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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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IRIDIUM OPERATING LLC
(Exact name of Registrant as specified in its charter)
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DELAWARE 4800 52-2066319
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of organization) Classification Code Number) Identification Number)
</TABLE>
1575 EYE STREET, N.W., WASHINGTON, DC 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
IRIDIUM CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 4800 52-2048739
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of organization) Classification Code Number) Identification Number)
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1575 EYE STREET, N.W., WASHINGTON, DC 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
IRIDIUM ROAMING LLC
(Exact name of Registrant as specified in its charter)
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DELAWARE 4800 52-2048734
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of organization) Classification Code Number) Identification Number)
</TABLE>
1575 EYE STREET, N.W., WASHINGTON, DC 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
IRIDIUM IP LLC
(Exact name of Registrant as specified in its charter)
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DELAWARE 4800 52-2048736
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of organization) Classification Code Number) Identification Number)
</TABLE>
1575 EYE STREET, N.W., WASHINGTON, DC 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
F. THOMAS TUTTLE, ESQ.
IRIDIUM OPERATING LLC, 1575 EYE STREET, N.W., WASHINGTON, DC 20005
(202) 408-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each Registrant)
------------------------
Please send copies of all communications to:
DENNIS C. SULLIVAN, ESQ.
SULLIVAN & CROMWELL
1701 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
11 1/4% Senior Notes due 2005, Series C/EN... 100% 301,500,000 301,500,000 88,942.50
Guarantees of the Notes...................... $300,000,000 (2) (2) None
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</TABLE>
(1) Pursuant to Rule 457(f)(1), based on the closing price of the Notes on the
PORTAL Market on January 9, 1997.
(2) No separate consideration will be received for the Guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 15, 1997
PROSPECTUS IRIDIUM LOGO
IRIDIUM OPERATING LLC
IRIDIUM CAPITAL CORPORATION
IRIDIUM ROAMING LLC
IRIDIUM IP LLC
------------------------
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF 11 1/4% SENIOR NOTES DUE 2005, SERIES C/EN FOR
EACH
$1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 11 1/4% SENIOR NOTES DUE 2005, SERIES
C
------------------------
Iridium Operating LLC, a Delaware limited liability company ("Iridium"), and
Iridium Capital Corporation, a Delaware corporation ("Capital," and together
with Iridium, the "Issuers"), as joint and several obligors, hereby offer, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer") to exchange an aggregate principal amount of up to $300,000,000 of
11 1/4% Senior Notes due 2005, Series C/EN (the "Exchange Notes") of the
Issuers, which will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus constitutes a part, for a like principal amount of 11 1/4% Senior
Notes due 2005, Series C (the "Original Notes" and, together with the Exchange
Notes, the "Notes") of the Issuers with the holders (the "Note Holders")
thereof.
Upon consummation of the Exchange Offer, the terms of the Exchange Notes
will be substantially identical in all material respects (including principal
amount, interest rate, the date from which interest accrues, maturity and
ranking) to the terms of the Original Notes for which they may be exchanged,
except that the Exchange Notes will be freely transferable by holders thereof
(except as provided below). The Exchange Notes will be issued without any
covenant regarding exchange or registration under the Securities Act. The
Exchange Notes will be issued under the indenture governing the Original Notes
for which they may be exchanged (as supplemented, the "Indenture"). Interest on
the Exchange Notes will, and interest on the Original Notes does, accrue at the
rate of 11 1/4% per annum. Interest on the Notes will be payable in cash
semi-annually on January 15 and July 15 of each year, commencing on January 15,
1998. The Exchange Notes will be, and the Original Notes are, redeemable at the
option of either Issuer, in whole or in part, at any time on or after July 15,
2002 at the redemption prices set forth herein, together with, as applicable,
accrued and unpaid interest, if any, and Liquidated Damages (as defined), if
any, to the redemption date. At any time on or prior to January 15, 2000, either
Issuer may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of the Notes, with the cash proceeds to Iridium of one or more
Equity Offerings (as defined), at a redemption price equal to 111.250% of the
principal amount of any Notes being redeemed plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of redemption; provided that at
least 66 2/3% of the original aggregate principal amount of the Notes being
redeemed must remain outstanding after each such redemption. See "Description of
Notes -- Optional Redemption."
Upon the occurrence of a Change of Control (as defined), each Note Holder
may require the Issuers to repurchase all or a portion of such Note Holder's
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to the purchase date. See
"Description of Notes -- Change of Control."
The Exchange Notes will be, and the Original Notes are, senior obligations
of the Issuers ranking pari passu in right of payment to the Initial Senior
Notes (as defined) and all other existing and future senior Indebtedness (as
defined) of the Issuers, other than Indebtedness that is expressly subordinated
to the Notes. However, subject to certain limitations set forth in the
Indenture, Iridium and its Subsidiaries (as defined) may incur other senior
Indebtedness, including Indebtedness that is secured by the assets of Iridium
and its Subsidiaries. The Notes will be effectively subordinated to any secured
Indebtedness of the Issuers to the extent of the value of the assets securing
such Indebtedness. The Exchange Notes will be, and the Original Notes are, fully
and unconditionally guaranteed, on an unsecured senior basis, by Iridium Roaming
LLC ("Roaming") and by Iridium IP LLC ("IP" and, together with Roaming, the
"Initial Guarantors" and, together with the Issuers, the "Iridium Parties"),
each of which is a Delaware
(Continued on next page)
SEE "RISK FACTORS" ON PAGE 18 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
limited liability company and a wholly owned subsidiary of Iridium. In addition,
the Notes will be fully and unconditionally guaranteed (the "Subsidiary
Guarantees") on an unsecured, senior basis by all future Guarantor Subsidiaries
(as defined). As of December 31, 1997, the Iridium Parties had outstanding
approximately $1,550 million of unsecured senior Indebtedness (including the
principal amount of the Initial Senior Notes (as defined)) and approximately
$273 million in Indebtedness that is subordinated to the Notes. As of December
31, 1997, Iridium had outstanding approximately $350 million of senior secured
Indebtedness, which Iridium is required to borrow but hold in a collateral
account for the benefit of the lenders under the Secured Bank Facility (as
defined). See "Use of Proceeds," "Risk Factors -- Significant Additional Funding
Needs," "-- Ranking of the Notes" and "Description of Notes."
The Original Notes were issued and sold on October 17, 1997 pursuant to an
offering (the "Original Offering") of the Original Notes. Such sales were not
registered under the Securities Act in reliance upon the exemptions provided by
Section 4(2), Rule 144A and Regulation S of the Securities Act. Accordingly, the
Original Notes may not be reoffered, resold or otherwise pledged, hypothecated
or transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon interpretations by the Staff of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Issuers believe that
the Exchange Notes to be issued pursuant to the Exchange Offer in exchange for
the Original Notes may be offered for resale, resold and otherwise transferred
by holders thereof (other than any holder which is (i) an "affiliate" of an
Iridium Party within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired Original Notes exchanged for such Exchange Notes
directly from an Issuer or (iii) a broker-dealer who acquired Original Notes as
a result of market making or other trading activities) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer,
where such Original Notes were acquired by such broker-dealer as a result of
market making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Original
Notes where such Original Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Iridium Parties
have agreed that, for a period not to exceed 180 days after the Expiration Date
(as defined), they will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution." Any Note
Holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a resale transaction.
The Original Notes and the Exchange Notes constitute new issues of
securities with no established trading market. Any Original Notes not tendered
and accepted in the Exchange Offer will remain outstanding. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Original Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders of
Original Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuers will have no further obligation to such holders
to provide for the registration under the Securities Act of the Original Notes,
except under certain limited circumstances. See "Exchange and Registration
Rights Agreement." No assurance can be given as to the liquidity of the trading
market for either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless extended
(the "Expiration Date"). The date of acceptance for exchange of the Original
Notes (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of validly tendered Original Notes. Original
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date; otherwise such tenders are irrevocable.
The obligation of the Issuers to consummate the Exchange Offer is subject to
certain conditions. See "The Exchange Offer -- Conditions to the Exchange
Offer." The Issuers reserve the right to terminate or amend the Exchange Offer
at any time prior to the Expiration Date upon the occurrence of any such
condition.
------------------------
The date of this Prospectus is , 1998
<PAGE> 4
AVAILABLE INFORMATION
The Iridium Parties have filed with the Commission a Registration Statement
on Form S-4 (the "Registration Statement," which term shall include all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
Iridium is a wholly owned subsidiary of Iridium LLC, a Delaware limited
liability company ("Iridium LLC" or "Parent"). As a result of an initial public
offering (the "IWCL IPO") of the Class A Common Stock (the "Class A Common
Stock"), par value $0.01 per share, of Iridium World Communications Ltd.
("IWCL"), the publicly held member of Parent, and the use of the net proceeds
thereof to purchase Class 1 Interests (as defined) of Parent, on June 13, 1997,
Parent became subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). As a result of the Asset Drop-Down Transaction (as defined), pursuant to
which Parent transferred substantially all of its assets and liabilities to
Iridium (including its obligations with respect to the 13% Senior Notes due
2005, Series A/EN (the "Series A Notes"), the 14% Senior Notes due 2005, Series
B/EN (the "Series B Notes" and, together with the Series A Notes, the "Initial
Senior Notes") and the Original Notes), Iridium became subject to the periodic
reporting and other informational requirements of the Exchange Act. Periodic
reports, proxy statements and additional information filed with the Commission
may be inspected at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material also can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov that contains
information regarding registrants that file electronically with the Commission.
The Iridium Parties have agreed that, notwithstanding that they may not be
required to be or remain subject to the reporting requirements of Sections 13 or
15(d) of the Exchange Act, they will file with the Commission, and provide the
Trustee (as defined) and Holders and prospective investors in the Notes (upon
request) with the annual reports and the information, documents and other
reports which are specified in Sections 13 and 15(d) of the Exchange Act. See
"Description of the Notes -- Certain Covenants -- SEC Reports."
FORWARD LOOKING INFORMATION
Iridium is a development stage enterprise. Accordingly, all statements in
this Prospectus that are not clearly historical in nature are forward looking.
Examples of such forward looking statements include the statements concerning
Iridium's operations, prospects, markets, size of addressable markets for mobile
satellite services, technical capabilities, funding needs, financing sources,
pricing, launch schedule, commercial operations schedule, the estimate of the
last year in which Iridium will have negative cash flow and a net increase in
year-end borrowings, and future regulatory approvals, as well as information
concerning expected characteristics of competing systems and expected actions of
third parties such as equipment suppliers, gateway operators, service providers
and roaming partners. These forward looking statements are inherently predictive
and speculative and no assurance can be given that any of such statements will
prove to be correct. Actual results
i
<PAGE> 5
and developments may be materially different from those expressed or implied by
such statements. See "Risk Factors" for a discussion of various factors which,
among others, could result in any of such forward looking statements proving to
be inaccurate.
* * *
IRIDIUM and Iridium Logo are registered trademarks and servicemarks of
Iridium IP LLC, a wholly owned subsidiary of Iridium.
ASSET DROP-DOWN TRANSACTION
On December 18, 1997, Parent entered into an asset drop-down transaction
(the "Asset Drop-Down Transaction") with Iridium, a newly formed wholly-owned
subsidiary of Parent. Pursuant to the Asset Drop-Down Transaction, substantially
all of the assets and liabilities of Parent were transferred to Iridium,
including, without limitation, all liabilities with respect to the outstanding
Initial Senior Notes and the Original Notes. Pursuant to the indentures relating
to the Initial Senior Notes and the Original Notes, Iridium has been substituted
for Parent, and Parent has been released from all obligations under the
indentures relating to the Initial Senior Notes and the Original Notes and the
Initial Senior Notes and the Original Notes. Unless otherwise specified,
references herein to Iridium relating to any action or event prior to the date
of the Asset Drop-Down Transaction should be construed as references to Parent,
as predecessor of Iridium. See "Parent's Ownership Structure and Strategic
Investors -- Asset Drop-Down Transaction."
* * *
In this Prospectus, references to "dollars" and "$" are United States
dollars.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUERS SINCE THE DATE HEREOF.
ii
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TABLE OF CONTENTS
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Available Information................................................................ i
Forward Looking Information.......................................................... ii
Prospectus Summary................................................................... 1
Risk Factors......................................................................... 18
Parent's Ownership Structure and Strategic Investors................................. 47
Use of Proceeds...................................................................... 49
Capitalization....................................................................... 50
The Exchange Offer................................................................... 51
Selected Financial Data.............................................................. 60
Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 61
Business............................................................................. 65
Regulation of Iridium................................................................ 86
Principal Contracts for the Development of the IRIDIUM System........................ 95
Certain Matters Regarding Relationship Among IWCL, Parent and Iridium................ 102
Management........................................................................... 107
Interest Ownership of Certain Beneficial Owners and Management....................... 118
Certain Relationships and Related Transactions of Iridium............................ 119
Parent's Investors, Number of Class 1 Interests Owned, Percentage Ownership and
Principal Gateway Service Territories.............................................. 123
Description of Parent Limited Liability Company Agreement............................ 128
Description of Iridium Operating LLC Limited Liability Company Agreement............. 135
Description of Other Indebtedness.................................................... 140
Description of Notes................................................................. 146
Exchange and Registration Rights Agreement........................................... 177
Tax Considerations................................................................... 180
Plan of Distribution................................................................. 180
Validity of the Securities........................................................... 181
Experts.............................................................................. 181
Glossary............................................................................. 182
Index to Financial Statements........................................................ F-1
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
related notes thereto included elsewhere in this Prospectus. Holders and
prospective Holders are urged to read this Prospectus in its entirety. See
"Glossary" for definitions of certain terms used in this Prospectus.
IRIDIUM
Iridium Operating LLC ("Iridium") is developing and commercializing a
global mobile wireless communications system that will enable subscribers to
send and receive telephone calls virtually anywhere in the world -- all with one
phone, one phone number and one customer bill. The IRIDIUM communications system
(the "IRIDIUM System") will combine the convenience of terrestrial wireless
systems with the global reach of Iridium's satellite system. The IRIDIUM System
encompasses four components: the "space segment," which will include the low
earth orbit satellite constellation and the related control facilities; the
ground stations or "gateways," which will link the satellites to terrestrial
communications systems; the IRIDIUM subscriber equipment, which will provide
mobile access to the satellite system and terrestrial wireless systems; and the
terrestrial wireless interprotocol roaming infrastructure, which will facilitate
roaming among the IRIDIUM satellite system and multiple terrestrial wireless
systems that use different wireless protocols. The first launch of IRIDIUM
satellites occurred on May 5, 1997. Iridium expects to commence commercial
operations in September 1998. The satellite constellation is being designed,
assembled and delivered in orbit by Motorola, Inc. ("Motorola"), a leading
international provider of wireless communications systems, phones and pagers,
semiconductors and other electronic equipment. Motorola also is the principal
investor in Iridium, having provided investments, guarantees and conditional
agreements to provide guarantees totaling over $1.1 billion. As a part of this,
Motorola has conditionally agreed to guarantee up to an additional $350 million
of borrowings under the Guaranteed Bank Facility described below. Other
strategic investors include leading wireless communications service providers
from around the world, as well as experienced satellite manufacturers and
experienced launch providers. Iridium is a wholly owned subsidiary of Iridium
LLC, a Delaware limited liability company ("Iridium LLC" or "Parent"). On
December 18, 1997, substantially all of the assets and liabilities of Parent
were transferred to Iridium pursuant to the Asset Drop-Down Transaction. See
"Parent's Ownership Structure and Strategic Investors -- Asset Drop-Down
Transaction."
Iridium Capital Corporation ("Capital"), a Delaware corporation, is a
wholly owned subsidiary of Iridium. The Original Notes are, and the Exchange
Notes will be, the joint and several obligations of Iridium and Capital (the
"Issuers"), although Capital did not receive any of the net proceeds on the
Original Notes. Capital has no assets and does not conduct any operations.
Iridium IP LLC ("IP") and Iridium Roaming LLC ("Roaming"), each a Delaware
limited liability company and a wholly owned subsidiary of Iridium, will
guarantee the Notes (IP and Roaming together, the "Initial Guarantors" and,
together with the Issuers, the "Iridium Parties".
The principal executive office for each of the Iridium Parties is located
at 1575 Eye Street, N.W., Washington, DC 20005, telephone (202) 408-3800.
IRIDIUM SERVICES AND MARKET
Global mobile satellite service ("MSS") systems such as the IRIDIUM System
are designed to address two broad trends in the communications market: (i) the
worldwide growth in the demand for portable wireless communications -- according
to industry sources, the worldwide wireless communications market had
approximately 135 million subscribers at year-end 1996 and is estimated to grow
to over 400 million subscribers by year-end 2000; and (ii) the growing demand
for communications services to and from areas where landline or terrestrial
wireless service is not available or accessible. The IRIDIUM System architecture
and IRIDIUM voice, data, facsimile and
1
<PAGE> 8
paging services ("IRIDIUM Services") are primarily designed to serve customers
who place the greatest value on global mobile communications services.
Iridium believes there is a significant market comprised of individuals and
businesses who need global communications capability and are willing to pay for
the convenience of a hand-held wireless phone or belt-worn pager. The
availability of terrestrial wireless communications service is often constrained
by the limited geographic coverage of terrestrial systems, the incompatibility
of differing wireless protocols or the absence of roaming agreements among
wireless operators. The combination of IRIDIUM Cellular Roaming Service
("ICRS"), IRIDIUM Satellite Services (as defined) and IRIDIUM paging will extend
wireless access globally and allow customers of Iridium to be reached by phone
or pager, and to place phone calls from or to virtually anywhere in the world
with one phone and one phone number. ICRS is expected to enable customers to
roam on an international basis among terrestrial wireless networks, including
those using different protocols, that have roaming agreements with Iridium.
IRIDIUM Satellite Services will extend voice services to the regions of the
world not served by terrestrial systems. Iridium intends to offer global paging
both in combination with IRIDIUM voice services and as a stand-alone service.
Iridium believes that the signaling capabilities of the IRIDIUM System will
enable Iridium to track the location of a voice customer effectively and with
minimal customer cooperation, thereby allowing Iridium to direct pages and calls
as customers travel globally. Iridium also expects to offer, commencing in 1999,
a broad range of in-flight passenger communications services with participating
airlines, including global incoming and outgoing voice, data and facsimile
services. In addition, Iridium expects to market IRIDIUM Services to
governmental, industrial and rural users of wireless communications systems.
Iridium believes it will be the only wireless communications system in operation
prior to 2000 that will be able to offer this array of global communications
services. See "Risk Factors -- Consequences of Satellite Service Limitations on
Customer Acceptance" and "-- Consequences of IRIDIUM Phone and Pager
Characteristics on Customer Acceptance."
To estimate potential demand for its services, Iridium has engaged in
extensive market analysis, including primary market research which involved
screening over 200,000 persons and interviewing more than 23,300 individuals
from 42 countries and 3,000 corporations with remote operations. Based on this
market analysis, Iridium has identified five target markets for IRIDIUM
Services: traveling professionals; corporate/industrial; government; rural; and
aeronautical. Iridium expects the traveling professional and
corporate/industrial markets will provide most of the demand for IRIDIUM
Services. Iridium believes that individuals in these markets are more likely to
need and have the ability to afford hand-held, global mobile communications
capability than, for example, individuals who live in remote areas outside
existing distribution channels for wireless communications services.
Iridium estimates that the addressable traveling professional market, which
it defines as all employed adults living in urban areas who own a wireless phone
and travel at least four times per year beyond the coverage of their current
wireless phone, will include approximately 42 million individuals by 2002. The
global corporate/industrial addressable market, which consists of companies with
more than 1,000 employees in industries with operations that are likely to need
mobile satellite services, is estimated by Iridium to include over 8,800
companies by 2002. Iridium believes that its unique service package is well
tailored to meet the demands of, and will give Iridium an advantage over
competing MSS systems in, these target markets. Iridium estimates that it will
have customer counts in the year 2002 in the range of 2.2 million to 3.2 million
for its satellite-based voice services, IRIDIUM Satellite Services (satellite
voice and paging) and IRIDIUM Universal Service (the combination of IRIDIUM
Satellite Service and ICRS), 1.0 million to 1.3 million for stand-alone ICRS and
350,000 to 500,000 for stand-alone paging. Iridium's estimates of target markets
and customer counts are based upon a number of assumptions, one or more of which
is likely to be incorrect. There can be no assurance that actual target markets
and actual customer counts for IRIDIUM Services will not be materially different
from Iridium's estimates or that Iridium will not revise such estimates
substantially from time to time. For a more detailed description of Iridium's
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<PAGE> 9
target markets see "Business -- The IRIDIUM Market," and for a discussion of the
forward looking nature of Iridium's estimates, and various of the factors which
could cause actual addressable markets and actual customer counts to differ
materially from these estimates, see "Risk Factors -- Risk of Error in Forward
Looking Statements."
THE IRIDIUM SYSTEM
The satellite constellation of the IRIDIUM System, which will consist of 66
operational satellites arranged in six polar orbital planes, is being assembled
and delivered in orbit by Motorola pursuant to a fixed price contract, subject
to certain adjustments. Motorola also will operate and maintain the satellite
constellation for five years (extendible to seven years at Iridium's option)
under a fixed price contract, subject to certain adjustments. Iridium believes
the IRIDIUM System will have greater signal strength than other proposed MSS
systems, thereby allowing it to better serve hand-held phones and providing a
higher degree of in-building penetration for paging services. The IRIDIUM System
utilizes adaptations of proven technologies, including GSM cellular call
processing technology, intersatellite links, FDMA/TDMA radio transmission
technology, a 2,400 bps vocoder and business support software. The IRIDIUM
satellites will feature cross-link antennas allowing telephone calls and
signaling information to be passed globally from satellite to satellite. These
intersatellite links, which enable the satellites to function as switches in the
sky, will allow the IRIDIUM System to (i) select the optimal space-to-ground
path of each call, thereby enhancing system reliability and capacity while
reducing the costs associated with the use of terrestrial phone systems, (ii)
communicate with subscribers in all regions of the world (including mid-ocean
and remote areas) regardless of their proximity to a gateway, (iii) provide full
global coverage with a relatively small number of gateways, thereby lowering
total ground segment build-out and operating costs and (iv) provide enhanced
ability to track the location of a voice customer, allowing Iridium to direct
calls and pages as customers travel globally. In addition, the communications,
station keeping and control systems of the IRIDIUM satellites can be upgraded,
maintained and reconfigured in orbit through the remote loading of software.
Iridium believes that its primary technological challenge in implementing the
IRIDIUM System is the integration of these proven technologies into a single
system.
Iridium expects to provide virtually global service initially through at
least nine and up to 12 gateways, although it will be able to provide such
global service with fewer than nine gateways. Each of these gateways will be
owned, operated and financed by one or more investors in Iridium or their
affiliates. See "Risk Factors -- Potential for Delay and Cost
Overruns -- Construction and Operation of Gateways."
IRIDIUM subscriber equipment will support voice, data and paging services.
Iridium expects that portable, hand-held IRIDIUM phones will be manufactured by
at least two experienced suppliers, Motorola and Kyocera Corporation
("Kyocera"), both of which have hand-held IRIDIUM phones under development. The
phones are expected to be available in satellite-only and "multi-mode" models.
The multi-mode phone being developed by Motorola uses changeable terrestrial
radio cassettes ("TRCs") which can be inserted into the phone. TRCs will be
developed for most major terrestrial wireless protocols so that with a single
multi-mode phone and the appropriate TRCs, a subscriber will be able to access
the IRIDIUM System and most major terrestrial wireless systems. Kyocera's
multi-mode phone is expected to be configured as a satellite phone casing into
which terrestrial wireless phones using different protocols can be inserted. The
IRIDIUM belt-worn pager, to be manufactured by Motorola, will have the
capability to receive alphanumeric messages virtually anywhere in the world.
ICRS will support roaming among the two principal types of terrestrial
wireless protocols -- IS-41 (AMPS, NAMPS and CDMA) and GSM (GSM900, DCS1900 and
DCS1800). Roaming between these protocols requires cross protocol translation
which will be accomplished for ICRS through the IRIDIUM Interoperability Unit
("IIU"), being developed under the direction of Motorola.
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<PAGE> 10
The IIU will permit system management information, including customer
authentication and location, to be relayed between systems that use different
technologies.
PRICING STRATEGY, DISTRIBUTION AND MARKETING
Iridium intends to implement a pricing strategy for its voice services
similar to the prevailing pricing structure for terrestrial wireless calls.
Prices for terrestrial wireless calls generally reflect two components -- a
charge based on the landline "dial-up" rate for a comparable call (primarily the
long distance charges) and a mobility premium for the convenience of wireless
service (including any roaming charges). Pricing for both IRIDIUM Satellite
Services and ICRS is expected to be based on this structure.
For international IRIDIUM Satellite Services calls, which Iridium expects
will constitute the majority of calls over the IRIDIUM satellite system, the
"dial-up" rate component will be designed to approximate the rates for
comparable landline point-to-point international long distance calls. Iridium
has analyzed and will continue to analyze published international direct dial
rates around the world as well as published international calling card rates of
many of the largest international telecommunications carriers in establishing
the "dial-up" rate component. Iridium intends to set the global mobility premium
with reference to the premium charged by other wireless services, including
cross-protocol international terrestrial wireless roaming services and competing
MSS systems.
Iridium will set the wholesale prices for its services to allow for a
suggested retail price that will approximate the "dial-up" plus mobility premium
price. Iridium's wholesale price will be designed to compensate Iridium, as the
network provider, and the originating and terminating gateways, as well as to
cover the PSTN tail charges. The home gateway will mark up the wholesale price
and the service provider will establish the final retail price. Iridium expects
that for international wireless calls, Iridium's suggested retail prices will be
competitive with other global MSS systems. In addition, from a regulatory
approval perspective in markets where the monopoly telecommunications provider
and the licensing authority are the same entity, a pricing strategy that takes
into account the "dial-up" alternatives allows Iridium to respond to concerns
that Iridium will capture the local monopoly provider's long-distance revenues
by undercutting terrestrial "dial-up" rates.
For ICRS pricing, the "dial-up" rate component is primarily the long
distance charge, if any, which will be passed through to the customer. The
mobility premium will be set to compensate the parties involved, primarily the
serving network for its airtime charges, the visited gateway for customer
authentication and Iridium for protocol translation services. The retail price
will include the markup of the home gateway and service provider. Iridium
believes that its ICRS suggested retail prices will be comparable to prices
charged by other cross-protocol roaming services.
In addition to airtime charges, IRIDIUM subscribers will pay a monthly
subscription fee in the same manner that terrestrial wireless customers pay
monthly charges. Iridium will permit service providers that are wireless network
operators to offer IRIDIUM Services as additional features to their existing
wireless services, permitting their customers to remain customers of the
wireless network and to roam onto the IRIDIUM System. These customers will pay a
feature charge to Iridium for the roaming privilege that will be significantly
below the IRIDIUM monthly subscription fee, but they will pay an additional
roaming premium for calls made over the IRIDIUM System.
Initially, Iridium paging subscribers will pay a fixed monthly subscription
fee for unlimited paging. Iridium expects to implement per page pricing after
commencement of commercial operations, with the cost per page based, in part, on
the size of the geographic area covered by the page. The monthly paging
subscription fees will be reduced for persons who are also subscribers to
IRIDIUM voice services.
Iridium's distribution strategy reflects its role as a wholesaler of
IRIDIUM Services and is primarily designed to leverage off established retail
distribution channels by using existing distributors of wireless services as
IRIDIUM service providers and marketing IRIDIUM Services to their
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<PAGE> 11
customers. Iridium will implement the distribution of IRIDIUM Services through
its gateway operators, all of which have agreed to become or to engage IRIDIUM
service providers within their exclusive gateway territories. IRIDIUM service
providers will generally have primary responsibility for marketing IRIDIUM
Services within their territories in accordance with marketing policies and
programs established by Iridium. They will also be responsible for customer
service, billing and collection. Iridium anticipates its gateway operators will
generally seek to utilize more than one method of distribution in their markets.
Iridium expects that its service providers also will include affinity partners
(e.g., airlines, hotels and car rental companies).
Iridium's marketing strategy is to position IRIDIUM as the premier brand in
global wireless communications services. Iridium believes that its principal
target markets -- traveling professional and corporate/industrial -- can be
accessed through established marketing channels, which will permit more
effective marketing compared to MSS systems targeting individuals in remote
areas where marketing opportunities and distribution channels are limited.
Iridium is coordinating with its gateway partners to determine the optimum
allocation of marketing expenditures based on the market analysis that Iridium
has conducted. Iridium plans to engage in direct marketing to certain markets,
such as the utility, oil and gas, mining and maritime industries. Iridium
believes that a coordinated and comprehensive global marketing strategy,
supported by its market research, will promote a consistent message and permit
Iridium to establish a global brand identity.
IRIDIUM'S INVESTOR GROUP
Iridium LLC is the parent and sole member of Iridium. Iridium's strategic
investors are members of Parent. See "Parent's Ownership Structure and Strategic
Investors." The IRIDIUM investor team includes enterprises from around the world
with skills and experience in developing, manufacturing, licensing and
distributing satellite and telecommunications products and services. IWCL, the
publicly held member of Parent, and the IRIDIUM strategic investors have
collectively invested, or committed to invest, approximately $3.26 billion in
Iridium (directly or indirectly through Parent), including equity, debt,
guarantees and the Reserve Capital Call (as defined). These investments
represent approximately 74% of Iridium's projected total funding needs through
September 23, 1998, the date on which Iridium expects to commence commercial
operations, and approximately 62% of Iridium's projected total funding needs
through December 31, 1999, the last year in which Iridium projects negative cash
flow and a net increase in year-end borrowings. By partnering with strategic
investors, Iridium benefits from the development, manufacturing and launch
expertise of leading worldwide satellite development and launch organizations
and from the wireless telecommunications distribution and regulatory expertise
of leading telecommunications companies. The IRIDIUM investor team includes
leading telecommunications companies in North America (Motorola, Sprint and BCE
Mobile Communications Inc.), Europe (STET and o.tel.o communications GmbH & Co.)
and Asia (DDI in Japan, UCOM in Thailand, P.T. Bakrie Communications Corporation
in Indonesia and SK Telecom in South Korea). Iridium expects that these
investors will use their wireless communications sales and services
organizations to market IRIDIUM Services and equipment in their territories,
which include their existing base of approximately 14 million wireless
subscribers. In addition, because of the prominence of many of these investors,
Iridium believes that their efforts to obtain necessary regulatory approvals
have been, and will continue to be, of great importance. The investor team also
includes organizations with significant satellite communications development,
manufacturing and launch expertise including Raytheon, Lockheed Martin, Nuova
Telespazio ("Telespazio"), Khrunichev and China Aerospace. Iridium expects
subscriber equipment for use with the IRIDIUM System will be manufactured and
sold by Motorola and Kyocera, two of the world's leading manufacturers of
wireless phones.
IWCL was formed to act as a publicly held member of Parent and to have no
other business. On June 13, 1997, the IWCL IPO was consummated, whereby IWCL
issued 12,000,000 shares of its Class A Common Stock and applied the net
proceeds of approximately $225 million to purchase 12,000,000 Class 1 Interests
in Parent ("Class 1 Interests"). In connection with the IWCL IPO,
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<PAGE> 12
IWCL was admitted as a member of Parent and IWCL owns approximately 8.5% of the
outstanding Class 1 Interests. See "Parent's Ownership Structure and Strategic
Investors" and "Certain Matters Regarding Relationship Among IWCL, Parent and
Iridium."
PROGRESS TO DATE
Iridium, Motorola and the various gateway owners have made substantial
progress in the development and implementation of the IRIDIUM System and related
activities and expect to commence global commercial service on schedule in
September 1998. Satellite hardware development is substantially complete. The
first five IRIDIUM satellites were launched on May 5, 1997 on a Delta II launch
vehicle and the next seven IRIDIUM satellites were launched on June 18, 1997 on
a Proton launch vehicle. Altogether, Iridium completed nine launches in 1997,
for a total of 46 IRIDIUM satellites in orbit (approximately two-thirds of the
expected constellation of 66 operational and six spare satellites). In early
July, the IRIDIUM System logged its first test paging message to a prototype
pager from orbiting satellites. In addition, the north-south and east-west
satellite cross-links have been tested using data packets and limited voice
testing has occurred.
As of the date of this Prospectus, Iridium had successfully launched 46
IRIDIUM satellites; however, on July 18, 1997, Iridium was informed by Motorola
that Motorola had lost communications with one of five IRIDIUM satellites
launched on July 9, 1997. In October 1997, Motorola informed Iridium that it
experienced a problem controlling one of the IRIDIUM satellites. Iridium has
been advised by Motorola that should loss of either satellite be confirmed,
Iridium will not bear the financial risk of loss, nor will it affect the
scheduled date for commercial service in September 1998. See "Risk
Factors -- Potential for Delay and Cost Overruns -- Deployment of Satellites,"
"-- Limited Life of Satellites; Cost of Maintaining the Space Segment; Risk of
Satellite Failure or Damage" and "-- Satellite Launch Risks -- Number of
Launches; Compressed Launch Schedule."
Motorola has completed construction of most of the terrestrial facilities
necessary to command the in-space movements of the IRIDIUM System's satellites,
including the Master Control Facility and the associated tracking, telemetry and
command ("TT&C") facilities. The construction of nine of the 12 gateway
facilities is substantially complete and the telecommunications equipment has
been installed at six locations and is in the process of being installed at
three other locations. Equipment procurement has commenced for three other
gateways pursuant to gateway equipment purchase agreements with Motorola. Of
these remaining gateways, two are significantly behind schedule with the
construction of, and equipment procurement for, their gateways. Motorola has
produced a functional, unminiaturized prototype of the IRIDIUM phone, and
Motorola has produced a functional prototype of the IRIDIUM belt-worn pager.
Iridium has also made substantial progress in the development of its IRIDIUM
business support systems, which will be used for the provision of its billing
and customer support functions. See "Risk Factors" for a description of the
risks that could impair the ability of Iridium to commence commercial operations
on schedule in September 1998.
Iridium has made significant progress to date in securing the worldwide
regulatory approvals necessary to build and operate the IRIDIUM System. At the
1992 World Administrative Radio Communication Conference ("WARC-92"), the
International Telecommunications Union (the "ITU") allocated 16.5 MHZ of
spectrum in the 1610-1626.5 MHZ band to MSS systems. The U.S. Federal
Communications Commission (the "FCC") conditionally assigned the IRIDIUM System
exclusive use of 5.15 MHZ of the 16.5 MHZ for use in the United States. The
space segment of the IRIDIUM System has been licensed in the United States.
Iridium believes that coordination through the ITU has been completed
successfully between the IRIDIUM System and all existing or planned systems that
have been identified under the ITU's coordination process. No other action is
required from any other country to license the space segment. Seven licenses and
two experimental licenses to build and operate gateways have been received. Each
country in which Iridium intends to operate must authorize use of IRIDIUM
subscriber equipment, including allocation of subscriber link frequencies. The
FCC has issued a conditional license covering IRIDIUM Satellite Services in the
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<PAGE> 13
United States and 15 additional countries have granted conditional licenses for
IRIDIUM Satellite Services in their respective countries. Iridium's gateway
owners are dedicating substantial effort to obtaining licensing for IRIDIUM
Satellite Services in the countries in their service territories with particular
focus on obtaining licenses by the commencement of commercial operations in
those countries which are expected to account for most of the demand for and
usage of IRIDIUM Services. See "Risk Factors -- Risks Associated with Licensing
and Spectrum Allocation -- Significant Regulatory Approvals Required for
Operation of the IRIDIUM System," "-- Significant Remaining Regulatory
Approvals" and "Regulation of Iridium" for a discussion of the conditions to
these licenses and the additional regulatory approvals outside the United States
that remain to be obtained.
BUSINESS STRATEGY
Iridium's strategy is to launch and operate the premier global mobile
wireless network. The key components of this strategy are set forth below:
Provide a unique service package to traveling professionals enabling them
to be reached and make calls virtually anywhere in the world. IRIDIUM Satellite
Services will complement terrestrial wireless services and provide the traveling
professional with communications capability in areas where terrestrial wireless
service is unavailable, inconvenient, of poor quality or unreliable. Iridium
intends to offer ICRS and global paging as complements to IRIDIUM Satellite
Services and as stand-alone services. Iridium believes that it will be the only
wireless communications system in operation prior to 2000 that will be able to
offer virtually global mobile voice and paging services, including:
- Global coverage. An IRIDIUM subscriber will generally have worldwide
wireless coverage wherever IRIDIUM Services are authorized, including
mid-ocean and remote areas. The availability of the IRIDIUM Satellite
Service will not be limited by the customer's proximity to a gateway.
Iridium believes this feature will make its Satellite Services
particularly well suited for aeronautical and shipping communications and
for service in land areas where LEO MSS systems using "bent pipe"
technology are not expected to have the more extensive gateway
infrastructure needed by such systems to provide global coverage.
- Convenient roaming onto terrestrial wireless networks. Iridium will
offer subscribers a combination of IRIDIUM Satellite Services and ICRS.
With the addition of ICRS, customers will be able to overcome (i) the
incompatibility of differing wireless protocols and (ii) the service
limitations of satellite-only voice services in buildings and urban
canyons. Iridium expects to be able to deliver all of its voice services
with one phone, one phone number and one customer bill.
- Global paging with belt-worn pagers. The IRIDIUM belt-worn pager will
have the capability of receiving alphanumeric messages of up to 63
characters and numeric messages of up to 20 digits virtually anywhere in
the world. With Iridium's global paging, users of IRIDIUM Satellite
Services or ICRS will generally be able to update their location on the
IRIDIUM System by briefly turning on their phone, thereby allowing the
IRIDIUM System to send a targeted page. Iridium believes that it will be
the first company, and the only company prior to 2000, which will offer
global paging to a belt-worn pager.
- Greater signal strength. The IRIDIUM System is designed to provide
greater signal strength than proposed competing MSS systems. Iridium
believes this greater signal strength will allow it to better serve
hand-held phones, and provide a higher degree of in-building signal
penetration for pagers, than competing MSS systems.
Be the first to market with a global wireless communications
system. Iridium plans to capitalize on the substantial design, development,
fabrication and testing efforts and financial investment to date of its
strategic investors to bring IRIDIUM Services to market at the earliest
practicable date,
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which is currently expected to be September 1998. Iridium believes that it will
be the only wireless communications system in operation prior to 2000 that will
be able to offer global mobile voice and paging services in each country in
which IRIDIUM Services are authorized.
Adapt proven technologies through an industrial team led by Motorola. The
IRIDIUM System adapts proven technology, including GSM cellular call processing
technology, intersatellite links, FDMA/TDMA radio transmission technology, a
2,400 bps vocoder and business support software. Iridium believes that the
primary technological challenge is the integration of these proven technologies
into a single system. Motorola, the principal investor in Iridium, is a leading
international provider of wireless communications systems, cellular phones,
pagers, semiconductors and other electronic equipment. The industrial team
assembled by Motorola to build and deliver in orbit the IRIDIUM System consists
of major companies experienced in aerospace and telecommunications, including
Telespazio, Lockheed Martin, Raytheon, Boeing, Khrunichev and China Aerospace.
Capitalize on the strengths of its strategic investors. A number of the
IRIDIUM strategic investors provide telecommunications services in various parts
of the world and have significant operating, regulatory and marketing experience
in their service territories. Iridium expects that its investors with existing
wireless communications sales and service organizations will use these
organizations to market and distribute IRIDIUM Services and equipment to
potential subscribers. Because of the prominence of many of these investors,
Iridium believes that their efforts to obtain the necessary regulatory approvals
have been, and will continue to be, of great importance.
Utilize existing wireless distribution channels. Iridium's strategy is to
target primarily traveling professionals, who are generally wireless phone
users. Iridium's strategy is to provide customers with an enhancement to their
existing terrestrial wireless service through existing marketing and
distribution channels rather than to focus on individuals who have no or limited
landline or wireless communications experience and live in areas where no
marketing and distribution channels currently exist.
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SOURCES AND USES OF FUNDS BY IRIDIUM
The following table describes the currently estimated sources and uses of
funds by Iridium from inception of its predecessor through September 23, 1998
(the date on which Iridium expects to commence commercial operations).
Significant additional funds will be needed to cover Iridium's cash needs prior
to its expected generation of positive cash flow from operations. The projection
of total sources and total uses of funds is forward looking and could vary,
perhaps substantially, from actual results, due to events outside Iridium's
control, including unexpected costs and unforeseen delays. See "Risk
Factors -- Risk of Error in Forward Looking Statements."
PRE-OPERATIONAL PERIOD(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDS
- ------------------------------------
<S> <C>
Secured Bank Facility(2)............ $ 705
The Notes(3)........................ 293
The Units and Series B Notes(4)..... 745
Guaranteed Bank Facility(5)......... 445
14 1/2% Senior Subordinated Notes
due in 2006....................... 238
Series A Class 2 Interests of
Parent(6)......................... 31
Class 1 Interests of Parent(7)...... 1,951
------
Total Pre-operational
Sources...................... $4,408
======
Additional Amounts Available Under
Secured Bank Facility............. $ 45
<CAPTION>
USE OF FUNDS
- ------------------------------------
<S> <C>
Space System Contract(8)............ $3,450
Terrestrial Network Development
Contract(9)....................... 151
Business Support Systems and other
Expenditures(10).................. 177
Net Interest and Financing
Costs(11)......................... 253
Net Expenses and Working
Capital(12)....................... 377
------
Total Pre-operational Net
Uses......................... $4,408
======
</TABLE>
- ---------------
(1) Assumes that the IRIDIUM System will commence commercial operations on
September 23, 1998. Iridium anticipates total cash needs of $5.3 billion
(net of assumed revenues following commencement of commercial operations)
through year-end 1999, the last year in which Iridium projects negative
cash flow and a net increase in year-end borrowings. Many factors,
including Iridium's ability to generate significant revenues, could affect
this estimate. See "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Iridium currently
expects to satisfy its additional funding requirements through the
incurrence of debt. Iridium expects to seek secured bank financing in
addition to the Guaranteed Bank Facility and the Secured Bank Facility (as
defined) in order to meet its expected funding requirements following the
commencement of commercial operations. Such additional bank financing may
require credit support from the IRIDIUM strategic investors, vendors or
others for which Iridium will be required to pay compensation. There can be
no assurance that such additional bank financing will be obtained by
Iridium on terms and conditions that are acceptable to it, and if such
additional bank financing is unavailable, there can be no assurance that
Iridium will be able to obtain alternative financing on terms and
conditions acceptable to it. Among other things, the availability of any
financing is subject to market conditions at the time of any proposed
financing. See "Risk Factors -- Significant Additional Funding Needs," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(2) Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the
investment banking division of Barclays Bank PLC, and a syndicate of
lenders with respect to a senior bank facility in a principal amount of $1
billion (the "Secured Bank Facility"), of which $250 million is not
available prior to the defined commercial activation date. The Secured Bank
Facility is to be secured by substantially all of Iridium's assets. The
Secured Bank Facility is to be further secured by the Reserve Capital Call
(as defined) and all of the membership interests in Iridium. See
"Description of Other
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Indebtedness -- Secured Bank Facility." The availability of funds under the
Secured Bank Facility is subject to significant conditions, including
technical conditions relating to the IRIDIUM System, conditions relating to
regulatory approvals and conditions relating to other financing sources.
Borrowings under the Secured Bank Facility mature on September 30, 1998,
subject to Iridium's right to extend such maturity up to June 30, 1999 if
it can demonstrate by July 1, 1998 that it has sufficient available or
committed funding for the budgeted project costs through such extended
maturity. See "Description of Other Indebtedness."
(3) Reflects the net proceeds to Parent from the Original Offering, after
deducting the expenses of the Original Offering and the discount to the
Initial Purchasers.
(4) Reflects the net proceeds received directly or indirectly by Parent from
the offering of (i) 300,000 Units, each consisting of $1,000 principal
amount of Series A Notes and one Warrant, representing the right to
purchase 5.2 shares of Class A Common Stock of IWCL, and (ii) $500,000,000
aggregate principal amount of Series B Notes. See "Description of Other
Indebtedness."
(5) As of December 31, 1997, Iridium had drawn $210 million under a $450
million unsecured borrowing facility with a syndicate of banks (the
"Guaranteed Bank Facility"). Borrowings under the Guaranteed Bank Facility
are guaranteed by Motorola (the "Motorola Guarantee"). A portion of the
proceeds of the Initial Senior Notes and the Original Notes was used to
permanently reduce the Guaranteed Bank Facility from $750 million to $450
million. Depending on market conditions, Iridium may make additional senior
note offerings in order to further reduce the Guaranteed Bank Facility. The
Guaranteed Bank Facility matures on June 30, 1999. Pursuant to a Memorandum
of Understanding, dated July 11, 1997, between Parent and Motorola and
modified to apply to Iridium in connection with the Asset Drop-Down
Transaction (the "Motorola MOU"), Motorola agreed to extend the Motorola
Guarantee until after the stated maturity of the Initial Senior Notes
(which is the same date as the Stated Maturity of the Notes) if the
Guaranteed Bank Facility is so extended. There can be no assurance,
however, that the bank lenders would agree to extend the term of the
Guaranteed Bank Facility if requested by Iridium. Pursuant to the Motorola
MOU, Motorola has conditionally agreed that Motorola will guarantee up to
$350 million of additional Indebtedness (including principal and interest)
of Iridium under the Guaranteed Bank Facility or another credit agreement
with the same terms (the "Motorola Additional Guarantee"), provided that
borrowings under such additional Indebtedness are made prior to February
28, 1999. For a description of the Motorola MOU and the Motorola Additional
Guarantee see "Certain Relationships and Related Transactions of
Iridium -- Motorola Related Matters -- Motorola MOU and Agreement Regarding
Guarantee." There can be no assurance that the bank lenders would agree to
increase the amount of their commitments under the Guaranteed Bank Facility
in respect of the Motorola Additional Guarantee. See "Description of Other
Indebtedness."
(6) The Series A Class 2 Interests of Parent pay a 14 1/2% dividend which, at
the option of Parent may be paid in-kind until 2001 and paid in cash
thereafter. The Series A Class 2 Interests are convertible at any time into
Class 1 Interests. If all dividends permitted to be paid in-kind are paid
in-kind, at the time when the Series A Class 2 Interests convert to a cash
dividend, there will be 62,668 Series A Class 2 Interests outstanding
convertible into 1,159,985 Class 1 Interests, subject to anti-dilution
adjustments. The Series A Class 2 Interests are not obligations of Iridium.
(7) Includes approximately $224 million net proceeds to Parent from the
issuance of Class 1 Interests in connection with the IWCL IPO consummated
on June 13, 1997. Includes $49 million due from South Pacific Iridium
Holdings Limited ("SPI"), an affiliate of P.T. Bakrie Communications
Corporation, an Indonesian corporation, pursuant to a definitive purchase
agreement under which SPI purchased 7,500,000 Class 1 Interests at $13.33
per Class 1 Interest on May 30, 1997. SPI paid $40 million on May 30, 1997.
Payment of the second installment
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occurred on August 26, 1997, and a partial prepayment of the third
installment in the amount of $9 million (including interest) occurred on
September 9, 1997. The outstanding amount of $48.8 million becomes due on
May 15, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(8) As of December 31, 1997, $2.86 billion of this amount had been incurred.
See "Risk Factors -- Potential for Delay and Cost Overruns," "-- Risks
Associated with Principal Supply Contracts" and "-- Satellite Launch
Risks -- Impact of Excusable Delays."
(9) As of December 31, 1997, $138 million of this amount had been incurred. The
total cost of the Terrestrial Network Development Contract is estimated to
be approximately $284 million, with approximately $133 million of such
total due at or after September 23, 1998, the expected date of the
commencement of commercial operations. See "Risk Factors -- Risks
Associated with Principal Supply Contracts."
(10) As of December 31, 1997, $82 million of this amount had been incurred. See
"Risk Factors -- Potential for Delay and Cost Overruns -- Development and
Implementation of Software."
(11) Based on assumed interest payment obligations, interest rates and borrowing
levels and Iridium's estimates of associated costs. Actual interest and
financing costs will depend upon applicable interest rates and the amount
and timing of actual borrowings.
(12) Comprised of operating expenses of $607 million and net of interest income
of $18 million and working capital of $212 million.
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<PAGE> 18
THE EXCHANGE OFFER
The Exchange Offer......... The Issuers are offering to exchange (the "Exchange
Offer") up to $300,000,000 aggregate principal
amount of 11 1/4% Senior Notes due 2005, Series
C/EN (the "Exchange Notes"), which have been
registered under the Securities Act, for up to
$300,000,000 aggregate principal amount of
outstanding 11 1/4% Senior Notes due 2005, Series C
(the "Original Notes"). Upon consummation of the
Exchange Offer, the terms of the Exchange Notes
will be substantially identical in all material
respects (including principal amount, interest
rate, maturity and ranking) to the terms of the
Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the
Exchange Notes will be freely transferable by
holders thereof except as provided herein (see "The
Exchange Offer -- Terms of the Exchange" and
"-- Terms and Conditions of the Letter of
Transmittal"). The Exchange Notes will be issued
without any covenant regarding exchange or
registration under the Securities Act.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an "affiliate" of an Iridium
Party within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired
Original Notes exchanged for such Exchange Notes
directly from an Iridium Party or (iii)
broker-dealers who acquired Original Notes
exchanged for such Exchange Notes as a result of
market making or other trading activities) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holders' business and such
holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding
with any person to participate in, a distribution
of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for
its own account in exchange for Original Notes,
where such Original Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
See "Plan of Distribution."
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 unless
extended (the "Expiration Date").
Exchange Date.............. The first date of acceptance for exchange for the
Original Notes will be the first business day
following the Expiration Date upon surrender of
validly tendered Original Notes.
Conditions to the Exchange
Offer.................... The obligation of the Issuers to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer --
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<PAGE> 19
Conditions to the Exchange Offer." The Issuers
reserve the right to terminate or amend the
Exchange Offer at any time prior to the Expiration
Date upon the occurrence of any such condition.
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
Procedures for Tendering
Original Notes........... To participate in the Exchange Offer, holders of
Original Notes must tender by (a) book-entry
transfer pursuant to the procedures set forth under
"The Exchange Offer -- How to Tender" or (b)
forwarding certificates representing such Original
Notes with the Letter of Transmittal. Holders who
are participants in DTC (as defined) tendering by
book-entry transfer must execute such tender
through the DTC's ATOP (as defined) procedures. A
holder using ATOP should transmit its acceptance to
DTC on or prior to the Expiration Date. DTC will
verify such acceptance, execute a book-entry
transfer of the tendered Original Notes into the
Exchange Agent's account at DTC and then send to
the Exchange Agent confirmation of such book-entry
transfer, including an Agent's Message (as defined)
confirming that DTC has received an express
acknowledgment from such holder that such holder
has received and agrees to be bound by the Letter
of Transmittal and that the Iridium Parties may
enforce the Letter of Transmittal against such
holder. The book-entry confirmation (as defined)
must be received by the Exchange Agent in order for
the tender relating thereto to be effective.
If the tender is not made through ATOP,
certificates for such Original Notes, as well as
the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any
required signature guarantees, and any other
documents required by the Letter of Transmittal,
must be received by the Exchange Agent at its
address set forth in the Letter of Transmittal on
or prior to the Expiration Date in order for such
tender to be effective. See "The Exchange
Offer -- How to Tender."
Letters of Transmittal and certificates
representing Original Notes should not be sent to
any of the Iridium Parties. Such documents should
only be sent to the Exchange Agent. Questions
regarding how to tender and requests for
information should be directed to the Exchange
Agent. See "The Exchange Offer -- Exchange Agent."
Federal Income Tax
Consequences............. The exchange of Original Notes for Exchange Notes
by Note Holders should not constitute a taxable
exchange for federal income tax purposes, and
holders should not recognize any taxable gain or
loss or any interest income as a result of such
exchange. See "Tax Considerations."
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<PAGE> 20
Effect on Holders of
Original Notes............. As a result of the making of this Exchange Offer,
and upon acceptance for exchange of validly
tendered Original Notes pursuant to the terms of
this Exchange Offer, the Iridium Parties will have
fulfilled a covenant contained in the Exchange and
Registration Rights Agreement (the "Exchange and
Registration Rights Agreement"), dated as of
October 17, 1997, among Iridium LLC ("Iridium LLC"
or "Parent"), Capital, IP, Roaming, Chase
Securities Inc. and Merrill Lynch, Pierce, Fenner
and Smith Incorporated (the "Initial Purchasers")
and, accordingly, the holders of the Original Notes
will have no further registration or other rights
under the Exchange and Registration Rights
Agreement, except under certain limited
circumstances. See "Exchange and Registration
Rights Agreement." Holders of the Original Notes
who do not tender their Original Notes in the
Exchange Offer will continue to hold such Original
Notes and will be entitled to all the rights and
limitations applicable thereto under the indenture,
dated as of October 17, 1997, among Parent,
Capital, IP, Roaming, and State Street Bank and
Trust Company, as Trustee (the "Trustee"), relating
to the Original Notes and the Exchange Notes (as
supplemented by the first supplemental indenture,
dated as of December 18, 1997, among the Iridium
Parties and the Trustee giving effect to the
substitution of Iridium for Parent, the
"Indenture"). All untendered, and tendered but
unaccepted, Original Notes will continue to be
subject to the restrictions on transfer provided
for in such Original Notes and the Indenture. To
the extent that Original Notes are tendered and
accepted in the Exchange Offer, the trading market,
if any, for the Original Notes could be adversely
affected. See "Risk Factors -- Consequences of
Failure to Exchange."
TERMS OF THE NOTES
The Exchange Offer applies to $300,000,000 aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes except that the Exchange Notes will be
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will be issued without any
covenant regarding exchange or registration under the Securities Act. The
Exchange Notes will evidence the same debt as the Original Notes and will be
entitled to the benefits of the Indenture. See "Description of Notes."
Issuers.................... Iridium Operating LLC (as successor to Parent), a
Delaware limited liability company ("Iridium"), and
Iridium Capital Corporation, a Delaware
corporation. As a result of the Asset Drop-Down
Transaction and the related supplemental indenture,
Iridium has been substituted for Parent, and Parent
has been released from all obligations under the
Indenture and the Notes.
Maturity Date.............. July 15, 2005.
Principal Amount of
Notes...................... $300,000,000.
Interest Payment Dates..... Interest on the Notes will accrue from October 17,
1997 at an annual rate of 11 1/4%. Interest on each
Note will be payable semi-annually in arrears on
January 15 and July 15 of each year, commencing
January 15, 1998.
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<PAGE> 21
Security................... None.
Optional Redemption........ Except as described below, the Issuers may not
redeem the Notes prior to July 15, 2002. On or
after such date, either Issuer may redeem the
Notes, in whole or in part, at any time at the
redemption prices set forth herein, together with
accrued and unpaid interest and Liquidated Damages,
if any, to the date of redemption.
At any time and from time to time on or prior to
July 15, 2000, either Issuer may, subject to
certain requirements, redeem in the aggregate up to
33 1/3% of the original aggregate principal amount
of the Notes with the cash proceeds to Iridium of
one or more Equity Offerings (as defined) at a
redemption price equal to 111.250% of the principal
amount of the Notes being redeemed, plus accrued
and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption; provided that at
least 66 2/3% of the original aggregate principal
amount of the Notes must remain outstanding
immediately after each such redemption. See
"Description of Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined), each holder of Notes will have the option
to require the Issuers to repurchase all or a
portion of such holder's Notes at 101% of the
principal amount of the Notes, plus accrued and
unpaid interest and Liquidated Damages, if any, to
the purchase date. However, certain highly
leveraged transactions may not be deemed to be a
Change of Control, including, without limitation,
transactions with affiliates which comply with the
other covenants included in the Indenture. See
"Description of Notes -- Change of Control."
Additionally, there can be no assurance that the
Issuers will have the financial resources necessary
to repurchase the Notes upon a Change of Control.
See "Risk Factors -- Change of Control" and
"Description of Notes -- Change of Control."
Subsidiary Guaranties...... The Notes will be fully guaranteed on an unsecured,
senior basis by all present or future Guarantor
Subsidiaries. Iridium currently has no subsidiaries
other than Capital, Roaming and IP. Roaming and IP
are Guarantor Subsidiaries. See "Description of
Notes -- Subsidiary Guarantees" and "-- Certain
Covenants -- Future Guarantor Subsidiaries."
Ranking.................... The Notes will be senior obligations of the
Issuers. The Notes will rank pari passu in right of
payment with the Initial Senior Notes and all other
existing and future senior Indebtedness of the
Issuers, other than any Subordinated Obligations
(as defined). The Notes will be effectively
subordinated to any secured Indebtedness of the
Issuers to the extent of the value of the assets
securing such Indebtedness. The Subsidiary
Guarantees will be unsecured, senior obligations of
the Guarantor Subsidiaries. As of December 31,
1997, the Iridium Parties had outstanding
approximately $1,550 million in unsecured senior
Indebtedness (including the principal amount of the
Initial Senior Notes) and approximately $273
million in Indebtedness that is subordinated to the
Notes. As of December 31, 1997, Iridium had
outstanding approxi-
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<PAGE> 22
mately $350 million in secured indebtedness
(borrowed but held in a collateral account for the
benefit of the lenders under the Secured Bank
Facility). See "Use of Proceeds," "Description of
Other Indebtedness" and "Risk
Factors -- Significant Additional Funding Needs."
Restrictive Covenants...... The Indenture limits (i) the incurrence of
additional Indebtedness by Iridium and the
Restricted Subsidiaries (as defined); (ii) the
payment of dividends on, and redemption of, Capital
Stock (as defined) of Iridium and the Restricted
Subsidiaries and the redemption of certain
Subordinated Obligations (as defined) of Iridium
and the Restricted Subsidiaries; (iii) certain
other restricted payments, including certain
investments; (iv) sales of assets and Restricted
Subsidiary stock; (v) certain transactions with
affiliates; (vi) the sale or issuance of capital
stock of Restricted Subsidiaries; (vii) the
creation of liens; (viii) the lines of business in
which Iridium and the Restricted Subsidiaries may
operate; and (ix) consolidations, mergers and
transfers of all or substantially all of the
Issuers' assets. The Indenture will also prohibit
certain restrictions on distributions from
Restricted Subsidiaries. However, all of these
limitations and prohibitions are subject to a
number of important qualifications and exemptions.
See "Description of Notes -- Certain Covenants" and
"-- Merger and Consolidation."
Registration Rights........ Pursuant to the Exchange and Registration Rights
Agreement (as defined), the Iridium Parties have
agreed (i) to file a registration statement within
90 days after the Issue Date (as defined) with
respect to an offer to exchange the Original Notes
(the "Exchange Offer") for a series of notes of the
Issuers with terms substantially identical in all
material respects to the Original Notes (the
"Exchange Notes") and (ii) to use their reasonable
efforts to cause the registration statement to be
declared effective by the Commission within 180
days after the Issue Date. In certain
circumstances, the Iridium Parties will be required
to provide a shelf registration statement to cover
resales of the Notes by certain holders. The
Registration Statement of which this Prospectus
forms a part was filed on January , 1998 to
fulfill the Iridium Parties' obligations under
clause (i) of the preceding sentence, and the sole
purpose of the Exchange Offer is to fulfill the
obligations of the Iridium Parties with respect to
the Exchange and Registration Rights Agreement. If
the Issuers and the Guarantor Subsidiaries do not
comply with their obligations under the Exchange
and Registration Rights Agreement, the Issuers will
pay Liquidated Damages to each Holder of Original
Notes as and to the extent described therein. See
"Exchange and Registration Rights Agreement."
Transfer Restrictions;
Absence of a Public Market
for the Notes............ The Original Notes have not been registered under
the Securities Act and are subject to restrictions
on transferability and resale. The Original Notes
are new securities and there is currently no
established market for them. If issued, the
Exchange Notes gener-
16
<PAGE> 23
ally will be freely transferable (subject to the
restrictions discussed elsewhere herein) but will
be new securities for which there initially will be
no market. Accordingly, there can be no assurance
as to the development or liquidity of any market
for the Original Notes or, if issued, the Exchange
Notes. The Original Notes are eligible for trading
in the PORTAL market. The Initial Purchasers have
advised the Issuers that they currently intend to
make a market in the Original Notes and, if issued,
the Exchange Notes. However, they are not obligated
to do so, and any market making with respect to the
Original Notes or, if issued, the Exchange Notes
may be discontinued without notice. The Issuers do
not intend to apply for listing of the Original
Notes or, if issued, the Exchange Notes on any
national securities exchange or for their quotation
through the Nasdaq National Market (the "NNM").
RISK FACTORS
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY HOLDERS OF
NOTES IN CONNECTION WITH THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON
PAGE 18.
17
<PAGE> 24
RISK FACTORS
The following risk factors, in addition to the other information contained
elsewhere in this Prospectus, should be carefully considered by holders of the
Original Notes in connection with the Exchange Offer.
DEVELOPMENT STAGE COMPANY; ABSENCE OF REVENUES
Iridium is a development stage enterprise with no operating history.
Prospective investors have no operating and financial data about the IRIDIUM
System on which to base an evaluation of the IRIDIUM System's performance and an
investment in the Notes. Through December 31, 1997, Iridium had realized
cumulative net losses of approximately $427 million and expects to realize
significant net losses at least until some time after the IRIDIUM System
commences commercial operations, which is currently anticipated to be September
23, 1998. Through December 31, 1997, Iridium had incurred expenditures totaling
$2.86 billion to Motorola under the Space System Contract and expenditures
totaling $138 million under the Terrestrial Network Development Contract, in
respect of completed milestones. The completion and maintenance of the IRIDIUM
System and implementation of commercial service will require significant
additional expenditures of funds. Iridium currently has no source of revenues
other than nominal interest income. No assurances can be given that, or when,
the IRIDIUM System will become commercially operational, or that, or when,
Iridium will have revenues from operations sufficient to service its debt
obligations. Until such time as Iridium develops sufficient revenues from
operations, Iridium will rely on additional debt to satisfy its debt service
obligations.
SIGNIFICANT ADDITIONAL FUNDING NEEDS
Iridium anticipates total cash funding requirements of approximately $4.408
billion through September 23, 1998, the date on which Iridium expects to
commence commercial operations, and $5.3 billion (net of assumed revenues
following commercial activation) through year-end 1999, the last year in which
Iridium projects negative cash flow and a net increase in year-end borrowings.
On June 13, 1997, the IWCL IPO was consummated. The net proceeds of the IWCL IPO
were approximately $224 million. As of December 31, 1997, Iridium had indirectly
received net proceeds of $1.982 billion from equity investments in Parent,
including the net proceeds of the IWCL IPO and $42 million due from SPI pursuant
to the terms of a definitive purchase agreement. At December 31, 1997, Iridium's
debt equaled approximately $1.89 billion, including borrowings under the $450
million (reduced from $750 million with net proceeds of the Initial Senior Notes
and the Original Notes) Guaranteed Bank Facility and $350 million which Iridium
was required to borrow but hold in a collateral account for the benefit of the
lenders under the Secured Bank Facility. Borrowings under the Guaranteed Bank
Facility are guaranteed by the Motorola Guarantee. Depending on market
conditions, Iridium may make additional senior note offerings in order to
further reduce the Guaranteed Bank Facility. Pursuant to the Motorola MOU,
however, Motorola has conditionally agreed that, after giving effect to all
permanent reductions in the Guaranteed Bank Facility resulting from senior note
offerings, Motorola will guarantee up to $350 million of additional Indebtedness
(including principal and interest) under the Guaranteed Bank Facility or another
credit facility on identical terms, provided that borrowings under such
additional Indebtedness are made on or prior to February 28, 1999. Borrowings
under the Guaranteed Bank Facility mature on June 30, 1999. Pursuant to the
Motorola MOU, Motorola agreed to extend the Motorola Guarantee (including the
Motorola Additional Guarantee, if committed) until after the Stated Maturity (as
defined) of the Initial Senior Notes (which is the same date as the Stated
Maturity of the Notes) if the Guaranteed Bank Facility is so extended. Iridium
believes it would be able to increase the Guaranteed Bank Facility if it so
requests. There can be no assurance, however, that the bank lenders would agree
to extend the term of the Guaranteed Bank Facility, that such bank lenders would
agree to any such requested increase or that any such other identical credit
facility would be available. See "Certain
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<PAGE> 25
Relationships and Related Transactions of Iridium -- Motorola Related
Matters -- Motorola MOU and Agreement Regarding Guarantee" and "Description of
Other Indebtedness."
Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders for a senior
bank facility in a principal amount up to $1 billion, of which $250 million is
not available prior to the defined commercial activation date. The Secured Bank
Facility is to be secured by substantially all of Iridium's assets and by
Parent's ownership interest in Iridium. The Secured Bank Facility is to be
further secured by the Reserve Capital Call (as defined) and all of Parent's
membership interests in Iridium. Iridium's Subsidiaries will also guarantee
Iridium's obligations thereunder. The availability of funds under the Secured
Bank Facility is subject to significant conditions, including technical
conditions relating to the IRIDIUM System, conditions relating to regulatory
approvals and conditions relating to other financing sources. Borrowings under
the Secured Bank Facility will mature on September 30, 1998, subject to
Iridium's right to extend such maturity up to June 30, 1999 if it can
demonstrate by July 1, 1998 that it has sufficient available or committed
funding for the budgeted project costs through such extended maturity. See
"Description of Other Indebtedness." Assuming approximately $445 million of
borrowings under the Guaranteed Bank Facility and $705 million under the Secured
Bank Facility, Iridium expects to have sufficient cash to meet its anticipated
funding requirements through September 23, 1998, the date on which Iridium
expects to commence commercial operations. Iridium expects to seek other senior
secured bank financing in order to meet its expected funding requirements
through at least year-end 1999, the last year in which Iridium projects negative
cash flow and a net increase in year-end borrowings. There can be no assurance,
however, that funds under the Secured Bank Facility will be available to
Iridium, or that any such other bank financing will be obtained by Iridium on
terms and conditions acceptable to it, and, if any of such financing is
unavailable, there can be no assurance that Iridium will be able to obtain
alternative financing on terms and conditions acceptable to it. Iridium's
estimated funding requirements do not reflect any contingency amounts and
therefore those requirements will increase, perhaps substantially, in the event
of unexpected cost increases or schedule delays.
RISK OF HIGHLY LEVERAGED CAPITAL STRUCTURE
Iridium is a development stage company with a highly leveraged capital
structure and expects to incur substantial additional Indebtedness, including
secured indebtedness. As of December 31, 1997, the Iridium Parties had
outstanding approximately $1,550 million in aggregate principal amount of
unsecured senior Indebtedness (including the principal amount of the Initial
Senior Notes) and approximately $273 million in aggregate principal amount of
Indebtedness that is subordinated to the Notes. See "Use of Proceeds." As of
December 31, 1997, the Iridium Parties had approximately $350 million senior
secured Indebtedness outstanding which Iridium was required to borrow but hold
in a collateral account for the benefit of the lenders under the Secured Bank
Facility. Iridium expects to incur additional secured Indebtedness permitted by
the Indenture, including an aggregate principal amount of $1 billion (inclusive
of the existing $350 million) pursuant to the Secured Bank Facility and other
senior secured bank financing in order to meet its expected funding requirements
through at least year-end 1999, the last year in which Iridium projects negative
cash flow and a net increase in year-end borrowings. See "Description of Other
Indebtedness" and "Description of Notes -- Certain Covenants." The amount of
debt needed to finance the IRIDIUM System could be increased by one or more
factors outside the control of Iridium, including cost increases related to the
acquisition of the IRIDIUM System, a delay in the delivery date of the system
and increases in prevailing market interest rates. Subject to restrictions in
the Indenture, the Guaranteed Bank Facility, the Motorola MOU and the Secured
Bank Facility, Iridium may incur additional Indebtedness from time to time,
including secured and other senior Indebtedness. Iridium currently has no
significant income-producing assets from which to service the Notes or any other
indebtedness. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Certain
Relationships
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<PAGE> 26
and Related Transactions of Iridium -- Motorola Related Matters -- Motorola MOU
and Agreement Regarding Guarantee," "Description of Other Indebtedness" and
"Description of Notes -- Certain Covenants -- Limitation on Indebtedness" and
"-- Limitation on Liens."
Iridium's current and future debt service requirements could have important
consequences to the holders of the Notes, including the following: (i) Iridium's
limited ability to obtain additional financing for future working capital needs
or for other purposes; (ii) a substantial portion of Iridium's cash flow from
operations will be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing funds available for operations; and (iii)
Iridium's greater exposure to adverse economic conditions than competing
companies that are not as highly leveraged. In addition, the discretion of
Iridium's management with respect to certain business matters will be limited by
covenants contained in the Indenture, the Guaranteed Bank Facility, the Secured
Bank Facility and other debt instruments. Among other things, such covenants
limit or prohibit Iridium and its subsidiaries from incurring additional
indebtedness, creating liens on their assets, making certain loans, investments
or guarantees, issuing preferred stock, making certain asset or stock
dispositions and entering into transactions with affiliates and related persons.
The Secured Bank Facility is to be secured by substantially all of the assets of
Iridium, the membership interests in Iridium and the Reserve Capital Call (as
defined). There can be no assurance that such restrictions or prior liens will
not materially and adversely affect Iridium's ability to finance its future
operations or capital needs or to operate its business and engage in other
corporate activities. Moreover, a failure to comply with the terms of any
agreements with respect to outstanding or additional financing could result in
an event of default under such agreements, which could result in the
acceleration of the related debt and acceleration of debt under other debt
agreements that may contain cross-acceleration or cross-default provisions. See
"Description of Notes -- Certain Covenants" and "Description of Other
Indebtedness."
RISK OF ERROR IN FORWARD LOOKING STATEMENTS
Iridium is a development stage company. Accordingly, all statements in this
Prospectus that are not clearly historical in nature are forward looking.
Examples of such forward looking statements include the statements concerning
Iridium's operations, prospects, markets, size of addressable markets for mobile
satellite services, expected customer counts, technical capabilities, funding
needs, financing sources, pricing, launch schedule, commercial operations
schedule and regulatory approvals, as well as information concerning expected
characteristics of competing systems and expected actions of third parties such
as equipment suppliers, gateway operators, service providers and roaming
partners. These forward looking statements are inherently predictive and
speculative and no assurance can be given that any of such statements will prove
to be correct. Actual results and developments may be materially different from
those expressed or implied by such statements. Prospective investors should
carefully review the other risk factors set forth in this section of this
Prospectus for a discussion of various of the factors which could result in any
of such forward looking statements proving to be inaccurate.
In addition, the information in this Prospectus under "Summary -- Sources
and Uses of Funds by Iridium" (other than historical information) and the
statements therein and elsewhere that 1999 is the last year in which Iridium
expects negative cash flow and a net increase in year-end borrowings and as to
projected additional capital needs after the commencement of commercial
operations, are forward looking statements which may turn out to be inaccurate
for the reasons described in the preceding paragraph and are also based upon a
number of assumptions. One or more of these assumptions is likely to be
incorrect. The projected financial information assumes, among other things, that
(i) the IRIDIUM System will become commercially operational in September 1998;
(ii) the IRIDIUM System will meet all systems specifications set forth in the
Space System Contract and the Terrestrial Network Development Contract and will
have service characteristics at least as favorable as those expected by Iridium
and described in this Prospectus; (iii) there will be no increased costs
resulting from excusable delays under the Space System Contract, the
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<PAGE> 27
Operations and Maintenance Contract or the Terrestrial Network Development
Contract; (iv) Motorola and Kyocera will develop, manufacture and sell in
sufficient numbers portable, hand-held phones that are capable of operating in
multi-mode format and Motorola will develop alphanumeric pagers for use with the
IRIDIUM System on a timely basis in accordance with the model descriptions set
forth in this Prospectus and at the estimated prices set forth in this
Prospectus and Iridium will not incur any significant expenditures as a result
of any need to place any orders for or sell any IRIDIUM subscriber equipment;
(v) a sufficient number of gateways will be constructed and delivered not later
than September 1998 and will be fully operational at such time; (vi) the
satellite navigation and communications software and the business support
systems software will be developed and integrated into Iridium's operations on a
timely basis; (vii) Iridium will contract with a sufficient number of service
providers and roaming partners to ensure effective marketing of IRIDIUM
Services; (viii) the IRIDIUM System will not require the placing into orbit of
replacement satellites as a result of events that require Iridium to bear the
costs of replacement under the Operations and Maintenance Contract; (ix) there
will be no material change in legislation or regulations or the administration
thereof that will have an unexpected effect on the business of Iridium; (x)
there will be no material adverse changes in any of Iridium's existing material
contracts; (xi) Iridium, its customers and other companies doing business with
Iridium will obtain timely requisite regulatory approvals to provide services in
sufficient countries to enable Iridium to carry out its business strategy; (xii)
the capacity of the IRIDIUM System, as affected by, among other things, spectrum
allocation, vocoder selection and IRIDIUM Services usage patterns, will be
sufficient to meet Iridium's business plan; and (xiii) there will be a
sufficient number of subscribers and usage of the IRIDIUM System to produce the
revenue anticipated by Iridium after the commencement of commercial operations,
including the period from the expected commencement of commercial operations
through year-end 1999, the last year Iridium projects negative cash flow and a
net increase in year-end borrowings.
With regard to the statements concerning the expected size of the
addressable market for Iridium's target markets and expected customer counts set
forth under "Prospectus Summary" and under "Business -- The IRIDIUM Market," and
in addition to the information set forth above, prospective investors are
cautioned that such statements are based exclusively upon market analysis
conducted by Iridium. Market analysis, including use of market research, by its
nature does not lend itself to mathematical certainty, since it is based upon
respondents' assertions rather than actual purchase decisions. Iridium's market
analysis is based upon a number of assumptions and it is likely that some of
these assumptions will not prove correct and unanticipated events may occur
which could affect actual markets realized. Moreover, the risks associated with
market analysis are heightened in cases such as this, where the analysis deals
with a product and service that does not yet exist and that is not directly
comparable to any product or service with which the respondents could be
familiar. Consequently, actual markets should be expected to vary from the
market analysis included herein and such variations may be material.
Iridium does not intend to publish updates or revisions of the projected
financial information or addressable market and customer count estimates
included in this Prospectus to reflect events or circumstances after the date
hereof or to reflect subsequent market analysis.
POTENTIAL FOR DELAY AND COST OVERRUNS
Iridium's business plan assumes the IRIDIUM System will commence commercial
operations prior to the end of September 1998. Motorola's construction schedule
for the satellites in the IRIDIUM System requires an unprecedented rate of
satellite assembly for commercial telecommunications systems. A significant
delay in the delivery of the satellites needed for the space segment would
materially and adversely affect Iridium's operations. Although the Space System
Contract is a fixed-price contract (subject to certain adjustments) with a firm
schedule for construction and delivery, there can be no assurance that delays
will not occur. In addition, certain events causing failures or delays in
performance may constitute excusable delays under the Space System
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Contract. In the event of an excusable delay, the schedule may be equitably
extended and the price will be adjusted for any additional costs incurred by
Motorola. Motorola has the burden to prove an event of excusable delay has
occurred. Moreover, the liability of Motorola under the contract is limited. See
"Principal Contracts for the Development of the IRIDIUM System."
A significant delay in the date the IRIDIUM System becomes fully
operational would harm the competitive position of Iridium by eroding the timing
advantages Iridium currently anticipates, would delay the generation of revenue
by Iridium and might significantly affect Iridium's ability to pay interest on,
and the principal of, the Notes. See "Business -- Competition."
Deployment of Satellites
The launch of the first five IRIDIUM satellites occurred on May 5, 1997 on
a Delta II launch vehicle. This launch had been scheduled for January 1997 but
was postponed until May 1997 following a launch failure involving the Delta II
launch vehicle (which is the type of launch vehicle that Boeing is using for the
IRIDIUM satellites). The milestone date for the first launch under the Space
System Contract was January 29, 1997. Motorola has informed Iridium that,
notwithstanding the first launch postponement, Motorola believes its launch
schedule should permit Iridium to meet its planned September 1998 commencement
of commercial operations. The second launch occurred on June 18, 1997 using
Khrunichev's Proton launch vehicle, which carried seven IRIDIUM satellites.
Altogether, Iridium completed nine launches in 1997, for a total of 46 IRIDIUM
satellites in orbit (approximately two-thirds of the expected constellation of
66 operational and six spare satellites). There can be no assurance, however,
that succeeding launches will proceed on schedule or that the space segment will
be operational on schedule. The current launch schedule requires that there are
no additional significant launch delays and that all three launch providers --
Boeing, Khrunichev and China Great Wall -- are able to provide launch services
as currently planned. The current launch schedule is more compressed than the
original schedule and several intermediate milestones of the Space System
Contract, in addition to the first launch, occurred after their contract
milestone dates. This compression of the launch schedule has added risk to the
launch schedule and put additional pressure on the in in-orbit testing phase,
including reduced flexibility in responding to any problems identified in-orbit
testing, since some portions of the in-orbit testing cannot commence until a
minimum number of satellites are in their assigned orbital position. The launch
delay and the compression of the launch schedule also could place pressure on
the achievement of milestones under the Terrestrial Network Development
Contract. See "Principal Contracts for the Development of the IRIDIUM System."
Following the January 1997 launch failure involving the Delta II launch
vehicle, Motorola advised Iridium of its position that the U.S. government's
temporary postponement of Delta II launches pending completion of a failure
review analysis constituted an "excusable delay" under the Space System
Contract, the Operations and Maintenance Contract and the Terrestrial Network
Development Contract. Motorola then began the process of reworking the original
launch schedule and notified Iridium it would not claim either a cost adjustment
under the Space System Contract, the Operations and Maintenance Contract or the
Terrestrial Network Development Contract or a schedule extension of the final
Space System Contract milestone as a result of the January 1997 Delta II launch
failure. There can be no assurance that events constituting an "excusable delay"
will not arise in the future, or, if any such event of "excusable delay" does
arise, that it will be resolved on terms that are not materially adverse to
Iridium.
On July 18, 1997, Iridium was informed by Motorola that Motorola had lost
communications with an IRIDIUM satellite, confirmed through technical analysis
on July 17, 1997. The satellite, one of five launched on July 9, 1997, was in a
parking orbit awaiting its ascent to final mission orbit. In October 1997,
Motorola informed Iridium that it experienced a problem controlling one of the
IRIDIUM satellites. Iridium has been advised by Motorola that should loss of
either satellite be confirmed, Iridium will not bear the financial risk of loss,
nor will it affect the scheduled date for commercial service in September 1998.
No assurance can be given that anomalies such as occurred
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with respect to that satellite, or other anomalies with comparable effects, will
not occur in the future, or that such an event would not have a significant
adverse effect on Iridium. In addition, no assurance can be given that from time
to time certain events will not occur that may require Motorola to conclude that
one or more satellites are not performing within the necessary parameters for
such satellite or satellites to be included in the constellation, or that such a
conclusion would not have an adverse effect on the commercial activation
schedule.
Construction and Operation of Gateways
The operation of the IRIDIUM System is dependent on the successful
construction and operation of gateways and the timely availability of necessary
regulatory licenses and approvals. Pursuant to the Gateway Authorization
Agreements, the gateway operators are obligated to use their reasonable best
efforts to meet certain operational capability dates. Iridium closely monitors
the progress of each gateway and currently expects that at least nine and up to
12 gateways will be in operation with voice functionality at the commencement of
commercial operations. Iridium expects paging functionality to be available at a
portion of the gateways by September 1998 with the remainder activated by
October 1998. However, there can be no assurance that one or more gateways will
not fail to be completed by the commencement of commercial operations, which
could have a material adverse effect upon Iridium. In particular, two gateways,
the China gateway and the Middle East-Africa gateway, are significantly behind
schedule with construction of, and equipment procurement for, their gateways.
While Iridium believes that it is possible that these two gateways will be
operational by the planned September 1998 commencement of commercial operations,
in order for them to do so they will need to move forward promptly, including
making certain overdue payments under their gateway equipment purchase
agreements with Motorola. In addition, as Iridium approaches the commencement of
commercial operations, each of the gateways (including their service providers
and roaming partners) must be integrated into the IRIDIUM System, which will
require the gateways to be constructed and capable of operation in advance of
the commencement of commercial operations. Several gateways are behind Iridium's
internal schedule for system integration. There can be no assurance that one or
more gateways will not be capable of operation sufficiently in advance of the
commencement of commercial operations so that it or they can be integrated into
the IRIDIUM System on a timely basis. See "-- Reliance on Motorola, Gateway
Owners and Other Third Parties" and "Technology and Technology Implementation
Risks; Inability to Fully Test Prior to Space Deployment."
