<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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(Name of Registrant as Specified in Its Charter)
IRIDIUM WORLD COMMUNICATIONS LTD.
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[IRIDIUM LETTERHEAD LOGO]
Iridium World Communications Ltd.
1575 Eye Street, NW
Washington, DC 20005
USA
April 16, 1998
To All Members:
You are cordially invited to attend the 1998 Annual General Meeting of
Members of Iridium World Communications Ltd. (the "Company"), which will be held
at The Hotel Inter-Continental New York, 111 East 48th Street, New York, New
York, on Thursday, May 21, 1998, at 9:00 a.m. Eastern Daylight Time. Holders of
record of the Company's Class A Common Stock at the close of business on April
3, 1998 are entitled to notice of and to vote at the 1998 Annual General
Meeting.
The items for consideration at the 1998 Annual General Meeting are set
forth on the accompanying Notice of 1998 Annual General Meeting.
We hope that you will attend the 1998 Annual General Meeting. Whether or
not you plan to attend, please sign, date and return your proxy promptly in the
envelope provided in order to make certain that your shares will be represented
at the 1998 Annual General Meeting.
The Company's 1997 Annual Report for the fiscal year ended December 31,
1997 is included in this package, and we urge you to read it carefully.
Sincerely yours,
/s/ EDWARD F. STAIANO
Edward F. Staiano
Chairman of the Board and Chief
Executive Officer
<PAGE> 3
NOTICE OF 1998 ANNUAL GENERAL MEETING OF MEMBERS
MAY 21, 1998, 9:00 A.M. (EDT)
To the Members:
Notice is hereby given that the 1998 Annual General Meeting of members
(holders of shares) of Iridium World Communications Ltd. (the "Company"), a
Bermuda company limited by shares, will be held on Thursday, May 21, 1998 at The
Hotel Inter-Continental New York, 111 East 48th Street, New York, New York at
9:00 a.m., Eastern Daylight Time, for the following purposes:
1. To elect Directors for the ensuing year.
2. To consider and approve an amendment to the Iridium Option Plan.
3. To consider and approve the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for 1998.
4. To transact such other business as may properly come before the
meeting.
Only holders of record of the Company's Class A Common Stock, $0.01 par
value ("Common Stock") at the close of business on April 3, 1998 will be
entitled to vote at the meeting.
PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO MEMBERS OF
THE COMPANY AS OF APRIL 3, 1998 (OR THEIR AUTHORIZED REPRESENTATIVES).
Holders of Common Stock entitled to vote at the meeting are requested to
date, sign and mail the enclosed proxy even if they intend to attend the
meeting. If holders of Common Stock entitled to vote at the meeting are present
at the meeting, their proxies may be withdrawn, even if previously voted by
mail, and they may vote personally on all matters properly brought before the
meeting on which holders of Common Stock are entitled to vote.
By order of the Board of Directors
/s/ F. THOMAS TUTTLE
F. Thomas Tuttle, Assistant Secretary
April 16, 1998
IN ORDER THAT THERE MAY BE A PROPER REPRESENTATION AT THE MEETING, MEMBERS
ARE REQUESTED TO VOTE THEIR PROXIES BY SENDING THE PROXY CARDS IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. ATTENTION TO
THIS REQUEST WILL REDUCE THE EXPENSE OF SOLICITING PROXIES.
<PAGE> 4
IRIDIUM WORLD COMMUNICATIONS LTD.
PROXY STATEMENT
The 1998 Annual General Meeting of members (holders of shares) of Iridium
World Communications Ltd. (the "Company") will be held on Thursday, May 21, 1998
at 9:00 a.m., Eastern Daylight Time, at The Hotel Inter-Continental New York,
111 East 48th Street, New York, New York for the purposes set forth in the
accompanying Notice. The only matters which the Board of Directors of the
Company intends to present are those listed in the accompanying Notice of 1998
Annual General Meeting. It is anticipated that this Proxy Statement and the
enclosed proxy will be first mailed to members on or about April 16, 1998.
Only members of record at the close of business on April 3, 1998 will be
entitled to notice of the meeting or any postponements or adjournments thereof.
Only members of record holding shares of the Company's Class A Common Stock,
$0.01 par value ("Common Stock") on April 3, 1998 will be entitled to vote at
the meeting. On that date, there were 12,040,832 issued and outstanding shares
of Common Stock, the only class of voting securities of the Company. For each
matter which may properly come before the meeting, each share of Common Stock is
entitled to one vote.
The enclosed proxy is solicited by the Board of Directors on behalf of the
Company and the costs thereof will be borne by Iridium LLC on behalf of the
Company. If the proxy in such form is properly returned by dating, signing and
mailing and choices are specified, the shares of Common Stock represented
thereby will be voted at the meeting in accordance with those instructions.
Unless contrary instructions are indicated on the proxy, all shares of Common
Stock represented by valid proxies received pursuant to this solicitation (and
not revoked) will be voted as follows:
FOR -- Election of each of the Directors nominated by the Board of
Directors.
FOR -- Approval of an amendment to the Iridium Option Plan.
FOR -- Approval of the selection of KPMG Peat Marwick LLP as the
Company's independent auditors for 1998.
-- and in the proxyholders' discretion upon any other matter properly
brought before the 1998 Annual General Meeting.
A proxy, if given, may be revoked by the member giving it at any time
before it is voted. A proxy may be revoked by written notice of revocation or by
a later dated proxy, in either case delivered by mail to the Assistant Secretary
of the Company prior to the 1998 Annual General Meeting. Attendance at the 1998
Annual General Meeting will not automatically revoke a proxy, but a member in
attendance may request to vote in person, thereby revoking a previously given
proxy.
Directors are elected by a majority of the votes cast in person or
represented by proxy at the 1998 Annual General Meeting. A majority of the votes
cast in person or represented by proxy at the 1998 Annual General Meeting is
required to approve the amendment of the Iridium Option Plan and to approve the
selection of independent auditors and to act on any other matters properly
brought before the 1998 Annual General Meeting.
Abstentions have no effect upon the vote of any matter submitted for member
approval. In the case of broker non-votes (which occur when a broker or other
nominee holding shares for a beneficial owner does not vote on a proposal, but
votes on another proposal), the broker non-vote will have no effect upon the
vote of any matters submitted for member approval.
Under the Company's Bye-Laws, each item for action at the meeting shall
first be voted on by a show of hands, and each member present and each person
holding a valid proxy shall be entitled to one vote. The Chairman of the meeting
shall then declare whether the item has carried or failed if such outcome was
determined unanimously. If the item has not carried or failed unanimously, the
Chairman of the meeting shall call for a poll of the meeting by written ballot
to determine the item. In such poll, each person present shall be entitled to
one vote for each share owned by such person or for which such person has a
valid proxy. The written ballots shall be examined by the inspection committee,
which shall consist of at least two members or
<PAGE> 5
holders of valid proxies who shall be appointed by the Chairman of the meeting,
and the result of the poll shall be declared by the Chairman.
The Company's 1997 Annual Report for the fiscal year ended December 31,
1997 is enclosed herewith.
RELATIONSHIP BETWEEN THE COMPANY AND IRIDIUM LLC
The Company is organized to act as a special purpose member of Iridium LLC
and to have no other business. The power and authority to conduct and manage the
business of the Company is vested in the Board of Directors of the Company. The
Company's only assets are its Class 1 Membership Interests in Iridium LLC and
its rights to acquire Class 1 Membership Interests in Iridium LLC. The Company's
only business is participating in the management of Iridium LLC. As of April 3,
1998 there were 12,040,832 issued and outstanding shares of Common Stock, and
the Company owned 12,040,832 Class 1 Membership Interests in Iridium LLC,
representing approximately 8.5% of the Class 1 Membership Interests. The
remaining approximately 91.5% of the Class 1 Membership Interests are owned by
Iridium LLC's strategic investors. The following is a chart of Iridium LLC's
ownership structure as of April 3, 1998, reflecting percentage ownership in
Class 1 Membership Interests.
