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EXHIBIT 6
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SECOND AMENDED AND RESTATED
MEMORANDUM OF UNDERSTANDING
This Second Amended and Restated Memorandum of Understanding ("MOU"),
dated as of December 23, 1998, among Motorola, Inc., a Delaware corporation
("Motorola"), Iridium LLC, a Delaware limited liability company ("Iridium") and
Iridium Operating LLC, a Delaware limited liability company and a wholly-owned
subsidiary of Iridium ("Operating"), amends and restates the Amended and
Restated Memorandum of Understanding, dated as of May 11, 1998 among Motorola,
Iridium and Operating (the "First Amended MOU"), which amended the Memorandum of
Understanding originally dated as of July 11, 1997, between Iridium and Motorola
(the "Original MOU").
Reference is made to (i) that certain Guarantee Agreement, dated as of
August 21, 1996, as amended (the "Bridge Guarantee Agreement"), pursuant to
which Motorola has guaranteed the payment of up to $275,000,000 of the
obligations of Operating under that certain Credit Agreement, dated as of August
21, 1996, as amended, between Operating (as successor to Iridium) and the
Lenders named therein (the "Bridge Agreement"), and (ii) the Third Amended and
Restated Agreement Regarding Guarantee, dated as of December 23, 1998, among
Motorola, Iridium and Operating (the "Agreement Regarding Guarantee").
Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Agreement Regarding Guarantee.
On July 16, 1997, Iridium issued (i) $300 million aggregate principal
amount of 13% Senior Notes due 2005, Series A (the "Series A Notes") and (ii)
$500 million aggregate principal amount of 14% Senior Notes due 2005, Series B
(the "Series B Notes"). On October 17, 1997, Iridium issued $300 million
aggregate principal amount of 11.25% Senior Notes due 2005, Series C (the
"Series C Notes" and, together with the Series A Notes and the Series B Notes,
the "Series A, B & C Senior Notes"). Other than their respective interest rates,
the Series A Notes, the Series B Notes and the Series C Notes have substantially
similar terms.
On December 18, 1997 Iridium entered into an asset drop-down
transaction (the "Asset Drop-Down Transaction") with Operating, pursuant to
which substantially all of the assets and liabilities of Iridium were
transferred to Operating, including without limitation the Series A, B & C
Senior Notes and the Bridge Agreement.
Operating has entered into a $1 billion senior secured interim Credit
Agreement, dated as of December 19, 1997, with the banks and other financial
institutions named therein (the "Secured Bank Facility"). In connection with the
execution of the Secured Bank Facility, Motorola, Operating and The Chase
Manhattan Bank (as Administrative Agent and Collateral Agent) entered into that
certain Consent and Agreement (the "Motorola Consent", and for purposes of this
Agreement this term
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shall refer to any amended or new consent and agreement entered into by Motorola
pursuant to Section 6(c)). As of the date hereof, Operating has drawn
approximately $550 million under the Secured Bank Facility.
On May 8, 1998, Operating issued $350 million aggregate principal
amount of 10.875% Senior Notes due 2005, Series D (the "Series D Notes" and,
together with the Series A, B & C Notes, the "Outstanding Senior Notes"). Other
than their respective interest rates, the Series D Notes and the Series A, B & C
Notes have substantially similar terms.
At any time and from time to time, Iridium World Communications Ltd.
("IWCL"), Iridium and Operating, individually or in combination, may issue and
sell (i) additional senior notes of Operating ("Additional Senior Notes" and,
together with the Outstanding Senior Notes, the "Senior Notes"), (ii)
subordinated notes of Operating ("Subordinated Notes"), (iii) Class A Common
Stock of IWCL, (iv) warrants to purchase Class A Common Stock, (v) Class 1
Membership Interests of Iridium LLC, (vi) warrants to purchase Class 1 Interests
and (vii) securities that are combinations (as convertible or exchangeable
securities or otherwise) of the securities and interests listed in (i) though
(vi). The securities and interests listed in (i) through (vi) above are referred
to herein collectively as "Additional Securities".
Operating, Iridium and IWCL intend to raise new funds to finance
Operating's development, construction and operation of the Iridium satellite
communications system (the "Iridium System"), including the refinancing of
Operating's indebtedness under the Secured Bank Facility, through a combination
of one or more funding sources, including the following: (i) an offering or
offerings of Additional Securities, (ii) the up to $475 million Guaranteed
Credit Facility Increase (as defined in Section 2(a)) (which, when taken
together with an amendment to the current Bridge Agreement and Bridge Guarantee
Agreement or the entering into of a separate Credit Agreement as contemplated by
Section 1(d) (either in addition to or as a replacement of the then current
Bridge Agreement), would result in a $750 million Credit Facility guaranteed by
Motorola), (iii) a new secured Credit Agreement or Agreements satisfying at
least the minimum requirements set forth in Section 2(b) (collectively, the
"Permanent Bank Facility") and (iv) the up to $350 million Commitment Increase
(as defined in Section 1(b)). As of the date hereof, the "Permanent Bank
Facility" shall refer to the Senior Secured Credit Agreement dated as of
December 23, 1998 among Operating, Chase Securities Inc. and Barclays Bank PLC,
as Global Lead Arrangers and Joint Book Managers, the Administrative Agent and
Collateral Agent, the Documentation Agent and the Lenders named therein.
