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EXHIBIT 10.16
EXECUTION COPY
AGREEMENT REGARDING GUARANTEE
Agreement Regarding Guarantee, dated as of August 21, 1996
between Motorola, Inc., a Delaware corporation (the "Guarantor"), and Iridium
LLC, a Delaware limited liability company (the "Company").
1. Bridge Financing Guarantee. The Guarantor has
concurrently herewith entered into a Guarantee Agreement attached hereto as
Annex A (the "Bridge Agreement Guarantee") pursuant to which the Guarantor will
guarantee the payment of up to $750,000,000 of the obligations of the Company
under the Credit Agreement, dated as of August 21, 1996, between the Company
and the banks named therein (as such agreement exists when originally executed,
the "Bridge Agreement"), attached hereto as Annex B. The Company will provide
the Guarantor with written notice at least five full Business Days (and no more
than ten Business Days) prior to giving notice to the banks under the Bridge
Agreement of a proposed borrowing. Capitalized terms used herein which are
defined in the Bridge Agreement shall have the meanings set forth in the Bridge
Agreement unless otherwise defined herein.
2. Possible Takeout Financing Guarantee. The Guarantor and
the Company acknowledge that the Company will seek to arrange for one or more
debt facilities to secure appropriate bank financing to complete the project
(which may include an extension of the Bridge Agreement) which will refinance
the Bridge Agreement (the "Takeout Financing Facility") and that any such
facilities will likely require guarantees or other credit support. The
Guarantor has offered to provide a guarantee or other credit support for up to
$750 million of the Company's obligations under the Takeout Financing Facility
(the "Takeout Financing Facility Guarantee"), subject to the completion of
negotiations with the senior lenders under the Takeout Financing Facility
satisfactory to the Guarantor with respect to the amount and other terms and
conditions of the Takeout Financing Facility Guarantee and of the Takeout
Financing Facility. Any agreement by Guarantor to extend the Takeout Financing
Facility Guarantee would be subject to the terms and conditions set forth in
Guarantor's Proposal to the Company, dated May 9, 1996 (revised), attached
hereto as Annex C (the "Proposal").
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3. Reimbursement Obligation.
(a) Company Default. Other than as set forth under Section
3(b) below, if and to the extent that the Lenders or the Administrative Agent
demand that the Guarantor pay, and the Guarantor does pay, any Bridge Agreement
Amount (as defined below) pursuant to the Bridge Agreement Guarantee (a "Bridge
Guarantee Payment"), the Company shall, promptly upon receipt from the
Guarantor of a written demand for reimbursement, reimburse the Guarantor for
such Bridge Guarantee Payment, plus interest accruing at a rate equal to that
which would be in effect under the Bridge Agreement, without duplication.
"Bridge Agreement Amount" means any amount due from the Company under the
Bridge Agreement or any Revolving Credit Note.
(b) Guarantor Default. If a Bridge Guarantee Payment relates
to a Bridge Agreement Amount that has been accelerated or otherwise become due
as a result of a Motorola-Based Default (as defined below), then (i) the
Guarantor shall assume and become subject to the obligations of the Lenders and
the Agents under the Bridge Agreement vis-a-vis the Company (including, without
limitation, the obligation to make Loans in the aggregate principal amount of
the Lenders' Commitments), (ii) the Guarantor shall assume and become entitled
to the benefits of the rights of the Lenders and the Agents under the Bridge
Agreement vis-a-vis the Company (including, without limitation, the right to
receive payments in respect of Loans made under the Bridge Agreement), but not
including any provisions relating to the Bridge Agreement Guarantee or the
occurrence of a Motorola Default (as defined in the Bridge Agreement), (iii)
the Company shall become obligated to reimburse the Guarantor for such Bridge
Guarantee Payment and to repay any additional amounts for which the Company may
become indebted to the Guarantor pursuant to clause (ii) above on the terms and
conditions contained in the Bridge Agreement as the Bridge Agreement is
modified by clause (ii) above, and (iv) the Company shall continue to be
subject to the terms and conditions of the Bridge Agreement (including, without
limitation, the covenants contained therein), as the Bridge Agreement is
modified by clause (ii) above.