[OWNERSHIP STRUCTURE CHART]
THE COMPANY'S PARTICIPATION IN THE GOVERNANCE OF IRIDIUM LLC
Iridium LLC is governed by the Board of Directors of Iridium LLC and the
members of Iridium LLC may manage Iridium LLC only through their election of
Directors to the Board of Directors of Iridium LLC. The Limited Liability
Company Agreement of Iridium LLC provides the Company with certain special
membership rights (the "Company Special Rights") unless (i) the Company sells or
otherwise disposes of Class 1 Membership Interests in Iridium LLC and, as a
result of such sale or other disposition, the Company's Class 1 Membership
Interests represent less than 5% of the total outstanding Class 1 Membership
Interests, or (ii) one of various events involving a change in the control of
the Company occurs.
The Company Special Rights include (i) the right to appoint to the Iridium
LLC Board of Directors two Directors of the Company who otherwise are not
employed by or affiliated with Motorola, Inc. or Iridium LLC, or any other
member of Iridium LLC owning more than 5% of the outstanding Class 1 Membership
Interests (the "Independent Company Directors"), (ii) the right to designate one
Independent Company
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<PAGE> 6
Director as Vice Chairman of the Iridium LLC Board of Directors, (iii) the right
to designate one Independent Company Director for membership in each committee
of the Iridium LLC Board of Directors, and (iv) the obligation of Iridium LLC to
obtain the consent of one of the Independent Company Directors prior to: (A)
making any material amendments or modifications to the Limited Liability Company
Agreement of Iridium LLC; (B) approving any business plan of Iridium LLC that
would result in any material change in the purpose of Iridium LLC or the
business of Iridium LLC as set forth and contemplated by the Limited Liability
Company Agreement of Iridium LLC; (C) making certain acquisitions; (D) selling,
leasing (as lessor), exchanging or otherwise disposing of substantially all the
assets of Iridium LLC (other than to a person controlled by Iridium LLC); (E)
causing the dissolution and/or liquidation of Iridium LLC; or (F) taking certain
bankruptcy or insolvency related actions with respect to Iridium LLC.
The Company will not be entitled to appoint more than two Directors to the
Board of Directors of Iridium LLC even if its ownership interest in Iridium LLC
increases. Since June 1997, Richard L. Lesher and William A. Schreyer have
served as the Independent Company Directors.
MANAGEMENT SERVICES PERFORMED BY IRIDIUM LLC FOR THE COMPANY
The Company and Iridium LLC have entered into a Management Services
Agreement pursuant to which Iridium LLC has agreed to supervise and manage the
day-to-day operations of the Company in accordance with the instructions of the
Board of Directors of the Company. Among other things, Iridium LLC is
responsible for administering the following functions of the Company: treasury,
accounting, legal, tax, insurance, licenses and permits, investor relations,
public relations and securities law compliance. Iridium LLC receives no fee or
expense reimbursement for its services under the Management Services Agreement.
The Company has no salaried employees. Each executive officer of the
Company is also an executive officer of Iridium LLC, except the Secretary of the
Company, Mr. Wayne Morgan, who under Bermuda law must be a Bermuda resident.
Executive officers of Iridium LLC who also serve as executive officers of the
Company are not separately compensated for their services to the Company. Mr.
Wayne Morgan is compensated for his services as Secretary of the Company by
Iridium LLC pursuant to the Management Services Agreement.
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<PAGE> 7
ITEM NO. 1
ELECTION OF DIRECTORS
The term of office of all present Directors of the Company will expire on
the day of the 1998 Annual General Meeting upon the election of their
successors. The number of Directors of the Company to be elected at the meeting
is seven. Each Director elected at the 1998 Annual General Meeting will serve
until the 1999 Annual General Meeting or until his successor is elected or
appointed, or until the office is otherwise vacated.
NOMINEES
Each of the nominees named below is currently a Director of the Company.
At the time of the 1998 Annual General Meeting, if a nominee named below is
not available to serve as a Director (an event which the Board of Directors does
not now anticipate), the shares of Common Stock represented by all valid proxies
will be voted for the election of such other person as the Board of Directors
may recommend.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
Set forth below are the names and ages of the nominees, the principal
occupation of each, the year in which first elected a Director of the Company,
the business experience of each for at least the past five years and certain
other information concerning each of the nominees.
EDWARD F. STAIANO -- 61 -- Chairman of the Board of the Company since May
1997 and Chief Executive Officer of the Company since March 1997. Vice Chairman
and Chief Executive Officer of Iridium LLC since January 2, 1997 and Director of
Iridium LLC since October 1994. Prior to joining Iridium LLC, Dr. Staiano served
Motorola, Inc. as Executive Vice President, President and General Manager of the
General Systems Sector (comprised of the cellular subscriber group, cellular
infrastructure group, network ventures division, personal communications and the
computer group) from 1989 to December 1996.
ROBERT W. KINZIE -- 64 -- Director of the Company since December 1996.
Chairman of the Board of Iridium LLC since October 1991 and Chief Executive
Officer of Iridium LLC from October 1991 to January 1, 1997. Prior to joining
Iridium LLC, Mr. Kinzie was the Director of Strategic Planning for Intelsat from
1987 to 1991. Prior to joining Intelsat, Mr. Kinzie worked from 1966 to 1987 in
a number of positions with COMSAT Corporation including President,
Communications Services Division and President of COMSAT General Corporation.
Prior to joining COMSAT Corporation in 1966, Mr. Kinzie was an economist with
the FCC from 1962 to 1965.
RICHARD L. LESHER -- 63 -- Director of the Company since June 1997. Vice
Chairman of the Board and Independent Company Director of Iridium LLC since June
1997. Dr. Lesher served as the President of the Chamber of Commerce of the
United States, the world's largest association of business organizations, from
1975 to 1997, when he retired.
ULF BOHLA -- 53 -- Director of the Company since December 1996. Director of
Iridium LLC since October 1994. Mr. Bohla has been the Chief Executive Officer
of o.tel.o communications GmbH & Co. since July 1, 1994 and is currently
Chairman of the Board of Directors of Vebacom Holdings, Inc. Prior thereto, he
served in various positions with IBM beginning in 1970, including General
Manager of Telecommunications at IBM Europe from 1993 to June 1994, Vice
President of International Marketing Operations at IBM USA from 1991 to 1993 and
Director of the North German region at IBM Germany from 1989 to 1991.
ALBERTO FINOL -- 62 -- Deputy Chairman and Director of the Company since
December 1996. Director of Iridium LLC since July 1993. Mr. Finol has been the
President of Ilapeca, a Venezuelan holding company with interests in dairy
products, supermarkets, pharmaceuticals and communications, since 1990 and has
served as a Director since 1966. He is the Chairman of Iridium SudAmerica and
the Chairman and a major shareholder of Iridium Andes-Caribe Ltd., one of the
owners of Iridium SudAmerica. He has also served as the Director of Group
Zuliano, a major Venezuelan petrochemical holding group. He represented his
native region of Zulia in the Venezuelan Congress from 1969 to 1993.
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<PAGE> 8
WILLIAM A. SCHREYER -- 70 -- Director of the Company since June 1997.
