Item 1.02 Termination of a Material Definitive Agreement
On October 15, 2018, Aircom Telecom LLC ("Aircom Telecom"), a Taiwanese limited
liability company and a wholly owned subsidiary of Aircom Pacific, Inc.
("Aircom"), a California corporation and a wholly-owned subsidiary of Aerkomm
Inc. (the "Aerkomm") entered into a product purchase agreement, or the October
15th PPA, with Republic Engineers Maldives Pte. Ltd., a company affiliated with
Republic Engineers Pte. Ltd., or Republic Engineers, a Singapore based, private
construction and contracting company. On November 30, 2018, the October 15th PPA
was re-executed with Republic Engineers Pte. Ltd. as the signing party. We refer
to this new agreement as the November 30th PPA and, together with the October
15th PPA, the PPA. Under the terms of the PPA, Republic Engineers committed to
the purchase of a minimum of 10 shipsets of the AERKOMM K++ system at an
aggregate purchase price of $10 million. Additionally, under the terms of the
PPA, the Executive Director of Republic Engineers, C. A. Raja, agreed to sign an
agreement, or the Guarantee, to guarantee all of the obligations of Republic
Engineers under the PPA. Republic Engineers had submitted a purchase order, or
PO, dated October 15, 2018 for the 10 shipsets and was supposed to have made
payments to Aircom Telecom against the purchase order shortly thereafter. To
date, Republic Engineers has made no payments against the purchase order and the
Company has not begun any work on the ordered shipsets. On July 7, 2020,
Republic Engineers and Mr. Raja filed a complaint against Aerkomm, Aircom and
Aircom Telecom in the Superior Court of the State of California for the County
of Almeda, or the Court, seeking declaratory relief only and no money damages,
alleging that the PPA and the PO were not executed or authorized by Republic
Engineers and that the Guarantee was not executed or authorized by Mr. Raja.
Republic Engineers and C. A. Raja have requested from the Court (i) orders that
the PPA, the PO and the Guarantee be declared null and void and (ii) the payment
of their reasonable attorney's fees. On July 29, 2020, Aircom Telecom provided
notice to Republic Engineers that the PPA and the PO have been terminated
according to their terms as a result of the non-performance of Republic
Engineers and the Failure of Mr. Raja to provide the Guarantee. Aerkomm denies
the allegations in the complaint and believes that the claims filed by Republic
Engineers and Mr. Raja have no merit. Aerkomm has retained special litigation
counsel and intends to vigorously defend against the claims. Aerkomm does not
expect that this proceeding will have a material adverse effect on its results
of operations or cashflow.
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