(c) Costs and Expenses. The Company further agrees to
reimburse the Guarantor for all reasonable out-of-pocket costs and expenses
(including, without limitation, the fees and expenses of legal counsel) in
connection with any enforcement of the Company's obligations under Sections
3(a)(including, without limitation, any
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fees and expenses incurred in connection with any bankruptcy proceedings).
4. Compensation to Guarantor. The Company shall compensate
the Guarantor for entering into the Bridge Agreement Guarantee and, subject to
the terms and conditions of Section 2 hereof and the terms and conditions of
the Proposal, any Takeout Financing Facility Guarantee by issuing warrants to
purchase Class 1 Interests in the Company("Shares") to the Guarantor in
substantially the form attached hereto as Annex D(the "Warrants"). On the 45th
day following the end of each quarter during which either the Bridge Agreement
Guarantee or the Takeout Financing Facility Guarantee (collectively, the
"Guarantees") remains outstanding or the Guarantor has made any payment under
either of the Guarantees, the Company shall issue a certificate to the
Guarantor evidencing the Warrants earned by the Guarantor in respect of the
Guarantee in such quarter. The Guarantor shall earn Warrants based on the
Outstanding Guarantee Amount during any period according to the following
formula:
(A) 11,000 x [A x (B / 365)]
where "A" equals the Outstanding Guarantee Amount divided by
100,000,000 and "B" equals the number of days during which
Outstanding Guarantee Amount is at least $750,000,000, for
example, if the Guarantor guarantees $750,000,000 of the
Company's obligations under the Bridge Agreement for a period
of one year, the Guarantor will have earned Warrants relating
to 82,500 Shares;
(B) 8,500 x [A x (C / 365)]
where "A" equals the Outstanding Guarantee Amount divided by
100,000,000 and "C" equals the number of days during which
Outstanding Guarantee Amount is less than $750,000,000 but at
least $500,000,000, for example, if the Guarantor guarantees
$500,000,000 of the Company's obligations under the Bridge
Agreement for a period of one year, the Guarantor will have
earned Warrants relating to 42,500 Shares; and
(C) 5,500 x [A x (D / 365)]
where "A" equals the Outstanding Guarantee Amount divided by
100,000,000 and "D" equals the number of days during which
Outstanding Guarantee Amount is any positive amount
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less than $500,000,000, for example, if the Guarantor
guarantees $250,000,000 of the Company's obligations under
the Bridge Agreement for a period of one year, the Guarantor
will have earned Warrants relating to 13,750 Shares.
Notwithstanding the foregoing, in no event shall the Warrants relate to more
than 150,000 Shares (subject to antidilution adjustments in accordance with the
terms of the Warrants and to recourse reduction milestones acceptable to the
Guarantor). "Outstanding Guarantee Amount" means the amount of the Company's
obligations which the Guarantor has guaranteed (regardless of the actual amount
of the Company's obligations outstanding to the lender at any time during such
period) together, without duplication, with the amount the Guarantor has paid
pursuant to the Guarantees which has not been reimbursed by the Company
pursuant to this Agreement.
5. Gateway Territory Incentives. The Company shall issue the
warrants earned by gateway owners pursuant to Section II.D. of the Proposal no
later than (i) in respect of the completion of each gateway owner's gateway
activities prior to the start of commercial service according to the commercial
activation plan ("Commercial Activation"), 30 days after Commercial Activation
and (ii) in respect of service revenue generated by each gateway owner, 17
months after Commercial Activation.
6. Asset Drop Down. The Guarantor consents and agrees that
the Company may establish a limited liability company Subsidiary at least
ninety-nine percent of the equity of which would be owned by the Company
("Iridium Sub") and transfer to Iridium Sub all or substantially all of the
assets of the Company (the "Asset Drop Down"); provided the Iridium Sub shall
assume in writing certain of the Company's obligations under this Agreement and
the Security Agreement, with the Company remaining subject to the remainder of
such obligations, all on terms and conditions mutually agreeable to the Company
and the Guarantor.