Independent Company Director of Iridium LLC since June 1997. Mr. Schreyer is
Chairman Emeritus of Merrill Lynch & Co., Inc. and served as Chairman of the
Board from April 1985 through June 1993, and as Chief Executive Officer from
July 1984 through April 1992. Mr. Schreyer is currently a Director of Callaway
Golf Company, Deere & Company, Schering-Plough Corporation and Willis Corroon
Group.
YOSHIHARU YASUDA -- 58 -- Director of the Company since December 1996.
Director of Iridium LLC since January 1996. Mr. Yasuda has been Vice President
of Nippon Iridium (Bermuda) Corporation since June 1996 and a Director since
June 1995. Mr. Yasuda was Director of DDI Corporation from 1992 to 1995. Prior
to joining DDI Corporation, Mr. Yasuda was with the Sanwa Research Institute.
MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY
During 1997, the Board of Directors of the Company had seven meetings. Five
of the meetings were in person and two meetings were via teleconference. All
incumbent Directors attended 75% or more of the combined total meetings of the
Board of Directors during 1997.
COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors has no standing committees. The Board of Directors
may form ad hoc committees from time to time, as necessary. Because the
Company's only asset is its membership interests in Iridium LLC and the
Company's only business is participating in the management of LLC, the Audit
Committee of the Iridium LLC Board of Directors acts as an audit committee on
behalf of the Company. The present members of the Audit Committee of the Iridium
LLC Board of Directors are Gordon J. Comerford (Chairman), Giuseppe Morganti,
Yusai Okuyama, Tao-Tsun Sun, and Richard L. Lesher. This committee held four
meetings during 1997.
Mr. Comerford has been a Director of Iridium LLC since July 1993 and
recently retired from Motorola, Inc. where he served as Senior Vice President
since 1989. Mr. Morganti has been a Director of Iridium LLC since April 1996,
has served as Chief Executive Officer and Managing Director of Iridium Italia
S.p.A. since August 1996 and has been with STET (now Telecom Italia) since 1984
in various management positions. Mr. Okuyama has been Director of Iridium LLC
since July 1996 and has been President of DDI Corporation since 1993. Mr. Sun
has been a Director of Iridium LLC since January 1994 and has been Executive
Director and President of Pacific Electric Wire & Cable Co., Ltd. since 1986.
Dr. Lesher is the Independent Company Director appointed to the Audit Committee
of the Iridium LLC Board of Directors. Dr. Lesher's biography appears above.
All members of the Audit Committee of Iridium LLC attended at least 75% of
the committee meetings.
INDEPENDENT DIRECTORS' COMPENSATION
Directors of the Company other than the Independent Company Directors
receive no fees for their services as Directors. Since June 1997, Dr. Lesher and
Mr. Schreyer have served as the Independent Company Directors. Pursuant to the
Management Services Agreement, Iridium LLC pays each Independent Company
Director $20,000 per year for their service as Independent Company Directors,
plus $2,500 for attendance at each regular quarterly meeting of the Board of
Directors of each of the Company and Iridium LLC, or any committee meeting of
the Board of Directors of Iridium LLC held concurrently therewith. Each
Independent Company Director also receives $500 for any extraordinary or
telephonic meeting attended and reimbursement for ordinary expenses incurred in
connection with attendance at any meeting of the Board of Directors (or
committees thereof) of the Company or Iridium LLC. In addition, Iridium LLC
(pursuant to the Iridium Option Plan) granted each of Dr. Lesher and Mr.
Schreyer options to purchase 1,000 shares of Common Stock at the initial public
offering price ($20 per share) upon their appointment as Independent Company
Directors.
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<PAGE> 9
APPROVAL BY MEMBERS
In order to be elected, a nominee must receive a majority of the votes cast
at the 1998 Annual General Meeting. Shares may be voted for or against each
nominee. Abstentions and broker non-votes will have no effect on the outcome of
the election because Directors will be elected by a majority of the votes cast
for Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION AS DIRECTORS OF
THE NOMINEES NAMED HEREIN. UNLESS INDICATED OTHERWISE BY YOUR PROXY VOTE, YOUR
SHARES OF COMMON STOCK WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF SUCH
NOMINEES.
ITEM NO. 2
APPROVAL OF AMENDMENT TO IRIDIUM OPTION PLAN
The Board of Directors recommends that the holders of Common Stock approve
adoption of the Amendment (the "Amendment") described below to the Iridium
Option Plan (the "Plan"). The Amendment was approved by the Iridium LLC Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
ADOPTION OF THE AMENDMENT.
Under the Plan, which was established by Iridium LLC in April 1996,
executive officers and managers of Iridium LLC may be awarded options to
purchase Common Stock. The Plan is administered and options are awarded by the
Compensation Committee of the Iridium LLC Board of Directors. The Company has
agreed that, upon the due and valid exercise of options granted under the Plan,
it will issue the number of shares of Common Stock covered by the exercised
options. Iridium LLC has agreed that, simultaneously with any such issuance of
Common Stock, Iridium LLC will deliver to the Company a like number of Class 1
Membership Interests in Iridium LLC, subject to anti-dilution adjustments.
This arrangement is the same in substance as if Iridium LLC awarded options
to purchase Class 1 Membership Interests and the Company agreed to exchange
Common Stock for any Class 1 Membership Interests issued pursuant to such
options. As options are exercised, the Company's relative ownership in Iridium
LLC increases. The exercise price of the option is paid to Iridium LLC and
represents payment for the Common Stock by the exercising option holder and for
the Class 1 Membership Interests by the Company.
The Plan currently covers 2,625,000 shares of Common Stock. The Plan also
permits the award of stock appreciation rights in connection with any grant of
options. As of March 31, 1998, options covering 2,581,775 shares of Common Stock
had been granted. Thus, at that date only 43,225 of the Plan's authorized shares
remained available for awards. The Amendment would increase the number of shares
of Common Stock covered by the Plan to 5,625,000.
As stated by the Compensation Committee of the Iridium LLC Board of
Directors, the purpose of the Plan is to (i) attract and retain the best
available personnel with entrepreneurial qualities for positions of substantial
responsibility, and certain other key employees to promote the success of
Iridium LLC's business, and (ii) create a situation where employees may receive
economic gain from the growth and performance of Iridium LLC. The Plan
accomplishes this purpose by giving employees a financial interest in the equity
performance of Iridium LLC through the grant of options to purchase shares of
Common Stock in the Company. The Board of Directors of the Company believes that
the Amendment furthers this purpose by making available sufficient shares to
permit future awards by the Compensation Committee of the Iridium LLC Board of
Directors as a part of its employee compensation program and believes the
Amendment is important to the success of Iridium LLC and, accordingly, the
Company.
Of the options to purchase 2,581,775 shares of Common Stock awarded
pursuant to the Plan as of March 31, 1998, options to purchase 530,978 shares of
Common Stock were vested as of March 31, 1998. As
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<PAGE> 10
of that date no stock appreciation awards had been granted under the Plan. If an
award under the Plan expires, or is terminated, surrendered or canceled, the
Class 1 Membership Interests and shares of Common Stock subject to such award
are added to the number of Class 1 Membership Interests and shares of Common
Stock available for awards under the Plan.
The right to exercise the options generally vests, pro rata, over a period
of five years; however, all options and stock appreciation rights become
immediately vested on a Change in Control of Iridium LLC (as defined in the
Plan) and, in the event of a Change in Control, Iridium LLC is required to
purchase each outstanding option and stock appreciation right for an immediate
lump sum payment equal to the difference between (i) the higher of (x) the fair
market value of a share of Common Stock immediately prior to payment or (y) the
highest price actually paid in connection with the Change in Control, and (ii)
the exercise price. Under the Plan, a "Change in Control" occurs when there is
(i) a sale by one or more holders of 50% or more of the outstanding Class 1
Membership Interests to third parties who are not holders of Class 1 Membership
Interests or affiliated with holders of Class 1 Membership Interests, and (ii)
following such sale, the members of the Iridium LLC Board of Directors prior to
the sale cease to constitute a majority of the Iridium LLC Board of Directors.