The purpose of this MOU is to set forth certain binding agreements
among Motorola, Iridium and Operating that are intended to (i) incorporate the
remaining pertinent terms of the First Amended MOU and (ii) reflect certain
agreements of the parties in respect of (A) the issuance of Additional
Securities, (B) the commitment of
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Motorola to defer its receipt of certain payments owed to it under the IRIDIUM
System Operations and Maintenance Contract between Operating, as successor to
Iridium, and Motorola, dated as of July 29, 1993 as amended (the "O&M
Contract"), (C) the conditional commitment of Motorola to guarantee the payment
of up to an additional $475,000,000 of obligations of Operating (inclusive of
principal, interest and other amounts) under the Bridge Agreement and (D) the
commitment of Motorola (conditional with respect to the following clause (1)) to
permit Operating to use the Guarantee Increase (as defined in Section 1(b)) for
the purpose of (1) obtaining new guaranteed loans under the Bridge Agreement or
another credit agreement or agreements and (2) guaranteeing up to $300 million
of the Permanent Bank Facility.
Section 1. Bridge Agreement - Extension and $350 Million Guarantee
Increase.
(a) Extension Amendment. Subject to Sections 9(e) and 10,
upon the written request of Operating, Motorola will consent to Operating's
entering into an amendment to the Bridge Agreement (the "Extension Amendment")
pursuant to which the following change shall be made to the Bridge Agreement:
the definition of "Commitment Termination Date" with respect to up to $275
million of obligations guaranteed by Motorola under the existing Bridge
Agreement shall be changed to a date (the "Extended Maturity Date") which is
after the maturity of the Outstanding Senior Notes (but not later than December
31, 2005); provided, however, that to the extent that the Commitments under the
Bridge Agreement or loans made thereunder are increased pursuant to Section 1(b)
or Section 2, the maturity of any loans based on such Commitment increases shall
be as set forth in Section 1(b) or Section 2, as the case may be.
(b) Commitment Increase Amendment and Guarantee Increase.
Subject to Sections 1(e), 9(e) and 10 and the satisfaction of the New Guarantee
Condition (as defined in Section 2(b)), upon the written request of Operating
provided prior to October 1, 1999, Motorola will (i) consent to Operating's
entering into an amendment or amendments to the Bridge Agreement (the
"Commitment Increase Amendment") pursuant to which the Commitments under the
Bridge Agreement or loans available thereunder shall be increased by up to $350
million (the "Commitment Increase") and (ii) agree to guarantee up to an
additional $350 million of borrowings of Operating (inclusive of principal,
interest and other amounts) (the "Guarantee Increase") under the Commitment
Increase; provided, however, that Motorola shall not be required to agree to a
Guarantee Increase to the extent any borrowings guaranteed thereby would be
advanced or incurred after October 1, 1999 or have a maturity later than
December 29, 2000. Motorola's obligations to consent to the Commitment Increase
Amendment and to agree to the Guarantee Increase shall expire on October 1,
1999. In consideration for providing the Guarantee Increase, Iridium and
Operating will compensate Motorola pursuant to the Agreement Regarding Guarantee
and, as specified in the Agreement Regarding Guarantee, if Operating incurs any
obligations under a Credit Agreement that are
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guaranteed by the Guarantee Increase (or any part thereof or the Alternative
Guarantee), the entire amount of the Guarantee Increase (including, without
duplication the Alternative Guarantee, if available) that is, or could be, made
available under this MOU shall constitute Motorola Exposure regardless of
whether Operating has arranged for commitments from lenders or incurred
obligations that are subject to such amount.
(c) Certain Guarantee Agreement Amendments. Subject to
Sections 9(e) and 10 and the satisfaction of the New Guarantee Condition,
Motorola will enter into an amendment or amendments to the Bridge Guarantee
Agreement pursuant to which only the changes necessary to reflect the Extension
Amendment and the Commitment Increase Amendment shall be made to the Bridge
Guarantee Agreement; provided, however, that Motorola shall not be required to
agree to the Guarantee Increase to the extent (i) Motorola's liability under the
Guarantee Increase would exceed $350 million (inclusive of principal, interest
and other amounts) or (ii) any borrowing guaranteed by the Guarantee Increase
would be advanced or incurred after October 1, 1999 or have a maturity later
than December 29, 2000. In addition, subject to the terms of Sections 9(e) and
10, Motorola will enter into any amendment to a Guarantee Agreement, and will
consent to any amendment to, or other modification of, a Credit Agreement,
pursuant to which solely the following changes shall be made: (i) the maximum
liability of Motorola under such agreement shall be reduced and (ii) the
Commitment of the Lenders under such agreement shall be reduced.