7. Amendments to SSC, TNDC and O&M Contract; Letter
Agreement. The Company represents and warrants that it has duly authorized,
executed and delivered (a) Amendment No. 6 dated August 16, 1996, to the Space
System Contract effective July 29, 1993 (the "SSC"), between the Company and
the Guarantor, in the form attached hereto as Annex E, (b) Amendment No. 2,
dated August 16, 1996, to the Terrestrial Network Development Contract
effective January 1, 1993 (the "TNDC") between the Company and the Guarantor,
in the
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form attached hereto as Annex F, (c) Amendment No. 6 dated August 16, 1996, to
the Operations and Maintenance Contract effective July 29, 1993 (the "O&M
Contract"), between the Company and the Guarantor, in the form attached hereto
as Annex G and (d) that certain Letter Agreement with the Guarantor, in the
form attached hereto as Annex H, with respect to the FCC license to build and
operate the Iridium system.
8. Authorization of Capital Call. The Company represents
and warrants that Section 4.02 of the Limited Liability Company Agreement of
the Company is in full force and effect and the Company acknowledges that it is
obligated to call for additional capital on the terms and subject to the
conditions expressly stated therein.
9. Security Agreement. The Company shall enter into a
Security Agreement, in the form attached hereto as Annex I, granting the
Guarantor a security interest in the Collateral (as defined therein).
10. Additional Company Representations and Warranties. The
Company represents and warrants that
(a) the representations and warranties of the Company set
forth in Section 7 of the Bridge Agreement are true and correct as of
the date given under the Bridge Agreement;
(b) the Certificates of Designation relating to the Company's
Series B Class 2 Interests and Series C Class 2 Interests have been
duly adopted by the Company's Banking and Financing Committee in the
form attached hereto as Annex J and all other necessary corporate
actions have been taken to duly authorize the issuance to the
Guarantor of the Series B Class 2 Interests and Series C Class 2
Interests;
(c) The execution, delivery and performance of this
Agreement, the Warrants, the amendments and waiver letter contemplated
by Section 5 hereof and all other agreements contemplated hereby to
which the Company is a party, have been duly authorized by the
Company. This Agreement, the Warrants, such amendments, such waiver
letter and the Certificates of Designation relating to the Company's
Series B Class 2 Interests and Series C Class 2 Interests and all
other agreements contemplated hereby to which the Company is a party
each constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. The
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execution and delivery by the Company of this Agreement, the Warrants,
such amendments, such waiver letter and all other agreements
contemplated hereby to which the Company is a party, the offering,
sale and issuance of the Company's Series B Class 2 Interests and
Series C Class 2 Interests and the Warrants hereunder, the issuance of
the Company's Class 1 Interests upon exercise of Warrants and the
fulfillment of and compliance with the respective terms hereof and
thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) , except as provided in the Security
Agreement, result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's equity
capital or assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency
pursuant to, the charter, limited liability company agreement or
bylaws of the Company or any Subsidiary, or any law, statute, rule or
regulation to which the Company or any Subsidiary is subject, or any
agreement, instrument, order, judgment or decree to which the Company
or any Subsidiary is subject.