Except for Dr. Staiano, a participant under the Plan whose employment is
terminated by Iridium LLC forfeits any unvested options. There are exceptions
for death, retirement and certain other situations. Dr. Staiano's options will
continue to vest even if his employment is terminated by Iridium LLC, other than
for cause, so long as he is not retained or employed by a competitor of Iridium
LLC.
APPROVAL BY MEMBERS
In order to be approved, the Amendment must receive a majority of the votes
cast at the 1998 Annual General Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE IRIDIUM OPTION PLAN. UNLESS INDICATED OTHERWISE BY YOUR PROXY VOTE, YOUR
SHARES OF COMMON STOCK WILL BE VOTED FOR APPROVAL OF THE AMENDMENT TO THE
IRIDIUM OPTION PLAN.
ITEM NO. 3
APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1998.
Because the Company's only assets are its Class 1 Membership Interests in
Iridium LLC and its rights to acquire Class 1 Membership Interests in Iridium
LLC, and the Company's only business is participating in the management of
Iridium LLC, the Audit Committee of the Iridium LLC Board performs the functions
of an audit committee on behalf of the Company. The Audit Committee of the
Iridium LLC Board makes recommendations to the Board of Directors of the Company
concerning the engagement of independent auditors and the scope of the audit to
be undertaken. The Audit Committee of the Iridium LLC Board has recommended the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
1998. For biographical information regarding the members of the Audit Committee
of the Iridium LLC Board of Directors see "Election of Directors -- Committees
of the Board of Directors of the Company".
KPMG Peat Marwick LLP also serves as the independent auditors for Iridium
LLC and its subsidiaries.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
1998 Annual General Meeting and will have the opportunity to make a statement if
they desire to do so and to respond to appropriate questions from members.
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APPROVAL BY MEMBERS
In order to be approved, the resolution to approve the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors must receive a majority
of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1998. UNLESS
INDICATED OTHERWISE BY YOUR PROXY VOTE, YOUR SHARES OF COMMON STOCK WILL BE
VOTED FOR THE APPROVAL OF APPOINTMENT OF KPMG PEAT MARWICK LLP.
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<PAGE> 12
SECURITY OWNERSHIP OF DIRECTORS OF THE COMPANY AND
MANAGEMENT OF THE COMPANY AND IRIDIUM LLC
Except as forth in the table below, there are no persons known by the
Company to own beneficially more than five percent of the Common Stock. The
following table sets forth certain information regarding beneficial ownership of
Common Stock as of April 3, 1998, by (i) the current Directors of the Company
(which include all nominees for Director), (ii) the five Named Executive
Officers (as defined) of Iridium LLC listed in the Summary Compensation Table,
and (iii) all current Directors of the Company and the executive officers of the
Company and Iridium LLC as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) PERCENT OF CLASS(1)
------------------------------------ -------------------------- -------------------
<S> <C> <C>
Robert W. Kinzie...................................... 79,957(3) *
Edward F. Staiano..................................... 250,000 2.04%
Mauro Sentinelli...................................... 21,602 *
Leo Mondale........................................... 42,542 *
Mark Gercenstein...................................... 26,353 *
Alberto Finol......................................... 127,900(4) 1.06%
Ulf Bohla............................................. 0 --
Richard Lesher........................................ 10,000 *
William Schreyer...................................... 11,000 *
Yoshiharu Yasuda...................................... 2,000 *
All Current Directors of the Company and the Executive
Officers of the Company and Iridium LLC as a
Group............................................... 669,819 5.38%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of April 3, 1998, may be acquired within sixty
days pursuant to the exercise of options (which shares are treated as
outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth).
(2) Except as noted, all shares are owned directly with sole investment and
voting power.
(3) Includes 1,500 shares owned by Mr. Kinzie's wife, as to which Mr. Kinzie
disclaims beneficial ownership.
(4) Includes 122,900 shares owned by Mr. Finol's holding company and 5,000
shares owned by Mr. Finol's wife. Mr. Finol disclaims beneficial ownership
of the shares owned by his wife.
MANAGEMENT OF THE COMPANY AND IRIDIUM LLC
EXECUTIVE OFFICERS OF THE COMPANY AND IRIDIUM LLC
The Company's only business is participating in the management of Iridium
LLC. Each executive officer of the Company is also an executive officer of
Iridium LLC, except the Secretary of the Company, Mr. Wayne Morgan, who under
Bermuda law must be a resident of Bermuda. The Company has no salaried
employees. Executive officers of Iridium LLC who also serve as executive
officers of the Company are not separately compensated for their services to the
Company. Mr. Wayne Morgan is compensated for his services as Secretary of the
Company by Iridium LLC.
Accordingly, set forth below is information concerning each executive
officer of the Company and Iridium LLC. Unless otherwise noted, each executive
officer of the Company and each executive officer of Iridium LLC holds office
until a successor is duly elected and qualified.
EDWARD F. STAIANO -- Chairman of the Board of the Company since May 1997
and Chief Executive Officer of the Company since March 1997. Vice Chairman and
Chief Executive Officer of Iridium LLC since January 2, 1997 and Director of
Iridium LLC since October 1994. For biographical information see "Election of
Directors".
-9-
<PAGE> 13
MAURO SENTINELLI -- Executive Vice President -- Marketing and Distribution,
Iridium LLC since August 1, 1997. Prior thereto, Mr. Sentinelli was Deputy
Director General in charge of Strategic Planning, Strategic Marketing and
International Affairs for Telecom Italia Mobile from 1995 to 1997 and Deputy
Managing Director for 1994 to 1995. He joined SIP, Telecom Italia's predecessor,
in 1974, and held various positions in engineering, marketing and strategic
planning. He became head of Business Development of the Mobile Service
Department in 1988 and launched the company's cellular service. Mr. Sentinelli
is not an executive officer of the Company.
LEO MONDALE -- Senior Vice President -- Strategic Planning and Business
Development, Iridium LLC since January 1995. From July 1993 until January 1995,
Mr. Mondale served as Vice President, Government Affairs and Strategic Planning,
Iridium LLC and from January 1991 to July 1993 as Vice President --
International Relations, Iridium LLC. From July 1, 1990 to January 31, 1992, he
was Director of International Relations for the Satellite Communications unit of
Motorola, Inc. Before joining Motorola, Inc., Mr. Mondale served as Vice
President of the Fairchild Space & Defense Corporation, where he was responsible
for the international and commercial activities of Fairchild Space from 1989 to
1990. Prior to joining Fairchild, Mr. Mondale was Legal Counsel to the then
Space Division of Matra, S.A. (now Matra-Marconi Space, N.V.), based in Paris,
France, following several years of private legal practice in Washington, D.C.
Mr. Mondale is not an executive officer of the Company.
O. BRUCE DALE -- Vice President -- Network Operations, Iridium LLC since
April 1995. Prior thereto, Mr. Dale served in a number of positions at Bell
Communications Research ("Bellcore") including, General Manager, Service
Assurance Systems and General Manager, Planning & Engineering System from March
1993 to April 1995, Vice President, Customer Service Center from January 1992 to
March 1993, and Assistant Vice President, Provisioning Systems Laboratory from
January 1990 to January 1992. From March 1982 to December 1989, Mr. Dale served
as Director of Data Network Systems Development Laboratory for AT&T Bell
Laboratories. Mr. Dale is not an executive officer of the Company.