(d) Consolidation or Separation of Amendments. The
foregoing amendments may be consolidated or separated into one or more
amendments to the then current Bridge Agreement, or may be effected pursuant to
one or more credit agreements (in addition to or in replacement of the then
current Bridge Agreement) having terms identical in all material respects (other
than terms as to pricing) to the then current Bridge Agreement (as otherwise
permitted to be amended pursuant to the MOU), to the extent that such amendments
or credit agreements, as the case may be, address the substantive issues
described in Sections 1(a)-(c); provided, however, that, if such amendments are
consolidated into the then current Bridge Agreement or into other credit
agreements, Motorola's obligations thereunder shall be no different than its
obligations would have been if each amendment had been provided pursuant to a
separate credit agreement. In addition, if the substance of the amendments
(including any roll-over of the existing Bridge Agreement, as contemplated by
Section 2(d)) is provided pursuant to a separate credit agreement, then Motorola
agrees to provide a guarantee of such credit agreement on terms identical in all
material respects to the Bridge Agreement Guarantee (but amended as contemplated
hereby). Any reference herein to the "Bridge Agreement" includes the existing
Bridge Agreement as so amended from time to time as well as any such separate
credit agreement; and any reference herein to the "Bridge Guarantee Agreement"
includes the existing Bridge Guarantee Agreement as amended from time to time in
accordance herewith, as well as any new Motorola guarantee thereof provided
pursuant hereto.
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(e) Option of Operating to Use the Guarantee Increase for
the Permanent Bank Facility. Subject to satisfaction of the New Guarantee
Condition, Motorola agrees that, upon the written request of Operating provided
prior to October 1, 1999, in lieu of up to $300 million of its commitment to
consent to the Commitment Increase and to provide up to $300 million of the
Guarantee Increase, Motorola will enter into an agreement with the lenders under
the Permanent Bank Facility to guarantee up to $300 million (inclusive of
principal, interest and other amounts) of Operating's borrowings under the
Permanent Bank Facility (the "Alternative Guarantee") on a basis identical in
all material respects to Motorola's Guarantee of borrowings under the Bridge
Agreement pursuant to the Bridge Guarantee Agreement. Motorola shall not be
required to provide the Alternative Guarantee to the extent (i) Motorola's
aggregate liability under the Alternative Guarantee and the Commitment Increase
would exceed $350 million (inclusive of principal, interest and other amounts)
or (ii) any borrowings guaranteed by the Alternative Guarantee would be advanced
or incurred after October 1, 1999 or have a maturity later than December 29,
2000. Motorola's obligation to provide the Alternative Guarantee is in lieu of
its obligations to consent to $300 million of the Commitment Increase and to
provide up to $300 million of the Guarantee Increase, and Motorola shall not be
required to consent to the Commitment Increase or to provide the Guarantee
Increase to the extent (but only to the extent) that it has provided the
Alternative Guarantee. (For the avoidance of doubt, for any period in which
Motorola provides the Alternative Guarantee in an amount of $300 million, each
of the Commitment Increase and the Guarantee Increase could not exceed $50
million, if otherwise available). Notwithstanding any other provision of this
MOU to the contrary, Motorola agrees that Motorola's obligation to provide up to
$300 million (inclusive of principal, interest and other amounts) of the
Guarantee Increase or, at Operating's request, $300 million (inclusive of
principal, interest and other amounts) of the Alternative Guarantee in lieu of
the Guarantee Increase shall be unconditional and irrevocable under any and all
circumstances (other than satisfaction of the New Guarantee Condition), and not
subject to any defense, set-off or counterclaim until the earlier of (i) October
1, 1999 and (ii) the first date on which the lenders under the Permanent Bank
Facility do not have the right to demand that any amount of the Alternative
Guarantee be applied to the Permanent Bank Facility (the "Release Date"). After
the Release Date, Motorola's obligation to provide this $300 million portion of
the Guarantee Increase and to permit Commitment increases related thereto shall
be subject to the conditions hereof, including, without limitation, Section 9(e)
and Section 10 and the New Guarantee Condition. (For the avoidance of doubt,
Motorola's obligation to provide the remaining up to $50 million portion of the
Guarantee Increase and to permit Commitment increases related thereto shall be
subject to the conditions hereof, including, without limitation, Sections 9(e)
and 10 and the New Guarantee Condition at all times).