Development and Implementation of Software
As discussed under "-- Technology and Technology Implementation Risks;
Inability to Fully Test Prior to Space Deployment -- Integration of
Technologies" and "-- Development and Integration of Software," prior to
commencement of commercial operations, Iridium must develop and, in conjunction
with each of the gateway owners, integrate and test software related to the
operation of the IRIDIUM System, including the business support systems. A
significant delay in the development, deployment or implementation of such
software systems would have a material adverse effect on Iridium.
Development, Manufacture and Distribution of Subscriber Equipment
Significant delay in the development, manufacture and sale of phones and
pagers would have a material adverse effect on Iridium. Planned commercial
operation of the IRIDIUM System assumes that commercial quantities of the
portable, hand-held phones, TRCs and belt-worn pagers will be ordered
approximately six months in advance of expected delivery and then produced for
distribution shortly in advance of the commencement of commercial operations.
There can be no assurance that any such products will be developed, manufactured
and sold on a timely basis. Because there is no current market for IRIDIUM
Services and subscriber equipment, the financial incentive for manufacturers to
produce significant quantities of subscriber equipment in advance is limited.
While Iridium generally does not expect to act as a distributor of subscriber
equipment or derive any
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significant income from the sale of subscriber equipment, it is contemplating a
pre-commercial operation order of phones to facilitate the initial availability
of such equipment. There can be no assurance that Iridium will place a
pre-commercial operation order of phones. If Iridium places such a
pre-commercial operation order, Iridium will bear the risk that it will be
unable to resell the phones that it commits to purchase or that it will be
unable to do so at prices that will allow it to recoup its payments to the
manufacturer(s). Moreover, there is a risk that demand for IRIDIUM Services will
not materialize in a timely manner unless Iridium, its gateway operators or
service providers subsidize the cost of hand-held phones. Neither Iridium nor,
to Iridium's knowledge, its gateway owners and service providers currently plan
to provide any such subsidies. The costs associated with any pre-commercial
operation order of phones and the cost of any such subsidization could be
significant. Iridium's current projected funding needs do not reflect any costs
associated therewith.
TECHNOLOGY AND TECHNOLOGY IMPLEMENTATION RISKS; INABILITY TO FULLY TEST PRIOR TO
SPACE DEPLOYMENT
Integration of Technologies
Motorola's timely completion of its obligations under the Space System
Contract is necessary for Iridium to commence commercial operations on its
expected schedule in September 1998. However, the timely completion of such
obligations is not, in itself, sufficient for Iridium to achieve its expected
commercial operation schedule. To build the IRIDIUM System, Motorola and its
subcontractors must integrate a number of sophisticated technologies. The
integration of this array of diverse technologies is a complex task which has
not previously been attempted and is further complicated by the fact that a
significant portion of the hardware components associated with the IRIDIUM
System will be in space. Despite the extensive testing of the components of the
IRIDIUM System on the ground, the nature and complexity of the system is such
that final confirmation of the ability of the system to function in the intended
manner, including the ability of the IRIDIUM System to handle the anticipated
number of calls each day, cannot be confirmed until a substantial portion of the
system is deployed in space. Errors involving hardware or software components in
space may result in service limitations and corresponding reductions in revenue.
Development and Integration of Software
Implementation and operation of the IRIDIUM System, including the business
support systems necessary for such tasks as customer billing and subscriber
authentication, are also significantly dependent on software which has been, is
being or will have to be developed, integrated and tested and which would have
to be reprogrammed if errors require changes. Iridium believes that the
development of the software for the IRIDIUM System, including the space segment,
is one of the largest and most complex software creation and integration tasks
ever undertaken in a commercial satellite communications program. No assurance
can be given that the software necessary to Iridium's business will be completed
when required, including integration and testing, or that such software will
function as required.
Prior to commencement of commercial operations, the gateway operators must
license additional business support software, develop interface programs between
various software programs and implement software and support systems with
service providers and roaming partners. There can be no assurance that the
gateway operators will acquire or implement the business support systems
necessary for IRIDIUM Services or that the system supplier will provide such
systems or related services on a timely basis. Failure of a gateway operator to
acquire and implement an adequate business support system could have a material
adverse effect on Iridium.
Development and Production of Subscriber Equipment
The IRIDIUM subscriber equipment is also an essential component critical to
the successful commercial operation of the IRIDIUM System. An inability to
successfully develop and manufacture
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subscriber equipment in sufficient numbers could delay commencement of
commercial operations or limit the capacity of the system and the quality of
services offered. Such limitations could affect subscriber acceptance of IRIDIUM
Services and as a result could materially and adversely affect Iridium. Motorola
has produced a functional unminiaturized prototype of the hand-held phone and a
functional prototype of the belt-worn pager. However, there can be no assurance
that Motorola, Kyocera or any other manufacturer will be able to develop on a
timely basis, or at all, portable, hand-held phones or belt-worn pagers that
meet Iridium's expectations and which can be mass produced at economical prices.
See "-- Potential for Delay and Cost Overruns -- Development, Manufacture and
Distribution of Subscriber Equipment" and "-- Reliance on Motorola, Gateway
Owners and Other Third Parties."
CONSEQUENCES OF SATELLITE SERVICE LIMITATIONS ON CUSTOMER ACCEPTANCE
Iridium's ability to generate operating revenues sufficient to pay the
interest on, and principal of, the Notes will depend upon customer acceptance of
and satisfaction with IRIDIUM Services, which in turn will depend upon a variety
of factors, including the price and technical capabilities of the IRIDIUM
Services and equipment, and the extent, availability and price of alternative
telecommunications services.
There is no service available today which approximates the hand-held,
satellite-based service Iridium expects to provide. The IRIDIUM satellite system
is not intended to provide communications services that compete with terrestrial
wireless and paging services where they are available because of the advantages
such wireless and paging systems generally have in terms of cost, voice quality,
signal strength and ability to penetrate various environments (such as
buildings). Based upon current testing and simulations, IRIDIUM subscribers
using IRIDIUM Satellite Services via portable, hand-held phones should expect
some degradation in service quality and availability to occur in environments
where obstructions, such as trees, buildings and other natural and man-made
obstacles, are positioned between a satellite and the user. The severity of this
degradation will increase as the obstacles become larger and more densely
spaced. Only extremely limited satellite voice service, or no satellite voice
service, is expected to be available in densely packed urban environments or
inside buildings with steel construction and metal coated glass common in many
urban high rise buildings (including, in particular, in most hotels and
professional buildings). In addition, because the structure of automobiles will
tend to obstruct the satellite signal, use of a hand-held Iridium phone in a
moving automobile will make the effect of environmental obstructions temporary
but more pronounced. The actual limitations will vary, sometimes significantly,
as actual situations and conditions change and as the satellites move across the
sky. The IRIDIUM satellite paging service will also be unable to provide service
in certain environments where terrestrial paging generally would. While Iridium
believes that the addition of ICRS and the availability of multi-mode phones
will lessen the effect of these obstacles by providing access to local cellular
service (if available and if the local cellular provider has an agreement in
place with Iridium) in environments in which the IRIDIUM Satellite Service is
unavailable or degraded, there can be no assurance that (i) Iridium's
expectation will be correct as to subscribers' willingness to accept service
limitations, higher prices and heavier hand-held phones and larger pagers than
those to which such subscribers may otherwise be accustomed in order to have the
ability to make and receive calls on a worldwide basis with a single phone or to
receive pages on a satellite pager or (ii) that the service limitations will not
result in significantly lower sales to professional and other travelers, or
lower usage of IRIDIUM Services by such persons, than Iridium anticipates. Also,
IRIDIUM Satellite Services call set-up times and the number of blocked or
dropped calls may exceed the call set-up times and the number of blocked or
dropped calls of available terrestrial wireless systems. Although the Iridium
paging service will also be satellite-based, Motorola believes that because of
the IRIDIUM System's expected signal strength for paging, Iridium pages will be
generally received in most environments other than in the innermost sections of
large buildings, in densely packed urban canyons or in other situations where
there are significant obstructions between the satellite and the pager. However,
the
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in building penetration of an Iridium pager is expected to be below that
generally experienced by terrestrial pagers with mature terrestrial paging
systems.
The IRIDIUM System has not been designed to provide high-speed data and
facsimile transmission capability. As a result, Iridium expects that the appeal
of Iridium facsimile and data services will be limited.
CONSEQUENCES OF IRIDIUM PHONE AND PAGER CHARACTERISTICS ON CUSTOMER ACCEPTANCE
Iridium believes that its success is dependent on the development of
satellite phones which are portable and hand-held and pagers which may be worn
on a belt. Moreover, Iridium's business plan assumes that there will be
multi-mode versions of the phone capable of operation with most of the major
terrestrial wireless system standards so that a subscriber can use the same
phone for terrestrial wireless service, including ICRS, and for IRIDIUM
Satellite Service. The phone and pager for the IRIDIUM System are still under
development. Motorola has informed Iridium that the portable, hand-held phone
that Motorola is developing is expected to be larger and heavier than today's
pocket-sized terrestrial wireless phones and is expected to have a significantly
longer and thicker antenna than hand-held terrestrial wireless telephones.
Iridium expects that the Kyocera phone will be relatively the same size and
weight as the Motorola phone. The pager Motorola is developing is slightly
larger than today's standard alphanumeric belt-worn pagers.
Subscribers will generally purchase equipment from service providers.
Iridium does not currently intend to manufacture or distribute IRIDIUM
subscriber equipment or derive any significant income from the sale of IRIDIUM
subscriber equipment. See "-- Potential for Delay and Cost
Overruns -- Development, Manufacture and Distribution of Subscriber Equipment."
Based on information received from Motorola, Iridium expects that Motorola's
version of the multi-mode portable, hand-held phones will have an initial retail
price of approximately $3,000, including at least one TRC, with each extra TRC
having an initial retail price in the range of $500 to $1,000. Motorola's
version of the alphanumeric pager is expected to have an initial retail price of
approximately $500. These projected prices substantially exceed today's prices
for terrestrial wireless phones and pagers and may also exceed prices for
subscriber equipment of competing satellite-based systems. The cost of IRIDIUM
hand-held phones may limit demand for IRIDIUM Services, particularly among
individual purchasers. Motorola has made no commitment to sell subscriber
equipment at these estimated prices. Kyocera has not yet advised Iridium as to
the expected pricing of its hand-held phone.
RISKS RELATED TO ICRS
Subscribers to Iridium's ICRS service will not experience the
satellite-related service limitations when their multi-mode phone is accessing
local wireless service, for example, in major urban areas. While the
availability of ICRS may lessen somewhat the impact of the satellite-related
service limitations, ICRS will only be available in an area if (i) that area has
an existing wireless system, (ii) the system uses a protocol supported by
Iridium and (iii) that system has a roaming agreement with Iridium. In addition,
many wireless systems as currently configured, including systems covering large
portions of South America, use a form of wireless technology that does not
permit sufficient anti-fraud security or certain international dialing and,
therefore, it is unlikely that Iridium will provide ICRS coverage in areas that
are principally served by this type of technology. To fully implement ICRS,
Iridium also may need to obtain tariff approvals and other regulatory
authorizations from countries where the service will be offered, none of which
has been obtained. Portions of the ICRS service allowing roaming between IS-41
systems will not be implemented before 1999 and ICRS service in Japan is
expected to be delayed until 1999 as well.
In order for Iridium to offer interprotocol ICRS, Motorola entered into a
contract with a third-party supplier to develop, manufacture and deliver the IIU
that will permit protocol translation. However, there can be no assurance that
the required IIU will be delivered on a timely basis.
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The integration of ICRS into Iridium's business management system requires
substantial software development and integration. There can be no assurance that
Iridium will be able to incorporate ICRS into its business support system on a
timely basis. Iridium's business plan currently calls for roaming agreements
covering networks in 57 countries by the commencement of commercial operations
in September 1998, with roaming agreements covering networks in approximately
150 countries in place by 2002. To date, Roaming has entered into 69 roaming
agreements. Certain terrestrial wireless service providers are offering or have
announced their intention to offer interprotocol roaming services that will
compete with ICRS, and Iridium may not be able to enter into roaming agreements
with such service providers. An inability to execute roaming agreements which
provide ICRS customers terrestrial wireless coverage in significant markets
could have a material adverse effect on Iridium. Neither Motorola nor Iridium
may have sufficient intellectual property rights to prevent other parties from
developing, selling or using equipment and systems for providing interprotocol
roaming services.
SATELLITE LAUNCH RISKS
Number of Launches; Compressed Launch Schedule
In order for the IRIDIUM System to be fully operational under its current
specifications and timetable, Iridium anticipates the need to launch
successfully at least 66 low earth orbit satellites in the 12 to 15 month period
from the first launch on May 5, 1997. Moreover, to maintain the system,
additional satellites are expected to be launched each year during the term of
the Operations and Maintenance Contract. No other commercial satellite
communications system has required this number of launches to become fully
deployed and operational. Motorola has subcontracted with Boeing, Khrunichev and
China Great Wall for launch services. These launch service providers have from
time to time experienced launch failures. There can be no assurance that
Iridium's satellites will be successfully deployed in a timely manner or that
launch failures, whether or not deploying IRIDIUM satellites, will not occur and
materially and adversely affect Iridium. The risk of a material and adverse
effect associated with an Iridium launch failure is exacerbated by the fact that
each launch vehicle will contain multiple satellites.
The launch of the first five IRIDIUM satellites occurred on May 5, 1997 on
a Delta II launch vehicle. This launch had been scheduled for January 1997 but
was postponed until May 1997 as a result of the United States government's
decision to temporarily postpone launches of the Delta II launch vehicle (which
is the type of launch vehicle that Boeing is using for IRIDIUM satellites)
following a launch failure involving the Delta II launch vehicle. Motorola has
informed Iridium that, notwithstanding the first launch postponement, Motorola
believes its launch schedule should permit Iridium to meet its planned September
1998 commencement of commercial operations. The current launch schedule is more
compressed than the original schedule and several intermediate milestones of the
Space System Contract, in addition to the first launch, occurred after their
contract milestone dates. This compression of the launch schedule has added risk
to the launch schedule and put additional pressure on the in-orbit testing
phase, including reduced flexibility in responding to any problems identified in
in-orbit testing, since some portions of the in-orbit testing cannot commence
until a minimum number of satellites are in their assigned orbital position. The
launch delay and the compression of the launch schedule also could place
pressure on the achievement of milestones under the Terrestrial Network
Development Contract. Delays in the launch schedule could delay the commencement
of commercial operations, the availability of subscriber equipment and the
ability of gateways to function on a timely basis as well as impair Iridium's
ability to obtain additional funding. The second launch occurred on June 18,
1997 using Khrunichev's Proton launch vehicle, which carried seven IRIDIUM
satellites. Altogether, Iridium completed nine launches in 1997, for a total of
46 IRIDIUM satellites in orbit (approximately two-thirds of the expected
constellation of 66 operational and six spare satellites). On July 18, 1997,
however, Iridium was informed by Motorola, confirmed by technical analysis on
July 17, 1997, that it had lost communications with one of five satellites from
a July 9, 1997 launch. The satellite was in a parking orbit awaiting its ascent
to final mission orbit. In October 1997, Motorola informed Iridium that it
experienced a problem controlling
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one of the IRIDIUM satellites. Iridium has been advised by Motorola that, should
loss of either satellite be confirmed, Iridium will not bear the financial risk
of loss, nor will it affect the scheduled September 1998 date for commercial
service. No assurance can be given as to the occurrence of anomalies in the
future, or as to their effect on Iridium.
Khrunichev is expected to provide additional launch services for Iridium
using the Proton launch vehicle. In November 1996, there was a failure with
Khrunichev's Proton launch vehicle in connection with the Mars 96 mission that
the failure analysis determined was attributable to faulty guidance and control
commands from the Mars 96 spacecraft. In addition, Khrunichev experienced launch
failures in February 1996 and May 1993. China Great Wall is expected to provide
launch services for Iridium using the Long March 2C. China Great Wall
experienced failures in December 1992 and January 1993 with its Long March 2E
launch vehicle, and in February 1996 with its 3B launch vehicle.
Impact of Excusable Delays
The terms of the Space System Contract provide that Motorola will bear the
responsibility of launching the satellites that comprise the space segment.
Nevertheless, Iridium retains the risk of cost overruns and delays associated
with excusable delays, including delays in launch provider schedules due to
prior delays of launches of non-IRIDIUM satellites, and the risk of economic
damage due to any delay or reduced performance beyond the limited remedies
provided by the Space System Contract. Following the January 1997 launch failure
involving the Delta II launch vehicle, Motorola advised Iridium of its position
that the United States government's temporary postponement of Delta II launches
pending completion of a failure review analysis constituted an "excusable delay"
under the Space System Contract, the Operations and Maintenance Contract and the
Terrestrial Network Development Contract. Motorola then began the process of
reworking the original launch schedule and notified Iridium that it would not
claim either a cost adjustment under the Space System Contract, the Operations
and Maintenance Contract or the Terrestrial Network Development Contract or a
schedule extension of the final Space System Contract milestone as a result of
the January 1997 Delta II launch failure. The current launch schedule requires
that there are no additional significant launch delays and that all three launch
providers -- Boeing, Khrunichev and China Great Wall -- are able to provide
launch services as currently planned. Iridium and Motorola intend to amend the
Space System Contract to reflect the new launch schedule. There can be no
assurance that events constituting "excusable delays" will not arise in the
future, or, if any event of "excusable delay" does arise, that it will be
resolved on terms that are not materially adverse to Iridium. See "-- Potential
for Delay and Cost Overruns -- Deployment of Satellites" and "Principal
Contracts for the Development of the IRIDIUM System."
Risks Related to Non-U.S. Launches
China Great Wall and Khrunichev are located in China and Russia,
respectively. Changes in laws, treaties, trade agreements, governmental policies
or political leadership in the United States, China, Russia or Kazakhstan, where
Khrunichev's launch facilities are located, could affect the political or
economic relationship between these countries and, as a result, could affect the
cost, availability, timing or overall advisability of utilizing these launch
services providers. In addition, the use of these launch services providers
requires various approvals from the government of the United States under the
United States Arms Export Control Act and the Export Administration Act. See
"Regulation of Iridium." There can be no assurance that the remaining required
approvals will be obtained. Failure to receive any of the required approvals
could result in an excusable delay under the Space System Contract, the
Terrestrial Network Development Contract and the Operations and Maintenance
Contract. Motorola has informed Iridium that in view of the suspension for over
three months in Delta II launches following the January 1997 Delta II launch
failure, its ability to meet its revised launch schedule and to meet the
schedule specified in the Space System Contract for delivery of the space
segment is dependent upon each of Boeing, Khrunichev and China Great Wall being
able to provide launch services on a timely basis.
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LIMITED LIFE OF SATELLITES; COST OF MAINTAINING THE SPACE SEGMENT; RISK OF
SATELLITE FAILURE OR DAMAGE
A significant portion of Iridium's tangible assets will be represented by
the satellites in the space segment. Iridium's business plan currently assumes
that the satellites will have a useful life of five years from their respective
launch dates. There can be no assurance that any satellite will actually achieve
such a useful life. The actual useful life of any satellite will depend upon a
variety of factors including the quality of construction of the satellite, the
quality and durability of its components and whether the satellite sustains
casualty damage in space. Due to their low and rapid orbit of the Earth, IRIDIUM
satellites will place significant stress on the satellite batteries which will
be discharged and recharged 12 to 14 times a day, as contrasted with
approximately 20 times a year for geostationary satellites.
Maintaining the space segment is a complex undertaking which has not
previously been attempted on a commercial basis. The cost of maintaining the
space segment and the risk of loss of satellites are significant. Iridium has
entered into an Operations and Maintenance Contract with Motorola which provides
for the operation and maintenance of the space segment for its first five years
of operation at an aggregate cost to Iridium of approximately $2.88 billion,
assuming the space segment is delivered in September 1998 and assuming no
excusable delay occurs. Iridium has the option to extend the Operations and
Maintenance Contract for an additional two years for additional aggregate
payments aggregating $1.33 billion (based on the same assumption) and assuming
no excusable delay occurs. Under the Operations and Maintenance Contract,
Iridium will bear the risk of damage to satellites by the acts of third parties
(including but not limited to the degradation or complete loss of any satellite
due to contact with space debris of any size or character). See "Principal
Contracts for the Development of the IRIDIUM System -- Operations and
Maintenance Contract." Satellites operating in the low earth orbit region, such
as the IRIDIUM satellites, face a higher risk of damage from space debris than
satellites operating in geostationary orbit. As with any satellite system, the
IRIDIUM satellites face risk of damage from meteor and solar storms, which are
recurring phenomena. The potential for damage from meteor and solar storms is
difficult to quantify. Iridium has obtained insurance to cover certain of these
risks, but there can be no assurance that such insurance will provide adequate
mitigation in the event of a loss. Iridium also bears the risk of damage to
person or property resulting from the survival of any portion of a satellite
following planned or unplanned reentry. Motorola believes that the likelihood of
such damage is extremely remote and Iridium expects to insure against such risk.
Premature failure or interruption of one or more satellites, including
temporary losses, that for whatever reason are not promptly corrected or
replaced, could, among other things, cause gaps in service availability,
significantly degrade service quality, increase costs in the event Iridium is
liable, and result in loss of revenue for the period that service is compromised
and, as a result, could materially and adversely affect Iridium. On July 18,
1997, Iridium was informed by Motorola that Motorola had lost communications
with an IRIDIUM satellite, confirmed through technical analysis on July 17,
1997. The satellite, one of five launched on July 9, 1997, was in a parking
orbit awaiting its ascent to final mission orbit. In October 1997, Motorola
informed Iridium that it experienced a problem controlling one of the IRIDIUM
satellites. Iridium has been advised by Motorola that should loss of either
satellite be confirmed, Iridium will not bear the financial risk of loss, nor
will it affect the scheduled date for commercial service in September 1998. No
assurance can given as to the occurrence of anomalies in the future, or as to
their effect on Iridium, including financial risk of loss. See "-- Potential for
Delay and Cost Overruns -- Deployment of Satellites."
Upon the expiration of the Operations and Maintenance Contract, Iridium,
unless it enters into another similar contract with Motorola or a third party,
will bear all risks of satellite damage or failure. In addition, if the contract
is not renewed, Iridium is obligated to pay Motorola $46 million for each spare
satellite then located in a low earth, non-operational storage orbit and, unless
Iridium has given Motorola one year's notice of its intention not to renew the
contract, $31 million for each spare satellite not yet launched and a fraction
of that amount for each partially completed spare satellite. The Space System
Contract provides that title and risk of loss or damage to each individual
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satellite will pass to Iridium upon the arrival of each satellite at its
designated orbital location in the satellite constellation.
Given the limited life of the IRIDIUM System satellites, Iridium expects to
incur significant expense in maintaining an operational constellation of
satellites in space either through the Operations and Maintenance Contract (as
discussed above), or successor arrangements. If Iridium is for any reason unable
to finance such expenses through internally generated funds or external
financing, such inability would have a material adverse effect on Iridium. In
addition, while Iridium has engaged in preliminary discussions with Motorola
regarding possible long-term enhancements to the IRIDIUM System, and has filed
an application with the FCC for authorization to operate a satellite system in
the 2GHz band, such actions are preliminary and Iridium has made no significant
financial commitment to long-term enhancements.
RISKS ASSOCIATED WITH LICENSING AND SPECTRUM ALLOCATION
Significant Regulatory Approvals Required for Operation of the IRIDIUM System
The operation of the IRIDIUM System is and will continue to be subject to
United States and international regulation. This regulation is pervasive and
largely outside Iridium's direct control. The successful implementation of the
IRIDIUM System requires (1) the international allocation by a World Radio
communication Conference ("WRC") under the ITU of the spectrum required for
IRIDIUM subscriber, gateway and intersatellite links, (2) the domestic
allocation in each country of spectrum for MSS and Aeronautical Mobile Satellite
(Route) Service ("AMS(R)S") use, (3) a license from the FCC for the
construction, launch and operation of the IRIDIUM satellites, using frequencies
assigned to it for subscriber, gateway and intersatellite links, (4) authority
to construct and operate the North American gateway in the United States and
system control facilities to be located in the United States and Canada,
including spectrum assignments for the gateway links, and for the use of the
IRIDIUM subscriber equipment, including spectrum assignments for the user links,
(5) in each other country in which a gateway or system control terminal will be
located, an authorization to construct and operate those facilities, including
necessary gateway link spectrum assignments, (6) in each country in which
IRIDIUM subscriber equipment will be operated, authority to market and operate
that equipment with the IRIDIUM System, user link spectrum assignments, and
authorization to offer IRIDIUM communications services, (7) international
coordination of the IRIDIUM System under the auspices of the ITU or domestic
coordination in each country where IRIDIUM Services are offered with other
entities using or proposing to use the spectrum required for the IRIDIUM System
or adjacent spectrum, to ensure the avoidance of harmful interference and (8)
consultation with the International Telecommunications Satellite Organization
("Intelsat") and the International Maritime Satellite Organization ("Inmarsat")
to ensure technical compatibility and avoid significant economic harm to the
extent required by those organizations. See "Regulation of Iridium." The
availability of funds under the Secured Bank Facility is conditioned on, among
other things, obtaining and maintaining regulatory approvals as specified in the
Secured Bank Facility. See "Description of Other Indebtedness -- Secured Bank
Facility."
Significant Remaining Regulatory Approvals
Iridium, Motorola, and the various gateway owners have made substantial
progress in taking the steps needed to implement the IRIDIUM System, but a
significant number of additional regulatory approvals remain to be obtained, in
particular with respect to the approvals mentioned in (2), (5), (6) and (7)
above. See "Regulation of Iridium."
Aeronautical Certification. With respect to (2) above, Motorola submitted
in December 1996 a request to the FCC to authorize the IRIDIUM System to provide
AMS(R)S in its authorized band as part of its in-flight passenger communications
service. Several parties filed comments with and have petitioned the FCC to deny
Motorola's application. Among other arguments, petitioners claim that the
AMS(R)S proposal is inconsistent with ITU and FCC rules and allocations. In
addition to FCC approval, approval is needed from the Federal Aviation
Administration ("FAA"), which must certify that the IRIDIUM avionics equipment
meets minimum performance standards, and it may be
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necessary for Iridium to satisfy other international certification requirements.
There can be no assurance that the FCC application will be granted, or that the
avionics certification requirements will be satisfied in a timely fashion or at
all.
Gateway Licensing. With respect to (5) above, Iridium currently expects to
have at least nine and up to 12 operating gateways at the commencement of
commercial operations. However, because the IRIDIUM System utilizes
intersatellite links, Iridium can provide service worldwide with a smaller
number of gateways or even a single gateway. Unlike "bent pipe" systems, it is
not necessary for a subscriber and a gateway to be within the footprint of a
single satellite for a call to be completed over the IRIDIUM System.
Nevertheless, it is important for Iridium to have a sufficient number of
gateways available at the commencement of commercial operations in order to
reduce the landline charges from the gateway to the call termination point and
to ensure sufficient capacity of the IRIDIUM System. Iridium believes that with
a majority of the 12 gateways operational it will be able to provide a
sufficient level and quantity of service and there is no specific gateway, or
specific combination of gateways, that is critical to providing IRIDIUM
Satellite Services. If a gateway is not operational at the commencement of
commercial operations, the calls it would process would have to be processed by
an operational gateway, preferably one located in an adjacent territory so that
the costs of relaying the calls terrestrially can be minimized. There can be no
assurance that Iridium will have the necessary number of gateways in service and
licensed at the commencement of commercial operations or that a gateway that is
not operational or licensed at the commencement of commercial operations will be
able to make appropriate arrangements with an operational and licensed gateway
to provide service to its territory. See "-- Potential for Delay and Cost
Overruns -- Construction and Operation of Gateways."
Each gateway must be licensed by the jurisdiction in which it is located.
Licenses have been granted for the gateways in the United States (Tempe),
Thailand (Bangkok), Taiwan (Taipei), Korea (Seoul), Brazil (Rio de Janeiro),
Japan (Nagano) and Italy (Fucino). Currently, the North American gateway
operator is contemplating locating a second gateway in the United States.
Additionally, experimental licenses have been granted for the gateways in Russia
(Moscow) and India (Bombay) and permit the gateways to test their links between
the IRIDIUM satellites and terrestrial services. The gateways to be located in
China (Beijing) and Saudi Arabia (Jeddah) have not received licenses or
commenced construction, although in the case of the gateway in Saudi Arabia,
Iridium Middle East Corporation has entered into an agreement with Telespazio
for the construction of the gateway. The licenses that have been received by the
gateways are subject to conditions that relate to the completion of construction
and the provision of technical information to regulatory authorities. Iridium
expects that the licenses its gateways are seeking will have similar conditions.
There can be no assurance that the additional licenses necessary for Iridium to
obtain the service capability assumed in its business plan will be obtained on a
timely basis or at all. In addition, while Iridium believes the conditions
specified in the gateway licenses that have been received can be satisfied,
there can be no assurance that such conditions will be satisfied or that
conditions to licenses received in the future will be satisfied. See "Regulation
of Iridium -- Licensing Status."
Numerous Remaining Individual Country Authorizations. With respect to (2)
and (6) above, only 16 countries or territories have given all necessary
authorizations needed to operate the IRIDIUM System in their territory. The 16
countries and territories are: United States, Argentina, Colombia, Thailand,
Malaysia, Guatemala, Puerto Rico, Finland, El Salvador, Afghanistan, Panama,
Fiji, San Marino, Micronesia, Palau and the Cook Islands. Iridium will require
similar approvals in each country in which it intends to offer service. In order
for Iridium's business plan to be successful, approvals in a substantial number
of countries will need to be obtained prior to September 1998, the month
commercial operations are expected to commence. Iridium is seeking licenses
throughout the world. However, Iridium and its gateway operators are placing
emphasis on obtaining approvals by September 1998 from the 70 to 90 countries
where Iridium expects substantially all of the demand for, and usage of, IRIDIUM
Services is likely to be generated. While Iridium believes that all required
licenses will be obtained in a substantial majority of these countries by
September 1998,
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there can be no assurance that the required authorizations will be granted at
all or in a timely manner, or without burdensome conditions. Failure to obtain
licenses in a timely fashion could have a material adverse effect on Iridium.
Approval of the offering of IRIDIUM Services by many countries will be
contingent upon Iridium providing such countries with the ability to legally
monitor calls made to or from such countries. Iridium believes that it will be
able to address the concerns of many of these countries by the date commercial
service is expected to begin and of other countries after the commencement of
commercial operations, but there can be no assurance that it will be able to do
so. In addition, other governmental or political concerns may arise, including
spectrum license fees or auctions, that may impair the ability of Iridium to
obtain licenses or offer IRIDIUM Services on a timely basis. See "-- Risks
Associated with International Operations and Developing Markets."
Interference from Other Satellite Systems. In addition, the IRIDIUM System
MSS downlinks to the IRIDIUM subscriber equipment operate on a secondary basis.
Under the rules of the ITU and the FCC, these downlinks may not cause harmful
interference to any primary spectrum user operating in the same frequency band
and must accept any interference caused to them by a primary spectrum user
operating in the same frequency band. In light of the secondary nature of
IRIDIUM's MSS downlinks, there can be no assurance that issues concerning
intersystem interference from CDMA MSS Systems will be resolved everywhere in
the world in a way that will protect Iridium subscriber units from harmful
interference. Any failure to implement an acceptable limit on out-of-band CDMA
emissions could significantly reduce the total capacity of the IRIDIUM System.
Furthermore, the MSS downlinks of the IRIDIUM System may need to accept
interference from Inmarsat terminals, including Inmarsat aeronautical and land
mobile terminals, when they are in the vicinity of an IRIDIUM terminal. See
"-- Competitive Risks; Factors Affecting Iridium's Competitive Position --
Recent Developments in Licensing of MSS Competitors."
GLONASS and Radio Astronomy Coordination. With respect to (7) above, the
IRIDIUM System, including IRIDIUM subscriber equipment, must be coordinated with
all other domestic and foreign users of the 1.6 GHz band. Currently, the Russian
aeronautical navigation system, GLONASS, operates in a frequency band that
overlaps the 1610-1626.5 MHZ band. MSS systems are required to coordinate their
operations with the previously registered operations of GLONASS. Iridium
believes that a bilateral coordination agreement between Russia and the United
States is in negotiation, under which Russia would agree to move the GLONASS
system's operations to frequencies below 1610 MHZ by January 1, 1999, and to
frequencies below approximately 1605 MHZ by the year 2005. The FCC has
conditioned the Iridium blanket subscriber license upon compliance with a level
of protection from interference to the GLONASS system. Iridium believes that it
can meet the protection requested for GLONASS when GLONASS shifts down in
frequency to below approximately 1605 MHZ by the year 2005. During the interim
period between 1999 and when GLONASS shifts to below approximately 1605 MHZ,
while there can be no assurance as to what level of protection will be required
to protect GLONASS, Iridium believes it will be able to satisfy any reasonable
level of protection required.
In addition, it will be necessary for other administrations to coordinate
with the Russian Federation concerning the level of protection that will be
afforded to GLONASS in countries outside the United States and Russia. In
Russia, additional restrictions are expected to be imposed which may limit the
amount of spectrum available to Iridium in Russia. There can be no assurance
that sufficient spectrum will be available to meet subscriber demand in Russia
or any other country that requires a higher level of protection for GLONASS than
the United States. Moreover, there can be no assurance that the CDMA based
global MSS systems will be able to meet the levels of protection required for
GLONASS, either in the United States, Russia, or elsewhere. Such an eventuality
might lead the FCC and other countries' regulatory authorities to consider
requests to reassign the CDMA systems to higher frequencies within the
1610-1626.5 MHZ allocation to protect GLONASS. This development might, in turn,
reduce the amount of spectrum available to Iridium. By orders released July 1,
1997 the FCC's International Bureau granted two MSS licenses, increasing the
number of
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U.S.-licensed MSS systems (including the IRIDIUM System) to four. The two new
licenses are for CDMA based systems which may make it more difficult for the
CDMA global systems to meet the protection levels required for GLONASS. See
"-- Competitive Risks; Factors Affecting Iridium's Competitive
Position -- Recent Developments in Licensing of MSS Competitors."
Under the FCC's rules, the IRIDIUM System also must protect U.S. radio
astronomy sites during periods when they are observing in the 1610.6-1613.8 MHZ
band. To date, Motorola has entered into memoranda of understanding and letter
agreements establishing principles for coordinating spectrum use (or, in one
case, determining that coordination is not required) with entities representing
14 of the 15 U.S. Radio astronomy sites. There can be no assurance that final
coordination agreements with these sites will be concluded in a timely manner
or, if FCC intervention is required, that the FCC will impose a coordination
solution that is acceptable to Iridium. Nor can there be any assurance that the
technical assumptions underlying the memoranda of understanding will not differ
from the manner in which the IRIDIUM System performs once it is operational.
Some other countries will also require that the IRIDIUM System be
coordinated with Radio astronomy sites that observe in the 1.6 GHz band, and
Iridium will not be permitted to cause harmful interference to any such site.
Iridium and Motorola have commenced coordination discussions with numerous
non-U.S. Radio astronomy sites. While Iridium believes that it will be able to
demonstrate that Iridium's operations will not materially and adversely affect
the ability of radio astronomers to observe in the 1.6 GHz band, there can be no
assurance that these coordinations will be concluded successfully or in a timely
manner.
COMPETITIVE RISKS; FACTORS AFFECTING IRIDIUM'S COMPETITIVE POSITION
Certain sectors of the telecommunications industry are highly competitive
in the United States and in other countries. The uncertainties and risks created
by this competition are intensified by the continuous technological advances
that characterize the industry, regulatory developments which affect competition
and alliances between industry participants. While no single wireless
communications system serves the global personal communications market today,
Iridium anticipates that more than one system will serve this market in some
fashion in the future. Iridium believes that its most likely direct competition
will come from the planned ICO Global Communications (Holdings) Limited ("ICO")
telecommunications service and one or more of the other FCC-licensed MSS
applicants -- Loral/Qualcomm Partnership, L.P. (on behalf of Globalstar), Mobile
Communications Holdings, Inc. ("MCHI") (on behalf of Elipso) and Constellation
Communications, Inc. ("Constellation") (on behalf of Aries). Iridium also
expects to face competition from regional geostationary satellite-based systems,
including Asia Pacific Mobile Telecommunications Satellite ("APMT"), Afro-Asian
Satellite ("ASC") and PT Asia Cellular Satellite ("ACeS") and from the existing
Inmarsat geostationary global satellite system. See "Business -- Competition."
Recent Developments in Licensing of MSS Competitors
By Orders released July 1, 1997, the FCC's International Bureau granted
licenses for the Ellipso system proposed by MCHI and the Aries system proposed
by Constellation. These Orders, which are subject to review by the full FCC,
increase to four the number of U.S.-licensed global MSS systems (including the
IRIDIUM System) and may result in increased competition for the IRIDIUM System.
The licensing of these two CDMA systems reduces the possibility that only one
CDMA system will become operational in the 1610-1621.35 MHZ frequency band
adjacent to the IRIDIUM System's frequency assignment. This in turn reduces the
likelihood that the FCC will increase the frequency assignment for the IRIDIUM
System. In addition, MCHI's and Constellation's licenses may make it more
difficult for CDMA based global systems to meet the protection levels required
for GLONASS, either in the United States, Russia or elsewhere. An inability to
meet these levels might lead to requests to reassign the CDMA systems to higher
frequencies within the 1610-1626.5 MHZ allocation to protect GLONASS. This
development might in turn reduce the amount of spectrum available to Iridium.
Furthermore, the possibility that two more CDMA systems may become
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operational may increase the risk of harmful interference into the IRIDIUM
System's MSS downlinks.
Competition from Interprotocol Roaming Service Providers, GSM Roaming
Services, Regional MSS Systems and Wireless Phone Rentals
Certain services are already available to provide roaming services among a
number of countries, including those that use incompatible cellular standards.
For example, GlobalRoam and Cellcard provide roaming between some North American
AMPS networks and some European and other GSM networks. The availability of such
international near-global roaming services is likely to increase. These services
will compete directly with Iridium's ICRS service and with Iridium's
satellite-based phone services for traveling professionals who travel between or
among territories with incompatible cellular standards. Three other proposed MSS
systems, ICO, Globalstar and Odyssey, and at least one regional geostationary
satellite, ACeS, have indicated that they may also offer some form of dual-mode
satellite/cellular service, which may include interprotocol roaming capabilities
such as those expected to be offered by Iridium. Moreover, it is expected that
GSM-based terrestrial wireless service will continue to expand its reach
(including further into North America), permitting broader roaming capability by
subscribers to such systems without the need for any interprotocol equipment and
with a single phone. There is a risk that one or more regional mobile satellite
services could enter into agreements to provide intersystem roaming which could
be global or nearly global in scope. Iridium will also compete for travel
customers with businesses that provide short-term rentals of terrestrial
wireless phones capable of operating in specific countries or regions. These
businesses often have rental locations at airports, hotels and other locations
and will also deliver phones.
Risk of Delayed Market Entry
The success of the IRIDIUM System will depend in part on the ability of
Iridium to develop and operate the system in a timely fashion. Because some of
the regional satellite-based systems contemplate relatively simple ground
systems and are expected to deploy no more than two satellites, they may succeed
in deploying their systems before Iridium. A significant delay in the
commencement of service by Iridium could result in one or more competing global
MSS systems reaching the market before Iridium. If competing regional or global
systems are deployed and marketed before Iridium's system, Iridium's ability to
compete may be materially and adversely affected. See "-- Potential for Delay
and Cost Overruns."
Technical Capabilities and Financial Resources of Competitors
The technological qualities of Iridium's system will be critical to its
ability to compete. Iridium's system and each of its competitors'
satellite-based systems have different planned technical capabilities. The
actual technical capabilities of satellite-based communications systems will not
be known until such systems are in service. There can be no assurance that the
technological qualities of competing satellite-based systems will not exceed
those of the IRIDIUM System, making those systems more attractive to potential
subscribers. For example, Iridium believes that it will have a link margin
(signal strength) advantage over proposed competing MSS systems, but such
systems may be able to develop and implement technologies, such as "path
diversity" (serving a phone with multiple satellites simultaneously), that may
reduce or eliminate Iridium's expected advantage. Also, it is possible that the
IRIDIUM System may not be able to achieve the technological expectations of
Iridium.
Some of Iridium's potential competitors may have financial and other
resources greater than those of Iridium. There can be no assurance that one or
more of these competitors will not be better capitalized than Iridium.
Terrestrial wireless service providers have found it advantageous to subsidize
wireless phone purchases in order to stimulate demand for their services or to
respond to competitive pressures. Such subsidization requires financial
resources. There can be no assurance
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that Iridium will have the financial resources required to pursue subsidization
in the event subscriber equipment subsidization becomes an advantageous strategy
in the MSS market.
Competition for Subscribers and Service Providers; Pricing
The IRIDIUM System is not intended to provide communications services that
compete with landline and terrestrial wireless services, but instead is designed
to complement such services. IRIDIUM Satellite Services will be priced
significantly higher than most terrestrial phone and paging services, and
IRIDIUM customers are not expected to discontinue their use of terrestrial
wireless services. Iridium's business plan assumes that Iridium will be able to
charge a global mobility premium, over the cost of a hypothetical
terrestrial-based call, for its Satellite Services. If the market will not
support such a premium, Iridium's ability to compete may be materially adversely
affected. Also, the IRIDIUM System will lack the operational capacity to provide
local service to large numbers of subscribers in concentrated areas and the
IRIDIUM System will not afford the same voice quality, signal strength and
degree of building penetration in areas that are served by mature terrestrial
wireless voice or paging systems. The extension of land-based telecommunications
systems to areas that are currently not serviced by landline or terrestrial
wireless phone or paging systems could reduce demand that might otherwise exist
in such areas for IRIDIUM Services.
In addition to competing for subscribers to its service, Iridium also
expects to compete with various other communications services for local service
providers. A failure to effectively compete with these services could materially
and adversely affect the availability to Iridium of the more desirable service
providers or the revenue sharing arrangements among Iridium, gateway operators,
service providers and roaming partners. Furthermore, ICO could have an advantage
in obtaining spectrum allocations and local operating approvals in a number of
countries because it is affiliated with Inmarsat, and investors in ICO and
Inmarsat include many state-owned telecommunications companies and the
regulatory authorities in their countries. See "Regulation of Iridium."
Competition in Paging Services
In addition to competing with paging services offered by proposed global
and regional MSS systems, if any, the IRIDIUM paging service will face
competition from regional and nationwide terrestrial paging services, and from
M-Tel's SkyTel service which currently provides paging services to approximately
22 countries around the world. SkyTel operates by forwarding paging messages via
international circuits to a foreign paging network that subsequently transmits
the message over its local network. Also, in 1995 Inmarsat introduced an
international satellite-based one-way messaging service.
Competition Related to New Technologies and New Satellite Systems
Iridium may also face competition in the future from companies using new
technologies and new satellite systems which could render the IRIDIUM System
obsolete or less competitive. Such new technologies, even if not ultimately
successful, could have a material and adverse effect on Iridium as a result of
associated initial marketing efforts. Iridium's business could be materially and
adversely affected if competitors begin operations or existing
telecommunications service providers penetrate Iridium's target markets before
completion of the IRIDIUM System.
RELIANCE ON MOTOROLA, GATEWAY OWNERS AND OTHER THIRD PARTIES
Construction and Operation of the IRIDIUM System
Iridium does not independently have and does not intend to acquire, except
by contracting with other parties, the ability to design, develop or produce the
components of the IRIDIUM System or to launch the constellation of satellites or
to operate and maintain the system once it is fully deployed. Motorola has
agreed to provide these services to Iridium under the Space System Contract, the
Operations and Maintenance Contract and the Terrestrial Network Development
Contract. Thus,
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Iridium currently relies on Motorola to perform these critical tasks. Motorola,
in turn, is relying to a significant extent on subcontractors and suppliers to
perform many of the critical tasks in constructing the IRIDIUM System. In
addition, Iridium is currently relying on Motorola to maintain the necessary
operating licenses for the system control facilities in the United States, and
the license from the FCC to construct, launch and operate the system, and to
operate and maintain the space segment for the benefit of Iridium. Any
assignment or transfer of control of these licenses could be subject to the
prior consent of the FCC. See "Regulation of Iridium -- Licensing Status."
Motorola has developed the specifications for the gateways and subscriber
equipment. Motorola is also supplying gateway equipment and associated services
and Iridium believes that currently Motorola and Kyocera are the only companies
that are planning to develop and sell subscriber equipment. If for any reason
Motorola or any of its important subcontractors fail to perform as required
under the agreements, the ability of Iridium to implement the IRIDIUM System on
time and within estimated costs and, once implemented, to maintain and operate
the system, could be materially and adversely affected. Motorola's liability
under the agreements for damages for any breach thereof is limited. See
"Principal Contracts for the Development of the IRIDIUM System" and
"-- Conflicts of Interest with Motorola."
Parent has obtained commitments from its investors who are gateway
operators that they will use their reasonable best efforts to perform certain
critical functions including: obtaining the necessary licenses, if any, from the
jurisdictions in their gateway territories; constructing and operating the
gateways; connecting the IRIDIUM System to PSTNs; marketing IRIDIUM Services;
selecting, or acting as, service providers; and managing relations with IRIDIUM
System subscribers either directly or through service providers. Iridium is
dependent on the activities of its gateway operators for its success. Some
gateway operators are behind schedule in the steps necessary to establish and
implement their gateways. Other gateway operators have indicated that they may
not receive regulatory approvals for some of the countries in their territories
at the anticipated commencement of commercial operations in September 1998.
Iridium has entered into Gateway Authorization Agreements with its gateway
operators with respect to these obligations and gateway operators have entered
into gateway equipment purchase agreements with Motorola for the purchase of
gateway equipment for 11 gateways. Motorola has committed to deliver the gateway
equipment for these gateways including voice functionality by September 1998
although, in certain circumstances such as a gateway's failure to perform its
payment obligations or comply with import license requirements and beneficial
occupancy dates, the relevant contracts permit Motorola to delay delivery or
cancel the agreement. Motorola has indicated that several gateways are currently
late in complying with some of these conditions. In particular, the China
gateway and the Middle East-Africa gateway are substantially behind schedule.
Motorola currently intends to activate the gateway equipment for paging
functionality at a portion of the gateways by September 1998 with the remainder
activated by October 1998. There can be no assurance that Motorola will be able
to meet its gateway supply commitments or that gateway operators will perform
their obligations under the Gateway Authorization Agreements or gateway
equipment purchase agreements. In addition, the enhanced call intercept
functionality negotiated with Iridium will require gateway owners who need such
functionality to sign agreements with Motorola in order for such gateways to
have this functionality. No such agreements have been signed, although several
of the gateway owners have indicated to Motorola that they wish to order the
enhanced call intercept functionality. See "Principal Contracts for the
Development of the IRIDIUM System -- Gateway Authorization Agreements."
Distribution and Marketing of IRIDIUM Services
The sales of IRIDIUM Services and of IRIDIUM subscriber equipment to the
ultimate consumer will be made by service providers which will be, or will be
selected by, Iridium's gateway operators. Iridium and its gateway operators
currently have agreements with 51 such service providers. Iridium's business
plan assumes substantial sales of IRIDIUM subscriber equipment by service
providers prior to the commencement of commercial services. Iridium's success
will depend upon the motivation and ability of such service providers to
generate on a timely basis demand for
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IRIDIUM Services and subscriber equipment, and there can be no assurance that
such demand can be generated on a timely basis. As Iridium will not control the
retail pricing of IRIDIUM Services or equipment to subscribers, decisions on
pricing by gateway operators and service providers could materially and
adversely affect Iridium. The failure of one or more gateway operators to
fulfill their obligations to Iridium on a timely basis could have a material and
adverse effect on Iridium, particularly in view of the fact that the appeal of
the IRIDIUM System will be dependent in part upon the extent to which its
services are accessible from, and deliverable to, most of the world. There can
be no assurance that service providers will have sufficient economic or
contractual incentive to successfully execute Iridium's business plan with
respect to customer acquisition and retention, pricing, customer service and
marketing, particularly in light of the fact that sales of IRIDIUM Services and
subscriber equipment are likely to represent only a portion of each service
provider's business. In addition, while Iridium anticipates devoting significant
resources to advertising, Iridium is dependent on gateway operators and service
providers effectively cooperating in the marketing of IRIDIUM Services in their
territories. Failure of the gateway operators and service providers to
adequately fund and implement the marketing of IRIDIUM Services could have a
material adverse effect on Iridium.
A number of gateway operators have entered into non-binding memoranda of
understanding with entities that have indicated an interest in becoming IRIDIUM
Service providers in their service territories but have not yet executed
definitive agreements to any significant extent. The willingness of companies to
become service providers will be dependent upon a variety of factors including
pricing of services and compensation to service providers, local regulations and
the perceived competitiveness of the IRIDIUM System.
RISKS ASSOCIATED WITH PRINCIPAL SUPPLY CONTRACTS
Space System Contract
Iridium and Motorola are parties to the Space System Contract which
provides for the payment by Iridium to Motorola of $3.45 billion (subject to
certain adjustments) for the design, development, production and delivery in
orbit of the space segment. As of December 31, 1997, Iridium had incurred $2.86
billion of this amount, and all but $150 million of this price is required to be
paid by Iridium before the space segment is determined to be fully operational.
Furthermore, Motorola's aggregate liability under the Space System Contract and
related contracts with Iridium in the event the system is not operational is
subject to the Motorola Liability Limitations (defined below) and in no event is
Motorola required under the contract to refund amounts previously paid by
Iridium to Motorola. In addition, subject to certain exceptions, Iridium bears
the risk, including additional costs, if any, resulting from excusable delays
under the Space System Contract, as well as certain of the risks of loss for
satellites once placed in orbit. Following the January 1997 launch failure
involving the Delta II launch vehicle, Motorola advised Iridium of its position
that the United States government's temporary postponement of Delta II launches
pending completion of a failure review analysis constituted an "excusable delay"
under the Space System Contract, the Operations and Maintenance Contract and the
Terrestrial Network Development Contract. Motorola then began the process of
reworking the original launch schedule and notified Iridium that it would not
claim either a cost adjustment under the Space System Contract, the Operations
and Maintenance Contract or the Terrestrial Network Development Contract or a
schedule extension of the final Space System Contract milestone as a result of
the January 1997 Delta II launch failure. The current launch schedule requires
that there are no additional significant launch delays and that all three launch
providers -- Boeing, Khrunichev and China Great Wall -- are able to provide
launch services as currently planned. The second launch occurred on June 18,
1997 using Khrunichev's Proton launch vehicle, which carried seven IRIDIUM
satellites. Altogether, Iridium completed nine launches in 1997, for a total of
46 IRIDIUM satellites in orbit (approximately two-thirds of the expected
constellation of 66 operational and six spare satellites). There can be no
assurance that events constituting "excusable delays" will not arise in the
future, or, if any event constituting an "excusable delay" does arise, that it
will be resolved on terms that are not materially adverse to Iridium. See
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"-- Potential for Delay and Cost Overruns -- Deployment of Satellites" and
"Principal Contracts for the Development of the IRIDIUM System."
On July 18, 1997, Iridium was informed by Motorola that Motorola had lost
communications with an IRIDIUM satellite, confirmed through technical analysis
on July 17, 1997. The satellite, one of five launched on July 9, 1997, was in a
parking orbit awaiting its ascent to final mission orbit. In October 1997,
Motorola informed Iridium that it experienced a problem controlling one of the
IRIDIUM satellites. Iridium has been advised by Motorola that should loss of
either satellite be confirmed, Iridium will not bear the financial risk of loss,
nor will it affect the scheduled date for commercial service in September 1998.
The Space System Contract may be terminated upon the occurrence of certain
events of default. If Iridium defaults, it is obligated to (i) make certain
payments to Motorola, including the reasonably anticipated profits Motorola
could have earned had it been permitted to complete its contracts, a portion of
the prices of all partially completed milestones and all costs of stopping work,
including Motorola's costs of terminating subcontracts and purchase commitments
and (ii) assign certain permits and licenses to Motorola which were previously
transferred to Iridium. If Motorola defaults, Motorola's liability is limited to
reasonable costs of completion in excess of the contract price, subject to the
Motorola Liability Limitations discussed below. Motorola would also be entitled
to withhold certain intellectual property associated with various aspects of the
IRIDIUM System, as a result of which Iridium might not be able to complete the
construction of the system. See "Principal Contracts for the Development of the
IRIDIUM System."
The Space System Contract provides that, to the extent Motorola has any
liability to Iridium under the contract for any costs, damages, claims or losses
whatsoever arising out of or related to such contract, or any such liability
under the Operations and Maintenance Contract, the Terrestrial Network
Development Contract or any other contract executed between Iridium and Motorola
in connection with the IRIDIUM System, or any provisions of any of the
foregoing, whether pursued as a breach of contract or as a tort or other cause
of action and whether accruing before or after completion of all the work
required under the contracts, such liability shall be limited to $100 million in
the aggregate. Each contract also provides that Motorola shall not be liable to
Iridium, whether in contract, tort or otherwise, for special, incidental,
indirect or consequential damages, including, without limitation, lost profit or
revenues. As described under "Principal Contracts for the Development of the
IRIDIUM System," the Space System Contract, Operations and Maintenance Contract
and Terrestrial Network Development Contract each contain other significant
limitations on Motorola's potential liability. The foregoing are the "Motorola
Liability Limitations."
Operations and Maintenance Contract
Iridium and Motorola are also parties to the Operations and Maintenance
Contract, which obligates Motorola for a period of five years after completion
of the final milestone under the Space System Contract to operate the IRIDIUM
space segment and to exert its best efforts to monitor, upgrade and replace the
hardware and software of the IRIDIUM space segment as necessary to maintain
specified performance levels. Iridium has the right to extend the term of this
contract for an additional two years. This contract provides for specified
increasing quarterly payments by Iridium to Motorola that are expected to
aggregate approximately $2.88 billion, subject to certain adjustments. If
Iridium exercises its option to extend the Operations and Maintenance Contract
for an additional two years, the payments due will be based upon specified
quarterly payments ranging up from $157 million in 2003. Such payments are
expected to aggregate approximately $1.33 billion, subject to certain
adjustments. In the event that completion of the Space System Contract and,
therefore, the commencement of the five year period of the Operations and
Maintenance Contract, is delayed more than six months for any reason (other than
causes within the reasonable control of Motorola), the specified quarterly
payments will be adjusted to account for any additional costs incurred by
Motorola. See "Principal Contracts for the Development of the IRIDIUM System."
Motorola does not make any warranty with respect to the services, materials or
equipment supplied under this
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contract. In the event that the Operations and Maintenance Contract terminates
or expires (including termination arising from certain defaults by Motorola or
Iridium), Iridium would be obligated to make certain additional payments to
Motorola. However, if the termination arises from certain defaults of Motorola,
Motorola could also be required to make certain payments to Iridium (subject to
the Motorola Liability Limitations). See "-- Limited Life of Satellites; Cost of
Maintaining the Space Segment; Risk of Satellite Failure or Damage." The
remedies of Iridium and Motorola specified in the contract for a default under
the contract are exclusive of all other remedies.
The Operations and Maintenance Contract contains provisions relating to
indemnification, excusable delays, insurance, permits and licenses, waivers of
rights, events of default and other matters similar to those contained in the
Space System Contract. Motorola's liability under the Operations and Maintenance
Contract is subject to the Motorola Liability Limitations. In the event that the
Space System Contract is terminated for whatever reason, the Operations and
Maintenance Contract will also terminate. See "Principal Contracts for the
Development of the IRIDIUM System."
Terrestrial Network Development Contract
Iridium and Motorola also are parties to the Terrestrial Network
Development Contract, pursuant to which Motorola is obligated to design and
develop the gateway hardware and software, and license Iridium to use and permit
others to use intellectual property developed under the contract to procure the
development and manufacture of gateways from sources other than Motorola.
Motorola will be paid a total of approximately $284 million under the contract
in increments tied to the completion of milestones, including those relating to
acceptance tests of the completed gateway design. Motorola's liability under the
Terrestrial Network Development Contract is subject to the Motorola Liability
Limitations and the contract contains provisions relating to excusable delays,
waivers of rights, events of default and other matters similar to those
contained in the Space System Contract and the Operations and Maintenance
Contract.
Amendments to Principal Contracts
As a result of technological developments, changes in the desired product
mix and features of the IRIDIUM Services, the addition of enhanced system
capabilities (including ICRS, "follow-me paging" and enhanced call intercept),
and scheduling adjustments, there have been, and Iridium anticipates there will
be, a variety of pending and anticipated amendments and interpretations to the
principal supply contracts and other agreements and letters with Motorola.
Iridium's estimate of the cost of anticipated amendments is reflected in
Iridium's estimates of its funding requirements. There can be no assurance that
future technological, market or regulatory developments will not necessitate
unanticipated amendments to such contracts and agreements or that Motorola or
other vendors will be willing or able to provide for these new capabilities on
terms acceptable to Iridium. Furthermore, Iridium has no assurance of having
alternative suppliers to Motorola for provision of these capabilities.
RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS AND DEVELOPING MARKETS
Iridium expects that its telecommunications services will be available in
almost every country. As a result, Iridium and its gateway operators and service
providers will be subject to certain multinational operational risks, such as
changes in domestic and foreign government regulations and telecommunications
standards, licensing requirements, tariffs or taxes and other trade barriers,
price, wage and exchange controls, political, social and economic instability,
inflation, and interest rate and currency fluctuations. The risks enumerated
above are often greater in developing countries or regions. There can be no
assurance that Iridium, its gateway operators or service providers will not be
adversely affected by such multinational risks. In addition, although Iridium
anticipates that gateway operators and service providers will make all payments
in United States dollars, the potential lack of available United States currency
in developing markets may prevent gateway operators and service providers in
such markets from being able to do so. Because Iridium
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expects to receive most payments in United States dollars it does not intend to
hedge against exchange rate fluctuations. Under current United States law,
Iridium, as a U.S. company, may be prohibited from doing business in Cuba, Iran,
Iraq, Libya and North Korea. These restrictions may limit, or eliminate
entirely, the provision of gateway services or IRIDIUM Services in these
countries. Motorola and other United States companies may also be prohibited
from selling or licensing equipment in these countries.
PRICING RISK
Under Iridium's pricing strategy it will set wholesale prices for IRIDIUM
Services and service providers will control the retail price. Service providers
may price IRIDIUM Services in a manner that is sub-optimal to Iridium, including
setting too high a retail price, and thereby reducing total demand without an
offsetting increase in per minute revenue to Iridium. Moreover, Iridium and its
service providers may be forced to lower retail prices in response to
competition. In addition, pricing for telecommunication services, including long
distance rates, has trended downward in recent years. This downward trend may
make it difficult for Iridium to hold or raise its wholesale prices.
LIMITED SATELLITE CAPACITY
To provide commercially adequate service, ensure user acceptance and
operate successfully, the IRIDIUM System will have to provide minimum levels of
availability of IRIDIUM Satellite Services, which will depend upon system
capacity. Various factors, including usage patterns, will have a significant
impact on the capacity of the IRIDIUM System for a particular geographic area
and on a system-wide basis. Most important among these are usage patterns and
spectrum allocation. Iridium could experience unexpected usage patterns which
could exceed the capacity of the IRIDIUM System through one or several gateways.
If Iridium faces significant capacity issues, its ability to increase its
spectrum assignment in any market is subject to significant regulatory hurdles.
There can be no assurance that the necessary spectrum assignments will occur or
that adverse and unanticipated usage patterns will not materialize. Failure to
achieve a commercially viable capacity level for any reason, including but not
limited to those mentioned in this section, would materially and adversely
affect Iridium.
CONFLICTS OF INTEREST WITH MOTOROLA
Motorola has and will have various conflicts of interest with Iridium and
Parent. Motorola is the creator and developer of the concept of the IRIDIUM
System, the principal supplier to Iridium, a founding investor of Iridium
(through its Parent and its predecessor), a gateway owner, Parent's largest
Class 1 Interest holder, a holder of warrants to acquire Class 1 Interests and a
warrant to acquire Series M Class 2 Interests and the guarantor of Iridium's
borrowings under its Guaranteed Bank Facility. See "Certain Relationships and
Related Transactions of Iridium -- Motorola Related Matters" and "Description of
Other Indebtedness."
Although Motorola does not by itself control the Parent Board or the
Iridium Board and is not permitted to participate in decisions or other actions
by Iridium with respect to the Space System Contract, Operations and Maintenance
Contract and the Terrestrial Network Development Contract, Motorola, through its
position as (i) the indirect holder of the largest ownership interest in
Iridium, (ii) potentially the largest holder of Class A Common Stock (through
exchanges of Class 1 Interests for shares of Class A Common Stock), (iii) the
guarantor under the Motorola Guarantee and, if issued, the Motorola Additional
Guarantee and (iv) the principal supplier to Iridium, could in certain
situations exercise significant influence over Iridium. For example, in addition
to its representation on the Parent Board and the Iridium Board, Motorola could
have control over Iridium as or similar to that of a creditor through its
position as a guarantor under the Guaranteed Bank Facility.
Motorola and Parent (as predecessor to Iridium) entered into the Space
System Contract, the Operations and Maintenance Contract and the Terrestrial
Network Development Contract after
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extensive negotiations. However, Parent was a wholly owned subsidiary of
Motorola at the time the Space System Contract and Operations and Maintenance
Contract were negotiated and therefore these negotiations were not conducted on
an arm's-length basis. Moreover, although these agreements provide for specific
prices, Motorola's obligations and liabilities thereunder are subject to certain
limitations which allocate various risks to Iridium and may have the effect of
increasing the price paid by Iridium. Iridium's payment obligations under these
agreements are expected to comprise most of its expenses. See "Principal
Contracts for the Development of the IRIDIUM System" and "Certain Relationships
and Related Transactions of Iridium."
Under the Space System Contract, Motorola has agreed to license the rights
to manufacture, sell and use certain intellectual property to the extent
essential to manufacture IRIDIUM subscriber equipment to competent suppliers
that are acceptable to Motorola. Motorola maintains that it has substantial
discretion in its exercise of these rights and could limit the ability of
potential suppliers to manufacture and sell IRIDIUM subscriber equipment. See
"Principal Contracts for the Development of the IRIDIUM System -- Space System
Contract." If Motorola asserts its position and refuses to license intellectual
property to one or more potential manufacturers, the availability of subscriber
equipment and the characteristics and price thereof could be adversely affected,
which could in turn reduce the demand for IRIDIUM Services. Motorola has,
however, entered into a license agreement with Kyocera which allows Kyocera to
manufacture IRIDIUM phones and Iridium believes that if both Motorola and
Kyocera manufacture equipment, they will be able to produce a sufficient number
of IRIDIUM phones. In addition, Motorola has informed Iridium that it has not
declined to license the essential intellectual property to any third party.
Therefore, while Iridium believes that this risk has been reduced, such risk has
not been eliminated since there can be no assurance that Motorola will not
exercise its rights in the future in a manner that limits the access of other
potential manufacturers to the intellectual property essential for the
manufacture of subscriber equipment.
CONFLICTS OF INTEREST WITH GATEWAY OWNERS
The Iridium Board and the Parent Board are identical in composition and
consist of representatives of certain of the world's leading telecommunications
companies. Almost all of the members of the Iridium Board and the Parent Board
have been appointed by investors in Iridium who also are gateway owners and
service providers. Because Iridium will be a supplier to the gateways and the
service providers, the interests of Iridium are expected to conflict in certain
respects with the interests of the gateway owners and the service providers. For
example, this conflict of interest will be relevant in setting the wholesale
prices that Iridium will charge for airtime and other IRIDIUM Services. There
can be no assurance that the allocation of revenues between Iridium and the
gateway owners or operators by the Iridium Board will not have an adverse effect
on Iridium. See "Principal Contracts for the Development of the IRIDIUM System."
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL
Iridium's success will be dependent upon the efforts of its management team
and its ability to attract and retain qualified management and personnel in the
future. Iridium has no employment contract with any employee and is subject to
the possibility of loss of one or more key employees at any time. Iridium must
also rely upon several employees of Motorola who play a key role in the
performance of Motorola's obligations under the Space System Contract, the
Operations and Maintenance Contract and the Terrestrial Network Development
Contract. Iridium has no control over the relationship between Motorola and such
employees. Iridium could be materially and adversely affected by the loss of one
or more key employees. In addition, Iridium's success will be dependent in part
upon gateway operators having qualified personnel at the various gateways to (i)
oversee the construction of and operate gateways and (ii) execute significant
aspects of Iridium's licensing, marketing and distribution efforts. Significant
and rapid growth in demand for IRIDIUM Services would also require Iridium and
possibly various gateway operators to make additions to personnel to manage such
growth while continuing to meet customer service expecta-
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tions. A significant portion of the management of Iridium will be supplied by
employees of Parent under a Management Services Agreement among Iridium, Parent
and IWCL. See "Certain Matters Regarding the Relationship Among IWCL, Parent and
Iridium -- Management Services Agreement".
PATENTS AND PROPRIETARY RIGHTS
The Space System Contract and the Terrestrial Network Development Contract
provide generally that Motorola will retain all rights to the intellectual
property associated with the IRIDIUM System. Motorola's obligations under the
Space System Contract and the Terrestrial Network Development Contract to
license these intellectual property rights to third-party suppliers are subject
to significant conditions which could limit Iridium's ability to obtain
alternate suppliers of necessary components of the IRIDIUM System in the future.
Various aspects of the design of the IRIDIUM System are already covered by
Motorola patent, copyright and trade secret rights or are the subject of pending
patent applications. Motorola has filed numerous patent applications on the
IRIDIUM System to date and expects to file additional patent applications, both
in the United States and abroad, as the development of the IRIDIUM System
progresses. There can be no assurance that such applications will be granted in
a timely manner or at all, or that, if such patents are obtained that such
patents, and any copyrights or trade secret rights will be adequate to prevent
others from using the intellectual property used in Iridium's business.
Furthermore, many of Iridium's competitors have obtained, and may be expected to
obtain in the future, patents that may cover or affect products or services that
directly or indirectly relate to those offered by Motorola for the IRIDIUM
System. Iridium or Motorola may not be aware of all patents that may potentially
be infringed by products developed by Motorola for the IRIDIUM System. In
addition, patent applications in the United States are confidential until a
patent is issued and, accordingly, Iridium cannot evaluate the extent to which
the products developed by Motorola for the IRIDIUM System may infringe claims
contained in pending patent applications. In general, if it were determined that
one or more of such products infringe on patents held by others, Motorola and
Iridium could be required to (i) cease developing or marketing such products,
(ii) obtain licenses to develop and market such products from the holders of the
patents or (iii) redesign such products in such a way as to avoid infringing the
patent claims. The extent to which Iridium may be required in the future to
obtain licenses with respect to patents held by others and the availability and
cost of any such licenses is currently unknown. There can be no assurance that
Iridium would be able to obtain such licenses on commercially reasonable terms
or, if it were unable to obtain such licenses, that Motorola would be able to
redesign the products which it developed for the IRIDIUM System to avoid
infringement.
Motorola has agreed pursuant to the Space System Contract to indemnify
Iridium for claims of infringement of any valid and enforceable patent in any
country where IRIDIUM Services are authorized which is brought against Iridium
on account of the space segment or any part thereof that is supplied to Iridium
by Motorola under the Space System Contract. However, Motorola's liability
thereunder is subject to certain significant limitations. For example, if
Motorola's liability in respect of a claim or proceeding in any particular
country exceeds 10% of the actual income derived by Iridium from the provision
of IRIDIUM Services in that country, Iridium is required to cooperate to
mitigate Motorola's liability, including either terminating the provision of
IRIDIUM Services in that country or releasing Motorola from liability for patent
infringement in that country in excess of such 10% amount. See "Principal
Contracts for the Development of the IRIDIUM System -- Space System Contract."
ALLEGED HEALTH RISKS
Certain media reports have suggested possible links between the use of
portable cellular telephones which integrate transmitting antennas into their
handsets and certain health risks, including cancer, as well as possible
interference between digital cellular telephones and pacemakers, hearing aids
and other electronic medical devices. The FCC has issued amended and updated
guidelines for evaluating environmental radio frequency radiation from
FCC-regulated transmitters.
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These guidelines are intended to protect the public from health risks due to
exposure to radio frequency energy. Similar guidelines were issued in 1996 by
the International Commission on Non-Ionizing Radiation Protection, an
international body assigned to develop guidelines regarding non-ionizing
radiation. Guidelines are also being considered by certain other international
agencies. No assurance can be given that in the future other standards bodies
will not issue standards that could require or otherwise result in phone
modifications which may materially and adversely affect Iridium. At this time,
there are no FCC proposals relating to the alleged health risks associated with
digital-based cellular phones and pacemakers, hearing aids and other electronic
medical devices. There can be no assurance that the FCC will not regulate the
use of digital technology in wireless communications devices in a manner that
would adversely affect Motorola's or Kyocera's ability to design and develop a
digital phone for use with the IRIDIUM System.
RISK OF ANTITRUST OR OTHER COMPETITION REGULATION
Antitrust and competition laws generally may affect Iridium's ability to
grant exclusive rights to construct and operate IRIDIUM gateway systems. See
"Principal Contracts for the Development of the IRIDIUM System -- Gateway
Authorization Agreements." Compliance with these and other laws and regulations
may, in some cases, require formal notification or informal consultation with
governmental enforcement or administrative authorities. This process may result
in delays in securing approval, where necessary, to offer, grant or exercise
rights, or may result in restrictions or prohibitions on the offer, grant or
exercise of such exclusive rights. It also could adversely affect the ability of
Iridium to operate or to obtain necessary licenses or otherwise to conduct
business in one or more areas of the world.
RISKS ASSOCIATED WITH GROWTH
While there can be no assurance that customer acceptance of and
satisfaction with IRIDIUM Services will result in substantial and increasing
demand for IRIDIUM Services, significant and rapid growth in demand for IRIDIUM
Services would require Iridium to make additions to personnel and management
information systems to manage such growth while continuing to meet customer
service expectations. In addition, spectrum and satellite infrastructure
characteristics of the IRIDIUM System set inherent capacity limitations that
would prevent growth above certain levels.
RANKING OF THE NOTES
The Exchange Notes will be, and the Original Notes are, senior obligations
of the Issuers. The Exchange Notes will, and the Original Notes do, rank pari
passu in right of payment to the Initial Senior Notes and all other existing and
future unsecured Indebtedness of the Issuers, other than the Subordinated
Obligations (as defined). The Subsidiary Guaranties are and will be unsecured,
senior obligations of the Guarantor Subsidiaries. The Guarantor Subsidiaries
will also guarantee Iridium's obligations under the Secured Bank Facility on a
senior secured basis. The obligations of Iridium under the Guaranteed Bank
Facility are guaranteed by Motorola to the extent described under "Description
of Other Indebtedness -- Guaranteed Bank Facility." The Motorola Guarantee
reimbursement obligations of Iridium to Motorola under the Agreement Regarding
Guarantee (as defined) rank pari passu with the Notes and the Initial Senior
Notes.
The Notes are not secured by any asset of any Iridium Party. Accordingly,
the Original Notes are, and the Exchange Notes will be, effectively subordinated
to any secured obligation of the Iridium Parties, including the Secured Bank
Facility, to the extent of the value of the assets securing such obligations. If
Iridium becomes insolvent or is liquidated, or if payment under any secured
obligation is accelerated, the creditor with respect to any secured obligation
would be entitled to exercise the remedies available to a secured creditor under
applicable law and pursuant to instruments governing such obligation.
Accordingly, such creditors will have a prior claim on the secured assets of
Iridium. In any event, because the Notes will not be secured by any of Iridium's
assets, it is possible that there would be no assets remaining from which claims
of the holders of the
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Notes could be satisfied or, if any such assets remain, such assets might be
insufficient to satisfy such claims fully. See "Description of Notes." Moreover,
because Parent has pledged all of its ownership interests in Iridium, a default
under the Secured Bank Facility could result in a change of control of Iridium.
Although the Notes contain certain provisions regarding a change of control of
Iridium, there can be no assurance of the effect such a change of control would
have on the Notes. See "Description of Notes -- Change of Control."
As of December 31, 1997, the Iridium Parties had outstanding approximately
$1,550 million in aggregate principal amount of unsecured senior Indebtedness
(including the principal amount of the Initial Senior Notes) and approximately
$273 million in aggregate principal amount of Indebtedness that is subordinated
to the Notes. See "Use of Proceeds." As of December 31, 1997, the Iridium
Parties had approximately $350 million senior secured Indebtedness outstanding
under the Secured Bank Facility, which Iridium was required to borrow but hold
in a collateral account for the benefit of the lenders under the Secured Bank
Facility. Iridium expects to incur additional secured Indebtedness permitted by
the Indenture, including an aggregate principal amount of $1 billion (inclusive
of the existing $350 million) pursuant to the Secured Bank Facility and other
senior secured bank financing in order to meet its expected funding requirements
through at least year-end 1999, the last year in which Iridium projects negative
cash flow and a net increase in year-end borrowings. See "Description of Other
Indebtedness." Under the Indenture, Iridium and its subsidiaries will be
permitted to incur additional Indebtedness, including Indebtedness secured by
assets of Iridium and its subsidiaries. See "Description of Notes -- Certain
Covenants -- Limitation on Indebtedness" and "-- Limitation on Liens."
RESTRICTIVE LOAN COVENANTS UNDER OTHER INDEBTEDNESS
The Guaranteed Bank Facility and the Secured Bank Facility include certain
covenants that, among other things, restrict the ability of Iridium and its
subsidiaries to: (i) dispose of assets; (ii) incur additional indebtedness;
(iii) incur guarantee obligations; (iv) prepay other indebtedness or amend other
debt instruments; (v) pay dividends; (vi) create liens on assets; (vii) make
investments, loans or advances; (viii) make acquisitions; (ix) engage in mergers
or consolidations; (x) change the business conducted by Iridium; or (xi) engage
in certain transactions with affiliates and otherwise will restrict certain
corporate activities. In addition, the Secured Bank Facility contains a total
debt capitalization covenant and a covenant to maintain committed or available
funding sources through the term of the Secured Bank Facility to meet Iridium's
budgeted project costs. There can be no assurance that these requirements will
be met in the future. If they are not, the holders of the Indebtedness under the
Guaranteed Bank Facility and Secured Bank Facility will be entitled to declare
such Indebtedness immediately due and payable.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if an
Issuer or a Guarantor Subsidiary, at the time it issued or guaranteed the Notes,
(i) incurred or guaranteed such indebtedness with the intent to hinder, delay or
defraud creditors, or (ii)(a) received less than reasonably equivalent value or
fair consideration and (b)(1) was insolvent at the time of such incurrence, (2)
were rendered insolvent by reason of such incurrence or guarantee (and the
application of the proceeds thereof), (3) was engaged or were about to engage in
a business or transaction for which the assets remaining with such Issuer or
Guarantor Subsidiary constituted unreasonably small capital to carry on its
business, or (4) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature, then, in each such case, a
court of competent jurisdiction could void, in whole or in part, the Notes or
the applicable Subsidiary Guarantee or, in the alternative, subordinate the
Notes or the applicable Subsidiary Guarantee to existing and future indebtedness
of that Issuer or Guarantor Subsidiary. The measure of insolvency for purposes
of the foregoing would likely vary depending upon the law applied in such case.
Generally, however, an Issuer would be considered
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insolvent if the sum of its debts, including contingent liabilities, were
greater than all of its assets at a fair valuation, or if the present fair
saleable value of its assets was less than the amount that would be required to
pay the probable liabilities on its existing debts, including contingent
liabilities, as such debts become absolute and matured. Iridium believes that,
for purposes of the United States Bankruptcy Code and state fraudulent transfer
or conveyance laws, the Exchange Notes are being issued without the intent to
hinder, delay or defraud creditors and for proper purposes and in good faith,
and that Iridium will receive reasonably equivalent value or fair consideration
therefor, and that after the issuance of the Exchange Notes, Iridium will be
solvent, will have sufficient capital for carrying on its businesses and will be
able to pay its debts as they mature. However, there can be no assurance that a
court passing on such issues would agree with the determination of Iridium.
POSSIBLE UNENFORCEABILITY OF SUBSIDIARY GUARANTIES
The holders of the Notes will have no direct claim against Guarantor
Subsidiaries other than the claim created by the Subsidiary Guaranties, which
may themselves be subject to legal challenge in the event of the bankruptcy of a
Guarantor Subsidiary. If such a challenge were upheld, the Subsidiary Guarantees
would be unenforceable. To the extent that the Subsidiary Guarantees are not
enforceable, the rights of holders of the Notes to participate in any
distribution of assets of any Guarantor Subsidiary upon liquidation, bankruptcy,
reorganization or otherwise may, as is the case with other unsecured creditors
of Iridium, be subject to prior claims of creditors of that Guarantor
Subsidiary. The Indenture contains covenants that restrict the ability of
Iridium's Restricted Subsidiaries to enter into agreements limiting
distributions and transfers, including dividends. However, the ability of
Iridium's subsidiaries to pay dividends and make other payments may be
restricted by, among other things, applicable state corporate laws and
regulations or by terms of agreements to which they may become party. See
"Description of Notes."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require the Issuers to repurchase all or any portion of such
holder's Notes at a price equal to 101% of the principal amount of such Notes,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase. The Issuers' failure to purchase the Notes pursuant to an offer to
purchase would result in a default under the Indenture. The Guaranteed Bank
Facility contains, the Secured Bank Facility is likely to contain and other
future indebtedness of the Issuers may contain prohibitions of certain events
which would constitute a Change of Control or require such indebtedness to be
repurchased, repaid or redeemed upon certain events which would constitute a
Change of Control. In the event of a Change of Control, there can be no
assurance that the Issuers would have sufficient assets to satisfy all of its
obligations. Moreover, the exercise by Holders of the right to require the
Issuers to repurchase the Notes is likely to cause a default under the Secured
Bank Facility, and could cause a default under other Indebtedness of Iridium,
even if the Change of Control itself does not. Finally, the Issuers' ability to
redeem the Notes may be limited by applicable securities laws. See "Description
of Notes -- Change of Control." Moreover, because Parent has pledged all of its
ownership interests in Iridium, a default under the Secured Bank Facility could
result in a change of control of Iridium. Although the Notes contain certain
provisions regarding a change of control of Iridium, there can be no assurance
of the effect such a change of control would have on the Notes. See "Description
of Notes -- Change of Control."
ABSENCE OF A PUBLIC MARKET
The Original Notes have not been registered under the Securities Act and
are subject to restrictions on transferability and resale. The Original Notes
are new securities and there is currently no established market for them. If
issued, the Exchange Notes generally will be freely transferable (subject to the
restrictions discussed elsewhere herein) but will be new securities for which
there initially will be no market. Accordingly, there can be no assurance as to
the development or liquidity
45
<PAGE> 52
of any market for the Original Notes or, if issued, the Exchange Notes. The
Original Notes are eligible for trading in the PORTAL market. Although the
Initial Purchasers have informed the Issuers that they currently intend to make
a market in the Notes, they are not obligated to do so and any such
market-making, if commenced, may be discontinued at any time without notice in
the sole discretion of the Initial Purchasers. In addition, such market making
activity may be limited during the pendency of the Exchange Offer or the
effectiveness of a shelf registration statement in lieu thereof. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Notes and, if issued, the Exchange Notes. If an active public market does
not develop, the market price and liquidity of the Notes may be adversely
affected. If a trading market develops for the Notes, the future trading prices
thereof will depend on many factors including, among other things, Iridium's
results of operations, prevailing interest rates, the market for securities with
similar terms and the market for securities of other companies in similar
businesses. The Issuers do not intend to apply for listing of the Original Notes
or, if issued, the Exchange Notes on any national securities exchange or for
their quotation through the NNM.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Issuers do
not intend to register the Original Notes under the Securities Act. In addition,
any holder of Original Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes not tendered could be adversely affected. No holder of an
Original Note shall be entitled to receive any Liquidated Damages with respect
to such Original Note, if a holder of such Original Note was, at any time while
the Exchange Offer was pending, eligible to exchange, and did not validly
tender, such Original Note for a freely transferable corresponding Exchange Note
in such Exchange Offer. See "The Exchange Offer" and "Exchange and Registration
Rights Agreement."