LAURI J. FITZ-PEGADO -- Vice President -- Global Gateway Relations, Iridium
LLC since May 1997. Prior thereto, Ms. Fitz-Pegado served at the U.S. Department
of Commerce as the Director General and Assistant Secretary of the U.S. &
Foreign Commercial Service (US&FCS) International Trade Administration from June
1994 to June 1997 and as a Special Advisor to the Secretary of Commerce from
June 1993 to June 1994. From June 1982 to June 1993, Ms. Fitz-Pegado worked at
Hill & Knowlton Public Affairs Worldwide, most recently as Managing Director and
Senior Vice President. Ms. Fitz-Pegado is not an executive officer of the
Company.
MARK GERCENSTEIN -- Vice President -- Business Operations, Iridium LLC
since August 1992. Prior thereto, Mr. Gercenstein was Director of Marketing of
Motorola Satellite Communications from 1990 to 1992. Prior to assuming that
position, Mr. Gercenstein held various marketing and engineering assignments at
Motorola Government Electronics Group from 1984 to 1990, Spar Aerospace from
1985 to 1987 and Bendix Aerospace from 1975 to 1982. Mr. Gercenstein is not an
executive officer of the Company.
ROY GRANT -- Chief Financial Officer of the Company since April 1997. Vice
President -- Chief Financial Officer, Iridium LLC since April 30, 1997 and Vice
President -- Treasurer, Iridium LLC from November 1996 to July 1997. Prior
thereto, Mr. Grant served from 1992 to 1996 as Finance Director for Edison
Mission Energy, the largest independent power developer in the United States.
Mr. Grant also worked for Marriott Corporation from 1988 to 1992 in its
corporate and project finance areas and at American Airlines from 1980 to 1988,
most recently as its Managing Director -- Banking, where he was responsible for
all of the airline's banking relationships.
DALE F. HOGG -- Vice President -- Human Resources, Iridium LLC since August
1996 and Director of Human Resources since August 1994. Prior thereto, Mr. Hogg
was Corporate Manager, Compensation and Global Staffing for W.R. Grace & Co. He
previously served from 1985 to 1991 as Regional Director, Human Resources for
the Coca-Cola Company, from 1982 to 1985 as Vice President for Warner
Communications and from 1980 to 1982 as Corporate Personnel Manager for the LTV
Corporation. He has also held Human Resources positions at The Williams
Companies and Rockwell International. Additionally, he served as news anchor for
a CBS affiliate from 1972 to 1980. Mr. Hogg is not an executive officer of the
Company.
-10-
<PAGE> 14
WAYNE MORGAN -- Secretary of the Company. Mr. Morgan has been employed as a
corporate manager by Codan Services Ltd. in Bermuda since August 1996. Prior
thereto, Mr. Morgan served Johnson & Higgins (Bermuda) Limited from 1980 to 1996
in a number of positions including Vice President and Manager of Support
Services, Senior Vice President, Client Account Management and Senior Vice
President, Principal Branch Manager. Prior to joining Johnson & Higgins, Mr.
Morgan was the Deputy Accountant General for the Government of Bermuda from 1975
to 1980. Mr. Morgan is not an executive officer of Iridium LLC.
LARRY G. RANDS -- Vice President -- Engineering, Iridium LLC since August
1993. Mr. Rands was employed by Motorola Satellite Communications as Assistant
Manager System Engineering from November 1991 through July 1993. Prior thereto,
Mr. Rands spent twelve years with COMSAT Corporation, where he served in several
management positions, most recently, Senior Director of System Engineering. He
has also held positions with CONTEL/ASC, RCA Laboratories, Rockwell
International and Hughes Aircraft. Mr. Rands is not an executive officer of the
Company.
F. THOMAS TUTTLE -- Assistant Secretary of the Company since December 1996.
Vice President, General Counsel and Secretary, Iridium LLC since April 1996. Mr.
Tuttle had been employed by Iridium LLC as Assistant Secretary since January
1994 and as Deputy General Counsel since November 1993. Mr. Tuttle was in
private law practice in Washington, D.C. from 1986 to 1994. Prior thereto, he
served as Vice President, Regulatory and Industry Relations with Satellite
Business Systems and held senior legal positions with COMSAT Corporation.
DIRECTORS OF THE COMPANY
EDWARD F. STAIANO -- Chairman of the Board of the Company since May 1997.
For biographical information see "Election of Directors".
ALBERTO FINOL -- Deputy Chairman and Director of the Company since December
1996. Director of Iridium LLC since July 1993. For biographical information see
"Election of Directors".
ULF BOHLA -- Director of the Company since December 1996. Director of
Iridium LLC since October 1994. For biographical information see "Election of
Directors".
ROBERT W. KINZIE -- Director of the Company since December 1996. Chairman
of the Board of Iridium LLC since October 1991. For biographical information see
"Election of Directors".
RICHARD L. LESHER -- Director of the Company since June 1997. Vice Chairman
of the Board and Independent Company Director of Iridium LLC since June 1997.
For biographical information see "Election of Directors".
WILLIAM A. SCHREYER -- Director since June 1997. Director of Iridium LLC
since June 1997. For biographical information see "Election of Directors".
YOSHIHARU YASUDA -- Director of the Company since December 1996. Director
of Iridium LLC since January 1996. For biographical information see "Election of
Directors".
-11-
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS OF IRIDIUM LLC
The Company has no salaried employees. Each executive officer of the
Company is also an executive officer of Iridium LLC, except the Secretary of the
Company, Mr. Wayne Morgan, who under Bermuda law must be a resident of Bermuda.
Executive officers of Iridium LLC who are also executive officers of the Company
are not separately compensated for their services to the Company. Mr. Morgan is
compensated for his services as Secretary of the Company by Iridium LLC.
Accordingly, the following table sets forth the compensation paid for the
fiscal year ended December 31, 1997 to those persons who were, at December 31,
1997, the Chief Executive Officer of Iridium LLC and the four next most highly
compensated executive officers of Iridium LLC (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- -----------------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL POSITION OTHER ANNUAL UNDERLYING LTIP ALL OTHER
WITH IRIDIUM LLC YEAR SALARY BONUS(a) COMPENSATION OPTIONS/SARS PAYOUT COMPENSATION
- --------------------------------- ---- -------- -------- ------------ ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward F. Staiano................ 1997 $500,000 -- $187,827(b) 750,000 -- $ 4,750(c)
Vice Chairman and Chief
Executive Officer
Robert W. Kinzie................. 1997 $368,424 $154,560 -- 90,000 -- $ 8,462(d)
Chairman & Former Chief 1996 $344,000 $117,669 -- 90,000 -- $ 7,819
Executive Officer 1995 $310,000 $102,000 -- -- -- $ 7,469
Mauro Sentinelli................. 1997 $208,333 -- -- 75,000 -- $24,803(e)
Executive Vice President --
Marketing & Distribution
Leo Mondale...................... 1997 $262,504 $110,000 -- 67,500 -- $ 4,750(c)
Senior Vice President -- 1996 $220,561 $100,000 -- 45,000 -- $ 4,500
Strategic Planning &
Business Development 1995 $190,000 $ 56,050 -- -- -- $ 4,500
Mark Gercenstein................. 1997 $210,613 $ 88,729 -- -- -- $ 4,750(c)
Vice President -- Business 1996 $201,692 $ 62,909 -- 45,000 -- $ 4,500
Operations 1995 $176,250 $ 54,226 -- -- -- $ 4,500
</TABLE>
- ---------------
(a) Through the fiscal year ending December 31, 1995 Iridium LLC maintained the
Iridium Long Range Incentive Plan of 1993 (the "Incentive Plan"). The
Incentive Plan was terminated as of December 31, 1995. Final awards for
performance in Fiscal Year 1995 were determined by the Compensation
Committee of the Iridium LLC Board in April 1996. The Iridium Option Plan
(described elsewhere) was at that time substituted for the Incentive Plan.