(f) Except for Permanent Bank Facility, Loans Not to Exceed
Guarantees. Operating and Iridium hereby agree that, except in the case of the
Permanent Bank Facility and the Alternative Guarantee or if Motorola otherwise
provides its written consent (which may be conditional), with respect to a
Credit Agreement that is subject to
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a Guarantee by Motorola, neither Iridium nor Operating will draw loans on
commitments under such Credit Agreement in an amount that exceeds the Guarantee
available for such Credit Agreement unless all subsequent reductions to such
Credit Facility would first be applied on a one-for-one basis to reduce the
loans Guaranteed by Motorola (for the avoidance of doubt, in such cases, loans
guaranteed by Motorola must be the first loans repaid). In the case of the
Permanent Bank Facility in the event the Alternative Guarantee is applied
thereto, Operating and Iridium hereby agree that when the Alternative Guarantee
is in place, the Alternative Guarantee will be reduced from time to time on a
ratable basis with any payment or prepayment of the loans under the Permanent
Bank Facility (for example, if when there are $600 million of loans outstanding
under the Permanent Bank Facility and $300 million of the Alternate Guarantee is
in place, $200 million in loans are paid or prepaid, the amount available under
the Alternate Guarantee will be reduced by $100 million).
Section 2. $475 Million Increase to the Guaranteed Credit
Facility
(a) New Bank Guarantee. Subject to the satisfaction of the
New Guarantee Condition and the terms of Sections 9(e) and 10, upon the written
request of Operating provided prior to October 1, 1999, Motorola will (i)
consent to Operating's entering into an amendment to the Bridge Agreement
pursuant to which the Commitments thereunder shall be increased by up to $475
million (the "Guaranteed Credit Facility Increase") and (ii) enter into an
amendment to the Bridge Guarantee Agreement to guarantee up to $475 million
(inclusive of principal, interest and other amounts) of Operating's borrowings
under the Bridge Agreement (the "$475 Million Guarantee Amendment"); provided,
however, that Motorola shall not be required to consent to the Guaranteed Credit
Facility Increase or to enter into the $475 Million Guarantee Amendment to the
extent (i) Motorola's liability under the $475 Million Guarantee Amendment would
exceed $475 million (inclusive of principal, interest and other amounts) or (ii)
any borrowings guaranteed thereby would be advanced or incurred after October 1,
1999 or have a maturity later than December 29, 2000. In consideration for
providing the $475 Million Guarantee Amendment, Operating and Iridium will
compensate Motorola pursuant to the Agreement Regarding Guarantee.
(b) New Guarantee Condition. Motorola's obligations under
Sections 1(b), 1(c), 1(e), 2(a) and 3 are subject to the satisfaction of the
following condition (the "New Guarantee Condition"): Operating obtaining, prior
to January 1, 1999, the Permanent Bank Facility, with commitments thereunder of
no less than $800 million and a maturity not earlier than December 29, 2000.
(c) Agreements of Operating with Respect to the Guaranteed
Credit Facility Increase. Operating hereby agrees that, of the amounts borrowed
by Operating pursuant to the Guaranteed Credit Facility Increase and the
Permanent Bank Facility, an aggregate of not less than $400 million of such
amounts will be used for payments to
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Motorola for amounts due to Motorola under any agreement (for the avoidance of
doubt, the refinancing of existing indebtedness incurred to make payments to
Motorola shall not be considered in determining whether Operating has used not
less than $400 million for payments to Motorola).
(d) Combination of $275 Million Existing Bridge Agreement
with Guaranteed Credit Facility Increase. If the substance of the Guaranteed
Credit Facility Increase is provided pursuant to a new credit agreement (as
contemplated by Section 1(d) above), Motorola agrees that, upon the request of
Operating, it will consent to a roll-over of the existing $275 million Bridge
Agreement into such new credit agreement, and it will provide a guarantee of
that Credit Agreement which combines the then current $275 million Bridge
Guarantee Agreement with the substance of the $475 million Guarantee Amendment;
provided, however, that, if the Guaranteed Credit Facility Increase and the
Guarantee Amendment is provided pursuant to a new Credit Agreement and Guarantee
in connection with such a roll-over, Motorola's obligations under that new
credit facility and Guarantee shall be no different than its obligations would
have been if the Guaranteed Credit Facility Increase and Guarantee Amendment had
been provided pursuant to an amendment to the Bridge Agreement and the Bridge
Guarantee Agreement.
Section 3. O&M Contract Financing.
(a) New O&M Financing. Subject to the New Guarantee
Condition, Motorola agrees to defer its receipt (the "O&M Deferrals") of amounts
due from Operating to Motorola under the O&M Contract beginning with the full
amount of the "November-December" 1998 payments due under the O&M Contract, up
to an aggregate of $400 million (the "O&M Financing Amount") until December 29,
2000. At Motorola's request, Operating will execute and deliver from time to
time such evidences of Operating's obligations to pay amounts outstanding under
the O&M Contract, including any outstanding O&M Financing Amount, in such form
as Motorola may reasonably request; provided, however, that the O&M Financing
Amount and such evidences of Operating's obligations will be subordinated as
provided in Section 6. Operating and Iridium hereby agree that all amounts due
under the O&M Contract which are not subject to the O&M Deferrals shall be paid
in full when due. In consideration for providing the O&M Deferrals, Iridium and
Operating will compensate Motorola pursuant to the Agreement Regarding
Guarantee, and the outstanding amount of O&M Deferrals shall constitute Motorola
Exposure for purposes of, and as set forth in, the Agreement Regarding
Guarantee.