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<PAGE> 53
PARENT'S OWNERSHIP STRUCTURE AND STRATEGIC INVESTORS
Iridium, the issuer and a wholly-owned subsidiary of Parent, was formed as
a limited liability company pursuant to the provisions of the Delaware Limited
Liability Company Act (the "Delaware Act") on October 23, 1997. Iridium's
purpose is to acquire, own and manage the IRIDIUM System. Capital was formed as
a Delaware corporation on June 16, 1997, and other than serving as an Issuer of
the Initial Senior Notes and the Notes, does not conduct any business.
Parent was formed as a limited liability company pursuant to the provisions
of the Delaware Act on July 16, 1996. Iridium, Inc., a Delaware corporation and
the predecessor of Parent, was formed on June 14, 1991. On July 29, 1996,
Iridium, Inc. was merged with and into Parent, with Parent as the surviving
entity.
On December 18, 1997, Iridium entered into an Asset Transfer Agreement with
Parent, pursuant to which Parent transferred substantially all of its assets and
liabilities to Iridium (the "Asset Drop-Down Transaction"). Unless otherwise
specified, references herein to Iridium relating to any action or event prior to
the date of the Asset Drop-Down Transaction should be construed as references to
Parent, as predecessor of Iridium.
IWCL was incorporated by Parent as a Bermuda company on December 12, 1996
and has its principal offices at Clarendon House, 2 Church Street, Hamilton,
Bermuda. IWCL was formed for the purpose of acting as a member of Parent. IWCL's
only asset is its interest in Parent and its only activity is participating in
the management of Iridium.
The following is a chart of Parent's ownership structure and strategic
investors:
OWNERSHIP STRUCTURE CHART
The percentage ownership of Parent reflected in the chart above relates to
ownership of outstanding Class 1 Interests only. The Parent Board is composed of
representatives of its strategic investors. Each director of Parent also is a
director of Iridium. Each officer of Iridium LLC also is an officer of Iridium,
with the same title and authority. Iridium has no directors or officers who are
not directors or officers of Parent.
For additional information on the relationship among IWCL, Parent and
Iridium, see "Certain Matters Regarding Relationship Among IWCL, Parent and
Iridium." For information regarding the Asset Drop-Down Transaction and the
relationship of Parent and Iridium, see "Certain Matters
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<PAGE> 54
Regarding Relationship Among IWCL, Parent and Iridium," "-- Asset Drop Down
Transaction," "Description of Parent Limited Liability Company Agreement" and
"Description of Iridium Operating LLC Limited Liability Company Agreement."
Capital is a wholly owned subsidiary of Iridium. The Original Notes are,
and the Exchange Notes will be, the joint and several obligations of Iridium and
Capital, although Iridium received all of the net proceeds of the Original
Notes. Capital has no significant assets and does not conduct any operations.
IP, a Delaware limited liability company and a wholly owned subsidiary of
Iridium, holds the worldwide trademark registrations for Iridium. Roaming, also
a Delaware limited liability company and a wholly owned subsidiary of Iridium,
is the entity that enters into roaming agreements for ICRS on behalf of Iridium.
Iridium currently has no subsidiaries other than Capital, Roaming and IP.
ASSET DROP-DOWN TRANSACTION
On December 18, 1997, Parent and Iridium effected the Asset Drop-Down
Transaction for the purpose of providing the agent for the Secured Lenders under
the Secured Bank Facility with an efficient means for obtaining a security
interest in the membership interests in Iridium. See "Description of Other
Indebtedness -- Secured Bank Facility." Pursuant to the Asset Transfer Agreement
between Parent and Iridium, dated as of December 18, 1997 (the "Asset Transfer
Agreement"), substantially all of the assets and liabilities of Parent were
transferred to Iridium.
Assets transferred to Iridium included, without limitation, (i) Parent's
right, title and interest in the Space System Contract, the Operations and
Maintenance Contract, the Terrestrial Network Development Contract and the
Gateway Authorization Agreements, as well as other contracts necessary for the
construction and operation of the IRIDIUM System, and (ii) Parent's interest in
Capital, Roaming and IP. Liabilities transferred to and assumed by Iridium
included, without limitation, Iridium's obligations in respect of all
outstanding Initial Senior Notes and the Notes. Pursuant to the indentures
relating to the Initial Senior Notes and the Notes, Iridium has been substituted
for Parent, and Parent has been released from all obligations under such
indentures and the Initial Senior Notes and the Notes. Parent retained its
employees and other assets and liabilities necessary to provide management
services to Iridium and IWCL, including, without limitation, its employee
benefit plans. See "Certain Matters Regarding the Relationship Among IWCL,
Parent and Iridium -- Management Services Agreement."
IRIDIUM'S STRATEGIC INVESTORS
Strategic investors in Parent include market leaders in providing wireless
telecommunications services, manufacturing telecommunications equipment and
satellite systems and supplying satellite launch services. IWCL and Iridium's
strategic investors have collectively invested, or committed to invest,
approximately $3.26 billion in Parent, including equity, debt and guarantees,
representing approximately 74% of Iridium's projected total funding needs
through September 23, 1998, the date on which Iridium expects to commence
commercial operations, and approximately 62% of Iridium's projected total
funding needs through the end of 1999, the last year in which Iridium expects
negative cash flow and a net increase in year-end borrowings. See "Prospectus
Summary -- Sources and Uses of Funds by Iridium." Iridium believes that its
ability to develop and commercialize the IRIDIUM System and to compete in the
highly competitive wireless telecommunications market is greatly enhanced by the
technical expertise, regulatory experience, project management skills,
distribution capacity and market presence of its strategic investors.
Parent's strategic investors which are telecommunications services
providers include such leading companies as Sprint and BCE Mobile Communications
Inc. in North America, STET and Vebacom in Europe and DDI (Japan), UCOM
(Thailand) and SK Telecom in Asia. Motorola, one of the world's leading
providers of wireless communications systems and equipment, Iridium Canada Inc.
and Sprint Corporation have been allocated the North American gateway service
territory, which principally consists of the United States and Canada. STET, a
leading European telecommunications company, has been allocated a gateway
service territory consisting of countries in Western Europe,
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<PAGE> 55
including Belgium, Denmark, France, Greece, Italy, Luxembourg, the Netherlands
and Switzerland. o.tel.o communications GmbH & Co., a provider of mobile and
satellite communications in Germany and an indirect subsidiary of VEBA AG, one
of the largest corporations in Germany, has been allocated a gateway service
territory consisting of countries in or near Europe, including Austria,
Bulgaria, the Czech Republic, Finland, Germany, Hungary, Ireland, Israel,
Norway, Poland, Portugal, Romania, Spain, Sweden, Slovakia, Ukraine and the
United Kingdom. SK Telecom, a provider of cellular and paging services, has been
allocated the gateway service territory consisting of North Korea and South
Korea. Pacific Electric Wire & Cable Co., Ltd. ("PEWC"), a leading provider of
telecommunications services and equipment, has been allocated a gateway service
territory consisting of Taiwan, Indonesia, Brunei, Papua New Guinea and the
Philippines. Thai Satellite Telecommunications Co., Ltd., a company formed by
UCOM, one of the largest cellular and paging operations in Thailand, has been
allocated a gateway service territory consisting of Cambodia, Laos, Malaysia,
Singapore, Thailand and Vietnam. Because of the prominence of many of these
investors, Iridium believes that such strategic investors have provided
significant assistance in the process of seeking regulatory approvals and their
assistance will continue to be of great importance. In addition, Iridium expects
that these investors will use their existing wireless communications sales and
services organizations to market and distribute IRIDIUM Services and subscriber
equipment for use with the IRIDIUM System in their territories, which include
their existing base of approximately 14 million wireless subscribers.
The Parent's investor group also includes organizations with significant
satellite development and launch expertise, including Raytheon, a leading
developer and manufacturer of electronic systems, equipment and components,
Lockheed Martin, a world leader in defense and space system technology and
design, Khrunichev, a state-owned aerospace engineering and manufacturing
company in Russia, and China Aerospace, a major diversified industrial group. As
strategic investors, each has contributed significantly to major subsystems of
the space segment of the IRIDIUM System. Lockheed Martin designed and is
manufacturing the satellite bus; Raytheon is providing the main mission antennas
for the satellites; China Great Wall Industry Corporation, a subsidiary of China
Aerospace, will provide launches for the initial deployment of the satellites of
the space segment (and additional launches for the maintenance of the space
segment); and Khrunichev will provide several launches for the initial
deployment of the space segment. In addition, Iridium expects that Motorola and
Kyocera, two of the world's leading manufacturers of wireless telephones, will
manufacture and sell subscriber equipment for use with the IRIDIUM System. See
"Parent's Investors, Number of Class 1 Interests Owned, Percentage Ownership and
Principal Gateway Service Territories."
USE OF PROCEEDS
There will be no proceeds to the Issuers from the exchange pursuant to the
Exchange Offer. Iridium will pay the expenses of the Exchange Offer, estimated
to be approximately $400,000. The net proceeds to Parent from the Original
Offering were approximately $293 million. Approximately $205 million of such net
proceeds were used to permanently reduce the Guaranteed Bank Facility to $450
million (which correspondingly reduced the Motorola Guarantee) and the remaining
$88 million of such net proceeds were used primarily for milestone payments
under the Space System Contract and the Terrestrial Network Development Contract
and to a lesser extent for other general corporate purposes. Prior to such uses,
Parent repaid amounts outstanding under the revolving Guaranteed Bank Facility
and invested the remainder in short-term investment grade debt securities. See
"Prospectus Summary -- Sources and Uses of Funds by Iridium." For a discussion
of the term of, and the interest rates applicable to, the Guaranteed Bank
Facility, see "Description of Other Indebtedness -- Guaranteed Bank Facility."
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<PAGE> 56
CAPITALIZATION
The following table sets forth as of September 30, 1997: (i) the
capitalization of Parent; and (ii) the pro forma capitalization of Parent giving
effect to the Original Offering and the application of net proceeds of the
Original Offering. Parent is the predecessor of Iridium, and has transferred
substantially all of its assets and liabilities to Iridium pursuant to the Asset
Transfer Agreement between Parent and Iridium. See "Parent's Ownership Structure
and Strategic Investors -- Asset Drop-Down Transaction."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
ACTUAL PRO FORMA
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Guaranteed Bank Facility.................................. $ 235,000 $ 235,000(1)
13% Senior Notes due 2005, Series A(2).................... 276,019 276,019
14% Senior Notes due 2005, Series B(2).................... 477,459 477,459
11 1/4% Senior Notes due 2005, Series C................... -- 300,000(3)
14 1/2% Senior Subordinated Notes due to Members in
2006.................................................... 262,035 262,035
Members' equity:
Class 2 Interests, 50,000 interests authorized for Series
M; an aggregate of 300,000 interests authorized for
Series A, Series B and Series C
Series M, no interests issued and outstanding........... -- --
Series A, 37,194 interests issued and outstanding....... 38,511 38,511
Series B, 1 interest issued and outstanding............. -- --
Series C, 75 interests issued and outstanding........... -- --
Class 1 Interests, 225,000,000 interests authorized,
141,219,180 interests issued and outstanding............ 2,017,539 2,017,539
Deficit accumulated during the development stage.......... (301,789) (301,789)
Adjustment for minimum pension liability.................. (733) (733)
---------- ----------
Total members' equity........................... 1,753,528 1,753,528
---------- ----------
Total capitalization............................ $3,004,041 $3,304,041
========== ==========
</TABLE>
- ---------------
(1) Does not reflect any temporary reduction in the outstanding principal amount
under the Guaranteed Bank Facility resulting from the application of the net
proceeds of the Original Offering. See "Use of Proceeds."
(2) The Series A Notes will accrete to a value of $300 million at maturity and
the Series B Notes will accrete to a value of $500 million at maturity.
(3) Represents the aggregate principal amount of the Original Notes.
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<PAGE> 57
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were originally issued and sold on October 17, 1997.
Such sales were not registered under the Securities Act in reliance upon the
exemptions provided by Section 4(2), Rule 144A and Regulation S of the
Securities Act. Pursuant to an Exchange and Registration Rights Agreement
entered into in connection with the sale of the Original Notes, the Iridium
Parties have agreed to file with the Commission a registration statement (an
"Exchange Offer Registration Statement") relating to an exchange offer (a
"Registered Exchange Offer") pursuant to which other series of notes of the
Issuers (the Exchange Notes) would (i) be covered by such Exchange Offer
Registration Statement, (ii) contain terms which are identical in all material
respects to the terms of the respective Original Notes, except as set forth in
this Prospectus, and (iii) be offered in exchange for Original Notes tendered at
the option of the holders thereof. The Registration Statement of which this
Prospectus is a part is an Exchange Offer Registration Statement within the
meaning of the Exchange and Registration Rights Agreement, and the Exchange
Offer constitutes a Registered Exchange Offer within the meaning of the Exchange
and Registration Rights Agreement. The sole purpose of the Exchange Offer is to
fulfill the obligations of the Iridium Parties with respect to the Exchange and
Registration Rights Agreement. See "Exchange and Registration Rights Agreement."
If (i) because of any change in law or applicable interpretations thereof
by the Commission, the Issuers determine upon the advice of their outside
counsel that they are not permitted to effect the Exchange Offer as contemplated
by the Exchange and Registration Rights Agreement, (ii) any Original Notes
validly tendered pursuant to the Exchange Offer are not exchanged for Exchange
Notes within 30 days after the commencement of the Exchange Offer, (iii) either
Chase Securities Inc. or Merrill Lynch, Pierce, Fenner and Smith Incorporated,
as Initial Purchasers of the Original Notes so requests within 90 days after the
consummation of the Exchange Offer with respect to Original Notes that were not
eligible to be exchanged for Exchange Notes in the Exchange Offer and are then
held by it following the consummation of the Exchange Offer, (iv) any applicable
law or interpretations do not permit any holder of Original Notes to participate
in the Exchange Offer, (v) any holder of an Original Note that participates in
the Exchange Offer notifies Iridium within 20 business days after the
consummation of the Exchange Offer that it did not receive freely transferable
Exchange Notes in exchange for validly tendered Original Notes or (vi) the
Issuers so elect, then the Iridium Parties will use their reasonable efforts to
file as promptly as practicable with the Commission a shelf registration
statement (the "Shelf Registration Statement") on the terms set forth in the
Exchange and Registration Rights Agreement to cover resales of Transfer
Restricted Securities (as defined) from time to time by such holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement and who agree in writing to be
bound by all provisions of the Exchange and Registration Rights Agreement
(including certain indemnification obligations). For purposes of the foregoing,
"Transfer Restricted Securities" means each Original Note until (i) the date of
which such Original Note has been exchanged for a freely transferable
corresponding Exchange Note in the Exchange Offer, (ii) the date on which such
Original Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement, or (iii) the
date on which such Original Note is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. In the event that (i) the Iridium Parties have failed to file
the Exchange Offer Registration Statement or, if applicable, the Shelf
Registration Statement, (ii) the Exchange Offer Registration Statement, or, if
applicable, the Shelf Registration Statement, has not been declared effective by
the Commission, or (iii) the Exchange Offer has not been consummated or the
Exchange Offer Registration Statement or the Shelf Registration Statement ceases
to remain effective or usable, in each case within specified time periods, the
Iridium Parties will be obligated to pay Liquidated Damages with respect to
certain remaining Transfer Restricted Securities. See "Exchange and Registration
Rights Agreement."
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<PAGE> 58
TERMS OF THE EXCHANGE
The Issuers hereby offer to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the "Letter of Transmittal") $1,000 in principal amount of Exchange
Notes for each $1,000 in principal amount of Original Notes. The terms of the
Exchange Notes are identical in all material respects to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Exchange Notes will generally be freely transferable by holders
thereof. The holders of the Exchange Notes (as well as remaining holders of any
Original Notes (except in the limited case of any obligation relating to a Shelf
Registration Statement, as discussed above)) will not be entitled to exchange or
registration rights under the Exchange and Registration Rights Agreement. See
"Exchange and Registration Rights Agreement." The Exchange Notes will evidence
the same debt as the Original Notes and will be entitled to the benefits of the
Indenture pursuant to which such Notes were issued. See "Description of Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on interpretations by the Commission set forth in no-action letters
issued to third parties, the Issuers believe that Exchange Notes issued pursuant
to the Exchange Offer in exchange for the Original Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of an Iridium Party within the meaning of
Rule 405 under the Securities Act, (ii) a broker-dealer who acquired such
Original Notes directly from an Iridium Party or (iii) broker-dealers who
acquired such Original Notes as a result of market making or other trading
activities) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such Exchange Notes are acquired
in the ordinary course of such holders' business, and such holders are not
engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging, and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Original Notes where such Original Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that they will make this Prospectus
available to be used in connection with any such resale by all persons subject
to the prospectus delivery requirements of the Securities Act for such period of
time as such persons must comply with such requirements in order to resell
Exchange Notes; provided that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by a broker-dealer receiving
Exchange Notes in exchange for Original Notes acquired for its own account as a
result of market-making activities or other trading activities (an "Exchanging
Dealer"), such period shall be the lesser of 180 days and the date on which all
Exchanging Dealers have sold all Exchange Notes held by them and (ii) the
Issuers shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Notes for a period of not less than 90 days after the consummation of
the Exchange Offer. Any holder that cannot rely upon such interpretations must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
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<PAGE> 59
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998, unless the
Issuers in their sole discretion extend the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Issuers, expires.
The Issuers reserve the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to
(the "Exchange Agent") and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Original Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Issuers expressly reserve the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "-- Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Issuers and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Original Notes. If any such termination or
amendment occurs, the Issuers will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holders of the
Original Notes as promptly as practicable. Unless the Issuers terminate the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Issuers will exchange the Exchange Notes for the Original Notes on the
Exchange Date.
If the Issuers waive any material condition to the Exchange Offer, or amend
the Exchange Offer in any other material respect, and if at the time that notice
of such waiver or amendment is first published, sent or given to holders of
Original Notes in the manner specified above, the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the fifth
business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Issuers to record holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
HOW TO TENDER
The tender to the Issuers of Original Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Issuers in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. Except as set forth below, in order for Original Notes
to be validly tendered pursuant to the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry tender, an Agent's Message
(as defined) in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at its address set forth on
the back cover of this Prospectus and either (i) tendered Original Notes must be
received by the Exchange Agent, (ii) such Original Notes must be tendered
pursuant to the procedures for book-entry transfer set forth below and a
book-entry confirmation, including an Agent's Message if the tendering holder
has not delivered a Letter of Transmittal, must be received by the Exchange
Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed
delivery procedures set forth below must be complied with. The term "book-entry
confirmation" means a timely confirmation of a book-entry transfer of Original
Notes into the Exchange Agent's account of DTC. The term "Agent's Message" means
a message, transmitted by DTC to and received by the Exchange Agent and forming
a part of
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<PAGE> 60
a book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by the Letter of
Transmittal (including the representations contained therein) and that the
Iridium Parties may enforce the Letter of Transmittal against such participant.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuers and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a firm (an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program (an "Eligible Program") within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Original Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Original Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself or herself, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such beneficial
owner's name or follow the procedures described in the immediately preceding
paragraph. The transfer of record ownership may take considerable time.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Original Notes at The Depository Trust Company ("DTC") for
purposes of the Exchange Offer within two business days after the date of this
Prospectus. Any financial institution that is a participant in DTC's book-entry
transfer facility system may make a book-entry delivery of the Original Notes by
causing DTC to transfer such Original Notes into the Exchange Agent's account at
DTC in accordance with DTC's Authorized Tender Offer Program ("ATOP") procedures
for transfers. Such holder of Original Notes using ATOP should transmit its
acceptance on DTC on or prior to the Expiration Date (or comply with the
guaranteed delivery procedures set forth below). DTC will verify such
acceptance, execute a book-entry transfer of the tendered Original Notes into
the Exchange Agent's account at DTC and then send to the Exchange Agent
confirmation of such book-entry transfer, including an Agent's Message
confirming that DTC has received an express acknowledgment from such holder that
such holder has received and agrees to be bound by the Letter of Transmittal and
that the Iridium Parties may enforce the Letter of Transmittal against such
holder.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter or facsimile transmission from an
Eligible Institution setting forth the name and address of the tendering holder,
the names in which the Original Notes are registered and, if possible, the
certificate numbers of the Original Notes to be
54
<PAGE> 61
tendered, and stating that the tender is being made thereby and guaranteeing
that within five trading days after the date of execution of such letter or
facsimile transmission by the Eligible Institution, the Original Notes, in
proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Original Notes being tendered by the
above-described method (or a timely book-entry confirmation) are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuers may, at their option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are being delivered with this Prospectus
and the related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely book-entry confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Original Notes (or a timely
book-entry confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Issuers, be unlawful. The Issuers also reserve the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. None of the Issuers, the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Issuers' interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Issuers and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Issuers
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Issuers and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Iridium Parties of
their obligations under the Exchange and Registration Rights Agreement and that
the Iridium Parties shall have no further obligations or liabilities thereunder
(except in certain limited circumstances). All authority conferred by the
Transferor will survive the death or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
55
<PAGE> 62
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of any of the Iridium Parties within the meaning of Rule 405 under
the Securities Act, that it is acquiring the Exchange Notes offered hereby in
the ordinary course of such Transferor's business, that such Transferor has no
arrangement with any person to participate in the distribution of such Exchange
Notes and, if not a broker-dealer, the Transferor is not engaged in a
distribution of the Exchange Notes or (b) that it is an "affiliate" (as so
defined) of an Iridium Party or of the Initial Purchasers and that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered Original Notes to be withdrawn, the certificate numbers of Original
Notes to be withdrawn, the principal amount of Original Notes to be withdrawn
(which must be an authorized denomination), a statement that such holder is
withdrawing his election to have such Original Notes exchanged, and the name of
the registered holder of such Original Notes, and must be signed by the holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Issuers that the person withdrawing the tender has succeeded
to the beneficial ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuers, and
such determination will be final and binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuers shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if an Issuer has given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Issuers and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Issuers will be returned without expense to the
tendering holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at DTC pursuant to the procedures
described above, such non-exchanged Original Notes will be credited to an
account maintained with DTC promptly following the Expiration Date) or, if the
Issuers terminate the Exchange Offer prior to the Expiration Date, promptly
after the Exchange Offer is so terminated.
56
<PAGE> 63
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, no Iridium Party will be required to issue or guarantee
Exchange Notes in respect of any properly tendered Original Notes not previously
accepted and may terminate the Exchange Offer (by oral or written notice to the
Exchange Agent and by timely public announcement communicated, unless otherwise
required by applicable law or regulation, by making a release to the Dow Jones
News Service) or, at its option, modify or otherwise amend the Exchange Offer,
if (a) there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof, or (iii) resulting in
a material delay in the ability of the Issuers to accept for exchange or
exchange some or all of the Original Notes pursuant to the Exchange Offer; (b)
any statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the sole judgment of the Issuers might
directly or indirectly result in any of the consequences referred to in clauses
(a)(i) or (ii) above or, in the sole judgment of the Issuers, might result in
the holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Commission referred to in this Prospectus, or would
otherwise make it inadvisable to proceed with the Exchange Offer; or (c) a
material adverse change shall have occurred in the business, condition
(financial or otherwise), operations, or prospects of the Issuers.
The foregoing conditions are for the sole benefit of the Iridium Parties
and may be asserted by any of them with respect to all or any portion of the
Exchange Offer regardless of the circumstances (including any action or inaction
by any Iridium Party) giving rise to such condition or may be waived by the
Issuers in whole or in part at any time or from time to time in their sole
discretion. The failure by the Issuers at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, and each right
will be deemed an ongoing right which may be asserted at any time or from time
to time. In addition, the Issuers have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to terminate or amend the
Exchange Offer.
Any determination by the Issuers concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Issuers will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to (i) the registration statement of which this Prospectus constitutes a
part or (ii) qualification under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") of the applicable Indenture pursuant to which such
Original Notes were issued.
EXCHANGE AGENT
, has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at its address set forth on the back cover page of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile number other than the ones set forth herein, will
not constitute a valid delivery.
57
<PAGE> 64
SOLICITATION OF TENDERS; EXPENSES
The Iridium Parties have not retained any dealer-manager or similar agent
in connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Iridium
Parties will, however, pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Iridium Parties will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting and legal fees, will be paid by
Iridium and are estimated at approximately $400,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by any Iridium Party. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of any Iridium Party since the respective dates as of which information
is given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Original Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuers may, at
their discretion, take such action as it may deem necessary to make the Exchange
Offer in any such jurisdiction and extend the Exchange Offer to holders of
Original Notes in such jurisdiction. In any jurisdiction the securities laws or
blue sky laws of which require the Exchange Offer to be made by a licensed
broker or dealer, the Exchange Offer is being made on behalf of the Issuers by
one or more registered brokers or dealers which are licensed under the laws of
such jurisdiction.
APPRAISAL RIGHTS
Holders of Original Notes will not have dissenters' rights or appraisal
rights in connection with the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders should not be
a taxable exchange for Federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Iridium Parties will have fulfilled a covenant contained in the terms of the
Exchange and Registration Rights Agreement. Holders of the Original Notes who do
not tender their certificates in the Exchange Offer will continue to hold such
certificates and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture pursuant to which such Original Notes were issued.
Except in limited circumstances relating to rights to request a Shelf
Registration Statement, as discussed above, the exchange and registration
rights, and the right to receive Liquidated Damages, pursuant to the Exchange
and Registration Rights Agreement will cease to have further effect as a result
of the consummation of this Exchange Offer. See "Exchange and Registration
Rights Agreement." All untendered Original Notes will continue to be subject to
the restriction on transfer set forth in the Indenture pursuant to which such
Original Notes were issued. To the extent that Original Notes are tendered and
accepted
58
<PAGE> 65
in the Exchange Offer, the trading market, if any, for the Original Notes could
be adversely affected. See "Risk Factors -- Consequences of Failure to
Exchange."
The Issuers may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
59
<PAGE> 66
SELECTED FINANCIAL DATA
The following selected financial data of Parent as of December 31, 1992
(predecessor company), 1993, 1994, 1995 and 1996 and for the year ended December
31, 1992 (predecessor company), the period January 1, 1993 to July 28, 1993
(predecessor company) and the period July 29, 1993 (the Initial Contribution
Date) to December 31, 1993, and the years ended December 31, 1994, 1995 and
1996, have been derived from the consolidated financial statements of Parent
(and its predecessor prior to the Initial Capital Contribution Date), which have
been audited by KPMG Peat Marwick LLP, independent certified public accountants.
The selected financial data of Parent as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 are derived from the unaudited
condensed consolidated financial statements of Parent. In the opinion of
management of Iridium, such unaudited condensed consolidated financial
statements include all adjustments necessary for a fair presentation of the
financial position and the results of operations of Parent as of and for such
periods. The selected financial data set forth below should be read in
conjunction with "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of Parent and notes thereto included herein. Parent is the
predecessor of Iridium, and has transferred substantially all of its assets and
liabilities to Iridium pursuant to the Asset Transfer Agreement between Parent
and Iridium. See "Parent's Ownership Structure and Strategic Investors -- Asset
Drop-Down Transaction."
<TABLE>
<CAPTION>
PERIOD PRIOR TO
INITIAL CAPITAL PERIODS FOLLOWING INITIAL
CONTRIBUTION DATE(1) CAPITAL CONTRIBUTION DATE NINE MONTHS
----------------------------- ------------------------------------------- ENDED
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31, SEPTEMBER 30,
YEAR ENDED TO TO --------------------------- -------------------
DEC. 31, 1992 JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1996 1997
------------- ------------- ------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF LOSS
DATA:
Revenues(2).................. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and
administrative............. 8,773 5,309 7,141 17,561 27,187 71,404 38,352 169,465
Interest income.............. -- -- 390 4,252 5,226 2,395 2,217 1,516
Provision for income taxes... -- -- 173 1,525 1,684 4,589 5,600 --
------ ------ ------ ------- ------- ------- ------- --------
Net loss..................... $ 8,773 $ 5,309 $ 6,924 $14,834 $23,645 $73,598 $41,735 $167,949
====== ====== ====== ======= ======= ======= ======= ========
Net loss per Class 1
Interest................... $ -- $ -- $ .43 $ .38 $ .27 $ .64 $ .37 $ 1.33
====== ====== ====== ======= ======= ======= ======= ========
OTHER DATA(3):
Ratio of earnings to fixed
charges(4)................. -- -- -- -- -- -- -- --
Deficiency of earnings to
cover fixed charges........ $ 8,773 $ 5,309 $ 6,751 $13,309 $21,961 $97,136 $51,069 $248,919
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(5)
------- -------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................. $ -- $ 23,496 $202,391 $ 51,332 $ 1,889 $ 9,189 $ 302,039
System under construction.................. -- 275,000 646,000 1,448,000 2,376,884 2,003,472 2,003,472
Total assets............................... -- 299,886 851,809 1,505,383 2,434,081 3,190,885 3,490,885
Long-term debt............................. -- -- -- -- 735,904 1,015,513 1,315,513
Total members' equity (deficit)............ $(9,530) $294,308 $795,813 $1,404,610 $1,572,029 $1,753,528 $1,753,528
</TABLE>
- ---------------
(1) These amounts reflect certain costs incurred by Motorola prior to July 29,
1993, which were reimbursed by Parent.
(2) Parent is a development stage company and accordingly has no revenue for the
periods presented.
(3) For purposes of determining the ratio of earnings to fixed charges, and the
deficiency of earnings to cover fixed charges, "earnings" includes pre-tax
income (loss) adjusted for fixed charges. "Fixed charges" consists of
interest capitalized and that portion of operating lease rental expense
(deemed to be one-third of rental expense) representative of interest.
(4) The ratios of earnings to fixed charges are not presented for each of 1992,
1993, 1994, 1995 and 1996, and the nine months ended September 30, 1996 and
1997, because earnings were inadequate to cover fixed charges by
approximately $8,773,000, $12,060,000, $13,309,000, $21,961,000 and
$97,136,000, and $51,069,000 and $248,919,000, respectively.
(5) Pro forma as adjusted to give effect to the Original Offering. Does not
reflect any temporary reduction in the outstanding principal amount of the
Guaranteed Bank Facility resulting from the application of the net proceeds
of the Initial Senior Notes or the Original Notes. See "Use of Proceeds."
60
<PAGE> 67
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Iridium is currently devoting its entire efforts to commercializing and
establishing the IRIDIUM System. As such, Iridium's current principal activities
relate to managing the design, construction and development of the system and
preparing for its day-to-day operations. See "Business" and Parent's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
The discussion below relates in part to the financial condition and results
of operations of Parent. Parent is the predecessor of Iridium, and has
transferred substantially all of its assets and liabilities to Iridium pursuant
to the Asset Transfer Agreement. See "Parent's Ownership Structure and Strategic
Investors -- Asset Drop-Down Transaction." Each of Roaming, IP and Capital is a
wholly owned subsidiary of Iridium. Each of Roaming, IP and Capital has no
significant assets and does not conduct any significant operations. IWCL acts as
a member of Parent and has no other business. See "Certain Matters Regarding
Relationship Among IWCL, Parent and Iridium." IWCL's sole asset is its Class 1
Interests in Parent.
LIQUIDITY AND CAPITAL RESOURCES
Funding Requirements
While Iridium has raised sufficient funds to meet its expected
pre-commercial operations budgeted project costs, Iridium expects to require
substantial additional funding after commencement of operations. See "Sources
and Uses of Funds by Iridium." With respect to the IRIDIUM System, Iridium and
Motorola are parties to (i) the Space System Contract for the design,
development, production and delivery in orbit of the space segment, (ii) the
Operations and Maintenance Contract to provide day-to-day management of the
space segment after deployment and to monitor, upgrade and replace hardware and
software of the space segment as necessary to maintain performance
specifications and (iii) the Terrestrial Network Development Contract to design
the gateway hardware and software. Substantially all of the initial capital
raised by Iridium is being used and will continue to be used to make payments to
Motorola under the Space System Contract and, to a lesser extent, the
Terrestrial Network Development Contract. The Space System Contract provides for
a fixed price of $3.45 billion (subject to certain adjustments), scheduled to be
paid by Iridium to Motorola over approximately a five-year period for completion
of milestones under the contract. Payments under the Operations and Maintenance
Contract will be payable quarterly and are expected to aggregate approximately
$2.88 billion over such contract's initial five-year term (assuming commencement
of commercial operations on September 23, 1998 and no excusable delays), in
addition to the cost of certain spare satellites at the completion of the
contract. The payments increase each year, ranging from quarterly payments of
$129.4 million in 1998 to $157.4 million in 2003 to $171.4 million in 2005. If
Iridium exercises its option to extend the Operations and Maintenance Contract
for an additional two years, the payments due for that two-year extension are
expected to aggregate approximately $1.33 billion (assuming commencement of
commercial operations on September 23, 1998 and no excusable delays). The
Terrestrial Network Development Contract provides for payments aggregating
approximately $284 million. As a result of technological developments, changes
in the product mix of the IRIDIUM Service, and scheduling adjustments, including
the implementation of ICRS into Iridium's service offerings, there have been,
and Iridium anticipates there will be, amendments and interpretations of the
Space System Contract, the Terrestrial Network Development Contract and the
Operations and Maintenance Contract and other agreements and letters with
Motorola, which may increase the total costs of these contracts. Iridium's
estimate of the cost of anticipated amendments is reflected in Iridium's
estimates of its funding requirements. These amendments and interpretations may
affect the price and terms of those agreements. See "Risk Factors -- Risks
Associated with Principal Supply Contracts -- Amendments to Principal
Contracts."
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<PAGE> 68
Through December 31, 1997, Parent has incurred expenditures totaling $2.86
billion to Motorola under the Space System Contract in respect of completed
milestones and expenditures totaling $138 million under the Terrestrial Network
Development Contract. Based on estimates and the planned schedule as of December
31, 1997, Iridium's expected future cash requirements by year under the
contracts through December 31, 1999 are approximately as follows:
<TABLE>
<CAPTION>
1998 1999
------ ------
(IN MILLIONS)
<S> <C> <C>
Space System Contract.................................... $145 $589
Terrestrial Network Development Contract................. 36 89
Operations and Maintenance Contract...................... -- 140
</TABLE>
Iridium will also require funds for working capital, business software
development, interest on anticipated borrowings, financing costs and operating
expenses until some time after the commencement of commercial operations. See
"Prospectus Summary -- Sources and Uses of Funds by Iridium." Iridium's interest
expense will increase significantly as a result of its financing plan. During
commercialization, Iridium will be required to make payments to Motorola under
the Operations and Maintenance Contract. After December 31, 1999 (the last year
in which Iridium projects negative cash flow and a net increase in year-end
outstanding borrowings), Iridium's obligations relating to the Operations and
Maintenance Contract and funds needed for working capital, capital expenditures
and debt service are anticipated to be funded through operations. Iridium
anticipates cash funding requirements of approximately $4.408 billion through
September 23, 1998, the date on which Iridium expects to commence commercial
operations, and $5.3 billion (net of assumed revenues following commencement of
commercial operations) through year-end 1999, the last year in which Iridium
projects negative cash flow and a net increase in year-end borrowings.
The foregoing information reflects Iridium's current estimate of its
funding requirements through year-end 1999. Actual amounts may be expected to
vary from such estimates for a variety of reasons, including unforeseen
construction, integration or regulatory delays or launch failures. See "Risk
Factors -- Risk of Error in Forward Looking Statements," "-- Potential for Delay
and Cost Overruns," and "-- Satellite Launch Risks -- Impact of Excusable
Delays."
Sources of Funding
As of December 31, 1997, Iridium had indirectly received $1.982 billion
from equity investments in the Parent, including approximately $224 million in
net proceeds from the IWCL IPO and $42 million due from South Pacific Iridium
Holdings Limited pursuant to the terms of a definitive purchase agreement. At
December 31, 1997, Iridium's debt equaled approximately $1.89 billion, including
borrowings under the $450 million (reduced from $750 million with net proceeds
of the Initial Senior Notes and the Original Notes) Guaranteed Bank Facility.
Borrowings under the Guaranteed Bank Facility are guaranteed by Motorola.
Depending on market conditions, Iridium may make additional senior note
offerings in order to further reduce the Guaranteed Bank Facility. Pursuant to
the Motorola MOU, however, Motorola has conditionally agreed that, after giving
effect to all permanent reductions in the Guaranteed Bank Facility resulting
from senior note offerings, Motorola will guarantee up to $350 million of
additional Indebtedness (including principal and interest) under the Guaranteed
Bank Facility or another credit facility on identical terms (the "Motorola
Additional Guarantee"), provided that borrowings under such additional
Indebtedness are made on or prior to February 28, 1999. Borrowings under the
Guaranteed Bank Facility mature on June 30, 1999. Pursuant to the Motorola MOU,
Motorola agreed to extend the Motorola Guarantee (including the Motorola
Additional Guarantee, if committed) until after the Stated Maturity of the
Initial Senior Notes (which is the same date as the Stated Maturity of the
Notes), if the Guaranteed Bank Facility is so extended. Iridium believes it
would be able to increase the Guaranteed Bank Facility if it so requests. There
can be no assurance, however, that the bank
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lenders will agree to increase the amount of the Guaranteed Bank Facility or to
extend the term of the Guaranteed Bank Facility if so requested by Iridium, or
that any such other identical credit facility would be available. See
"Description of Other Indebtedness" and "Certain Relationships and Related
Transactions of Iridium -- Motorola Related Matters."
Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1 billion (the
"Secured Bank Facility"), of which $250 million is not available prior to the
defined commercial activation date. The Secured Bank Facility is to be secured
by substantially all of Iridium's assets. The Secured Bank Facility is to be
further secured by the Reserve Capital Call (as defined) and all of the
membership interests in Iridium. The availability of the Secured Bank Facility
is subject to significant conditions, including technical conditions relating to
the IRIDIUM System, conditions relating to regulatory approvals and conditions
relating to other financing sources. Borrowings under the Secured Bank Facility
would mature on September 30, 1998, subject to Iridium's right to extend such
maturity until up to June 30, 1999 if it can demonstrate by July 1, 1998 that it
has sufficient available or committed financing for its budgeted project costs
through such extended maturity. See "Description of Other Indebtedness."
Assuming approximately $445 million of borrowings under the Guaranteed Bank
Facility and $705 million under the Secured Bank Facility, Iridium expects to
have sufficient cash to meet its anticipated funding requirements through
September 23, 1998, the date on which Iridium expects to commence commercial
operations. Iridium expects to seek other senior secured bank financing in order
to meet its expected funding requirements through at least year-end 1999, the
last year in which Iridium projects negative cash flow and a net increase in
year-end borrowings.
Additional financing may also need to be obtained through the issuance of
equity or debt securities in the public or private markets. The availability and
terms of any such financing are uncertain and are dependent, in part, on market
conditions existing at the time of any proposed financing. Iridium's estimated
funding requirements will increase, perhaps substantially, in the event of
unexpected cost increases or schedule delays. Additional equity financing, if
pursued, may be raised either privately from strategic or financial investors,
or through additional public offerings. Depending on market conditions, Iridium
may make additional senior note offerings in order to further reduce the
Guaranteed Bank Facility as contemplated in the Motorola MOU.
In connection with the Secured Bank Facility, the bank lenders required a
security interest in substantially all of Iridium's assets and the Reserve
Capital Call (as defined). The bank lenders also required that the membership
interests in Parent, or any company to which all or substantially all of
Iridium's assets are transferred, be pledged as security under the Secured Bank
Facility. In connection with granting such security interest, Parent entered
into the Asset Drop-Down Transaction with Iridium. Parent pledged all of the
membership interests in Iridium to the bank lenders in connection with the
Secured Bank Facility. See "Parent's Ownership Structure and Strategic
Investors -- Asset Drop-Down Transaction" and "-- Asset Transfer Agreement."
As a result of Iridium's outstanding debt and the expected incurrence of
significant additional indebtedness required to meet its capital requirements,
Iridium will have substantial indebtedness. Iridium's ability to meet all of its
debt service obligations when due will require it to generate significant cash
flow from operations or, if necessary, make additional borrowings to refinance
its outstanding indebtedness. No assurance can be made that Iridium will be able
to generate sufficient cash flow to meet its debt service obligations or will be
able to refinance indebtedness. The debt instruments governing future
indebtedness will contain restrictions on, among other things, the incurrence of
indebtedness. See "Risk Factors -- Significant Additional Funding Needs,"
"-- Risk of Highly Leveraged Capital Structure."
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OPERATIONS
Iridium is a development stage company and, as such, will not generate any
revenues from operations until the IRIDIUM System is constructed and deployed,
and commercial operations commence, which is currently anticipated to be in
September 1998. To date, Iridium's only source of income has been interest
income on the cash and investment balances from the proceeds of equity
commitments in Parent, which amounted to approximately $13.8 million from the
initial capital contribution date to September 30, 1997. During the same period,
Parent recorded a net loss of $287 million. In addition, during the years ended
December 31, 1991 and 1992, and the period from January 1, 1993 to the Initial
Capital Contribution Date, aggregate costs of $14.8 million were incurred by
Motorola. Such costs were paid by Parent to Motorola pursuant to a reimbursement
agreement.
As a development stage company, Iridium has incurred losses since inception
of its predecessor companies and will continue to do so for the foreseeable
future. Iridium's ability to become profitable and generate positive cash flow
is dependent on the successful commencement of the operation of the IRIDIUM
System, wide subscriber acceptance and numerous other factors. See "Risk
Factors -- Development Stage Company; Absence of Revenues."
Capitalization of Costs
All payments by Iridium under the Space System Contract are being
capitalized. These capitalized costs are then depreciated over the five-year
estimated life of the satellites. Depreciation expense is realized on a
satellite-by-satellite basis, commencing with the insertion of each satellite in
its mission orbit. Depreciation related to the ground control stations commences
with the placement in service of each such station. Capitalized amounts under
the Space System Contract and the Terrestrial Network Development Contract
aggregated $3 billion through December 31, 1997. In addition, costs incurred in
connection with the issuance by Iridium of Class 1 Interests are reflected as a
reduction of additional paid-in capital. Payment of these costs and charges has
resulted in significant negative operating cash flow. Certain interest expenses
will also be capitalized. See "-- Interest Expense."
A portion of the payments made under the Operations and Maintenance
Contract will be capitalized and depreciated. The amount so capitalized will be
determined on a yearly basis depending upon the number of replacement satellites
put into service. Any payments under the Operations and Maintenance Contract not
capitalized will be expensed in the year paid.
Operating Expenses
For the period from the Initial Capital Contribution Date through September
30, 1997, marketing, general and administrative expenses were approximately $293
million. During the period prior to the Initial Capital Contribution Date, total
accumulated expenditures of approximately $14.8 million were incurred, primarily
to reimburse Motorola for expenses associated with operating Iridium during the
period from its incorporation in 1991 through the Initial Capital Contribution
Date. Iridium expects a substantial increase in future operating expenditures
relating to sales, marketing and other costs associated with commercialization.
Interest Expense
Iridium expects to finance a significant portion of its capital
requirements through borrowings. As a result of these borrowings, Iridium will
have significant interest costs. Interest costs are being capitalized while the
system is under construction and will be depreciated thereafter. This has
resulted in all interest costs being capitalized during 1995, 1996, and the
three and nine month periods ended September 30, 1997, and will likely have
similar results for the remainder of 1997, with a meaningful portion of interest
cost expensed in 1998 and all interest cost expensed beginning in 1999. Some
portion of interest expense will not be paid in cash, including the interest
expense
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related to Iridium's 14 1/2% Senior Subordinated Notes through March 1, 2001.
Such non-cash interest will be accrued and such accrual will increase
outstanding indebtedness on Iridium's balance sheet.
Income Taxes
Each of Parent and Iridium reports its income as a partnership for United
States federal income tax purposes and, accordingly, is not expected to be
directly subject to U.S. federal income tax. Iridium may, however, be subject to
tax in some state, local or foreign jurisdictions on portions of its income.
BUSINESS
OVERVIEW
Iridium is developing and commercializing a global mobile wireless
communications system that will enable subscribers to send and receive telephone
calls virtually anywhere in the world -- all with one phone, one phone number
and one customer bill. The IRIDIUM System will combine the convenience of
terrestrial wireless systems with the global reach of Iridium's satellite
system. Launch of the first five IRIDIUM satellites occurred on May 5, 1997 on a
Delta II launch vehicle and launch of the next seven IRIDIUM satellites occurred
on June 18, 1997 on a Proton launch vehicle. Altogether, Iridium completed nine
launches in 1997, for a total of 46 IRIDIUM satellites in orbit (approximately
two-thirds of the expected constellation of 66 operational and six spare
satellites). On July 18, 1997, however, Iridium was informed by Motorola that it
had lost communication with one of five satellites launched on July 9, 1997. In
addition, in October 1997, Motorola informed Iridium that it experienced a
problem controlling one of the IRIDIUM satellites. See "Risk Factors --
Satellite Launch Risks." Iridium expects to commence commercial service in
September 1998. See "Risk Factors -- Potential for Delay and Cost Overruns."
Iridium believes there is a significant market comprised of individuals and
businesses who need global communications capability and are willing to pay for
the convenience of a hand-held wireless phone or belt-worn pager. The
availability of terrestrial wireless communications service is often constrained
by the limited geographic coverage of terrestrial systems, the incompatibility
of differing wireless protocols or the absence of roaming agreements among
wireless operators. The combination of ICRS, IRIDIUM Satellite Services and
IRIDIUM paging will extend wireless access globally and allow Iridium's
customers to be reached by phone or pager, and to place phone calls from or to,
virtually anywhere in the world with one phone and one phone number. ICRS is
expected to enable customers to roam internationally among terrestrial wireless
networks, even those using different protocols, that have roaming agreements
with Iridium. IRIDIUM Satellite Services will extend voice services to the
regions of the globe not served by terrestrial systems. Iridium intends to offer
global paging both in combination with IRIDIUM voice services and as a
stand-alone service. Iridium believes that the signaling capabilities of the
IRIDIUM System will enable Iridium to track a voice customer's location
effectively and with minimal customer cooperation, thereby allowing Iridium to
direct pages and calls as customers travel globally. Iridium also expects to
offer, commencing in 1999, a broad range of in-flight passenger communications
services with participating airlines, including global incoming and outgoing
voice, data and facsimile services. In addition, Iridium expects to market
IRIDIUM Services to governmental, industrial and rural users of wireless
communications systems. Iridium believes it will be the only wireless
communications system in operation prior to 2000 that will be able to offer this
array of global communications services. See "Risk Factors -- Consequences of
Satellite Service Limitations on Customer Acceptance" and "-- Consequences of
IRIDIUM Phone and Pager Characteristics on Customer Acceptance."
The IRIDIUM System encompasses four components: the "space segment," which
will include the low earth orbit satellite constellation and the related control
facilities; the ground stations or "gateways," which will link the satellites to
terrestrial communications systems; the IRIDIUM
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subscriber equipment, which will provide mobile access to the satellite system
and terrestrial wireless systems; and the terrestrial wireless interprotocol
roaming infrastructure, which will facilitate roaming among the IRIDIUM
satellite system and multiple terrestrial wireless systems that use different
wireless protocols. The satellite constellation of the IRIDIUM System, which
will consist of 66 operational satellites arranged in six polar orbital planes,
is being assembled and delivered in orbit by Motorola pursuant to a fixed price
contract, subject to certain adjustments. Motorola also will operate and
maintain the satellite constellation for five years (extendible to seven years
at Iridium's option). Each of the gateways will be owned, operated and financed
by one or more investors in Iridium or their affiliates. Iridium expects that
portable, hand-held IRIDIUM phones will be manufactured by at least two
experienced suppliers, Motorola and Kyocera, both of which have hand-held
IRIDIUM phones under development. The phones are expected to be available in
satellite only and multi-mode models, with the multi-mode model allowing
subscribers to access the IRIDIUM System and most major terrestrial wireless
systems using different protocols with a single phone. ICRS will support roaming
among the two principal types of terrestrial wireless protocols -- IS-41 (AMPS,
NAMPS and CDMA) and GSM (GSM900, DCS1900 and DCS1800). Roaming between these
protocols requires cross-protocol translation which will be accomplished for
ICRS through the IIU, being developed under the direction of Motorola. The IIU
will permit system management information, including customer authentication and
location, to be relayed between systems using different technologies.
STRATEGY
Iridium's strategy is to launch and operate the premier global mobile
wireless network. The key components of this strategy are set forth below:
Provide a unique service package to traveling professionals enabling them
to be reached and make calls virtually anywhere in the world. IRIDIUM Satellite
Services will complement terrestrial wireless services and provide the traveling
professional with communications capability in areas where terrestrial wireless
service is unavailable, inconvenient, of poor quality or unreliable. Iridium
intends to offer ICRS and global paging as complements to IRIDIUM Satellite
Services and as stand-alone services. Iridium believes that it will be the only
wireless communications system in operation prior to 2000 that will be able to
offer virtually global mobile voice and paging services, including:
- Global coverage. An IRIDIUM subscriber will generally have worldwide
wireless coverage wherever IRIDIUM Services are authorized, including
mid-ocean and remote areas. The availability of the IRIDIUM Satellite
Service will not be limited by the customer's proximity to a gateway.
Iridium believes this feature will make its Satellite Services
particularly well suited for aeronautical and shipping communications and
for service in land areas where LEO MSS systems using "bent pipe"
technology are not expected to have the more extensive gateway
infrastructure needed by such systems to provide global coverage.
- Convenient roaming onto terrestrial wireless networks. Iridium will
offer subscribers a combination of IRIDIUM Satellite Services and ICRS.
With the addition of ICRS, customers will be able to overcome (i) the
incompatibility of differing wireless protocols and (ii) the service
limitations of satellite-only voice services in buildings and urban
canyons. Iridium expects to be able to deliver all of its voice services
with one phone, one phone number and one customer bill.
- Global paging with belt-worn pagers. The IRIDIUM belt-worn pager will
have the capability of receiving alphanumeric messages of up to 63
characters and numeric messages of up to 20 digits virtually anywhere in
the world. With Iridium's global paging, users of IRIDIUM Satellite
Services or ICRS will generally be able to update their location on the
IRIDIUM System by briefly turning on their phone, thereby allowing the
IRIDIUM System to send a targeted page. Iridium believes that it will be
the first company, and the only company prior to 2000, which will offer
global paging to a belt-worn pager.
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- Greater signal strength. The IRIDIUM System is designed to provide
greater signal strength than proposed competing MSS systems. Iridium
believes this greater signal strength will allow it to better serve
hand-held phones, and provide a higher degree of in-building signal
penetration for pagers, than competing MSS systems.
Be the first to market with a global wireless communications
system. Iridium plans to capitalize on the substantial design, development,
fabrication and testing efforts and financial investment to date of its
strategic investors to bring the IRIDIUM Services to market at the earliest
practicable date, which is currently expected to be September 1998. Iridium
believes that it will be the only wireless communications system in operation
prior to 2000 that will be able to offer global mobile voice and paging services
in each country in which IRIDIUM Services are authorized.
Adapt proven technologies through an industrial team led by Motorola. The
IRIDIUM System adapts proven technology, including GSM cellular call processing
technology, intersatellite links, FDMA/TDMA radio transmission technology, a
2,400 bps vocoder and business support software. Iridium believes that the
primary technological challenge is the integration of these proven technologies
into a single system. Motorola, the principal investor in Iridium, is a leading
international provider of wireless communications systems, cellular phones,
pagers, semiconductors and other electronic equipment. The industrial team
assembled by Motorola to build and deliver in orbit the IRIDIUM System consists
of major companies experienced in aerospace and telecommunications, including
Telespazio, Lockheed Martin, Raytheon, Boeing, Khrunichev and China Aerospace.
Capitalize on the strengths of its strategic investors. A number of the
IRIDIUM strategic investors provide telecommunications services in various parts
of the world and have significant operating, regulatory and marketing experience
in their service territories. Iridium expects that its investors with existing
wireless communications sales and service organizations will use these
organizations to market and distribute IRIDIUM Services and equipment to
potential subscribers. Because of the prominence of many of these investors,
Iridium believes that their efforts to obtain the necessary regulatory approvals
have been, and will continue to be, of great importance.
Utilize existing wireless distribution channels. Iridium's strategy is to
target primarily traveling professionals, who are generally wireless phone
users. Iridium's strategy is to provide customers with an enhancement to their
existing terrestrial wireless service through existing marketing and
distribution channels rather than to focus on individuals who have no or limited
landline or wireless communications experience and live in areas where no
marketing and distribution channels currently exist.
IRIDIUM SERVICES
General
Iridium will provide global communications services primarily to
individuals who require the convenience of having a hand-held wireless phone and
belt-worn pager that can be used virtually anywhere. Iridium will offer IRIDIUM
Satellite Services to customers who need to send or receive telephone calls in
areas not currently served by terrestrial wireless services. Iridium will offer
ICRS to customers who require wireless communications but travel frequently to
areas served by terrestrial wireless services that are incompatible with their
"home" wireless service. For customers who require continuous wireless
communications outside their terrestrial wireless coverage areas, IRIDIUM
Satellite Services and ICRS will be offered in combination as IRIDIUM Universal
Service, which will allow the customer to conveniently switch between the
IRIDIUM satellite system and any terrestrial wireless system that has a roaming
agreement with Iridium. Iridium expects to be able to deliver all of its voice
services with one phone, one phone number and one customer bill. Iridium also
intends to offer global paging both in combination with Iridium's voice services
and as a stand-alone service.
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IRIDIUM Satellite Services
Because the IRIDIUM System will consist of a global network of satellites,
it will generally provide service to subscribers anywhere on the surface of the
Earth where IRIDIUM Services are authorized. The IRIDIUM System is designed to
provide a satellite-mode link margin (signal strength) for voice communication
that averages approximately 16dB with an unobstructed view of the satellite,
which Iridium believes will be a significantly higher link margin than other
proposed MSS systems. Iridium believes its greater signal strength will allow it
to better serve portable, hand-held telephones than competing MSS systems. See
"Risk Factors -- Consequences of Satellite Service Limitations on Customer
Acceptance" for a discussion of certain of the service limitations of IRIDIUM
Satellite Services. Iridium also expects to be able to offer a full array of
features including call waiting, call hold, conference calling, call forwarding
and call barring, although certain of these features are not expected to be
available until after commencement of commercial operations.
The IRIDIUM System has not been designed to provide high-speed data and
facsimile transmission capability. IRIDIUM satellite fax service will allow
subscribers to send and receive facsimiles at 2,400 bps over the IRIDIUM System.
Subscribers will be provided with a fax mailbox through which faxes are sent to
the subscriber and retrieved by the subscriber when convenient. The mailbox
notifies subscribers of received faxes and can allow them to be automatically
forwarded to any facsimile device. Iridium expects that its facsimile services
will commence in 1999. Iridium will also provide data services commencing in
1999 which will enable customers to send or receive asynchronous data over the
IRIDIUM System at speeds of up to 2,400 bps.
IRIDIUM Cellular Roaming Services
Iridium is planning to establish the broadest global terrestrial wireless
roaming service. To meet this goal, Iridium intends to enter into roaming
agreements with wireless service providers worldwide and to offer ICRS as a
complement to IRIDIUM Satellite Services. Iridium's business plan currently
calls for roaming agreements covering networks in more than 50 countries by the
commencement of commercial operations in September 1998, with roaming agreements
covering networks in more than 150 countries in place by 2002. To date, Roaming
has entered into more than 69 roaming agreements. ICRS will permit subscribers
to roam among terrestrial wireless networks that have roaming agreements with
Iridium, with Iridium essentially acting as the customer's "home" system or as
an interface between the visited wireless network and the customer's home
terrestrial wireless network, even if the visited and home networks use
differing cellular protocols (e.g., IS-41, including AMPS, NAMPS and CDMA; and
GSM, including GSM900, DCS1900 and DCS1800). With ICRS, customers are expected
to be able to overcome (i) the coverage limitations of their "home" wireless
network when traveling to a city served by a wireless operator that does not
have a roaming agreement with the customer's home wireless network but does have
one with Iridium and (ii) the service limitations of satellite-only service when
in buildings and urban canyons, where terrestrial wireless service will
typically be available. Customers who travel between cities that are served by
different terrestrial wireless protocols but do not travel beyond the reach of
terrestrial wireless services will be able to realize the interprotocol benefits
of ICRS with either Iridium's planned single phone that is compatible with
multiple protocols, or with a combination of cellular phones, one for each
protocol. See "Risk Factors -- Risks Related to ICRS." The availability of ICRS
depends upon the successful development of the IIU. See "-- Space
Segment -- ICRS."
IRIDIUM Universal Services
Iridium intends to offer its Universal Services to customers who require
both satellite and terrestrial wireless service while traveling outside of their
"home" territories. IRIDIUM's Universal Service will allow a customer to
conveniently use both the IRIDIUM satellite system and any terrestrial wireless
network that has a roaming agreement with Iridium. For Universal Service, a user
will require an IRIDIUM phone and a phone that is compatible with the local
wireless protocol. To meet this requirement with a single phone, Motorola is
developing a multi-mode phone that will work
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alternatively with the IRIDIUM System and most major terrestrial wireless
systems, with the user able to adapt the phone to the appropriate terrestrial
protocol by inserting the corresponding TRC into the phone (e.g. a GSM900-TRC in
Europe or an AMPS-TRC in North America), although the CDMA TRC will not be
available until some time after commencement of commercial operations. Kyocera
is developing a multi-mode phone that is expected to be configured as a
satellite phone casing into which terrestrial wireless phones using differing
wireless protocols can be inserted. In addition, like IRIDIUM Satellite Services
and ICRS customers, Universal Service customers will be able to have one phone
number, which can either be an IRIDIUM phone number (i.e., it will begin with
"8816" or "8817," the international country codes assigned to Iridium by the
ITU) or the customer's "home" cellular number.
Paging
Iridium intends to offer global paging both as a stand-alone service and
bundled with its voice service offerings. Iridium believes that its bundled
paging and voice service offering will be particularly attractive to Iridium's
principal target customer, the traveling professional, who desires constant
communication capability. The IRIDIUM pager is expected to have a 26dB link
margin and provide the ability to receive alphanumeric messages of up to 63
characters and numeric messages of 20 digits. Iridium believes it will be the
first company, and the only company prior to 2000, that will be able to offer
global paging to a belt-worn pager. See "Risk Factors -- Consequences of IRIDIUM
Phone and Pager Characteristics on Customer Acceptance."
To use the L-band capacity of the IRIDIUM System efficiently, a page will
be sent to specified message delivery areas ("MDAs"). Iridium intends to vary
the size of each MDA in light of demand, capacity and competition. Since the
pager is a one-way device and cannot tell the network its location, it is
anticipated that the subscriber will be required to choose up to three MDAs for
normal delivery of the message. It is anticipated that, when traveling,
subscribers will be able to update their MDAs via a touch-tone phone, operator
assistance or Internet access. An IRIDIUM Satellite Service or ICRS customer
will have the benefit of "follow-me paging." Unlike the pager, the IRIDIUM
satellite phone and cellular phones are two-way devices and, when turned on,
identify the location of the subscriber. With "follow-me paging," customers will
generally be able to register their location by briefly turning on their IRIDIUM
phone (at no charge) or, in the case of ICRS customers, their terrestrial
wireless phone. The network then can identify the appropriate MDAs to send a
page, without further customer cooperation.
Iridium expects that a caller who is unable to reach an Iridium customer,
because the phone is turned off or the customer is in a building or urban canyon
where satellite voice service is unavailable, will be given the option to send a
page, leave a voice-mail message for the customer or both. By this means,
Iridium expects to provide communications capability virtually anywhere in the
world.
Aeronautical Services
Iridium expects to offer cabin and flightdeck communications to and from
business and commercial aircraft commencing in 1999. This service is expected to
be an extension of Iridium's voice services, since airline passengers,
especially business travelers, have a heightened demand for telephone services
due to the isolated, restrictive, and often time-consuming nature of air travel.
Subscribers to the IRIDIUM Satellite Services will not be able to use their
IRIDIUM phone within aircraft due to regulatory constraints and the inability of
the voice signal to penetrate the exterior of the aircraft, although Iridium
pagers should be able to receive pages unless prohibited by the carrier.
Therefore, a specialized IRIDIUM communications subsystem is expected to be
manufactured and sold to carriers to serve this market segment. Using this
communications subsystem, the IRIDIUM System would offer passengers (whether or
not they are IRIDIUM subscribers) and the flight-deck global voice, data and
facsimile communications capability. This would extend cabin coverage beyond
traditional land-based air-to-ground services. Iridium believes it will be able
to provide
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aeronautical services with less voice delay and smaller exterior equipment than
competing satellite-based systems. Iridium has entered into a non-binding
memorandum of understanding with AlliedSignal to design and provide these
services and equipment and Iridium, Motorola and AlliedSignal are in the process
of negotiating definitive agreements. See "Risk Factors -- Reliance on Motorola,
Gateway Owners and Other Third Parties."
In December 1996, Motorola submitted a request to the FCC to authorize the
IRIDIUM System to provide Aeronautical Mobile-Satellite Route Service
("AMS(R)S") in its authorized band. The IRIDIUM System is the only mobile
satellite system, licensed or in development, that can provide a communication
capability that is truly global, while using spectrum already allocated for
AMS(R)S. Several parties filed comments with and have petitioned the FCC to deny
Motorola's application to provide AMS(R)S service. Among other arguments,
petitioners claim that the AMS(R)S proposal is inconsistent with International
Telecommunication Union and FCC rules and allocations. In addition to FCC
approval, approval is needed from the FAA, which must certify that the avionics
satisfy other international certification requirements. There can be no
assurance that the FCC application will be granted, or that the avionics
certification requirements will be satisfied at all, or in a timely fashion. See
"Regulation of Iridium -- Licensing Status." Assuming all necessary
authorizations are obtained, Iridium expects to provide both the FCC required
"safety" communications capabilities to the flightdeck and passenger
communications, including voice and facsimile. An individual aircraft may be
served by multiple satellite communications carriers.
THE IRIDIUM MARKET
General
The market for IRIDIUM Satellite Services and ICRS is the worldwide market
for global personal voice, paging and data communications. IRIDIUM Services are
targeted at meeting the communications needs of users who (i) travel outside
their "home" wireless network to areas that are not served by terrestrial
wireless systems or are served only by local wireless standards that are
incompatible with their "home" wireless network standard, (ii) find it important
to be able to make or receive calls, or receive pages, at any time by means of a
single phone or belt-worn pager, with a single phone or pager number or (iii)
are located where terrestrial landline or wireless services are not available or
do not offer an attractive and convenient option.
Global MSS systems such as the IRIDIUM System are designed to address two
broad trends in the communications market: (i) the worldwide growth in the
demand for portable wireless communications -- according to industry sources,
the worldwide wireless communications market had approximately 135 million
subscribers at year-end 1996 and is estimated to grow to over 400 million
subscribers by year-end 2000; and (ii) the growing demand for communications
services to and from areas where landline or terrestrial wireless service is not
available or accessible. The IRIDIUM System architecture and the IRIDIUM
Services are primarily designed to serve customers who place the greatest value
on global mobile communications capability and have the ability to pay for
premium service. To estimate potential demand for its services, Iridium has
engaged in extensive market analysis, including primary market research which
involved screening over 200,000 persons and interviewing more than 23,300
individuals from 42 countries and 3,000 corporations with remote operations.
Based on this market analysis, Iridium has identified five target markets for
IRIDIUM communications services: traveling professionals; corporate/industrial;
government; rural; and aeronautical. Iridium expects the traveling professional
and corporate/industrial markets will provide most of the demand for IRIDIUM
Services. Iridium expects that individuals in these markets are more likely to
need and have the ability to afford handheld, global mobile communications
capability than, for example, individuals who live in remote areas outside
existing distribution channels for wireless communications.
Iridium estimates that the addressable traveling professional market, which
it defines as all employed adults living in urban areas who own a wireless phone
and travel at least four times per
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year beyond the coverage of their current wireless phone, will include
approximately 42 million individuals by 2002. The global corporate/industrial
addressable market, which consists of companies with more than 1,000 employees
in industries with operations that are likely to need mobile satellite services,
is estimated by Iridium to include over 8,800 companies by 2002. Iridium
believes that its unique service package is well-tailored to meet the demands
of, and will give Iridium an advantage over competing MSS systems in, these
target markets. Iridium estimates that it will have customer counts in the year
2002 in the range of 2.2 million to 3.2 million for its satellite-based voice
services, IRIDIUM Satellite Services (satellite voice and paging) and IRIDIUM
Universal Service (the combination of IRIDIUM Satellite Service and ICRS), 1.0
million to 1.3 million for stand-alone ICRS and 350,000 to 500,000 for
stand-alone paging. Iridium's estimates of target markets and customer counts
are based upon a number of assumptions, one or more of which is likely to be
incorrect. There can be no assurance that actual target markets and actual
customer counts for IRIDIUM Services will not be materially different from
Iridium's estimates or that Iridium will not revise such estimates substantially
from time to time. For a discussion of the forward looking nature of Iridium's
estimates and various of the factors which could cause actual addressable
markets and customer counts to differ materially from these estimates see "Risk
Factors -- Risk of Error in Forward Looking Statements."
Target Markets
Iridium believes that the traveling professional and corporate/industrial
communications markets will be its principal target markets.
Traveling Professional. Individuals in the traveling professional market
segment are expected to represent a major market opportunity for IRIDIUM
Services. Currently, the ability of terrestrial wireless service subscribers to
roam outside their home territory or region is limited by (i) the absence or
unavailability of local wireless service in many regions, particularly
lesser-developed regions of the world; (ii) the absence of roaming agreements
between the user's local wireless provider and the wireless providers in the
country or region in which the user is traveling; and (iii) the inability of the
user's phone to operate with wireless phone systems employing a different
wireless protocol than in the user's "home" wireless system. Iridium expects
that its satellite, ICRS and paging services will appeal to traveling
professionals as a logical extension of their existing communications
capabilities. Iridium believes traveling professionals will use this increased
capability to remain in contact with their home or office and a substantial
portion of these calls will be international calls. The defining element for
this segment is that the handset purchase decision is made by the individual,
with the IRIDIUM account registered in his or her name.
Corporate/Industrial. Iridium believes that the corporate/industrial
market segments constitute a significant opportunity for IRIDIUM Services. The
corporate sub-segment consists of national and multinational companies whose
executives travel outside of their home terrestrial wireless coverage area and
who will have a need for MSS services in the regular course of business. The
industrial sub-segment includes industries that are expected to demand MSS
services at remote industrial sites and on land and water transportation
vehicles, such as utilities, oil and mineral exploration, pipeline,
construction, engineering, fishing and forestry. For companies that have
multiple locations around the globe, or a requirement for remote fleet
management and communications, the IRIDIUM System is expected to provide a
single technical and operational communications solution regardless of location,
in contrast to MSS and terrestrial systems that cannot provide global coverage.
IRIDIUM Satellite Services are expected to be used in this market segment for
business communication and emergency backup communication. The defining element
for this group is that the handset purchase decision is made by the business and
that the end user is an employee of that business.
Aeronautical. The worldwide aviation fleet is expected to number over
250,000 aircraft in the year 2002 with 44,000 aircraft expected to be users of
either satellite or terrestrial communications services. Unlike the
geostationary systems currently in use, the size and weight of the expected
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IRIDIUM aeronautical product line make it feasible to include aircraft from all
segments of the aviation industry in the addressable market for MSS services.
Iridium expects its satellite communications services to co-exist with existing
terrestrial aeronautical system installations, providing regional coverage in
areas not served by terrestrial networks, such as mid-ocean and remote areas.
Government. Currently, governments are significant users of satellite
services, and Iridium anticipates that the coverage and portability
characteristics of IRIDIUM Satellite Services and paging services will make them
attractive for a variety of governmental applications. The government
communications addressable market is expected to encompass use of MSS services
by governmental departments and agencies and international organizations for
civilian and military applications, including law enforcement, official travel
and disaster relief. In addition, governments are expected to demand MSS
services for operations in areas where inadequate terrestrial communication
capability is common, such as for border patrols, customs officials,
communication with ships at sea and embassy communications.
Rural. The rural communications market segment for MSS systems is
comprised of two main subcategories: services to users based in (i) areas with
inadequate or inconvenient access to any telephone services, typically in
developing countries, and (ii) areas in which potential demand for terrestrial
wireless service exists but such services have yet to be deployed, or, if
deployed, are of poor quality, typically in rural areas of developed countries.
The variety of available subscriber equipment is expected to permit a range of
applications that would enable IRIDIUM Satellite Services to be a precursor to a
permanent wired or terrestrial wireless service in the geographic area. IRIDIUM
Satellite Services could also be used as a long-term communications solution for
those geographic areas around the world for which no terrestrial system can be
economically justified.
DISTRIBUTION AND MARKETING
Iridium's distribution strategy reflects its role as a wholesaler of
IRIDIUM Services and is primarily designed to leverage off established retail
distribution channels by using existing distributors of wireless services as
IRIDIUM service providers and marketing IRIDIUM Services to their customers.
Iridium will implement the distribution of IRIDIUM Services through its gateway
operators, all of which have agreed to become or engage IRIDIUM service
providers within their exclusive gateway territories. IRIDIUM service providers
will generally have primary responsibility for marketing IRIDIUM Services within
their territories in accordance with marketing policies and programs established
by Iridium. They will also be responsible for customer service, billing and
collection. Iridium anticipates that gateway operators will distribute IRIDIUM
Services through their own distribution channels or through, or in conjunction
with, one or more existing wireless service providers (including ICRS roaming
partners). Iridium expects that its service providers also will include affinity
partners (e.g., airlines, hotels and car rental companies). Iridium and its
gateway operators currently have agreements with 51 service providers.
Iridium has targeted key markets and is in active discussions in
conjunction with its gateway operators to contract with entities to act as
service providers and roaming partners in each of these markets. Within each
market, Iridium is targeting those potential service providers and roaming
partners that can reach the targeted Iridium market segments in the most
effective manner. The ability to provide roaming capabilities onto terrestrial
wireless networks is a critical element of establishing a roaming relationship
between roaming partners and the IRIDIUM System. When acquiring a terrestrial
wireless carrier as a retail distribution access point, the benefit of the
incremental roaming revenue brought to that roaming partner from around the
world through the Iridium network relationships could prove to be important in
signing the roaming partner. IRIDIUM Services can also be easily added to the
terrestrial wireless providers' bundle of services offered to its customer base.
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Iridium's marketing strategy is to position IRIDIUM as the premier brand in
global wireless communications services. Iridium believes that its principal
target markets -- traveling professional and corporate/industrial -- can be
accessed through established marketing channels, which will permit more
effective marketing compared to MSS systems targeting individuals in remote
areas where marketing opportunities and distribution channels are limited.
Iridium is coordinating with its gateway partners to determine the optimum
allocation of marketing expenditures based on the primary market research that
Iridium has conducted. Iridium plans to engage in direct marketing to certain
markets, such as the utility, oil and gas, mining and maritime industries.
Iridium believes that a coordinated and comprehensive global marketing strategy,
supported by its market research, will promote a consistent message and permit
Iridium to establish a global brand identity.
PRICING
Iridium intends to implement a pricing strategy for its voice services
similar to the prevailing pricing structure for terrestrial wireless calls.
Prices for terrestrial wireless calls generally reflect two components -- a
charge based on the landline "dial-up" rate for a comparable call (primarily the
long distance charges) and a mobility premium for the convenience of wireless
service (including any roaming charges). Pricing for both IRIDIUM Satellite
Services and ICRS is expected to be based on this structure.
For international IRIDIUM Satellite Services calls, which Iridium expects
will constitute the majority of calls over the IRIDIUM satellite system, the
"dial-up" rate component will be designed to approximate the rates for
comparable landline point-to-point international long distance calls. Iridium
has analyzed and will continue to analyze published international direct dial
rates around the world as well as published international calling card rates of
many of the largest international telecommunications carriers in establishing
the "dial-up" rate component. Iridium intends to set the global mobility premium
with reference to the premium charged by other wireless services, including
cross-protocol international terrestrial wireless roaming services and competing
MSS systems.
Iridium will set the wholesale prices for its services to allow for a
suggested retail price that will approximate the "dial-up" plus mobility
premium. Iridium's wholesale price will be designed to compensate Iridium, as
the network provider, and the originating and terminating gateways, as well as
to cover the PSTN tail charges. The home gateway will mark up the wholesale
price and the service provider will establish the final retail price. Iridium
expects that for international wireless calls, Iridium's suggested retail prices
will be competitive with other global MSS systems. In addition, from a
regulatory approval perspective in markets where the monopoly telecommunications
provider and the licensing authority are the same entity, a pricing strategy
that takes into account the "dial-up" alternatives allows Iridium to respond to
concerns that Iridium will capture the local monopoly provider's long-distance
revenues by undercutting terrestrial "dial-up" rates.
For ICRS pricing, the "dial up" rate component is primarily the long
distance charge, if any, which will be passed through to the customer. The
mobility premium will be set to compensate the parties involved, primarily the
serving network for its airtime charges, the visited gateway for customer
authentication and Iridium for protocol translation services. The retail price
will include the markup of the home gateway and service provider. Iridium
believes that its ICRS suggested retail prices will be comparable to other
cross-protocol roaming services.
In addition to airtime charges, IRIDIUM subscribers will pay a monthly
subscription fee in the same manner that terrestrial wireless customers pay
monthly charges. Iridium will permit service providers that are wireless network
operators to offer IRIDIUM Services as additional features to their existing
wireless services, permitting their customers to remain customers of the
wireless network and to roam onto the IRIDIUM System. These customers will pay a
feature charge to Iridium for the roaming privilege that will be significantly
below the IRIDIUM monthly subscription fee, but they will pay an additional
roaming premium for calls made over the IRIDIUM System.
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Initially, Iridium paging subscribers will pay a fixed monthly subscription
fee for unlimited paging. Iridium expects to implement per page pricing after
commencement of commercial operations, with the cost per page based, in part, on
the size of the geographic area covered by the page. The monthly paging
subscription fees will be reduced for persons who are also subscribers to
IRIDIUM voice services.
While Iridium expects to compete with other MSS systems and other
cross-protocol roaming services, Iridium does not intend to compete with
terrestrial cellular telephone systems for the vast majority of personal
communications services, because, among other reasons, IRIDIUM satellite voice
services are expected to be priced significantly higher than most terrestrial
wireless services.
THE IRIDIUM SYSTEM
The IRIDIUM System is comprised of four functional components: the space
segment, the gateways, the IRIDIUM subscriber equipment and the terrestrial
wireless interprotocol roaming infrastructure. The space segment, which includes
the satellite constellation and the related ground control facilities, will
allow Iridium to route voice, data and paging communications virtually anywhere
in the world. The gateways will link the satellite constellation with
terrestrial communications systems and will provide other call-processing
services, such as subscriber validation and billing information collection. The
Iridium subscriber equipment, which is expected to include single-mode and
multi-mode, portable, hand-held phones, aeronautical equipment, including
installed phones, and belt-worn pagers, will allow subscribers to access the
IRIDIUM System or be contacted via the IRIDIUM System virtually anywhere in the
world. The terrestrial wireless interprotocol roaming infrastructure will
facilitate roaming among the IRIDIUM System and multiple terrestrial wireless
systems that use different wireless protocols. Iridium will own the space
segment and the interprotocol roaming infrastructure, gateway owners will own
and operate the gateways, and subscribers will own the subscriber equipment.
Iridium believes that the capabilities of the IRIDIUM System will allow
Iridium to provide service features that Iridium's principal target markets,
traveling professional and corporate/industrial, will find desirable and that
will differentiate Iridium from its competitors. The number and distribution of
satellites in the IRIDIUM constellation should allow Iridium to provide
virtually global coverage, including mid-ocean and remote area access to the
IRIDIUM System. Multi-mode phones are expected to allow ICRS subscribers to
operate first with a local terrestrial cellular service (if one having a roaming
agreement in effect with Iridium is available) and then switch to the IRIDIUM
satellite system if a terrestrial service cannot be accessed. With Iridium's
global paging service, a subscriber will be able to receive a targeted page
virtually anywhere in the world with minimal customer cooperation. Iridium
believes that its expected signal strength will allow it to better serve
hand-held phones and provide a higher degree of in- building penetration for
pagers than competing MSS systems. Iridium believes that the 2,400 bps vocoder
selected by Motorola will provide voice quality that is acceptable to
terrestrial wireless customers. See "Risk Factors -- Consequences of Satellite
Service Limitations on Customer Acceptance" and "-- Consequences of IRIDIUM
Phone and Pager Characteristics on Customer Acceptance."
SPACE SEGMENT
The satellite constellation of the space segment will consist of a
constellation of 66 operational satellites arranged in six orbital planes in low
earth orbit. To minimize the cost of the constellation and reduce production
time, the design of the satellites emphasizes attributes which facilitate
production in large quantities. The satellites will be placed in six distinct
planes in near-polar orbit at an altitude of approximately 780 kilometers and
will circle the Earth approximately once every 100 minutes. Each satellite will
communicate with subscriber equipment on the ground using main mission antennas,
with gateways using gateway link antennas and with other IRIDIUM satellites in
space using cross-link antennas.
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The main mission antennas will communicate with subscriber units through
tightly focused antenna beams forming a continuous pattern on the Earth's
surface. The main mission antenna subsystem of each satellite will include three
phased array antennas, each containing an array of transmit/receive modules.
Collectively, the 48 beams produced by a single satellite will combine to cover
a circular area with a diameter of approximately 4,340 kilometers. The IRIDIUM
System architecture will incorporate certain characteristics, such as call
hand-off, which will allow the space segment communications link with subscriber
equipment to be transferred from satellite to satellite as the satellites move
over the area where the subscriber is located.
The cross-link antennas will permit satellites in the constellation to
communicate with one another. Each IRIDIUM satellite will have four cross-link
antennas to allow it to communicate and route traffic to the two satellites that
are fore and aft of it in the same orbital plane as well as neighboring
satellites in the adjacent co-rotating orbital planes. This intersatellite
networking capability is a significant distinguishing feature of the IRIDIUM
System and provides a number of benefits. These intersatellite links, which
enable the satellites to function as switches in the sky, will allow the IRIDIUM
System to (i) select the optimal space-to-ground path of each call, thereby
enhancing system reliability and capacity while reducing the costs associated
with the use of terrestrial phone systems, (ii) service subscribers in all areas
(including, mid-ocean and remote areas) regardless of the proximity to a
gateway, (iii) provide full global service with a relatively small number of
gateways, thereby lowering total ground segment build-out and operating costs
and (iv) provide enhanced ability to track the location of a voice customer,
allowing Iridium to target calls and pages as customers travel globally.
Operation of the satellites will be monitored, managed and controlled by
the system control segment. The master control facility is located in Virginia,
the back-up control facility is located in Italy, and the TT&C stations are
located in northern Canada and Hawaii, with an additional transportable
telemetry system currently located in Iceland. These facilities will manage the
performance and status of each of the individual satellites. The master control
facility will also manage the network by developing and distributing routing
tables for use by the satellites and gateways, directing traffic routing through
the network, and controlling cell formation by the satellites' main mission
antennas. In addition, the master control facility will manage the system
control segment itself by, for example, assigning earth terminals to satellites
and controlling data flow between the master and back-up control facilities.
Implementation of the Space Segment. The space segment of the IRIDIUM
System is being designed and constructed for Iridium by Motorola. See "Principal
Contracts for the Development of the IRIDIUM System."