Under the Incentive Plan, amounts were earned each year and credited to an
account established for the participant. Amounts in each account earn
interest at 1% over the prime rate until the end of the performance cycle
which runs from 1993 through 1998. The amounts in each account will become
payable in fiscal year 1999, subject to forfeiture in the event the
participant's employment with Iridium LLC is terminated for any reason other
than death, disability, retirement or a change from full-time to part-time
employment.
(b) This amount includes amounts paid to Dr. Staiano for airplane expenses
($53,663), car lease expense ($7,837), apartment expenses ($38,447) and a
salary gross-up to cover taxes incurred ($87,880).
(c) Iridium LLC matching contributions to 401(k) plan.
(d) This amount includes the value of term life insurance provided to Mr. Kinzie
($3,712) and Iridium LLC's matching contribution to 401(k) plan ($4,750).
(e) This amount includes relocation expenses paid for Mr. Sentinelli ($20,053)
and Iridium LLC's matching contribution to 401(k) plan ($4,750).
-12-
<PAGE> 16
EMPLOYMENT ARRANGEMENTS
On January 2, 1997, Edward F. Staiano became Chief Executive Officer of
Iridium LLC and Vice Chairman of the Iridium LLC Board. Pursuant to the terms of
his employment agreement, Dr. Staiano receives a base salary of $500,000 per
year. In addition to base salary, Iridium LLC has agreed to provide Dr. Staiano,
at its expense, with a car, a furnished apartment in Washington, D.C. and access
to a corporate jet aircraft. Iridium LLC has agreed to provide reimbursement for
any tax liability created as a result of the use of those items. Dr. Staiano was
also awarded options to purchase 750,000 shares of Common Stock at a price of
$13.33 per share. These options vest, pro rata, over a period of five years.
Vested options may be exercised at any time. Dr. Staiano's options will continue
to vest even if his employment is terminated by Iridium LLC, other than for
cause, so long as he is not retained or employed by a competitor. Dr. Staiano
does not receive an annual bonus or participate in Iridium LLC's retirement
plans.
OPTION GRANTS
The following table sets forth the options granted for the fiscal year
ended December 31, 1997 for each Named Executive Officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM(a)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ ---------------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Edward F. Staiano..... 750,000 53.20% $13.33 1/12/07 $6,285,000 $15,930,000
Robert W. Kinzie...... 90,000 6.38 13.33 4/14/07 754,200 1,911,600
Mauro Sentinelli...... 75,000 5.32 13.33 7/31/07 628,500 1,593,000
Leo Mondale........... 67,500 4.79 13.33 4/14/07 565,650 1,433,700
Mark Gercenstein...... -- -- -- -- -- --
</TABLE>
- ---------------
(a) This figure is achieved by multiplying the number of options by the Final
Assumed Appreciated Stock Price at the end of the Option Term, and then
subtracting the original cost of the options, which is the number of options
multiplied by the Exercise or Base Price.
YEAR END OPTION/SAR TABLE
The following table shows certain information with respect to stock options
held as of December 31, 1997 by each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNEXERCISED OPTIONS
ACQUIRED AT FISCAL YEAR-END(a)
ON OPTIONS VALUE DATE OF MONTHS ---------------------------
NAME YEAR EXERCISE GRANTED REALIZED OPTION HELD EXERCISABLE UNEXERCISABLE
---- ---- -------- ------- -------- ------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward F. Staiano.... 1997 -- 750,000 -- 1/13/97 11 137,500 612,500
Robert W. Kinzie..... 1997 -- 90,000 -- 4/15/97 8 46,500 133,500
Mauro Sentinelli..... 1997 -- 75,000 -- 8/1/97 5 5,000 70,000
Leo Mondale.......... 1997 -- 67,500 -- 4/15/97 8 26,250 86,250
Mark Gercenstein..... 1997 -- 0 -- 1/1/96 23 17,250 27,750
<CAPTION>
NUMBER OF UNEXERCISED
IN-THE-MONEY
OPTIONS/SAR
AT FISCAL YEAR-END(b)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Edward F. Staiano.... $5,018,750 $22,356,250
Robert W. Kinzie..... 1,697,250 4,872,750
Mauro Sentinelli..... 182,500 2,555,000
Leo Mondale.......... 958,125 3,148,125
Mark Gercenstein..... 629,625 1,012,875
</TABLE>
- ---------------
(a) These figures include all options granted before fiscal year 1997.
(b) The closing price of Common Stock on the last day of the fiscal year was
$36.50 per share.
-13-
<PAGE> 17
IRIDIUM LLC PENSION PLAN
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000................................... $ 36,964 $ 49,286 $ 61,607 $ 76,929 $ 86,250
150,000................................... 45,000 60,000 75,000 90,000 105,000
175,000................................... 53,036 70,714 88,393 106,071 123,750
200,000................................... 61,071 81,429 101,786 122,143 142,500
225,000................................... 69,107 92,143 115,179 138,214 161,250
250,000................................... 77,143 102,857 128,571 154,286 180,000
300,000................................... 93,214 124,286 155,357 186,429 217,500
400,000................................... 125,357 167,143 208,929 250,714 292,500
450,000................................... 141,429 188,571 235,714 282,857 330,000
500,000................................... 157,500 210,000 262,500 315,000 367,500
</TABLE>
Iridium LLC maintains the Iridium LLC Pension Plan (the "Pension Plan") for
the benefit of its employees. The Pension Plan is a defined benefit plan and is
qualified under the provisions of the U.S. Internal Revenue Code related to such
plans. Benefits payable under the Pension Plan are computed on the basis of a
single life annuity payable at age 65 and are subject to a partial offset by
Social Security payments. Compensation taken into account for purposes of
computing the benefits payable under the Pension Plan generally includes final
average salary, bonuses and qualified salary deferrals. Although the U.S.
Internal Revenue Code of 1986, as amended, limits the amount of covered
compensation under the Pension Plan to $150,000 subject to adjustment (the
"Compensation Cap"), the table above also reflects benefits payable under a
supplemental retirement income plan (the "Supplemental Plan") established by
Iridium LLC for the benefit of employees whose compensation exceeds the
Compensation Cap or whose benefit would be limited by Section 415 of the U.S.
Internal Revenue Code. Benefits under the Supplemental Plan are calculated in
the same manner as the Pension Plan. Under the Supplemental Plan, Iridium LLC
will pay the employee an amount which together with the amounts due under the
Pension Plan will equal what the employee would have received under the Pension
Plan if the Compensation Cap was not in effect. Mr. Kinzie has six years of
credited service; Mr. Sentinelli has zero years of credited service; Mr. Mondale
has seven years of credited service; and Mr. Gercenstein has 12 years of
credited service. Messrs. Kinzie, Mondale and Gercenstein participate in the
Pension Plan but do not participate in the Supplemental Plan.