(b) Agreement to Refinance the O&M Financing Amount.
Operating agrees that it will use its best efforts to finance the payment of
all outstanding O&M Financing Amounts no later than October 1, 1999 pursuant to
a new Credit Agreement (the "O&M Credit Facility") that (i) has terms identical
in all material respects to the Bridge Agreement (other than terms as to
pricing) and (ii) is guaranteed by Motorola on terms identical in all material
respects to the Bridge Agreement Guarantee (the "O&M
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Guarantee"). Subject to the terms of Sections 9(e) and 10 and the New Guarantee
Condition, upon the written request of Operating, made on or before October 1,
1999 Motorola will (i) consent to Operating's entering into the O&M Credit
Facility and (ii) enter into an agreement (the "O&M Guarantee Agreement") for
the benefit of Operating with the lenders and other parties to the O&M Credit
Facility to guarantee up to $400 million (inclusive of principal, interest and
other amounts) of Operating's borrowings under the O&M Credit Facility;
provided, however, that, without relieving Operating of its obligation hereunder
to refinance the O&M Financing Amount pursuant to the O&M Credit Facility,
Motorola shall not be required to consent to Operating's entering into the O&M
Credit Facility or enter into the O&M Guarantee Agreement to the extent (i)
Motorola's liability under the O&M Guarantee Agreement would at any time exceed
the lesser of (A) the O&M Financing Amount then outstanding or (B) $400 million
(inclusive of principal, interest and other amounts) or (ii) any borrowings
guaranteed thereby would have a maturity later than December 29, 2000. In
consideration for providing the O&M Guarantee, Iridium and Operating will
compensate Motorola pursuant to the Agreement Regarding Guarantee, and, as set
forth therein, outstanding amounts under the O&M Credit Facility that are
subject to the O&M Guarantee shall constitute Motorola Exposure for purposes of
the Agreement Regarding Guarantee.
(c) Agreements of Operating with Respect to the O&M
Guarantee. Operating hereby agrees that any amounts borrowed under the O&M
Credit Facility will be used exclusively for payments to Motorola of the O&M
Financing Amount or other payments under the O&M Contract. Operating hereby
agrees that, unless Motorola has failed to provide an O&M Guarantee that it is
required to provide under the terms hereof, to the extent of available funds
under the O&M Credit Facility, Operating shall borrow such available funds and
apply all such funds to pay Motorola for outstanding O&M Financing Amounts.
Section 4. Senior Notes.
(a) Terms of any Additional Senior Notes. Each of Iridium
and Operating agree with Motorola that any Additional Senior Notes will have
terms that are no less favorable to Motorola than the Material Terms (as
defined). The "Material Terms" are those described under "Description of Notes"
in the Offering Memorandum for the Series C Notes, dated October 9, 1997 (the
"Offering Memorandum") under the captions "Change of Control", "Certain
Covenants--Limitations on Indebtedness," "--Limitation on Restricted Payments,"
"--Limitation on Transactions with Affiliates," "--Limitations on Liens" and
"Defaults" (as well as any definitions used in such provisions), each only as
they relate to (i) Motorola or (ii) the ability of Operating (as successor to
Iridium) to make payments to Motorola under any written agreement between
Motorola and Iridium or prepay indebtedness under any Credit Agreement.
(b) Repurchase of Senior Notes. Operating agrees to repay
all amounts outstanding under the Bridge Agreement, the O&M Credit Facility and
any other
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Credit Facility that has the benefit of a Guarantee, including, without
limitation, the portion of the Permanent Bank Facility guaranteed by the
Alternative Guarantee if the Alternate Guarantee is in effect thereon, and to
terminate the commitments thereunder prior to or simultaneously with any
redemption of any Senior Notes pursuant to any optional redemption provisions of
any Senior Notes. In the event that Operating is required to purchase any Senior
Notes as a result of a "change of control" as defined in the Offering Memorandum
(other than a "change of control" triggered by a change in Motorola's ownership
of Iridium), Operating agrees to repay the Bridge Agreement, the O&M Credit
Facility, any other Credit Facility that has the benefit of a Guarantee,
including without limitation, the portion of the Permanent Bank Facility
guaranteed by the Alternative Guarantee and any other Motorola Exposure pro rata
with such purchase of Senior Notes or, if Operating is unable or unwilling to do
so, Operating hereby waives its right to pay Motorola High Yield Compensation
pursuant to Section 3 of the Agreement Regarding Guarantee, as amended, until it
does so.