11. Guarantor Protection Rights. So long as Guarantor's
guarantee of any amount of the Company's debt, under the Bridge Agreement
Guarantee, is in effect the Company shall not without the prior written
approval of Guarantor (which may be withheld in the absolute discretion of
Guarantor):
(a) subject to the terms of Section 6, sell, lease or
otherwise dispose of, or permit any Subsidiary to sell,
lease or otherwise dispose of, more than 5% of the
consolidated assets of the Company and its Subsidiaries
(computed on the basis of book value, determined in
accordance with generally accepted accounting principles
consistently applied, or fair market value, determined by
the Company's board of directors in its reasonable good
faith judgment) in any transaction or series of related
transactions or sell or permanently dispose of any of its
or any Subsidiary's Intellectual Property Rights (other
than commercially available software designed for
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operation on a personal computer or network of personal
computers);
(b) merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other
than a Wholly-Owned Subsidiary);
(c) liquidate, dissolve or effect a recapitalization or
reorganization of the Company's capital structure in any
form of transaction;
(d) effect a change in the equity capitalization of the
Company that requires the approval of the holders of
Shares other than in connection with an initial public
offering of the Company's equity securities;
(e) directly or indirectly declare or pay any dividends or
make any distributions upon any of its equity capital
other than distributions to members made pursuant to
Section 3.07(a) of the LLC Agreement with respect to
certain members' U.S. tax liabilities;
(f) directly or indirectly redeem (other than a redemption of
the Series B or C, Class 2 interests of the Company
pursuant to the LLC Agreement), purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's or any
Subsidiary's capital stock or other equity securities
(including, without limitation, warrants, options and
other rights to acquire such capital stock or other
equity securities) other than pursuant to the exercise of
the Company's remedies against any holder of Shares
pursuant to the terms of the LLC Agreement or the 1993
Stock Purchase Agreement (as defined in the LLC
Agreement);
(g) incur any indebtedness for borrowed money other than
indebtedness the amount, terms and conditions (including
without limitations, the subordination provisions) of
which have been approved in advance by the lenders to the
extent required under the Bridge Agreement; or
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(h) take any action or permit any circumstances to exist
which is prohibited under the terms of the Bridge
Agreement or fail to take any action required to be taken
by it under the terms of the Bridge Agreement, in each
case subject to the grace period applicable to any
default created by such action or circumstance pursuant
to Section 9 of the Bridge Agreement; provided, however,
that this clause (h) shall not apply to any action or
circumstance which would constitute a Motorola Default
(as defined in the Bridge Agreement).
12. Amendments and Modifications to Bridge Agreement. The
Company shall not enter into any amendment, waiver, supplement or modification
of the Bridge Agreement without the prior written consent of the Guarantor,
which consent may be granted or withheld by the Guarantor in its sole
discretion, but acting in good faith.
13. Referral of Matters to Related Party Contracts Committee.
The Company acknowledges and agrees that the Contract Committee (as defined in
the LLC Agreement) of the Company's board of directors has a limited scope of
authority with respect to the relationship between Guarantor and the Company,
and that only those matters specifically required by the LLC Agreement and
matters related to the Guarantee, other contracts between the Guarantor and the
Company and actions or claims by the Company against the Guarantor will be
taken to the Contract Committee for approval.
14. Use of Proceeds. The Company will use the proceeds of the
Loans solely (i) to make payments to the Guarantor at the times and in the
amounts required pursuant to the SSC or TNDC, (ii) to pay fees and expenses
payable to the Global Arrangers, the Agents and the Lenders in connection with
the Bridge Agreement and (iii) for general corporate purposes so long as the
amount subject to this clause (iii) does not exceed the amounts budgeted for
such purposes in the budget plans approved by the Company's board of directors
from time to time.
15. Network Implementation; Review Procedures. The Company
agrees to use its best efforts to comply with Part I, Section IV of the
Proposal relating to network implementation and review procedures.
16. Copies of Information and Notices. Any and all
information, notices and correspondence provided by or on behalf of the Company
or Iridium Sub to the Global Arrangers, the
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Administrative Agent or any Lender or by or on behalf of the Global Arrangers,
the Administrative Agent or any Lender to the Company or Iridium Sub (in each
case whether or not required under the Bridge Agreement) shall be provided at
the same time to the Guarantor.
17. Access. The Company shall permit the Guarantor to have
access to relevant meetings, documents or other materials, other than Internal
Meetings, Documents and Materials (as defined below), directly relating to the
Guarantee, the Bridge Agreement, the Takeout Facility Guarantee or the Takeout
Financing Facility. "Internal Meetings, Documents and Materials" means meetings
between or among executives or employees of the Company or between or among the
Company and its consultants, advisors and/or counsel; documents or other
materials which are prepared in connection with such meetings; and documents or
other materials which are circulated solely between or among executives or
employees of the Company or between or among the Company and its consultants,
advisors and/or counsel.