Iridium LLC maintains a supplementary retirement plan for selected senior
officers. The plan provides for an annual income, normally beginning at age 60,
equal to the larger of (i) 40% of the participant's compensation (salary plus an
adjustment for bonuses) at retirement or (ii) the annual benefit calculated
using the formula under the Supplemental Plan, in either case reduced by any
amount payable under the Pension Plan. Regardless of which formula is used, the
total retirement income cannot exceed 70% of an individual's retiring salary. At
retirement, a participant receives an annuity purchased from an insurance
company sufficient to make the payments required. Iridium LLC also pays to the
participant or to the proper taxing authorities an amount sufficient to pay the
income taxes arising from the purchase of the annuity for the participant. A
participant also has the option of receiving a lump sum equal to the purchase
price of the annuity. As with the annuity, Iridium LLC pays the income taxes
arising from the payment of the lump sum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Iridium LLC Board of Directors determines
the compensation of the executive officers of Iridium LLC consistent with
guidelines established by the Iridium LLC Board of Directors.
The members of the Compensation Committee for the fiscal year ending
December 31, 1997 were John L. Mitchell, Chairman, Alberto Finol, Richard L.
Lesher, Jung L. Mok, Sribhumi Sukhanetr, Yoshiharu
-14-
<PAGE> 18
Yasuda and Wang Mei Yue. The Compensation Committee is chaired by Mr. Mitchell,
formerly an executive officer of Motorola, Inc., who continues to serve as Vice
Chairman of the Board of Directors of Motorola, Inc. Mr. Finol serves as the
Deputy Chairman of the Company. His biography appears above. Dr. Lesher is the
Independent Company Director appointed to the Compensation Committee of the
Iridium LLC Board of Directors. Dr. Lesher's biography appears above. Mr. Mok
has been a Director of Iridium LLC since 1994 and has served as a Director and
as the Senior Executive Vice President of SK Telecom since 1994. Mr. Sukhanetr
has been a Director or Iridium LLC since 1993 and has served as the Chairman of
United Communication Industry Ltd. ("UCOM") and of Thai Satellite
Telecommunications Co., Ltd., a subsidiary of UCOM, since 1992. Mr. Yasuda is a
Director of the Company and his biography appears above. Dr. Wang has served as
a Director of Iridium LLC since 1995, as Chairman and President of Iridium China
(Hong Kong) Ltd. since 1995, as Chairman and President of China Aerospace
International Holdings Ltd., Hong Kong since 1993 and as Chairman of China
Southern Telecommunication Co.. Ltd. since 1991.
REPORT OF THE COMPENSATION COMMITTEE
OF IRIDIUM LLC
ON EXECUTIVE COMPENSATION
The Company has no salaried employees. Each executive officer of the
Company is also an executive officer of Iridium LLC, except the Secretary of the
Company, Mr. Wayne Morgan, who under Bermuda law must be a resident of Bermuda.
Executive officers of Iridium LLC who are also executive officers of the Company
are not separately compensated for their services to the Company. Mr. Morgan is
compensated for his services as Secretary of the Company by Iridium LLC.
Accordingly, this discussion addresses the executive compensation of Iridium
LLC.
The Compensation Committee of the Iridium LLC Board of Directors oversees
the Compensation Program for executive officers of Iridium LLC. The Committee
discusses and reviews in detail the compensation of the Chief Executive Officer
and other executive officers of the Company and recommends to the Board of
Directors of Iridium LLC for its approval changes in compensation for those
executive officers. The Compensation Committee also awards stock options
pursuant to the Iridium Option Plan in accordance with the Iridium Compensation
Program.
The Compensation Committee of Iridium LLC is composed entirely of
independent, non-employee Directors of Iridium LLC. Dr. Lesher, an Independent
Company Director, Mr. Finol and Mr. Yasuda are the Directors of the Company who
served on the Compensation Committee of the Iridium LLC Board of Directors in
the fiscal year ending December 31, 1997.
OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The success of Iridium LLC centers on its ability to attract, motivate and
retain the highest caliber executives. Iridium LLC's key executives are critical
to the development and long-term success of Iridium LLC and, accordingly, the
Company. Based on the schedule-driven nature of the Iridium endeavor, the
Iridium LLC compensation system rewards performance. Salary increases,
promotions, bonuses and awards under the Iridium Option Plan are directly
affected by the level of achievement of agreed upon goals and objectives.
SUMMARY OF THE EXECUTIVE COMPENSATION PROGRAM
Iridium LLC has implemented a total compensation strategy to retain its
existing talent, as well as attract those needed in the future. Iridium LLC's
Compensation Program has three components: base salaries, incentive bonuses and
options.
Base Salaries. Base salaries are periodically reviewed and compared to
industry standards using leading telecommunications surveys, as well as to the
data generated by an independent compensation consulting firm. When needed, the
base salaries of selected officers may be adjusted to meet peers in the market.
An
-15-
<PAGE> 19
independent compensation consulting firm provides market specific comparison
data for similar positions within the marketplace. Merit increases occur at the
employee's anniversary date and are a result of an evaluation of level of the
individual achievements, and Iridium LLC's attainment of major milestones.
Officers' increases are recommended by the Chief Executive Officer and presented
to the Compensation Committee for approval and final presentation to the Board.
Incentive Bonus Plan. Incentive bonus awards under the Incentive Bonus
Plan are tied to specific targets for each employee that are set at the
beginning of the year. The achievements are specific, weighted and tied to a
specific date. Officers split their expected results between individual
performance and corporate achievements. Awards are expressed as a percentage of
annual base salary, with a maximum possible award of 100%. In 1998, 50% of the
annual payout for all officers and executives who participate in the Incentive
Bonus Plan will depend on the successful launch of Commercial Activation by
September 23, 1998.
Options. The granting of options to officers of Iridium LLC is based on
comparable practices among peer companies as well as salary grade, historical
precedent, and the achievement of individual and company goals as specified by
the officer. Because of the individual nature of each officer's goals and
objectives, achievement is determined by the Chief Executive Officer, who then
recommends an option award for the officer to the Compensation Committee. The
Compensation Committee, in turn, has the discretion to alter this amount if it
so chooses. Awards are made pursuant to the Iridium Option Plan generally on a
yearly basis, or at whatever intervals are deemed appropriate by the
Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
Pursuant to a written letter agreement dated December 2, 1996, compensation
for Dr. Staiano, Chief Executive Officer and Vice Chairman of the Iridium Board,
who began employment with Iridium LLC on January 1, 1997, consists of a base
salary of $500,000 per year. In addition to the base salary, Iridium LLC has
agreed to provide Dr. Staiano, at its expense, with a car, a furnished apartment
in Washington, D.C. and access to a corporate jet aircraft. Iridium LLC has
agreed to provide reimbursement for any tax liability created as a result of
those items. Dr. Staiano was also awarded 750,000 options to purchase shares of
Common Stock at a price of $13.33 per share. These options vest, pro rata, over
a period of five years. Vested options may be exercised at any time. Dr.
Staiano's options will continue to vest even if his employment is terminated by
Iridium LLC, other than for cause, so long as he is not retained or employed by
a competitor. Dr. Staiano does not receive an annual bonus or participate in
Iridium LLC's retirement plans.
COMPENSATION COMMITTEE OF THE IRIDIUM LLC BOARD OF DIRECTORS:
John F. Mitchell, Chairman
Alberto Finol
Richard L. Lesher
Jung L. Mok
Sribhumi Sukhanetr
Yoshiharu Yasuda
Wang Mei Yue
For biographical information regarding the members of the Compensation
Committee of the Iridium LLC Board of Directors see "Compensation of Executive
Officers of Iridium LLC -- Compensation Committee Interlocks and Insider
Participation".