Section 5. Financings after the Permanent Funding Date;
Acquisitions.
(a) Reduction of Motorola Exposure -- Mandatory Prepayments
From Excess Cash Flow. Each of Iridium and Operating agrees to use its best
efforts (to the extent permitted by the Permanent Bank Facility), including
consummating an offering or offerings of Additional Securities and obtaining
credit agreements that are not guaranteed by Motorola, to reduce the Motorola
Exposure to an amount less than or equal to $275 million by the earliest
possible date. Each of Iridium and Operating hereby confirm that the resolutions
of November 24, 1998 of their respective Boards of Directors which authorize the
issuance of up to $750 million of Additional Securities are in effect on the
date hereof. Each of Iridium and Operating further agree that, not later than
the date 60 days after the end of Operating's first three fiscal quarters and
120 days after the end of Operating's fiscal year (commencing with the first
fiscal quarter ending on March 31, 1999), Operating shall use Excess Cash Flow
(as defined below) that is available to it under the terms of the Permanent Bank
Facility and its other credit agreements (and not required to be applied to
prepay loans), if any, to reduce Motorola Exposure until the Motorola Exposure
is less than or equal to $275 million, it being the intent of the parties that
during the term of the Permanent Bank Facility Excess Cash Flow will be applied
to reduce the commitments of the lenders (or outstanding loans) under the
Permanent Bank Facility and the Motorola Exposure on as close to equal basis as
the Permanent Bank Facility permits (for the avoidance of doubt, it is the
intent of the parties that, if for any period 50% of Excess Cash Flow for that
period is applied to prepay the loans under the Permanent Bank Facility, as
close to the other 50% of Excess Cash Flow as possible would be applied to
otherwise reduce Motorola Exposure); provided, however, that Iridium and
Operating shall not be required to apply Excess Cash Flow to the reduction of
Motorola Exposure pursuant to this Section 5(a) to the extent that, taking into
account Operating's (i) expected cash needs (based on budgeted costs), (ii)
expected cash revenues and (iii) expected external financing, such reduction of
Motorola Exposure would be reasonably expected to result in Operating not having
sufficient cash (or access
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to cash) to meet its expected cash needs in the quarter in which such
application of Excess Cash Flow is to be made and the following quarter.
"Excess Cash Flow" means, for any period, the definition ascribed to such term
in the Permanent Bank Facility. Operating and Iridium hereby agree not to amend
such definition without the written consent of Motorola.
(b) No Acquisitions Without Motorola Approval. Iridium and
Operating agree that neither Iridium nor Operating nor IWCL nor any other entity
controlled, directly or indirectly, by Iridium, Operating or IWCL will finance
or carry any business acquisitions, directly or indirectly, with working capital
or with any indebtedness of Iridium or Operating or any of their respective
Subsidiaries without the consent of Motorola; provided, however, that this
limitation shall not apply if, after giving effect to the acquisition (including
the financing thereof), the Motorola Exposure is less than or equal to $275
million.
(c) Additional Compensation For Non-Reduction of Motorola
Exposure. Iridium and Operating agree that, if the Motorola Exposure exceeds
$275 million at any time after December 31, 2000, Iridium and Operating shall
make a one time cash payment to Motorola, which shall be payable immediately
upon the Motorola Exposure first exceeding such threshold amount after such
date, in the amount of $35 million (as additional compensation and not as a
penalty) and such payment shall be in addition to amounts due from Iridium and
Operating under the Agreement Regarding Guarantee.
Section 6. Subordination.
(a) Guarantee Increase. Motorola hereby agrees with
Operating that Motorola will comply with its obligations under Article VI of the
Motorola Consent (or any replacement consent), including its obligations to
agree that any reimbursement rights of Motorola against Operating relating to
any payments made by Motorola to Operating's creditors under the Guarantee
Increase, the Alternative Guarantee, the $475 Million Guarantee Amendment, the
O&M Guarantee and the Handset Guarantee will be Motorola Subordinated Claims (as
defined in the Motorola Consent) with respect to Operating's obligations under
Operating's Senior Bank Debt (as defined in the Motorola Consent), and will rank
pari passu with all other senior unsecured indebtedness of Operating. Operating
hereby agrees with Motorola that Operating will comply with its obligations
under Article VI of the Motorola Consent.
(b) O&M Deferrals. Motorola hereby agrees with Operating
that Operating's payment obligations for amounts deferred pursuant to the O&M
Deferrals (including the O&M Financing Amount), whether pursuant to the O&M
Contract, this MOU or the Agreement Regarding Guarantee, will be Motorola
Subordinated Claims with respect to Operating's Senior Bank Debt and will rank
pari passu with all other
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senior unsecured indebtedness of Operating, including, without limitation, the
Senior Notes.