18. Notices under this Agreement. All notices, requests,
demands, claims, and other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication hereunder shall be
deemed duly given (i) when delivered, if personally delivered, (ii) when
receipt is electronically confirmed, if faxed (with hard copy to follow via
first class mail, postage prepaid) or (iii) one day after deposit with a
reputable overnight courier, in each case addressed to the intended recipient
as set forth below:
If to the Company:
Iridium, LLC
0000 X Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attention: Vice President and Chief Financial Officer
and Vice President - General Counsel
Telecopy #: (000)000-0000
If to the Guarantor:
Motorola, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Treasurer
Telecopy #: (000)000-0000
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with a copy (which shall not constitute notice) to:
Motorola, Inc.
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Vice President - Law Department, Iridium Matters
Telecopy #: (000)000-0000
19. Definitions. The following terms when used in this
Agreement have the following meanings.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks,
service marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with
all of the goodwill associated therewith, (iii) copyrights (registered
or unregistered) and copyrightable works and registrations and
applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer
software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and
information), (vii) other intellectual property rights and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
"LLC Agreement" means the Limited Liability Company Agreement
of Iridium LLC dated as of July 19, 1996.
"Motorola-Based Default" means (i) a Motorola Default as
defined in the Bridge Agreement other than
(A) a Motorola Default occurring as the result of the
ownership percentage of the Guarantor and its affiliates
falling below the thresholds set forth in Section 9(n) of the
Bridge Agreement unless it falls below such thresholds as the
result of the Guarantor or
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an affiliate disposing of the Company's voting securities; and
(B) any Motorola Default in existence on or prior to a date on
which the Company provides a notice of borrowing to the
Lenders pursuant to Section 4.05 of the Bridge Agreement if
the Company fails to provide prior notice to the Guarantor of
such borrowing in the manner prescribed in Section 1 hereof,
and
(ii) a demand for payment under the Bridge Agreement Guarantee which
has arisen as a result of a material default by the Guarantor under
(1) the SSC, the TNDC or the O&M Contract, so long as the
Company has fully complied in all material respects with its
obligations under the SSC, the TNDC and the O&M Contract and
the Guarantor's default is the primary cause for the default
under the Bridge Agreement which has caused such demand for
payment or
(2) under any gateway purchase agreement between Guarantor and
a gateway purchaser, so long as the default by the Guarantor
thereunder was not excused or caused by any default on the
part of the purchaser thereunder.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or
other business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a
limited liability company, partnership, association
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or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person
or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business
entity gains or losses or shall be or control any managing director
or general partner of such limited liability company, partnership,
association or other business entity.
20. Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties with respect to the matters
addressed herein and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
21. Miscellaneous. This Agreement Regarding Guarantee (a) is
made under and shall be governed by the laws of the State of New York without
regard to principles of conflict of laws, (b) is intended for the benefit of
the parties hereto and is not intended to benefit any other person and no
person other than the parties hereto may rely upon the provisions hereof, (c)
may be executed in counterparts, each of which taken together shall constitute
one and the same instrument, and (d) may be amended or waived only if such
amendment or waiver is in writing and signed by the party against whom it is
sought to be enforced.
* * * * *
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EXHIBIT 10.16
IN WITNESS WHEREOF, the parties have entered into this
Agreement Regarding Guarantee in each case as of the date first above written.
IRIDIUM LLC
By: /s/ XXXX XXXXXXX
--------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
MOTOROLA, INC.
By: /s/ XXXXX X. XXXXX
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
and Treasurer
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List of Annexes
Annex A - Bridge Agreement Guarantee
Annex B - Bridge Agreement
Annex C - Proposal
Annex D - Form of Warrant
Annex E - Amendment to SSC
Annex F - Amendment to TNDC
Annex G - Amendment to O&M Contract
Annex H - Letter Agreement
Annex I - Security Agreement
Annex J - Certificates of Designation
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