Launch of the first five IRIDIUM Satellites occurred on May 5, 1997 on a
Delta II launch vehicle and the next seven IRIDIUM satellites were launched on
June 18, 1997 on a Proton launch vehicle. Altogether, Iridium completed nine
launches in 1997, for a total of 46 IRIDIUM satellites in orbit (approximately
two-thirds of the expected constellation of 66 operational and six spare
satellites). On July 18, 1997, however, Iridium was informed by Motorola that it
had lost communication with one of five satellites launched on July 9, 1997. See
"Risk Factors -- Satellite Launch Risks." Under the Space System Contract,
Motorola has completed 40 of the 47 contract milestones. Contract milestone
30 -- initial launch of Iridium satellites -- was scheduled for completion in
January 1997, but the launch did not occur until May 5, 1997. See "Risk
Factors -- Potential for Delay and Cost Overruns." The remaining 7 milestones
relate to the deployment, testing and completion of the space segment of the
IRIDIUM System, including the related ground control facilities. The space
segment is scheduled under the Space System Contract for completion on September
23, 1998. Ground testing of satellite hardware has been substantially completed.
Motorola has completed construction of most of the terrestrial facilities
necessary to command the in-space movements of the satellites, including the
master control facilities and the associated TT&C facilities.
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Motorola has entered into subcontracts with suppliers for the provision of
major subsystems of the Space Segment. The principal Space Segment
subcontractors include:
Manufacturers
- Lockheed Martin Corporation. Lockheed has designed and is manufacturing
the satellite bus. Lockheed is an investor in Iridium.
- Raytheon Company. Raytheon is providing the main mission satellite
antennas. Raytheon is an investor in Iridium.
- Nuova Telespazio. Telespazio is providing system engineering on system
control segment development and is expected to operate the back-up
control facility. Telespazio is an affiliate of STET, an investor in
Iridium.
Launch Providers
The requirements for the deployment of the initial satellite constellation
entail the placement into orbit of a large number of satellites in a relatively
short period of time, using conventional expendable launch vehicles. Based on
technical, commercial and other considerations, Motorola selected the following
three commercially offered launch systems for the deployment phase: Long March
2C through China Great Wall; Proton through Khrunichev; and Delta II through
Boeing.
- China Great Wall Industry Corporation. China Great Wall has contracted
with Motorola to provide some of the launches for the initial deployment
of the space segment (and additional launches for the maintenance of the
space segment) utilizing its Long March 2C vehicle, which is expected to
launch two IRIDIUM satellites into orbit with each launch. An affiliate
of China Great Wall, Iridium China (Hong Kong) Ltd., is an investor in
Iridium and has been allocated the IRIDIUM gateway service territory for
China, Hong Kong, Macau and Mongolia.
- Khrunichev State Research and Production Space Center. Khrunichev has
contracted to provide some of the launches for the initial deployment of
the space segment utilizing the Proton launch vehicle, which is expected
to launch seven IRIDIUM satellites into orbit with each launch.
Khrunichev is an investor in Iridium and has been allocated the IRIDIUM
gateway service territory for Russia and eight other republics of the
former Soviet Union.
- Boeing Corporation. Boeing, the successor to McDonnell Douglas
Corporation, has contracted to provide the majority of the launches for
the initial deployment of the space segment utilizing the Delta II launch
vehicle, which is expected to launch five IRIDIUM satellites into orbit
with each launch.
Under the Space System Contract and the Operations and Maintenance
Contract, Motorola has agreed to procure the necessary space segment launch
services, and to place into orbit, and maintain in orbit, the space segment. In
light of the magnitude of the launch services procurement, the risks inherent in
satellite launch activity and the potential impact on Iridium's business if the
provision of launch services fails (including the potential that launch service
problems could give rise to excusable delays under the space System Contract and
Operations and Maintenance Contract), Motorola has developed numerous space
segment launch scenarios using various combinations of available launch systems
to fit the requirements of the IRIDIUM System in terms of cost, reliability,
availability, technical performance, credibility of suppliers and other factors.
The launch of the first five IRIDIUM satellites occurred on May 5, 1997 on
a Delta II launch vehicle. This launch had been scheduled for January 1997 but
was delayed on four successive days and then postponed following a launch
failure involving the Delta II launch vehicle. Following the January 1997
failure of a Delta II launch vehicle, the United States government ordered a
halt to all further Delta II launches pending completion of an internal review
of the failure. That failure review was completed on May 2, 1997 and concluded
that the launch failure resulted from an explosion of one of the nine solid
rocket boosters attached to the first stage of the launch vehicle. Thereafter,
the launch suspension was lifted. The first launch of IRIDIUM satellites
occurred on May 5, 1997
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(following successive postponements on May 2, May 3 and May 4 due to weather
conditions and a faulty warning light). Motorola has informed Iridium that,
notwithstanding the first launch postponement, Motorola believes its launch
schedule should permit Iridium to meet its planned September 1998 commencement
of commercial operations. This current launch schedule assumes that there are no
additional significant launch delays and that all three launch
providers -- Boeing, Khrunichev and China Great Wall -- are able to provide
launch services as currently planned. The current launch schedule also creates
risks because it has compressed the time otherwise available for testing. The
second launch occurred on June 18, 1997 using Khrunichev's Proton launch
vehicle, which carried seven IRIDIUM satellites. Altogether, Iridium completed
nine launches in 1997, for a total of 46 IRIDIUM satellites in orbit
(approximately two-thirds of the expected constellation of 66 operational and
six spare satellites). There can be no assurance that succeeding launches will
proceed as currently contemplated or that the space segment will be operational
on schedule. See "Risk Factors -- Potential for Delay and Cost Overruns." On
July 18, 1997, Iridium was informed by Motorola that Motorola had lost
communications with an IRIDIUM satellite, confirmed through technical analysis
on July 17, 1997. The satellite, one of five launched on July 9, 1997, was in a
parking orbit awaiting its ascent to final mission orbit. In October 1997,
Motorola informed Iridium that it experienced a problem controlling one of the
IRIDIUM satellites. Iridium has been advised by Motorola that should loss of
either satellite be confirmed, Iridium will not bear the financial risk of loss,
nor will it affect the scheduled date for commercial service in September 1998.
There can be no assurance that other anomalies would not occur with respect to
satellites after launch, or that such anomalies would not have a significant
adverse affect on Iridium including financial risk of loss. In addition, no
assurance can be given that from time to time certain events will not occur that
may require Motorola to conclude that one or more satellites are not performing
within the necessary parameters for such satellite or satellites to be included
in the constellation, or that such a conclusion would not have an adverse effect
on the commercial activation schedule. See "Risk Factors -- Satellite Launch
Risks."
Following the initial deployment of the satellite constellation, launch
services will be required in connection with the maintenance of the system. This
will entail the placement into orbit of satellites for the replacement of failed
or degraded satellites originally placed into orbit as part of the deployment
mission. The maintenance mission for satellite launch services may be performed
by a number of launch systems. Motorola has conducted technical and commercial
discussions with a number of potential suppliers and has selected a Long March
2C launch vehicle for what it expects will be a minority portion of the
maintenance launch services. Motorola expects that a number of other launch
systems currently under development would satisfy the remaining requirements of
the maintenance mission. Motorola intends to select a supplier or suppliers for
the remaining maintenance launches based on technical, commercial and other
considerations.
See "Risk Factors -- Potential for Delay and Cost Overruns -- Deployment of
Satellites" for a discussion of various risks associated with the deployment of
the satellites.
In addition, Motorola has constructed the master control facility located
in Virginia, two TT&C stations in northern Canada and one TT&C station in
Hawaii, with an additional transportable telemetry system currently located in
Iceland. The back-up control facility is nearing completion in Italy and is
expected to be operated by Telespazio under contract with Motorola. Telespazio
will also provide engineering support services in connection with the
integration and construction of the facility.
Gateways
Gateway earth stations will provide call-processing services, such as
subscriber validation and the interconnection between the world's PSTNs and the
IRIDIUM System by connecting calls made through the IRIDIUM System to and from
the local PSTN generally through an international switching center. Gateways
will communicate with the space segment via gateway link antennas on the
satellites and ground-based antennas, or earth terminals, at each terrestrial
gateway facility.
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Each gateway facility will typically include three or four antennas, a
controller to manage communications with the constellation, an operations center
to perform local network management, a paging message origination controller,
and a switch that connects the gateway to the local PSTN. Each gateway will also
include a subscriber database used in call-processing activities, such as
subscriber validation. Gateways will generate call detail records used in
billing. Iridium has authorized the issuance of warrants to acquire up to
9,165,000 Class 1 Interests at a price of $.00013 per Class 1 Interest to
gateway owners who complete construction and installation of their gateways on
schedule and who meet certain revenue criteria thereafter. None of such warrants
has been issued.
Implementation of Gateways. The success of Iridium is dependent upon the
efforts of its gateway owners, all of whom are investors, or affiliates of
investors, in Parent. Iridium is focusing considerable efforts on the
coordination of the development of the gateway infrastructure and business
systems. See "-- Distribution and Marketing."
Iridium has assigned all of its gateway service territories to investors in
Parent or their affiliates. Iridium expects these gateway service territories to
be served initially through at least nine and up to 12 gateways. Each gateway
owner has entered into a Gateway Authorization Agreement. The Gateway
Authorization Agreements obligate the gateway operators to use reasonable best
efforts to perform, among other obligations, the following with respect to their
designated territories: (i) contract with Motorola to supply the gateway
equipment; (ii) provide gateway services; (iii) obtain all required governmental
licenses and permits necessary to construct and operate gateways; (iv) designate
IRIDIUM service providers, which may include the gateway operator; (v) require
compliance by each service provider with established guidelines; and (vi)
support Iridium-approved positions at the WRC of the ITU. See "Principal
Contracts for the Development of the IRIDIUM System -- Gateway Authorization
Agreements."
Under the Space System Contract, Motorola has agreed to (i) design and make
available to Iridium as proprietary information the gateway interface
specification, (ii) develop and sell IRIDIUM gateway equipment and (iii) license
to responsible and competent suppliers of that equipment the rights to use the
information in that specification for certain purposes to the extent essential
to manufacture and sell IRIDIUM gateways. Iridium does not anticipate that
companies other than Motorola will manufacture gateway equipment. In order to
assure timely development of the gateway equipment and to coordinate the
development effort, Iridium entered into the Terrestrial Network Development
Contract in 1995 which has allowed it to implement a more disciplined and
systematic development plan for the gateways and which Iridium believes will
increase the likelihood of a timely in-service date for the gateways. Under the
Terrestrial Network Development Contract, Motorola is designing and developing
the gateway hardware and software. See "Principal Contracts for the Development
of the IRIDIUM System -- Terrestrial Network Development Contract."
Iridium and the gateway operators have established a schedule for the
construction of the necessary gateway facilities by the gateway operators. While
some gateway operators are behind in meeting some of the milestones in this
schedule, Iridium believes that at least nine and up to 12 gateway facilities
will be completed and operational at the time commercial operations commence.
Eleven gateway operators have entered into gateway equipment purchase agreements
with Motorola. Pursuant to the executed gateway equipment purchase agreements,
gateways have been configured to match the owner's anticipated initial capacity
requirements for the relevant gateway service territory. The construction of the
Iridium North America (Tempe, Arizona), Nippon Iridium Corporation (Nagano,
Japan) and the Iridium SudAmerica (Rio de Janeiro) gateway facilities is
substantially complete and the telecommunications equipment has been installed
at those locations. Currently, the North American gateway operator is
contemplating locating a second gateway in the United States. The construction
of six other gateway facilities is substantially complete and equipment
procurement has commenced pursuant to gateway equipment purchase agreements with
Motorola. Motorola has indicated that several gateways are currently late in
complying with the conditions of their gateway equipment purchase agreements. In
particular, the China gateway and the Middle East-Africa gateway are
substantially behind schedule. While Iridium believes that it is
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possible that these two gateways will be operational by the planned September
1998 commencement of commercial operations, in order for them to do so they will
need to move forward promptly, including making certain overdue payments under
their gateway equipment purchase agreements with Motorola. There can be no
assurance that one or more gateways will not fail to be completed by the
commencement of commercial operations, which could have a material adverse
effect upon Iridium.
Subscriber Equipment
Subscribers will communicate via the system of satellites and gateways
using IRIDIUM subscriber equipment that will provide one or more of voice,
paging, data, and facsimile services. Iridium expects that subscriber equipment
will be made available by at least two suppliers, Motorola and Kyocera. In
addition to portable, hand-held phones Iridium expects that vehicle-mounted,
transportable, fixed telephones, as well as simplex alphanumeric belt-worn
pagers will be made available. Based on information received from Motorola,
Iridium expects that Motorola's version of the portable, multi-mode, hand-held
phone will have an initial retail price of approximately $3,000, including at
least one TRC, and its version of the alphanumeric pager will have an initial
retail price of approximately $500. Iridium has not been advised by Kyocera as
to the possible pricing of Iridium subscriber equipment that is expected to be
manufactured by Kyocera.
Iridium does not currently intend to manufacture or distribute IRIDIUM
subscriber equipment or derive any income from the sale of IRIDIUM subscriber
equipment. See "Risk Factors -- Potential for Delay and Cost
Overruns -- Development, Manufacture and Distribution of Subscriber Equipment"
and "-- Consequences of IRIDIUM Phone and Pager Characteristics on Customer
Acceptance." Such equipment is expected to be manufactured by existing
manufacturers of similar terrestrial subscriber equipment and to be distributed
by such manufacturers through gateway owners and operators, service providers
and other telecommunications equipment distributors. Motorola has committed
substantial resources to develop, and plans to sell, IRIDIUM subscriber
equipment including portable, hand-held phones and belt-worn pagers. Motorola
has informed Iridium that it has entered into a license agreement with Kyocera
relating to the basic intellectual property rights essential to develop and
manufacture personal voice subscriber equipment for use on the IRIDIUM System.
This license agreement does not obligate Kyocera to develop, manufacture or sell
any IRIDIUM subscriber equipment. If other subscriber equipment manufacturers
wish to develop and sell IRIDIUM subscriber equipment, they will be required to
enter into similar licensing agreements with Motorola. See "Principal Contracts
for the Development of the IRIDIUM System" for a description of Motorola's
agreement with Iridium to grant certain licenses for intellectual property
rights. See "Risk Factors -- Conflicts of Interest with Motorola."
The IRIDIUM System phones are still under development, although a
functional unminiaturized prototype has been developed. Motorola has informed
Iridium that the portable, hand-held phone that Motorola has been developing is
expected to be larger and heavier than today's pocket-sized, hand-held cellular
telephones and is expected to have a longer and thicker antenna than hand-held
cellular telephones. Motorola has informed Iridium that the pager Motorola will
develop is expected to be slightly larger than today's standard alphanumeric
belt-worn pagers. The unminiaturized prototypes have been built using the same
or similar components expected to be used in the production model of the IRIDIUM
phone. The prototypes have been built in a larger housing to facilitate testing
and problem solving.
Business Support Systems
The IRIDIUM System will be capable of supporting basic "back office"
business functions required by Iridium, gateway operators, and service
providers, including a clearinghouse operated by Iridium to calculate the
amounts owed to and from Iridium and each gateway operator in order to determine
net settlements of such amounts among such entities. These business support
functions include service provision, customer service, and billing and
collection, as well as clearing and settlements. These functions will be
provided by means of computer and manual processes at each
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gateway and service provider location and, most likely, at a central processing
point. The gateway owners and operators will be required to license or purchase
software and equipment in order to exchange information with the clearinghouse
and to handle settlements with service providers, inter-exchange service
providers, government entities and others. Iridium has proposed to develop, and
to provide to the gateways, some of the required software and hardware. In
addition, the gateways will have to enter into settlement agreements with
service providers, on behalf of Iridium, in order to account for and settle the
ICRS and the non-satellite service portions of the IRIDIUM Services. The
coordination of business support functions among Iridium, the gateways and the
service providers necessary to the provision of the IRIDIUM Services is a large
and complex undertaking which will require the establishment of comprehensive
data exchange capabilities and the negotiation and execution of hundreds of
settlement agreements with gateway operators and service providers. See "Risk
Factors -- Reliance on Motorola, Gateway Owners and Other Third Parties."
ICRS
ICRS allows different protocol-based networks to communicate with each
other. Protocol formats are the "language" by which networks communicate.
Similar protocol networks can communicate easily with one another by sending
signals between the networks in a standard language that is understood by both
networks. Different protocol networks require a translator in order to
communicate with each other.
An ICRS customer who roams onto a cellular network that has a roaming
agreement with Iridium will be recognized by the visited network as an Iridium
customer when the customer turns on his phone. The visited network, using an
Iridium gateway, will send a request for authentication either terrestrially or
over the IRIDIUM System to the IIU, the protocol translation device that is
being developed under the direction of Motorola for Iridium. The IIU will search
for the home location of the customer and convert the signal to the appropriate
protocol of the customer's home network. The home network will authenticate the
customer by signaling back to the IIU which will then convert the signal back to
the protocol of the visited network and send the response in the appropriate
protocol to the visited network. When an ICRS customer is called, the IRIDIUM
network will route the call to the visited network (which is expected to be
completed in seconds). The visited network will perform the necessary
authentication to allow the roaming customer to access the visited network as a
roaming customer and complete a call.
An ICRS customer can be "homed" on a cellular network, in which case the
customer's phone number will be his home cellular phone number. Alternatively,
the customer can be "homed" on the IRIDIUM System, in which case the customer's
phone number will begin with "8816" or "8817," the international "country" codes
assigned to Iridium. Customers "homed" on the IRIDIUM System may pay a monthly
subscription fee and a fee for calls made over the IRIDIUM System. Customers
"homed" on a cellular network may pay a feature charge to Iridium that will be
significantly below the monthly subscription fee, but they may pay an additional
roaming premium for calls made over the IRIDIUM System (retail prices will be
determined by the home network provider). In general, customers who place a
large number of IRIDIUM satellite service calls will have an incentive to be
"homed" on the IRIDIUM System, while customers who place a small number of
IRIDIUM satellite service calls will have an incentive to be "homed" on a
terrestrial network.
For inter-protocol terrestrial cellular roaming, a user must have a
telephone that operates with the visited network (e.g., a GSM phone if roaming
onto a GSM network or a DCS1800 phone roaming onto an IS-41 network that uses
the DCS1800 frequency). An ICRS customer will not be required to own an IRIDIUM
phone. Subscribers will be able to use any terrestrial wireless handset that can
support a GSM SIM card or have an IS-41 handset that has been programmed for
ICRS service. Motorola has indicated that it intends to develop TRCs compatible
with most major terrestrial wireless networks, although some (including CDMA)
will be developed and distributed after the commencement of commercial
operations.
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Iridium's business plan currently calls for roaming agreements with
wireless operators in more than 50 countries by the commencement of commercial
operations in September 1998 expanding to approximately 150 countries by 2002.
To date, Roaming has entered into more than 69 roaming agreements. Many wireless
systems as currently configured, including systems covering large portions of
South America, use a form of wireless technology that does not permit sufficient
anti-fraud security or certain international dialing and, therefore, it is
unlikely that Iridium will provide ICRS coverage in areas that are principally
served by this type of technology. See "Risk Factors -- Risks Related to ICRS."
ICRS is not expected to be available between certain IS-41 systems before 1999
or in Japan before 1999.
PROGRESS TO DATE
The following chart sets forth Iridium's past and projected development
milestones. Estimates for the commencement of service do not account for
potential delays. There can be no assurance that the IRIDIUM System will
commence commercial operations in September 1998 as planned. See "Risk
Factors -- Potential for Delay and Cost Overruns."
<TABLE>
<C> <S>
---------------------------------------------------------------------------------
1987: - IRIDIUM System conceived by Motorola
- Research and development begins
=================================================================================
1990: - Planned IRIDIUM System announced worldwide
- FCC license application filed
=================================================================================
1991: - Iridium, Inc. incorporated
=================================================================================
1992: - Global MSS spectrum allocated at WARC-92
- Experimental license granted by FCC
- Full scale research and development by Motorola, Lockheed and Raytheon underway
=================================================================================
1993: - Stock purchase agreements executed covering $800 million in equity commitments
- Space System Contract and Operations and Maintenance Contract become effective
- Key subcontracts signed by Iridium and Motorola
- System procurement and build-out commenced
=================================================================================
1994: - IRIDIUM System preliminary design reviews completed
- Additional stock purchase agreements executed covering an additional $798
million
- IRIDIUM satellite communications payload application-specific integrated
circuits designed, fabricated and validated
- Gateway Authorization Agreements executed
=================================================================================
1995: - Space Segment license awarded by FCC, subject to certain conditions
- IRIDIUM System critical design reviews completed
- Terrestrial Network Development Contract executed
- Nine Gateway Equipment Purchase Agreements executed
- Prototype phones available for lab testing
- Additional $300 million raised
=================================================================================
1996: - Full-scale IRIDIUM satellite manufacture begins
- $750 million Guaranteed Bank Facility established
- Kyocera begins development of Iridium phones
- Construction of gateways begins
---------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<C> <S>
---------------------------------------------------------------------------------
1997: - First launch of IRIDIUM satellites on a Delta II launch vehicle
- IWCL IPO completed
- $100 million SPI purchase of Class 1 Interests
- First launch of IRIDIUM satellites on a Proton launch vehicle
- Offering of Units and Series B Notes completed
- Master control facility substantially complete
- Offering of Series C Notes completed
- $1 billion Secured Bank Facility established
- Two-thirds of satellite launches completed
- Gateway construction expected to continue and initial testing to begin
- Prototype pagers tested with in-orbit satellites
- Limited voice testing with in-orbit satellites
- Significant progress in obtaining service providers, roaming agreements and L-
band licenses
=================================================================================
1998: - Satellite launches expected to be completed
- Gateway construction expected to be completed
- Subscriber trials expected to be completed
- Continued progress expected in obtaining service providers, roaming agreements
and L-band licenses
- Commercial operations expected to begin
---------------------------------------------------------------------------------
</TABLE>
COMPETITION
Certain sectors of the telecommunications industry are highly competitive
in the United States and other countries. The uncertainties and risks created by
this competition are intensified by the continuous technological advances that
characterize the industry, regulatory developments that affect competition and
alliances between industry participants. While no single existing wireless
communications system serves the global personal communications market today,
Iridium anticipates that more than one system will seek to serve this market in
some fashion in the future. Iridium believes that its most likely direct
competition will come from the planned ICO telecommunications service and from
one or more of the other FCC licensed MSS applicants -- Loral/Qualcomm
Partnership, L.P., on behalf of Globalstar, MCHI, on behalf of Ellipso, and
Constellation, on behalf of Aries.
Iridium believes that its ability to compete successfully in the market for
global personal communications will depend primarily upon the timing of its
entry into the market, the technological qualities of the IRIDIUM System,
including its global coverage, signal strength, dependability and capacity and
the market appeal of Iridium's service offerings, including ICRS. Successful
competition will also depend on the cost of service to subscribers and the
success of the marketing, distribution and customer service efforts of gateway
operators and service providers. Iridium believes that it currently has an
earlier planned full global service capability than any of the licensed MSS
applicants or ICO (based upon information contained in their FCC filings or
public announcements).
While Iridium's system and proposed competing mobile satellite systems have
different planned technical capabilities, Iridium believes that the
distinguishing features of the IRIDIUM System will include: (i) its higher
signal strength for Satellite Services which Iridium believes will afford both
better voice quality and signal penetration to portable, handheld phones and a
higher degree of in-building penetration for pagers; (ii) its intersatellite
networking capability, which Iridium believes will permit full global coverage,
reduce the number of gateways required to provide global coverage, enhance
system reliability and capacity and reduce tail charges incurred for the
landline portion of telephone calls; and (iii) its ICRS offering, which will
offer one number, one phone, one bill, voice, fax and data communication and
"follow-me paging" through either a cellular or an IRIDIUM phone number. Iridium
believes that these distinguishing features will make IRIDIUM Services better
suited,
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compared with other potential MSS competitors, to meet the global coverage and
service quality demanded from the high-end, traveling professional. In addition,
Iridium believes that it will be the first MSS system to offer full global
coverage in all authorized jurisdictions.
Mobile Satellite Systems
Inmarsat has announced plans for a 12-satellite, MEO system consisting of
ten operational and two spare satellites. This system is to operate in the 2 GHz
band and will be owned by a new Inmarsat affiliate, ICO. Many of the investors
in Inmarsat, including numerous state-owned telecommunications companies,
participate in the ownership of the new venture and ICO has announced the
receipt of significant equity commitments from these investors. Iridium believes
that ICO will be the most direct competitor to Iridium for the traveling
professional market. However, ICO has announced that the full constellation will
not be operational before the year 2000, which should provide Iridium with a
first-to-market advantage.
Globalstar, a 48-satellite LEO system, has been proposed by Loral/Qualcomm.
It will offer both fixed and mobile telecommunications services. The Globalstar
system will employ CDMA digital modulation technology and Globalstar has
announced an expected in-service date of 1998, with the full constellation in
place by early 1999. The Globalstar system utilizes "bent pipe" technology and
Globalstar has indicated that it will require between 50 and 75 gateways to
provide full global land-based coverage of virtually all inhabited areas of the
globe. The target market for Globalstar, like the regional GEO systems described
below, covers persons who lack telephone service or are under served or not
served by existing or future cellular systems.
Ellipso, a 16-satellite NGSO system, has been proposed by MCHI. Aries, a
46-satellite NGSO system, has been proposed by Constellation. Both systems would
offer mobile satellite service globally and would use CDMA digital modulation
technology. The licenses for each of MCHI's and Constellation's systems require
that the system be fully operational by July 2003. MCHI has announced that it
intends to begin full operation of its system by the year 2000, while
Constellation has stated that it plans to begin operations in 2002.
Iridium also expects to encounter competition from regional mobile
satellite systems, three of which have been launched and several of which are in
the planning stage, as well as from Inmarsat. In April 1995, AMSC launched a GEO
satellite covering the continental United States, Alaska, Hawaii, Puerto Rico,
the U.S. Virgin Islands and U.S. coastal waters to provide fixed and mobile
voice and data services to briefcase-sized mobile terminals and car-mounted
units. TMI, a spinoff of Telsat Canada, launched a virtually identical satellite
to AMSC's in 1996 to cover Canada and other parts of the Caribbean not served by
AMSC and to provide the same type of service to similar terminals. Mobilesat,
launched in 1994, is a GEO satellite covering Australia, New Zealand and parts
of the Pacific Basin which provides mobile and fixed, voice and data services to
briefcase-sized mobile terminals and carmounted units. ACeS has proposed a one-
or two-satellite GEO satellite system covering Asia, including Thailand,
Indonesia and the Philippines, and offering mobile voice and data
telecommunications to briefcase-sized mobile terminals, car-mounted units and
handheld units. APMT has proposed a two-satellite GEO satellite system covering
India, China and certain Southeast Asian nations, offering mobile
telecommunications to dual-mode, handheld terminals. Satphone and Thuraya are
two consortia proposing GEO systems to serve the North Africa/Middle East
region, with dual-mode hand-held phones. EAST is a hybrid system proposed by
Matra-Marconi to provide fixed services, and mobile services to hand-held units,
with a GEO satellite covering Europe, the Middle East and Africa. Afro-Asian
Satellite Communications has proposed a two GEO satellite system covering 55
countries in the Middle East, the Asia Pacific region and eventually Africa,
serving dual-mode, hand-held terminals. Elekon-Stir is a proposed Russian LEO
system consisting of seven satellites offering store and forward mobile data
services and with limited voice capabilities. Inmarsat currently operates a
world-wide GEO system that is capable of providing fixed and mobile voice and
data services to laptop-sized "Mini-M" terminals and to briefcase-sized mobile
terminals and car-mounted units. Other regional systems that may be
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established could also provide services that compete with the IRIDIUM Satellite
Services. The regional GEO systems do not provide full global coverage and,
therefore, are expected to generally target persons not currently served by
landline or cellular telephone service. It is possible that one or more regional
mobile satellite services could enter into agreements to provide intersystem
roaming that could be global or nearly global in scope.
Land-based Telecommunications Systems
Iridium does not intend to compete with terrestrial cellular telephone
systems for the vast majority of personal communications services, because,
among other reasons, IRIDIUM satellite voice services will be priced
significantly higher than most terrestrial wireless services, the IRIDIUM System
will lack the operational capacity to provide local service to large numbers of
subscribers in concentrated areas and Iridium's satellite system is not expected
to afford the same voice quality, signal strength, or ability to penetrate
various environments (such as buildings) as terrestrial wireless systems.
Rather, Iridium expects its subscribers to use IRIDIUM Satellite Services in
areas or situations where local cellular systems use a standard incompatible
with that of the users' home markets or where terrestrial service is
unavailable, inconvenient, of poor quality or unreliable. As terrestrial
cellular systems expand their geographical penetration, particularly outside of
major urban and suburban areas and improve the quality of coverage in
already-served areas, potential customers for IRIDIUM Satellite Services and
other satellite-based services will be lost. Moreover, the advent of near global
terrestrial cellular roaming described below will represent a significant
competitive threat to Iridium's satellite-based service and ICRS, particularly
with respect to traveling professionals who spend most of their time in regions
that are well served by terrestrial-based wireless services.
Terrestrial Cellular Interprotocol Roaming Services
Iridium's ICRS service offering, which will allow IRIDIUM subscribers to
roam onto a variety of cellular networks, will face competition from existing
and future terrestrial cellular interprotocol roaming services, which provide
roaming services across similar cellular networks.
GTE Mobilnet (GTE) and Deutsche Telekom Mobil ("DeTeMobil") of Germany
currently offer GlobalRoam, a two-way cellular roaming service between certain
North American AMPS cellular networks and GSM cellular networks in certain
countries where DeTeMobil has GSM roaming agreements. AT&T Wireless Services of
the United States and Vodafone of the United Kingdom offer CellCard, a service
which provides one-way roaming from certain North American AMPS networks to
certain GSM networks in certain countries which have roaming agreements with
Vodafone.
Three other proposed MSS systems, ICO, Globalstar and Odyssey, and at least
one regional GEO, ACeS, have indicated that they may also offer some form of
dual-mode satellite/cellular service, which may include interprotocol roaming
capabilities such as those expected to be offered by Iridium.
In addition, a number of rental services, primarily United States based,
provide cellular phones to persons traveling in countries with cellular
standards that differ from the traveler's home market. For example, Worldcell
provides United States based travelers GSM phones for travel to Europe, while
Shared Technologies Cellular, in conjunction with United Airlines, provides AMPS
phones for visitors to the United States. These businesses often have rental
locations at airports, hotels and auto rental locations and will also deliver
phones by mail service. These companies' services may compete with Iridium's
ICRS service and satellite-based service offerings. See "Risk Factors --
Competitive Risks; Factors Affecting Iridium's Competitive
Position -- Competition from Interprotocol Roaming Service Providers, GSM
Roaming Services, Regional MSS Systems and Wireless Phone Rentals."
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Paging
In addition to competing with paging services offered by proposed regional
MSS systems, the IRIDIUM paging service will face competition from regional and
nationwide terrestrial paging services, and from M-Tel's SkyTel service which
currently provides paging services to 22 countries around the world. SkyTel
operates by forwarding paging messages via international circuits to a foreign
paging network that subsequently transmits the message over its local network.
Also, in 1995 Inmarsat introduced an international satellite-based one-way
messaging service. Iridium believes that the relatively higher link margins of
the IRIDIUM paging service will provide superior performance to any proposed
satellite paging systems and that Iridium will be the only global paging service
using a belt-worn pager before 2000.
Competition Related to New Technologies and New Satellite Systems
Iridium may also face competition in the future from companies using new
technologies and new satellite systems which could render the IRIDIUM System
obsolete or less competitive. Such new technologies, even if not ultimately
successful, could have a material and adverse effect on Iridium as a result of
associated initial marketing efforts. Iridium's business could be materially and
adversely affected if competitors begin operations or existing
telecommunications service providers penetrate Iridium's target markets before
completion of the IRIDIUM System.
RESEARCH AND DEVELOPMENT
Iridium has engaged in preliminary discussions with Motorola regarding
possible long-term enhancements to the IRIDIUM System, including a possible
second generation of IRIDIUM satellites, and in September 1997 Iridium filed an
application with the FCC for authorization to operate a satellite system in the
2GHz band. Such actions are preliminary steps in the research and development
process and Iridium has made no significant financial commitment to long-term
enhancements.
EMPLOYEES
Pursuant to the Iridium LLC Agreement each officer of Parent holds the same
position with Iridium. There are 13 persons who are executive officers of Parent
and Iridium. Iridium has no employees other than its officers who also are
officers of Parent. As of September 30, 1997, Parent had approximately 355
full-time employees. None of Parent's employees are covered by a collective
bargaining agreement. Iridium's management considers its relations with its
officers and the employees of Parent to be good. See "Certain Matters Regarding
Relationship Among IWCL, Parent and Iridium."
PROPERTIES
Motorola has constructed the master control facility on a 10.4 acre parcel
of land in Loudoun County, Virginia, TT&C facilities on leased or licensed land
in Yellowknife and Iqualuit, Northwest Territories, Canada and Oahu, Hawaii and
the backup control facility, which is nearing completion in Rome, Italy. Title
to these properties is scheduled to be passed to Iridium prior to the time
Motorola completes the final milestone under the Space System Contract.
Iridium leases approximately 128,750 square feet of space at three
locations in metropolitan Washington, D.C. under leases that expire in January
1999, with renewal options. Iridium's principal executive office is located at
1575 Eye Street, N.W., Washington, D.C. 20005.
LEGAL PROCEEDINGS
Iridium is not a party to any pending legal proceedings material to its
financial condition or results of operations. None of Capital, Roaming or IP is
a party to any pending legal proceedings.
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REGULATION OF IRIDIUM
TELECOMMUNICATIONS REGULATION AND SPECTRUM ALLOCATION: OVERVIEW
The allocation and use of the radio frequency spectrum for the provision of
communications services are subject to international and national regulation.
The implementation and operation of the IRIDIUM System, like those of all other
satellite and wireless systems, are dependent upon obtaining licenses and other
approvals.
The international regulatory framework for spectrum allocation and use is
established by the International Telecommunication Union ("ITU"). The ITU, which
is composed of representatives from most of the countries of the world, meets
officially at conferences known as World Radio Conferences ("WRC"s) (previously
known as World Administrative Radio Conferences or "WARC"s) to decide the radio
services that should be permitted to operate in various radio bands and the
rules for operating in those bands.
The national administration of each country decides how the radio
frequencies that the ITU has allocated to particular communications services
should be allocated and assigned domestically to specific radio systems. In
addition, the provision of communications services in most countries is subject
to regulatory controls by the national governments of each country.
In the United States, the FCC is the regulatory agency responsible
domestically for allocating spectrum and for licensing and regulating
communication systems, facilities, and services. The FCC regulates satellites in
accordance with laws passed by the United States Congress, particularly the
Communications Act of 1934, as amended (the "Communications Act"), regulations
adopted pursuant to those laws, and judicial opinions rendered by U.S. courts.
IRIDIUM SYSTEM LICENSING REQUIREMENTS
The IRIDIUM System is being built with the capability to link phones to
IRIDIUM satellites using up to 10.5 MHz of spectrum in L-band frequencies from
1616-1626.5 MHz on a bi-directional time division basis, Earth-to-space and
space-to-Earth. The system will also be capable of operating "feeder" links in
the frequencies 19.4-19.6 GHz and 29.1-29.3 GHz (connecting satellites to ground
earth station gateway facilities) and intersatellite links in the frequencies
23.18-23.38 GHz (linking the satellites in the constellation to each other).
The licensing requirements for the IRIDIUM System include: (i) the FCC
license for the space segment; (ii) the licenses in each country where there is
a gateway or TT&C earth station; and (iii) the licenses in each country for the
IRIDIUM subscriber equipment and service and for the use of required
frequencies. In addition, the IRIDIUM System must be coordinated with other
users of spectrum that have rights to use the same or adjacent frequencies to
the frequencies assigned to the IRIDIUM System. It is only necessary for one
country to license the space segment, which includes authorizing the
construction, launch, and operation of the satellites, including the use of the
intersatellite links and the operation of the primary satellite control center
in the country.
The gateway earth stations provide the feeder link between the satellite
network and the PSTNs around the world. Iridium expects that IRIDIUM gateways
will be located in at least eleven different countries during the first years of
operation. A radio license to operate a gateway earth station in a significant
portion of the 29.1-29.3 GHz (Uplink) and 19.4-19.6 GHz (Downlink) frequency
bands must be issued by the appropriate governmental authority of each of the
countries in which an IRIDIUM gateway is to be located. Similar authorizations
may be obtained in the United States and Canada to operate TT&C earth stations.
Each country in which Iridium intends to operate must authorize the use of
the frequencies linking the phones to the satellites, allowing communication
between end users and the satellite network. At a minimum, the IRIDIUM System
needs exclusive use of the frequencies 1621.35-1626.5 MHz for this purpose, with
authority to operate bi-directionally within that band. In
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order to operate the IRIDIUM subscriber equipment in a country, Iridium must
obtain from the country a radio license to permit the operation of phones and
pagers within the country. The licensing procedures vary in different countries.
Generally there are three aspects to the required license(s): (i) authorization
for the use of the frequencies requested; (ii) authorization for the equipment
to be marketed and used (including subscriber equipment that may circulate from
country to country); and (iii) authorization for the service to be provided.
Because of the global mobile nature of the service, each national
administration will be asked to grant a blanket or class license authorizing a
substantial number of handsets, recognize equipment that has been type approved
or certified by other countries and allow for the free circulation and
transborder roaming of terminal equipment.
LICENSING STATUS
General
Iridium, Motorola, and the gateway owners have made substantial progress in
taking the regulatory steps needed for the IRIDIUM System to obtain the coverage
assumed in its business plan, but a significant number of additional regulatory
approvals outside the United States remain to be obtained. Each gateway must be
licensed by the jurisdiction in which it is located. Licenses have been granted
for the gateways in the United States (Tempe), Thailand (Bangkok), Taiwan
(Taipei), Korea (Seoul), Brazil (Rio de Janeiro), Japan (Nagano) and Italy
(Fucino). Currently, the North American gateway operator is contemplating
locating a second gateway in the United States. Additionally, experimental
licenses have been granted for the gateways in Russia (Moscow), and India
(Bombay) and permit the gateways to test their links between the IRIDIUM
satellites and terrestrial services. The gateways to be located in China
(Beijing) and Saudi Arabia (Jeddah) have not received licenses or commenced
construction. See "Risk Factors -- Reliance on Motorola, Gateway Owners and
Other Third Parties -- Construction and Operation of the IRIDIUM System." The
final licenses that have been received by the gateways are subject to conditions
that relate to the completion of construction and the provision of technical
information to regulatory authorities. Iridium expects that the licenses its
other gateways are seeking will have similar conditions. There can be no
assurance that the additional licenses necessary for Iridium to obtain the
service capability assumed in its business plan will be obtained on a timely
basis or at all. In addition, while Iridium believes the conditions specified in
the final gateway licenses that have been received can be satisfied, there can
be no assurance that such conditions will be satisfied or that conditions to
licenses received in the future will be satisfied.
To date, 16 administrations which have given all the authorizations
necessary to operate the IRIDIUM System in their territories. The 16 countries
and territories are: United States, Argentina, Colombia, Thailand, Malaysia,
Guatemala, Puerto Rico, Finland, El Salvador, Afghanistan, Panama, Fiji, San
Marino, Micronesia, Palau and the Cook Islands. In addition, Italy, Brazil, the
United States, Japan and India have granted experimental licenses for the
provision of IRIDIUM Satellite Services. Iridium is seeking licenses throughout
the world. However, Iridium is placing emphasis on obtaining approvals by
September 1998 from the 70 to 90 countries where Iridium expects substantially
all of the demand for, and usage of, IRIDIUM Services is likely to be generated.
There can be no assurance that additional authorizations will be granted at all,
or in a timely manner, or without burdensome conditions. There can be no
assurance that sufficient licenses for Iridium to obtain the coverage assumed in
its business plan will be obtained on a timely basis or at all. Nor can there be
any assurance that Iridium will be able to secure additional spectrum, if
needed. In addition, while Iridium is not aware of any country that has
indicated that it will not provide a service license by the commencement of
commercial operations, the process of obtaining service licenses in each country
of the world is complex and certain gateway operators, in particular those with
responsibility for obtaining licenses in numerous countries such as Iridium
Africa and Iridium SudAmerica, have indicated that they may not receive
regulatory approvals for some of the countries of their territories at the
anticipated commencement of commercial operations in September 1998. See
"Description of
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Other Indebtedness -- Secured Bank Facility" for a discussion of regulatory
approvals as a borrowing condition under the Secured Bank Facility.
Spectrum Allocation
At the WARC-92, the ITU allocated to the MSS service: (i) on a primary
basis, 16.5 MHz of spectrum in the 1610-1626.5 MHz band (Earth-to-space); and
(ii) on a secondary basis, 12.7 MHz of spectrum in the 1613.8-1626.5 MHz band
(space-to-Earth). The ITU had previously authorized the other frequency bands
used in the IRIDIUM System for the purpose for which Iridium intends to use
them. At the 1995 World Radio Conference ("WRC 95"), the ITU defined the
coordination procedure for systems operating in the bands proposed to be used by
Iridium for its feeder links. The ITU's role in allocating frequencies necessary
for the operation of the first generation IRIDIUM System is now essentially
complete.
United States Licensing
The space segment of the IRIDIUM System, including the use of the
intersatellite frequency band (23.18 to 23.38 GHz), has already been licensed by
the FCC in the United States. The license has a term of ten years and contains
other conditions typical of satellite system licenses granted by the FCC. The
license term begins on the date the first satellite is in orbit and the first
transmission occurs. The license states that, absent extensions, the IRIDIUM
System must be fully constructed and operational by October 2002. Two applicants
have appealed the FCC decision which (i) found that they initially had failed to
establish the necessary financial qualifications, and gave them additional time
to demonstrate such qualifications; and (ii) granted licenses to the IRIDIUM
System and two other global MSS systems. This appeal is being held in abeyance
while the FCC considers an application for review of its decision. Such
applicants also appealed the FCC decision which adopts qualification standards
for the applicants. This appeal has been dismissed as moot. The license for the
IRIDIUM System remains in full force and effect while these appeals are pending
and Iridium expects that the FCC decision to issue a license for the IRIDIUM
System will be affirmed, although there can be no assurance that the courts will
do so. See "-- Competition."
Although the FCC has stated that it will renew the IRIDIUM System
authorization unless extraordinary circumstances prevent it from doing so, there
can be no assurance that the IRIDIUM System license will be renewed.
The IRIDIUM System license is held by SpaceSystem License, Inc. a wholly
owned subsidiary of Motorola, which is contractually bound to operate the system
for the exclusive benefit of Iridium. As a result, Motorola, rather than
Iridium, has the responsibility to construct, launch, operate and maintain the
IRIDIUM System in accordance with the terms of the license. Any request to renew
or modify the IRIDIUM System license must be filed and prosecuted by Motorola.
If the Space System Contract or the Operations and Maintenance Contract is ever
terminated or not renewed, Motorola would have to assign the IRIDIUM license to
Iridium or a third party. Any such assignment would be subject to FCC approval.
Under both the ITU's rules and the terms of the IRIDIUM System license, the
IRIDIUM System must be coordinated with all other domestic and foreign users of
the frequency bands assigned to the IRIDIUM System. The United States has
essentially completed the process of registering the IRIDIUM space segment
operations with the ITU. It has submitted the advance publication and
coordination materials to the ITU and coordinated the use of the space segment
with all those administrations expressing concerns that the system might cause
or receive interference to their systems. On this basis, the United States has
requested the ITU to notify the IRIDIUM System in the ITU's Master Frequency
Register, which will give it a legal right to protection from interference from
future systems. Once the request is published, administrations that have
previously engaged in coordination with the United States regarding the IRIDIUM
System may file comments on the claim that coordination is complete. Any
comments will need to be resolved before the IRIDIUM System
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will be listed in the Master Frequency Register. Iridium believes that
coordination has been completed successfully between the IRIDIUM System and all
existing or planned systems that have been identified under the coordination
process. If further coordination is required with any identified system, it is
possible that such coordination would not be completed prior to Iridium's
projected commencement of commercial operations. However, Iridium believes that
failure to complete such coordination would be unlikely to have a material
adverse effect on Iridium. There is no other action required from any other
country to license the space segment.
Under the FCC's rules and the terms of the license, prior to commencing
operations Motorola must complete coordination with U.S. radio astronomy sites
and complete consultations with the Inmarsat and Intelsat systems. See
"-- Consultations and Coordinations."
In the United States, frequencies have been assigned to the IRIDIUM System
feeder links in the 29.1-29.25 and 19.4-19.6 GHz bands. The 29.1-29.25 GHz
frequencies are shared with the local multipoint distribution service ("LMDS"),
and the FCC has adopted restrictions on LMDS operations that are designed to
protect MSS feeder links from interference. The 19.4-19.6 GHz frequencies are
shared with terrestrial microwave stations and each gateway earth station must
be coordinated in advance with licensed microwave stations. Both frequency bands
are also shared with the proposed feeder link operation of TRW's Odyssey system.
TRW's earth stations must be separated geographically from the IRIDIUM System
gateways in order to avoid causing harmful interference. The FCC recently
granted a license for the first IRIDIUM System gateway to be located in Tempe,
Arizona. Licenses have also been granted in the United States for authority to
construct and operate TT&C facilities in Arizona and Hawaii.
The United States license authorizing construction, launch and operation of
the space segment includes the use of 1621.35 to 1626.5 MHz radio frequency band
in the United States exclusively for the IRIDIUM subscriber links. This
frequency assignment may be increased if no more than one CDMA satellite system
becomes operational in the adjacent frequency band. The FCC has issued a license
permitting 200,000 IRIDIUM mobile phones to be used in the United States,
conditioned upon Motorola submitting a study showing its terminals will comply
with radiation hazard requirements. Iridium believes that Motorola will comply
with this requirement.
Licensing Outside the United States
In countries other than the United States, the remaining significant
regulatory steps include: (i) in each country in which a gateway or system
control terminal will be located, authorization to construct and operate those
facilities, including necessary gateway feeder link spectrum assignments, must
be obtained; (ii) in each country in which IRIDIUM subscriber equipment will
operate, authority to market and operate that equipment with the IRIDIUM System,
and the use of the necessary user link spectrum, must be granted; and (iii)
coordination of the use of the frequencies to be used by the IRIDIUM System must
be achieved. As discussed under "-- General," applications for authorizations
for gateway, subscriber and TT&C facilities are in varying stages of processing
in countries other than the United States and there can be no assurance that
these applications will be granted or that sufficient spectrum for initial needs
will be assigned. Of the gateway and subscriber authorizations granted to date,
several are conditional and there can be no assurance that these conditions will
be satisfied. If the initial spectrum assignments prove insufficient as demand
increases over time, there is no assurance Iridium will be able to obtain
additional spectrum from the FCC or other administrations.
Countries in Europe are approaching frequency assignments and licensing
issues on a regional basis. CEPT, an organization of forty-three countries in
greater Europe, has adopted recommendations regarding the frequency assignment
plan and the authorization process which it will recommend that member countries
follow. These recommendations are voluntary but 13 European countries have
adopted some or all of these recommendations and many other European
countries -- especially EU members -- are expected to follow these
recommendations. These recom-
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mendations currently give Iridium the opportunity to obtain the spectrum it
needs to operate initially in Europe. There is a risk that Iridium may have to
share this spectrum with other planned satellite systems using an FDMA/TDMA
access mode. Because European countries must follow ITU procedures which Iridium
believes will protect Iridium's minimum spectrum requirements, Iridium believes
this risk is unlikely to occur. However, there can be no assurance that Iridium
will receive all the spectrum it needs to operate in Europe.
IRIDIUM mobile subscriber equipment must be type accepted in many countries
in accordance with national, regional and/or internationally-recognized
standards relating to unwanted emissions, network controls, etc. At the 1996 ITU
World Telecommunication Policy Forum, the participating countries agreed to
start a process that has become known as the GMPCS memorandum of understanding
(the "GMPCS MOU"). Participating countries have concluded the development of a
first set of agreements covering the IRIDIUM System and the IRIDIUM subscriber
equipment, which may facilitate (i) the free circulation of subscriber equipment
and (ii) universal handset type approvals. It is now necessary for countries to
implement these agreements. Absent such implementation, IRIDIUM subscriber
equipment circulation from country to country would require numerous bilateral
agreements. While a first set of agreements has been developed, there can be no
assurance that countries will implement these agreements in time to benefit
Iridium.
In connection with Iridium's efforts to obtain worldwide regulatory
approval for IRIDIUM Services, governmental, political and security concerns
have arisen. One such concern is that authorization of IRIDIUM Services by many
countries will be contingent upon Iridium providing such countries with the
ability to legally monitor calls made to or from such countries. Iridium
believes that it will be able to address the concerns of many of these countries
by the date commercial service is expected to begin and of other countries after
the expected commencement of commercial operations. However, there can be no
assurance that it will be able to do so or that the emergence of governmental or
political concerns will not impair the ability to obtain licenses or the
offering of IRIDIUM Services on a timely basis. See "Risk Factors -- Risks
Associated with Licensing and Spectrum Allocations."
Research & Development
In September 1997, Iridium filed an application with the FCC for
authorization to operate a satellite system in the 2GHz band. Such action is a
preliminary step in the research and development process and Iridium has made no
significant financial commitment to long-term enhancements.
CONSULTATIONS AND COORDINATIONS
Intelsat and Inmarsat are international organizations that own and operate
satellite systems. International obligations undertaken by the nations which
have signed the international agreements creating Intelsat and Inmarsat,
including the United States, impose special requirements on the licensing and
operation of other satellite systems, including the IRIDIUM System.
Specifically, under these international agreements the United States must
consult with both Intelsat and Inmarsat prior to authorizing any international
satellite system to ensure that the system will not cause significant economic
or technical harm to the Intelsat system or significant technical harm to the
Inmarsat system. The FCC license to construct, launch and operate the IRIDIUM
System is expressly subject to the completion of these consultations and
notification by the United States Department of State that the United States has
completed its international obligations with respect to Intelsat and Inmarsat.
The consultation with Intelsat has been completed, although the Department of
State has not yet issued its notification and, therefore, the condition in the
FCC license has not technically been fulfilled. The consultation with Inmarsat
has not begun, but Iridium believes the consultation will be successfully
concluded.
Currently, the Russian global navigation satellite system, GLONASS,
operates in a frequency band that partially overlaps the 1610-1626.5 MHz MSS
band. When operating co-channel with GLONASS, MSS systems are required to
coordinate their operations with the previously registered
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operations of GLONASS. In addition, even when not operating co-channel, they are
required to protect GLONASS operations from harmful interference. Iridium
believes that a bilateral coordination agreement between Russia and the United
States is in negotiation, under which Russia would agree to move the GLONASS
system's operations to frequencies below 1610 MHz by January 1, 1999, and to
frequencies below approximately 1605 MHz by the year 2005. The FCC has
conditioned the IRIDIUM blanket subscriber license upon compliance with a level
of protection from interference to the GLONASS system which has yet to be
determined. During the three-month period between September 1, 1998, the month
Iridium expects to commence commercial operations, and January 1, 1999, the
month the GLONASS operational frequencies will shift from being below 1616 MHz
to being below 1610 MHz, and during the interim period between 1999 and when
GLONASS shifts to below 1605 MHz, Iridium believes it will be able to satisfy
any reasonable level of protection that is required although there can be no
assurance as to what level of protection will be required. Iridium believes that
it can meet the protection requested for GLONASS when GLONASS shifts down in
frequency to below 1605 MHz by January 1, 2005. Other administrations will also
need to coordinate with the Russian Federation concerning the level of
protection that will be afforded to GLONASS in their territory. In Russia
itself, additional restrictions are expected to be imposed which may limit the
amount of spectrum available to Iridium in Russia. There can be no assurance
that sufficient spectrum will be available to meet subscriber demand in Russia
or any other country that requires a higher level of protection for GLONASS than
the United States. Moreover, there can be no assurance that CDMA systems will be
able to meet the levels of protection required for GLONASS, either in the United
States, Russia or elsewhere. If such systems do not meet the protection
requirements, the FCC and/or other countries' regulatory authorities might
consider requests to reassign the CDMA systems to higher frequencies within the
1610-1626.5 MHz allocation in order to protect GLONASS. This development might
in turn reduce the amount of spectrum available to Iridium. See
"-- Competition."
Under the FCC's rules, the IRIDIUM System also must protect U.S. radio
astronomy sites during periods when they are observing in the 1610.6-1613.8 MHz
band. Coordination with each such site must be completed before Iridium may
commence operations. To date, Motorola has entered into memoranda of
understanding and letter agreements establishing principles for coordinating
spectrum use (or, in one case, determining that coordination is not required)
with entities representing 14 of the 15 U.S. radio astronomy sites. As to the
one remaining site (Arecibo), negotiations have stalled. Motorola may ask the
FCC to intervene in this matter. Iridium believes that Motorola will be able to
demonstrate that Iridium's operations will not materially and adversely affect
the ability of radio astronomers to observe in the 1.6 GHz band, but there can
be no assurance that final coordination agreements with these sites will be
concluded in a timely manner or, if FCC intervention is required, that the FCC
will impose a coordination solution that is acceptable to Iridium. Also, there
can be no assurance that the technical assumptions underlying the memoranda of
understanding will not differ from the manner in which the IRIDIUM System
performs once it is operational.
Other administrations may also require that the IRIDIUM System be
coordinated with radio astronomy sites that observe in the 1.6 GHz band. Iridium
believes there are approximately 13 other countries that have such radio
astronomy sites observing in that band. Iridium and Motorola have commenced
coordination discussions with numerous non-U.S. radio astronomy sites. While
Iridium believes that it will be able to demonstrate that Iridium's operations
will not materially and adversely affect the ability of radio astronomers at
these sites to observe in the 1.6 GHz band, there can be no assurance that these
coordinations will be concluded successfully or in a timely manner.
In addition to potential interference between MSS systems and other users
of the 1.6 GHz band, there is a potential for intersystem interference among the
MSS systems themselves. Although the FCC declined to impose an unwanted
emissions requirement on CDMA MSS systems to limit their out-of-band emissions
in order to protect IRIDIUM subscriber units from interference, it has directed
the parties to negotiate an agreement imposing an out-of-band emissions mask on
the CDMA systems; if an agreement cannot be reached, the FCC has stated that it
will resolve the issue.
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Emissions standards are now under consideration in various international
forums which would limit out-of-band emissions into the IRIDIUM System to a
level which Iridium believes would not cause harmful interference to the
operation of the IRIDIUM System. These standards would apply to all CDMA MSS
systems, including any subsequent CDMA MSS systems which are authorized to use
the 1610-1621.35 MHz band. There can be no assurance, however, that the
standards adopted would not cause harmful interference to the operation of the
IRIDIUM System.
The IRIDIUM System MSS downlinks operate on a secondary basis. Under the
rules of the ITU and the FCC, these secondary downlinks may not cause harmful
interference to any primary spectrum user that is operating co-frequency and
must accept any interference caused to them by such primary spectrum users. In
light of the secondary nature of IRIDIUM's MSS downlinks, if the FCC is required
to resolve the inter-system interference issue, there can be no assurance that
it will protect IRIDIUM subscriber units from harmful interference. Any failure
to implement an acceptable CDMA emissions mask could significantly reduce the
total capacity of the IRIDIUM System. Furthermore, the downlinks of the IRIDIUM
System may need to accept interference from Inmarsat terminals, including
Inmarsat aeronautical and land mobile terminals, when they are in the vicinity
of an IRIDIUM terminal.
ELECTRONIC SURVEILLANCE LAWS
The Communications Assistance for Law Enforcement Act of 1994 ("CALEA") was
enacted on October 25, 1994. CALEA requires that telecommunications carriers
deploy equipment, facilities and services that meet certain electronic
surveillance requirements identified in the statute. Penalties of $10,000 a day
could be imposed under CALEA as well as an order of compliance in the case of a
failure to comply, and other unspecified penalties, including injunctions, might
otherwise be imposed. The U.S. government has indicated that CALEA imposes
requirements on the IRIDIUM System similar to the requirements that the U.S.
government has requested to be implemented by the cellular industry. Discussions
with the U.S. government are ongoing to determine the extent of the IRIDIUM
System's obligations and the timing of the implementation of these requirements
into the IRIDIUM System. It is unknown whether an agreement will be reached with
the U.S. government which resolves these issues. Thus, there exists the
possibility of a dispute over the IRIDIUM System's obligations. See
"-- Licensing Status" for a description of the surveillance requirements of
countries outside the United States.
UNITED STATES INTERNATIONAL TRAFFIC IN ARMS REGULATIONS; EXPORT ADMINISTRATIONS
ACT
The United States International Traffic in Arms Regulations under the
United States Arms Export Control Act authorize the President of the United
States to control the export and import of articles and services that can be
used in the production of arms. Among other things, these regulations limit the
ability to export certain articles and related technical data to certain
nations. The scope of these regulations is very broad and extends to certain
spacecraft, including certain satellites. Certain information involved in the
performance of Iridium's operations will fall within the scope of these
regulations.
The Export Administrations Act and the regulations thereunder control the
export and re-export of United States-origin technology and commodities capable
of both civilian and military applications (so-called "dual use" items). These
regulations may prohibit or limit export and re-export of certain
telecommunications equipment and related technology which are not affected by
the International Traffic in Arms Regulations by requiring a license from the
Department of Commerce before controlled items may be exported or re-exported to
certain destinations. Although these regulations should not affect Iridium's
ability to put the space segment in place, the export or re-export of IRIDIUM
subscriber equipment as well as earth stations and related equipment and
technical data, may be subject to these regulations, if such equipment is
manufactured in the United States and then exported or re-exported. These
regulations may also affect the export, from one country outside the United
States to another, of United States-origin technical data or the direct products
of such technical data.
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Motorola has obtained authorization to export the IRIDIUM satellites,
including associated launch support equipment, currently scheduled to be
launched in Kazakhstan on Khrunichev's Proton launch vehicle. Motorola has
obtained authorization needed to export the IRIDIUM satellites, including
associated launch support equipment, currently scheduled for launch in China on
China Great Wall's Long March 2C launch vehicle. See "Risk Factors -- Satellite
Launch Risks -- Risks Related to Non-U.S. Launches."
COMPETITION
At the time that the FCC authorized the construction of the IRIDIUM System,
it also authorized one other competitive MSS system to operate in the
1610-1626.5 MHz band. This was the Globalstar system, proposed by Loral/Qualcomm
Partnership, L.P. ("Loral/Qualcomm"). The Globalstar and IRIDIUM System were the
only Big LEO systems initially licensed by the FCC. While the IRIDIUM System was
granted exclusive use of the 1621.35-1626.5 MHz band in the United States,
Globalstar was granted shared use of the bands 1610-1621.35 MHz and 2483.5-2500
MHz. Both competitive systems have been licensed to operate; and they are not
mutually exclusive.
At the same time the FCC authorized the IRIDIUM and Globalstar systems, the
FCC afforded three other applicants (that had initially failed to establish
their qualifications) additional time in which to demonstrate that they were
financially qualified: MCHI; Constellation; and American Mobile Satellite
Corporation ("AMSC"). In September 1996, AMSC chose not to proceed and the FCC
dismissed its application.
MCHI and Constellation have filed challenges to the FCC's licensing rules,
as well as the FCC's determination that they were each not financially
qualified, with the United States Court of Appeals for the District of Columbia
Circuit. These challenges include an appeal from the FCC's decision to license
the IRIDIUM and Globalstar Systems. The challenges to the licensing rules were
recently dismissed as moot and the other court action has been placed in
abeyance pending a final FCC decision on MCHI's and Constellation's licenses.
Following the submission of updated financial information by MCHI and
Constellation to the FCC, by Orders released July 1, 1997, the FCC's
International Bureau granted licenses for the Ellipso system proposed by MCHI
and the Aries system proposed by Constellation. These Orders, which are subject
to review by the full Commission, increase to five the number of U.S.-licensed
global MSS systems (including the IRIDIUM System) and may result in increased
competition for the IRIDIUM System. The licensing of these two Code Division
Multiple Access ("CDMA") systems reduces the possibility that only one CDMA
system will become operational in the 1610-1621.35 MHz frequency band adjacent
to the IRIDIUM System's frequency assignment. This in turn reduces the
likelihood that the FCC will increase the frequency assignment for the IRIDIUM
System. In addition, MCHI's and Constellation's licenses may cause the CDMA
based global systems to have less capacity available for their use and thereby
make it more difficult for them to accept the protection levels required for
GLONASS, either in the United States, Russia or elsewhere. This could lead to
requests to reassign the CDMA systems to higher frequencies within the
1610-1626.5 MHz allocation to protect GLONASS. This development might in turn
reduce the amount of spectrum available to Iridium. Furthermore, the possibility
that two more CDMA systems may become operational may increase the risk of
harmful interference into the IRIDIUM System's MSS downlinks.
Competition with the IRIDIUM System is also expected from ICO, the private
company affiliated with Inmarsat to provide a mobile satellite service using
satellites to be positioned in medium earth orbit. ICO's system is expected to
become a significant competitor of the IRIDIUM System. ICO's proposed service
will not operate in the same set of user link frequencies in which the IRIDIUM
and Globalstar systems are proposed to operate.
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INTERCONNECTION
The IRIDIUM System is predicated upon an international dialing and
signaling model that treats the system as if it were a separate "country." Most
traffic moving to or from the IRIDIUM network will be considered as
international traffic. The IRIDIUM gateway serves as the link between the
IRIDIUM System and the PSTNs within the gateway territory. Consistent with this
"country" model, an IRIDIUM gateway needs to route traffic between the IRIDIUM
System and the international PSTNs. For a country to send a call originating on
its PSTN to the IRIDIUM System, it must send the call to the nearest IRIDIUM
gateway, which may be in a different country. Similarly, for the IRIDIUM System
to send an IRIDIUM System-originated call to a country's PSTN, it must send the
call through its gateway to the terminating PSTN. In both cases, IRIDIUM
gateways need to interconnect to the PSTN. Thus, interconnection agreements need
to be established between the IRIDIUM gateway operators and the local PSTN
operators in all countries served by the gateway. Some gateways may be required
to achieve carrier status in their countries of origin in order to enter into
such agreements.
Every country should be able to send traffic from its PSTN to the nearest
IRIDIUM gateway. Since the IRIDIUM System will be treated like a "country" with
a dedicated country code, each country will route traffic based on that country
code to the IRIDIUM gateway. To route IRIDIUM System traffic properly, the
network operators in every country must program their international switches
(and domestic ones, if necessary) to include the IRIDIUM country code and
signaling point codes.
COUNTRY CODE
The ITU Telecommunication Standardization Bureau ("TSB") is empowered to
allocate international dialing codes for countries, geographic areas and global
services. Although there are numerous three-digit "country codes" still
available for allocation, until recently such codes have generally been granted
only to countries and to geographic areas, in order to conserve this limited
resource. The TSB is advised on international code issues by its Study Group 2,
which is composed primarily of representatives of telecommunications service
organizations and representatives of government administrations. Iridium applied
to the TSB for a country code for the IRIDIUM System. ICO, Globalstar and
Odyssey submitted requests for country code resources, as well.
In May 1996, Study Group 2 decided that these systems should share a
country code and allocated code "881" for this purpose. Each eligible system
will receive two values of the digit following the code 881. For example, the
IRIDIUM System will use codes 8816 and 8817, which will enable Iridium to
identify 200 million subscribers. The Director of the TSB will let each system
reserve its codes for testing and officially assign them later. Iridium has
already been advised by the Director of the TSB that codes have been reserved
for the IRIDIUM System.
The four-digit country code must be used by domestic and international
carriers in each country to route calls to the IRIDIUM System and to recognize
those calls for billing purposes as calls to the IRIDIUM network. Although the
typical three-digit country code is supported by all carriers for the call
routing and billing systems, it is expected that some carriers will have to
modify their routing and billing systems, and in some cases, enhance their
switch capacity, to be able to route and bill for calls destined for the IRIDIUM
System and other MSS systems. It is possible that some carriers will not agree
to make the necessary modifications, to make them in a timely fashion, or to
make them without Iridium and other MSS system operators paying for some or all
of the costs of such modifications. It is generally expected that resistance to
making the modifications is most likely to occur in developing countries that
employ less modern switching equipment.
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PRINCIPAL CONTRACTS FOR THE DEVELOPMENT OF THE IRIDIUM SYSTEM
Iridium and Motorola are parties to the Space System Contract, the
Operations and Maintenance Contract and the Terrestrial Network Development
Contract. In addition, each IRIDIUM investor who has been allocated a gateway
service territory has entered into a Gateway Authorization Agreement. Iridium
also has contracted with Andersen Consulting LLP for the development and
deployment of the IRIDIUM business support systems and the associated gateway
business systems that will be deployed in each gateway. The following summary
discusses the material provisions of those contracts. There have been, and
Iridium anticipates there will be, amendments and interpretations to the
principal supply contracts. See "Risk Factors -- Potential for Delay and Cost
Overruns" and "-- Risks Associated with Principal Supply Contracts -- Amendments
to Principal Contracts." For a discussion of the material provisions of the
Management Services Agreement, see "Certain Matters Regarding the Relationship
Among IWCL, Parent and Iridium -- Management Services Agreement". Capitalized
terms used in the following summary that are defined in the contracts have the
meanings ascribed to them in the contracts (copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part).
SPACE SYSTEM CONTRACT
Motorola has agreed under the Space System Contract to design, develop,
produce and deliver in orbit the Space Segment of the IRIDIUM System consisting
of the Constellation and System Control Segment. The Space System Contract
provides for a price of $3.45 billion, scheduled to be paid by Iridium to
Motorola over approximately a five-year period upon the completion of 47
performance milestones. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." This price is not subject to change based
upon inflation but is subject to certain other adjustments. The Space System
Contract generally requires that the Space Segment must pass an acceptance plan
demonstrating, among other things and as specified therein, specified minimum
performance coverage and capacity criteria by a specified date (as extended for
certain excusable delays) as a condition to Iridium's obligation to accept the
Space Segment and make the final contract payment of $150 million. Following
acceptance by Iridium, the coverage and capacity performance level of the Space
Segment will be governed by the Operations and Maintenance Contract. In
addition, the Space System Contract provides that the warranty made by Motorola
that the Space Segment will comply with the requirements specified in the
acceptance plan immediately upon completion of the contract, but not thereafter,
is in lieu of all other warranties. The liability of Motorola to Iridium under
the Space System Contract is subject to certain limitations (discussed below).
The Space System Contract also requires Motorola to deliver the Satellite
Subscriber Unit (Voice) Interface Specification and the Space System Operations
Plan. The Satellite Subscriber Unit (Voice) Interface Specification was
delivered by Motorola and accepted by Iridium in October 1996. Motorola has also
agreed to license the rights to use the information in the Voice Encoding
Algorithm to the extent essential to implementation of the Satellite Subscriber
Unit (Voice) Interface Specification to telecommunications equipment
manufacturers on mutually acceptable terms and conditions (which may include
royalty payments), provided that the government of such manufacturer's country
has authorized the operation of the IRIDIUM System in that country. Motorola has
indicated to Iridium that it interprets the word "essential" as used in the
prior sentence to mean "technically essential." Iridium does not agree that this
qualification of the term "essential" can or should be implied from the
applicable language in the Space System Contract. In the Space System Contract
Motorola has agreed to design and make available to Iridium as proprietary
information: (i) the Gateway Interface Specification; (ii) the Paging Unit
Interface Specification; and (iii) the Satellite Communication Link Interface
Specification. Separate agreements have been and are expected to be entered into
between Motorola and other appropriate parties providing for the production and
sale of IRIDIUM gateways, subscriber units and other components of the IRIDIUM
System. Motorola has also agreed to develop and sell IRIDIUM gateway equipment,
phones, paging
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units and MXUs to third parties and to license to responsible and competent
suppliers acceptable to Motorola, all on reasonable terms and conditions (which
may include royalty payments) mutually acceptable to Motorola and such third
parties and suppliers, the right to use the information in these interface
specifications to the extent essential for the supplier to manufacture and sell
the applicable Iridium products. The Space System Contract provides that in
connection with the grant of licenses referred to in this paragraph Motorola may
require reciprocal rights to intellectual property of the prospective licensee.
The Space System Contract provides for 47 milestones with scheduled
completion dates ranging from January 29, 1994 to September 23, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Upon completion of each such milestone in accordance with the
contract, Iridium is obligated to pay Motorola the price corresponding to such
milestone. The contract generally provides that Iridium's exclusive remedy for
Motorola's failure to complete any or all of the interim milestones by the
scheduled dates shown on an exhibit to the Space System Contract (as they may be
adjusted) is relief of Iridium's obligation to pay the applicable amount for
such milestones until Motorola completes or is deemed to have completed such
milestones. Iridium has the right, in the event it disagrees with Motorola's
assertion that it has completed a milestone and is therefore permitted to
receive payment, to challenge such assertion by Motorola. Failure to complete
any given milestone will not relieve Iridium of its obligation to make payments
with respect to subsequent completed milestones. Failure to complete one or more
of the milestones on a timely basis so as to prevent completion of the final
milestone within twelve months of the scheduled date (as that date may have been
adjusted under the contract) in accordance with the terms of the contract as
established by clear and convincing evidence would permit Iridium to terminate
the contract if Motorola does not act to commence correction of that failure
within 30 days after receipt of notice from Iridium specifying that failure.
Failure to complete the final milestone by the scheduled completion date (as it
may be adjusted) may cause Motorola to forego all or a portion of the $150
million final milestone payment. The final milestone payment is payable in full
only if Motorola completes the final milestone on the scheduled completion date
(as that date may have been extended under the contract). The payment will be
reduced ratably each day from $150 million to $115 million if completion of the
final milestone is delayed to December 23, 1998 or to the extent that the
commitment to deliver a specified number of gateways is not met. Thereafter,
failure to complete the final milestone will result in a monthly reduction of
the remaining $115 million ratably on a monthly basis from $115 million to zero
if the final milestone is delayed to on or after September 23, 1999. The final
milestone payment penalty is stated in the Space System Contract to be Iridium's
exclusive remedy for Motorola's failure to complete the final milestone on a
timely basis, except that, under certain circumstances, Iridium may declare
Motorola in default if the final milestone is not completed within 12 months of
the scheduled date (as that date may have been adjusted under the Space System
Contract).
Motorola will have no liability under the Space System Contract for
failures or delays in performance, including with respect to the failure to
complete the final milestone on a timely basis, to the extent that such failure
or delay results from an event that is an excusable delay or certain other
specified delays or occurrences. Further, milestone payments under the Space
System Contract will be adjusted to account for any additional costs incurred by
Motorola as a result of an excusable delay. An excusable delay is defined under
the Space System Contract to include any event beyond the reasonable control and
without the fault or negligence of Motorola and its subcontractors, which may
therefore limit the effect of the specified payment penalties. Delays in
launches of satellites caused by the actions or inactions of Motorola's launch
service subcontractors directly pursuant to their subcontracts with Motorola do
not constitute excusable delays under the contract. All other delays in the
launch of satellites arising for whatever reason not caused by Motorola would
constitute excusable delays under the contract, including delays in launches of
IRIDIUM satellites due to delays in prior launches scheduled for third parties.
Motorola has the burden of proving that an event constitutes an excusable delay.
In the event of an excusable delay,
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Motorola will have an obligation to use its best efforts to mitigate the
additional costs or schedule impact of the excusable delay to the extent
reasonable.
The Space System Contract provides that Motorola generally will retain
rights to the intellectual property associated with the Space Segment. Motorola
has agreed to indemnify Iridium, subject to specified qualifications and
limitations, for claims of infringement of any valid and enforceable patent on
account of the Space Segment or any part thereof provided by Motorola to Iridium
under the Space System Contract in any country of the world where an IRIDIUM
service provider has been authorized to provide IRIDIUM Services by an
authorized gateway operator and licensed, to the extent required, by the
government of such country to provide IRIDIUM Services. These qualifications and
limitations include the following: (i) Motorola's total indemnity liability for
attorneys' fees, costs and adverse judgments is limited to the amount Iridium
paid Motorola for the particular items found to infringe; (ii) if Motorola's
liability in respect of a claim or proceeding in any particular country exceeds
10% of the actual income derived by Iridium from operation of the IRIDIUM System
in that country, Iridium will cooperate in mitigating Motorola's liability,
including either terminating service in that country or releasing Motorola from
liability for patent infringement in that country in excess of such 10% amount;
and (iii) Motorola's total liability in respect of this indemnity obligation is
subject to, and counted against, the Motorola Liability Limitations set forth
under "Risk Factors -- Risks Associated with Principal Supply Contracts -- Space
System Contract." Iridium has agreed to indemnify Motorola for claims or losses
resulting from Motorola's compliance with Iridium's designs, specifications or
instructions. See "Risk Factors -- Patents and Proprietary Rights."
Motorola has agreed under the Space System Contract that it, or one of its
wholly owned subsidiaries, shall use its reasonable best efforts to obtain all
permits, licenses and approvals required by the FCC or by any applicable United
States law or regulation, as well as obtain and coordinate the necessary orbital
locations and radio frequency spectrum, to construct, launch and operate the
Space Segment. Under the Space System Contract, Motorola is responsible for all
of its costs in applying for, obtaining and renewing these licenses and
approvals and Iridium is responsible for any other expenses of Motorola in
connection with the licenses and approvals. The Space System Contract provides
that Motorola must use its reasonable best efforts to apply for and obtain
appropriate authorization from the FCC to transfer such permits, licenses and
approvals to Iridium if Iridium so requests and is, in the written opinion of
Motorola's legal counsel, lawfully qualified to hold them. Motorola is not
entitled to any reimbursement by Iridium of its expenses in obtaining or
transferring the FCC permits, licenses and approvals.
In addition, the Space System Contract provides that Motorola will have no
liability to Iridium or its direct or indirect customers for any damages
resulting from any loss, destruction, degradation or failure of the Space
Segment or its subsystems to operate satisfactorily. Iridium has agreed in the
Space System Contract to indemnify Motorola and its affiliates without limit
against any and all claims by third parties caused by or arising out of the
development, operation or use of any part of the Space Segment after passage of
title thereto to Iridium, except liabilities, losses and damages caused by the
willful misconduct or gross negligence of Motorola. Iridium has also granted
Motorola certain waivers of liability and has agreed to maintain at least $500
million of general liability insurance during the term of the Space System
Contract to cover certain third-party liability risks arising out of the
development, operation or use of any part of the Space Segment after passage of
title thereto to Iridium. The remedies of Iridium and Motorola specified in the
contract for a default under the contract are exclusive of all other remedies.
The Space System Contract provides that title and risk of loss or damage to
each individual satellite will pass to Iridium upon the arrival of each
satellite at its designated orbital location in the satellite constellation.
Title and risk of loss or damage of the System Control Segment shall pass to
Iridium upon the earlier of (i) Motorola's demonstration to Iridium of each
Constellation and System Control Segment facility's acceptance plan pursuant to
the Space System Contract or (ii) completion of Milestones 40 (backup control
facility integration and test complete) and 41 (master control facility
integration and test complete) in respect to each facility.
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Motorola has agreed in the Space System Contract that, without Iridium's
consent, it will not produce for itself or others a similar satellite-based
space system of a global communication system for commercial use prior to the
earlier of July 31, 2003 or the termination date of the Space System Contract.
OPERATIONS AND MAINTENANCE CONTRACT
The Operations and Maintenance Contract provides for the operation and
maintenance of the IRIDIUM System at a specified level of performance once it is
completed pursuant to the Space System Contract. This contract obligates
Motorola, for a period of five years after completion of the final milestone
under the Space System Contract, to operate the Space Segment and to exert its
best efforts to monitor, upgrade and replace the hardware and software of the
Space Segment (including the individual satellites) necessary to maintain it at
specified minimum coverage and capacity factors, in exchange for specified
quarterly payments. The Operations and Maintenance Contract provides for fixed
quarterly payments that range from $129.4 million per quarter in 1998,
increasing annually to $178.8 million per quarter in 2006. Such payments during
the initial five-year term are expected to aggregate approximately $2.88
billion, subject to certain adjustments. In addition, Iridium has the option to
extend this contract for an additional two years with payments based upon the
quarterly payments specified above. Such payments for the two year extension are
expected to aggregate approximately $1.33 billion. In the event that completion
of the Space System Contract and, therefore, the commencement of the five year
period of the Operations and Maintenance Contract is delayed more that six
months for any reason other than causes within the reasonable control of
Motorola, the specified quarterly payments shall be adjusted to account for any
additional costs incurred by Motorola.
Specifically, the Operations and Maintenance Contract requires Motorola to
provide the necessary labor to operate the system control segment facilities as
specified in the Space System Operations Plan and to control the satellites of
the satellite constellation and the day-to-day Space Segment management
functions, including the monitoring of the Space Segment interface with the
gateways, phones, paging units and MXUs. It also requires Motorola to exert its
best efforts to monitor, upgrade and replace the hardware and software of the
Space Segment, including the launch of additional satellites, as necessary to
maintain the Space Segment at specified minimum coverage and capacity factors.
In the event of any excusable delay, Motorola would be relieved of the
obligation to exert its best efforts to meet the specified factors, but would be
required to maintain the coverage and capacity factors at the best reasonable
level it can, and it would also be entitled to continued payment of the full
quarterly amounts under the contract and any additional costs it incurs as a
result of such excusable delay.
The Operations and Maintenance Contract provides that the title and risk of
loss or damage to each spare satellite passes to Iridium upon the earlier of its
arrival in low earth storage orbit or the date on which Motorola demonstrates to
Iridium the arrival of the satellite in its designated orbital location. The
Operations and Maintenance Contract provides for additional payments by Iridium
to Motorola (as much as $46 million per satellite) where satellites in low earth
orbit (including satellites in low earth orbit storage) are damaged by the acts
of third parties (as described therein, including contact with space debris) and
replaced by Motorola at the request of Iridium. If the cause of a partial or
complete degradation or inoperability of a satellite is not known to have been
caused by contact with an object in space, its loss will nonetheless be assumed
to have been caused by a third party (and its replacement cost therefore the
responsibility of Iridium rather than Motorola) if the evidence available to the
parties suggests to reasonable and prudent experts knowledgeable in the field of
spacecraft orbital operations and/or space debris that a space object (i.e.,
space debris) may have impacted a satellite and caused it to become partially or
completely inoperative. Iridium's cost for a replacement satellite will be $23
million in this circumstance rather than $46 million. Moreover, the effect of
damage to satellites by acts of third parties is to be disregarded in
determining the coverage and capacity factors, so that the required performance
of the Space
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Segment under the contract would be reduced while the affected satellites were
repaired or replaced.
TERRESTRIAL NETWORK DEVELOPMENT CONTRACT
Under the Terrestrial Network Development Contract, Motorola agreed to
design and develop the gateway hardware and software and license Iridium to use
and permit others to use intellectual property developed under the contract to
procure the development and manufacture of gateway equipment from sources other
than Motorola. The Terrestrial Network Development Contract specifies certain
performance standards and service requirements for the gateways, and provides
common specifications for the gateways and improved oversight by Iridium of the
development process for the gateways. Iridium believes this streamlined the
development process and resulted in better integration of the gateways into the
IRIDIUM System. Iridium has currently agreed to pay Motorola approximately $284
million under the contract in increments tied to the completion of milestones,
including milestones relating to acceptance tests of the completed gateway
design.
IRIDIUM BUSINESS SUPPORT SYSTEM CONTRACT
Iridium and Andersen Consulting, LLP ("Andersen") are parties to a contract
under which Andersen is developing the business support system for the IRIDIUM
System. This computer system is called the Iridium Business Support System
("IBSS"). The IBSS will provide for typical telecommunications business support
functions, including billing, settlement, customer records, service activation,
and equipment management. In conjunction with the development of the IBSS,
Andersen is developing the gateway and service provider business systems that
will be deployed at each gateway and service provider location and which are
necessary for the gateways and service providers to operate with the IBSS and to
perform essential gateway and service provider back office business functions.
The Iridium component of the IBSS will be located and operated at Iridium
facilities in the United States. The gateway and service provider components
will be located throughout the world. The components will be connected by a
terrestrial data network and will operate together to support the functions of
the IBSS. The IBSS is to be deployed using both custom designed software and
currently existing software purchased from commercial vendors. Because
components of the IBSS will have to be deployed around the world, it will be
necessary to meet U.S. export requirements and import requirements of other
countries.
The contract with Andersen for the development of the IBSS has been entered
into at a fixed price of $43 million. Andersen has also agreed to perform
deployment and maintenance functions of the IBSS. Andersen and Iridium are
currently negotiating the terms and conditions for the deployment and
maintenance functions. An agreement for the incorporation of the changes
necessary to accommodate the ICRS has not been negotiated.