(c) Amendment of Motorola Consent. Motorola hereby agrees
that it will enter into any amendment to, or replacement of, the Motorola
Consent to the extent such amendment or replacement is necessary to reflect the
Permanent Bank Facility and the other agreements contemplated by the MOU
(including the agreements regarding subordination set forth in Sections 6(a) and
6(b)).
Section 7. Agreement Regarding Guarantee. Motorola, Iridium and
Operating each agree to execute and deliver the Third Amended and Restated
Agreement Regarding Guarantee in the form attached hereto as Annex A
contemporaneously with the execution and delivery of this MOU.
Section 8. TNDC Vendor Financing. Notwithstanding Articles 6.G and
6.I of the TNDC (which are hereby deleted in their entirety from the TNDC),
Operating shall pay Motorola the amounts to be paid under Paragraphs C, D, E, F,
G, I, J, K, L, M, N, O and P of Article 5, "Price", of the TNDC as follows:
(a) Upon Motorola's completion of any milestone
associated with such Paragraphs C, D, E, F, G, I, J, K, L, M,
N, O and P, Motorola shall provide Operating notice of such completion.
(b) Operating shall have up to twelve (12) months
from such milestone completion date to pay Motorola the full amount
corresponding to such completed milestone plus interest at the rate of ten
percent (10%) per annum beginning on the milestone completion date (with such
compensation to be paid in the manner and at the times specified in Section
3(c) of the Agreement Regarding Guarantee).
(c) If Operating has not paid in full the amount of
such milestone (plus all accrued interest) by the end of such twelve month
period, then the amount of such milestone (plus all accrued interest) which
remains unpaid shall become part of both the "Vendor Financing Amount" and the
"Motorola Exposure" under the Agreement Regarding Guarantee.
Section 9. Certain Additional Agreements.
(a) Indebtedness Conditions. Each of Iridium and Operating
agrees that Iridium and Operating (on a consolidated basis) shall not have
outstanding at any time prior to the Extended Maturity Date (i) in excess of
$1.7 billion of indebtedness for borrowed money that is secured by the assets of
Operating, (ii) in excess of $1.62 billion in aggregate principal amount (or
initial gross proceeds in the case of the Outstanding Senior Notes) of Senior
Notes, including the Outstanding Senior Notes and the aggregate principal amount
of any Additional Senior Notes or (iii) any other indebtedness of the
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types described in (i) and (ii) above if the aggregate amount of indebtedness of
the types described in (i) and (ii) would be in excess of $3.32 billion, unless,
in each case, (A) the total Motorola Exposure (other than Excluded Indebtedness)
is (or, after the issuance of such indebtedness and the receipt and application
of the proceeds thereof would be) less than or equal to $275 million, (B)
Motorola is being compensated for such Motorola Exposure pursuant to Section
2(e) of the Agreement Regarding Guarantee and (C) none of the Motorola Exposure
is subordinated to any Senior Notes.
"Excluded Indebtedness" means up to $150 million of unsecured indebtedness owed
to Motorola relating to approved amendments to the TNDC (including TNDC
Amendment No. 3 and TNDC Amendment No. 4).
(b) Motorola Representation. Operating and Iridium
hereby agree that, based on Motorola's current holdings of Membership Interest
and the terms of the LLC Agreement of Iridium LLC (i) so long as the Motorola
Exposure is less than or equal to $750 million and greater than $275 million,
Motorola will be entitled to designate 5 members of the Iridium Board of
Directors and (ii) so long as the Motorola Exposure is greater than $750
million, Motorola will be entitled to designate 6 members of the Iridium LLC
Board of Directors and 1 additional member of the Banking and Financing
Committee thereof; and Operating and Iridium further agree that all approvals
and consents of the members of Iridium and the respective Boards of Directors of
Iridium and Operating necessary to effect such representation of Motorola at
such times have been obtained. For the duration of any period in which the
Motorola Exposure is less than or equal to $275 million, Motorola is being
compensated for such Motorola Exposure pursuant to Section 3(e) of the Agreement
Regarding Guarantee and Motorola has not been required to make any payments
under the Bridge Guarantee Agreement or any other Guarantee, Motorola will (i)
cause its Series B Class 2 Director to resign from the Iridium LLC Board of
Directors and (ii) deliver over to an escrow agent selected by Motorola and
Iridium all of its Series B Class 2 Interests and Series C Class 2 Interests
under an agreement specifying that such agent shall not exercise any rights
represented by those interests. Iridium hereby agrees that it will reregister
the transfer immediately after the Motorola Exposure is more than $275 million.
Each of Iridium and Operating hereby agree that, if and to the extent Motorola
is entitled to representation on their respective boards of directors (or
committees thereof) as a result of holding Series B Class 2 Interests or Series
C Class 2 Interests, Iridium and Operating will take all necessary action to
ensure that Motorola is provided such representation.
