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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
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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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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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