Although Iridium believes that the development of the IBSS is proceeding in
accordance with its expectations and with its commercial activation plan, there
is no assurance that Andersen will be successful or timely in the development
and delivery of the IBSS. While the contract with Andersen for the IBSS provides
that Iridium can secure damages from Andersen up to a set limit in the event of
Andersen's breach, the amount of such damages would be insufficient to
compensate Iridium for the loss of revenue should the IBSS fail to function for
a substantial period of time.
OTHER SYSTEM DEVELOPMENT CONTRACTS AND AMENDMENTS
In addition to the contracts described above, Iridium is currently in
negotiations with Motorola and other vendors or prospective vendors relating to
new contracts, or amendments to existing contracts, providing for the
development of new or enhanced system or service capabilities. In addition,
Iridium anticipates that it is likely that requirements will arise in the future
for additional contracts, or additional amendments to existing contracts, for
the development of system or service
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capabilities not currently identified, or for other changes regarding system
development or implementation. In general, Iridium believes that it will be able
to successfully complete such negotiations, on terms that it finds acceptable,
and in a time frame consistent with the implementation of the system and service
capabilities described herein, but there can be no assurance that such
negotiations will be successfully, or timely, concluded or that the work to be
performed thereunder will be satisfactorily and timely completed.
Amendments to Principal Contracts
As a result of technological developments, changes in the product mix of
the IRIDIUM service, and scheduling adjustments, there have been, and Iridium
anticipates there will be, amendments to the Space System Contract, the
Terrestrial Development Contract, the Operations and Maintenance Contract and
the IBSS Contract. Iridium's estimate of the costs of anticipated amendments is
reflected in Iridium's estimates of its funding requirements. There can be no
assurance that future technological, market or regulatory developments will not
necessitate unanticipated amendments to such contracts or that Motorola or other
venders will be willing or able to provide these new capabilities on terms
acceptable to Iridium.
Gateway and Service Provider Rights
The Parent LLC Agreement provides certain exclusive rights to most of its
investors to be gateway operators in specified gateway service territories.
Pursuant to the Iridium LLC Agreement, Iridium acknowledges, and agrees, not to
take any action in contravention of, such rights. Each IRIDIUM investor who has
been allocated a gateway service territory has entered into a Gateway
Authorization Agreement. See "-- Gateway Authorization Agreements." The
allocation of gateway service territories is subject to any applicable antitrust
laws. The allocation of gateway rights to any IRIDIUM investor is also subject
to forfeiture for a number of reasons, including the failure of such investor to
obtain required authorizations within stated time periods. The loss of gateway
rights, however, does not diminish an investor's obligations under the Parent
LLC Agreement, including obligations to fund committed amounts to Parent. See
"-- Gateway Authorization Agreements" for a description of the terms of the
Gateway Authorization Agreements.
The Parent LLC Agreement provides that each IRIDIUM investor that has been
allocated a gateway service territory shall have the exclusive right, to the
extent permitted by applicable law, to act as, and to designate others to act
as, an IRIDIUM satellite service provider in its allocated territory, subject to
obtaining necessary government authorizations and entering into documentation
that is acceptable to such investor and Parent. Pursuant to the Iridium LLC
Agreement, Iridium acknowledges, and agrees not to take any action in
contravention of, such rights.
Obligations Relating to Spectrum Access
Each non-governmental investor that has been allocated a gateway service
territory has agreed: (i) to use its reasonable best efforts to cause the
government and other relevant authorities in jurisdictions in which such
purchaser conducts any material part of its business to ratify and adopt the
spectrum allocation and service definitions for low earth orbiting satellites
adopted at WARC-92; (ii) to use its reasonable best efforts to obtain from such
governments and authorities allocations of the frequencies necessary to operate
and use the IRIDIUM System within the jurisdictions of such governments and
authorities; and (iii) to use its reasonable best efforts to cause such
governments and authorities to facilitate the coordination of the use of such
frequencies within such government's jurisdiction. In addition, each
governmental investor has agreed: (i) to ratify and adopt the spectrum
allocation and service definitions for low earth orbiting satellites adopted at
WARC-92; (ii) to use its reasonable best efforts to facilitate the allocation of
the frequencies necessary to operate and use the IRIDIUM System within its
country; and (iii) to use its reasonable best efforts to facilitate the
coordination of the use of such frequencies within such government's
jurisdiction.
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GATEWAY AUTHORIZATION AGREEMENTS
The Gateway Authorization Agreements provide that Iridium and each gateway
operator will use their reasonable best efforts to agree upon: (i) the specific
location of the gateway within the gateway operator's allocated territory; (ii)
the communications capacity of each gateway; and (iii) the specific construction
and operational schedule for each gateway (collectively, the "Gateway Master
Plan"). At present, most of the gateway operators have committed to country
locations for their gateways in their respective Gateway Authorization
Agreements. The Gateway Authorization Agreements also provide that the each
gateway operator will use its reasonable best efforts to have its gateway
operational in advance of the scheduled Full Operational Capability Date.
The Gateway Authorization Agreements also provide that each gateway
operator will use its reasonable best efforts to undertake and complete on a
schedule consistent with the Gateway Master Plan the following: (i) apply for,
obtain and maintain all governmental authorizations and frequency allocations
necessary to construct and operate its gateway and provide gateway services in
its gateway service territory, (ii) contract with Motorola and/or other
suppliers to design, construct and maintain its gateway in accordance with the
Gateway Master Plan and Iridium's set of guidelines, recommendations, rules,
plans and other instructions relating to technical and operational matters
associated with operation of the IRIDIUM System (the "IRIDIUM System
Practices"), (iii) provide for the staffing, testing and operation of its
gateway in accordance with the IRIDIUM System Practices, (iv) consistent with
the applicable requirements of the IRIDIUM System Practices, establish and
maintain appropriate interconnection, access and settlement arrangements through
and with each PSTN operating within its gateway service territory that are
required to effectively distribute and utilize IRIDIUM Satellite Services within
its gateway service territory, (v) designate service providers, which may
include the gateway operator, within its gateway service territory, provide
gateway services to its service providers and require compliance by its service
providers with established guidelines, and (vi) support Iridium-approved
positions at WRCs of the ITU.
Pursuant to the Gateway Authorization Agreements, Iridium agreed to provide
to each gateway operator, including each gateway operator's designated service
providers, continuous access to the Space Segment, commencing at such time as
the gateway operator's gateway has been constructed, tested and commissioned in
accordance with the Gateway Master Plan and is in full satisfactory compliance
with the IRIDIUM System Practices. The Gateway Authorization Agreements also
provide that each gateway operator will comply with certain instructions of
Iridium, when in Iridium's reasonable judgment any action is required, including
cessation of gateway transmissions. In addition, Iridium has the right to
suspend access to the Space Segment if Iridium reasonably determines that such
continued access would harm overall system operation and either (i) the gateway
operator has failed to take previously requested corrective action or (ii) the
need for immediate action by Iridium is required to avoid harm to overall system
operation.
The Gateway Authorization Agreements provide that the Iridium Board (as
defined) will establish pricing policies and practices, including specific rates
and currency requirements, governing access to the Space Segment upon prior
consultation with each gateway operator, and that each gateway operator will
comply with these pricing policies and practices to the extent permitted by
applicable law and regulation.
The Gateway Authorization Agreements also provide that Iridium will use its
reasonable best efforts to establish and have operational the clearinghouse
facility, which will serve as the central point for the collection of call
detail and billing records produced within the IRIDIUM System, on or before the
Full Operational Capability Date.
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CERTAIN MATTERS REGARDING RELATIONSHIP AMONG IWCL, PARENT AND IRIDIUM
IWCL was formed to act as a member of Parent. The power and authority to
conduct and manage the business of IWCL is vested in the IWCL Board. The IWCL
Board is comprised of seven members, a majority of whom also are executive
officers of Iridium and Parent or one of Parent's other members. At least two
members of the IWCL Board will at all times be persons not currently employed by
or affiliated with Parent or Motorola or any other member of Parent owning more
than five percent of the outstanding Class 1 Interests (the "Independent Company
Directors"). See "Management." Iridium is a wholly owned subsidiary of Parent.
Pursuant to the Iridium LLC Agreement, each of the directors and officers of
Parent also is a director or officer of Iridium. See "Description of Iridium LLC
Limited Liability Company Agreement."
IWCL PARTICIPATION IN THE GOVERNANCE OF PARENT AND IRIDIUM
Parent is governed by its Board of Directors (the "Parent Board"). The
members of Parent may manage Parent only through their election of directors,
and have no authority, in their capacity as members, to act on behalf of Parent.
IWCL has waived the limitation on liability provided by the Delaware Act. The
other members of Parent have not waived this limitation and do not have
liability with respect to the debts or obligations of Iridium in excess of their
investment in their interests in Parent. Notwithstanding IWCL's unlimited
liability with respect to Parent, the holders of Class A Common Stock will not
have liability under Bermuda law with respect to their shares of Class A Common
Stock other than the possible loss in the value of those shares. See
"Description of Parent Limited Liability Company Agreement -- Limitations on
Liability." Iridium is governed by its Board of Directors (the "Iridium Board").
Parent is the sole member of Iridium. Each director of Parent also is a director
of Iridium. Iridium has no directors who are not directors of Parent.
The Parent LLC Agreement and the Iridium LLC Agreement each provide that
IWCL will have certain special rights during the period (the "Special Rights
Period") commencing on the first date that IWCL's Class 1 Interests represent
five percent or more of the total outstanding Class 1 Interests (which occurred
upon the consummation of the IWCL IPO) and ending on the date of delivery by
Parent of notice of the termination of IWCL's special rights following (i) the
sale or other disposition by IWCL of Class 1 Interests, if, as a result of such
sale or other disposition, IWCL's Class 1 Interests represent less than five
percent of the total outstanding Class 1 Interests or (ii) following the
occurrence of a Company Change in Control. "Company Change of Control" means an
event or series of events not approved either by members of Parent owning a
majority of the Class 1 Interests or by a majority of the Parent Board, at a
time when IWCL owns Class 1 Interests representing less than 50% of the
outstanding Class 1 Interests, as a result of which (a) any "person" or "group"
(as such terms are defined in Section 12(d) and 14(d) of the Exchange Act) other
than Parent becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of more than 30% of IWCL's
outstanding common stock (or equivalent securities), (b) IWCL consolidates with
or merges into another corporation or conveys, transfers or leases all or
substantially all of its assets to any person, or any corporation consolidates
with or merges into IWCL, in either event pursuant to a transaction in which
IWCL's outstanding common stock is changed into or exchanged for cash,
securities or other property, other than any transaction (i) between IWCL and
either Parent, an affiliate of Parent or a wholly-owned subsidiary of Parent, or
(ii) after which the shareholders who beneficially owned IWCL's common stock
immediately before such transaction beneficially own at least 50% of the
outstanding voting stock of the surviving entity and no person beneficially owns
more than 30% of the outstanding voting stock of the surviving entity, or (c)
during any period of two consecutive years, individuals who at the beginning of
such period constituted IWCL Board (together with any new directors whose
election by IWCL Board or whose nomination for election was approved by a vote
of 66 2/3% of the members of the IWCL Board then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the IWCL Board then in office.
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During the Special Rights Period (i) IWCL shall be entitled to designate
two Independent Company Directors as directors of both Parent and Iridium, (ii)
one such director shall be elected Vice Chairman of each of the Parent Board and
the Iridium Board and (iii) one director of Parent designated by IWCL shall be a
member of each committee of the Parent Board and each committee of the Iridium
Board. Pursuant to the Parent LLC Agreement and Iridium LLC Agreement, IWCL will
not be entitled to appoint more than two directors to the Parent Board, and the
Iridium Board, even if its ownership interest increases and it would otherwise
have been entitled to additional appointment rights. In addition to any other
voting rights which IWCL may have under the Parent LLC and Iridium LLC
Agreement, under the Delaware Act or otherwise, during the IWCL Special Rights
Period, Parent and Iridium may not take any of the following actions, or permit
any of the following actions or events to occur, without the consent of one of
the directors of Parent and Iridium designated by IWCL ("IWCL's Special Rights
Consent"): (i) make any material amendments or modifications to either of their
Limited Liability Company Agreements; (ii) approve any business plan of Parent
or Iridium that would result in any material change in the purpose of Parent or
Iridium, as the case may be, as set forth in their respective Agreements or
otherwise change Parent's or Iridium's business so that it varies materially
from the business purpose contemplated by their respective Limited Liability
Company Agreements; (iii) acquire, other than in the ordinary course of business
of Parent or Iridium, as the case may be, (a) a controlling interest or a
majority of the voting stock or equity of, any corporation or other entity that
would be a Significant Subsidiary (as such term is defined in the rules under
the Securities Act) or (b) any other assets if the aggregate fair market value
thereof is greater than $50 million; (iv) sell, lease (as lessor), exchange or
otherwise dispose of all or substantially all of the assets of Parent or
Iridium, as the case may be, (other than to a person controlled by Parent or
Iridium); (v) cause the dissolution and/or liquidation of Parent or Iridium; or
(vi) take certain bankruptcy or insolvency related actions with respect to
Parent or Iridium.
MANAGEMENT SERVICES AGREEMENT
In connection with the IWCL IPO, Parent and IWCL entered into a Management
Services Agreement. The Management Services Agreement was amended and restated
in connection with the Asset Drop-Down Transaction to add Iridium as a party.
Pursuant to the Management Services Agreement, Parent has agreed to supervise
and manage the day-to-day operations of IWCL and IWCL has agreed to allow Parent
to do so. Parent will implement or cause to be implemented all policy decisions
relating to the operations of IWCL approved by the IWCL Board and to conduct or
cause to be conducted the ordinary and usual business and affairs of IWCL. The
IWCL Board has the right to give Parent written instructions, not inconsistent
with the terms of the Management Services Agreement, with respect to matters
arising under the Agreement and Parent is required to follow such instructions.
Among other things, Parent will be responsible for administering the following
functions of IWCL: treasury, accounting, legal, tax, insurance, licenses and
permits, investor relations, public relations and securities law compliance and
stock listing compliance. Parent has no authority under the Management Services
Agreement to give any notice or to approve any matter under the Parent LLC
Agreement on behalf of IWCL, including, but not limited to, IWCL's Special
Rights Consent. Parent also will advance funds to IWCL, under certain
conditions, to enable IWCL to pay any income tax liability that cannot be
satisfied by distributions to IWCL on its Class 1 Interests. See "Description of
Parent Limited Liability Company Agreement." Parent will receive no fees or
expense reimbursement from IWCL for its services to IWCL under the Management
Services Agreement. The Management Services Agreement is terminable as to the
duties of Parent to IWCL only with the consent of both Parent and IWCL, except
that Parent has the right to terminate the Agreement as to the duties of Parent
to IWCL only after the occurrence of an IWCL Change of Control. See "-- IWCL
Participation in the Governance of Iridium."
Pursuant to the Management Services Agreement, Parent also has agreed to
supervise and manage the day-to-day operations of Iridium and Iridium has agreed
to allow Parent to do so. Parent will implement or cause to be implemented all
policy decisions relating to the operations of Iridium
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approved by the Iridium Board and to conduct or cause to be conducted the
ordinary and usual business and affairs of Iridium. The Iridium Board has the
right to give Parent written instructions, not inconsistent with the terms of
the Management Services Agreement, with respect to matters arising under the
agreement and Parent is required to follow such instructions. Pursuant to the
Iridium LLC Agreement, the offices and directors of Iridium are identical in all
respects to the offices and officers of Parent. Pursuant to the Management
Services Agreement, all actions taken by an officer of Parent are deemed to be
actions of an officer of Iridium. Pursuant to the Management Services Agreement,
among other things, Parent will be responsible for administering the following
functions of Iridium: contract administration, treasury, accounting, legal, tax,
insurance, licenses and permits, investor relations, public relations and
securities law compliance and stock listing compliance. Parent has no authority
under the Management Services Agreement to take action on any matter reserved
for action by Iridium alone under the Iridium LLC Agreement. Pursuant to the
Management Services Agreement, Iridium will provide sufficient funds to Parent
to enable Parent to manage the business and operations of Iridium and IWCL,
including payment of Parent's obligations to its employees, consultants and
directors, and payments for Parent's office space and equipment, sales, general
operating and administrative expenses, insurance and its obligations under
certain contracts transferred to Iridium by Parent in connection with the Asset
Drop-Down Transaction, subject to the limitation that Iridium will not be
obligated to reimburse Parent for the physical construction, operation,
maintenance or insurance of any satellite system other than the satellite system
to be delivered under the Space System Contract and any other satellite system
to be owned by Iridium. In addition, Iridium will reimburse Parent for payment
obligations under the Share Issuance Agreement, the Global Ownership Program and
the Interest Exchange Agreement. Any funds received by Parent in respect of a
Reserve Capital Call shall be treated as a capital contribution from Parent to
Iridium. See "Description of Parent Limited Liability Company Agreement." The
Management Services Agreement is terminable as to the duties of Parent to
Iridium only with the consent of both Parent and Iridium.
EXCHANGE RIGHTS OF PARENT MEMBERS
Pursuant to an Interest Exchange Agreement between Parent and IWCL (the
"Interest Exchange Agreement"), IWCL has agreed that after the Exchange Date
(defined below) and subject to the restrictions on transfer in the Parent LLC
Agreement it will permit holders of Class 1 Interests of Parent to exchange
those interests for shares of Class A Common Stock at a ratio of one share of
Class A Common Stock for each Class 1 Interest (subject to anti-dilution
adjustments). See "Description of Parent Limited Liability Company
Agreement -- Issuance of Additional Interests; Restrictions on Transfer; Rights
of First Refusal" for a description of certain restrictions on transfer of the
Class 1 Interests contained in the Parent LLC Agreement. If a holder of Class 1
Interests (a "Class 1 Holder") desires to effect an exchange of all or a portion
of its Class 1 Interests it must provide written notice to IWCL and Parent. No
exchange shall take place unless approved by Parent, pursuant to authorization
of Directors representing at least 66 2/3% of the Parent Board. The Exchange
Date is the 90th day following the first fiscal quarter in which Parent has
achieved positive earnings before interest, taxes, depreciation and
amortization. In order to exercise its rights under the Interest Exchange
Agreement, a holder of Class 1 Interests and its affiliates must be in full
compliance with the Parent LLC Agreement and any Gateway Authorization Agreement
to which it is a party. Parent and IWCL have the right to defer exchanges under
the Interest Exchange Agreement if doing so is in the best interests of Parent
or IWCL in light of possible or pending financing transactions.
Under the Interest Exchange Agreement, IWCL has agreed that at any time
after the Exchange Date, IWCL will, at the request of Class 1 Holders and
holders of Class A Common Stock acquired under the Interest Exchange Agreement,
representing not less than 2% of the Fully Diluted Class A Shares (defined
below), file with the Commission a registration statement and use its reasonable
best efforts to have that registration statement remain effective for a period
of up to six months, permitting such holders to sell shares of Class A Common
Stock in the manner specified by those
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holders. IWCL has certain rights to defer the filing of a registration statement
or to cause holders to stop distributing securities under an effective
registration statement. Registering holders are required to pay their pro rata
portion of the costs of registration. "Fully Diluted Class A Shares" means all
shares of Class A Common Stock actually outstanding and the aggregate number of
shares of Class A Common Stock issuable under the Interest Exchange Agreement in
exchange for Class 1 Interests at the then applicable exchange rate, whether or
not the Class 1 Interests are then exchangeable. At the request of Parent,
acting pursuant to authorization of Directors representing at least 66 2/3% of
the Parent Board, IWCL will take all reasonable steps to register pursuant to
these provisions any other shares of Class A Common Stock acquired under the
Interest Exchange Agreement specified by Parent.
SHARE ISSUANCE AGREEMENT
IWCL and Parent have entered into a Share Issuance Agreement governing
offerings of securities by IWCL. The Share Issuance Agreement provides that all
net proceeds from the sale of securities by IWCL will be invested by IWCL in
membership interests in Parent. IWCL will not issue any securities except
pursuant to the Share Issuance Agreement (or pursuant to warrants issued in
accordance therewith), the Interest Exchange Agreement and the Global Ownership
Program described below. IWCL has agreed that if requested by Parent it will use
its best efforts to sell securities of IWCL in compliance with all applicable
laws and will cease to do so, if requested by Parent.
If IWCL sells Class A Common Stock pursuant to the Share Issuance
Agreement, Parent will issue to IWCL, in exchange for the net proceeds of such
offering, one Class 1 Interest for each share of Class A Common Stock sold by
IWCL (subject to anti-dilution adjustments). If Parent directs IWCL to issue
securities other than Class A Common Stock, Parent will issue to IWCL interests
in or securities of Iridium, in exchange for the net proceeds of such offering,
which replicate as nearly as possible the economic attributes of the securities
sold by IWCL. Parent is not obligated to contribute the net proceeds of any such
offering to Iridium, or otherwise to use such net proceeds in connection with
the business of Iridium.
Parent has agreed to pay all expenses incurred by IWCL in connection with
any issuance of securities under the Share Issuance Agreement and to indemnify
IWCL and its officers, directors and employees against certain losses, claims,
damages or liabilities. See "-- Management Services Agreement." IWCL also has
agreed to issue Class A Common Stock pursuant to the Share Issuance Agreement in
connection with the Iridium Option Plan. Parent will issue to IWCL one Class 1
Interest for each share of Class A Common Stock issued by IWCL in connection
with the Option Plan (subject to anti-dilution adjustments).
GLOBAL OWNERSHIP PROGRAM
IWCL and Parent have commenced a Global Ownership Program (the "Global
Ownership Program"), which is designed to offer an equity investment opportunity
in IWCL to certain governmental telecommunication administrations and related
entities (the "Telecom Administrations") as part of a comprehensive program to
enhance market access, improve the competitive standing of the IRIDIUM System
and achieve appropriate regulatory approvals. Under the Global Ownership
Program, IWCL will sell shares of its Class B Common Stock to Telecom
Administrations designated from time to time by Iridium. IWCL has authorized the
issuance of up to 2,500,000 shares of Class B Common Stock under the Global
Ownership Program. No shares of Class B Common Stock are outstanding. The Class
B Common Stock will be sold to Telecom Administrations at a price per share
equal to $13.33. At the time of issuance, the purchasers in the Global Ownership
Program will only be required to pay an amount equal to the par value per share
of the Class B Common Stock -- $.01 per share. The balance of the purchase price
will be payable through the withholding of dividends, if any, which would
otherwise be payable on the shares of Class B Common Stock. A purchaser will
have the right but not the obligation to pay the purchase price in
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cash at any time, except as otherwise required under Bermuda law (e.g., on
winding up). The Class B Common Stock will be nontransferable until the latest
of (i) the date on which the full purchase price for the shares has been paid
(through withheld dividends or otherwise), (ii) the date on which certain
specified regulatory approvals have been obtained to the satisfaction of Parent
and (iii) the date that is one year after the date of issuance of the Class B
Common Stock (the "Transferability Date"). The Class B Common Stock is also
subject to restrictions on transfer under applicable securities laws and the
purchasers will agree not to transfer the Class B Common Stock to a U.S. Person
(as defined). IWCL will have the right to repurchase the Class B Common Stock
from any holder at a price equal to the portion of the purchase price paid
through the date of repurchase, if the specified regulatory approvals applicable
to that holder have not been obtained by a specified date. IWCL and the holder
have the right to cause the Class B Common Stock to be exchanged for Class A
Common Stock at any time after the Transferability Date. The initial exchange
rate will be one share of Class A Common Stock for each share of Class B Common
Stock exchanged and such rate is subject to antidilution adjustments. At the
time of issuance of any shares of Class B Common Stock, IWCL will acquire from
Parent Class 1 Membership Interests at a rate of one Class 1 Interest for each
share of Class B Common Stock issued (subject to anti-dilution adjustments). The
purchase price for the Class 1 Interests will be identical to the proceeds to
IWCL from the issuance of the Class B Common Stock, with all but a nominal
amount deferred and paid through an offset against distributions that would
otherwise be payable on the Class 1 Interests acquired. The Parent LLC Agreement
provides that if any portion of the purchase price for an interest in Parent is
payable after the issuance of the interest, the Parent Board may restrict the
rights otherwise incident to the holding of such interest. IWCL may require
Parent to repurchase Class 1 Interests in an amount corresponding to any Class B
Common Stock repurchased by IWCL. Parent has agreed to pay or reimburse IWCL for
the payment of all expenses incurred by IWCL in connection with the Global
Ownership Program and to indemnify IWCL and its officers, directors and
employees against certain losses, claims, damages or liabilities.
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MANAGEMENT
PARENT AND IRIDIUM
The following table sets forth information concerning the executive
officers and directors of Parent and Iridium as of December 31, 1997. Pursuant
to the Iridium LLC Agreement, each officer and director of Parent holds the same
position within Iridium.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------------
<S> <C> <C>
Robert W. Kinzie(1)............... 63 Chairman
Edward F. Staiano................. 61 Vice Chairman and Chief Executive Officer
Mauro Sentinelli.................. 51 Executive Vice President -- Marketing and
Distribution
Leo Mondale....................... 38 Senior Vice President -- Strategic Planning and
Business Development
O. Bruce Dale..................... 55 Vice President -- Network Operations
Lauri J. Fitz-Pegado.............. 42 Vice President -- Global Gateway Relations
Mark Gercenstein.................. 46 Vice President -- Business Operations
Roy Grant......................... 40 Vice President -- Chief Financial Officer
Dale F. Hogg...................... 55 Vice President -- Human Resources
Francis Latapie................... 56 Vice President -- Government Affairs
Neal F. Meehan.................... 56 Vice President -- Aeronautics
Larry G. Rands.................... 57 Vice President -- Engineering
F. Thomas Tuttle.................. 55 Vice President, General Counsel and Secretary
Robert N. Beury, Jr............... 44 Assistant Secretary and Deputy General Counsel
Richard L. Lesher(2)(3)(4)........ 63 Vice Chairman and Independent Company Director
Aburizal Bakrie(4)................ 50 Director (designated by South Pacific Iridium
Holdings)
Hasan M. Binladin(4).............. 49 Director (designated by Iridium Middle East)
Ulf Bohla(1)(4)................... 53 Director (designated by Vebacom Holdings, Inc.)
Gordon J. Comerford(2)............ 60 Director (designated by Motorola)
Atilano de Oms Sobrinho(2)(4)..... 54 Director (designated by Iridium SudAmerica)
Robert A. Ferchat(4).............. 63 Director (designated by Iridium Canada)
Alberto Finol(1)(3)(4)............ 62 Director (designated by Iridium SudAmerica)
Edward Gams(1).................... 49 Director (designated by Motorola)
Kazuo Inamori(4).................. 65 Director (designated by Nippon Iridium)
S. H. Khan(4)..................... 59 Director (designated by Iridium India)
Anatoli I. Kiselev(4)............. 58 Director (designated by Khrunichev)
George S. Medawar(1)(3)(4)........ 64 Director (designated by Iridium Africa)
John F. Mitchell(3)............... 69 Director (designated by Motorola)
Jung L. Mok(3)(4)................. 48 Director (designated by SK Telecom)
Giuseppe Morganti(1)(2)(4)........ 65 Director (designated by Iridium Italia)
J. Michael Norris................. 51 Director (designated by Motorola)
Yusai Okuyama(2)(4)............... 66 Director (designated by Nippon Iridium)
John M. Scanlon................... 55 Director (designated by Motorola)
Theodore H. Schell(1)(4).......... 53 Director (designated by Sprint)
William A. Schreyer(2)(3)(4)...... 69 Independent Company Director
Sribhumi Sukhanetr(3)(4).......... 65 Director (designated by Thai Satellite)
Tao-Tsun Sun(2)(4)................ 47 Director (designated by Pacific Electric Wire &
Cable)
Yoshiharu Yasuda(1)(3)(4)......... 57 Director (designated by Nippon Iridium)
Wang Mei Yue(3)(4)................ 56 Director (designated by Iridium China)
</TABLE>
- ---------------
(1) Members of the Banking and Financing Committee
(2) Members of the Audit Committee
(3) Members of the Compensation Committee
(4) Members of the Related Party Contracts Committee
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CAPITAL
The following table sets forth information concerning the executive
officers and directors of Capital as of December 31, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Robert W. Kinzie..................... 64 Director
Edward F. Staiano.................... 61 Chairman of the Board and Chief Executive Officer
Roy Grant............................ 40 Chief Financial Officer
F. Thomas Tuttle..................... 55 Secretary
</TABLE>
Executive Officers of Parent, Iridium and Capital
Set forth below is information concerning each director and executive
officer of Parent and Iridium and, where indicated, Capital, including each
individual's principal occupation and employment. Unless otherwise indicated,
each executive officer holds office until a successor is duly elected and
qualified. The directors of Parent are designated by the members of Parent and
serve until a successor is designated. Pursuant to the Iridium LLC Agreement,
the directors and officers of Iridium are identical in all respects to the
directors and officers of Parent. There are no family relationships between any
officers and directors of Iridium.
Unless otherwise noted, each executive officer of Parent became an
executive officer of Iridium, in the same capacity, on December 18, 1997.
EDWARD F. STAIANO -- Vice Chairman and Chief Executive Officer since
January 2, 1997 and Director since October 1994. Chairman of the Board and Chief
Executive Officer of Capital since June 18, 1997. Dr. Staiano served Motorola 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.
MAURO SENTINELLI -- Executive Vice President -- Marketing and Distribution
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 the Mobile Service Department in 1988 and launched
the company's cellular service.
LEO MONDALE -- Senior Vice President -- Strategic Planning and Business
Development since January 1995. From July 1993 until January 1995, Mr. Mondale
served as Vice President, Government Affairs and Strategic Planning and from
January 1991 to July 1993 as Vice President -- International Relations of
Parent. From July 1, 1990 to January 31, 1992, he was Director of International
Relations for the Satellite Communications unit of Motorola. Before joining
Motorola, 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.
O. BRUCE DALE -- Vice President -- Network Operations 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.
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LAURI J. FITZ-PEGADO -- Vice President -- Global Gateway Relations 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.
MARK GERCENSTEIN -- Vice President -- Business Operations 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.
ROY GRANT -- Vice President -- Chief Financial Officer since April 30, 1997
and Vice President -- Treasurer from November 1996 to July 1997. Chief Financial
Officer of Capital since June 18, 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 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.
FRANCIS LATAPIE -- Vice President -- Government Affairs since October 1996.
From January 1996 until October 1996, Mr. Latapie served as Executive Director,
Government Affairs of Parent. Prior thereto, Mr. Latapie worked for Intelsat
since 1974 in various management positions. From 1968 to 1974, Mr. Latapie was
Scientific Attache in the United States, representing the French Government in
all matters dealing with space and telecommunications.
NEAL F. MEEHAN -- Vice President -- Aeronautics since April 1997. Prior
thereto, Mr. Meehan served as Executive Vice President of In-Flight Phone
Corporation ("IFPC") from April 1995 and as a consultant to IFPC from March 1992
to April 1995. Mr. Meehan was co-founder and Executive Director of Worldwide
Transportation Group, Inc. from 1991 to 1995. Mr. Meehan worked at Texas Air
Corporation from 1987 to 1990 as Senior Vice President of Customer Services. Mr.
Meehan also served as the founding President and Chief Executive Officer of
Continental Express, the regional airline subsidiary of Continental Airlines.
LARRY G. RANDS -- Vice President -- Engineering 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.
F. THOMAS TUTTLE -- Vice President, General Counsel and Secretary since
April 1996. Mr. Tuttle had been employed by Parent as Assistant Secretary since
January 1994 and as Deputy General Counsel since November 1993. Secretary of
Capital since June 18, 1997. Prior thereto, 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.
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ROBERT N. BEURY JR. -- Assistant Secretary and Deputy General Counsel since
April 1996 and Assistant Secretary since January 1995. Mr. Beury has been
employed by Parent as Counsel -- Corporate Matters since May 1994. Prior to
joining Iridium, he was General Counsel of the Virginia Center for Innovative
Technology from 1987 to 1994.
Directors of Iridium
ROBERT W. KINZIE -- Chairman of the Board since October 1991 and Chief
Executive Officer from October 1991 to January 1, 1997. Director of Iridium
Capital since June 18, 1997. Prior thereto, 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 -- Vice Chairman of the Board and Independent Company
Director since June 1997. Mr. Lesher was appointed Vice Chairman of the Board
and Independent Company Director upon consummation of the IWCL IPO. Mr. Lesher
has served as the President of the Chamber of Commerce of the United States, the
world's largest association of business organizations, since 1975.
ABURIZAL BAKRIE -- Director since July 1997; member of the Related Party
Contracts Committee. Since 1992 Mr. Bakrie has been Chairman of the Bakrie Group
of Companies, a diversified corporation engaged in manufacturing, fabrication,
telecommunications, mining, real estate, financial services, agri-business and
trading activities. Mr. Bakrie is the President of ASEAN Chamber of Commerce and
Industry and President of the Indonesian Chamber of Commerce and Industry. Mr.
Bakrie has served as a member of the People's Consultative Assembly of the
Republic of Indonesia since 1987.
HASAN M. BINLADIN -- Director since January 1996. During the past five
years, Mr. Binladin has served as Senior Vice President of the Saudi Binladin
Group.
ULF BOHLA -- Director since October 1994; member of the Banking and
Financing Committee and the Related Party Contracts Committee. 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 since 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.
GORDON J. COMERFORD -- Director since July 1993; Chairman of the Audit
Committee. Mr. Comerford is a member of the Board of Directors of Iridium
SudAmerica Corporation and Iridium Canada, Inc. Mr. Comerford has been a Senior
Vice President of Motorola since 1989. He joined Motorola's communications
sector in 1974 as a Director of Business Management and became a Corporate Vice
President in 1980.
ATILANO DE OMS SOBRINHO -- Director since June 1996; member of the Audit
Committee and the Related Party Contracts Committee. Mr. Oms is Chairman of the
Board, President and CEO of Inepar S.A., a diversified Brazilian corporation
with operations in telecommunications, electrical current control equipment and
services, mass transport, vehicle distribution and financial markets. Mr. Oms is
a member of the Board of Directors SudAmerica and Iridium Brasil. He also serves
on the Boards of the National Confederation of Industries (CNI), ABINEE-National
Association of Electro-Electronic Industries and the Federation of Industries of
Parana State.
ROBERT A. FERCHAT -- Director since January 1995; member of the Related
Party Contracts Committee. Mr. Ferchat has served as Chairman and Executive
Officer since May 1995 and as Chairman, President and Chief Executive Officer
from November 1994 to May 1995 at BCE Mobile
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Communications Inc. Prior thereto he served as Chairman, President and Chief
Executive Officer of TMI Communications, a satellite communications company,
from 1992 to 1994. He also served as President of Northern Telecom Canada Ltd.
from 1985 to 1990. Mr. Ferchat has also served as a director at BCE Mobile
Communications Inc. since 1994.
ALBERTO FINOL -- Director since July 1993; member of the Compensation
Committee, the Banking and Financing Committee, and the Related Party Contracts
Committee. 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 on the Venezuelan
Congress from 1969 to 1993.
EDWARD GAMS -- Director since July 1993; member of the Banking and
Financing Committee. Mr. Gams has served as Corporate Vice President and
Director of Investor Relations of Motorola since 1996 and Vice President and
Director of Investor Relations of Motorola since 1991. He was first employed by
Motorola in 1979, and has held a variety of positions in operational and
corporate finance, including service as Director of Corporate Financial Planning
from February 1991 to August 1991 and as manager of Corporate Financial Planning
from December 1989 to February 1991.
KAZUO INAMORI -- Director since July 1993; member of the Related Party
Contracts Committee. Dr. Inamori has been Chairman of the Board of DDI
Corporation since 1984, of Kansai Cellular Telephone Co., Ltd. since 1988, of
Taitoh Corporation since 1990, of Nippon Iridium Corporation since 1993, of DDI
Tokyo Pocket Telephone Inc. since 1994, of DDI Kansai Pocket Telephone Co., Ltd.
since 1994, Kyocera Multimedia Corporation since 1995 and at Kyocera DDI
Institute of Future Telecommunications Inc. since 1996. Dr. Inamori established
Kyocera Corporation in 1959 and has been Chairman of the Board since 1986.
S. H. KHAN -- Director since October 1994, member of the Related Party
Contracts Committee. Mr. Khan has served as Chairman and Managing Director of
the Industrial Development Bank of India since December 1993. Prior thereto,
from 1966, he served in various positions with the Industrial Development Bank
of India, including Managing Director from February 1992 to December 1993 and
Executive Director from 1986 to 1992. He also serves as Chairman of the Small
Industries Development Bank of India, Credit Analysis & Research Ltd., National
Securities Depository Ltd. and National Stock Exchange of India Ltd. He is also
Director on the Boards of Export-Import Bank of India, IDBI Bank Ltd., Life
Insurance Corporation of India, General Insurance Corporation of India, Discount
and Finance House of India Ltd., Deposit Insurance and Credit Guarantee
Corporation and Securities Trading Corporation of India Ltd., India Growth Fund
Inc., as a Trustee of Unit Trust of India ("UTI"), and as a Member of the
Advisory Board of UTI Mutual Fund and India Fund.
ANATOLI I. KISELEV -- Director since July 1993; member of the Related Party
Contracts Committee. Mr. Kiselev has served as General Director of the facility
that has produced the Salyut, Almaz and Mir space stations, the Proton rocket,
and other spacecraft since 1993. Mr. Kiselev has been employed by Khrunichev,
and its predecessor organizations since 1956, including as Khrunichev Enterprise
Director from 1975 to 1993.
GEORGE S. MEDAWAR -- Director since July 1993; member of the Compensation
Committee, the Related Party Contracts Committee and the Banking and Financing
Committee. Dr. Medawar has served as Group Senior Advisor to the Mawarid Holding
Company and Director of Mawarid Services (UK Limited) since 1987. He has also
been a board member of ACE (Insurance) Holding Inc. since 1978 and of Orbit
Communications Company Limited since 1993. He served as the Chairman of the
Board of Directors at Halston Borghese International from 1991 to 1994.
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JOHN F. MITCHELL -- Director since July 1993; Chairman of the Compensation
Committee since July 1993. Mr. Mitchell has served as Vice Chairman of the Board
of Motorola since 1988 and served as Officer of the Board from 1988 to 1995. He
was employed by Motorola from 1953 to 1995 and served as President from 1980 to
1986 and as Chief Operating Officer from 1986 to 1988.
JUNG L. MOK -- Director since October 1994; member of the Compensation
Committee and the Related Party Contracts Committee. Mr. Mok has served as a
director and as the Senior Executive Vice President of SK Telecom since 1994.
Prior thereto, Mr. Mok served as Senior Managing Director and Chief Operating
Officer of Taehan Telecom Limited from 1991 to 1994 and as Managing Director at
USA, Inc. since 1989.
GIUSEPPE MORGANTI -- Director since April 1996; member of the Banking and
Financing Committee, the Audit Committee and the Related Party Contracts
Committee. Since August 1996, Mr. Morganti has served as Chief Executive Officer
and Managing Director of Iridium Italia S.p.A. Mr. Morganti has been with STET
since 1984 in various management positions within the Planning and Strategic
Control Department, most recently as the head of the Telecommunications Services
Division.
J. MICHAEL NORRIS -- Director since July 1996; Mr. Norris is a Senior Vice
President of Motorola and has been with Motorola for 24 years. He is currently
the Senior Vice President and General Manager of the Network Management Group,
responsible for all Motorola cellular joint ventures and IRIDIUM gateway
operations worldwide. He also sits on the boards of Hutchinson Telephone Company
Ltd. (Hong Kong), World Telecom Holding Company, Ltd. (Thailand) and Pelephone
(Israel).
YUSAI OKUYAMA -- Director since July 1996; member of the Audit Committee
and Related Party Contracts Committee. Mr. Okuyama has been President of DDI
Corporation since 1993 and President of Nippon Iridium (Bermuda) Ltd. since
1995. Mr. Okuyama has been Chairman of the Board at seven of the DDI Pocket
Telephone Companies since 1994 and at five of the DDI Cellular Telephone
companies since 1995. Mr. Okuyama retired from MPT in 1989 as a deputy secretary
of MPT and served at MPT related enterprises as President before joining DDI
Corporation in 1993.
JOHN M. SCANLON -- Director since January 1997. Mr. Scanlon is Executive
Vice President of Motorola and President of Motorola's Cellular Networks & Space
Sector. Mr. Scanlon joined Motorola in August 1990. Prior to joining Motorola,
Mr. Scanlon spent 24 years with AT&T, rising to the position of Group Vice
President. Mr. Scanlon is also a director of Media.Com.
THEODORE H. SCHELL -- Director since July 1993; Chairman of the Banking and
Financing Committee and member of the Related Party Contract Committee. Mr.
Schell has served as Senior Vice President -- Strategic Planning and Corporate
Development at Sprint since 1990. Prior thereto, he served as President and
Chief Executive Officer of RealCom Communications Corporation, an IBM
subsidiary.
WILLIAM A. SCHREYER -- Independent Company Director. Mr. Schreyer was
appointed Independent Company Director, upon consummation of the IWCL IPO in
June 1997. Mr. Schreyer is Chairman Emeritus of Merrill Lynch & Co., Inc. and
has 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, True North
Communications Inc., Schering-Plough Corporation and Willis Corroon Group.
SRIBHUMI SUKHANETR -- Director since July 1993; member of the Compensation
Committee, the Banking and Financing Committee and the Related Party Contracts
Committee. Since 1992, Mr. Sukhanetr has been the Chairman of United
Communication Industry Co., Ltd. ("UCOM") and of Thai Satellite
Telecommunications Co., Ltd., a subsidiary of UCOM. Prior thereto, he served as
advisor to the Prime Minister's Office in Thailand from February 1991 to
September 1992 and as Permanent Secretary to the Ministry of Transport and
Communications from 1988 to February 1991.
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<PAGE> 119
TAO-TSUN SUN -- Director since January 1994; member of the Audit Committee
and the Related Party Contracts Committee. Mr. Sun has been Executive Director
and President of Pacific Electric Wire & Cable Co., Ltd. since 1986. Since 1996,
he has served as Executive Director of Taiwan Electric Wire & Cable Ind. Assoc.
and of Chinese National Federation of Industries, and as Honorary Chairman of
the Council for Industry and Commercial Development. He has also served as
Chairman of Taiwan Aerospace Corporation since 1994, Executive Director of
Walsin Lihwa Corp. and Executive Vice Chairman of Charoong Thai Wire & Cable
Co., Ltd. since 1993 and Director of Pacific Construction Co., Ltd. since 1995.
YOSHIHARU YASUDA -- Director since January 1996; member of the Banking and
Financing Committee, the Compensation Committee and the Related Party Contracts
Committee. Mr. Yasuda has been Vice President of Nippon Iridium 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.
WANG MEI YUE -- Director since October 1995; member of the Compensation
Committee and the Related Party Contracts Committee. Dr. Wang has served as
Chairman and President of Iridium China (Hong Kong) Ltd. since September 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. From 1988 to 1993 Dr. Wang served as Vice Chairman of the Board at
Conic Investment Co. Ltd.
Executive Compensation
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 Parent and Iridium and the four next most highly
compensated executive officers of Parent and Iridium.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A)(B) COMPENSATION OPTIONS/SARS PAYOUT COMPENSATION
- ------------------------------ ----- --------- ------------ ------------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward F. Staiano............. 1997 $ 500,000 -- $187,827(c) 750,000 -- $ 4,750(d)
Vice Chairman and Chief
Executive Officer
Robert W. Kinzie.............. 1997 $ 368,424 -- -- 90,000 -- $ 8,462(e)
Chairman & Former Chief 1996 $ 372,194 $117,669 -- 90,000 -- $ 7,819
Executive Officer
Mauro Sentinelli.............. 1997 $ 208,333 -- -- 75,000 -- $ 24,803(f)
Executive Vice President --
Marketing & Distribution
Leo Mondale................... 1997 $ 262,504 -- -- 67,500 -- $ 4,750(d)
Senior Vice President -- 1996 $ 220,561 $100,000 -- 45,000 -- $ 4,500
Strategic Planning &
Business Development
Mark Gercenstein.............. 1997 $ 210,613 -- -- 0 -- $ 4,750(d)
Vice President -- Business 1996 $ 201,692 $ 62,909 -- 45,000 -- $ 4,500
Operations
</TABLE>
- ---------------
(a) Bonuses earned for fiscal year 1997 have not yet been determined by the
Compensation Committee.
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<PAGE> 120
(b) Through the fiscal year ending December 31, 1995 Parent maintained the
Iridium Long Range Incentive Plan of 1993 (the "Plan"). The Plan was
terminated as of December 31, 1995. Final awards for performance in Fiscal
Year 1995 were determined by the Compensation Committee of the Parent Board
in April 1996. The Iridium Option Plan (described elsewhere) was at that
time substituted for the Plan. Under the Long Range 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 is
terminated for any reason other than death, disability, retirement or a
change from full-time to part-time employment.
(c) This amount includes amounts paid to Mr. Staiano for airplane expenses
($53,663) and a salary gross-up to cover taxes incurred ($87,880).
(d) Parent matching contributions to 401(k) plan.
(e) This amount includes the value of term life insurance provided to Mr. Kinzie
($3,712) and Parent's matching contribution to 401(k) plan ($4,750).
(f) This amount includes relocation expenses paid for Mr. Sentinelli ($20,053)
and Parent's matching contribution to 401(k) plan ($4,750).
On January 2, 1997, Edward F. Staiano became Chief Executive Officer of
Parent and Vice Chairman of the Parent Board. Pursuant to the terms of his
employment agreement, Dr. Staiano will receive a base salary of $500,000 per
year. In addition to base salary, Parent 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. Parent 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 Class A Common Stock of Iridium at
a price of $13.33 per share. The options vest, pro rata, over a period of five
years. Vested options may be exercised at any time after a public offering. Dr.
Staiano's options will continue to vest even if his employment is terminated by
Iridium, other than for cause, so long as he is not retained or employed by a
competitor. Dr. Staiano does not receive an annual bonus or participate in
Parent's retirement plans.
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<PAGE> 121
Option Grants
The following table sets forth the options granted for the fiscal year
ended December 31, 1997 for each named executive officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS/SARS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS/ EMPLOYEES OF OPTION TERM(A)
SARS IN FISCAL BASE PRICE EXPIRATION ----------------------------
NAME GRANTED YEAR ($/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 the named executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED
ON OPTIONS VALUE DATE OF MONTHS
NAME YEAR EXERCISE GRANTED REALIZED OPTION HELD
- ----------------------------------- ---- -------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Edward F. Staiano.................. 1997 -- 750,000 -- 1/13/97 11
Robert W. Kinzie................... 1997 -- 90,000 -- 4/15/97 8
Mauro Sentinelli................... 1997 -- 75,000 -- 8/1/97 5
Leo Mondale........................ 1997 -- 67,500 -- 4/15/97 8
Mark Gercenstein................... 1997 -- 0 -- 1/1/96 23
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS/SAR
AT FISCAL YEAR-END(A) AT FISCAL YEAR-END(B)
-------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Edward F. Staiano.................. 137,500 612,500 $ 5,018,750 $22,356,250
Robert W. Kinzie................... 46,500 133,500 1,697,250 4,872,750
Mauro Sentinelli................... 5,000 70,000 182,500 2,555,000
Leo Mondale........................ 26,250 86,250 958,125 3,148,125
Mark Gercenstein................... 17,250 27,750 629,625 1,012,875
</TABLE>
- ---------------
(a) These figures include Options granted before fiscal year 1997.
(b) The closing price of Company Stock on the last day of the fiscal year was
$36.50 per share.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Parent Board and the Iridium Board
determines the compensation of the executive officers of Parent and Iridium
consistent with guidelines established by the Parent Board and the Iridium
Board. The members of the Compensation Committee for the fiscal year ending
December 31, 1997 were Alberto Finol, Richard L. Lesher, George S. Medawar, John
F. Mitchell, Jung L. Mok, Sribhumi Sukhanetr, Wang Mei Yue and Yoshiharu Yasuda.
The Compensation Committee was chaired by Mr. Mitchell, formerly an executive
officer of Motorola, who continues to serve as Vice Chairman of the Board of
Directors of Motorola. Mr. Finol serves as the Deputy Chairman of IWCL.
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<PAGE> 122
Pension Plan
<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 $ 73,929 $ 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>
Parent maintains the Parent 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
Parent 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, Parent 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. Staiano has one year of credited
service; 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.
Parent 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 by Iridium from an
insurance company sufficient to make the payments required. Parent 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 Parent pays the income taxes arising
from the payment of the lump sum.
Employment Arrangements
On January 2, 1997, Edward F. Staiano became Chief Executive Officer and
Vice Chairman of the Parent Board. Pursuant to the terms of his employment
agreement, Dr. Staiano will receive a base salary of $500,000 per year. In
addition to base salary, Parent 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. Parent 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 Class 1 Interests of Iridium at a price of
$13.33 per Interest. The options vest, pro rata, over a period of five
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<PAGE> 123
years. Vested options may be exercised at any time after a public offering.
Generally, Dr. Staiano's options are subject to all of the provisions of the
Parent Option Plan (described elsewhere) except that Dr. Staiano's options will
continue to vest even if his employment is terminated by Parent, 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 Parent's pension plans.
Option Plan
Parent has established a plan under which executive officers and managers
of Parent are awarded options to purchase Class A Common Stock (the "Option
Plan"). The Option Plan covers 2,625,000 shares of Class A Common Stock. The
Option Plan also permits the award of stock appreciation rights in connection
with any grant of options. As of the date of this Prospectus, options covering
2,003,187 shares of Class A Common Stock had been granted at an exercise price
of $13.33 per share of Class A Common Stock. As of that date no stock
appreciation awards had been granted. This amount of outstanding options
includes the options issued to Dr. Staiano when he joined Iridium. If an award
under the Option Plan expires, or is terminated, surrendered or canceled, the
shares of Class A Common Stock subject to such award are added to the number of
shares of Class A Common Stock available for awards under the Option Plan.
Under the Option Plan, option awards are made from time to time by the
Compensation Committee of the Iridium Board. The exercise price of options under
the Option Plan is the fair market value of a share of Class A Common Stock
Interest on the date the option is granted.
The right to exercise the options vests, pro rata, over a period of five
years, however, all options and stock appreciation rights become immediately
vested on a Change in Control (as defined in the Option Plan) and in the event
of a Change in Control, Iridium 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
Class A Common Stock immediately prior to payment or (y) the highest price
actually paid in connection with the Change in Control, and (iii) the exercise
price. A "Change in Control" is defined in the Option Plan as a sale by one or
more holders of 50% or more of the outstanding Class 1 Interests, other than in
connection with a Public Offering (as defined), to third parties who are not
holders of Class 1 Interests or affiliated with holders of Class 1 Interests and
following which the members of the Parent prior to the sale cease to constitute
a majority of the Parent Board.
The plan was established in April 1996. Except for Dr. Staiano, under the
Option Plan, a participant whose employment is terminated by Parent 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 Parent, other than for cause, so long as he is not retained or
employed by a competitor.
IWCL has agreed that upon the exercise of any options, it will issue to
Parent, for delivery to an exercising option holder, the number of shares of
Class A Common Stock covered by the exercised options and Parent has agreed to
simultaneously deliver to IWCL a like number of Class 1 Interests, subject to
anti-dilution adjustments. The exercise price of the option will be paid to
Parent and will represent payment for the Class A Common Stock by the exercising
option holder and for the Class 1 Interests by IWCL. See "Certain Matters
Regarding Relationship Among IWCL, Parent and Iridium -- Share Issuance
Agreement."
THE INITIAL GUARANTORS
Each of the Initial Guarantors is a Delaware limited liability company, of
which Iridium is the only member. Pursuant to the limited liability company
agreement relating to each Initial Guarantor, the power and authority to manage
and conduct the business and affairs of such company is vested in Iridium,
acting through certain of the officers and directors of Iridium listed above.
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<PAGE> 124
INTEREST OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT IN PARENT
Iridium is a wholly owned subsidiary of Parent. The following table sets
forth certain information regarding beneficial ownership of Parent's Class 1
Interests as of December 31, 1997 (i) by each person known by Parent to own
beneficially more than five percent of its Class 1 Interests and (ii) by all of
Iridium's executive officers and directors of Parent and Iridium (named in the
table under "Management" above) as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(1)
----------------------------------------- -------------------------- -------------------
<S> <C> <C>
Motorola, Inc.(2)........................ 39,888,428 27.40%
1303 East Algonquin Rd.
Schaumburg, IL 60196
Nippon Iridium (Bermuda) Limited(3)...... 15,750,000 11.15
c/o NIPPON IRIDIUM CORPORATION
Ichibancho FS Building 8
Ichibancho Chiyoda-ku
Tokyo 102 Japan
Vebacom Holdings, Inc.(4)................ 12,427,875 8.80
c/o o.tel.o communications GmbH & Co.
Am Bonneshof 35
D-40474 Dusseldorf Germany
All Directors and Executive Officers as a
Group(5)............................... 0 0
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power with respect to the
Class 1 Interests. Class 1 Interests subject to options or warrants
currently exercisable or exercisable within 60 days of the date of this
Prospectus are deemed outstanding for computing the percentage ownership of
the person holding such options or warrants, but are not deemed outstanding
for computing the percentage of any other person.
(2) The Class 1 Interests beneficially owned by Motorola include 25,033,425
Class 1 Interests held directly by Motorola and 4,355,003 Class 1 Interests
issuable under a warrant to purchase Series M Class 2 Interests in Iridium
which would be convertible into Class 1 Interests equal to 2.5% of the fully
diluted number of Class 1 Interests outstanding at the time of exercise. The
remaining Class 1 Interests shown in the table as being beneficially owned
by Motorola consists of 5,250,000 Class 1 Interests held by Iridium Canada
(33.3% of which is owned by a subsidiary of Motorola) and 5,250,000 Class 1
Interests held by Iridium India Telecom (20% of which is owned by a
subsidiary of Motorola). Although Motorola does not have the right to vote
or dispose of the Class 1 Interests held by these companies, it may be
deemed to beneficially own these interests because these companies cannot
dispose of their Class 1 Interests without the consent of the applicable
Motorola subsidiary. The beneficial ownership of Motorola does not include
Class 1 Interests issuable under warrants to which Motorola will become
entitled after the date of this Prospectus as a result of its guarantee of
borrowings by Iridium or Class 1 Interests that may be issued pursuant to
the Reserve Capital Call.
(3) Nippon Iridium (Bermuda) Limited is a wholly owned subsidiary of Nippon
Iridium Corporation, which is a consortium formed by DDI Corporation.
(4) Vebacom Holdings, Inc. is a wholly owned subsidiary of o.tel.o
communications GmbH & Co., which is owned by VEBA Telecom GmbH and Lehman
Brothers Bankhaus Aktiengesellschaft (as a fiduciary).
(5) No directors or executive officers of Parent own Class 1 Interests. As of
December 31, 1997, the IWCL directors and the executive officers of Parent
owned an aggregate of 253,894 shares of Class A Common Stock and IWCL owned
253,894 Class 1 Interests in respect of such Class A Common Stock. Up to
2,625,000 shares of Class A Common Stock may be issued pursuant to the
Option Plan. As of the date of this Prospectus, options covering an
aggregate of 2,003,187 shares of Class A Common Stock had been granted under
the Option Plan. Options to purchase 298,451 shares of Class A Common Stock
were vested at December 31, 1997. See "Management -- Option Plan."
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<PAGE> 125
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF IRIDIUM
MOTOROLA RELATED MATTERS
Motorola is one of the world's leading providers of electronic equipment,
systems, components and services. Its products include two-way radios, pagers,
cellular telephones and systems, semiconductors, defense and aerospace
electronics, automotive and industrial electronics and data communications and
information processing equipment.
Motorola created and developed the concept of the IRIDIUM System and
Iridium's initial technical and business plans. Motorola is a founding investor,
has been allocated gateway service territories, shares a gateway service
territory and has additional interests in other entities which have been
allocated gateway service territories. Motorola is Parent's largest member,
owning directly and indirectly approximately 18% of the Class 1 Interests in
Iridium. The directors and officers of Parent and Iridium include numerous
current and former Motorola employees. Motorola is also Iridium's principal
supplier through the Space System Contract, the Operations and Maintenance
Contract and the Terrestrial Network Development Contract. See "Principal
Contracts for the Development of the IRIDIUM System."
Under a Support Agreement, Motorola provides certain general and
administrative support to Iridium. On a cost reimbursable basis, Motorola has
provided payroll processing and related benefits to Iridium employees, processed
payment to certain contractors providing support to Iridium and has provided
other administrative support. The amount of the services provided by Motorola
has declined as Iridium's internal staff has increased. In 1996, total payments
to Motorola under the Support Agreement were approximately $852,000.
Motorola MOU and Agreement Regarding Guarantee
Motorola initially guaranteed up to $750 million of Parent's borrowings
(including principal and interest) under the Guaranteed Bank Facility pursuant
to the Motorola Guarantee. In connection with the execution and delivery of the
Motorola Guarantee, Motorola and Parent entered into an Agreement Regarding
Guarantee (the "Original Agreement Regarding Guarantee"), under which (among
other things) Parent agreed (i) to reimburse Motorola for any payment required
pursuant to the Motorola Guarantee, (ii) not to take certain actions without
Motorola's approval and (iii) to pay to Motorola, as compensation for the
Motorola Guarantee, warrants to purchase Class 1 Interests. In addition,
pursuant to the Original Agreement Regarding Guarantee, Motorola was granted the
right to appoint an additional Director on the Parent Board and as security for
Iridium's reimbursement obligation under the Original Agreement Regarding
Guarantee, Parent granted to Motorola a security interest in substantially all
of its assets.
In connection with the offering of the Initial Senior Notes, Parent and
Motorola entered into a Memorandum of Understanding ("Motorola MOU") and amended
and restated the Original Agreement Regarding Guarantee (as so amended and
restated, the "Agreement Regarding Guarantee"). Pursuant to the Motorola MOU,
(i) Motorola agreed to consent to an amendment of the Guaranteed Bank Facility
(and to enter into related amendments to the Motorola Guarantee) in order to
extend the maturity of such Facility until after the Stated Maturity of the
Initial Senior Notes (which is the same date as the Stated Maturity of the
Notes); (ii) Motorola agreed to consent to an amendment to the Guaranteed Bank
Facility (or to entry into a new bank credit facility on the same terms) in
order to increase such Facility by (or to establish such new facility in the
amount of) $350 million -- the amount of the Motorola Additional
Guarantee -- and to document the Motorola Additional Guarantee; (iii) Parent
agreed that, to the extent the net proceeds to Iridium of senior note offerings
prior to December 31, 1997 exceed $650 million, it would apply such excess to a
prepayment of the Guaranteed Bank Facility and to a permanent reduction of the
commitments of the lenders thereunder (provided that such commitments need not
be reduced to an amount less than $275 million) (as a result, the commitment
under the Guaranteed Bank Facility was reduced
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<PAGE> 126
from $750 million to $655 million with the net proceeds of the Initial Senior
Notes offering; for the purposes of the Original Offering only, Motorola waived
this requirement upon Iridium's permanent reduction of the Guaranteed Bank
Facility and the corresponding Motorola Guarantee by $205 million (to $450
million)); (iv) Motorola agreed to release its security interest in Parent's
assets granted pursuant to the Original Agreement Regarding Guarantee; (v)
Parent agreed to repay all amounts outstanding under the Guaranteed Bank
Facility and to terminate the commitments of the lenders thereunder prior to or
simultaneous with any optional redemption of the Initial Senior Notes or the
Notes; (vi) Motorola agreed to subordinate certain of its claims to the claims
of the lenders under the Secured Bank Facility; (vii) Motorola agreed to allow
Iridium to defer, at Iridium's option, payment of approximately $96 million
expected to be due to Motorola on September 30, 1998 and thereafter pursuant to
the Terrestrial Network Development Contract until after the Stated Maturity of
the Initial Senior Notes (which is the same date as the Stated Maturity of the
Notes), with the amount deferred being compensated as part of the Motorola
Exposure (the amount of the deferral pursuant to the Motorola MOU (to the extent
exceeding amounts deferrable pursuant to the Terrestrial Network Development
Contract), including accrued interest thereon, the "FOC Payment Deferral"); and
(viii) during certain periods in which the Motorola Exposure (as defined below)
is less than $275 million and Motorola has not been required to make payments on
its guarantee of the Guaranteed Bank Facility, Motorola will waive certain
rights it holds in connection with the Series B and Series C Class 2 Interests
of Iridium (see "Description of Iridium LLC Limited Liability Company
Agreement"). In addition, in the Motorola MOU Parent agreed that, in certain
circumstances, it will not have outstanding at any time until the maturity of
the Guaranteed Bank Facility (as extended as discussed above) (i) in excess of
$1.7 billion in aggregate principal amount of borrowed money indebtedness that
is secured by assets of Parent; (ii) in excess of $1.25 billion in aggregate
principal amount (or initial gross proceeds in the case of any senior notes
issued at a discount) of senior notes (including the Initial Senior Notes and
the Notes), and (iii) total indebtedness for borrowed money (which shall consist
solely of amounts described in clauses (i) and (ii) above) in excess of $2.95
billion. Certain of the agreements of Motorola and Iridium in the Motorola MOU
are subject to conditions, including the consistency of definitive documents
with the Motorola MOU and the Agreement Regarding Guarantee. Motorola's
agreement to provide the Motorola Additional Guarantee is subject to the
condition that the Parent LLC Agreement be amended to provide Motorola with
additional governance rights if the Motorola Exposure exceeds $750 million. The
obligations of Parent under the Motorola MOU were transferred to Iridium
pursuant to the Asset Drop-Down Transaction.
Under the Agreement Regarding Guarantee (and after giving effect to the
transfer of obligations under the Asset Drop-Down Transaction), (i) Iridium is
obligated to reimburse Motorola for any payment required pursuant to the
Motorola Guarantee or the Motorola Additional Guarantee; provided, that if the
Guaranteed Bank Facility is accelerated as result of a Motorola-Based Default
(as defined in the Agreement Regarding Guarantee) such reimbursement will be
made on the same terms as provided in the Guaranteed Bank Facility or any other
relevant credit agreement; (ii) Iridium shall not, except in situations in which
the Motorola Exposure is $275 million or less and certain other conditions are
satisfied, take certain actions without Motorola's approval; and (iii) Parent
must pay to Motorola, as compensation for the Motorola Exposure, warrants to
purchase Class 1 Interests based on the amount and duration of the Motorola
Exposure. In the event the Motorola Exposure is $275 million or less and certain
other conditions are satisfied, then in lieu of such warrants to purchase Class
1 Interests, Iridium may pay to Motorola, as compensation for the Motorola
Exposure, (i) interest thereon at an interest rate equal to the excess of the
rate borne by the Initial Senior Notes over the rate applicable under the
Guaranteed Bank Facility or any other relevant credit agreement, and (ii) for
each day, the average daily warrant compensation payable to holders of senior
notes of Iridium multiplied by the Motorola Exposure (pro rata based on the
amount and duration of the Motorola Exposure compared with the amount and
duration of such senior notes).
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"Motorola Exposure" means the commitments of the lenders under the
Guaranteed Bank Facility, the payments made by Motorola pursuant to the Motorola
Guarantee or the Motorola Additional Guarantee (to the extent not repaid by
Iridium) and the Vendor Financing Amount. "Vendor Financing Amount" means the
amount of the FOC Payment Deferral (if such deferral is exercised) and any other
vendor financing provided by Motorola to or for the benefit of Iridium, other
than any vendor financing or payment deferral under the Terrestrial Network
Development Contract as in effect on the date of the Agreement Regarding
Guarantee.
Motorola Conflicts of Interest
Motorola has and may have various conflicts of interest with Iridium and
with other members of Iridium LLC. See "Risk Factors -- Conflicts of Interest
with Motorola." Motorola is the principal supplier to Iridium as well as the
actual or prospective supplier and licensor to gateway owners and operators,
service providers, subscriber equipment manufacturers and individual
subscribers. See "Risk Factors -- Reliance on Motorola, Gateway Owners and Other
Third Parties." Motorola has asserted and may assert positions on the Space
System Contract, Operations and Maintenance Contract, the Terrestrial Network
Development Contract and the Guarantee Agreement that are contrary to those
asserted by Iridium. See "Principal Contracts for the Development of the IRIDIUM
System" and "Risk Factors -- Satellite Launch Risks." To help ameliorate these
conflicts under the Space System Contract, the Operations and Maintenance
Contract and the Terrestrial Network Development Contract, Iridium maintains a
Related Party Contracts Committee of the Iridium Board which consists of all
Board members other than any Board members who are directors, officers,
employees or persons nominated to serve on the Board of Directors by Motorola
(so long as Motorola is a party to the Space System Contract, the Operations and
Maintenance Contract or the Terrestrial Network Development Contract), Lockheed
Martin or Raytheon (so long as Lockheed Martin or Raytheon, as the case may be,
are subcontractors to Motorola under the Space System Contract or the Operations
and Maintenance Contract). The Related Party Contracts Committee has authority
to review and monitor the Space System Contract, the Operations and Maintenance
Contract and the Terrestrial Network Development Contract and, as it deems
appropriate, cause Iridium to enforce its rights thereunder and propose
amendments and waivers to these contracts. Iridium's payment obligations under
these contracts comprised most of Iridium's expenses and a portion of the
proceeds of the Original Offering have been or will be used primarily to make
milestone payments under the Space System Contract and the Terrestrial Network
Development Contract. See "Risk Factors -- Conflicts of Interest with Motorola"
and "Use of Proceeds."
Motorola has been involved in the manufacture of components for satellites
for over thirty years. Motorola has informed Iridium that it has under
consideration possible future space-based data and communications systems and
ventures. Motorola has also informed Iridium that Motorola may decide to
undertake further development of one or more such systems or ventures but no
decision has been made as to whether Iridium would be a participant in any such
system or venture. It is possible that any such system could be competitive to
some degree with the IRIDIUM System. Motorola has agreed in the Space System
Contract that, without Iridium's consent, it will not produce for itself or
others a similar satellite-based space system of a global communication system
for commercial use prior to the earlier of July 31, 2003 or the termination date
of the Space System Contract. Subsidiaries of Motorola have applied to the FCC
for licenses to construct, launch and operate satellite-based systems designed
to provide fixed-broadband, fixed-data transmissions.
OTHER MATTERS
Iridium Services Deutschland, a wholly owned subsidiary of o.tel.o
communications GmbH & Co., the parent of Vebacom Holdings, Inc., a holder of
approximately 8.8% of the Class 1 Interests, was allocated a gateway service
territory consisting of several countries in or near Europe. Nippon Iridium
Corporation, an affiliate of Nippon Iridium (Bermuda) Corporation, a holder of
approximately 11.2% of the Class 1 Interests, was allocated the Japan gateway
service territory.
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Each of o.tel.o communications GmbH & Co. and Nippon Iridium Corporation have
entered into a Gateway Authorization Agreement, 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 Corporation will serve as service providers to their respective gateway
territory and, as such, will be entitled to payments associated with sales of
IRIDIUM Services.
Kyocera, an affiliate of Nippon Iridium Corporation, a holder of
approximately 11.2% of the Class 1 Interests, has entered into a license
agreement with Motorola with respect to the development and manufacture of
multi-mode phones for use with the IRIDIUM System. This license agreement does
not obligate Kyocera to develop, manufacture or sell any IRIDIUM subscriber
equipment. Iridium expects that Kyocera will develop, manufacture and sell
multi-mode phones for use with the IRIDIUM System. Iridium intends to enter into
a contract with Motorola to cover the expenses associated with testing the
Kyocera subscriber equipment with the IRIDIUM System, estimated to be $12.2
million.
Certain of the directors of IWCL are, or have been within the past year,
executive officers of suppliers of Iridium. In addition, certain of the
directors of Iridium are executive officers of gateway owners and service
providers. See "Management" and "Risk Factors -- Conflict of Interest with
Gateway Owners."
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PARENT'S INVESTORS, NUMBER OF CLASS 1 INTERESTS OWNED,
PERCENTAGE OWNERSHIP AND PRINCIPAL GATEWAY SERVICE TERRITORIES
Iridium is a wholly owned subsidiary of Parent. Set forth below is a
summary of the investors in Parent, the number of Class 1 Interests owned by
each investor, their percentage ownership of Class 1 Interests and, if
applicable, their principal gateway service territories at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF
CLASS 1
INTERESTS PERCENTAGE PRINCIPAL GATEWAY
INVESTOR OWNED(1) OWNERSHIP(2) SERVICE TERRITORY
- -------------------------------- ---------- ------------ --------------------------------
<S> <C> <C> <C>
IWCL............................ 12,000,000 8.50 Not Applicable
Iridium Africa Corporation...... 4,500,000 3.19 Africa (excluding Morocco and
Egypt) and Turkey
Iridium Andes -- Caribe......... 4,350,000 3.08 South America and Caribbean(4)
Iridium Brasil Ltda............. 2,824,755 2.00 South America and Caribbean(4)
Iridium Canada, Inc............. 5,250,000(5) 3.72 North America(3)
Iridium China (Hong Kong)
Ltd. ......................... 5,250,000 3.72 China, Mongolia, Hong Kong and
Macau
Iridium India Telecom Limited... 5,250,000 3.72 Indian Subcontinent
Iridium Italia S.p.A............ 5,550,000 3.93 Certain countries in Europe
including Belgium, Denmark,
France, Greece, Italy,
Luxembourg, the Netherlands
and Switzerland(4)
Iridium Middle East
Corporation................... 6,000,000 4.25 Middle East, Morocco, Egypt and
Central Asia
Khrunichev State Research and
Production Center............. 6,133,125 4.34 Russia and eight other republics
of the Commonwealth of
Independent States
Motorola, Inc................... 25,033,425(5) 17.73 North America(3), Mexico(6) and
Central America, South America
and Caribbean(4)
Nippon Iridium (Bermuda)
Limited....................... 15,750,000 11.15 Japan
Pacific Electric Wire & Cable
Co., Ltd...................... 5,250,000 3.72 Indonesia, Brunei, Papua New
Guinea, the Philippines and
Taiwan
SK Telecom...................... 5,250,000(5) 3.72 North Korea and South Korea
South Pacific Iridium
Holdings(7)................... 7,500,000 5.31 Certain countries in the South
Pacific region including
Australia and New Zealand
Sprint Iridium, Inc. ........... 5,250,000 3.72 North America(3)
Thai Satellite
Telecommunications Co.,
Ltd........................... 5,250,000 3.72 Southeast Asia
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF
CLASS 1
INTERESTS PERCENTAGE PRINCIPAL GATEWAY
INVESTOR OWNED(1) OWNERSHIP(2) SERVICE TERRITORY
- -------------------------------- ---------- ------------ --------------------------------
<S> <C> <C> <C>
Vebacom Holdings, Inc........... 12,427,875 8.80 Certain countries in or near
Europe including Austria,
Bulgaria, the Czech Republic,
Finland, Germany, Hungary,
Ireland, Israel, Norway,
Poland, Portugal, Romania,
Spain, Sweden, Slovakia,
Ukraine and the United Kingdom
Lockheed Martin Corporation..... 1,500,000 1.06 Not Applicable
Raytheon Company................ 900,000 0.64 Not Applicable
</TABLE>
- ---------------
(1) Represents each investor's direct holdings of outstanding Class 1 Interests,
excluding Class 1 Interests issuable upon exercise of outstanding options,
warrants (including the LLC Interest Warrants) and conversion of outstanding
convertible securities.
(2) The percentages do not give effect to any Class 1 Interests that IWCL may
have acquired or will acquire as a result of the application of the proceeds
from the sale of shares of IWCL's non-voting Class B Common Stock, par value
$.01 per share (the "Class B Common Stock") pursuant to the Global Ownership
Program. See "Certain Matters Regarding Relationship Among IWCL, Parent and
Iridium -- Global Ownership Program."
(3) The North American gateway service territory, principally consisting of the
United States and Canada, is shared by Iridium Canada, Motorola and Sprint.
(4) The South America and Caribbean gateway service territory is owned and will
be operated by Iridium SudAmerica. Iridium SudAmerica is owned by Iridium
Brasil, Iridium Andes-Caribe, Motorola International Development
Corporation, a wholly owned subsidiary of Motorola, and Iridium Italia.
(5) As of December 31, 1997, SK Telecom and Sprint Iridium, Inc. each owned
14,894 Series A Class 2 Interests in addition to the Class 1 Interest set
forth above. Similarly, Motorola, Inc. also owns 1 Series B Class 2 Interest
and 75 Series C Class 2 Interests. BCE Mobile Communications, Inc., an
affiliate of Iridium Canada, Inc., owns 10,119 Series Class 2 Interests.
(6) It is anticipated that the Mexican gateway service territory initially will
be served by the North American gateway equipment.
(7) The investment by South Pacific Iridium Holdings is comprised of an
investment by South Pacific Iridium Holdings Limited and an investment by
South Pacific Iridium Holdings II Limited, each in 3,750,000 Class 1
Interests. The South Pacific gateway service territory was allocated to
South Pacific Iridium Holdings Limited.
IWCL was incorporated by Iridium on December 12, 1996. Its only asset is
its interest in Iridium and its only activity is participating in the management
of Iridium. See "Certain Matters Regarding Relationship Among IWCL, Parent and
Iridium."
IRIDIUM AFRICA CORPORATION was formed by Mawarid Overseas Company Limited
to invest in Iridium. Mawarid Overseas Company Limited is related to the Mawarid
Group, one of the largest industrial groups in Saudi Arabia, with operations in
satellite broadcasting, financial services, trading, manufacturing,
construction, telecommunications, and municipal and health care services.
Iridium Africa Corporation has been allocated a gateway service territory
consisting of over 50 countries located primarily in or near Africa (excluding
Morocco and Egypt) and Turkey.
IRIDIUM CANADA, INC. is a corporation owned one-third by a Motorola
subsidiary and one-third each by two subsidiaries of BCE, Inc. -- BCE Mobile
Communications, Inc. and Bell Canada International, Inc. BCE, Inc. is Canada's
largest telecommunications company. BCE Mobile provides a variety of wireless
telecommunications services to the Canadian market, including cellular, paging,
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data and air-to-ground communications services. Iridium Canada, Inc., Motorola
and Sprint Corporation share the North American gateway service territory,
consisting of Canada, St. Pierre and Miquelon, Bermuda, Puerto Rico and the
United States.
IRIDIUM CHINA (HONG KONG) LTD. is a wholly owned subsidiary of China
Aerospace, a major diversified industrial group based in China which is also the
parent company of China Great Wall Industries Corporation, the previous owner of
all Iridium China equity interests in Iridium. China Great Wall is a
subcontractor to Motorola to launch IRIDIUM satellites on its Long March 2C
rocket. Iridium China has been allocated a gateway service territory consisting
of China, Mongolia, Hong Kong and Macau.
IRIDIUM INDIA TELECOM LIMITED is a consortium of Indian financial
institutions that invested in Iridium initially through Infrastructure Leasing &
Financial Services Limited ("IL&FS"). The consortium includes: The Industrial
Development Bank of India, IL&FS, Exim Bank of India, State Bank of India, The
Industrial Credit and Investment Corporation of India Limited, General Insurance
Corporation of India, Housing Development Finance Corporation Limited, IL&FS
Venture Fund, Life Insurance Corporation of India, SCICI Ltd. and Unit Trust of
India. A wholly owned subsidiary of Motorola, Inc. is also a member of the
consortium. Iridium India Telecom Ltd. has been allocated a gateway service
territory consisting of India, Bangladesh, Bhutan, Nepal, Sri Lanka and
Maldives.
IRIDIUM ITALIA S.P.A. is an affiliate of STET -- Societa Finanziaria
Telefonica per Azioni ("STET"). STET is the holding company of an integrated
telecommunication group and is one of the largest corporations in Italy. Its
largest subsidiary, Telecom Italia, is the principal provider of voice and data
telecommunications services in Italy and is the world's fifth largest telecom
operator by number of subscribers. STET (or affiliated companies) is providing
engineering support services to Motorola as part of the procurement and
operation of the IRIDIUM System. Motorola has entered into several agreements
with an affiliate of STET, Telespazio, for work related to the backup system
control facility, gateways and other portions of the IRIDIUM System. Iridium
Italia has been allocated a gateway service territory consisting of certain
countries in Europe including Belgium, Denmark, France, Greece, Italy,
Luxembourg, the Netherlands and Switzerland.
IRIDIUM MIDDLE EAST CORPORATION is owned one-half by Mawarid Overseas
Company Limited and one-half by Trinford Investments S.A. Trinford Investments
is a company affiliated with the Saudi Binladin Group. Binladin is also one of
the largest diversified industrial groups in Saudi Arabia, with operations
covering major construction projects, airport maintenance and operation,
telecommunications and hotels. Both Mawarid and Binladin operate
internationally. Iridium Middle East Corporation has been allocated a gateway
service territory consisting of over 20 countries located in the Middle East and
Central Asia, as well as Morocco and Egypt.
IRIDIUM SUDAMERICA CORPORATION is owned by Iridium Andes-Caribe, Iridium
Brasil Ltda., Iridium Italia and a wholly-owned subsidiary of Motorola. Iridium
Andes-Caribe is a consortium of private Venezuelan investors with experience in
consumer foodstuffs, communications, construction, finance and retailing.
Inepar, the majority owner of Iridium Brasil, is a diversified Brazilian
corporation with operations in telecommunications, electrical current control
equipment and services, mass transport, vehicle distribution and financial
markets. Iridium SudAmerica has been allocated a gateway service territory
consisting of approximately 40 countries located primarily in South America and
the Caribbean.
KHRUNICHEV STATE RESEARCH AND PRODUCTION SPACE CENTER is a state-owned
aerospace engineering and manufacturing company in the Russian Federation.
Khrunichev has been engaged in the manufacture of launch vehicles, orbital
stations and other space equipment for more than 30 years. Khrunichev has
contracted to provide launch services to Motorola with the Proton rocket as part
of the deployment of the space segment. Khrunichev has also been allocated a
gateway service territory consisting of Belarus, Estonia, Georgia, Kazakhstan,
Latvia, Lithuania, Moldova, the Russian Federation and Uzbekistan.
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MOTOROLA, INC. is one of the world's leading providers of wireless
communications and electronic equipment, systems, components and services for
worldwide markets. Motorola products include two-way radios, pagers, personal
communications systems, cellular telephones and systems, discrete semiconductors
and integrated circuits, defense and aerospace electronics, automotive and
industrial electronics, data communications, and information processing and
handling equipment. Motorola is the primary contractor to Iridium and the
IRIDIUM gateway operators for the procurement of components of the IRIDIUM
System. See "Business -- Progress to Date." Motorola has also been allocated, or
otherwise received: (i) a share of the North American gateway service territory
along with Iridium Canada, Inc. and Sprint Corporation; (ii) the entire
Mexican/Central American gateway service territory; (iii) an interest in Iridium
SudAmerica, which has been allocated the gateway service territory including
South America and the Caribbean; and (iv) an interest in Iridium India Telecom
Limited, which has been allocated the gateway service territory for the Indian
subcontinent.
NIPPON IRIDIUM (BERMUDA) LIMITED is a wholly owned subsidiary of Nippon
Iridium Corporation which is a consortium company formed in Bermuda by DDI
Corporation, Japan's leading independent telecommunications company and a
provider of cellular, PHS and long distance telephone service, and Kyocera
Corporation, a supplier of ceramic integrated circuit packages, electronic
components and electronic equipment. Investors in Nippon Iridium Corporation
include Kansai Cellular Telephone Co., Ltd., Ushio Inc., SECOM Co., Ltd., Sony
Corporation, Mitsui & Co., Ltd., Kyushu Cellular Telephone Co., Ltd., Chugoku
Cellular Telephone Co., Ltd., Shikoku Cellular Telephone Co., Ltd., Tohoku
Cellular Telephone Co., Ltd., Hokuriku Cellular Telephone Co., Ltd., Hokkaido
Cellular Telephone Co., Ltd., The Sanwa Bank Limited, Daiwa Securities Co.,
Ltd., The Industrial Bank of Japan, Limited, The Long-Term Credit Bank of Japan,
Ltd., and Mitsubishi Corporation. Nippon Iridium Corporation has been allocated
the Japan gateway service territory.