(c) O&M Contract Extension. Operating will exercise
its existing option to extend the O&M Contract with Motorola if, and at the time
when, it is required to do so by the terms of the Senior Notes, the Bridge
Agreement, the O&M Credit Facility, the Permanent Bank Facility or any other
Credit Agreement.
(d) [Reserved]
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(e) Timely Payment. Iridium and Operating hereby
agree to pay (and to cause their affiliates to pay) all amounts due to Motorola
at the time due and further agree that if any "Material Payment Default" by
Iridium or Operating in an amount due to Motorola occurs and is not cured within
30 days, (i) Motorola's obligations hereunder, including, without limitation,
its obligation to provide additional Guarantees, shall cease and (ii) Motorola
may terminate Operating's right to draw on any undrawn Commitments supported by
an outstanding Guarantee under a Credit Agreement; provided, however, this
Section 9(e) shall not affect: (1) Motorola's obligation to (A) provide $300
million of the Guarantee Increase or $300 million of the Alternative Guarantee
prior to the Release Date or (B) to defer receipt of up to $400 million of O&M
Deferrals in accordance with Section 3(a); or (2) Operating's right to draw on
any undrawn Commitments supported by Motorola's Guarantee of up to $275 million
of revolving Commitments under the Bridge Agreement (or any replacement thereof
as contemplated by Section 2(d)).
"Material Payment Default" means any failure by Iridium or Operating to pay
Motorola an amount due to Motorola at or prior to the time such amount is due
which, unless being contested in good faith, individually or in the aggregate
with all other amounts Iridium and Operating have failed to pay Motorola (which
are not being contested in good faith), exceeds $5 million.
Section 10. Conditions. Iridium, Operating and Motorola acknowledge
that the execution and delivery of each document contemplated hereby is subject
to the compliance of Iridium and Operating with the Agreement Regarding
Guarantee and this MOU (including, without limitation, Section 9(e)).
Notwithstanding anything herein to the contrary, this Section 10 shall not
affect Motorola's obligation (i) to provide $300 million of the Guarantee
Increase or $300 million of the Alternative Guarantee prior to the Release Date
or (ii) to defer receipt of up to $400 million of O&M Deferrals in accordance
with Section 3(a). Iridium and Operating acknowledge that Motorola's agreements
set forth in this MOU also are conditioned upon consistency of the transactions
and agreements contemplated hereby with the terms set forth, or referenced in
this MOU. If the terms of the transactions or agreements contemplated hereby
vis-a-vis Motorola differ materially and adversely from such documents, or
contain additional material and adverse terms (in each case, in Motorola's
discretion acting in good faith), Iridium and Operating acknowledge that
Motorola has no obligation to execute any documents or to consent to the
transactions contemplated hereby.
Section 11. Acceptance of Certain Milestones. Operating hereby
agrees that upon execution and delivery of this MOU by Motorola, Operating (i)
will accept, as of November 1, 1998, Milestone 47 of the SSC and Milestones 7
and 8 of the TNDC and (ii) has accepted, or will accept as of November 1, 1998,
all other Milestones under the SSC, the TNDC and other agreements with Motorola
with respect to which the payment is required by this Section 11; and Operating
hereby agrees that it will make payment or
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payments to Motorola on or before December 31, 1998 in respect of such
Milestones in the aggregate amount of $370,663,615.
12. Complete Agreement. This MOU and the other
agreements and instruments referred to herein embody the complete agreement and
understanding among the parties with respect to the matters addressed herein and
supersede and preempt the First Amended and Restated Memorandum of Understanding
and 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.
13. Miscellaneous. This MOU (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) may be executed in counterparts, each of
which taken together shall constitute one and the same instrument and (c) 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.
14. Limited Rights Against Motorola. The parties
hereto agree that Iridium and Operating shall have no rights (apart from those
set forth in this MOU, the Agreement Regarding Guarantee or any other written
agreements between such parties) against Motorola as a result of Iridium's or
Operating's inability to meet drawing or other conditions under the Bridge
Agreement or any other Credit Agreement.
15. Third Party Beneficiaries. Except for the
provisions of this MOU concerning or relating to Motorola's obligation to
provide (i) the $300 million Alternative Guarantee and (ii) the up to $400
million of O&M Deferrals (which also are for the benefit of, and also may be
relied upon by, the Lenders and agents under the Permanent Bank Facility until
the Release Date), this MOU 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.
* * * *
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IN WITNESS WHEREOF, the parties have executed this Memorandum of
Understanding as of December 23, 1998.
MOTOROLA, INC.
By:
----------------------------
Name:
Title:
IRIDIUM LLC
By:
----------------------------
Name:
Title:
IRIDIUM OPERATING LLC
By:
----------------------------
Name:
Title:
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