change shall

be binding on either party unless and until such written document is

fully executed by both parties.



ARTICLE 9. IRIDIUM'S ACCESS



For the purpose of observing the status of Motorola's performance of

work, Motorola shall afford a limited number of Iridium's employees or

designees, as approved by Motorola and subject to the Article herein

entitled EXPORT REGULATIONS, access to those Contract Milestone

activities specified in Exhibit A Progress Payments, Milestones and

Deliverable at Motorola's and its first-tier subcontractor's facilities

subject to such subcontractor's approval and on a non-interference basis.

Motorola's approval of designees requested by Iridium shall not be

unreasonably withheld; provided, however, that such approval may be

withheld if Motorola or its first-tier subcontractor(s) have reasonable

concerns as to the protection of their proprietary information or

potential injury to their competitive market position(s).



ARTICLE 10. WARRANTY



Motorola warrants that the Gateway Design Package, as of the date it is

delivered to Iridium, will contain Motorola's then-current revision of

the Gateway Interface Specification and Iridium Gateway Segment

Specification. Motorola agrees that, if it revises such documents during

the twelve (12) month period following such delivery to Iridium to

correct such













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documents for Motorola-determined errors or omissions, that it will

deliver one copy of such revised versions of such documents to Iridium.

Furthermore, Motorola makes no other warranty with respect to the Gateway

Design Package. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,

WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO A

WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY

WARRANTIES OF DESIGN ALL OF WHICH ARE EXPRESSLY DISCLAIMED AND EXCLUDED.

This Article shall not be construed or interpreted as limiting or

reducing Motorola's obligations as set forth in Article 2 of this



ARTICLE 11. INTELLECTUAL PROPERTY RIGHTS



A. To the extent that Motorola has the right to do so, Iridium shall

have a paid-up, non-exclusive, non-transferable license with

respect to the information which is contained in the Gateway

Design Package as defined herein delivered to Iridium by Motorola

in connection with this Contract to use, have used, make and have

made for "IRIDIUM purposes" all data and inventions which are part

of that information (a) which were created by employees of

Motorola in the performance of this Contract or (b) which were

created by employees of subcontractors to Motorola in the

performance of this Contract.



B. In addition and to the extent that Motorola has the right to do

so, Iridium shall have a non-exclusive, non-transferable,

royalty-bearing license (whose terms will be mutually agreed upon)

with respect to any invention covered by a patent owned by

Motorola or licensed to Motorola (with a right of Motorola to

sublicense), which invention is directly incorporated in the

Gateway Design Package delivered to Iridium by Motorola in

connection with this Contract to use, have used, make and have

made for "IRIDIUM purposes" any such invention, but only if and to

the extent that such invention is essential for Iridium to procure

Gateways from third parties. To the extent Motorola's

subcontractors' have agreed to license to Motorola such patents

covered by this paragraph with a right to sublicense to Iridium

for the purposes covered by this paragraph, Motorola agrees to

negotiate the royalties and other terms associated with such

licenses directly with such subcontractors. With respect to the

license of Motorola's patents covered by this paragraph, Motorola

agrees that the amount of such royalty to be paid by Iridium shall

be a commercially reasonable amount.



C. "IRIDIUM purposes" means the use by Iridium in connection with the

design, development, construction, establishment, operation and

maintenance of the Gateways.



D. The above licenses will become effective upon delivery of the

Gateway Design Package as provided herein.



E. If any written material furnished as part of the Gateway Design

Package is copyrighted, Iridium shall have an unlimited right to

make copies of such copyrighted material and to use such copies

for "IRIDIUM purposes" without payment of additional













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compensation to Motorola only to the extent that Motorola has the

authority to grant such right. In the event Motorola does not

have such right, Motorola will use its best reasonable efforts to

obtain such rights for Iridium. In the event that the obtaining

of such rights involves the payment of a fee, Iridium shall

reimburse Motorola for said fee.



F. Notwithstanding the license grants in Paragraphs A&B above, the

parties agree that all data pertaining to manufacturing processes

technology, semiconductor technology and terrestrial cellular

networks or components, that are or may be delivered or disclosed

by Motorola to Iridium in the Gateway Design Package or otherwise

shall be subject to the Article herein entitled DISCLOSURE AND USE

OF INFORMATION BY THE PARTIES and Iridium acquires no rights,

title or interest in such intellectual property or other

intellectual property associated with the design of the IRIDIUM

Communications System except as may be negotiated in other license

agreements between Motorola and Iridium pursuant to reasonable

terms and conditions mutually acceptable to Motorola and Iridium.



ARTICLE 12. DEFAULT BY MOTOROLA



A. Iridium may, by written notice of default sent by registered

letter to Motorola, terminate this Contract for cause upon the

occurrence of any of the following circumstances:



1. if Motorola fails to make delivery of the Gateway Design

Package and complete all Milestones of this Contract within

four (4) months of the scheduled completion date of the

final Milestone (as may be adjusted under this Contract);

or,



2. if Motorola fails to perform any of the other material

provisions of this Contract or fails to timely complete one

or more of the Milestones so as to prevent completion of the

final Milestone of this Contract within four (4) months of

the scheduled date (as may be adjusted under this Contract),

and in either of these two circumstances does not act to

commence correction of such failure within a period of

thirty (30) days (or such longer period as Iridium may

authorize in writing) after receipt of notice from Iridium

specifying such failure. Notwithstanding such default,

Motorola shall be entitled to payment as provided in Article

6, Paragraph E if the conditions set forth therein are met.



B. If this Contract is terminated as provided in this Article,

Motorola shall:



1. to the extent that it has the right to do so, deliver to

Iridium the then-current version of the Gateway Design

Package as of the effective date of any such termination

along with the intellectual property licenses specified in

the Article herein entitled INTELLECTUAL PROPERTY RIGHTS;

and,



2. be paid a percentage of the total price of this contract

equal to the actual percentage of completion of the Gateway

Design Package that is completed as of the effective date of

such termination action; and,













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3. subject to the Article herein entitled LIMITATION OF

LIABILITY, pay to Iridium all reasonable costs to have this

Contract completed by another responsible contractor, to the

extent such costs exceed the total amount which Iridium

would have had to pay Motorola for this Contract had

Motorola completed the Contract as required; provided,

however, that Iridium enters into a Contract with a

responsible contractor to complete the terminated effort

within one (1) year of notification of termination for



C. NOTWITHSTANDING ANY PROVISION IN THIS CONTRACT TO THE CONTRARY,

THE REMEDIES SET FORTH IN THIS ARTICLE SHALL BE THE SOLE RECOURSE

AND MOTOROLA'S TOTAL LIABILITY TO WHICH IRIDIUM IS ENTITLED IN THE

EVENT OF MOTOROLA'S DEFAULT OR FOR ANY OTHER CLAIM AGAINST

MOTOROLA ARISING DIRECTLY OR INDIRECTLY OUT OF THIS CONTRACT

WHETHER IN CONTRACT, WARRANTY, TORT OR OTHERWISE.



D. If, after Iridium gives Motorola notice of default, it is

determined for any reason that Motorola was not in default under

the provisions of this Arti...

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