PACIFIC ELECTRIC WIRE & CABLE CO., LTD. ("PEWC") is a diversified
international corporation with interests in telecommunications services,
property development, banking and financial services and securities investment.
PEWC is the largest producer of telecommunications and power cable in Taiwan.
PEWC has been allocated a gateway service territory consisting of Taiwan,
Indonesia, Brunei, Papua New Guinea and the Philippines.
SK TELECOM was formed by Korea Telecommunications Corporation to provide
cellular and paging services in the Republic of Korea. Management control of
Korea Mobile Telecommunications Corporation is held by Sunkyong Business Group,
a large Korean conglomerate. Korea Mobile Telecommunications Corporation has
been allocated the gateway service territory consisting of North Korea and South
Korea.
SOUTH PACIFIC IRIDIUM HOLDINGS LIMITED AND SOUTH PACIFIC IRIDIUM HOLDINGS
II LIMITED are each a subsidiary of P.T. Bakrie & Brothers ("Bakrie"), a major
Indonesian conglomerate, with operations in plantations, rubber trading,
infrastructure support and telecommunications. Through subsidiaries, including
P.T. Bakrie Communications Corporation, Bakrie provides cellular services in
Indonesia (Ratelindo), Australia (Link Communications) and fixed wire services
in Vietnam and Uzbekistan. In connection with its investment in Iridium, South
Pacific Iridium Holdings Limited was allocated the South Pacific gateway service
territory.
SPRINT IRIDIUM, INC. is an indirect wholly owned subsidiary of Sprint
Corporation. Sprint Corporation is a diversified telecommunications company with
the only nationwide all-digital fiber-optic network in the United States. Its
divisions provide global voice, data and video conferencing services and related
products. Sprint Corporation has been allocated a share of the North American
gateway service territory along with Iridium Canada, Inc. and Motorola.
THAI SATELLITE TELECOMMUNICATIONS CO., LTD. is a company formed by United
Communications Industry Co., Ltd. of Thailand ("UCOM") to invest in Iridium.
UCOM is one of the largest cellular and paging operators in Thailand and is also
a reseller of communications equipment. Thai Satellite
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Telecommunications Co., Ltd. has been allocated a gateway service territory
consisting of Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand and
Vietnam.
VEBACOM HOLDINGS, INC., a wholly owned subsidiary of o.tel.o communications
GmbH & Co., which is owned by VEBA Telecom GmbH and Lehman Brothers Bankhaus
Aktiengesellschaft (as a fiduciary). VEBA AG, the indirect owner of o.tel.o
communications GmbH & Co., together with its subsidiaries, is one of the largest
corporations in Germany. Its telecommunications branch offers a wide variety of
telecommunications services including mobile communications, satellite
communications services, network management, cable television and paging
services. Vebacom has been allocated a gateway service territory consisting of
countries in or near Europe including Austria, Bulgaria, the Czech Republic,
Finland, Germany, Hungary, Ireland, Israel, Norway, Poland, Portugal, Romania,
Spain, Sweden, Slovakia, Ukraine and the United Kingdom.
The following investors have not been allocated a gateway service
territory:
LOCKHEED MARTIN CORPORATION is a world leader in defense and space systems
technology, designing and producing military aircraft, missiles, electronic
systems and satellites, as well as providing a wide range of government and
commercial aeronautical, space, environmental and engineering services. Lockheed
Martin is a principal subcontractor to Motorola in the construction of IRIDIUM
satellites.
RAYTHEON COMPANY is engaged in the conception, development, manufacture and
sale of electronic systems, equipment and components for government and
commercial use. Raytheon also has operations in aircraft products and energy and
environmental services. Raytheon is a principal subcontractor to Motorola in the
construction of the IRIDIUM System and is primarily responsible for providing
the main mission antennas for the satellites.
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DESCRIPTION OF PARENT LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary of certain provisions of the Limited Liability
Company Agreement of Parent, dated as of July 29, 1996, as amended (the "Parent
LLC Agreement"). This summary does not purport to be a complete description of
the Parent LLC Agreement, and is qualified in its entirety by reference to the
Parent LLC Agreement which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part and is available upon request to
Parent at 1575 Eye Street N.W., Washington, D.C. 20005, Attention: Secretary.
ESTABLISHMENT; PURPOSE
Parent was formed as a limited liability company pursuant to the provisions
of the Delaware Limited Liability Company Act (the "Delaware Act") on July 16,
1996. Iridium, Inc., a Delaware corporation and the predecessor of Parent, was
formed on June 14, 1991. On July 29, 1996, Iridium, Inc. was merged with and
into Parent, with Parent as the surviving entity. On December 18, 1997, Parent
transferred substantially all of its assets and liabilities to Iridium. See
"Parent's Ownership Structure and Strategic Investors -- Asset Drop-Down
Transaction." Parent's purpose is to acquire, own and manage the IRIDIUM System,
which it does through its wholly owned subsidiary, Iridium.
THE PARENT BOARD; COMMITTEE STRUCTURE AND MANAGEMENT
Parent is governed by the Parent Board. The Members may manage Parent only
through their designated directors and have no authority, in their capacity as
members, to act on behalf of Parent. The day-to-day activities of Parent are
managed by its officers, subject to the supervision of the Parent Board. The
officers are nominated and elected by the Parent Board. The Parent LLC Agreement
requires that the Chairman of the Parent Board be a director and that the Vice
Chairman and Chief Executive Officer be a director.
Each Member, other than IWCL, is entitled to appoint one director to the
Parent Board for each 5,250,000 Class 1 Interests owned. Class 1 Members, other
than IWCL, may aggregate their Class 1 Interests and appoint one director for
each 5,250,000 Class 1 Interests owned in the aggregate.
The Parent Board may act through one or more committees established by the
Parent LLC Agreement or by resolution, with each committee having the powers of
the Parent Board to the extent provided in the Parent LLC Agreement or the
relevant resolution. The Parent LLC Agreement establishes the following four
committees, which are the only existing committees of the Parent Board:
Banking and Financing Committee. This committee is authorized
generally to supervise matters relating to the financing of Parent. The
committee must consist of not fewer than eight directors.
Related Party Contract Committee. This committee consists of all
directors of Parent not designated by Motorola, Lockheed Martin and
Raytheon. Motorola, Lockheed Martin and Raytheon are the contracting and
principal subcontracting Members, respectively, under the Space System
Contract, the Operations and Maintenance Contract and the Terrestrial
Network Development Contract. The committee has the authority to review,
monitor and enforce Iridium's rights with respect to the Space System
Contract, the Operations and Maintenance Contract and the Terrestrial
Network Development Contract. Directors appointed by Lockheed Martin and
Raytheon will be appointed to the committee when they cease to be
subcontractors under the contracts. Directors appointed by Motorola will be
appointed to the committee when Motorola ceases to be a party to the
contracts.
Compensation Committee. This committee must consist of not fewer than
three directors, appointed by the Parent Board, who are not officers or
employees of Iridium. The committee has the authority to review, and
provide recommendations relating to the compensation and
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benefits of managerial employees and has authority to administer the Option
Plan (unless the Parent Board appoints a substitute committee).
Audit Committee. This committee is required to review, and make
recommendations regarding, Parent's internal accounting and financial
controls, including the preparation of financial statements and the
engagement of independent public accountants. The committee must consist of
two or more directors, appointed by the Parent Board, who are not officers
or employees of Parent. See "-- Classes of Membership Interests -- Series B
and Series C Class 2 Interests" for certain special rights with respect to
the Parent Board and its committees that have been granted to Motorola in
connection with its guarantee of the borrowings under the Guaranteed Bank
Facility.
SPECIAL RIGHTS OF IWCL IN THE GOVERNANCE OF PARENT
The Parent LLC Agreement provides that IWCL will have certain special
membership rights during the Special Rights Period (as defined). See "Certain
Matters Regarding Relationship Among IWCL, Parent and Iridium -- IWCL
Participation in the Governance of Iridium." During the IWCL Special Rights
Period (i) IWCL shall be entitled to designate two Independent Company Directors
as directors of Parent, (ii) one director of Parent designated by IWCL shall be
elected Vice Chairman of the Parent Board and (iii) one director of Parent
designated by IWCL shall be a member of each committee of the Parent Board.
Pursuant to the Parent LLC Agreement, IWCL will not be entitled to appoint more
than two directors to the Parent Board even if its ownership interest increases
and it would otherwise have been entitled to additional appointment rights. In
addition to any other voting rights which IWCL may have under the Parent LLC
Agreement, under the Delaware Act or otherwise, during the IWCL Special Rights
Period, Parent may not take any of the following actions, or permit any of the
following actions or events to occur, without the consent of one of the
directors of Parent designated by IWCL: (i) make any material amendments or
modifications to the Parent LLC Agreement; (ii) approve any business plan of
Parent that would result in any material change in the purpose of Parent as set
forth in the Parent LLC Agreement or otherwise change Parent's business so that
it varies materially from the business purpose contemplated by the Parent LLC
Agreement; (iii) acquire, other than in the ordinary course of business of
Parent, (a) a controlling interest or a majority of the voting stock or equity
of, any corporation or other entity that would be a Significant Subsidiary (as
such term is defined in the rules under the Securities Act) or (b) any other
assets if the aggregate fair market value thereof is greater than $50 million;
(iv) sell, lease (as lessor), exchange or otherwise dispose of all or
substantially all of the assets of Parent (other than to a person controlled by
Parent); (v) cause the dissolution and/or liquidation of Parent; or (vi) take
certain bankruptcy or insolvency related actions with respect to Parent.
CLASSES OF MEMBERSHIP INTERESTS
The Members' interests in Parent are divided into two classes: "Class 1
Interests" which represent the common equity of Parent and "Class 2 Interests"
which represent the preferred equity of Parent. The Parent LLC Agreement
authorizes Parent to issue 225,000,000 Class 1 Interests, 50,000 Series M Class
2 Interests and 300,000 additional Class 2 Interests. At December 31, 1997 there
were 141,222,442 Class 1 Interests issued and outstanding. There are three
Series of Class 2 Interests outstanding.
Class 1 Interests. Subject to the rights of holders of any Series of
Class 2 Interests, all voting rights of the Members are vested in the Class
1 Interests.
Series A Class 2 Interests. The Series A Class 2 Interests are
convertible preferred interests that are entitled to dividends at a rate of
14 1/2% per annum from the Original Issue Date to, but not including, the
relevant Series A Redemption Date. The dividends on the Series A Class 2
Interests are payable, either in kind or in cash, at the option of Parent,
through February 28, 2001. Commencing March 1, 2001, dividends on the
Series A Class 2 Interests are
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payable only in cash. Dividends on the Series A Class 2 Interests accrue
whether or not they have been declared and whether or not there are profits
or other funds of Parent legally available for the payment of such
dividends. No dividend may be declared and paid on the Class 1 Interests
unless all accrued dividends on the Series A Class 2 Interests have been
paid in full. The Series A Class 2 Interests are convertible to Class 1
Interests at any time, at the option of the holder, at the Series A
Conversion Price then in effect, initially $54.03. The Series A Conversion
Price is adjusted from time to time to reflect, among other things,
distributions or reclassification of the Class 1 Interests. At December 31,
1997, each Series A Class 2 Interest was convertible into 18.51 Class 1
Interests. The Series A Class 2 Interests are redeemable, at the option of
Iridium, at any time after March 1, 2001 at redemption prices that adjust
downward each March 1 for four years at a proportionate rate from 107.5% of
the Series A Liquidation Preference ($1,000 plus accrued and unpaid
dividends) on March 1, 2001 to 100% of the Series A Liquidation Preference
on March 1, 2005. After March 1, 2005 the Series A Class 2 Interests are
redeemable at 100% of the Series A Liquidation Preference. At December 31,
1997 there were 39,907 Series A Class 2 Interests outstanding.
Series B and Series C Class 2 Interests. In connection with
Motorola's guarantee of the Guaranteed Bank Facility, Parent issued to
Motorola one Series B Class 2 Interest and 75 Series C Class 2 Interests.
These are the only issued and outstanding Series B and Series C Class 2
Interests. The Series B Class 2 Interests and Series C Class 2 Interests do
not pay any dividends. The Series B Class 2 Interest entitles Motorola to
one seat on the Parent Board in addition to Directors it may otherwise
appoint as the owner of Class 1 Interests and Series M Class 2 Interests.
The Series C Class 2 Interests entitle Motorola to appoint a majority of
the Board of Directors (and of all committees other than the Related Party
Contract Committee) in the event of certain events of default relating to
the Guaranteed Bank Facility. The Series B and Series C Class 2 Interests
are redeemable by Parent at $.01 per Interest upon the later of (i) the
termination or expiration of the Guarantee Agreement of Motorola and (ii)
the reimbursement of any payments made by Motorola pursuant to the
Guarantee Agreement.
Series M Class 2 Interests. Motorola owns a warrant (the "Series M
Warrant") to purchase Series M Class 2 Interests in an amount that would be
convertible into 2.5% of the outstanding Class 1 Interests at the time of
exercise of the Series M Warrant, calculated on a fully diluted basis, at a
price of $1,000 per Series M Class 2 Interest, subject to antidilution
adjustments. No Series M Class 2 Interests are currently outstanding.
Dividends on each Series M Class 2 Interest will accrue at the rate of
8.00% per annum of the sum of the Liquidation Value thereof plus all
accumulated and unpaid dividends thereon, from and including the date of
issuance of such Interest to and including the date on which the
Liquidation Value of such Interests is paid or the date on which such
Interest is converted into Class 1 Interests. Dividends accrue whether or
not they have been declared and whether or not there are profits or other
funds of Parent legally available for the payment of dividends.
Additionally, when dividends are declared or paid on the Class 1 Interests,
the holders of Series M Class 2 Interests will be entitled to participate
in such dividends ratably. The Series M Class 2 Interests are convertible
into Class 1 Interests at any time at the option of the holder. The number
of Class 1 Interests into which the Series M Class 2 Interests are
convertible is computed by multiplying the number of Series M Class 2
Interests to be converted by $1,000 and dividing the result by the Series M
Conversion Price then in effect. The initial Series M Conversion Price is
$13.33, but is subject to antidilution adjustments from time to time, and
at the current Series M Conversion Price each Series M Class 2 Interest
would be convertible into 75 Class 1 Interests. Upon the occurrence of an
Event of Noncompliance, defined as a failure by Parent to pay when due the
full amount of dividends due to holders of Series M Class 2 Interests or
the occurrence of certain enumerated acts by Parent related to bankruptcy
or insolvency, the holders can demand the immediate redemption of all
interests at Liquidation Value plus accumulated and unpaid interest and the
number of seats on the Parent Board will be increased by one at the request
of the holders of a majority of the Series M Class 2 Interests then
outstanding and the
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holders of Series M Class 2 Interests will be entitled to elect an
individual to fill such newly created Director position. There are no
Series M Class 2 Interests issued or outstanding.
MERGER
The Parent LLC Agreement provides that Parent may merge or consolidate with
one or more limited liability companies, corporations, or similar entities
provided that the transaction is approved by the Parent Board and Class 1
Members holding not less than 66 2/3% of the outstanding Class 1 Interests. In
the event of a merger, Members who hold Interests and do not vote in favor of,
or consent in writing to, the merger are entitled to appraisal rights subject to
certain exceptions.
Dividend and Liquidation Rights
Class 1 Members are entitled to receive dividends, as and when declared by
the Parent Board, in its discretion. Class 2 Members are entitled to receive
dividends, if any, in accordance with the terms of the relevant Series of Class
2 Interests, as and when declared by the Parent Board. The Class 2 Interests
rank senior to the Class 1 Interests as to dividends and distributions upon the
liquidation, dissolution and winding-up of Parent.
The Parent LLC Agreement requires the Parent Board, to the extent of
legally available funds, to declare and pay a pro rata dividend in an amount
which, when added to any prior dividends paid with respect to the profits of the
same year, is sufficient to assure that each non-U.S. Class 1 Member receives an
amount at least equal to the amount of such Member's U.S. federal, state and
local income tax liability resulting from allocations of Parent's income to such
Member.
ISSUANCE OF ADDITIONAL INTERESTS; RESTRICTIONS ON TRANSFER; RIGHTS OF FIRST
REFUSAL
With the consent of Class 1 Members holding a majority of the Class 1
Interests, the Parent Board may, at any time, cause Parent to admit additional
Members upon conditions determined by the Parent Board. Subject to certain
exceptions, if Parent authorizes the issuance or sale of any Class 1 Interests,
Parent must first offer to sell to each Class 1 Member a portion of such Class 1
Interests that would prevent any dilution in such Class 1 Member's holdings of
Class 1 Interests, provided that upon exercise of such purchase rights, the
number of Class 1 Interests of any holder of Class 1 Interests may not exceed
45% of the Class 1 Interests deemed outstanding on such date.
The Parent LLC Agreement contains significant restrictions on the ability
of a Member to transfer any Class 1 Interests or Class 2 Interests in Parent.
Prior to making any transfer of Class 1 Interests or Class 2 Interests in Parent
(other than certain transfers to affiliates), the person seeking to make such
transfer must notify Parent and all holders of Class 1 and Class 2 Interests of
the terms and conditions of the proposed transfer. In order for the proposed
transfer to be permitted, a number of conditions must be satisfied, including
but not limited to the conditions that (i) a majority of the Parent Board
approve the transfer and (ii) the transfer not result in any person (other then
IWCL) beneficially owning, or having the right to beneficially own, more than
45% of the outstanding Class 1 Interests. In addition, Parent may elect to
purchase all (but not less than all) of the Class 1 and Class 2 Interests to be
transferred upon the terms and conditions of the proposed transfer and, if
Parent elects not to make such purchase, any of the holders of Class 1 and Class
2 Interests may purchase all (but not less than all) of the Class 1 and Class 2
Interests to be transferred on a pro rata basis.
The Parent LLC Agreement provides that as long as Motorola is the principal
supplier to Parent and/or Motorola or one of its subsidiaries is the holder for
the benefit of Parent of any FCC license to construct, operate or launch the
IRIDIUM System, Motorola will not transfer (other than certain exempt transfers)
any of its Class 1 Interests issued in respect of common stock of Iridium, Inc.
purchased under the 1993 Stock Purchase Agreement. This restriction does not
apply to any Class 1 Interests purchased pursuant to the Reserve Capital Call.
In addition, in the event that Motorola no longer is the principal supplier to
Parent and neither Motorola nor one of its
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subsidiaries is the holder for the benefit of Parent of any FCC license to
construct, operate or launch the IRIDIUM System, and Motorola desires to
transfer any Class 1 Interests prior to July 19, 2003, Motorola is required to
offer all other holders of Class 1 Interests the opportunity to participate
ratably in such sale at the same price and on the same terms as Motorola.
CAPITAL CONTRIBUTIONS; RESERVE CAPITAL CALL
Contributions to the capital of Parent, with respect to each Member who
purchases an Interest, are made in an amount equal to the net purchase price to
Parent for such Interest (such amount being such Member's capital contribution
to Parent). The Parent LLC Agreement requires that the Class 1 Members cause
their Class 1 Interests in the aggregate to be entitled to at least 21% of each
item of the capital, income, gain, loss, deduction or credit distributions of
Parent at all times. Members generally are not required to make additional
capital contributions to Parent other than in connection with the Reserve
Capital Call.
Seventeen Members of Parent have made varying Reserve Capital Call
commitments to purchase an aggregate of 18,206,550 additional Class 1 Interests
at a purchase price of $13.33 per Class 1 Interest, upon a date thirty days
after the date of the receipt of a funding notice from the treasurer of Parent.
The treasurer of Parent is required to provide such a notice on the date on
which the treasurer has first determined that Parent will not have available to
it sufficient funds to meet its contractual obligations and other funding
requirements on the forty-fifth day thereafter absent exercise of the Reserve
Capital Call. The Parent LLC Agreement provides Parent with several
non-exclusive remedies in the event a Member fails to pay any of the amounts
required by a Reserve Capital Call, including redeeming the defaulting Member's
Class 1 Interests for an amount equal to $1.33 per Class 1 Interest. Pursuant to
the Secured Bank Facility, Parent will pledge its rights with respect to the
Reserve Capital Call and Parent will be restricted from exercising the Reserve
Capital Call. See "Description of Other Indebtedness."
LIMITATIONS ON LIABILITY
In accordance with the Delaware Act, Members are generally not liable for
the debts, obligations or liabilities of Parent. Pursuant to the Parent LLC
Agreement, and in accordance with the Delaware Act, IWCL has waived the
limitation on liability contained in the Delaware Act, provided that IWCL has no
liability to any person, including Iridium, for any debt, obligation or
liability of Parent until all of the assets and capital of Parent have first
been exhausted in satisfaction thereof. No Member or director has any liability
for any debts, obligations or liabilities, whether arising in contract, tort or
otherwise, of any other Member or director.
Members, directors and officers of Parent have only the duties set forth in
the Parent LLC Agreement. The Parent LLC Agreement provides that the duties and
obligations owed to Parent and to the Members by the directors and officers of
Parent, and any duties and obligations that may be owed by any Member or by any
affiliates of any Member, are the same as the respective duties and obligations
owed to a corporation organized under the Delaware General Corporation Law by
its directors and officers and any such duties that may be owed to a corporation
by any similarly situated stockholder or affiliate thereof, respectively. The
Parent LLC Agreement also provides that, to the fullest extent permitted by the
Delaware General Corporation Law, a director shall not be liable to Parent or
the Members for monetary damages for a breach of fiduciary duty as a director.
Such limitation does not, however, limit liability of directors (i) for any
breach of the director's duty of loyalty to Parent, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) for acts relating to certain unlawful dividend payments or stock
redemptions or repurchases and (iv) for any transaction from which the director
derived an improper personal benefit.
The Parent LLC Agreement provides that Parent will indemnify the directors,
officers and other persons serving in similar capacities at the request of
Parent for another entity against all expenses
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(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with any action,
suit, or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of Parent) by reason of the fact that
such person was serving in such capacity, provided that such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of Parent, and, with respect to any criminal
action or proceedings, had no reasonable cause to believe such person's conduct
was unlawful. The Parent LLC Agreement further provides that Parent will
indemnify the directors, officers and other persons serving in similar
capacities at the request of Parent for another entity against expenses
(including attorney's fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit by or in the
right of Parent by reason of the fact that such person was serving in such
capacity, provided that such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
Parent, and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to Parent unless awarded pursuant to a court order.
ALLOCATIONS OF PROFITS AND LOSSES; TAX MATTERS PARTNER
The profits and losses of Parent generally are, subject to certain tax
considerations, the Delaware Act and the rights of the Class 2 Members, to be
allocated entirely to the Class 1 Members pro rata in proportion to their
percentage of ownership of all outstanding Class 1 Interests. The Parent LLC
Agreement provides:
Profits. Items of income and gain shall be allocated (i) first to the
Class 2 Members in amounts that match the distributions made to such
Members in accordance with the terms of the Class 2 Interest and (ii)
second to the Class 1 Members pro rata in proportion to their percentage of
ownership of all Class 1 Interests.
Losses. All items of loss, deduction, expense or credit shall be
allocated to the Class 1 Members pro rata in proportion to their percentage
ownership of all Class 1 Interests.
Motorola is the Tax Matters Partner of Iridium. The Tax Matters Partner
acts as the liaison between Parent and the Members, on the one hand, and the
United States Internal Revenue Service, on the other, in connection with all
administrative and judicial proceedings involving tax controversies regarding
Parent.
AMENDMENTS TO THE PARENT LLC AGREEMENT; MEETINGS
The Parent LLC Agreement may not be changed or amended, nor may the
observance of any provision of the Parent LLC Agreement be waived, without the
consent of Class 1 Members holding not less than 66 2/3% of the outstanding
Class 1 Interests. This general approval requirement for amendments to the
Parent LLC Agreement is subject to certain exceptions including, among others:
Parent Board. The provision of the Parent LLC Agreement granting to
the Members the right to elect members of the Parent Board may not be
amended without the consent of Class 1 Members holding not less than 95% of
the outstanding Class 1 Interests.
Related Party Contract Committee. The provisions of the Parent LLC
Agreement relating to the Related Party Contract Committee (which reviews
and monitors the principal contracts between Iridium and certain of its
Members) may not be amended without the consent of (i) 66 2/3% of the
directors serving on the Related Party Contracts Committee and (ii) 66 2/3%
of the non-interested Members.
Capital Contributions. Certain provisions of the Parent LLC Agreement
relating to the circumstances in which a Reserve Capital Call is
automatically triggered may only be amended by the affirmative vote of not
less than 85% of the entire Parent Board, and other provisions of the
Parent LLC Agreement covering Members' capital contributions may be amended
only with
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the consent of Iridium and each Member whose rights and obligations
thereunder are directly affected by such amendment.
Appraisal Rights. The provisions relating to the Member's appraisal
rights may not be amended without the unanimous consent of the Members.
An annual meeting for the Class 1 Members shall be held each year within
120 days after the close of the immediately preceding fiscal year of Iridium. At
such annual meeting each Member shall provide notice to Iridium and the other
Members of the names of any director or directors such Member is entitled to
appoint. Special meetings of Members may be called for any purpose stated in the
notice of such special meeting at any time by the Parent Board, the chairman of
the Board of Directors, the vice chairman and chief executive officer, the
president or the holders of not less than a majority of the Class 1 Interests
outstanding. Notice of any meeting shall be given to all Members entitled to
vote at such meeting and to each director not less than 10 nor more than 60 days
prior to the date of such meeting. The holders of a majority of the Class 1 and
Class 2 Interests entitled to vote on a particular item of business, present in
person or by proxy, shall constitute a quorum for purposes of the transaction of
such item of business. Each Member entitled to vote at a meeting of Members or
to express consent or dissent to any action in writing without a meeting may
authorize any person to act for it in such matters by proxy.
Unless otherwise provided by law, any action to be taken by the Members may
be taken without a meeting, without prior notice and without a vote, if consents
in writing, setting forth the action so taken, shall be signed by the Members
having not less than the minimum Interests that would be necessary to authorize
or take such action at a meeting at which all Members entitled to vote thereon
were present and voted and are delivered to Parent.
GATEWAY RIGHTS AND SPECTRUM ACCESS OBLIGATIONS
The exclusive right to own and operate the various gateway service
territories is assigned to Members pursuant to the Parent LLC Agreement. See
"Iridium's Investors, Number of Class 1 Interests Owned, Percentage Ownership
and Principal Gateway Service Territories" for the present allocation of Gateway
Service Territories. As a condition of the exclusive right to operate in their
assigned territories (including the exclusive right to act as, or select, the
service provider for such territory), each Member that has been assigned a
service territory has agreed (i) to use its best efforts to obtain the necessary
authorizations to provide gateway services in each of the jurisdictions included
in its service territory (the "Gateway Authorizations") and to construct and
operate such gateway on a timely basis consistent with the terms of such
Member's Gateway Authorization Agreement, (ii) to require any service provider
within its service territory to use its best efforts to obtain the necessary
authorizations to act as a service provider and (iii) use its best efforts to
cause the relevant authorities in their respective territories to ratify and
adopt the spectrum allocation and service definitions for LEO's adopted by the
WARC. See "Business -- Space Segment -- Implementation of Gateways," "Principal
Contracts for Development of the IRIDIUM System -- Gateway Authorization
Agreements" and "Regulation of Iridium."
The gateway and service provider rights of Class 1 Members may be
terminated without compensation if such a member fails to (i) comply with its
obligations regarding Gateway construction and spectrum allocation or (ii)
obtain the necessary Gateway Authorizations within the time periods set forth in
the Parent LLC Agreement. In the event that such rights are terminated in the
member's principal country of operation as a result of the Member's failure to
obtain the relevant Gateway Authorizations, and the Member used its best efforts
to obtain the Gateway Authorizations, such member is entitled to compensation
for the loss of the gateway service territory on the terms specified in the
Parent LLC Agreement.
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DISSOLUTION; WINDING-UP
The Parent LLC Agreement provides that Parent shall be dissolved and its
affairs wound-up upon: (i) the adoption of a resolution by not less than 66 2/3%
of the entire Parent Board that Parent be dissolved and the approval of such
resolution by the affirmative vote of Class 1 Members holding not less than
66 2/3% of the Class 1 Interests present at a meeting duly called for such
purpose; (ii) the death, retirement, resignation, bankruptcy or similar
occurrence which terminates the continued membership of any Member unless the
remaining Members exercise their right under the Parent LLC Agreement to
continue the business of Parent (such right to be exercised by the affirmative
consent of both (a) a majority of the Parent Board and (b) a "majority in
interest" (as defined in IRS Revenue Procedure 94-46) of the remaining Members);
and (iii) December 31, 2095, subject to amendment by an affirmative vote of
Class 1 Members holding not less than 66 2/3% of the Class 1 Interests.
DESCRIPTION OF IRIDIUM OPERATING LLC LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary of certain provisions of the Limited Liability
Company Agreement of Iridium dated as of December 8, 1997 (the "Iridium LLC
Agreement"). This summary does not purport to be a complete description of the
Iridium LLC Agreement, and is qualified in its entirety by reference to the
Iridium LLC Agreement which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part and is available upon request to
Iridium at 1575 Eye Street N.W., Washington, D.C. 20005, Attention: Secretary.
ESTABLISHMENT; PURPOSE
Iridium was formed as a limited liability company pursuant to the
provisions of the Delaware Act on or about October 23, 1997. Iridium is a wholly
owned subsidiary of Parent. Pursuant to the Asset Drop-Down Transaction, on
December 18, 1997, Parent transferred substantially all of its assets and
liabilities to Iridium. See "Parent's Ownership Structure and Strategic
Investors -- Asset Drop-Down Transaction." Iridium's purpose is to acquire, own
and manage the IRIDIUM System and any successor or replacement system.
MEMBERS, MANAGER-DIRECTORS, OFFICERS AND MEETINGS
The Board of Directors
Iridium is governed by the Iridium Board. The Members may manage Iridium
only through their designated directors and have no authority in their capacity
as members to act on behalf of Iridium. For so long as Parent is the majority
member of Iridium, the number of directors of Iridium will be equal to the
number of directors on Parent's Board. While Parent is the majority member of
Iridium, Parent shall appoint each member of the Iridium Board and the members
of the Iridium Board shall be identical to the members of the Parent Board.
Members
The sole initial Member of Iridium is Parent. Members have the rights,
powers, duties and obligations provided in the Iridium LLC Agreement and the
Delaware Act. Each Member agrees that it will not make a public offering of its
own securities if as a result of such offering, Iridium will become an entity
controlled by an investment company.
The Iridium LLC Agreement requires that annual meetings of Members be held
each year within 120 days after the close of the immediately preceding fiscal
year of Iridium. Special meetings may be called at any time and place, as shall
be stated in a notice. Members holding a majority of the Interests entitled to
vote, present in person or by proxy, constitute a quorum for all meetings of the
Members.
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When a quorum is present, the affirmative vote of the majority of Interests
entitled to vote on the subject matter will be the act of the Members.
Duties and Liabilities of Directors
Pursuant to the Iridium LLC Agreement, and in accordance with the Delaware
Act, no Member or director has any liability for any debts, obligations or
liabilities, whether arising in contract, tort or otherwise, of any other Member
or director.
The Iridium LLC Agreement provides that the duties and obligations owed to
Iridium and to the Members by the directors and officers of Iridium, and any
duties and obligations that may be owed by any Member or by any affiliates of
any Member, are the same as the respective duties and obligations owed to a
corporation organized under the Delaware General Corporation Law by its
directors and officers and any such duties that may be owed to a corporation by
any similarly situated stockholder or affiliate thereof, respectively. The
Iridium LLC Agreement also provides that, to the fullest extent permitted by the
Delaware General Corporation Law, a director shall not be liable to Iridium or
the Members for monetary damages for a breach of fiduciary duty as a director.
Such limitation does not, however, limit liability of directors (i) for any
breach of the director's duty of loyalty to Iridium, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) for acts relating to certain unlawful dividend payments or stock
redemptions or repurchases and (iv) for any transaction from which a director
derived an improper personal benefit.
The Iridium LLC Agreement provides that Iridium will indemnify the
directors, officers and other persons serving in similar capacities at the
request of Iridium for another entity against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with any such Proceeding, provided that
the person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interest of Iridium, and, with respect to
the subject matter of any Proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The Iridium LLC Agreement further provides that
Iridium will indemnify the directors, officers and other persons serving in
similar capacities for another entity against expenses (including attorney's
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit by or in the right of Iridium by
reason of the fact that such person was serving in such capacity, provided that
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of Iridium, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to Iridium unless
pursuant to a court order.
MANAGEMENT AND OPERATIONS
Members manage Iridium only through the Iridium Board. The business and
affairs of Iridium are to be managed by or under the direction of the Iridium
Board who shall have the power on behalf and in the name of Iridium to carry out
any and all of the purposes of Iridium and to perform all acts which they may
deem necessary or advisable in connection therewith.
Annual meetings of directors are held without notice immediately after, and
at the same place, as the annual meeting of Members. At this meeting, directors
elect a Chairman. Regular meetings are held, without notice, at such time and
such place as shall from time to time be determined by resolution of the Board.
Special meetings may be called by or at the request of any director on at least
48 hours notice to each director. A vote of the majority of directors present at
which a quorum is present, is an act of the Board, unless a previous resolution
of the Board requires the approval of a super-majority. At any meeting held
during any period in which directors of Parent have been elected by holders of
Series C Class 2 Interests of Parent, the affirmative vote of 66 2/3% of all
directors is required to approve any merger, liquidation, sale, lease conveyance
or transfer of
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Iridium or all or substantially all of its assets or to approve or recommend to
the Members any changes in the capital structure or in the rights of any
interests or security of Iridium or to approve any debt exceeding $10 million or
any amendments to the Iridium LLC Agreement which would have a material effect
on any of the members.
Iridium must give each of Raytheon Company and Lockheed Martin Corporation
written notice of each meeting of the Board of Directors at the same time an in
the same manner as notice is given to the directors, and a representative of
each may attend as non-participating observers. Raytheon and Lockheed Martin
shall designate, in writing to Iridium, their respective representatives. Each
representative will receive all written materials and other information given to
directors in connection with such meetings.
Iridium's Board of Directors has the same committees as that of the board
of Parent. Each such committee has the same authority, rights and
responsibilities as such committees of the board of Parent and the members are
to be the same as the members of such committees of the board of Parent. No
committee shall have the power or authority to amend the Iridium LLC Agreement.
Meetings of the committees shall be held in accordance with the committee's own
rules of procedure.
The offices and officers of Iridium are identical to the offices and
officers of Parent. Any change in an office or officer at Parent shall
automatically result in a corresponding change at Iridium. An officer removed as
an officer of Parent shall be removed as an officer of Iridium, but such removal
shall be without prejudice to the contract rights of the person so removed.
Officers are not compensated.
During the IWCL Special Rights Period, as defined by the Iridium LLC
Agreement, Iridium shall not, without the consent of one of the IWCL designated
directors: (i) make any material amendments or modifications to the Iridium LLC
Agreement, (ii) approve any business plan of Iridium that would result in any
material change in Iridium's purpose or otherwise change Iridium's business so
that it varies materially from its business purpose, (iii) acquire, other than
in the ordinary course of Iridium's business, a controlling interest or majority
of the voting stock or equity of a corporation or a Significant Subsidiary (as
defined in Rule 405 under the United States Securities Act of 1933) or any other
assets with an aggregate fair market value greater than $50 million, (iv) sell,
lease, exchange or otherwise dispose of all or substantially all of the assets
of Iridium (other than to a person controlled by Iridium or Parent), (v)
dissolve or liquidate Iridium, or (vi) take any action to commence a voluntary
case with respect to Iridium under applicable bankruptcy, insolvency or similar
laws, consent to the entry of an order for relief in an involuntary case under
any such law, consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian trustee of any substantial part of Iridium's
property, or make a general assignment for the benefit of creditors.
INTERESTS AND OTHER SECURITIES
Interests in Iridium are represented by certificates.
The voting rights of Iridium's Interests are vested exclusively in the
Members, who vote in proportion to the number of Interests they each own. In
case of liquidation, dissolution or winding up of Iridium, each Member is
entitled to receive all distributions on a pro rata basis in proportion to their
percentage of ownership of all outstanding Interests.
The Board of Iridium, at its discretion and in accordance with Delaware
law, may pay distributions or dividends to the Members. For purposes of
determining who is entitled to receive payment of any Dividend, the Board may
set a record date, which shall not precede the date upon which the resolution
fixing the record date is adopted and which shall not be more than 60 days
before such action. If no record date is adopted, the record date is the close
of business on the day on which the Board adopted the resolution relating
thereto. In deciding whether to pay a Dividend to
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Parent, Iridium's Board will consider the total tax liability of the member of
Parent in respect of their Class 1 Interests (as defined in Parent's Limited
Liability Agreement). If Parent's Board is required to pay a dividend pursuant
to sec. 3.07(c) of Parent's Limited Liability Agreement, the Board of Iridium
shall promptly pay a dividend in the same amount, provided such funds are
legally available.
A Member is not entitled to receive any Dividend with respect to any
Dividend payment date, until Iridium has funds legally available for the payment
of such Dividends.
DISSOLUTION AND WINDING UP
The Iridium LLC Agreement provides that Iridium shall be dissolved and its
affairs wound-up upon the adoption of a resolution by not less than 66 2/3% of
the entire Iridium Board that Iridium be dissolved and the approval of such
resolution by the affirmative vote of not less than 66 2/3% of the Interests
approving the dissolution at a meeting duly called for such purpose. Upon
dissolution of Iridium, the Chairman of Iridium's Board shall wind up Iridium's
affairs. Any amounts permitted to be distributed to Members shall be distributed
in proportion to the number of Interests held by each such Member.
A Member may resign from Iridium by transferring his or her Interests in
accordance with the Iridium LLC Agreement. No Member may resign due to
bankruptcy or any other reason, without the consent of 66 2/3% of Iridium's
Board.
TRANSFERS
The Iridium LLC Agreement contains restrictions on the ability of a Member
to transfer Interests in Iridium. Members cannot transfer Interests without the
prior approval of a majority of the directors. Each person who owns an Interest
pursuant to a Transfer must execute an agreement to the satisfaction of Iridium.
In the agreement, the new owner must agree to be bound by the provisions of the
Iridium LLC Agreement. Transferors are not relieved of their contractual
obligations under the Iridium LLC Agreement unless such relief is approved by
the holders of at least 66 2/3% of the then outstanding Interests. These
restrictions, however, do not apply to a transfer by any person of any ownership
interest in a Member.
A transferee can become a substituted Member if he or she receives the
consent of a majority in interest of the non-transferring Members. Such consent
may be granted or withheld at the discretion of the Members. A transferee not
made a Member, is not entitled to any rights granted to Members but such
transferee is bound by all limitations and obligations contained in the Iridium
LLC Agreement.
Members are permitted to pledge their Interests to secure indebtedness for
borrowed money and related obligations in connection with indebtedness incurred
by Iridium provided such pledge is either approved by the Board, or made in
connection with the Secured Bank Facility, as defined by the Iridium LLC
Agreement.
ADMISSION OF ADDITIONAL MEMBERS
Parent is the sole original Member of Iridium. Additional Members may be
admitted by Iridium's Board at any time with the consent of Members holding a
majority of the Interests. The Additional Member is deemed admitted upon the
later of the written request by such person that the Members' Interest Register
reflect such admission and the agreement of the person to be bound by the
Iridium LLC Agreement, and the time such person is listed as a Member in the
Members' Interest Register of Iridium and a Certificate evidencing such
ownership is issued.
GATEWAY RIGHTS OF PARENT CLASS 1 MEMBERS
Iridium agrees not to take any action that Parent could not take in
contravention of the rights granted to each Parent Class 1 Member pursuant to
Article VIII of the Parent LLC Agreement.
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Further, Iridium authorizes each Iridium Class 1 Member and its Affiliates to
provide Gateway Services and to retain Service Providers in the Gateway Service
Territory allocated to such Class 1 Members on the most recent Gateway Service
Territory Schedule (the "Schedule"). Iridium has pledged that it will not
authorize any other person to provide Gateway Services, construct Gateways, act
as a Service Provider, or retain Service Providers in any Parent Class 1
Member's Gateway Service Territory, except as set forth in the Schedule. Parent
agrees to provide Iridium with the Schedule no later than 10 days following the
date of each amendment, modification or other change in the Schedule.
GENERAL PROVISIONS
The Iridium LLC Agreement cannot be changed, amended or waived without the
consent of Iridium's Board. The Board's ability to amend the Iridium LLC
Agreement is limited. The Iridium LLC Agreement states that no amendments
regarding indemnification may be made without the consent of any party whose
rights are directly affected by such an amendment. Further, for so long as
Parent is the majority member of Iridium, no amendments to the provisions
regarding Gateway Rights of Parent Class 1 Members may be made unless an
amendment having the same intent has been made to the Parent LLC Agreement.
The Iridium LLC Agreement is governed by the laws of the State of Delaware
and should be governed to the maximum extent possible to comply with all of the
terms and conditions of the Delaware Act. If a court of competent jurisdiction
should find a provision of the Iridium LLC Agreement invalid or unenforceable,
such a determination shall not invalidate the entire Iridium LLC Agreement.
Instead, the Iridium LLC Agreement would either be construed so as to limit any
term or provision and make it enforceable or would be construed to omit such
unenforceable provisions.
Any suit brought with respect to the Iridium LLC Agreement may be brought
in a court of the United States sitting in the State of Delaware. Parties to the
Iridium LLC Agreement waive, to the fullest extent permitted by law, any
objection that the proceeding or judgment has been brought in an inconvenient
forum. Service of all writs, process and summons may be made upon The
Corporation Trust Company or the Process Agent, as defined in the Iridium LLC
Agreement. If, for any reason not contemplated by the Iridium LLC Agreement, a
party cannot be subject to the above mentioned jurisdiction, then the parties
may submit their dispute for arbitration in Stockholm, Sweden in accordance with
the Rule or Arbitration Institute of the Stockholm Chamber of Commerce. An
arbitration award shall be final and binding and arbitration fees shall be paid
by the party as designated by the arbitration award.
Iridium's power of attorney is granted to any Vice President of Iridium and
the Secretary of Iridium. Each director is deemed an authorized person within
the meaning of the Delaware Act.
All notices and other communications provided in the Iridium LLC Agreement
must be in writing, in the English language, and will be sufficiently given if
made to the attention of Iridium's General Counsel and delivered by hand
delivery, telecopier, express courier service or registered/certified mail to
1575 Eye Street, N.W., Washington, DC 20005.
RATIFICATION AND AUTHORIZATION OF CERTAIN ACTIONS
The Iridium LLC Agreement ratifies and approves the actions of the officers
with respect to Iridium's formation. Each officer is authorized to execute and
deliver the Asset Transfer Agreement, Management Services Agreement, Amendment
No. 1 to the Credit Agreement and Credit Agreement, as defined by the Iridium
LLC Agreement. Officers are further authorized to take any action necessary to
satisfy Iridium's obligations under the above listed agreements and amendments.
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DESCRIPTION OF OTHER INDEBTEDNESS
SECURED BANK FACILITY
General. Iridium entered into a Credit Agreement, dated as of December 19,
1997, with Chase Securities Inc. and Barclays Capital, the investment banking
division of Barclays Bank PLC, as Global Arrangers, The Chase Manhattan Bank
("Chase") as Administrative Agent, Barclays Bank PLC ("Barclays"), as
Documentation Agent, and certain other lenders (including Chase and Barclays,
the "Secured Facility Lenders"), providing for a $1 billion senior secured
interim credit facility, of which $350 million would be in the form of term
loans and the remainder, to the extent available, in revolving loans (the
"Secured Bank Facility"). As of December 31, 1997, Iridium had $350 million in
principal amount of term loan borrowings outstanding under the Secured Bank
Facility, all of which has been placed into a collateral account for the benefit
of the Secured Facility Lenders until Iridium is able to satisfy certain
conditions precedent to the disbursement of such funds. Additional borrowings
under the Secured Bank Facility are subject to additional conditions precedent
based, among other things, on the achievement of certain technical and
regulatory milestones.
Maturity and Prepayment. The Secured Bank Facility will mature on
September 30, 1998; provided that Iridium may extend the maturity up to June 30,
1999 if it can demonstrate by July 1, 1998 that it has sufficient available
funding to meet its business plan through the extended maturity. The Secured
Bank Facility is subject to mandatory prepayment as a result of certain debt or
equity issuances, asset dispositions, insurance recoveries and certain other
events. Mandatory prepayments result in equal reductions of the commitments of
the Secured Facility Lenders.
Ranking and Collateral. Iridium's obligations under the Secured Bank
Facility are senior obligations of Iridium and rank, except with respect to
collateral as described below, pari passu in right of payment to the Notes. In
satisfaction of one of the conditions to the disbursement of funds to Iridium
(which Iridium expects will happen in the first quarter of 1998), Iridium's
obligations under the Secured Bank Facility are to be secured by a pledge of
substantially all of Iridium's assets and by the obligations of certain of
Parent's members pursuant to the Reserve Capital Call and Parent's rights to
exercise the Reserve Capital Call (whether or not a default thereunder has
occurred and is continuing). As secured debt, the Secured Bank Facility is
effectively senior to the Notes and other senior indebtedness of Iridium to the
extent of the assets securing the Secured Bank Facility. See "Risk
Factors -- Ranking of the Notes."
In addition, Parent will be required to pledge its ownership interest in
Iridium which will permit the sale of Iridium as a going concern. The exercise
of this pledge by the Secured Facility Lenders would trigger the Change of
Control provisions under the Notes. See "Description of the Notes -- Change of
Control." Certain other provisions of the Secured Bank Facility, however, would
prevent the repurchase of the Notes upon a Change of Control.
Interest and Fees. Borrowings under the Secured Bank Facility bear
interest, at the option of Iridium, at either (i) the Alternate Base Rate
(generally, the higher of the Federal Funds Rate as established by the Federal
Reserve Bank of New York, plus .5%, or Chase's prime commercial lending rate)
plus 1.5% or (ii) an applicable LIBOR rate (which is based on a formula relating
to the London interbank offered rate for a given interest period) plus 2.75%. In
each case, the interest rate would increase by .5% on October 1, 1998 and at the
end of each subsequent three-month period. After execution of definitive Secured
Bank Facility documents, Iridium would be required to pay a commitment fee equal
to .5% per annum on undrawn portions of the Secured Bank Facility.
Conditions to Availability. Loans under the Secured Bank Facility will be
made available in four stages based upon satisfaction of certain significant
additional conditions, including achievement of certain technical requirements
relating to the IRIDIUM System, receipt of certain key regulatory approvals and
evidence of satisfaction of minimum financing goals. As a condition to release
of the initial $350 million loan under the Secured Bank Facility from the
collateral account specified above,
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Iridium must have (i) issued or have outstanding $1,900 million aggregate amount
of unsecured debt, which shall be deemed to include up to $350 million in
conditional commitments of Motorola to either provide such financing or
guarantees with respect thereto; (ii) provided perfected security interests in
the collateral described under "Ranking and Collateral" above; (iii) obtained
certain insurance and named the Secured Facility Lenders as additional insureds
thereunder; (iv) obtained certain assurances from Motorola regarding the
production of subscriber units and (v) obtained the pledge by Parent of its
ownership interests in Iridium.
Stage 1 of the Secured Bank Facility, expected to become available in
January, 1998, will result in the release to Iridium of the proceeds of the $350
million in term loans currently outstanding. Stage 2 of the Secured Bank
Facility, expected to become available on or about April 1, 1998, provides for
loans in a principal amount of up to an additional $200 million. Stage 3,
expected to become available on or about August 1, 1998, provides for loans in a
principal amount of up to an additional $200 million. Stage 4, expected to
become available on or about October 1, 1998, provides for loans in a principal
amount up to an additional $250 million. The four stages are tied to certain
regulatory accomplishments and the timing of specific technical milestones
within various project agreements, including the Space System Contract, the
Terrestrial Network Development Contract, and contracts relating to the IRIDIUM
business support system, the IIU and the control system. While current system
development plans provide for satisfaction of these conditions at or prior to
the time the loans would be required, no assurance can be given as to the timing
of such satisfaction. Delays in the implementation or development of the IRIDIUM
System, or other technical, political or regulatory problems, could have an
adverse effect on the availability of the Secured Bank Facility to pay
obligations as they come due. See "Risk Factors."
Covenants. The Secured Bank Facility contains covenants of Iridium,
including, but not limited to, (i) a requirement to obtain satisfactory
insurance, (ii) limitations on mergers, asset dispositions and acquisitions,
liens, incurrence of additional indebtedness, restricted payments, capital
expenditures, scope of business, certain transactions with affiliates and
amendments or modifications of project related documents which would have a
defined material adverse effect or would increase project costs for the
remaining term of the Secured Bank Facility by more than $75 million over then
budgeted project costs, and (iii) a requirement that Iridium maintain available
or committed financings in an amount sufficient to provide for the payment of
budgeted project costs for the term of the Secured Bank Facility. In addition,
the Secured Bank Facility contains a total debt to capitalization covenant and a
covenant to maintain committed or available funding sources through the term of
the Secured Bank Facility to meet Iridium's projected capital and operating
expenses.
Events of Default. The Secured Bank Facility includes events of default,
including, but not limited to: (i) failure to pay interest, principal or other
amounts with respect to the Secured Bank Facility; (ii) impairment of material
provisions of specified agreements relating to the IRIDIUM System or the
cessation of such provisions to be valid, binding and in full force and effect
or Parent, Iridium or one of its subsidiaries contests or repudiates such
agreements; (iii) certain events of bankruptcy, insolvency, reorganization or
liquidation affecting Iridium, Motorola, certain of their subsidiaries or
certain other project parties; (iv) cross-default to other indebtedness of
Iridium, Motorola or certain of their subsidiaries in excess of specified
amounts; (v) final judgment with respect to Iridium, Motorola or certain of
their subsidiaries in excess of specified amounts; (vi) failure by Iridium,
Motorola, certain of their subsidiaries or other project parties to obtain or
maintain necessary telecommunications or other regulatory approvals; (vii)
breaches of covenants by Iridium, its subsidiaries, Parent or Motorola; (viii)
failure of any representation or warranty made by Iridium, it subsidiaries,
Parent, Motorola or any other project party in connection with the Secured Bank
Facility; (ix) failure in the perfection of the liens granted by Iridium, it
subsidiaries, Parent or Motorola, as the case may be; (x) the occurrence of
certain ERISA or environmental events which could reasonably be expect to result
in a Material Adverse Effect; (xi) failure of Parent to own all of the equity
interests in Iridium; (xii) breach by Motorola of specified agreements relating
to the IRIDIUM System; (xiii) breach by other parties to project related
documents with Iridium if such
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breach could reasonably be expected to have a defined material adverse effect;
and (xiv) failure of Motorola to maintain a specified minimum ownership interest
in Iridium. Certain events specified above will be subject to cure periods to be
specified. In addition, the Secured Bank Facility provides that the
condemnation, seizure or loss of a material portion of the project or the
announcement by Iridium of its intention to abandon or indefinitely defer the
construction of the project will also be events of default.
Subsidiary Guarantees. The obligations of Iridium under the Secured Credit
Facility will be, upon initial availability of funds to Iridium, guaranteed on a
senior secured basis by all of Iridium's current and future domestic
subsidiaries, including Roaming and IP. Senior unsecured indebtedness of each
subsidiary, including pursuant to the Subsidiary Guaranties, will be effectively
subordinated to the guaranties under the Secured Credit Facility to the extent
of the value of pledged assets of such subsidiary.
Chase Securities Inc., an Initial Purchaser, is an affiliate of Chase.
GUARANTEED BANK FACILITY
General. Iridium entered into a Credit Agreement, dated as of August 21,
1996, with Chase Securities Inc. and BZW, the investment banking division of
Barclays Bank PLC, as Global Arrangers, The Chase Manhattan Bank ("Chase") as
Administrative Agent, Barclays Bank PLC ("Barclays"), as Documentation Agent,
and certain other lenders (including Chase and Barclays, the "Guaranteed
Facility Lenders"), providing for a $750 million revolving credit facility (the
"Guaranteed Bank Facility"). As of December 31, 1997, Iridium had $ million
in principal amount of borrowings outstanding under the Guaranteed Bank
Facility. Iridium used the proceeds of the Initial Senior Notes and Original
Notes to permanently reduce the bank commitments under the Guaranteed Bank
Facility to $450 million.
On December 19, 1997, Iridium, the Guaranteed Facility Lenders and the
agents under the Guaranteed Bank Facility entered into an amendment thereto
which, among other things, conformed certain covenants of Iridium to the Secured
Bank Facility and extended the term of the Guaranteed Bank Facility to June 30,
1999.
Motorola Guarantee. Iridium's borrowings under the Guaranteed Bank
Facility are guaranteed by Motorola pursuant to the Motorola Guarantee up to an
aggregate amount of $750 million (inclusive of interest). The Motorola Guarantee
was issued under a guarantee agreement between Motorola and Chase as
Administrative Agent, dated as of August 21, 1996 (the "Guarantee Agreement").
Pursuant to the Motorola MOU, Iridium has agreed that the Guaranteed Bank
Facility (and therefore the Motorola Guarantee) would be permanently reduced by
the net proceeds to Iridium of certain offerings of senior notes of Iridium
prior to or on December 31, 1997, to the extent the aggregate amount of such net
proceeds exceeds $650 million (provided that the Guaranteed Bank Facility is not
required to be reduced below $275 million). Accordingly, as a result of the
offering of the Initial Senior Notes and the Original Notes, Iridium permanently
reduced the commitment of the bank lenders in the Guaranteed Bank Facility and
the corresponding Motorola Guarantee to $450 million. For purposes of the
Original Offering only, Motorola waived this requirement upon Iridium's
permanent reduction of the Guaranteed Bank Facility and the corresponding
Motorola Guarantee by $205 million (to $450 million). See "Certain Relationships
and Related Transactions of Iridium -- Motorola Related Matters -- Motorola MOU
and Agreement Regarding Guarantee." Depending on market conditions, Iridium may
make additional senior note offerings in order to further reduce the Guaranteed
Bank Facility.
The Guarantee Agreement contains covenants by Motorola, including a
requirement to provide notice of defaults relating to Motorola and its
subsidiaries under the Guaranteed Bank Facility, and limitations on mergers,
liens and sale and leaseback transactions, the breach of which would cause an
event of default under the Guaranteed Bank Facility.
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Pursuant to the Motorola MOU, Motorola has conditionally agreed that, after
giving effect to any permanent reduction in the Guaranteed Bank Facility
resulting from the proceeds of the offering of the Units and Series B Notes,
Motorola will guarantee up to an additional $350 million of borrowings made
prior to February 28, 1999 under the Guaranteed Bank Facility pursuant to the
Motorola Additional Guarantee at Iridium's option. See "Certain Relationships
and Related Transactions of Iridium -- Motorola Related Matters -- Motorola MOU
and Agreement Regarding Guarantee." Iridium has not requested that the
Guaranteed Bank Facility be increased by the amount of Motorola Additional
Guarantee.
Maturity. Borrowings under the Guaranteed Bank Facility mature in June,
1999; provided, however, that as a result of the above-described limitation on
the amount guaranteed under the Motorola Guarantee, the obligations of Iridium
under the Guaranteed Bank Facility will become due if the principal amount of
borrowings thereunder exceeds an amount equal to 99 1/3% (rounded down to the
nearest 1,000,000) of the total then outstanding bank commitments thereunder.
Pursuant to the Motorola MOU, Motorola has agreed to extend the Motorola
Guarantee until after the Stated Maturity of the Initial Senior Notes (which is
the same date as the Stated Maturity of the Notes).
Ranking. Iridium's obligations to the Guaranteed Facility Lenders under
the Guaranteed Bank Facility are senior unsecured obligations of Iridium and
rank pari passu in right of payment to the Notes.
Interest. Borrowings under the Guaranteed Bank Facility bear interest, at
the option of Iridium, at the rate of either (i) the Base Rate (generally, the
higher of the Federal Funds Rate as established by the Federal Reserve Bank of
New York, plus 0.50%, or Chase's prime commercial lending rate) or (ii) an
applicable LIBOR rate (which is based on a formula relating to the London
interbank offered rate for a given interest period) increased to reflect reserve
requirements applicable to borrowings by U.S. banks in U.S. dollars outside of
the U.S., plus 0.25%. In addition, Iridium pays a commitment fee equal to .10%
per annum on any amounts not borrowed under the Guaranteed Bank Facility.
Conditions to Borrowing. Borrowings under the Guaranteed Bank Facility are
subject to certain conditions, including the absence of any default or event of
default and other conditions customary with respect to similar facilities.
Proceeds of any such borrowing must be used by Iridium to finance approved
project costs, including payments to Motorola under the Space System Contract.
Covenants. The Guaranteed Bank Facility contains covenants of Iridium,
including, but not limited to, insurance requirements, limitations on mergers,
consolidations and sales of certain assets, restrictions on certain transactions
with affiliates, limitations on liens, the incurrence of additional indebtedness
and certain restricted payments, and restrictions on Iridium's ability to engage
in any business or make any investments other than in connection with the
commercialization of the IRIDIUM System and related businesses. Through the
Guarantee Agreement, the Guaranteed Bank Facility also imposes covenants on
Motorola.
Events of Default. The Guaranteed Bank Facility contains events of default
for (i) failure to pay principal, interest or other amounts due; (ii) breach by
Iridium or Motorola of its respective covenants; (iii) cross-default to other
indebtedness of Iridium or its subsidiaries or Motorola or certain of its
subsidiaries in excess of specified outstanding amounts; (iv) certain events of
bankruptcy, insolvency or reorganization affecting Iridium or its subsidiaries
or Motorola or certain of its subsidiaries; (v) final judgments against Iridium
or Motorola or certain of their subsidiaries in excess of specified amounts;
(vi) termination, repudiation or unenforceability of the Motorola Guarantee and
defaults under the Guarantee Agreement; and (vii) failure of Motorola to
maintain a direct and indirect ownership interest in Parent of at least
13,266,713 Class 1 Interests and (as such number may be adjusted by stock
splits, stock dividends, etc.) free and clear of any lien or other contractual
restrictions and (viii) failure of Parent to own all of the equity interests of
Iridium. Certain defaults under the Guaranteed Bank Facility are subject to
specified cure periods.
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If any event of default under the Guaranteed Bank Facility is continuing,
Guaranteed Facility Lenders may exercise various remedies under the credit
agreement relating thereto. In addition, after expiration of a grace period and
a giving of prior notice to Motorola, the Guaranteed Facility Lenders may, but
are not obligated to, demand payment from Motorola under the Guarantee
Agreement.
Agreement Regarding Guarantee. In connection with the Motorola Guarantee,
Iridium and Motorola entered into the Original Agreement Regarding Guarantee,
and in connection with the offering of the Initial Senior Notes and the Motorola
MOU, Parent and Motorola amended and restated the Original Agreement Regarding
Guarantee (as amended and restated, the "Agreement Regarding Guarantee").
Pursuant to the Agreement Regarding Guarantee (and the transfer of obligations
under the Agreement Regarding Guarantee pursuant to the Asset Drop-Down
Transaction), Iridium has agreed to reimburse Motorola for amounts paid by
Motorola under the Guarantee Agreement; provided, that if the Guaranteed Bank
Facility is accelerated as result of a Motorola-Based Default (as defined in the
Agreement Regarding Guarantee) such reimbursement will be made on the same terms
as provided in the Guaranteed Bank Facility. For further information regarding
the Original Agreement Regarding Guarantee, the Agreement Regarding Guarantee
and the Motorola MOU, including certain covenants of Iridium, the compensation
to Motorola for the Motorola Guarantee and amendments to the Guaranteed Bank
Facility and Motorola Guarantee, see "Certain Relationships and Related
Transactions of Iridium."
Chase Securities Inc., an Initial Purchaser, is an affiliate of Chase.
INITIAL SENIOR NOTES
General. The 13% Senior Notes due 2005, Series A were issued in an
aggregate principal amount of $300 million on July 16, 1997. The 14% Senior
Notes due 2005, Series B were issued in an aggregate principal amount of $500
million on July 16, 1997.
Ranking. The Initial Senior Notes are unsecured senior obligations of the
Issuers. The Initial Senior Notes rank pari passu in right of payment with the
Notes and all other existing and future senior Indebtedness of the Issuers,
other than any defined subordinated obligations. The Initial Senior Notes are
unsecured obligations of Iridium and are effectively subordinated to any secured
Indebtedness of the Issuers to the extent of the value of the assets securing
such Indebtedness.
Interest. Interest accrues on the Series A Notes from the original date of
issuance at an annual rate of 13%. Interest is payable semi-annually in arrears
on January 15 and July 15 of each year, commencing January 15, 1998. Interest
accrues on the Series B Notes from the original date of issuance at an annual
rate of 14%. Interest is payable semi-annually in arrears on January 15 and July
15 of each year, commencing January 15, 1998.
Maturity and Redemption. The Initial Senior Notes mature on July 15, 2005.
Except as described below, the Issuers may not redeem the Initial Senior Notes
prior to July 15, 2002. On or after such date, either Issuer may redeem the
Initial Senior Notes, in whole or in part, at any time at the redemption prices
set forth herein, together with accrued and unpaid interest and liquidated
damages on such Initial Senior Notes, if any, to the date of redemption. At any
time and from time to time on or prior to July 15, 2000, either Issuer may,
subject to certain requirements, redeem in the aggregate up to 33 1/3% of the
original aggregate principal amount of the Initial Senior Notes with the cash
proceeds to Iridium of one or more Equity Offerings at a redemption price equal
to 113.500% of the principal amount of any Series A Senior Notes being redeemed,
or 115.000% of the principal amount of any Series B Notes being redeemed, plus
accrued and unpaid interest and liquidated damages on such Initial Senior Notes,
if any, thereon to the date of redemption; provided that at least 66 2/3% of the
original aggregate principal amount of the Initial Senior Notes must remain
outstanding immediately after each such redemption.
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Restrictive Covenants; Events of Default. The indenture governing the
Series A Notes (the "Series A Indenture") and the indenture governing the Series
B Notes (the "Series B Indenture" and, together with the Series A Indenture, the
"Initial Senior Indentures") contain covenants and events of default
substantially identical to the covenants and events of default contained in the
Indenture governing the Notes. See "Description of Notes."
Right to Require Repurchase upon Change of Control. The Initial Senior
Indentures provide holders of Initial Senior Notes with a right to require the
repurchase of their Initial Senior Notes upon the occurrence of a Change of
Control that is substantially identical to the right of repurchase upon a Change
of Control provided to Holders of the Notes by the Indenture governing the
Notes. Accordingly, in the event of a Change of Control, Holders of the Notes
and holders of the Initial Senior Notes would each have the right to require
repurchase of their Notes and Initial Senior Notes. See "Description of
Notes -- Change of Control."
Use of Proceeds from Insurance and Sales of Assets and Subsidiary
Stock. The Initial Senior Indentures provide that all Net Available Proceeds
(as defined) from any Asset Disposition (as defined) and certain Insurance
Proceeds (as defined) shall be applied (within 180 days in the case of an Asset
Disposition, and promptly in the case of the receipt of Insurance Proceeds) (1)
first, to the permanent repayment or reduction of Indebtedness then outstanding
under any Bank Credit Agreement (as defined) or Vendor Financing Facility (as
defined), to the extent such agreement or facility would require such
application or prohibit payments pursuant to the following clause (2) and (2)
second, to the extent of remaining Net Available Proceeds or Insurance Proceeds,
as the case may be, to make an offer to purchase outstanding Initial Senior
Notes at 100% of the principal amount of the Initial Senior Notes, plus accrued
and unpaid interest and liquidated damages, if any, to the date of purchase,
and, to the extent required by the terms thereof, any other Indebtedness of
Iridium or a Restricted Subsidiary that ranks pari passu with the Initial Senior
Notes at a price no greater than 100% of the principal amount thereof plus
accrued and unpaid interest and liquidated damages, if any, to the date of
purchase. The Indenture governing the Notes contains a substantially identical
covenant. Accordingly, in the event of an Asset Disposition or the receipt of
Insurance Proceeds, Holders of the Notes and holders of the Initial Senior Notes
would rank pari passu with respect to their respective rights to require
repurchase of the Notes and the Initial Senior Notes. See "Description of Notes
-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and
"-- Maintenance of Insurance."
SENIOR SUBORDINATED NOTES
General. The 14 1/2% Senior Subordinated Discount Notes due 2006 (the
"14 1/2% Notes") had an accreted value of approximately $253 million at
September 30, 1997 and will fully accrete to an aggregate face value of
approximately $480 million on March 1, 2001.
Ranking. The 14 1/2% Notes are unsecured obligations of Iridium and will
be junior in right of payment to the Notes, the Initial Senior Notes, the
Guaranteed Bank Facility and the expected Secured Bank Facility.
Interest. The 14 1/2% Notes were issued at a discount from their principal
amount and accrete in value until March 1, 2001, at which time cash interest
accrues at a rate of 14 1/2% per annum payable semi-annually.
Maturity and Redemption. The 14 1/2% Notes mature on March 1, 2006. The
14 1/2% Notes may be redeemed at declining premium beginning on March 1, 2001,
at redemption price of 107.500% declining to no premium beginning on March 1,
2004.
Events of Default. Events of default under the 14 1/2% Notes include
payment defaults, and certain events of bankruptcy, under other debt instruments
in excess of $10 million and the termination by Motorola of the Space System
Contract prior to delivery thereunder by Motorola of the Space System (as
defined therein), provided, that such termination has not been contested by
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Iridium in accordance with the Space System Contract or by appropriate
proceedings and, if such termination is so contested, within 180 days of such
notice if such termination has not been withdrawn or declared ineffective by any
court or mediator having jurisdiction.
DESCRIPTION OF NOTES
GENERAL
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of October 17, 1997 (as supplemented, the "Indenture") among
the Iridium Parties and State Street Bank and Trust Company, as trustee (the
"Trustee"). A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part and is available
upon request to Iridium at 1575 Eye Street N.W., Washington, D.C. 20005,
Attention: Secretary. The following summary of the material provisions of the
Indenture and the Notes does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act. Capitalized terms used herein
and not otherwise defined have the meanings set forth in the section "-- Certain
Definitions" below.
Principal of, premium and Liquidated Damages, if any, on and interest on
the Notes will be payable, and the Notes may be exchanged or transferred, at the
office or agency of the Issuers in the Borough of Manhattan, the City of New
York, except that, at the option of either Issuer, payment of interest may be
made by check mailed to the registered holders of the Notes at their registered
addresses.
The Original Notes were, and the Exchange Notes will be, issued only in
fully registered form, without coupons, in denominations of $1,000 and any
integral multiple of $1,000. No service charge will be made for any registration
of transfer or exchange of Notes, but the Issuers may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
Pursuant to the Asset Drop-Down Transaction, substantially all of the
assets and liabilities of Parent were transferred to Iridium, including, without
limitation, all obligations of Parent under the Indenture and other obligations
with respect to the Notes. See "Parent's Ownership Structure and Strategic
Investors -- Asset Drop-Down Transaction." As a result of the Asset Drop-Down
Transaction and the related supplemental indenture with respect to the Notes
executed by Iridium, Parent and the trustee, Iridium has been substituted for
Parent, and Parent has been released from all obligations under the Indenture
and the Notes. Unless otherwise specified, the description of the notes set
forth below gives effect to the Asset Drop-Down Transaction and such
substitution.
As of December 31, 1997, Iridium had no Subsidiaries other than Capital and
the Initial Guarantors. Capital is a co-issuer of the Notes. The Initial
Guarantors are Guarantor Subsidiaries (as defined). If Iridium creates or
acquires any Subsidiary in the future, such Subsidiary will be required to
Guarantee the Notes unless such Subsidiary is a Foreign Subsidiary or is
designated by Iridium as an Unrestricted Subsidiary in accordance with the
Indenture. Any Unrestricted Subsidiaries (including Foreign Subsidiaries
designated as such) will not be subject to the restrictive covenants contained
in the Indenture.
TERMS OF THE NOTES
The Original Notes are, and the Exchange Notes will be, unsecured senior
obligations of the Issuers, limited to $300 million aggregate principal amount,
and will mature on July 15, 2005. Each Note will bear interest at a rate of
11 1/4% per annum from October 17, 1997 or from the most recent date to which
interest has been paid or provided for, payable semi-annually in arrears on
January 15 and July 15 of each year, commencing on January 15, 1998, to Holders
of Notes of record at the
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close of business on the January 1 or July 1 immediately preceding the
applicable interest payment date.
OPTIONAL REDEMPTION
Except as described in the next succeeding paragraph, the Notes will not be
redeemable at the option of the Issuers prior to July 15, 2002. On and after
such date, the Notes will be redeemable, at either Issuer's option, in whole or
in part, at any time upon not less than 30 nor more than 60 days' prior notice
mailed by first-class mail to each Holder of Notes, at such Holder's registered
address, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of record Holders of Notes on
the relevant record date to receive interest due on the relevant interest
payment date that is on or prior to the date of redemption), if redeemed during
the 12-month period commencing on July 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---------------------------------------------------------------- ----------
<S> <C>
2002............................................................ 105.625%
2003............................................................ 102.813%
2004 and thereafter............................................. 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to July 15,
2000, either Issuer may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of Notes with the cash proceeds to Iridium of one or
more Equity Offerings, at a redemption price (expressed as a percentage of
principal amount thereof) of 111.250%, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date (subject to the right of
record Holders of the Notes on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption); provided, however, that at least 66 2/3% of the original aggregate
principal amount of the Notes must remain outstanding after each such
redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion deems to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The Indebtedness evidenced by the Notes will be unsecured senior
obligations of the Issuers and will rank senior in right of payment to any
existing and future Subordinated Obligations of the Issuers, and pari passu in
right of payment with the Initial Senior Notes and all other existing and future
senior Indebtedness of the Issuers. The Notes will be effectively subordinated
to any Secured Indebtedness of the Issuers, including the Secured Bank Facility,
to the extent of the value of the assets securing such Indebtedness.
The indebtedness evidenced by a Subsidiary Guaranty is unsecured senior
Indebtedness of the Guarantor Subsidiary. The payment of a Subsidiary Guaranty
ranks pari passu in right of payment with any existing and future senior
Indebtedness of such Guarantor Subsidiary, including guarantees under the
Secured Bank Facility, and is senior in right of payment to any existing and
future Subordinated Obligations of such Guarantor Subsidiary. Each Subsidiary
Guaranty also is effectively subordinated to any Secured Indebtedness of the
Guarantor Subsidiary to the extent of the value of
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the assets securing such Indebtedness. See "Risk Factors -- Possible
Unenforceability of Subsidiary Guaranties."
As of December 31, 1997, after giving pro forma effect to the issuance of
the Initial Senior Notes and the Notes and the application of a portion of the
proceeds from the Initial Senior Notes and the Notes to the permanent reduction
of the Guaranteed Bank Facility, the Iridium Parties would have had outstanding
$ million in aggregate principal amount of unsecured senior Indebtedness
(including the principal amount of the Notes) and approximately $ million in
aggregate principal amount of Indebtedness that is subordinated to the Notes.
"As of December 31, 1997, Iridium had outstanding approximately $350 million of
senior secured Indebtedness. Iridium expects to seek other senior secured bank
financing in order to meet its expected funding requirements through at least
year-end 1999, the last year in which Iridium projects negative cash flow and a
net increase in year-end borrowings. See "Description of Other Indebtedness,"
"Description of Notes -- Certain Covenants -- Limitation on Indebtedness" and
"-- Limitation on Liens."
SUBSIDIARY GUARANTIES
Roaming and IP (collectively, the "Initial Guarantors"), each a Delaware
limited liability company, provided Subsidiary Guaranties on the Issue Date. In
the event that Iridium acquires or creates a Subsidiary other than a Foreign
Subsidiary, Iridium will cause such Subsidiary (unless such Subsidiary is an
Unrestricted Subsidiary) (together with the Initial Guarantors, the "Guarantor
Subsidiaries") to, jointly and severally, as primary obligors and not merely as
sureties, irrevocably Guarantee on a senior unsecured basis the performance and
punctual payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all obligations of the Issuers under the Indenture and the Notes
issued pursuant thereto, whether for payment of principal of or premium,
interest or Liquidated Damages on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by the Guarantor Subsidiaries being
herein called the "Guaranteed Obligations"). Iridium may cause any Foreign
Subsidiary to execute and deliver a Subsidiary Guaranty in accordance with the
provisions of the Indenture, in which case such Foreign Subsidiary will be a
"Guarantor Subsidiary" for purposes of the Indenture. The Guarantor Subsidiaries
will agree to pay, in addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or the
Holders in enforcing any rights under the Subsidiary Guarantees. Each Subsidiary
Guaranty will be limited in amount to an amount not to exceed the maximum amount
that can be Guaranteed by the applicable Guarantor Subsidiary without rendering
such Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. See "-- Certain Covenants -- Future Guarantor Subsidiaries"
below.
Each Subsidiary Guaranty will be a continuing guarantee and will (a) remain
in full force and effect until payment in full of all the Guaranteed Obligations
covered thereby, (b) be binding upon each Guarantor Subsidiary and (c) inure to
the benefit of and be enforceable by the Trustee, the Holders and their
successors, transferees and assigns.
A Subsidiary Guaranty will be released upon (i) the sale of all of the
Capital Stock, or all or substantially all of the assets, of the applicable
Guarantor Subsidiary (in each case other than to Iridium or a Subsidiary of
Iridium), (ii) the designation by Iridium of the applicable Guarantor Subsidiary
as an Unrestricted Subsidiary, in each case in compliance with the Indenture or
(iii) the reorganization of the applicable Guarantor Subsidiary as a Foreign
Subsidiary.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the right
to require the Issuers to repurchase all or any part of such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount of such Notes, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (subject to the right of Holders of record on the relevant
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record date to receive interest due on the relevant interest payment date),
pursuant to the offer described below and the other procedures set forth in the
Indenture; provided, however, that notwithstanding the occurrence of a Change of
Control, the Issuers will not be obligated to purchase any Note pursuant to this
covenant to the extent that the Issuers have exercised their rights to redeem
such Note as described under "-- Optional Redemption".
A "Change of Control" means the occurrence of any of the following:
(a) one or more Dispositions which cause the amount of Capital Stock
of Iridium held directly by Motorola to be reduced by more than 50% as
compared to its direct holding of Capital Stock in Iridium as of July 16,
1997 (in each such case without giving effect to any rights, warrants or
options to purchase Capital Stock of Iridium, unless exercised prior
thereto).
(b) the first day on which Iridium fails to own, of record and
beneficially, 100% of the Capital Stock of Capital (other than directors'
qualifying shares);
(c) any sale, lease, or other transfer (in one transaction or in a
series of related transactions) is made by Iridium or its Restricted
Subsidiaries of all or substantially all of the assets of Iridium and its
Restricted Subsidiaries to any Person (other than in connection with the
Asset Drop-Down Transaction); or
(d) the adoption of a plan relating to the liquidation or dissolution
of Iridium or Capital.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
result from (x) the acquisition by IWCL, Motorola or any wholly owned subsidiary
of Motorola of substantially all the assets of Iridium, (y) the Asset Drop-Down
Transaction or any transfer of assets or merger reversing the Asset-Drop-Down
Transaction or (z) the merger of Iridium with and into IWCL, Motorola or any
wholly owned subsidiary of Motorola. See "Parent's Ownership Structure and
Strategic Investors -- Asset Drop-Down Transaction."
Within 30 days following any Change of Control, the Issuers will mail a
notice to each Holder with a copy to the Trustee stating, among other things:
(1) that a Change of Control has occurred and that such Holder has the right to
require the Issuers to purchase all or any portion of such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount of Notes, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest due on the relevant interest payment date); (2) the circumstances and
relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization, each after
giving effect to such Change of Control); (3) the repurchase date (which will be
no earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (4) the instructions determined by the Issuers, consistent with
this covenant, that a Holder must follow in order to have its Notes or any
portion thereof purchased.
The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Issuers will comply with the applicable
securities laws and regulations and will not be deemed to have breached their
obligations described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Issuers and the Initial Purchasers. Management has no present intention and
is not aware that Motorola has any present intention to engage in a transaction
involving a Change of Control, although it is possible that the Issuers or
Motorola would decide to do so in the future. Subject to the limitations
discussed below, the Issuers or Motorola could, in the future, enter into
certain transactions, including dispositions, acquisitions, refinancings or
other recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could change the ownership, increase the amount of
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indebtedness outstanding at such time or otherwise affect Iridium's capital
structure or credit ratings.
The Secured Bank Facility and the Guaranteed Bank Facility contain and
other future indebtedness of the Issuers may contain, prohibitions of certain
events which would constitute a Change of Control or require such indebtedness
to be repurchased, repaid or redeemed upon certain events which would constitute
a Change of Control. Moreover, the exercise by Holders of the right to require
the Issuers to repurchase the Notes is likely to cause a default under the
Secured Bank Facility, and could cause a default under other Indebtedness of
Iridium, even if the Change of Control itself does not. In addition, the
Issuers' ability to pay cash to the Holders upon a repurchase may be limited by
the Issuers' then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any repurchases
required in connection with a Change of Control. Finally, the Issuers' ability
to redeem the Notes may be limited by applicable securities laws. The Issuers'
failure to purchase Notes in connection with a Change of Control would result in
a default under the Indenture.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) Iridium will not, and will not permit any
Restricted Subsidiary to, Incur any Indebtedness (including any Acquired
Indebtedness) unless (i) immediately after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds thereof, the
Debt to Cash Flow Ratio would be less than 4.0 to 1.0 and (ii) if such
Indebtedness is Incurred by a Restricted Subsidiary, such Restricted Subsidiary
is a Guarantor Subsidiary. Notwithstanding the foregoing, prior to June 30,
2000, Iridium, Capital and any other Restricted Subsidiary that is a Guarantor
Subsidiary may Incur Indebtedness if immediately after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Debt to Capital Ratio would be less than 65%.