-16-
<PAGE> 20
STOCK PERFORMANCE GRAPH
The performance graph below compares the performance of Common Stock with
the cumulative total return of the Nasdaq Stock Market Composite Index (U.S. and
Foreign) and the Nasdaq Telecommunications Index through December 31, 1997. The
graph assumes $100 was invested in the Common Stock on June 10, 1997, the date
on which the Common Stock (Nasdaq: "IRIDF") was first listed on the Nasdaq
National Market, and that $100 was invested in each index on May 31, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG IRIDIUM WORLD COMMUNICATIONS LTD.,
THE NASDAQ STOCK MARKET COMPOSITE INDEX (U.S. & FOREIGN)
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[CHART]
<TABLE>
<CAPTION>
NASDAQ
STOCK
IRIDIUM MARKET
WORLD COMPOSITE NASDAQ
MEASUREMENT PERIOD COMMUNICATIONS INDEX (U.S. TELECOMMUNICATIONS
(FISCAL YEAR COVERED) LTD. & FOREIGN) INDEX
<S> <C> <C> <C>
INITIAL INVESTMENT 100 100 100
6/30/97 91 103 108
7/31/97 123 114 114
8/31/97 179 114 111
9/30/97 206 121 125
10/31/97 188 114 129
11/30/97 204 114 120
12/31/97 183 112 136
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<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Each of the Directors of the Company is also a Director of Iridium LLC and
its wholly-owned subsidiary Iridium Operating LLC. Mr. Bohla, a Director of the
Company, is the Chief Executive Officer of o.tel.o communications GmbH & Co. Mr.
Yasuda, a Director of the Company, is President of Nippon Iridium Corporation.
Iridium Services Deutschland, a wholly-owned subsidiary of o.tel.o
communications GmbH & Co., the parent of Vebacom Holdings, Inc. and a holder of
approximately 8.80% of the Class 1 Membership Interests of Iridium LLC, owns and
operates an Iridium service territory which serves several countries in or near
Europe. Nippon Iridium Corporation, an affiliate of Nippon Iridium (Bermuda)
Corporation, a holder of approximately 11.15% of the Class 1 Membership
Interests of Iridium LLC, owns and operates an Iridium gateway service territory
which serves Japan. Each of o.tel.o communications GmbH & Co. and Nippon Iridium
(Bermuda) Corporation has entered into a Gateway Authorization Agreement with
Iridium LLC, pursuant to which they, or their affiliates, will operate their
respective Gateway service territory and provide gateway services. In addition,
o.tel.o communications GmbH & Co. and Nippon Iridium (Bermuda) Corporation will
serve as service providers in their respective gateway territories and, as such,
will be entitled to payments from Iridium LLC associated with sales of Iridium
Services.
For a description of relationships and related transactions of Iridium LLC
that do not involve Directors or officers of the Company, including Iridium
LLC's relationships and transactions with Motorola, Inc. see the filings of
Iridium LLC with the Securities and Exchange Commission, including the Company's
Annual Report on Form 10-K. The Annual Report on Form 10-K is the joint report
of the Company, Iridium LLC and the reporting subsidiaries of Iridium LLC.
OTHER MATTERS
The Board of Directors of the Company knows of no other business to be
transacted at the 1998 Annual General Meeting. If any other matter properly
comes before the 1998 Annual General Meeting, the persons designated as proxies
will vote thereon in accordance with their best judgment.
MANNER AND COST OF PROXY SOLICITATION
All costs associated with the solicitation of proxies will be borne by
Iridium LLC pursuant to the Management Services Agreement. In addition to the
solicitation of proxies by use of the mails, officers, Directors and regular
employees of the Company and Iridium LLC, acting on behalf of the Company's
Board of Directors, may solicit proxies by telephone or personal interview.
Also, the Company has retained Corporate Investor Communications, Inc. to aid in
the solicitation of proxies, for which Iridium LLC will pay an estimated fee of
$6,000.00 plus expenses. Iridium LLC will request brokers and other custodians,
nominees and fiduciaries to forward proxy soliciting material to the beneficial
owners of shares held of record by such persons.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1997 all reports for the Company's
executive officers and Directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed.
PROPOSALS
Members who intend to present proposals in connection with the Company's
1999 Annual General Meeting of members must be received at the Company's
principal executive offices not later than December 17, 1998.
Such proposals should be addressed to F. Thomas Tuttle, Assistant
Secretary, Iridium World Communications Ltd., 1575 Eye Street, N.W., Suite 800,
Washington, D.C. 20005.
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<PAGE> 22
FINANCIAL INFORMATION
The Company's 1997 Annual Report for the fiscal year ended December 31,
1997 is enclosed herewith. The Company will provide without charge to any member
of record as of April 3, 1998, who so requests in writing, a copy of the
Company's Annual Report on Form 10-K (without exhibits) filed with the
Securities and Exchange Commission. The Annual Report on Form 10-K is the joint
annual report of the Company, Iridium LLC and the reporting subsidiaries of
Iridium LLC. Any such request should be addressed to F. Thomas Tuttle, Assistant
Secretary, Iridium World Communications Ltd., 1575 Eye Street, N.W., Suite 800,
Washington, D.C. 20005.
By order of the Board of Directors
F. Thomas Tuttle
F. Thomas Tuttle
Assistant Secretary
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<PAGE> 23
ANNEX
<TABLE>
<S><C>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED FOR PROPOSALS 1,2 AND 3 AND PROXYHOLDERS WILL VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE 1998 ANNUAL GENERAL MEETING AND ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
1. ELECTION OF DIRECTORS
FOR all nominees / / AGAINST all nominees / / *EXCEPTIONS (as indicated / / ABSTAIN / /
listed below listed below to the contrary below)
Edward F. Staiano, Robert W. Kinzie, Richard L. Lesher, Ulf Bohla, Alberto Finol, William A. Schreyer, Yoshiharu Yasuda
(INSTRUCTIONS: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.)
*Exceptions
-------------------------------------------------------------------------------------------------------------------------
2. Proposal to approve an amendment to the Iridium Option Plan. 3. Proposal to approve the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for
the year ending December 31, 1998.
FOR / / AGAINST / / ABSTAIN / /
FOR / / AGAINST / / ABSTAIN / /
4. At their discretion upon such other matters as may properly come before
the annual general meeting and any postponement or adjournment thereof. Change of Address
Mark Here / /
Change of address comments on reverse side.
(Signature should conform exactly as name shown on
this proxy. Executors, administrators, guardians,
trustees, attorneys and officers signing for
corporations should give full title.
Dated_________________________________, 1998
(Please be sure to insert date.)
Signed________________________________
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes MUST be indicated
(X) in Black or Blue ink
- -----------------------------------------------------------------------------------------------------------------------------------
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PROXY
IRIDIUM WORLD COMMUNICATIONS LTD.
PROXY SOLICITED ON BEHALF OF THE COMPANY BY THE BOARD OF DIRECTORS
FOR THE ANNUAL GENERAL MEETING MAY 21, 1998
The undersigned appoints F. Thomas Tuttle and Roy Grant, or any one of
them, each with full power of substitution, as proxies for the undersigned, to
vote, as designated below, all the shares of Class A Common Stock, par value
$.01 per share, of Iridium World Communications Ltd. held of record by the
undersigned on April 3, 1998, at the annual general meeting of members to be
held May 21, 1998, or any adjournments thereof, and in their discretion to vote
upon any other matters which may properly come before the meeting.
<TABLE>
<S> <C>
COMMENTS (Change of Address)
- -------------------------
- ------------------------- IRIDIUM WORLD COMMUNICATIONS LTD.
P.O. BOX 11428
- ------------------------- NEW YORK, N.Y. 10203-0428
- -------------------------
(If you have written in the above space, please
mark the corresponding box on the reverse
side of this card.)
</TABLE>
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxyholders cannot vote
your shares unless you sign and return this card.
-------------
see reverse
side
-------------