(b) Notwithstanding the foregoing paragraph (a), Iridium, Capital and any
other Restricted Subsidiary that is a Guarantor Subsidiary may Incur the
following Indebtedness:
(i) Indebtedness Incurred under any one or more Bank Credit
Agreements, Vendor Financing Facilities or other agreements or arrangements
to finance the Build-out of the IRIDIUM System; provided, however, that
Indebtedness Incurred pursuant to this clause (i), other than Indebtedness
Incurred pursuant to a Bank Credit Agreement or Vendor Financing Facility,
will not have a Stated Maturity earlier than the Stated Maturity of the
Notes, and will not be mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or be redeemable at the option of the holder
thereof, in whole or in part, prior to the Stated Maturity of the Notes
(other than pursuant to provisions which are substantially similar to those
contained in the Indenture which permit the holders of such Indebtedness to
require the issuer thereof to repurchase or repay such Indebtedness upon a
Change of Control (or an event substantially similar thereto) or to make an
offer to purchase as a result of the occurrence of an Asset Disposition or
receipt of insurance proceeds (or an event substantially similar thereto));
(ii) After Commercial Activation, Indebtedness under any one or more
Bank Credit Agreements or other agreements or arrangements to finance
working capital requirements of Iridium and any Refinancing Indebtedness in
respect of such Indebtedness; provided, however, at the time of the
Incurrence of such Indebtedness and after giving effect thereto, the
aggregate principal amount of all Indebtedness Incurred pursuant to this
clause (ii) and then outstanding does not exceed $950 million;
(iii) Indebtedness Incurred under any one or more Bank Credit
Agreements, Vendor Financing Facilities or other agreements or arrangements
that is guaranteed pursuant to the Motorola Additional Guarantee; provided,
however, at the time of Incurrence of such Indebted-
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ness and after giving effect thereto, the aggregate amount of all
Indebtedness incurred pursuant to this clause (iii) and then outstanding
does not exceed $350 million;
(iv) Indebtedness owed by Iridium to Capital or any Wholly-Owned
Restricted Subsidiary that is a Guarantor Subsidiary or Indebtedness owed
by Capital or any Wholly-Owned Restricted Subsidiary that is a Guarantor
Subsidiary to Iridium or to Capital or another Wholly-Owned Restricted
Subsidiary that is a Guarantor Subsidiary; provided, however, that upon
either (x) the transfer or other disposition by Capital, such Wholly-Owned
Restricted Subsidiary or Iridium of any Indebtedness so permitted to a
Person other than Iridium, Capital or another Wholly-Owned Restricted
Subsidiary that is a Guarantor Subsidiary or (y) the issuance, sale, lease,
transfer or other disposition of shares of Capital Stock (including by
consolidation or merger, but not including directors' qualifying shares or
interests required to be held by foreign nationals, in each case to the
extent mandated by applicable law) of such Wholly-Owned Restricted
Subsidiary or Capital to a Person other than Iridium, Capital or another
such Wholly-Owned Restricted Subsidiary, the provisions of this clause (iv)
will no longer be applicable to such Indebtedness and such Indebtedness
will be deemed to have been Incurred by the issuer thereof at the time of
such issuance, sale, lease, transfer or other disposition;
(v) Refinancing Indebtedness Incurred to Refinance Indebtedness
Incurred pursuant to the first paragraph of this covenant or pursuant to
clause (i), (ii), (iii), (vii) or (viii) or this clause (v) of this
paragraph;
(vi) Indebtedness consisting of Permitted Interest Rate or Currency
Protection Agreements;
(vii) Indebtedness represented or evidenced by the Notes and the
Exchange Notes, and Indebtedness of the Guarantor Subsidiaries evidenced by
the Subsidiary Guaranties;
(viii) Indebtedness outstanding on the Issue Date (other than the
Guaranteed Bank Facility and other Indebtedness described in clause (i),
(ii), (iii), (iv) or (vii) of this paragraph);
(ix) Indebtedness consisting of performance and other similar bonds
and reimbursement obligations Incurred in the ordinary course of business
securing the performance of contractual, franchise or license obligations
of Iridium, Capital or a Restricted Subsidiary, or in respect of a letter
of credit obtained to secure such performance; and
(x) Indebtedness in an aggregate principal amount which, together with
all other Indebtedness of Iridium, Capital and other Restricted
Subsidiaries that are Guarantor Subsidiaries outstanding on the date of
such Incurrence (without duplication and other than Indebtedness permitted
by clauses (i) through (ix) above or the first paragraph of this covenant)
does not exceed $100.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness Iridium, Capital and the other Restricted Subsidiaries are
permitted to Incur, Iridium, Capital or such Restricted Subsidiary, as the case
may be, will have the right, in Iridium's sole discretion, to classify such item
of Indebtedness at the time of its Incurrence and will only be required to
include the amount and type of such Indebtedness under the clause permitting the
Indebtedness as so classified.
Limitation on Restricted Payments. (a) Iridium will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Issuers), except dividends or
distributions payable solely in its Capital Stock and cash to the extent
required to pay for fractional shares of such Capital Stock (other than
Disqualified Stock) or payable to Iridium or another Restricted Subsidiary
(and, if such Restricted Subsidiary has
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shareholders other than the Issuers or other Restricted Subsidiaries, to
its other shareholders on a pro rata basis or on a basis that results in
the receipt by the Issuers or a Restricted Subsidiary of dividends or
distributions of equal or greater value);
(ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of Iridium or any Restricted Subsidiary held by Persons other
than Iridium or another Restricted Subsidiary;
(iii) purchase, repurchase, redeem, defease, acquire or retire for
value, or otherwise make any principal payment on, any Subordinated
Obligations prior to the scheduled maturity, scheduled repayment or
scheduled sinking fund payment thereof (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation
of satisfying a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition, or
any purchase, repurchase, redemption or other acquisition or prepayment
thereof in connection with any Refinancing thereof permitted pursuant to
clause (v) of paragraph (b) of the covenant described under "-- Limitation
on Indebtedness"); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement, Investment or payment being
herein referred to as a "Restricted Payment"), if at the time Iridium or
such Restricted Subsidiary makes such Restricted Payment: (1) a Default has
occurred and is continuing (or would result therefrom); (2) Iridium could
not Incur at least $1.00 of additional Indebtedness pursuant to the terms
of the first sentence of paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments declared or made
subsequent to the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income of Iridium accrued during
the period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
July 16, 1997 occurs to the end of the most recent fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, in case such Consolidated Net Income is a
deficit, minus 100% of such deficit); provided, however, that the
aggregate amount calculated pursuant to this clause (A) (if such
aggregate amount is a negative amount) shall be reset to zero on the
first date on which the Notes are assigned an Investment Grade Rating by
both Rating Agencies;
(B) the aggregate Net Cash Proceeds received by Iridium from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Restricted Subsidiary and other than an issuance or sale to an employee
stock ownership plan or to a trust established by Iridium or any
Restricted Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of Iridium is reduced on the
balance sheet of Iridium upon the conversion or exchange (other than by
a Restricted Subsidiary) subsequent to the Issue Date of any
Indebtedness of Iridium convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of Iridium (less the amount of any cash,
or the fair value of any other property or assets of Iridium or any
Restricted Subsidiary, distributed by Iridium upon such conversion or
exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in each
case to Iridium or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to Iridium's equity
interest in such Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary (as determined by the Board of Directors
in the manner described in paragraph (c) below) at the time such
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Unrestricted Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum does not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by Iridium or any Restricted Subsidiary
in such Unrestricted Subsidiary.
(b) Notwithstanding the foregoing, Iridium may
(i) subject to clause (vii) below, pay any dividend on Capital Stock
of any class within 60 days after the declaration thereof if, on the date
when the dividend was declared, Iridium could have paid such dividend in
accordance with the foregoing provisions;
(ii) repurchase any Capital Stock from Persons who were formerly
officers, managers or employees of Iridium or any of its Subsidiaries (or
from IWCL in connection with or relating to a repurchase by IWCL of its
Capital Stock from such Persons), provided, however, that the aggregate
amount of all such repurchases made pursuant to this clause (ii) will not
exceed $2.0 million, plus the aggregate cash proceeds received by Iridium
since July 16, 1997 from the issuance of its Capital Stock to officers,
managers and employees of Iridium or any of its Subsidiaries (or from IWCL
in connection with or relating to such an issuance by IWCL to such
Persons);
(iii) Refinance, and permit its Restricted Subsidiaries to Refinance,
any Indebtedness otherwise permitted to be Refinanced by clause (v) of
paragraph (b) under the covenant described under "-- Limitation on
Indebtedness" above;
(iv) during the period Iridium is treated as a partnership for U.S.
federal income tax purposes and after such period to the extent relating to
the liability for such period, make distributions in respect of members' or
partners' income tax liability with respect to Iridium (whether directly
incurred or indirectly incurred after the Asset Drop-Down Transaction) in
an amount not to exceed the Tax Amount;
(v) make distributions to IWCL to pay IWCL's ordinary and reasonable
operating expenses related to Iridium, as set forth in an Officers'
Certificate delivered to the Trustee;
(vi) repurchase any Capital Stock pursuant to Section 11.03 of the
Parent LLC Agreement in the event a member of Iridium fails to pay any of
the amounts required by a Reserve Capital Call (see "Description of Iridium
LLC Limited Liability Company Agreement -- Capital Contributions; Reserve
Capital Call");
(vii) make any Restricted Payment by exchange for, or out of the
proceeds of the substantially concurrent sale of, or capital contribution
in respect of, Capital Stock of Iridium (other than Disqualified Stock and
other than Capital Stock issued or sold to a Subsidiary of Iridium or an
employee stock ownership plan or to a trust established by Iridium or any
of its Subsidiaries for the benefit of their employees);
(viii) make any Restricted Payment pursuant to the Interest Exchange
Agreement, the Share Issuance Agreement, the Master Subscription Agreement
or the Management Services Agreement; and
(ix) make other Restricted Payments in an aggregate amount not to
exceed $10.0 million.
Any Restricted Payment made pursuant to clauses (ii), (iii), (iv), (vii),
(viii) and (ix) of the immediately preceding paragraph will be excluded from the
calculation of the aggregate amount of Restricted Payments made since the Issue
Date; provided, however, that the Net Cash Proceeds from the issuance of Capital
Stock pursuant to clauses (ii) and (vii) of the immediately preceding paragraph
will be excluded from the calculation of amounts under clause (B) of the second
preceding paragraph. A dividend or distribution by a Restricted Subsidiary in
respect of its Capital Stock will only be deemed to be a Restricted Payment to
the extent such dividend or distribution is paid to entities other than Iridium
and the Restricted Subsidiaries.
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(c) The net proceeds from the issuance of shares of Capital Stock upon
conversion of Indebtedness will be deemed to be an amount equal to (i) the
accreted value of such Indebtedness on the date of such conversion and (ii) the
additional consideration, if any, received by Iridium upon such conversion
thereof, less any cash payment on account of fractional shares. The amount of
all Restricted Payments (other than cash) will be the fair market value
(evidenced by a resolution of the Board of Directors determined in good faith
and set forth in an Officers' Certificate delivered to the Trustee) on the date
of the Restricted Payment of the asset(s) proposed to be transferred by Iridium
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, Iridium will
deliver to the Trustee an Officers' Certificate identifying each Restricted
Payment made by Iridium during such fiscal quarter and stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations may be based upon Iridium's latest available financial statements.
If Iridium makes a Restricted Payment which, at the time of the making of such
Restricted Payment, would in the good faith determination of Iridium be
permitted under the Indenture, such Restricted Payment will be deemed to have
been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to Iridium's financial statements affecting
Consolidated Net Income for any period.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. Iridium will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions to
Iridium or any Restricted Subsidiary on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, (ii) pay any
Indebtedness owed to Iridium or any Restricted Subsidiary, (iii) make any loans
or advances to Iridium or any Restricted Subsidiary or (iv) transfer any of its
property or assets to Iridium or any Restricted Subsidiary, except:
(1) any encumbrance or restriction pursuant to an agreement relating
to the Guaranteed Bank Facility or any other agreement in effect at or
entered into on the Issue Date or any encumbrance or restriction imposed
pursuant to the Indenture or the Notes (or similar limitations pursuant to
other notes issued by Iridium or other indentures relating thereto that are
substantially similar to those set forth in the Indenture) or any agreement
relating to the Secured Bank Facility;
(2) any encumbrance or restriction pursuant to an agreement relating
to any Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person so acquired and its Subsidiaries;
(3) any encumbrance or restriction pursuant to (x) an agreement or
instrument pursuant to Indebtedness which Refinances Indebtedness Incurred
pursuant to an agreement referred to in clause (1) or (2) of this covenant
or this clause (3), or contained in any amendment to an agreement or
instrument referred to in clause (1) or (2) of this covenant or this clause
(3), or (y) Indebtedness described in clause (i), (ii) or (iii) of
paragraph (b) of the covenant described above under "-- Limitation on
Indebtedness" and permitted Refinancing Indebtedness with respect thereto;
provided, however, that the encumbrances and restrictions contained in any
such refinancing agreement, instrument or amendment referred to in clause
(x) above are, taken as a whole, no more restrictive in any material
respect than the encumbrances and restrictions contained in the predecessor
agreements (as determined by the chief financial officer of Iridium in good
faith and evidenced by a certificate filed with the Trustee);
(4) any encumbrance or restriction contained in security agreements or
mortgages securing Indebtedness, or under any documents providing for
Capital Lease Obligations, of a Restricted Subsidiary which are not
prohibited by the covenant described under "-- Limitation on Liens" to the
extent such encumbrances or restrictions restrict the assignment or
transfer of
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the property or assets subject to such security agreements or mortgages, or
subject to such Capital Lease Obligations;
(5) any encumbrance or restriction existing under or by reason of
applicable law or regulations;
(6) customary non-assignment provisions of any licensing agreement or
of any lease but only to the extent such provisions restrict the transfer
of the license, lease or the property thereunder;
(7) any encumbrance or restriction contained in contracts for sales of
assets otherwise permitted by the Indenture;
(8) with respect to a Restricted Subsidiary, any encumbrance or
restriction imposed pursuant to an agreement that has been entered into for
the sale of all or substantially all of the Capital Stock of such
Restricted Subsidiary; provided, however, that after giving effect to such
transaction no Default will have occurred or be continuing, that such
restriction terminates if such transaction is not consummated and that such
consummation or abandonment of such transaction occurs within one year of
the date such agreement was entered into;
(9) any encumbrance or restriction, with respect to a Restricted
Subsidiary that is not a Restricted Subsidiary on the date of the
Indenture, in existence at the time such Person becomes a Restricted
Subsidiary and not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary; and
(10) any restriction on the sale or other disposition of assets or
property securing Indebtedness as a result of a Permitted Lien on such
assets or property.
Limitation on Sales of Assets and Subsidiary Stock. (a) Iridium will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, make
any Asset Disposition unless:
(i) Iridium or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Disposition at least equal
to the fair market value (including the value of all non-cash
consideration) of the shares and assets subject to such Asset Disposition,
as determined by the Board of Directors in good faith and evidenced by a
resolution filed with the Trustee;
(ii) at least 80% of the consideration therefor received by Iridium or
such Restricted Subsidiary, as the case may be, consists of cash or
Marketable Securities (provided that an amount equal to the fair value (as
determined in good faith by the Board of Directors as evidenced by a
resolution filed with the Trustee) of assets utilized or to be utilized in
a Related Business and received by Iridium or any Restricted Subsidiary in
connection with any Asset Disposition will be treated as cash solely for
purposes of this clause (ii)) or the assumption of Indebtedness of Iridium
(other than Indebtedness that is a Subordinated Obligation) or the
Restricted Subsidiary, as the case may be, and the release of Iridium or
such Restricted Subsidiary, as the case may be, from all liability on the
Indebtedness assumed; and
(iii) all Net Available Proceeds, less any amounts invested within 180
days of such disposition (or committed by such 180th day for investment
pursuant to a written agreement which commits such investment within 180
days after the date of such agreement) in assets that comply with the
covenant described under "Limitation on Lines of Business", are applied
within 180 days of such Asset Disposition (1) first, to the permanent
repayment or reduction of Indebtedness then outstanding under any Bank
Credit Agreement or Vendor Financing Facility, to the extent such agreement
or facility would require such application or prohibit payments pursuant to
the following clause (2), (2) second, to the extent of remaining Net
Available Proceeds, to make an offer to purchase outstanding Notes at 100%
of the principal amount of the Notes plus accrued and unpaid interest and
liquidated damages thereon, if any, to the date of purchase, and, to the
extent required by the terms thereof, any other Indebtedness of Iridium
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or a Restricted Subsidiary that ranks pari passu with the Notes at a price
no greater than 100% of the principal amount thereof plus accrued and
unpaid interest and liquidated damages thereon, if any, to the date of
purchase and (3) third, to the extent of any remaining Net Available
Proceeds after application of clauses (1) and (2) above, to the repayment
of other Indebtedness of Iridium or Indebtedness of a Restricted
Subsidiary, to the extent permitted under the terms thereof. To the extent
any Net Available Proceeds remain after such uses, Iridium and the
Restricted Subsidiaries may use such amounts for any purposes not
prohibited by the Indenture. Notwithstanding the foregoing, (x) these
provisions will not apply to any Asset Disposition which constitutes a
transfer, conveyance, sale, lease or other disposition of all or
substantially all of Iridium's or a Guarantor Subsidiary's properties or
assets as described under "-- Merger and Consolidation" and (y) Iridium
will not be required to repurchase or redeem Notes pursuant to clause (2)
above until Net Available Proceeds from all Asset Dispositions in the
aggregate, less any amounts invested within 180 days of such dispositions
(or committed by such 180th day for investment pursuant to a written
agreement which commits such investment within 180 days after the date of
such agreement) in a Related Business and any amounts applied pursuant to
clause (1) above and any amounts previously applied pursuant to clause (1),
(2) or (3) above, are greater than $10.0 million.
(b) The Issuers will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuers will comply
with the applicable securities laws and regulations and will not be deemed to
have breached their obligations described under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) Iridium will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate or Related Person of Iridium
(other than Iridium or a Wholly-Owned Restricted Subsidiary) that involves
consideration in excess of $5.0 million (an "Affiliate Transaction") on terms
(i) that, taken as a whole, are less favorable to Iridium or such Restricted
Subsidiary, as the case may be, than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate and (ii) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $10.0 million, are not in writing and have not
been approved either by a majority of the members of the Board of Directors
having no material direct or indirect financial interest in or with respect to
such Affiliate Transaction or by the Related Party Contracts Committee (if
appropriate under Iridium's Bylaws or the Parent LLC Agreement). In addition, if
such Affiliate Transaction is an Asset Disposition involving any Affiliate or
Related Person of Iridium (other than Iridium or a Wholly-Owned Restricted
Subsidiary) for an aggregate consideration in excess of $25.0 million, a
fairness opinion to the effect that such transaction is fair (from a financial
point of view) to Iridium or the Restricted Subsidiary, as applicable, must be
obtained from an Independent Financial Advisor or, with respect to
telecommunications-related matters, a recognized expert in the satellite
telecommunications industry.
(b) The provisions of the foregoing paragraph (a) will not apply to:
(i) employee benefit or compensation arrangements entered into in the
ordinary course of business and approved by the Board of Directors;
(ii) transactions solely between or among Iridium and the Restricted
Subsidiaries;
(iii) Restricted Payments permitted by the covenant described under
"-- Limitation on Restricted Payments";
(iv) Investments by IWCL, an Affiliate or Related Person of Iridium or
Capital in the Capital Stock (other than Disqualified Stock) of Iridium or
any Restricted Subsidiary; and
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(v) a transaction pursuant to an Existing Affiliate Agreement,
including any amendments thereto entered into after the Issue Date,
provided that the terms of any such amendment are not, taken as a whole,
less favorable to Iridium than the terms of the relevant agreement prior to
such amendment.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. Iridium will not, and will not permit any Restricted Subsidiary
to, issue, transfer, convey, sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary or securities convertible or exchangeable into
Capital Stock of a Restricted Subsidiary to any person other than Iridium,
Capital or a Wholly-Owned Restricted Subsidiary except (i) in a transaction
consisting of a sale of all the Capital Stock of such Restricted Subsidiary and
that complies with the provisions described under "-- Limitation on Sales of
Assets and Subsidiary Stock" to the extent such provisions apply; (ii) if
required, the issuance, transfer, conveyance, sale or other disposition of
directors' qualifying shares or of interests required to be held by foreign
nationals, in each case to the extent mandated by applicable law; (iii) in a
transaction in which, or in connection with which, Iridium or a Restricted
Subsidiary acquires at the same time sufficient Capital Stock of such Restricted
Subsidiary to at least maintain the same percentage ownership interest it had
prior to such transaction; (iv) any grant, establishment or exercise of any Lien
permitted under the covenant described under "-- Limitation on Liens"; and (v)
Disqualified Stock of a Restricted Subsidiary Incurred to Refinance Disqualified
Stock of such Restricted Subsidiary; provided, however, that the amounts of the
redemption obligations of such Disqualified Stock may not exceed the amounts of
the redemption obligations of, and such Disqualified Stock will have redemption
obligations no earlier than those required by, the Disqualified Stock being
Refinanced.
Limitation on Liens. (a) Iridium will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien on any of its property or assets (including Capital Stock), whether owned
on the Issue Date or thereafter acquired, unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such
obligation for so long as such obligation is so secured. The preceding sentence
will not require Iridium or any Restricted Subsidiary to equally and ratably
secure the Notes if the Lien consists of Permitted Liens.
(b) Any Lien created for the benefit of the Holders of the Notes pursuant
to the foregoing paragraph (a) will provide by its terms that such Lien will be
automatically and unconditionally released and discharged upon the earlier of
the release and discharge of the Lien which gave rise to the obligation to
secure such Notes and the release and discharge of the Indenture.
SEC Reports. Notwithstanding that the Issuers may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Issuers will file with the Commission, and provide the Trustee
and Holders and prospective Holders (upon request) with the annual reports and
the information, documents and other reports which are specified in Sections 13
and 15(d) of the Exchange Act.
In addition, for so long as any Notes remain outstanding, unless the
Issuers are subject to Section 13 or 15(d) of the Exchange Act, the Issuers will
furnish to the Holders and to prospective investors in the Notes, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
The foregoing will not require Capital or any Guarantor Subsidiary to file,
provide or furnish with or to any Person any report or information separate from
any report or information filed, provided or furnished by Iridium to the extent
Capital or any Guarantor Subsidiary would not be required to do so under Section
13 or 15(d) of the Exchange Act or pursuant to Rule 144A(d)(4) under the
Securities Act.
Future Guarantor Subsidiaries. Iridium will cause each Subsidiary created
or acquired after the Issue Date (other than an Unrestricted Subsidiary or a
Foreign Subsidiary) to execute and deliver to the Trustee supplemental
indentures pursuant to which such Subsidiary will Guarantee payment of
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the Notes. Iridium may cause any Foreign Subsidiary to execute and deliver a
Subsidiary Guaranty in accordance with the provisions of the Indenture. Each
Subsidiary Guaranty will be limited to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary without rendering the
Subsidiary Guaranty, as it relates to such Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. In addition, the Indenture will
provide that Issuers will not, and will not permit any of the Guarantor
Subsidiaries to, make any Investment in any Subsidiary that is not a Guarantor
Subsidiary unless either (i) such Investment is permitted by the covenant
described under "-- Limitation on Restricted Payments" or (ii) such Subsidiary
executes and delivers a Subsidiary Guaranty in accordance with the provisions of
the Indenture.
Limitation on Lines of Business. Iridium will not, and will not permit any
Restricted Subsidiary to, engage in any business other than a Related Business.
Limitation on Business Activities of Capital. Capital will not hold any
material assets, become liable for any material obligations, engage in any trade
or business, or conduct any business activity, other than the issuance of
Capital Stock to Iridium or any Wholly-Owned Restricted Subsidiary, the
Incurrence of Indebtedness as a co-obligor or guarantor of Indebtedness Incurred
by Iridium, including the Notes and the Exchange Notes, if any, that is
permitted to be Incurred by Iridium pursuant to the covenant described under
"-- Limitation on Indebtedness" (provided that the net proceeds of such
Indebtedness are retained by Iridium or loaned to one or more of Iridium's
Restricted Subsidiaries other than Capital), and activities incidental thereto.
Neither Iridium nor any Restricted Subsidiary (other than Capital) will engage
in any transactions with Capital in violation of the immediately preceding
sentence.
Maintenance of Insurance. Iridium will procure and maintain insurance with
financially sound and reputable insurance companies in such amounts, with such
deductibles and covering such risks as is customarily carried by companies
engaged in a business or businesses similar to Iridium and owning properties in
localities where Iridium and the Restricted Subsidiaries operate, including
without limitation in-orbit insurance.
Within 30 days following the Issue Date and within 30 days following any
date on which Iridium renews or obtains insurance, Iridium will deliver to the
Trustee an insurance certificate certifying the amount of insurance then renewed
or obtained and an Officers' Certificate stating that such insurance, together
with any other insurance, complies with the Indenture. In addition, Iridium will
cause to be delivered to the Trustee no less than once each year an insurance
certificate setting forth the amount of insurance then carried, which insurance
certificate will entitle the Trustee to (i) notice of any claim under any such
insurance policy; and (ii) at least 30 days' notice from the provider of such
insurance prior to the cancellation of any such insurance.
In the event that Iridium receives any proceeds of any in-orbit insurance,
such proceeds will constitute "Insurance Proceeds." Promptly following the
receipt of any Insurance Proceeds, Iridium will apply such Insurance Proceeds in
accordance with clause (iii) under the covenant described under "-- Limitation
on Sales of Assets and Subsidiary Stock" (treating such Insurance Proceeds as
Net Available Proceeds thereunder); provided, however, that Insurance Proceeds
will only be required to be so applied to the extent that the aggregate amount
of all Insurance Proceeds received by Iridium exceeds $10.0 million in any
12-month period.
MERGER AND CONSOLIDATION
Neither Iridium nor Capital will consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all its assets to, any Person; provided, however, that the
Indenture will provide that Iridium may consolidate with or merge with or into,
or convey, transfer or lease, all or substantially all its assets to, any
Person, if (i) the resulting, surviving or transferee Person (the "Successor
Company") is a Person organized and existing under the laws of the United States
of America, any State thereof, the District of Columbia or the
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laws of Bermuda and the Successor Company (if not Iridium) expressly assumes, by
an indenture supplemental thereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of Iridium under the
Indenture and the Notes issued thereunder; (ii) immediately after giving effect
to such transaction on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the Successor Company or any Subsidiary as a result of
such transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default under the Indenture has
occurred and is continuing, (iii) immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to the terms of the first sentence of paragraph (a) of the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness";
(iv) immediately after giving effect to such transaction, the Successor Company
has Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of Iridium immediately prior to such transaction; and (v) Iridium has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction and such supplemental indenture (if any)
comply with the Indenture. The requirements of clause (iii) above shall not
apply where Iridium merges with or into, or conveys, transfers or leases, in one
transaction or a series of transactions, all or substantially all of its assets
to, any Person with no outstanding Indebtedness (other than Indebtedness which
is also Indebtedness of Iridium).
The Indenture provided that Parent could, within six months of the Issue
Date, convey or transfer in one transaction or a series of related transactions,
all or substantially all its assets to a Wholly-Owned Restricted Subsidiary of
Iridium upon compliance with clauses (i) and (v) of the preceding paragraph (and
without complying with clauses (ii) through (iv), inclusive, of the preceding
paragraph). On December 18, 1997, Parent transferred substantially all of its
assets and liabilities to Iridium pursuant to the Asset Drop-Down Transaction.
See "Parent's Ownership Structure and Strategic Investors -- Asset Drop-Down
Transaction."
The Indenture will provide that Iridium will not permit any Guarantor
Subsidiary to consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or substantially all
of its assets to any Person unless: (i) the resulting, surviving or transferee
Person (if not such Subsidiary) is a Person organized and existing under the
laws of the jurisdiction under which such Subsidiary was organized or under the
laws of the United States of America, or any State thereof, the District of
Columbia or the laws of Bermuda, and such Person expressly assumes, by a
guaranty agreement, in a form satisfactory to the Trustee, all the obligations
of such Subsidiary, if any, under its related Subsidiary Guaranty (except to the
extent it would not otherwise have been required to provide a Subsidiary
Guaranty); (ii) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness which becomes an obligation of the
resulting, surviving or transferee Person as a result of such transaction as
having been issued by such Person at the time of such transaction), no Default
has occurred and is continuing under the Indenture; and (iii) Iridium has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such guaranty
agreement, if any, complies with the Indenture.
The Successor Company will be the successor to Iridium and will succeed to,
and be substituted for, and may exercise every right and power of, Iridium,
Capital or any Guarantor Subsidiary, respectively, under the Indenture, the
Notes and the related Subsidiary Guaranty, as applicable, and the predecessor
Company, Capital or Guarantor Subsidiary, respectively (other than in the case
of a lease), will be released from all obligations and covenants under the
Indenture and the Notes or the related Subsidiary Guaranty, as applicable.
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or
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substantially all" of the assets of Iridium or Capital, and therefore it may be
unclear whether the foregoing provisions are applicable.
DEFAULTS
An Event of Default is defined in the Indenture as:
(i) a default in any payment of interest or Liquidated Damages, if
any, on any Note when due, continued for 30 days;
(ii) a default in the payment of principal of any Note issued when due
at its Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise;
(iii) the failure by the Issuers to comply with their obligations
under the covenant described under "Merger and Consolidation" above;
(iv) the failure by the Issuers to comply for 30 days after notice
with any of their obligations under the covenants described under (A)
"-- Change of Control" and (B) "-- Limitation on Indebtedness",
"-- Limitation on Restricted Payments", "-- Limitation on Restrictions on
Distributions from Restricted Subsidiaries", "-- Limitation on Sales of
Assets and Subsidiary Stock", "-- Limitation on Transactions with
Affiliates", "-- Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries", "-- Limitation on Liens", "-- Future Guarantor
Subsidiaries", "Limitation on Lines of Business" and "-- Maintenance of
Insurance" described under "-- Certain Covenants" above (in each case,
other than a failure to purchase Notes issued under the Indenture);
(v) the failure by the Issuers or any Guarantor Subsidiary to comply
for 60 days after notice with its other agreements contained in the Notes
or in the Indenture;
(vi) the failure by the Issuers or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
the acceleration of any such Indebtedness by the holders thereof because of
a default, if the total amount of such Indebtedness unpaid or accelerated
exceeds $10.0 million or its foreign currency equivalent (the "cross
acceleration provision");
(vii) certain events of bankruptcy, insolvency or reorganization of
the Issuers or a Significant Subsidiary (the "bankruptcy provisions");
(viii) the rendering of any final judgment or decree (not subject to
appeal) in excess of $10.0 million or its foreign currency equivalent (net
of amounts paid within 30 days of any such judgment or decree under any
insurance, indemnity, bond, surety or similar instrument) against Iridium,
Capital or a Significant Subsidiary by a court or other adjudicatory
authority of competent jurisdiction to the extent which Iridium, Capital or
the Significant Subsidiary, as applicable, is not insured by a third Person
and such judgment or decree remains outstanding and is not discharged,
waived or stayed within 30 days after notice (the "judgment default
provision");
(ix) any Subsidiary Guaranty relating to the Indenture or Notes ceases
to be in full force and effect (except as contemplated by the terms
thereof) or any Guarantor Subsidiary denies or disaffirms its obligations
under the Indenture or any such Subsidiary Guaranty;
(x) termination by Motorola of the Space System Contract prior to
delivery thereunder by Motorola of the Space System (as defined therein),
provided that such termination has not been contested by Iridium in
accordance with the Space System Contract or by appropriate proceedings
and, if such termination is so contested, within 180 days of such notice
such termination has not been withdrawn or declared ineffective by any
recognized court or mediator; or
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(xi) termination by Motorola of the Operation and Maintenance
Contract, or Motorola ceases to be the operator of the IRIDIUM System prior
to the Stated Maturity of the Notes in each such case for a period of more
than 30 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv), (v) or (viii) will not constitute an
Event of Default under the Indenture until the Trustee or the Holders of 25% in
principal amount of the outstanding Notes notify the Issuers of the default and
the Issuers do not cure such default within the time specified in clauses (iv),
(v) and (viii) hereof after receipt of such notice.
If an Event of Default under the Indenture occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Notes by notice to the Issuers may declare the principal of and accrued but
unpaid interest on and Liquidated Damages, if any, on all the Notes to be due
and payable. Upon such a declaration, such principal and interest will be due
and payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuers occurs and is
continuing, the principal of and Liquidated Damages, if any, and interest on all
the Notes will become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount of the Notes then
outstanding may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee thereunder, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the relevant Holders
unless such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium and Liquidated Damages, if any, or interest when
due, no Holder may pursue any remedy with respect to the Indenture or the Notes
unless (i) such Holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) Holders of at least 25% in principal amount of the
Notes then outstanding have requested the Trustee to pursue the remedy, (iii)
such Holders have offered the Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the Holders of a majority in principal amount of
the Notes then outstanding have not given the Trustee a direction inconsistent
with such request within such 60-day period. Subject to certain restrictions,
the Holders of a majority in principal amount of the Notes then outstanding are
given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder thereunder or
that would involve the Trustee in personal liability. Prior to taking any action
under the Indenture, the Trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
The Indenture will provide that if a Default occurs and is continuing under
the Indenture and is known to the Trustee, the Trustee must mail to each Holder
thereunder notice of such Default within the earlier of 90 days after it occurs
or 30 days after it is known to a Trust Officer or written notice of it is
received by the Trustee. Except in the case of a Default in the payment of
principal of, premium and Liquidated Damages, if any, or interest on any Note,
the Trustee may withhold notice if and so long as a committee of its Trust
Officers in good faith determines that withholding notice is in the interests of
the Holders. In addition, the Issuers are required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know
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of any Default under the Indenture that occurred during the previous year. The
Issuers also are required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which would constitute certain
Defaults under the Indenture, their status and what action the Issuers are
taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default and its consequences or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each Holder of an outstanding Note affected, no amendment may (i) reduce the
amount of Notes whose Holders must consent to an amendment or waiver, (ii)
reduce the rate of or extend the time for payment of interest or Liquidated
Damages on any such Note, (iii) reduce the principal of or extend the Stated
Maturity of any such Note, (iv) reduce the premium payable upon the redemption
of any such Note or change the time at which any such Note may be redeemed as
described under "-- Optional Redemption" above, (v) make any such Note payable
in money other than that stated in such Note, (vi) impair the right of any
Holder to receive payment of principal of and premium, Liquidated Damages and
interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes, (vii) make any change in the amendment provisions which require
each Holder's consent or in the waiver provisions or (viii) make any change in
any related Subsidiary Guaranty that would adversely affect the Holders.
Without the consent of any Holder, the Issuers and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of
either Issuer under the Indenture (as contemplated under "-- Merger and
Consolidation" in connection with the Asset Drop-Down Transaction or otherwise),
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that such uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that such
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
further Guarantees with respect to such Notes, to release Guarantor Subsidiaries
when permitted by the Indenture, to secure the Notes, to add to the covenants of
the Issuers for the benefit of the Holders of the Notes or to surrender any
right or power conferred upon the Issuers, to make any change that does not
adversely affect the rights of any Holder of the Notes or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. A supplemental indenture was executed
and delivered by Iridium and the Trustee in connection with (and to give effect
to) the Asset Drop-Down Transaction.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Issuers are
required to mail to the Holders a notice briefly describing such amendment.
However, the failure to give such notice to all such Holders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
Upon any transfer or exchange, the registrar and Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuers may require a Holder to pay any taxes required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Note selected for redemption or to transfer or exchange any Note for a
period of
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15 days prior to a selection of Notes to be redeemed. The Notes will be issued
in registered form and the registered holder of a Note will be treated as the
owner of such Note for all purposes.
DEFEASANCE
The Issuers at any time may terminate all their obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuers at any time may terminate their obligations under the
covenants described under "-- Subsidiary Guaranties," "-- Change of Control,"
"-- Certain Covenants," the operation of the cross acceleration provision, the
bankruptcy default provisions with respect to Subsidiaries and the judgment
default provision described under "-- Defaults" above and the limitations
contained in clauses (ii), (iii) and (iv) under "-- Merger and Consolidation"
above ("covenant defeasance"). If the Issuers exercise their legal defeasance
option or their covenant defeasance option, each Guarantor Subsidiary will be
released from all of its obligations with respect to its Subsidiary Guaranty.
The Issuers may exercise their legal defeasance option notwithstanding
their prior exercise of their covenant defeasance option. If the Issuers
exercise their legal defeasance option, payment of the Notes may not be
accelerated because of an Event of Default with respect thereto. If the Issuers
exercise their covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (iv), (vi), (vii)
(with respect to Significant Subsidiaries only), (viii), (ix), (x) or (xi) under
"Defaults" above or because of the failure of Iridium to comply with clause
(ii), (iii) or (iv) under "-- Merger and Consolidation" above.
Defeasance options with respect to the Notes may be exercised to any
redemption date or the maturity date. In order to exercise either defeasance
option, the Issuers must irrevocably deposit in trust (the "defeasance trust")
with the Trustee money or Government Securities for the payment of principal,
premium and Liquidated Damages, if any, and interest on the Notes to redemption
or maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of the deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or member of Iridium or
Capital, as such, will have any liability for any obligations of the Issuers or
any Guarantor Subsidiary under the Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver will not constitute a waiver of liabilities under the federal securities
laws if it is the view of the Commission that such a waiver would be against
public policy.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company is the Trustee under the Indenture and
has been appointed by the Issuers as Registrar and Paying Agent with regard to
the Notes.
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GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such Person merges with or
into or consolidates with or becomes a Restricted Subsidiary of such specified
Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person, which Indebtedness or Lien was not Incurred in
anticipation of, and was outstanding prior to, such merger, consolidation or
acquisition.
"Affiliate" of any Person means any other Person, directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specific Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of Voting
Stock, by contract or otherwise; provided, however, that beneficial ownership of
10% or more of the Voting Stock of a Person will be deemed to be control. The
terms "controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, (a) no individual will be an Affiliate of Iridium
solely by reason of his or her being a director, officer or employee of IWCL,
Iridium or any Subsidiary of either and (b) none of the Restricted Subsidiaries
will be Affiliates of Iridium.
"Agreement Regarding Guarantee" means the Agreement Regarding Guarantee
between Iridium and Motorola, dated as of August 21, 1996, as amended and
restated as of July 11, 1997, and as further amended from time to time.
"Asset Disposition" means any transfer, conveyance, sale, lease or other
disposition (collectively, any "disposition") by Iridium or any Restricted
Subsidiary (including any disposition by means of a consolidation, merger or
similar transaction) but excluding a disposition by a Restricted Subsidiary to
Iridium or a Wholly-Owned Restricted Subsidiary or by Iridium to a Wholly-Owned
Restricted Subsidiary of (i) shares of Capital Stock of a Restricted Subsidiary,
(ii) all or substantially all of the assets of Iridium or any Restricted
Subsidiary representing a division or line of business or (iii) other assets or
rights of Iridium or any of its Restricted Subsidiaries other than a disposition
(a) in the ordinary course of business, (b) that constitutes a Restricted
Payment which is permitted under the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments" above, (c) that is subject to
the provisions set forth in the first, second or third paragraph under
"-- Merger and Consolidation" above, or (d) that constitutes the grant,
establishment or exercise of any Lien permitted pursuant to "-- Certain
Covenants -- Limitations on Liens" above; provided, however, that a transaction
described in clauses (i), (ii) and (iii) will constitute an Asset Disposition
only to the extent that the aggregate consideration for all such transfers,
conveyances, sales, leases or other dispositions exceeds $10.0 million in any
12-month period.
"Attributable Indebtedness" in respect of a Sale and Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale and Leaseback Transaction (including any period for which
such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness (or scheduled
redemption or similar payment with respect to Disqualified Stock) multiplied by
the amount of such payment by (ii) the sum of all such payments.
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"Bank Credit Agreement" means any one or more credit agreements (which may
include or consist of revolving credit agreements or similar arrangements)
between Iridium and/or any Subsidiary and one or more banks or other financial
institutions providing financing for the business of Iridium and its
Subsidiaries. The Guaranteed Bank Facility will be, and the Secured Bank
Facility (when executed and delivered by all the parties thereto) will be, Bank
Credit Agreements.
"Board of Directors" means the Board of Directors of Iridium or any
committee thereof duly authorized to act on behalf of such Board.
"Build-out" means the construction, acquisition, improvement, operation and
development (including all costs related thereto) of the IRIDIUM System up to
the occurrence of Commercial Activation and the construction, acquisition,
improvement and development (including all costs related thereto) thereafter of
contemplated enhancements to the IRIDIUM System described in this Prospectus.
See "Business -- IRIDIUM Services."
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capital Lease Obligation will be the capitalized amount of such obligation
determined in accordance with GAAP, and the Stated Maturity thereof will be the
date of the last scheduled payment of rent or any other amount due under the
relevant lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" of any Person means (i) in the case of a corporation,
corporate stock issued by such Person, (ii) in the case of an association or
business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock issued by such Person, (iii)
in the case of a partnership, partnership interests (whether general or limited)
issued by such Person, (iv) in the case of a limited liability company,
membership interests issued by such Person, (v) any other interest or
participation that confers on another Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(vi) any rights (other than debt securities convertible into, or exchangeable
for, Capital Stock), warrants or options to purchase any of the foregoing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Activation" means the date on which Iridium commences generally
available commercial service on the IRIDIUM System.
"Commission" means the Securities and Exchange Commission and any successor
agency.
"Consolidated Cash Flow" of Iridium means for any period the Consolidated
Net Income of Iridium and the consolidated Restricted Subsidiaries for such
period increased by (i) Consolidated Interest Expense of Iridium and the
consolidated Restricted Subsidiaries for such period, plus (ii) Consolidated
Income Tax Expense of Iridium and the consolidated Restricted Subsidiaries for
such period, plus (iii) the consolidated depreciation and amortization expense
included in the income statement of Iridium and the consolidated Restricted
Subsidiaries for such period (including any depreciation of any asset that
represents depreciation in respect of previously capitalized interest), plus
(iv) other non-cash charges of Iridium and the consolidated Restricted
Subsidiaries for such period deducted from consolidated revenues in determining
Consolidated Net Income for such period, minus (v) non-cash items of Iridium and
the consolidated Restricted Subsidiaries for such period which increased
consolidated revenues in determining Consolidated Net Income for such period,
minus (vi) the consolidated amortization expense related to payments made by
Iridium and the Restricted Subsidiaries to Motorola pursuant to the Operations
and Maintenance Contract included in the income statement of Iridium and the
consolidated Restricted Subsidiaries for such period.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its consolidated
Restricted Subsidiaries for such
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period determined on a consolidated basis in accordance with GAAP or, so long as
such Person is treated as a partnership or other pass through entity for United
States federal income tax purposes, the Tax Amount paid by such Person during
such period.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its consolidated
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of
Indebtedness discounts; (ii) any payments or fees with respect to letters of
credit, bankers' acceptances or similar facilities; (iii) fees with respect to
Interest Rate or Currency Protection Agreements; (iv) Preferred Stock dividends
of such Person (other than with respect to Disqualified Stock) declared and paid
or payable; (v) accrued Disqualified Stock dividends of such Person and all
Restricted Subsidiaries of such Person, whether or not declared or paid; (vi)
interest on Indebtedness Guaranteed by such Person; (vii) the portion of any
rental obligation allocable to interest expense; and (viii) capitalized
interest.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its consolidated Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP; provided, however, that there is excluded therefrom (to the extent
not already excluded therefrom) (i) the net income (or loss) of any Person
acquired by such Person or a Restricted Subsidiary of such Person in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (ii) the net income (but not the net loss) of any Restricted
Subsidiary of such Person which Restricted Subsidiary is subject to restrictions
which prevent the payment of dividends or the making of distributions to such
Person, but only to the extent of such restrictions, (iii) the net income (or
loss) of any Person that is not a Restricted Subsidiary (including any
Unrestricted Subsidiary) except to the extent of the amount of dividends or
other distributions actually paid to such Person by such other Person during
such period, (iv) gains or losses on Asset Dispositions by Iridium or any
Restricted Subsidiary, (v) all extraordinary gains and losses, (vi) the
cumulative effect of changes in accounting principles in the year of adoption of
such changes, (vii) non-cash gains or losses resulting from fluctuations in
currency exchange rates, and (viii) the tax effect of any of the items described
in clauses (i) through (vii) above; provided further, however, that for purposes
of any determination pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments," there will be deducted from the
consolidated net income of Iridium and the Restricted Subsidiaries for such
period an amount equal to the Tax Amount paid by Iridium during such period.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person and its consolidated Restricted Subsidiaries determined on
a consolidated basis in accordance with GAAP, less amounts attributable to
Disqualified Stock of such Person; provided, however, that, with respect to
Iridium, adjustments following the date of the Indenture to the accounting books
and records of Iridium in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of Iridium by another Person will not be given effect to.
"Debt to Capital Ratio" means on any date of determination for Iridium and
its Restricted Subsidiaries, on a consolidated basis, the ratio (expressed as a
percentage) of Outstanding Indebtedness on such date to Total Invested Capital
on such date.
"Debt to Cash Flow Ratio" means on any date of determination (the
"Determination Date") for Iridium and its Restricted Subsidiaries, on a
consolidated basis, the ratio of Outstanding Indebtedness on the Determination
Date to Consolidated Cash Flow for the four most recently completed fiscal
quarters immediately preceding the Determination Date (the "Measurement Period")
determined on a pro forma basis as if any Indebtedness to be Incurred had been
Incurred and the proceeds thereof had been applied on the first day of the
Measurement Period; provided, however, that in making such computations, (i) the
Consolidated Interest Expense attributable to interest on
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any proposed Indebtedness bearing a floating interest rate will be computed on a
pro forma basis as if the rate in effect on such Determination Date had been the
applicable rate for the entire Measurement Period, (ii) the Consolidated
Interest Expense attributable to interest on any Indebtedness under a revolving
credit facility will be computed based upon the average daily balance of such
Indebtedness during such Measurement Period, (iii) in the event Iridium or any
of its Restricted Subsidiaries has made asset dispositions or acquisitions of
assets not in the ordinary course of business (including acquisitions of other
Persons by merger, consolidation or purchase of Capital Stock) or has repaid
Indebtedness or Incurred additional Indebtedness during or after such
Measurement Period, such computation will be made on a pro forma basis as if the
asset dispositions, acquisitions, repayment or incurrence had taken place on the
first day of such Measurement Period, (iv) the net proceeds of the Indebtedness
to be Incurred will be deemed to have been applied on the first day of such
Measurement Period to acquire direct obligations of the United States government
having a maturity most closely approximating the maturity of the Indebtedness to
be incurred (or Indebtedness incurred during or after such Measurement Period);
provided, however, that the adjustment in this clause (iv) will not be made if,
and to the extent, that application of such net proceeds has otherwise been
fully reflected in the computation, and (v) the actual application of the net
proceeds of Indebtedness Incurred during or after such Measurement Period will
be given pro forma effect as if such application had taken place on the first
day of such Measurement Period.
"Default" means an event that is, or after the passing of time or the
giving of notice or both would be, an Event of Default.
"Disposition" means (i) the sale, transfer or other conveyance by Motorola
or any of its Subsidiaries (other than to a wholly owned subsidiary of Motorola)
of (a) Iridium's membership interests or (b) equity interests in any entity (an
"intermediate entity") which owns, directly or indirectly, Iridium's membership
interests or (ii) the issue and sale by any such intermediate entity of its
equity securities to one or more third parties if and to the extent the proceeds
of such issue and sale are distributed by such intermediate entity to Motorola
or any of its Subsidiaries.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock, or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the earlier of the Stated Maturity of the Notes or the date
on which no Notes remain outstanding. Disqualified Stock does not include any
Capital Stock that is not otherwise Disqualified Stock if by its terms the
holders have the right to require the issuer to repurchase such stock upon a
Change of Control (or upon events substantially similar to a Change of Control).
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A-3" or higher or "A-" or higher
according to Moody's Investors Service, Inc. or Standard & Poor's Ratings Group
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) respectively, at the time as of which any investment or rollover therein
is made.
"Equity Offering" means an offering made on a primary basis of Capital
Stock (other than Disqualified Stock) of IWCL or Iridium that results in Net
Cash Proceeds to IWCL or Iridium, as the case may be, provided, however, if any
such offering is an offering of the Capital Stock of IWCL only the Net Cash
Proceeds thereof that are contributed to Iridium will be taken into
consideration for the purposes of this definition.
"Event of Default" has the meaning set forth under "-- Defaults" above.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended (or
any successor act) and the rules and regulations thereunder.
"Exchange Notes" as used in this "Description of Notes" section means any
notes issued in exchange for Notes pursuant to the Exchange and Registration
Rights Agreement.
"Exchange Offer Registration Statement" means the registration statement to
be filed by the Issuers and any Guarantor Subsidiaries with the Commission with
respect to an offer to exchange the Notes for another series of notes of the
Issuers with substantially identical terms to the Notes.
"Existing Affiliate Agreements" means (i) the Space System Contract, (ii)
the Terrestrial Network Development Contract, (iii) the Operations and
Maintenance Contract, (iv) the Agreement Regarding Guarantee, (v) the Master
Subscription Agreement, (vi) the Interest Exchange Agreement, (vii) the Share
Issuance Agreement, (viii) the Management Services Agreement, (ix) the Motorola
MOU and any subordination agreement contemplated thereunder, (x) the agreement
or agreements among Iridium, Motorola and other parties thereto providing for
the development, manufacture and sale of individual subscriber equipment to be
used in the IRIDIUM System, which agreement or agreements will be executed and
delivered after the Issue Date as a condition to borrowings under the Secured
Bank Facility and (xi) any other agreements with Affiliates or related Person of
Iridium, existing on the Issue Date and listed on a schedule to the Indenture.
"Foreign Subsidiary" means, with respect to any Person, any Subsidiary of
such Person which is incorporated or otherwise organized under the laws of any
jurisdiction other than the United States of America, any state thereof or the
District of Columbia and substantially all of whose consolidated assets are
located primarily outside of the United States of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission. All ratios and computations based on GAAP contained in the Indenture
will be computed in conformity with GAAP.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged and which
have a remaining weighted Average Life to maturity of not more than one year
from the date of Investment therein.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person (the
"primary obligor") through an agreement enforceable by or for the benefit of the
holder of such Indebtedness and any such obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness, (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness, or (iv) to act as a co-obligor with such Person on its
Indebtedness (and "Guaranteed" and "Guaranteeing" shall have meanings
correlative to the foregoing); provided, however, that the Guarantee by any
Person will not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
"Guaranteed Bank Facility" means Iridium's $750 million borrowing facility
with a syndicate of banks, as amended from time to time.
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"Holders" means the registered holders from time to time of the Notes.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Indebtedness or other
obligation including by acquisition of Subsidiaries or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "Incurrence", "Incurred" and
"Incurring" have meanings correlative to the foregoing); provided, however, that
a change in GAAP that results in an obligation of such Person that exists at
such time becoming Indebtedness will not be deemed an Incurrence of such
Indebtedness and that neither the accrual of interest nor the accretion of
original issue discount will be deemed an Incurrence of Indebtedness.
Notwithstanding the foregoing, Iridium may elect to treat all or any portion of
revolving credit debt of Iridium or a Subsidiary as being Incurred from and
after any date beginning the date the revolving credit commitment is extended to
Iridium or a Subsidiary, by furnishing notice thereof to the Trustee, and any
borrowings or reborrowings by Iridium or a Subsidiary under such commitment up
to the amount of such commitment designated by Iridium as Incurred will not be
deemed to be new Incurrences of Indebtedness by Iridium or such Subsidiary;
provided, however, that in such event the undrawn portion of any such revolving
credit debt will be deemed to be outstanding Indebtedness until such time as the
commitment thereunder is terminated. The accretion of principal of a
non-interest bearing or other discount security will not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including any such obligations Incurred in connection with
the acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business which are not overdue by more than 30 days or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem or repurchase outstanding Disqualified Stock issued by such Person,
(viii) all Attributable Indebtedness, (ix) every obligation under Interest Rate
or Currency Protection Agreements of such Person, (x) every obligation of the
type referred to in clauses (i) through (ix) of another Person secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the fair market value of such property or assets and the amount of the
obligation so secured and (xi) every obligation of the type referred to in
clauses (i) through (x) of another Person and all dividends of another Person
the payment of which, in either case, such Person has Guaranteed. The "amount"
or "principal amount" of Indebtedness at any time of determination as used
herein represented by (a) any Indebtedness issued at a price that is less than
the principal amount at maturity thereof, will be the amount of the liability in
respect thereof determined in accordance with GAAP, (b) any Receivables Sale,
will be the amount of the unrecovered capital or principal investment of the
purchaser (other than Iridium or a Wholly-Owned Restricted Subsidiary) thereof,
excluding amounts representative of yield or interest earned on such investment,
(c) any Disqualified Stock, will be the maximum fixed redemption or repurchase
price in respect thereof, (d) any Capital Lease Obligation, will be determined
in accordance with the definition thereof and (e) any Permitted Interest Rate or
Currency Protection Agreement, will be zero. In no event will Indebtedness
include any liability for taxes. For purposes of determining any particular
amount of Indebtedness, Guarantees or Liens with respect to letters of credit
supporting Indebtedness otherwise included in the determination of a particular
amount will not be included. The term "Indebtedness" does not include any
obligations of
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Iridium or any Restricted Subsidiary (x) under the Space System Contract, the
Operations and Maintenance Contract or the Terrestrial Network Development
Contract (including any agreed upon deferrals of payment obligations thereunder)
or (y) in respect of amounts owing to gateway operators and other service
providers in connection with the clearinghouse system to be established and
operated by Iridium as described under "Business -- The IRIDIUM
System -- Business Support Systems") in this Prospectus.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Board of Directors, qualified to perform the task for which it
has been engaged and disinterested and independent with respect to the Issuers
and their Subsidiaries and Affiliates.
"Interest Exchange Agreement" means the Interest Exchange Agreement among
Iridium and IWCL, dated June 9, 1997, as amended from time to time.
"Interest Rate or Currency Protection Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest rates
or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Indebtedness issued
by, any other Person, including any payment on a Guarantee of any obligation of
such other Person, but excluding any loan, advance or extension of credit to an
employee of Iridium or any Restricted Subsidiary in the ordinary course of
business, accounts receivable and other commercially reasonable extensions of
trade credit. A delay in the purchase of any of Iridium's Capital Stock under a
purchase or similar agreement will not be deemed to be an Investment by Iridium
in the purchaser.
"Investment Grade Rating" means a rating equal to or higher than "Baa3" (or
the equivalent) by Moody's Investors Service, Inc. (or any successor to the
rating agency business thereof) and "BBB-" (or the equivalent) by Standard &
Poor's Ratings Group (or any successor to the rating agency business thereof).
"IRIDIUM System" means Iridium's global mobile wireless communications
system as described in this Prospectus.
"Issue Date" means the date on which the Notes are first issued and
delivered.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing or any
Sale and Leaseback Transaction).
"Management Services Agreement" means the Management Services Agreement
between Iridium and IWCL, dated as of June 9, 1997, as amended from time to
time.
"Marketable Securities" means: (i) Government Securities; (ii) any time
deposit account, money market deposit and certificate of deposit maturing not
more than 270 days after the date of acquisition issued by, or time deposit of,
an Eligible Institution; (iii) commercial paper maturing not more than 270 days
after the date of acquisition issued by a corporation (other than an Affiliate
of Iridium) with a rating, at the time as of which any investment therein is
made, of "P-1" or higher according to Moody's Investors Service, Inc. or "A-1"
or higher according to Standard & Poor's Ratings Group (or such similar
equivalent rating by at least one "nationally recognized statistical
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rating organization" (as defined in Rule 436 under the Securities Act)); (iv)
any banker's acceptances or money market deposit accounts issued or offered by
an Eligible Institution; (v) repurchase obligations with a term of not more than
seven days for Government Securities entered into with an Eligible Institution;
and (vi) any fund investing exclusively in investments of the types described in
clauses (i) through (v) above.
"Master Subscription Agreement" means the Agreement between Iridium and
IWCL, dated as of June 30, 1997 and as may be amended from time to time,
pursuant to which IWCL has agreed to sell shares of its Class B Common Stock in
connection with the Global Ownership Program. See "Certain Matters Regarding
Relationship Among IWCL, Parent and Iridium -- Global Ownership Program."
"Motorola Additional Guarantee" means the commitment by Motorola pursuant
to the Motorola MOU to guarantee up to an additional $350 million of
Indebtedness (inclusive of principal and interest), under the Guaranteed Bank
Facility or another credit agreement on identical terms, in excess of the
Motorola Guarantee.
"Motorola MOU" means the Memorandum of Understanding, dated as of July 11,
1997, between Iridium and Motorola, as amended from time to time.
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or Marketable Securities received (including by way of sale or discounting
of a note, installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiror of Indebtedness
or other obligations relating to such properties or assets) therefrom by such
Person, net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses Incurred and all federal, state, provincial, foreign and
local taxes (including taxes payable upon payment or other distribution of funds
from a foreign subsidiary to Iridium or another Subsidiary of Iridium) required
to be accrued as a liability as a consequence of such Asset Disposition, (ii)
all payments made by such Person or its Restricted Subsidiaries on any
Indebtedness which is secured by such assets in accordance with the terms of any
Lien upon or with respect to such assets or which must by the terms of such
Lien, or in order to obtain a necessary consent to such Asset Disposition or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments made to minority interest holders in
Restricted Subsidiaries of such Person or joint ventures as a result of such
Asset Disposition, (iv) appropriate amounts to be provided by such Person or any
Restricted Subsidiary thereof, as the case may be, as a reserve in accordance
with GAAP against any liabilities associated with such assets and retained by
such Person or any Restricted Subsidiary thereof, as the case may be, after such
Asset Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the Board
of Directors, in its reasonable good faith judgment evidenced by a resolution
filed with the Trustee; provided, however, that any reduction in such reserve
within twelve months following the consummation of such Asset Disposition will
be treated for all purposes of the Indenture and the Notes as a new Asset
Disposition at the time of such reduction with Net Available Proceeds equal to
the amount of such reduction, and (v) any consideration for an Asset Disposition
(which would otherwise constitute Net Available Proceeds) that is required to be
held in escrow pending determination of whether a purchase price adjustment will
be made, but amounts under this clause (v) will become Net Available Proceeds at
such time and to the extent such amounts are released to such Person.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Offer to Purchase" means a written offer (the "Offer") sent by the Issuers
by first class mail, postage prepaid, to each Holder at his address appearing in
the note register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer will specify an expiration date
(the "Expiration Date") of the Offer to Purchase which will be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Notes within five Business Days after the Expiration Date. The
Issuers will notify the Trustee in writing at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Issuers' obligation to make an Offer to Purchase, and the Offer
will be mailed by the Issuers or, at the Issuers' request, by the Trustee in the
name and at the expense of the Issuers. The Offer will contain information
concerning the business of Iridium and its Subsidiaries which Iridium in good
faith believes will enable such holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum will include (i) the most
recent annual and quarterly financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in Iridium's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring Iridium to make the
Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring Iridium to
make the Offer to Purchase and (iv) any other information required by applicable
law to be included therein). The Offer will contain all instructions and
materials necessary to enable such holders to tender Notes pursuant to the Offer
to Purchase.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer, the
Secretary or any Assistant Secretary of Iridium.
"Officers' Certificate" means a certificate signed by two Officers.
"Operations and Maintenance Contract" means the IRIDIUM System Operations
and Maintenance Contract between Iridium and Motorola, dated as of July 29,
1993, as amended from time to time.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
Iridium or the Trustee.
"Outstanding Indebtedness" means the aggregate consolidated principal
amount (or accreted value, in the case of any Indebtedness issued at a discount)
of Indebtedness of Iridium and its Restricted Subsidiaries, on a consolidated
basis, outstanding as of the date of determination.
"pari passu", when used with respect to the ranking of any Indebtedness of
any Person in relation to other Indebtedness of such Person, means that each
such Indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is subordinate in right of payment to
the same Indebtedness of such Person as is the other and is so subordinate to
the same extent and (b) is not subordinate in right of payment to the other or
to any Indebtedness of such Person as to which the other is not so subordinate.
"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions that is designed to protect such Person against
fluctuations in interest rates or currency exchange rates with respect to
Indebtedness Incurred and which will have a notional amount no greater than the
payments due with respect to the Indebtedness being hedged thereby, or with
respect to obligations or receivables denominated in foreign currencies, and not
for purposes of speculation.
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"Permitted Investment" means an Investment by Iridium or any Restricted
Subsidiary (i) in any Person as a result of which such Person becomes a
Restricted Subsidiary, the primary business of which is to engage in all or a
portion of a Related Business, (ii) in Marketable Securities, (iii) in Permitted
Interest Rate or Currency Protection Agreements, (iv) made as a result of the
receipt of noncash consideration from an Asset Disposition that was made
pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock", (v) consisting
of loans or advances to employees of Iridium or any Restricted Subsidiary made
in the ordinary course of business not to exceed $2.0 million in the aggregate
outstanding at any one time and (vi) in any Person for a purpose which is
related, ancillary or complementary to the businesses of Iridium and the
Restricted Subsidiaries on the date such Investment is made; provided that the
aggregate amount of Investments made pursuant to this clause (vi) and then
outstanding does not exceed $100.0 million. The amount of Investments
outstanding pursuant to clause (vi) of the prior sentence will be included in
the calculation of the aggregate amount of Restricted Payments made since July
16, 1997 pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Permitted Liens" means:
(i) Prior to Commercial Activation, Liens to secure up to $750 million
in principal amount of Indebtedness permitted to be incurred pursuant to
paragraph (b)(i) of the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness";
(ii) After Commercial Activation, Liens to secure up to $1.7 billion
in principal amount of Indebtedness (inclusive of the Indebtedness secured
by the Liens described in clause (i) above and any secured Indebtedness
which refinanced such Indebtedness) permitted to be Incurred pursuant to
the covenant described under "-- Certain Covenants -- Limitation on
Indebtedness";
(iii) Liens in favor of Holders of the Notes, the holders of the
Exchange Notes and the Trustee;
(iv) Liens in favor of the Issuers or a Wholly-Owned Restricted
Subsidiary;
(v) Liens on property at the time such Person or any of its
Subsidiaries acquires such property, including any acquisition by means of
a merger or consolidation with or into such Person or a Subsidiary of such
Person, other than any property delivered pursuant to the Space System
Contract or the Operations and Maintenance Contract; provided, however,
that such Liens are not created, incurred or assumed in connection with, or
in contemplation of, such acquisition; provided further, however, that the
Liens may not extend to any other property owned by such Person or any of
its Subsidiaries;
(vi) other than in connection with Indebtedness, any Lien arising in
the ordinary course of business (a) to secure payments of workers'
compensation, unemployment insurance, pension or other social security or
retirement benefits, or to secure the performance of bids, tenders, leases,
progress payments, contracts (other than for the payment of money) or to
secure public or statutory obligations of Iridium or any Restricted
Subsidiary, or to secure surety or appeal bonds to which Iridium or any
Restricted Subsidiary is a party, (b) imposed by law dealing with
materialmen's, mechanics', workmen's, repairmen's, warehousemen's,
landlords', vendors' or carriers' Liens created by law, or deposits or
pledges which are not yet due or, if due, the validity of which is being
contested in good faith by Iridium or any Restricted Subsidiary by
appropriate proceedings promptly instituted and diligently conducted and
against which Iridium has established appropriate reserves in accordance
with GAAP, (c) rights of financial institutions to set off and chargeback
arising by operation of law, (d) rights, if any, of gateway operators and
other service providers to setoff and chargeback arising under agreements
between Iridium and any such Person in respect of clearinghouse services
provided by Iridium to such Person, and (e) similar Liens;
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(vii) servitudes, licenses, easements, encumbrances, restrictions,
rights-of-way and rights in the nature of easements or similar charges
which will not in the aggregate materially adversely impair the use of the
subject property by Iridium or a Restricted Subsidiary;
(viii) zoning and building by-laws and ordinances, municipal bylaws
and regulations, and restrictive covenants, which do not materially
interfere with the use of the subject property by Iridium or a Restricted
Subsidiary;
(ix) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(x) Liens existing on the Issue Date;
(xi) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided, however, that any reserve or other appropriate provision as will
be required in conformity with GAAP will have been made therefor;
(xii) any interest in or title of a lessor to any property subject to
a Capital Lease Obligation which is permitted under the Indenture; and
(xiii) Liens incurred in the ordinary course of business of the
Issuers and the Restricted Subsidiaries with respect to obligations that do
not exceed $10.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than trade credit in the
ordinary course of business); and
(b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of
business by Iridium and the Restricted Subsidiaries.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Rating Agencies" means Standard & Poor's Rating Group and Moody's
Investors Service, Inc. or any successor to the respective credit rating
businesses thereof.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money in respect
of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than (x) any sale
of Receivables by such Person as to which (i) such Person is neither directly or
indirectly liable (as guarantor or otherwise) nor provides credit support of any
kind and (ii) the purchaser of such Receivables has no recourse to any assets or
property of such Person or (y) in connection with a disposition of the business
operations of such Person relating thereto or a disposition of defaulted
Receivables for purpose of collection and not as a financing arrangement.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" will have correlative meanings.
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"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Iridium or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that except in the case
of a Refinancing of the Guaranteed Bank Facility after any extension thereof (as
contemplated in the Motorola MOU) (i) such Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced, (iii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus accrued and unpaid
interest and fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced and (iv) in the event the Indebtedness
being Refinanced constitutes a Subordinated Obligation, the Refinancing
Indebtedness is subordinated to the Notes to at least the same extent as the
Indebtedness being Refinanced; provided further, however, that Refinancing
Indebtedness will not include Indebtedness of Issuers or a Restricted Subsidiary
that Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means the business of developing, owning, engaging in
and dealing with all or any part of the business of the provision of
telecommunications services and businesses and (i) reasonably related extensions
thereof, including but not limited to the manufacture, purchase, ownership,
operation, leasing, licensing, financing and selling of, and generally dealing
in or with, communications satellites, earth stations, gateways, ground
infrastructure and subscriber equipment, used or intended for use with
telecommunications services and businesses and (ii) any other activities that
are reasonably related to the provision of telecommunications services and
businesses.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Capital Stock of such Person
or (b) 5% or more of the combined voting power of the Voting Stock of such
Person.
"Restricted Subsidiary" means any Subsidiary of Iridium, whether existing
on or after the Issue Date, unless such Subsidiary is an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by Iridium or a Restricted Subsidiary whereby
Iridium or such Restricted Subsidiary transfers such property to a Person and
Iridium or such Restricted Subsidiary leases it from such Person, with respect
to any Person.
"Secured Indebtedness" means any Indebtedness of either Issuer secured by a
Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative
meaning.
"Share Issuance Agreement" means the Share Issuance Agreement between
Iridium and IWCL, dated as of June 9, 1997, as amended from time to time.
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act as in effect on the Issue Date.
"Space System Contract" means the Iridium Space System Contract between
Iridium and Motorola, dated as of July 29, 1993, as amended from time to time.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
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"Subordinated Obligation" means any Indebtedness of either Issuer (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. Iridium's 14 1/2% Senior Subordinated Notes due 2006 will be
Subordinated Obligations.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person or
(ii) any other Person (other than a corporation) in which such Person, or one or
more other Subsidiaries of such Person or such Person and one or more other
Subsidiaries of such Person, directly or indirectly, has at least a majority
ownership and power to direct the policies, management and affairs thereof.
"Subsidiary Guaranty" means any Guarantee of the Notes which may from time
to time be executed and delivered pursuant to the terms of the Indenture. Each
such Subsidiary Guaranty will be in the form prescribed in the Indenture.
"Tax Amount" means the aggregate amount of tax distributions required to be
made by Iridium to its members under the Parent LLC Agreement. Notwithstanding
anything to the contrary, Tax Amount will not include taxes resulting from
Iridium's reorganization as or change in the status to a corporation.
"Terrestrial Network Development Contract" means the Terrestrial Network
Development Contract between Iridium and Motorola, entered into in June 1995, as
amended from time to time.
"Total Invested Capital" means, as of any date of determination, the sum of
(a) Total Pro Forma Consolidated Indebtedness as of such date and (b) $1.982
billion plus the aggregate proceeds received by Iridium or any Restricted
Subsidiary in respect of the issuance of Capital Stock of Iridium, including the
fair value of property other than cash (as determined in good faith by the Board
of Directors in a resolution filed with the Trustee), less any redemptions of,
or dividends or other distributions on, Capital Stock of Iridium (other than any
Tax Amount or any dividend or distribution in Capital Stock) made after the
Issue Date and on or prior to the date of determination.
"Total Pro Forma Consolidated Indebtedness" means, as of any date of
determination, after giving effect to any Indebtedness to be Incurred by Iridium
and its Restricted Subsidiaries on a consolidated basis on such date and the
application of the proceeds therefrom, the aggregate amount of Outstanding
Indebtedness as of such date determined on a consolidated basis in accordance
with GAAP and which would appear on the consolidated balance sheet of Iridium.
"Unrestricted Subsidiary" means (i) any Subsidiary of Iridium designated as
such by the Board of Directors as set forth below where (a) neither Iridium nor
any of its other Subsidiaries (other than another Unrestricted Subsidiary) (1)
provides credit support for, or Guarantee of, any Indebtedness of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness), (2) is directly or
indirectly liable for any Indebtedness of such Subsidiary or any Subsidiary of
such Subsidiary, or (3) has any obligation to make additional Investments (other
than Permitted Investments) in such Subsidiary or any Subsidiary of such
Subsidiary (other than, with respect to clauses (1) and (2) above, in the case
of any Indebtedness of Iridium or any Restricted Subsidiary, the proceeds of
which were received by Iridium or a Restricted Subsidiary, that is permitted
under the covenant described in "-- Certain Covenants -- Limitation on
Indebtedness" as to which the Unrestricted Subsidiary provides a Guarantee) and
(b) such Subsidiary and each Subsidiary of such Subsidiary has at least one
director on its board of directors that is not a director or executive officer
of Iridium or any Restricted Subsidiary, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary to
be an Unrestricted Subsidiary by filing a resolution to such effect with the
Trustee unless such Subsidiary or any Subsidiary of such Subsidiary owns any
Capital Stock or Indebtedness of, or owns or holds any Lien (other than a
Permitted Lien) on any property of, Iridium
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or any other Subsidiary of Iridium which is not a Subsidiary of the Subsidiary
to be so designated or otherwise an Unrestricted Subsidiary; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) immediately after giving effect to such designation, Iridium could
incur an additional $1.00 of Indebtedness pursuant to the first sentence of
paragraph (a) under the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness" above; and provided further, however,
that Iridium could make a Restricted Payment in an amount equal to the greater
of the fair market value and the book value of such Subsidiary pursuant to the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments" and such amount is thereafter treated as a Restricted Payment for the
purpose of calculating the aggregate amount available for Restricted Payments
thereunder. The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary by filing a resolution to such effect with the
Trustee, provided that, immediately after giving effect to such designation,
Iridium could incur an additional $1.00 of Indebtedness pursuant to the first
sentence of paragraph (a) under the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness" above and such Subsidiary (as well as
each of Iridium and the other Guarantor Subsidiaries) complies with the covenant
described under "-- Certain Covenants -- Future Guarantor Subsidiaries" as if
such Subsidiary were a newly created Subsidiary. Notwithstanding the foregoing,
neither Capital nor any of its Subsidiaries may be Unrestricted Subsidiaries.
"Vendor Financing Facility" means any agreements between Iridium and/or any
Subsidiary of Iridium and one or more vendors or lessors of equipment to Iridium
and/or any Subsidiary (or any affiliate of any such vendor or lessor) providing
financing for the acquisition by Iridium or any such Subsidiary of equipment or
services from any such vendor or lessor.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" means, with respect to Iridium, a
Restricted Subsidiary of Iridium all of the outstanding Capital Stock or other
ownership interests of which (other than Capital Stock constituting directors'
qualifying shares or interests held by directors or shares or interests required
to be held by foreign nationals, in each case to the extent mandated by
applicable law) are owned by Iridium or by one or more Wholly-Owned Restricted
Subsidiaries of Iridium, or by Iridium and one or more Wholly-Owned Restricted
Subsidiaries of Iridium.
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The following summary of the material provisions of the Exchange and
Registration Rights Agreement does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Exchange and Registration Rights Agreement. A copy of the Exchange and
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part and is available upon request to
Iridium at 1575 Eye Street N.W., Washington, D.C. 20005, Attention: Secretary.
The Iridium Parties and the Initial Purchasers are parties to the Exchange
and Registration Rights Agreement, dated October 17, 1997, entered into in
connection with the issuance of the Original Notes. Pursuant to the Exchange and
Registration Rights Agreement, the Iridium Parties are obligated to (i) file
with the Commission on or prior to 90 days after the Issue Date (provided that
if the 90th day is not a business day, the first business day thereafter) a
registration statement on Form S-1 or Form S-4, if the use of such form is then
available (the "Exchange Offer Registration Statement"), relating to a
registered exchange offer (the "Registered Exchange Offer") for the Notes under
the Securities Act and (ii) use their reasonable efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
no later than 180 days after the Issue Date (provided that if the 180th day is
not a business day, the first
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business day thereafter) and to consummate the Registered Exchange Offer no
later than 210 days after the Issue Date (provided that if the 210th day is not
a business day, the first business day thereafter). As soon as practicable after
the effectiveness of an Exchange Offer Registration Statement, the Issuers will
offer to the holders of Transfer Restricted Securities (as defined) who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer the opportunity to exchange their Transfer Restricted
Securities for a new issue of notes (the "Exchange Notes") that are identical in
all material respects to the Notes being exchanged (except that the Exchange
Notes will not contain terms with respect to transfer restrictions). Pursuant to
the Exchange and Registration Rights Agreement, the Iridium Parties agreed to
use their reasonable efforts to keep the Registered Exchange Offer open for not
less than 20 business days (or longer, if required by applicable law or
otherwise extended by an Iridium Party at its option) after the date notice of
the Registered Exchange Offer is mailed to the holders of the Notes.
The Registration Statement of which this Prospectus is a part is an
Exchange Offer Registration Statement within the meaning of the Exchange and
Registration Rights Agreement, and the Exchange Offer constitutes a Registered
Exchange Offer within the meaning of the Exchange and Registration Rights
Agreement. The sole purpose of the Exchange Offer is to fulfill the obligations
of the Iridium Parties with respect to the Exchange and Registration Rights
Agreement. Each party tendering Original Notes for exchange under the Exchange
Offer agrees that the acceptance of such Original Notes by the Issuers and the
issuance of Exchange Notes in exchange therefor shall constitute performance in
full by the Iridium Parties of their obligations under the Exchange and
Registration Rights Agreement and that the Iridium Parties shall have no further
obligations or liabilities thereunder (except in the limited case of any
obligation relating to a Shelf Registration Statement, as discussed herein).
If (i) because of any change in law or applicable interpretations thereof
by the Commission, the Issuers determine upon the advice of their outside
counsel that they are not permitted to effect the Registered Exchange Offer as
contemplated by the Exchange and Registration Rights Agreement, (ii) any Notes
validly tendered pursuant to the Exchange Offer are not exchanged for Exchange
Notes within 30 days (such period to be extended if the above-referenced 20
business day period is extended pursuant to applicable law) after the
commencement of the Registered Exchange Offer, (iii) any Initial Purchaser so
requests within 90 days after the consummation of the Registered Exchange Offer
with respect to Notes that were not eligible to be exchanged for Exchange Notes
in the Registered Exchange Offer and are then held by it following the
consummation of the Registered Exchange Offer, (iv) any applicable law or
interpretations do not permit any holder of Notes to participate in the
Registered Exchange Offer, (v) any Holder that participates in the Registered
Exchange Offer notifies Iridium within 10 days after the consummation of the
Registered Exchange Offer that it did not receive freely transferable Exchange
Notes in exchange for validly tendered Notes or (vi) the Issuers so elect, then
the Iridium Parties will file with the Commission a shelf registration statement
(the "Shelf Registration Statement") on the terms set forth in the Exchange and
Registration Rights Agreement to cover resales of Transfer Restricted Securities
from time to time by such holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement and who agree in writing to be bound by all provisions of
the Exchange and Registration Rights Agreement (including certain
indemnification obligations). For purposes of the foregoing, "Transfer
Restricted Securities" means each Original Note until (i) the date on which such
Original Note has been exchanged for a freely transferable corresponding
Exchange Note in the Registered Exchange Offer, (ii) the date on which such
Original Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement, or (iii) the
date on which such Original Note is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
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Unless the Registered Exchange Offer would not be permitted by applicable
law or a policy of the Commission, the Iridium Parties will be required pursuant
to the Exchange and Registration Rights Agreement to commence the Registered
Exchange Offer and to use their reasonable efforts to consummate the Registered
Exchange Offer within 30 days (such period to be extended if the
above-referenced 20 business day period is extended pursuant to applicable law)
after the effective date of the Exchange Offer Registration Statement. If
applicable, the Iridium Parties will use their reasonable efforts to file the
Shelf Registration Statement with the Commission on or prior to 60 days after
such filing obligation arises as specified in the Exchange and Registration
Rights Agreement, to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to 60 days after such filing is made,
and to keep the Shelf Registration Statement effective for a period of two years
after the Issue Date. If (a) the Iridium Parties fail to file any of the
Registration Statements required by the Exchange and Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Target Date"),
(c) the Iridium Parties fail to consummate the Registered Exchange Offer within
30 days of the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Exchange and Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Iridium Parties will be obligated to pay liquidated damages
to each Holder of Original Notes, with respect to the first 90-day period
immediately following the occurrence of such Registration Default in an amount
equal to $.05 per week per $1,000 principal amount of the Original Notes held by
such Holder. Such damages, together with damages accrued by Iridium pursuant to
the next succeeding sentence, are collectively referred to herein as "Liquidated
Damages." The amount of the Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Original Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal
amount of Original Notes. All accrued Liquidated Damages will be paid to the
Holder in the same manner as interest payments on the Notes on semi-annual
payment dates which correspond to interest payment dates for the Notes.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Each holder of Original Notes who wishes to exchange Original Notes for
Exchange Notes in the Exchange Offer will be required to make the
representations specified in the Exchange and Registration Rights Agreement,
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has no arrangement
with any person to participate in the distribution of the Original Notes or
Exchange Notes, (iii) it is not an "affiliate" (as defined in Rule 405 under the
Securities Act) of an Iridium Party or, if such holder is an affiliate, that it
will comply with the registration and delivery requirements of the Securities
Act to the extent applicable, (iv) if such holder is not a broker-dealer, that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes, and (v) if such holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Original Notes that were
acquired as a result of market-making activities or other trading activities and
that it will deliver a Prospectus in connection with any resale of such Exchange
Notes.
Holders of the Original Notes will be required to make certain
representations to the Iridium Parties (as described above and in the Exchange
and Registration Rights Agreement) in order to participate in the Registered
Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their Original
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth in the preceding paragraphs. A
holder who sells Original Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil
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liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Exchange and Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations). Notwithstanding the foregoing, no holder of
Transfer Restricted Securities shall be entitled to receive any Liquidated
Damages with respect to such Transfer Restricted Securities, if a holder of such
Transfer Restricted Securities was, at any time while a Registered Exchange
Offer (including the Exchange Offer) was pending, eligible to exchange, and did
not validly tender, such Transfer Restricted Securities for freely transferable
corresponding Exchange Notes in such Registered Exchange Offer.
TAX CONSIDERATIONS
For United States federal income tax purposes, the exchange of Original
Notes for Exchange Notes pursuant to the Registered Exchange Offer should not be
a taxable exchange. As a result, (i) a Holder should not recognize taxable
income or loss as a result of exchanging Original Notes for Exchange Notes
pursuant to the Exchange Offer; (ii) the holding period of the Exchange Notes
should include the holding period of the Original Notes exchanged therefore; and
(iii) the adjusted tax basis of the Exchange Notes should be the same as the
adjusted tax basis of the Original Notes exchanged therefor immediately before
such exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for existing Notes where
such existing Notes were acquired as a result of market-making activities or
other trading activities. The Issuers have agreed that, for a period of up to
180 days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1998, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
None of the Iridium Parties will receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer for the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a Prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Iridium Parties will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Iridium Parties have agreed to pay all
expenses incident to the Exchange Offer (including the reasonable expenses of
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<PAGE> 187
one counsel for the Holders of the Notes) other than commissions or concessions
of any brokers or dealers and will indemnify the Holders of the Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF THE SECURITIES
The validity of the Exchange Notes and the Guarantee of the Initial
Guarantors offered hereby will be passed on for the Iridium Parties by Sullivan
& Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of Parent as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, and for the period June 14, 1991 (Inception) through December 31, 1996
have been included herein and in the Registration Statement of which this
Prospectus forms a part in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
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GLOSSARY
Aeronautical
Mobile-Satellite Route
Service("AMS(R)S")....... aviation communications services for safety and
non-safety purposes
"AMPS"..................... Advanced Mobile Phone Service -- a transmission
protocol used by some cellular operators primarily
in the Americas
"antenna beams"............ tightly focused radio beams transmitted by the
IRIDIUM satellites
"Big LEO".................. LEO MSS systems operating in the bands 1610-1626.5
MHz/2483.5-2500 MHz
"bps"...................... bytes per second
"CDMA"..................... Code Division Multiple Access -- a transmission
protocol used by some cellular networks that is
derived from spread spectrum techniques of the
military
"clearinghouse
functions"................. expected to be performed by Iridium, clearinghouse
functions will include preparation of master
billing tapes, administration of the subscriber
numbering plan and settlement activities
"coordination"............. the process of negotiation and agreement between
ITU member nations by which cases of potential
harmful interference by services duly authorized by
ITU member nations are resolved
"co-rotating orbital
planes".................... immediately adjacent orbital paths
"cross-link antennas"...... antennas used by the satellites to communicate with
one another
"dB"....................... decibel -- a unit used to express relative
difference in power
"earth terminals".......... land based units which communicate with the IRIDIUM
satellite constellation
"excusable delay".......... has the meaning assigned thereto in the Space
System Contract
"ELVs"..................... expendable launch vehicles
"FCC"...................... the United States Federal Communications Commission
"feeder links"............. communications links between gateways and
satellites used to relay message data; these links
use the K-Band on the IRIDIUM System; sometimes
referred to as "gateway links"
FDMA/TDMA.................. Frequency Division Multiple Access/Time Division
Multiple Access -- a transmission protocol used by
some cellular networks
"gateways"................. terrestrial interconnection points between the
IRIDIUM satellite constellation and PSTNs
"gateway links"............ communications links between gateways and
satellites used to relay message data; these links
use the K-Band on the IRIDIUM System; sometimes
referred to as "feeder links"
"GEO"...................... geostationary earth orbit
"GHz"...................... gigahertz -- one billion cycles per second
"global roaming"........... the ability to travel worldwide, subject to certain
limitations, and receive and make telephone calls
from a handheld mobile phone
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"GMPCS".................... Global Mobile Personal Communication Services
"GMSS"..................... Global Mobile Satellite Services
"GSM"...................... Global System for Mobile Communications -- a
transmission protocol used by cellular networks
including most of Europe and parts of Asia
"ICRS"..................... Iridium Cellular Roaming Service
"IIU"...................... Iridium Interoperability Unit being developed under
the direction of Motorola to permit system
management information, including customer
authentication and location, to be relayed between
systems using different protocols
"Inmarsat"................. the International Maritime Satellite Organization
"Intelsat"................. the International Telecommunications Satellite
Organization
"intersatellite links"..... communications links among the satellites in the
IRIDIUM satellite constellation
"IRIDIUM Satellite
Services".................. the satellite-based voice, data, facsimile and
paging services to be offered by Iridium
"IRIDIUM Services"......... the voice, data, facsimile and paging services to
be offered by Iridium
"IS-41".................... International Standard-41 -- a transmission
protocol used by cellular networks including most
of North America and South America
"ITU"...................... International Telecommunication Union
"landline"................. terrestrially-based telephone line
"LEO" (low earth orbit).... earth orbit at a relatively low (e.g., 780
kilometers) altitude
"link margin".............. the amount (usually expressed in dB) by which a
received signal exceeds a predetermined lower limit
for desired message quality
"main mission antennas".... the antennas used by IRIDIUM satellites to
communicate with subscriber equipment (phased array
antennas)
"master control
facility".................. the primary facility from which the IRIDIUM
constellation of satellites and the IRIDIUM System
are managed
"MEO"...................... medium earth orbit
"MHz"...................... megahertz -- one million cycles per second
"MSS"...................... mobile satellite services
"multi-mode phone"......... a phone designed to operate both with a terrestrial
wireless system and with the IRIDIUM System;
Motorola is designing a multi-mode phone which,
through the use of interchangeable TRCs will work
with various different terrestrial wireless
networks
"MXU"...................... multiplex units which contain numerous channels to
be used for communications between a terrestrial
telephone system and the IRIDIUM satellite
constellation
"near polar orbit"......... a flight path which generally follows the earth's
longitudinal lines and crosses both poles during
each orbit
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"Operations and Maintenance
Contract"................ the Operations and Maintenance Contract, effective
July 1993, between Iridium and Motorola, as amended
from time to time
"orbital plane"............ generally, the flight path of a satellite
"Parent LLC Agreement"..... the agreement, dated as of July 29, 1996, entered
into by the investors in Parent, and pursuant to
which Parent is organized
"phone".................... a handset that can be used to provide IRIDIUM voice
services
"primary".................. in the context of spectrum allocation, an
allocation to a service that is granted protection
from harmful interference from stations of a
secondary service
"protocol"................. technical standard used by a wireless
communications system permitting communications,
user authentication and billing
"PSTN"..................... public switched telephone network
"Reserve Capital Call"..... the contractual commitment by 17 of Iridium's
investors to purchase up to 18,206,550 Class 1
Interests at $13.33 per Interest
"secondary"................ in the context of spectrum allocation, an
allocation to a service that (i) cannot cause
harmful interference to stations of primary or
permitted services to which frequencies are already
assigned or to which frequencies may be assigned at
a later date and (ii) cannot claim protection from
harmful interference from stations of a primary or
permitted service to which frequencies are already
assigned or may be assigned at a later date
"service provider"......... the retail link in the IRIDIUM System distribution
chain -- IRIDIUM service providers are expected to
market IRIDIUM Services to, provide services for,
and ultimately bill the consumers of, IRIDIUM
Services. Gateway operators may or may not act as
service providers
"SIM Card"................. a subscriber identity module which, when inserted
into a phone, will permit the phone to identify a
subscriber to the IRIDIUM System
"space segment"............ the space-related portion of the IRIDIUM System
which will consist of a constellation of 66
operational low earth orbit satellites and related
ground infrastructure
"Space System Contract".... the Space System Contract, effective as of July 29,
1993, between Iridium and Motorola, as amended from
time to time
"spectrum"................. the radio frequency spectrum
"system control
facilities"................ facilities for controlling the operation of the
IRIDIUM System
"tail charge".............. the cost charged by local telephone systems for
connecting a telephone call
"TDMA"..................... Time Division Multiple Access -- a transmission
protocol used by some terrestrial wireless networks
"telemetry"................ the science of automatic measurement and
transmission of data from remote sources for
recording and analysis
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"Terrestrial Network
Development Contract".... the Terrestrial Network Development Contract,
entered into in June 1995, between Iridium and
Motorola, as amended from time to time
"TRCs"..................... Terrestrial Radio Cassettes being designed by
Motorola for use with multi-mode phones to permit
those phones to operate with one or more
terrestrial wireless protocols
"TT&C"..................... tracking, telemetry and command
"user links"............... communications links between subscriber equipment
and the IRIDIUM satellite constellation
"WRC-92/WRC-95"............ the 1992/1995 World Administrative Radio Conference
"WRCs"..................... World Radiocommunication Conferences (formerly
known as World Administrative Radio
Conferences -- WARCs)
"$"........................ United States Dollars
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
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<S> <C>
IRIDIUM LLC
Independent Auditors' Report......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996......................... F-3
Consolidated Statements of Loss for the years ended December 31, 1994, 1995 and 1996
and for the period from June 14, 1991 (Inception) through December 31, 1996........ F-4
Consolidated Statements of Members' Equity (Deficit) for the period from June 14,
1991 (Inception) through December 31, 1991, the year ended December 31, 1992, the
seven months ended July 29, 1993, the five months ended December 31, 1993, and the
years ended December 31, 1994, 1995 and 1996....................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996, and the period from June 14, 1991 (Inception) through December 31, 1996...... F-6
Notes to Consolidated Financial Statements........................................... F-7
Unaudited Condensed Consolidated Balance Sheet as of September 30, 1997.............. F-20
Unaudited Condensed Consolidated Statements of Loss for the nine months ended
September 30, 1996 and 1997 and for the period from June 14, 1991 (Inception)
through September 30, 1997......................................................... F-21
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1997 and for the period from June 14, 1991 (Inception)
through September 30, 1997......................................................... F-22
Notes to Unaudited Condensed Consolidated Financial Statements....................... F-23
</TABLE>
- ---------------
NOTE - Iridium LLC is the predecessor of Iridium Operating LLC, and has
transferred substantially all of its assets and liabilities to Iridium
Operating LLC pursuant to the Asset Transfer Agreement between Iridium
LLC and Iridium Operating LLC. Iridium Operating LLC was formed as a
Delaware single member limited liability company on October 23, 1997.
Iridium Capital Corporation ("Capital") was formed and capitalized by
Iridium LLC on June 16, 1997. Iridium Roaming LLC ("Roaming") was formed
by Iridium LLC on June 15, 1997. Iridium IP LLC ("IP") was formed by
Iridium LLC on February 28, 1997. Roaming and IP have no material assets,
liabilities (actual or contingent) or operations, except as covered in
the consolidated financial statements of Iridium LLC. Other than with
respect to the Notes, none of Capital, Roaming or IP has any significant
assets, liabilities (actual or contingent) or operations. See Note 10 to
the unaudited condensed consolidated financial statements.
F-1
<PAGE> 193
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Members
Iridium LLC:
We have audited the accompanying consolidated balance sheets of Iridium LLC
and subsidiary (a development stage limited liability company) as of December
31, 1996 and 1995, and the related consolidated statements of loss, members'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1996, and for the period from June 14, 1991 (inception)
through December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Iridium LLC
and subsidiary (a development stage limited liability company) as of December
31, 1996 and 1995, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996, and for the
period from June 14, 1991 (inception) through December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
Washington, D.C.
February 28, 1997, except as to Note 12
which is as of May 9, 1997
F-2
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IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT INTEREST DATA)
AS OF DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 51,332 $ 1,889
Due from affiliates........................................... -- 3,476
Prepaid expenses and other current assets..................... 873 7,154
----------- -----------
Total current assets.................................. 52,205 12,519
Property and equipment -- net (Note 4).......................... 1,264 2,065
System under construction (Note 8).............................. 1,448,000 2,376,884
Other assets.................................................... 3,914 42,613
----------- -----------
Total assets.......................................... $ 1,505,383 $ 2,434,081
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses......................... $ 4,969 $ 17,937
Accounts payable to Member (Note 8)........................... 90,186 100,563
----------- -----------
Total current liabilities............................. 95,155 118,500
Guaranteed bank facility (Note 5)............................... -- 505,000
Long-term debt due to Members (Note 6).......................... -- 230,904
Other liabilities (Note 9)...................................... 5,618 7,648
----------- -----------
Total liabilities..................................... 100,773 862,052
----------- -----------
Commitments and Contingencies (Notes 1, 3, 5, 8, 9 and 11)
Members' equity (Notes 1, 3, 5, 6, 8, 9 and 12):
Class 2 Interests, 50,000 interests authorized for Series M;
an aggregate of 300,000 interests authorized for Series A,
Series B and Series C
Series M, Convertible, no interests issued or
outstanding.............................................. -- --
Series A, Redeemable, Convertible, no and 46,977 interests
issued and outstanding; liquidation value of $46,977 as
of December 31, 1996..................................... -- 46,977
Series B, Redeemable, no and 1 interest issued and
outstanding.............................................. -- --
Series C, Redeemable, no and 75 interests issued and
outstanding.............................................. -- --
Class 1 Interests, 225,000,000 interests authorized;
110,326,200 and 120,836,025 interests issued and
outstanding; 9,132,150 and no interests subscribed but
unissued................................................... 1,465,917 1,659,625
Deficit accumulated during the development stage.............. (60,242) (133,840)
Adjustment for minimum pension liability (Note 9)............. (1,065) (733)
----------- -----------
Total Members' equity................................. 1,404,610 1,572,029
----------- -----------
Total liabilities and Members' equity............ $ 1,505,383 $ 2,434,081
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 195
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT INTEREST DATA)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31 JUNE 14, 1991
------------------------------------------- (INCEPTION) THROUGH
1994 1995 1996 DECEMBER 31, 1996
------------ ------------ ------------- -------------------
<S> <C> <C> <C> <C>
Operating expenses
Sales, general and
administrative (Notes 5, 8, 9
and 11)...................... $ 17,561 $ 27,187 $ 71,404 $ 138,132
Other income
Interest income................. 4,252 5,226 2,395 12,263
------------ ------------ ------------- -------------------
Loss before provision for income
taxes........................... 13,309 21,961 69,009 125,869
Provision for income taxes (Note
7).............................. 1,525 1,684 4,589 7,971
------------ ------------ ------------- -------------------
Net loss.......................... $ 14,834 $ 23,645 $ 73,598 $ 133,840
============ ============ ============= ===============
Preferred dividend requirement
(Note 3)........................ -- -- 3,652
------------ ------------ -------------
Net loss applicable to Class 1
Interests....................... $ 14,834 $ 23,645 $ 77,250
============ ============ =============
Net loss per Class 1 Interest..... $ 0.38 $ 0.27 $ 0.64
============ ============ =============
Weighted average interests used in
computing net loss per Class 1
Interest........................ 39,040,275 88,162,875 120,115,575
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 196
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT INTEREST DATA)
<TABLE>
<CAPTION>
ALL SERIES, CLASS 2 DEFICIT ADJUSTMENT
INTERESTS CLASS 1 INTERESTS ACCUMULATED FOR
------------------- ------------------------ DURING THE MINIMUM
NUMBER OF NUMBER OF DEVELOPMENT PENSION
INTERESTS AMOUNT INTERESTS AMOUNT STAGE LIABILITY TOTAL
--------- ------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception June 14, 1991......... -- $ -- -- $ -- $ -- $ -- $ --
Net loss........................ -- -- -- -- (757) -- (757)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1991...... -- -- -- -- (757) -- (757)
Net loss........................ -- -- -- -- (8,773) -- (8,773)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1992...... -- -- -- -- (9,530) -- (9,530)
Net loss........................ -- -- -- -- (5,309) -- (5,309)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, July 29, 1993.......... -- -- -- -- (14,839) -- (14,839)
Class 1 Interests subscribed,
July 29, 1993................. -- -- 60,000,000 -- -- -- --
Subscribed Class 1 Interests
issued for cash at $13.33 per
interest...................... -- -- -- 324,167 -- -- 324,167
Costs of raising equity......... -- -- -- (8,096) -- -- (8,096)
Net loss........................ -- -- -- -- (6,924) -- (6,924)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1993...... -- -- 60,000,000 316,071 (21,763) -- 294,308
Class 1 Interests subscribed.... -- -- 59,458,350 -- -- -- --
Subscribed Class 1 Interests
issued for cash at $13.33 per
interest...................... -- -- -- 518,202 -- -- 518,202
Costs of raising equity......... -- -- -- (1,863) -- (1,863)
Net loss........................ -- -- -- -- (14,834) -- (14,834)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1994...... -- -- 119,458,350 832,410 (36,597) -- 795,813
Subscribed Class 1 Interests
issued for cash at $13.33 per
interest...................... -- -- -- 633,514 -- -- 633,514
Costs of raising equity......... -- -- -- (7) -- -- (7)
Net loss........................ -- -- -- -- (23,645) -- (23,645)
Adjustment for minimum pension
liability..................... -- -- -- -- -- (1,065) (1,065)
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1995...... -- -- 119,458,350 1,465,917 (60,242) (1,065) 1,404,610
Class 1 Interests subscribed.... -- -- 1,377,675 -- -- -- --
Subscribed Class 1 Interests
issued for cash at $13.33 per
interest...................... -- -- -- 140,131 -- -- 140,131
Class 2 Interests issued for
cash at $1,000 per interest... 43,401 43,325 -- -- -- -- 43,325
Series A, Class 2 Interests
issued in dividends........... 3,652 3,652 -- (3,652) -- -- --
Costs of raising equity......... -- -- -- (251) -- -- (251)
Warrants to purchase Class 1
Interests issued in connection
with 14.5% Senior Subordinated
Notes......................... -- -- -- 31,761 -- -- 31,761
Warrants to purchase Class 1
Interests issued in connection
with debt guarantee........... -- -- -- 25,719 -- -- 25,719
Net loss........................ -- -- -- -- (73,598) -- (73,598)
Adjustment for minimum pension
liability..................... -- -- -- -- -- 332 332
--------- ------- ----------- ---------- ----------- ---------- ----------
BALANCE, December 31, 1996...... 47,053 $46,977 120,836,025 $1,659,625 $(133,840) $ (733) $1,572,029
======== ======= ========== ========= ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 197
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
YEAR ENDED DECEMBER 31, (INCEPTION)
----------------------------------- THROUGH
1994 1995 1996 DECEMBER 31, 1996
--------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss.............................. $ (14,834) $ (23,645) $ (73,598) $ (133,840)
Adjustments to reconcile net loss to
net cash used in operating
activities
Depreciation and amortization...... 832 751 674 2,305
Expense recognized from warrants
issued in connection with debt
guarantee........................ -- -- 25,719 25,719
Changes in assets and liabilities:
Increase in prepaid expenses and
other current assets.......... (105) (171) (6,281) (7,154)
Increase in due from
affiliates.................... -- -- (3,476) (3,476)
Increase in other assets......... (188) (1,633) (14,079) (16,373)
Increase in accounts payable and
accrued expenses.............. 1,549 1,586 12,968 17,937
Increase (decrease) in accounts
payable to member............. (2,998) 186 377 563
Increase in other liabilities.... 1,867 1,940 2,362 6,915
--------- --------- --------- -----------------
Net cash used in operating
activities.................. (13,877) (20,986) (55,334) (107,404)
--------- --------- --------- -----------------
Cash Flows From Investing Activities:
Purchases of property and equipment... (2,034) (493) (1,475) (4,370)
Additions to system under construction... (321,000) (762,000) (890,757) (2,248,757)
--------- --------- --------- -----------------
Net cash used in investing
activities.................. (323,034) (762,493) (892,232) (2,253,127)
--------- --------- --------- -----------------
Cash Flows From Financing Activities:
Net proceeds from issuance of Class 1
and Class 2 Interests.............. 516,339 633,514 183,205 1,649,128
Gross proceeds from issuance of senior
subordinated notes and warrants.... -- -- 238,453 238,453
Borrowings under bank line of
credit............................. -- -- 505,000 505,000
Deferred financing costs.............. (533) (1,094) (28,535) (30,161)
--------- --------- --------- -----------------
Net cash provided by financing
activities.................. 515,806 632,420 898,123 2,362,420
--------- --------- --------- -----------------
Increase (decrease) in cash and cash
equivalents........................... 178,895 (151,059) (49,443) 1,889
Cash and Cash Equivalents, beginning of
period................................ 23,496 202,391 51,332 --
--------- --------- --------- -----------------
Cash and Cash Equivalents, end of
period................................ $ 202,391 $ 51,332 $ 1,889 $ 1,889
========== ========== ========== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 198
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Iridium LLC ("Iridium") is devoting its present efforts to developing and
commercializing a global wireless system -- the IRIDIUM(R) communications system
(the "IRIDIUM System") -- that will enable subscribers to send and receive
telephone calls virtually anywhere in the world -- all with one phone, one phone
number and one customer bill.
Iridium, Inc. was incorporated on June 14, 1991. Iridium, Inc. operated as
a wholly owned subsidiary of Motorola, Inc. ("Motorola") until July 29, 1993. On
July 29, 1993, Iridium, Inc. closed on, and had its first capital draw under, a
private placement of shares of Common Stock, subscribed to by U. S. and foreign
investors. A second private placement of shares of Common Stock was closed in
August 1994. A third private placement was closed in March 1996. Pursuant to
these private placements and four supplemental placements with certain
additional investors, the investors have invested approximately $1.62 billion in
common equity of Iridium (and could invest up to approximately $1.86 billion in
common equity if a reserve capital call is exercised in full by Iridium). All
Common Stock was sold pursuant to stock purchase agreements, some of which
provided, among other things, for the allocation of gateway service territories
to certain investors.
Iridium was formed as a limited liability company, under the terms and
conditions of the limited liability agreement ("Parent LLC Agreement"), pursuant
to the provisions of the Delaware Limited Liability Company Act on July 29,
1996. Also on July 29, 1996, Iridium, Inc. was merged with and into Iridium,
with Iridium as the surviving entity. Concurrent with the merger, all shares of
Common Stock of Iridium, Inc. were exchanged for Class 1 Membership Interests
(the "Class 1 Interests") in Iridium.
Iridium has contracted with Motorola to design, develop, produce and
deliver into orbit the space segment component of the IRIDIUM System. The
scheduled date for delivery of the $3.45 billion space segment is in 1998.
Iridium plans to begin its commercial operations in the second half of 1998.
The IRIDIUM System is subject to regulation by the Federal Communications
Commission ("FCC") and by foreign administrations and regulatory bodies. On
January 31, 1995, Motorola obtained a license from the FCC to construct, launch
and operate the IRIDIUM System, subject to certain conditions.
The successful completion of the IRIDIUM System is subject, in part, to
raising additional funds. Iridium currently anticipates total capital
requirements of approximately $4.4 billion through September 1998, the expected
date of commencement of commercial operations. Iridium has raised equity
totaling $1.659 billion, and long-term and guaranteed bank facility commitments
totaling $0.988 billion. Iridium has commenced negotiations for an expanded
guaranteed bank facility for an additional $350 million. In addition, Iridium
has the right to exercise a reserve capital call up to $243 million in
additional Class 1 Interests from its members (see Note 3). The remaining funds,
approximately $1.5 billion, are expected to be raised through additional
financings of debt and/or equity as Iridium will have no source of revenues,
other than insignificant amounts of interest income, until 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Iridium LLC
and its wholly owned subsidiary, Iridium World Communications Ltd. ("IWCL"). All
significant intercompany transactions have been eliminated.
F-7
<PAGE> 199
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to July 29, 1993, Iridium was a wholly-owned subsidiary of Motorola.
As a result of three private placements of equity and four supplemental private
placements with certain additional equity investors, Motorola's direct and
indirect Class 1 Interest in Iridium has been reduced to approximately 24% as of
December 31, 1996 before considering unexercised warrants held by Motorola.
DEVELOPMENT STAGE ENTERPRISE
Iridium is devoting substantially all of its present efforts to
constructing, developing and marketing the IRIDIUM System. Its planned principal
operations, to manage the operation of the IRIDIUM System, have not commenced.
ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reported periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Iridium considers short-term, highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash equivalents.
Cash and cash equivalents include cash in banks and investments in reverse
repurchase agreements maturing overnight with Citibank, N.A. and Crestar Bank.
Such investments are recorded at cost, which approximates the market value.
PROPERTY AND EQUIPMENT
Property and equipment is carried at historical cost less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Office equipment and furniture.............................................. 5 years
Computer equipment.......................................................... 5 years
Software.................................................................... 3 years
Company vehicles............................................................ 5 years
</TABLE>
SYSTEM UNDER CONSTRUCTION
System under construction includes all costs incurred related to the
construction of the space and ground components of the IRIDIUM System.
Depreciation expense will be recognized on a satellite-by-satellite basis
commencing with the date of delivery in orbit of each satellite.
Interest costs incurred during the construction of the IRIDIUM System are
capitalized. Total interest cost incurred and capitalized for the year ended
December 31, 1996 was approximately $28,127,000. Interest paid for the year
ended December 31, 1996 was approximately $1,485,000. No interest was incurred,
paid or capitalized for the years ended December 31, 1994 and 1995.
During 1996, Iridium adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" ("Statement 121"). Statement 121 requires that
long-lived assets to be held and used be reviewed by Iridium for impairment
whenever events of changes in circumstances indicate that the carrying
F-8
<PAGE> 200
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount of an asset may not be recoverable. An impairment loss is recognized when
the undiscounted net cash flows associated with the asset are less than the
asset's carrying amount. Impairment losses, if any, are measured as the excess
of the carrying amount of the asset over its estimated fair market value. The
adoption of Statement 121 did not have a material impact on Iridium's results of
operations for the year ended December 31, 1996.
MEMBER INTEREST-BASED COMPENSATION
During 1996, Iridium adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-based Compensation" ("Statement 123"), which
encourages, but does not require, the recognition of member interest-based
employee compensation at fair value. Iridium has elected to continue to account
for member interest-based employee compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations. Accordingly, compensation cost
for options to purchase Class 1 Interests granted to employees is measured as
the excess, if any, of the fair value of Class 1 Interests at the date of the
grant over the exercise price an employee must pay to acquire the interest.
Warrants or options to purchase member interests granted to other than
employees as consideration for goods or services rendered are recognized at fair
market value.
EQUITY ISSUANCE COSTS
Iridium classifies all costs incurred in connection with the issuance of
equity as a reduction of members' equity. These costs include fees paid to
investment bankers, attorneys and others in connection with the issuance of
equity.
DEFERRED FINANCING COSTS
All costs incurred in connection with securing debt financing have been
deferred and are amortized over the terms of the related debt. Costs for future
debt financing are also deferred and are included in other non-current assets in
the accompanying consolidated balance sheets. Total deferred financing costs are
approximately $1,628,000 and $30,200,000 at December 31, 1995 and 1996,
respectively.
During October 1995, Iridium withdrew an intended public offering of
certain subordinated debt financing. Accordingly, Iridium wrote off
approximately $3,200,000 of deferred costs associated with the intended
financing. Such costs are included in operating expenses in the accompanying
consolidated statement of loss for the year ended December 31, 1995.
INCOME TAXES
Iridium, Inc. was subject to federal, state and local income taxes
directly. As a result of the merger of Iridium, Inc. with and into Iridium,
Iridium became a limited liability company. As a limited liability company,
Iridium is no longer subject to U.S. federal income tax directly. Rather, each
Class 1 member is subject to U.S. federal income taxation based on its ratable
portion of Iridium's income or loss. However, Iridium's primary operations are
in the District of Columbia, which does not recognize the limited liability
status for tax purposes. Accordingly, Iridium is subject to District of Columbia
franchise taxes directly. Iridium recognizes its provision for income taxes
under the asset and liability method. Under the asset and liability method,
deferred tax assets and deferred tax liabilities are recognized for the future
tax consequences attributable to differences between the
F-9
<PAGE> 201
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using tax rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
NET INCOME (LOSS) PER CLASS 1 INTEREST
Net income (loss) per Class 1 and Class 1 equivalent interest is calculated
by dividing net income (loss), after considering required dividends on Class 2
Interests, by the weighted average number of Class 1 and Class 1 equivalent
interests, to the extent dilutive, during the period. Class 1 equivalent
interests are comprised of options and warrants and convertible Class 2
Interests. Due to the losses incurred during the years ended December 31, 1994,
1995 and 1996, the impact of the Class 1 equivalent interests is anti-dilutive
and is not presented.
RECLASSIFICATIONS
Certain 1994 and 1995 amounts have been reclassified to conform to the 1996
presentation.
3. MEMBERS' EQUITY
CLASSES OF MEMBERSHIP INTERESTS
The members' interests in Iridium are divided into two classes: Class 1
Interests, which represent the common equity, and Class 2 Interests, which
represent the preferred equity. The Parent LLC Agreement authorizes Iridium to
issue 225,000,000 Class 1 Interests, 50,000 Series M Class 2 Interests, and
300,000 additional Class 2 Interests. A description of each of the classes of
membership interests follows:
Class 1 Interests. Subject to the rights of holders of any Series of
Class 2 Interests, all voting rights of the members are vested in the Class
1 Interests. Each member is entitled to appoint one Director for each
5,250,000 Class 1 Interests owned. Class 1 members may aggregate any or all
of their Class 1 Interests with other Class 1 members and appoint one
Director for each 5,250,000 Class 1 Interests owned in the aggregate. The
members may manage Iridium only through their designated Directors and have
no authority, in their capacity as members, to act on behalf of or bind
Iridium.
The Parent LLC Agreement contains a reserve capital call provision
under which certain members have agreed to purchase additional Class 1
Interests. If the Board elects to exercise this option, Iridium could raise
up to an additional $243 million for 18,206,550 Class 1 Interests.
Series M Class 2 Interests. Motorola owns a warrant to purchase
Series M Class 2 Interests in an amount that is convertible into 2.5% of
the outstanding Class 1 Interests at the time of exercise of the warrant
(calculated on a fully diluted basis) at a price of $1,000 per Series M
Class 2 Interest. Each Series M Class 2 Interest is currently convertible
into 75 Class 1 Interests. The initial Series M Conversion Price is $13.33,
but is subject to anti-dilution adjustments from time to time. Dividends on
Series M Class 2 Interests are cumulative and accrue at the rate of 8% per
annum. No Series M Class 2 Interests are outstanding.
Series A Class 2 Interests. The Series A Class 2 Interests are
convertible preferred interests that pay dividends at a rate of 14 1/2% per
annum. Dividends on the Series A Class 2 Interests are payable, either in
kind or in cash, at the option of Iridium, through February 28,
F-10
<PAGE> 202
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001. Commencing March 1, 2001, dividends on the Series A Class 2 Interests
are payable only in cash. Dividends on the Series A Class 2 Interests
accrue whether or not they have been declared and whether or not there are
profits or other funds of Iridium legally available for the payment of such
dividends. No dividend may be declared and paid on the Class 1 Interests
unless all accrued dividends on the Series A Class 2 Interests have been
paid in full. The Series A Class 2 Interests are convertible to Class 1
Interests at any time at the option of the holder. Currently each Series A
Class 2 Interest may be converted into 18.51 Class 1 Interests. The Series
A Class 2 Interests are redeemable, at the option of Iridium at anytime
after March 1, 2001, subject to a premium if redeemed prior to March 1,
2005.
Series B and Series C Class 2 Interests. In connection with
Motorola's guarantee of Iridium's $750 million credit facility (the
"Guarantee Agreement") (See Note 5), Iridium issued to Motorola one Series
B Class 2 Interest and 75 Series C Class 2 Interests. The Series B Class 2
Interest and Series C Class 2 Interests do not pay any dividends. The
Series B Class 2 Interest entitles Motorola to one seat on the Board of
Directors in addition to Directors it may appoint as the owner of Class 1
Interests and Series M Class 2 Interests. The Series C Class 2 Interests
entitle Motorola to appoint a majority of the Board of Directors in the
event of certain events of default by Iridium. The Series B and Series C
Class 2 Interests are redeemable at the option of Iridium at $.01 per
interest upon the later of (i) the termination or expiration of the
Guarantee Agreement and (ii) the reimbursement of any payments made by
Motorola pursuant to the Guarantee Agreement.
The Parent LLC Agreement provides that Iridium may merge or consolidate
with one or more limited liability companies, corporations, or similar entities,
provided that the transaction is approved by the Board of Directors and Class 1
members holding not less than 66 2/3% of the outstanding Class 1 Interests. In
the event of a merger, members who hold interests and do not vote in favor of,
or consent in writing to, the merger are entitled to appraisal and repurchase
rights of their interests as specified in the Parent LLC Agreement.
DIVIDEND AND LIQUIDATION RIGHTS
Class 1 members are entitled to receive dividends, as and when declared by
the Board of Directors, in its discretion. Class 2 members are entitled to
receive dividends, if any, in accordance with the terms of the relevant Series
of Class 2 Interests, as and when declared by the Board of Directors. The Class
2 Interests rank senior to the Class 1 Interests as to dividends and
distributions upon the liquidation, dissolution and winding-up of Iridium.
The Parent LLC Agreement requires the Iridium Board of Directors, to the
extent of legally available funds, to declare and pay a dividend sufficient to
assure that each non-U.S. Class 1 Member receives an amount at least equal to
the amount of such member's U.S. federal, state and local income tax liability
resulting from allocations of Iridium's taxable income to such member.
The Parent LLC Agreement contains significant restrictions on the ability
of a member to transfer any interests in Iridium, including but not limited to
the conditions that: (i) a majority of the Directors approve the transfer, and
(ii) the transfer not result in any member beneficially owning, or having the
right to beneficially own, more than 45% of the outstanding Class 1 Interests.
F-11
<PAGE> 203
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LIMITATIONS ON LIABILITY
Members are generally not liable for the debts, obligations or liabilities
of Iridium. IWCL, which will become a member of Iridium upon the consummation of
a pending public equity offering, has waived this limitation on liability.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996, consists of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Office equipment and furniture.................................. $ 1,977 $ 3,113
Trade show booth................................................ 722 826
Company vehicles................................................ 30 --
Leasehold improvements.......................................... 168 405
------- -------
2,897 4,344
------- -------
Less accumulated depreciation and amortization.................. (1,633) (2,279)
------- -------
Property and equipment, net..................................... $ 1,264 $ 2,065
======== ========
</TABLE>
5. GUARANTEED BANK FACILITY
On August 21, 1996, Iridium entered into a $750 million credit agreement
with a group of banks led by Chase Manhattan Bank, NA and Barclays Bank, PLC. On
the same date Iridium entered into the Guarantee Agreement whereby Motorola
agreed to guarantee the entire $750 million commitment amount. The credit
agreement provides that Iridium may elect to borrow amounts at the then current
short-term Eurodollar rate plus 1/4% or at the then current Prime Rate of Chase
Manhattan Bank. Iridium also pays a commitment fee of 1/10 of 1% on any unused
portion of the $750 million credit facility. Interest rates on the guaranteed
bank facility ranged from 5.75% to 5.94% during 1996. The credit agreement
expires on August 20, 1998.
Under the Guarantee Agreement, Iridium is required to issue up to 150,000
warrants to Motorola to purchase up to 11,250,000 Class 1 Interests in Iridium.
As consideration for its guarantee, Motorola earns up to 82,500 warrants to
purchase up to 6,187,500 Class 1 Interests for each year the $750 million
guarantee is outstanding, but in no event warrants to purchase more than
11,250,000 Class 1 Interests over the term of the guarantee. Warrants earned are
issued to Motorola on a quarterly basis. Each warrant entitles Motorola to
purchase 75 Class 1 Interests at an exercise price of $.01 per warrant, subject
to anti-dilution adjustments. The warrants may be exercised five years from date
of issuance and expire ten years from date of issuance. As of December 31, 1996,
Motorola has earned 29,836 warrants to purchase 2,237,700 Class 1 Interests in
accordance with the Guarantee Agreement. For the year ended December 31, 1996,
Iridium recognized $25,719,000 as an expense to reflect the fair market value of
the warrants earned by Motorola. Motorola has also been granted a security
interest in all of Iridium's assets.
Subsequent to December 31, 1996, Iridium, Motorola and a group of banks
commenced negotiations for an expansion of the guaranteed bank facility by $350
million under similar terms and conditions for borrowings and the guarantee by
Motorola as the existing $750 million facility.
F-12
<PAGE> 204
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT DUE TO MEMBERS
During 1996, Iridium sold units to certain of its members and their
affiliates; each unit consisting of $1,000 principal amount at maturity 14 1/2%
Senior Subordinated Discount Notes due 2006 (the "Notes") and one warrant to
purchase 10.40775 Class 1 Interests, for aggregate proceeds to Iridium of
approximately $238,453,000. The Notes are unsecured and are subordinate to all
senior debt of Iridium. The Notes fully accrete to an aggregate face value of
$480,150,000 on March 1, 2001 and mature on March 1, 2006. Each Note accrues
cash interest at a rate of 14 1/2% per annum, payable semi-annually commencing
on September 1, 2001. The Notes will be subject to redemption, at the option of
Iridium, at any time on or after March 1, 2001. The warrants entitle the holder
to purchase Class 1 Interests at an exercise price of $.01 per warrant, are
exercisable on March 1, 2001 and expire on March 1, 2006. Iridium recognized the
estimated fair market value of these warrants of $31,761,000 as an addition to
members' equity.
7. INCOME TAXES
From inception through July 29, 1996, Iridium, Inc. was subject to U.S.
federal and state and local income taxes directly, and accordingly, recognized
provisions for income taxes for U.S. federal and for all state and local
jurisdictions. Subsequent to the merger of Iridium, Inc. into a limited
liability company, Iridium is no longer subject to U.S. federal income tax
directly; however, Iridium is subject to District of Columbia franchise taxes.
Iridium's provision for income taxes for the years ended December 31, 1994,
1995, and 1996 consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C> <C>
Current -- Federal...................................... $1,142 $1,258 $3,435
-- State and Local.............................. 383 426 1,154
Deferred -- Federal...................................... -- -- --
-- State and Local.............................. -- -- --
------ ------ ------
$1,525 $1,684 $4,589
====== ====== ======
</TABLE>
The primary reconciling differences between income tax expense and the
amount of tax benefit that would be expected to result by applying the Federal
statutory rate of 35% to the loss before income taxes for the years ended
December 31, 1994 and 1995 and the period from January 1, 1996 to July 29, 1996
(the date of the merger of Iridium, Inc. into Iridium) relate primarily to the
capitalization for tax purposes of certain start-up expenditures, and state and
local taxes. The capitalization of start-up expenditures resulted in Iridium's
only significant deferred tax asset of $19,944,000 at December 31, 1995, for
which a 100% valuation allowance was established. Subsequent to the date of the
merger of Iridium, Inc. into Iridium, Iridium recognizes deferred taxes for
those jurisdictions for which Iridium is taxed directly, resulting in a deferred
tax asset for capitalized start-up expenditures of $4,774,000 at December 31,
1996, for which a 100% valuation allowance has been established.
During the years ended December 31, 1994, 1995, and 1996, Iridium made
income tax payments of approximately $1,430,000, $849,000 and $5,746,000,
respectively.
F-13
<PAGE> 205
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. TRANSACTIONS WITH MEMBERS
SUPPORT AGREEMENT
Under a Support Agreement, Motorola provides certain general and
administrative support to Iridium. On a cost reimbursable basis, Motorola has
provided payroll processing and related benefits to Iridium employees, processed
payments to certain contractors providing support to Iridium, and provided other
administrative support. The amounts and nature of such costs for the years ended
December 31, 1994, 1995 and 1996 consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ---- ----
<S> <C> <C> <C>
Stock issuance costs................................. $2,612 $ -- $ --
Fixed assets, net.................................... 35 -- --
------ ---- ----
Total capitalized............................... 2,647 -- --
------ ---- ----
Payroll and related costs............................ 428 -- --
Travel............................................... 35 -- 8
Consulting........................................... 493 603 826
Other................................................ 229 1 18
------ ---- ----
Total expense................................... 1,185 604 852
------ ---- ----
Total........................................... $3,832 $604 $852
====== ===== =====
</TABLE>
As of December 31, 1995, and 1996, Iridium's balance payable to Motorola
under the Support Agreement was approximately $186,000 and $563,000,
respectively.
SPACE SYSTEM CONTRACT
Iridium has a Space System Contract with Motorola to design, develop,
produce and deliver the Space Segment component of the Iridium Communications
System. Under this fixed priced contract, Motorola will construct the space
vehicles and place them into low-earth orbits for a contract price of $3.45
billion (subject to certain adjustments). The scheduled date of commencement of
commercial operations is September 1998. For the years ended December 31, 1994,
1995, and 1996, Iridium incurred $371 million, $802 million, and $836 million,
respectively, under the Space System Contract. Such costs are capitalized as
system under construction in the accompanying consolidated balance sheets. As of
December 31, 1995 and 1996, Iridium's balance payable to Motorola under the
Space System Contract was $90 million and $100 million, respectively.
The aggregate fixed and determinable portion of all remaining obligations
under the Space System Contract is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
----------------------------------------------------------------------- -----------
<S> <C>
1997............................................................... $ 652,000
1998............................................................... 514,000
-----------
$ 1,166,000
==========
</TABLE>
TERRESTRIAL NETWORK DEVELOPMENT CONTRACT
During 1995, Iridium entered into a Terrestrial Network Development
Contract ("TNDC") with Motorola for an original amount of $160 million. Under
the TNDC, Motorola is designing and developing the terrestrial gateway hardware
and software. The payments under the original contract
F-14
<PAGE> 206
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are tied to the completion of milestones specified in the contract. During 1996,
Iridium and Motorola amended the TNDC. Under the amendment, Motorola will
provide additional services and support under the TNDC in exchange for an
additional $18.9 million. In lieu of a cash payment for the $18.9 million,
Iridium may, at its election, issue 5,545 warrants to purchase an aggregate of
415,875 Class 1 Interests to Motorola. The warrants, if issued, have an exercise
price of $.01 per warrant and may be exercised beginning March 1, 2001 and
expire on March 1, 2006. Certain of Iridium's members will own the individual
gateways and will have no obligation to Iridium for any of the amounts due to
Motorola under the TNDC. For the year ended December 31, 1996, Iridium incurred
$64 million under the TNDC. Such costs are capitalized as system under
construction in the accompanying consolidated balance sheets.
The aggregate fixed and determinable portion of all remaining obligations
under the TNDC, assuming that all obligations are settled in cash, is as follow
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------------------------------------------------------- ---------
<S> <C>
1997................................................................. $ 68,000
1998................................................................. 46,900
---------
$ 114,900
=========
</TABLE>
OPERATIONS AND MAINTENANCE CONTRACT
To provide for the operations and maintenance of the space segment upon
completion of the Space System Contract, Iridium has entered into the Operations
and Maintenance Contract ("O&M") with Motorola. This contract obligates Motorola
for a period of five years after completion of the final milestone under the
Space System Contract to operate the Space System, and to exert its best efforts
to monitor, upgrade and replace hardware and software of the space segment
(including the individual space vehicles) at specified levels, in exchange for
specified quarterly payments. Such payments are expected to begin in 1998 and to
aggregate approximately $2.9 billion. During 1996, Iridium entered into a
two-year option agreement to extend the O&M contract with Motorola after the
completion of the initial five-year term. If such option is exercised, Iridium
will be obligated to make quarterly payments expected to aggregate an additional
$1.3 billion. Assuming that commercial operations commence in September 1998,
the aggregate fixed and determinable portion of all obligations under the O&M is
expected to be as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
----------------------------------------------------------------------- -----------
<S> <C>
1997............................................................... $ --
1998............................................................... 120,000
1999............................................................... 537,000
2000............................................................... 558,000
2001 and thereafter................................................ 1,685,000
-----------
$ 2,900,000
==========
</TABLE>
GATEWAY OWNERS INCENTIVES
Iridium has agreed to issue warrants to purchase 300,000 Class 1 Interests
to each gateway owner whose specified gateway activities are completed on
schedule, and warrants to purchase 7,500 Class 1 Interests for each $1 million
of cumulative Iridium service revenue generated within 15 months of commercial
activation, but in no event will more than an aggregate of 122,200 warrants
F-15
<PAGE> 207
IRIDIUM LLC
(A Development Stage Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
to purchase an aggregate of 9,165,000 Class 1 Interests be issued to all gateway
owners. The warrants will have terms identical to those issued to Motorola under
the Guarantee Agreement (see Note 5). As of December 31, 1996, no such warrants
had been issued.
9. EMPLOYEE BENEFITS
Iridium has adopted a comprehensive performance incentive and retirement
benefit package. The performance incentive program became effective in 1993,
while the various retirement plans became effective on February 1, 1994.
INCENTIVE PROGRAMS
Iridium has established short- and long-term incentive plans primarily
based on employee performance. Effective December 31, 1995, Iridium terminated
the long-term incentive plan. The remaining liability of the long-term incentive
plan is approximately $2,426,000 as of December 31, 1996 and is expected to be
paid in 1999. Under these plans, Iridium incurred expenses of approximately
$1,100,000, $1,300,000, and $1,252,000 for the years ended December 31, 1994,
1995, and 1996, respectively.
401(k) EMPLOYEE RETIREMENT SAVINGS PLAN
Iridium adopted a 401(k) employee retirement savings plan in 1994 covering
all employees. Iridium makes matching contributions to this qualified plan on
behalf of participating employees up to 3% of employees' compensation. Employee
contributions to the plan vest immediately. Iridium contributions vest ratably
over a seven-year period, including service credit for any prior employment with
Motorola. Under this plan, Iridium has incurred expenses of approximately
$87,000, $161,000 and $288,000 during the years ended December 31, 1994, 1995
and 1996, respectively.
RETIREMENT PLANS
All employees of Iridium are covered by a non-contributory defined benefit
retirement plan. Vesting in plan benefits generally occurs after five years.
Benefits under the plan are based on years of credited service (including any
prior employment with Motorola), age at retirement and the average earnings over
the last four years. The plan is funded annually in accordance with the Employee
Retirement Income Security Act of 1974.
In early 1995, Iridium adopted a non-qualified defined benefit plan
covering employees earning in excess of the maximum amounts which may be
considered under the qualified plan, excluding those executives participating in
the supplemental executive plans described below, who also participate in the
qualified defined benefit plan.
SUPPLEMENTAL EXECUTIVE PLANS
Iridium maintains a non-qualified defined benefit plan for selected senior
officers. During 1994 and 1995, one senior executive officer was covered by a
separate plan and a second plan was added for three additional executive
officers in early 1995. Vesting in these plans generally occurs upon the
attainment of age 55 with five years of service. Benefits under these plans are
based on average annual compensation prior to retirement. Iridium has also
agreed to provide for the payment of certain taxes associated with plan
benefits. The supplemental executive plans are not funded. The net periodic
pension cost recognized under the plans was approximately $698,000, $1,256,000
and $1,925,000 for the years ended December 31, 1994, 1995, and 1996,
respectively. In
F-16
<PAGE> 208
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
addition, Iridium recorded an additional minimum pension liability adjustment of
($1,065,000) and $332,000 for the years ended December 31, 1995 and 1996,
respectively, for its non-qualified plans. The additional minimum pension
liability is included as a reduction to members' equity.
SUMMARY OF DEFINED BENEFIT PLANS
Pension cost for the qualified and non-qualified defined benefit plans in
total for the years ended December 31, 1994, 1995 and 1996, are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------------------- --------------------- ---------------------
NON- NON- NON-
QUALIFIED QUALIFIED QUALIFIED QUALIFIED QUALIFIED QUALIFIED
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service Cost................... $ 272 $ 294 $ 372 $ 377 $ 789 $ 438
Interest cost on projected
benefit obligation........... 54 24 70 246 133 339
Actual return on assets........ (34) -- (66) -- (82) 51
Amortization of transition
obligation................ 17 71 19 238 19 238
--------- --------- --------- --------- --------- ---------
Net periodic cost.............. $ 309 $ 389 $ 395 $ 861 $ 859 $ 1,066
======= ======= ======= ======= ======= =======
</TABLE>
The following table describes the funded status of the plans at December
31, 1995 and 1996 (in thousands). The actuarial calculations were determined by
Iridium's consulting actuaries:
<TABLE>
<CAPTION>
1995 1996
--------------------- ---------------------
NON- NON-
QUALIFIED QUALIFIED QUALIFIED QUALIFIED
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Accumulated present value of obligations:
Accumulated benefit obligation, including
vested benefits........................... $ (1,158) $ (2,209) $ (1,828) (2,746)
======== ======== ======== ========
Projected benefit obligation for service
rendered to date.......................... $ (1,602) $ (4,404) $ (2,554) (5,179)
Plan assets at fair value.................... 1,186 -- 1,931 --
--------- --------- --------- ---------
Projected benefit obligation in excess of
plan assets............................... (416) (4,404) (623) (5,179)
Unrecognized transition obligation........... 339 2,598 320 2,360
Unrecognized net (gain) loss................. (122) 662 (227) 609
--------- --------- --------- ---------
Accrued pension cost......................... (199) (1,144) (530) (2,210)
Adjustment required to recognize minimum
liability................................. -- (1,065) -- (733)
--------- --------- --------- ---------
Pension liability............................ $ (199) $ (2,209) $ (530) (2,943)
======== ======== ======== ========
Actuarial assumptions:
Discount rate............................. 7% 7% 7.5% 7.5%
Long-term rate of return.................. 8% 8% 8% 8%
Salary increases.......................... 5% 5% 5% 5%
</TABLE>
F-17
<PAGE> 209
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPTION PLAN
On January 1, 1996, Iridium adopted an Option Plan. Under the terms of the
Option Plan, certain key employees were granted, at the discretion of the Board
of Directors, options to purchase Class 1 Interests. At the date of grant, each
employee has the option to purchase in cash all granted amounts of options,
subject to a five-year vesting period, or defer the exercise of such option over
a ten-year period, subject to earlier termination clauses. As of December 31,
1996, 2,625,000 Class 1 Interests have been reserved for issuance under the
Option Plan. As permitted by Statement 123, Iridium applies the intrinsic value
method in accounting for compensation cost under this plan. Accordingly, as all
options to acquire Class 1 Interests have been granted at an exercise price
equal to the fair market value as of the date of grant, no compensation cost has
been recognized under this plan in the accompanying consolidated financial
statements. Had compensation cost been determined consistent with the fair value
method of Statement 123, Iridium's net loss would have been increased to the pro
forma amount indicated below (in thousands except per interest data):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C> <C>
Net loss......................... As reported...................... $ (73,598)
Pro forma........................ (74,172)
Net loss per Class 1 Interest.... As reported...................... $ 0.64
Pro forma........................ 0.65
</TABLE>
During 1996, the fair value of options granted are estimated on the dates
of the grants using the Black-Scholes Option Pricing Model with the following
weighted-average assumptions: dividend yield of 0.0%, expected volatility of
45%, risk-free interest rate of 6.7%, and expected life of five years. The
effects on compensation cost as determined under Statement 123 on net loss in
1996 may not be representative of the effects on pro forma net income (loss) for
future periods.
The following table summarizes Iridium's Option Plan:
<TABLE>
<CAPTION>
WEIGHTED
INTERESTS AVERAGE
UNDER EXERCISE
OPTION PRICE
--------- --------
<S> <C> <C>
Outstanding at December 31, 1995............................... -- --
Granted................................................... 729,750 $13.33
Exercised................................................. -- --
Forfeited................................................. -- --
--------- --------
Outstanding at December 31, 1996............................... 729,750 $13.33
--------- --------
Options exercisable at December 31, 1996....................... --
---------
Weighted-average fair value at date of grant of options granted
during the year ended December 31, 1996...................... $ 6.50
---------
Weighted-average remaining contractual life (in years)......... 9.39
---------
</TABLE>
F-18
<PAGE> 210
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of Iridium's financial instruments as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Guaranteed bank facility..................................... $505,000 $505,000
Long-term debt due to Members................................ 230,904 230,904
</TABLE>
The fair value of Iridium's long-term debt is estimated based on the
current rates offered to Iridium for similar debt. The carrying amounts of cash
and cash equivalents, short-term investments, due from affiliates and accounts
payable and accrued expenses approximate their fair market value as of December
31, 1996 and 1995 because of the relatively short duration of these accounts.
11. OPERATING LEASE COMMITMENTS
Iridium leases its corporate headquarters office space and certain office
equipment under non-cancelable operating lease agreements expiring through 1999.
The corporate headquarters office lease is for a term of five years, which may
be extended at Iridium's election for an additional five years. Future minimum
payments under all operating lease arrangements are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
--------------------------------------------------------------------------- -------
<S> <C>
1997................................................................... $ 1,858
1998................................................................... 1,880
1999................................................................... 156
-------
$ 3,894
======
</TABLE>
The office lease agreement also requires Iridium to pay operating expenses,
which are estimated at $400,000 annually. Rent expense for the years ended
December 31, 1994, 1995, and 1996 was approximately $793,000, $1,025,000, and
$1,194,000, respectively.
12. SUBSEQUENT EVENTS
On April 16, 1997, the Limited Liability Company Agreement was amended to
increase the authorized number of Class 1 Interests from 3,000,000 to
225,000,000. On May 9, 1997, Iridium effected a 75 for 1 subdivision of its
Class 1 Interests whereby each existing Class 1 Interest was subdivided into 75
Class 1 Interests. All interest and per interest data appearing in the
consolidated financial statements and notes thereto have been retroactively
adjusted for the subdivision.
F-19
<PAGE> 211
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)
AS OF SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 9,189
Due from affiliates........................................................... 13,618
Prepaid expenses and other current assets..................................... 14,853
-----------
Total current assets.................................................. 37,660
Property and equipment -- net................................................... 1,008,450
System under construction....................................................... 2,003,472
Other assets.................................................................... 141,303
-----------
Total assets.......................................................... $ 3,190,885
==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses......................................... $ 49,614
Accounts payable to member.................................................... 130,258
Guaranteed bank facility, current portion..................................... 235,000
-----------
Total current liabilities............................................. 414,872
Long-term debt due to Members................................................... 262,035
Senior notes, Series A and Series B............................................. 753,478
Other liabilities............................................................... 6,972
-----------
Total liabilities..................................................... 1,437,357
-----------
Commitments and Contingencies
Members' equity:
Class 2 Interests, 50,000 interests authorized for Series M; an aggregate of
300,000 interests authorized for Series A, Series B and Series C:
Series M, convertible, no interest issued and outstanding.................. --
Series A, redeemable, convertible, 46,977 and 38,511 interests issued and
outstanding; liquidation value of $38,511................................. 38,511
Series B, redeemable, 1 interest issued and outstanding.................... --
Series C, redeemable, 75 interests issued and outstanding.................. --
Class 1 Interests, 225,000,000 interests authorized; 120,836,025 and
141,219,180 interests issued and outstanding............................... 2,019,107
Deferred Class 1 Interests Compensation....................................... (1,568)
Deficit accumulated during the development stage.............................. (301,789)
Adjustment for minimum pension liability...................................... (733)
-----------
Total Members' equity................................................. 1,753,528
-----------
Total liabilities and Members' equity................................. $ 3,190,885
==========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-20
<PAGE> 212
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER NINE MONTHS ENDED SEPTEMBER PERIOD FROM
30, 30, JUNE 14, 1991
---------------------------- ---------------------------- (INCEPTION) THROUGH
1996 1997 1996 1997 SEPTEMBER 30, 1997
------------ ------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
Operating expenses
Sales, general and
administrative................. $ 19,466 $ 39,061 $ 37,911 $ 122,926 $ 258,753
Depreciation and amortization.... 155 45,936 441 46,539 48,844
------------ ------------ ------------ ------------ -------------------
Total operating expenses....... 19,621 84,997 38,352 169,465 307,597
Other income
Interest income, net............. 502 902 2,217 1,516 13,779
------------ ------------ ------------ ------------ -------------------
Loss before provision for income
taxes............................ 19,119 84,095 36,135 167,949 293,818
Provision for income taxes......... 5,113 -- 5,600 -- 7,971
------------ ------------ ------------ ------------ -------------------
Net loss........................... $ 24,232 $ 84,095 $ 41,735 $ 167,949 $ 301,789
=========== =========== =========== =========== ================
Preferred dividend requirement..... 1,580 1,317 2,419 4,924
------------ ------------ ------------ ------------
Net loss applicable to Class 1
Interests........................ $ 25,812 $ 85,412 $ 44,154 $ 172,873
=========== =========== =========== ===========
Net loss per Class 1 Interest...... $ 0.21 $ 0.60 $ 0.37 $ 1.33
=========== =========== =========== ===========
Weighted average interests used in
computing net loss per Class 1
Interest......................... 120,821,421 141,219,180 119,523,754 130,065,304
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-21
<PAGE> 213
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD FROM
SEPTEMBER 30, JUNE 14, 1991
----------------------- (INCEPTION) THROUGH
1996 1997 SEPTEMBER 30, 1997
---------- ---------- -------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss......................................... $ (41,735) $ (167,949) $ (301,789)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization................. 441 46,539 48,844
Employee Class 1 Interests compensation....... -- 38 38
Expense recognized from warrants issued in
connection with debt guarantee.............. 7,793 48,631 74,350
Changes in assets and liabilities:
Increase in prepaids and other current
assets................................... (414) (7,699) (14,853)
Increase in due from affiliates............. (259) (10,142) (13,618)
Increase in other assets.................... (7,031) (36,825) (53,198)
Increase in accounts payable and accrued
expenses................................. 15,261 33,232 51,169
Increase (decrease) in other liabilities.... 12,878 (676) 6,802
---------- ---------- -------------------
Net cash used in operating activities.... (13,066) (94,851) (202,255)
---------- ---------- -------------------
Cash Flows From Investing Activities:
Purchases of property and equipment.............. (1,054) (4,189) (8,559)
Additions to system under construction........... (508,173) (614,045) (2,862,802)
---------- ---------- -------------------
Net cash used in investing activities.... (509,227) (618,234) (2,871,361)
---------- ---------- -------------------
Cash Flows From Financing Activities:
Net proceeds from issuance of Class 1 and Class 2
Interests..................................... 183,229 283,666 1,932,794
Net proceeds from issuance of senior notes and
warrants...................................... 238,453 745,939 984,392
Borrowings under bank line of credit............. 100,402 410,000 915,000
Payments under bank line of credit............... -- (680,000) (680,000)
Deferred financing costs......................... (22,173) (39,220) (69,381)
---------- ---------- -------------------
Net cash provided by financing
activities............................. 499,911 720,385 3,082,805
---------- ---------- -------------------
Increase (decrease) in cash and cash equivalents... (22,382) 7,300 9,189
Cash and Cash Equivalents, beginning of period..... 51,332 1,889 --
---------- ---------- -------------------
Cash and Cash Equivalents, end of period........... $ 28,950 $ 9,189 $ 9,189
========== ========== ===============
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-22
<PAGE> 214
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. ORGANIZATION
Iridium LLC ("Iridium") is devoting its present efforts to developing and
commercializing a global wireless telephony system -- the IRIDIUM(R)
communications system (the "IRIDIUM System") -- that will enable subscribers to
send and receive telephone calls virtually anywhere in the world -- all with
one phone, one phone number and one customer bill.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of Iridium LLC as of September 30, 1997, and the results of their
operations for the three and nine month periods ended September 30, 1997 and
1996, and the period from June 14, 1991 (inception) through September 30, 1997,
and their cash flows for the nine month period ended September 30, 1997 and
1996, and the period from June 14, 1991 (inception) through September 30, 1997.
These condensed consolidated financial statements are unaudited, and do not
include all related footnote disclosures. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative of
the results of operations expected in the future, although the Company will
continue to be a development stage limited liability company and anticipates a
net loss for the year. These financial statements should be read in conjunction
with Iridium LLC's audited consolidated financial statements and footnotes
thereto included in the registration statement on Form S-1 (333-23419,
23419-01), dated June 9, 1997.
3. ACCOUNTING FOR SATELLITES LOST AT LAUNCH OR FAILING IN ORBIT
The costs of constructing and placing satellites into service are
capitalized. Losses from satellite failures for which Iridium has financial
responsibility under its contractual arrangements with Motorola are recognized
currently. Motorola bears the risk of loss for launch failures and satellite
failures before a satellite is placed into service.
4. MEMBERS' EQUITY
On April 16, 1997, the Limited Liability Company Agreement of Iridium was
amended to increase the authorized number of Class 1 Interests from 3,000,000 to
225,000,000. On May 9, 1997, Iridium effected a 75 for 1 subdivision of its
Class 1 Membership Interests whereby each existing Class 1 Interest was
subdivided into 75 Class 1 Interests. All interest and per interest data
appearing in the unaudited condensed consolidated financial statements and notes
thereto have been retroactively adjusted for the subdivision.
On May 9, 1997, Iridium entered into a definitive agreement with South
Pacific Iridium Holdings Limited ("SPI"), an affiliate of P.T. Bakrie
Communications Corporation ("Bakrie"), pursuant to which SPI agreed to acquire
from Iridium 7,500,000 Class 1 Interests at $13.33 per interest. The transaction
closed on May 30, 1997 with 40% of the total purchase price paid on that date
and the remainder due on or before May, 1998. Through September 30, 1997,
Iridium has received an aggregate of $59.2 million from SPI in satisfaction of
that commitment.
On June 13, 1997, Iridium World Communications Ltd. ("IWCL"), a
wholly-owned subsidiary of Iridium as of that date, consummated an initial
public offering (the "Offering") of 12,000,000 shares of its Class A Common
Stock which resulted in proceeds of approximately $225 million to IWCL
F-23
<PAGE> 215
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(expenses of the Offering were paid by Iridium). Pursuant to the 1997
Subscription Agreement between Iridium and IWCL, such proceeds were used to
purchase 12,000,000 Class 1 Interests in Iridium. Upon consummation of the
Offering, all of the outstanding shares of IWCL held by Iridium were retired,
and IWCL became a member of Iridium.
Iridium declared approximately $1,317,000 and $1,580,000 in-kind dividends
to holders of Series A Class 2 Membership Interests during the three month
periods ended September 30, 1997 and 1996, respectively, and $4,924,000 and
$2,419,000 for the nine month periods ended September 30, 1997 and 1996,
respectively.
5. SUPPLEMENTAL CASH FLOW INFORMATION
During the nine months ended September 30, 1997 and 1996, $80,970,000 and
$14,934,000, respectively, of interest expense was incurred and capitalized to
the system under construction. Interest paid was $24,344,000 during the nine
months ended September 30, 1997, and no amounts were paid for interest during
the nine months ended September 30, 1996.
There were no income taxes paid during the nine months ended September 30,
1997, and the amount paid for income taxes was $6,192,000 during the nine months
ended September 30, 1996.
6. TRANSACTIONS WITH MEMBER
TERRESTRIAL NETWORK DEVELOPMENT CONTRACT
As a result of technological developments, changes in the desired product
mix and features of the IRIDIUM services, the addition of enhanced system
capabilities, and scheduling adjustments, Iridium entered into an amendment to
the Terrestrial Network Development Contract ("TNDC") with Motorola, Inc.
("Motorola"), effective July 15, 1997. Aggregate payments under the TNDC, as so
amended, are expected to be approximately $284 million.
GUARANTEED BANK FACILITY
In accordance with the Agreement Regarding the Guarantee between Iridium
and Motorola, pursuant to which Motorola guaranteed Iridium's obligations under
the Guaranteed Bank Facility, an additional 56,416 warrants to purchase
4,321,200 Class 1 Interests were earned by Motorola during the nine months ended
September 30, 1997. Iridium recognized $48,631,000 as expense during the nine
months ended September 30, 1997 to reflect the fair market value of the warrants
earned by Motorola.
On July 21, 1997, Iridium permanently reduced the commitment of the bank
lenders in the Guaranteed Bank Facility from $750 million to $655 million. On
October 22, 1997, the commitment of the bank lenders under the Guaranteed Bank
Facility was further permanently reduced from $655 million to $450 million. As a
result of the reduction, the maximum number of warrants Motorola may earn as
compensation for their guarantee of that facility until maturity in August 1998
is 110,085 warrants to purchase approximately 8,256,375 Class 1 Interests.
7. LONG TERM DEBT
On July 16, 1997, Iridium and Iridium Capital Corporation, a wholly owned
subsidiary of Iridium, completed an offering (the "High Yield Offering") of (i)
300,000 units, each consisting of $1,000 principal amount of 13% Senior Notes
due 2005, Series A ("Series A Notes"), and one IWCL
F-24
<PAGE> 216
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
Warrant representing the right to purchase 5.2 shares of Class A Common Stock of
IWCL, and (ii) $500 million aggregate principal amount of 14% Senior Notes due
2005, Series B ("Series B Notes"). The Series A Notes and Series B Notes are
guaranteed by Iridium Roaming LLC and Iridium IP LLC. The aggregate net proceeds
received were approximately $746 million. Interest on the Series A Notes and
Series B Notes is payable in cash semi-annually on January 15th and July 15th of
each year, commencing on January 15, 1998. The notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series A and Series B Notes mature on July 15, 2005. The IWCL Warrants
represent, in aggregate, the right to purchase 1,560,000 shares of Class A
Common Stock of IWCL. The exercise price of each IWCL Warrant is $20.90 per
share, exercisable at any time on or after one year from the date of original
issuance, and expires on July 15, 2005. Concurrent with the issuance of the IWCL
Warrants in the High Yield Offering, Iridium issued to IWCL 1,560,000 LLC
Interest Warrants, each exercisable for one Class 1 Interest at an exercise
price of $20.90 per LLC Interest Warrant. The LLC Interest Warrants provide that
one LLC Interest Warrant must be exercised upon the exercise of each IWCL
Warrant. Approximately $17,113,000 of the proceeds of the High Yield Offering
was allocated to the purchase price of the Iridium Interest Warrants.
Iridium has received a commitment letter from Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and BZW, the investment banking division
of Barclays Bank PLC, for a Secured Bank Facility in a principal amount up to
$750 million, to be secured by substantially all of Iridium's assets and by the
Reserve Capital Call, defined as the contractual commitment by 17 of Iridium's
investors to purchase up to 18,206,550 Class 1 Interests at $13.33 per interest.
Borrowings under the Secured Bank Facility would mature on September 30, 1998,
subject to Iridium's right to extend such maturity until June 30, 1999 if it can
demonstrate by July 1, 1998 that it has sufficient available or committed
financing for its approved project costs through such extended maturity. The
availability of the Secured Bank Facility is subject to significant conditions,
including the execution of satisfactory definitive documentation, technical
conditions relating to the IRIDIUM System, conditions relating to regulatory
approvals and conditions relating to other financing sources.
8. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("Statement 128"). Statement 128 supersedes
Accounting Principles Board Opinion No. 15, "Earnings per Share" ("APB 15") and
its related interpretations, and promulgates new accounting standards for the
computation and manner of presentation of Iridium's loss per Class 1 Interest
data. Iridium is required to adopt the provisions of Statement 128 for the year
ending December 31, 1997. Earlier application is not permitted; however, upon
adoption of Statement 128 Iridium will be required to restate previously
reported annual and interim loss per Class 1 Interest data in accordance with
the provisions of Statement 128. Iridium does not believe that the adoption of
Statement 128 will have a material effect on the computation or manner of
presentation of its loss per Class 1 Interest data as currently or previously
presented under APB 15.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("Statement 130"). Statement 130
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. Iridium is required to adopt the
provisions of Statement 130 for the year ending December 31, 1998. Earlier
application is permitted; however, upon adoption of Statement 130 Iridium will
be required to reclassify previously reported annual and interim financial
statements. Iridium believes that the disclosure of comprehensive income in
accordance with the provisions of Statement 130 will
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<PAGE> 217
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
materially affect the manner of presentation of its financial statements as
currently and previously reported.
9. SUBSEQUENT EVENT
On October 17, 1997, Iridium and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering of $300 million principal
amount of 11 1/4% Senior Notes due 2005, Series C ("Series C Notes"). The Series
C Notes are guaranteed by Iridium Roaming LLC and Iridium IP LLC. The net
proceeds received were approximately $293 million. Interest on the Series C
Notes is payable in cash semi-annually on January 15th and July 15th of each
year, commencing on January 15, 1998. The Series C Notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series C Notes mature on July 15, 2005.
10. IRIDIUM SUBSIDIARIES
Iridium's Series A Notes, Series B Notes and Series C Notes are co-issued
by Iridium Capital Corporation ("Capital") and are fully and unconditionally
guaranteed, jointly and severally, on a senior unsecured basis by Iridium
Roaming LLC and Iridium IP LLC (together with Capital, the "Iridium
Subsidiaries"). Each of the Iridium Subsidiaries is a wholly-owned subsidiary of
Iridium and, as of September 30, 1997, Iridium had no subsidiaries other than
the Iridium Subsidiaries. The following is summarized financial information of
the Iridium Subsidiaries as of September 30, 1997 and for the period from
inception of each Iridium Subsidiary through September 30, 1997. Full financial
statements of the Iridium Subsidiaries are not presented because management
believes they are not material to investors.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
<S> <C>
Current assets............................................................ $0
Total assets.............................................................. 0
Current liabilities....................................................... 0
Total liabilities......................................................... 0
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION THROUGH
SEPTEMBER 30, 1997(1)
----------------------
<S> <C>
Net revenues............................................................ $0
Cost of services........................................................ 0
Net loss................................................................ 0
</TABLE>
- ---------------
(1) Capital was formed and capitalized by Iridium on June 16, 1997 (subscribed
capital of $100). Iridium Roaming LLC was formed by Iridium on June 15,
1997. Iridium IP LLC was formed by Iridium on February 28, 1997.
F-26
<PAGE> 218
IRIDIUM OPERATING LLC
IRIDIUM CAPITAL CORPORATION
IRIDIUM ROAMING LLC
IRIDIUM IP LLC
IRIDIUMLOGO
The Exchange Agent for the Exchange Offer is
Facsimile Transmissions:
( )
(Eligible Institutions Only)
<TABLE>
<S> <C>
By Registered or Certified Mail By Hand or Overnight Delivery
</TABLE>
New York Drop Location
FOR INFORMATION CALL:
( )
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 219
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Capital, which is a Delaware corporation, is empowered by the Delaware
General Corporation Law, subject to the procedures and limitations stated
therein, to indemnify any person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his being or having
been a director, officer, employee or agent of Capital. The statute provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise. The
Certificate of Incorporation and by-laws of Capital provide for indemnification
of the directors and officers of such entities to the full extent permitted by
the Delaware General Corporation Law.
Pursuant to the Parent LLC Agreement, Iridium has agreed to indemnify any
person against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action brought
by Iridium), in which such person is made a party by reason of his being or
having been a director or officer of Iridium or is or was serving at the request
of Iridium as a manager, director, officer, employee, fiduciary or agent of
another limited liability company or of a corporation, partnership, joint
venture, trust or other enterprise, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of Iridium and, with respect to any criminal action or proceeding had
no reasonable cause to believe such person's conduct was unlawful.
Pursuant to the Iridium LLC Agreement, Iridium has agreed to indemnify any
person against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding (a
"proceeding"), whether civil, criminal, administrative or investigative (other
than an action brought by Iridium), in which such person is made a party by
reason of his being or having been a director or officer of Iridium or is or was
serving at the request of Iridium as a manager, director, officer, employee or
agent of another limited liability company or of a corporation, partnership,
joint venture, trust or other enterprise, if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of Iridium and, with respect to such proceeding, had no reasonable
cause to believe such person's conduct was unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as of July 29,
1996, as amended: Incorporated by reference to Exhibit 10.1 to the
Registration Statement on Form S-1 of Iridium World Communications Ltd.
("IWCL") and Iridium LLC (Registration Nos. 333-23419 and 333-23419-01) (the
"Form S-1").
3.2 Articles of Incorporation of Iridium Capital Corporation: Incorporated by
reference to Exhibit 3.2 of the Registration Statement on Form S-4 of Iridium
LLC, Iridium Capital Corporation ("Capital"), Iridium Roaming LLC
("Roaming"), and Iridium IP LLC ("IP") (Registration Nos. 333-31741, -01, -02
and -03) (the "1997 Form S-4").
</TABLE>
II-1
<PAGE> 220
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
3.3 By-Laws of Iridium Capital Corporation: Incorporated by reference to Exhibit
3.3 to the 1997 Form S-4.
3.4 Amended and Restated Limited Liability Company Agreement of Iridium Roaming
LLC.*
3.5 Amended and Restated Limited Liability Company Agreement of Iridium IP LLC.*
3.6 Limited Liability Company Agreement of Iridium Operating LLC.*
4.1.1 Indenture dated as of July 16, 1997 relating to Iridium LLC's and Iridium
Capital Corporation's 13% Senior Notes due 2005, Series A, and 13% Senior
Notes due 2005, Series A/EN: Incorporated by reference to Exhibit 4.1 to the
1997 Form S-4.
4.1.2 First Supplemental Indenture dated as of December 19, 1997 relating to
Iridium Operating LLC's and Iridium Capital Corporation's 13% Senior Notes
due 2005, Series A, and 13% Senior Notes due 2005, Series A/EN.*
4.2 Forms of Series A Note and Series A/EN Note: Incorporated by reference to
Exhibit 4.1 to the 1997 Form S-4.
4.3.1 Indenture dated as of July 16, 1997 relating to Iridium LLC's and Iridium
Capital Corporation's 14% Senior Notes due 2005, Series B, and 14% Senior
Notes due 2005, Series B/EN: Incorporated by reference to Exhibit 4.2 to the
1997 Form S-4.
4.3.2 First Supplemental Indenture dated as of December 19, 1997 relating to
Iridium Operating LLC's and Iridium Capital Corporation's 14% Senior Notes
due 2005, Series B, and 14% Senior Notes due 2005, Series B/EN.*
4.4 Forms of Series B Note and Series B/EN Note: Incorporated by reference to
Exhibit 4.2 to the 1997 Form S-4.
4.5.1 Indenture dated as of October 17, 1997 relating to Iridium LLC's and Iridium
Capital Corporation's 11 1/4% Senior Notes due 2005, Series C.*
4.5.2 First Supplemental Indenture dated as of December 19, 1997 relating to
Iridium Operating LLC's and Iridium Capital Corporation's 11 1/4% Senior
Notes due 2005, Series C.*
4.6 Forms of Series C Note and Series C/EN Note: contained in an exhibit to
Exhibit 4.5.1.*
5.1 Opinion of Sullivan & Cromwell.*
10.1 Form of Interest Exchange Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.2 to the Form S-1.
10.2 Form of amended and restated Management Services Agreement between IWCL,
Iridium LLC and Iridium Operating LLC.*
10.3 Form of 1997 Subscription Agreement between IWCL and Iridium LLC:
Incorporated by Reference to Exhibit 10.4 to the Form S-1.
10.4 Space System Contract between Iridium LLC and Motorola, Inc. effective July
29, 1993, as amended and conformed on January 14, 1997: Incorporated by
reference to Exhibit 10.6 to the Form S-1.+
10.5 Communications System Operations & Maintenance Contract between Iridium LLC
and Motorola, Inc. effective July 29, 1993, as amended and conformed on
January 14, 1997: Incorporated by reference to Exhibit 10.7 to the Form S-1.+
10.6 Terrestrial Network Development Contract between Iridium LLC and Motorola,
Inc. effective January 1, 1993, as amended and conformed on January 14, 1997:
Incorporated by reference to Exhibit 10.8 to the Form S-1.+
</TABLE>
II-2
<PAGE> 221
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
10.7 Amendment No. 3 to the Terrestrial Network Development Contract between
Iridium LLC and Motorola, Inc. effective June 20, 1997: Incorporated by
reference to Exhibit 10.7 to the 1997 Form S-4.+
10.8 Support Agreement between Iridium LLC and Motorola, Inc.: Incorporated by
reference to Exhibit 10.9 to the Form S-1.
10.9 Agreement, executed as of December 16, 1996, between Andersen Consulting LLC
and Iridium LLC relating to the development of business support systems:
Incorporated by reference to Exhibit 10.10 to the Form S-1.+
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of Iridium: Incorporated
by reference to Exhibit 10.11 to the Form S-1.
10.11 Form of Warrant issued in respect of 14 1/2% Senior Subordinated Discount
Notes: Incorporated by reference to Exhibit 10.13 to the Form S-1.
10.12 Warrant to purchase Series M Class 2 Interests dated July 29, 1993, as
amended: Incorporated by reference to Exhibit 10.13 to the Form S-1.
10.13 Form of Gateway Authorization Agreement: Incorporated by reference to Exhibit
10.14 to the Form S-1.
10.14 Guaranteed Bank Facility: Incorporated by reference to Exhibit 10.15 to the
Form S-1.
10.15 Amendment dated December 19, 1997 to Guaranteed Bank Facility.**
10.16 Motorola Agreement regarding Guarantee: Incorporated by reference to Exhibit
10.16 to the Form S-1.
10.17 Amended and Restated Agreement regarding Guarantee: Incorporated by reference
to Exhibit 10.17 to the 1997 Form S-4.
10.18 Memorandum of Understanding with Motorola, Inc: Incorporated by reference to
Exhibit 10.18 to the 1997 Form S-4.
10.19 Form of Share Issuance Agreement between IWCL and Iridium LLC: Incorporated
by reference to Exhibit 10.17 to the Form S-1.
10.20 Purchase Agreement in respect of Series C Notes, dated October 9, 1997.*
10.21 Exchange and Registration Rights Agreement: contained in an annex to Exhibit
10.20.*
10.22 Iridium LLC Option Plan: Incorporated by reference to Exhibit 10.5 to the
Form S-1.++
10.23 Iridium LLC Selected Senior Officers' Supplementary Retirement Plan:
Incorporated by reference to Exhibit 10.27 to the 1997 Form S-4.
10.24 Agreement between Mr. Staiano and Iridium LLC: Incorporated by reference to
Exhibit 10.28 to the 1997 Form S-4.
10.25 Asset Transfer Agreement.*
10.26 Consent of Arthur Andersen LLP to Contract Assignment.*
10.27 Consent of Motorola Inc. to Contract Assignment.*
10.28 Credit Agreement among Iridium Operating LLC, Chase Securities Inc., Barclays
Capital, The Chase Manhattan Bank and Barclays Bank PLC, dated as of December
19, 1997.**
10.29 Conditions Precedent to the Disbursement of the Term Loans under Section
2.01(a) of the Credit Agreement.**
10.30 Regulatory and Technical Conditions Precedent to availability of funding
under the Credit Agreement.**
10.31 Form of Assignment and Acceptance under the Credit Agreement.**
10.32 Form of Pledge and Security Agreement among Iridium Operating LLC, each of
the Subsidiaries and The Chase Manhattan Bank.**
</TABLE>
II-3
<PAGE> 222
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
10.33 Form of Parent Security Agreement between Iridium LLC and The Chase Manhattan
Bank.**
10.34 Form of Subsidiary Guarantee Agreement between each of the Subsidiary
Guarantors and The Chase Manhattan Bank.**
10.35 Form of Subsidiary Guarantee Assumption Agreement.**
10.36 Form of Depositary Agreement between Iridium Operating LLC and The Chase
Manhattan Bank.**
10.37 Form of Motorola Consent under the Credit Agreement among Motorola, Iridium
Operating LLC and The Chase Manhattan Bank.**
10.38 Form of Motorola Pledge Agreement between Motorola, Inc. and The Chase
Manhattan Bank.**
10.39 Form of Progress Certificate (Pre-Commercial Activation) under the Credit
Agreement.**
10.40 Form of Verification of Independent Technical Advisor under the Credit
Agreement.**
10.41 Form of Progress Certificate (Post-Commercial Activation) under the Credit
Agreement.**
10.42 Form of Borrowing Request under the Credit Agreement.**
11 Statement re Computation of Per Share Earnings.*
12 Statement Regarding Computation of Ratios.*
21 Subsidiaries of the Registrants.*
23.1 Consent of KPMG Peat Marwick LLP.*
23.2 Consent of Sullivan & Cromwell: contained in Exhibit 5.1
24 Power of Attorney: Contained on signature pages.
25.1 Statement on Form T-1 of Eligibility of Trustee respecting the Series A
Indenture: Incorporated by reference to Exhibit 25.1 to the 1997 Form S-4.
25.2 Statement on Form T-1 of Eligilibity of Trustee respecting the Series B
Indenture: Incorporated by reference to Exhibit 25.2 to the 1997 Form S-4.
25.3 Statement on Form T-1 of Eligibility of Trustee respecting the Series C
Indenture.*
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal and Notice of Guaranteed Delivery.**
99.2 Form of Letter to Clients.**
99.3 Form of Letter to Nominees.**
</TABLE>
II-4
<PAGE> 223
- ---------------
* Filed herewith.
** To be filed by amendment.
+ Confidential treatment previously granted in connection with the Form S-1 or
the 1997 Form S-4.
++ Management Compensation Plan.
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To file, during any period in which they offer or sell securities,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities that remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE> 224
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-6
<PAGE> 225
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Washington, District of
Columbia, on January 14, 1998.
IRIDIUM ROAMING LLC
By: /s/ EDWARD F. STAIANO
-----------------------------------
Edward F. Staiano
acting chief executive officer
IRIDIUM IP LLC
By: /s/ EDWARD F. STAIANO
-----------------------------------
Edward F. Staiano
acting chief executive officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Edward F. Staiano, Robert
W. Kinzie and F. Thomas Tuttle, acting individually, as his attorney-in-fact and
agent, with full power of substitution, for him in any and all capacities, to
sign the registration statement on Form S-4 of Iridium Roaming LLC and Iridium
IP LLC and any and all amendments thereto under the Securities Act of 1933,
including any and all pre-effective or post-effective amendments, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully as
he might or could do in person, and hereby ratifies, approves and confirms all
that his said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following persons
in the capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<C> <S> <C>
/s/ ROBERT W. KINZIE Chairman, Iridium Operating LLC January 14, 1998
- ---------------------------------------- (Sole Member of Iridium Roaming
Robert W. Kinzie LLC and Iridium IP LLC)
/s/ EDWARD F. STAIANO acting chief executive officer January 14, 1998
- ---------------------------------------- of Iridium Roaming LLC and
Edward F. Staiano Iridium IP LLC
/s/ ROY GRANT acting chief financial officer January 14, 1998
- ---------------------------------------- of Iridium Roaming LLC and
Roy Grant Iridium IP LLC
</TABLE>
II-7
<PAGE> 226
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Washington, District of
Columbia, on January 14, 1998.
IRIDIUM OPERATING LLC
By: /s/ ROBERT W. KINZIE
-----------------------------------
Robert W. Kinzie
Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Edward F. Staiano, Robert
W. Kinzie and F. Thomas Tuttle, acting individually, as his attorney-in-fact and
agent, with full power of substitution, for him in any and all capacities, to
sign the registration statement on Form S-4 of Iridium Operating LLC and any and
all amendments thereto under the Securities Act of 1933, including any and all
pre-effective or post-effective amendments, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully as he might or could do
in person, and hereby ratifies, approves and confirms all that his said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following persons
in the capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<C> <S> <C>
/s/ ROBERT W. KINZIE Chairman, Iridium Operating LLC January 14, 1998
- ----------------------------------------
Robert W. Kinzie
/s/ EDWARD F. STAIANO Vice President and Chief January 14, 1998
- ---------------------------------------- Financial Officer, Iridium
Edward F. Staiano Operating LLC
Director January , 1998
- ----------------------------------------
Aburizal Bakrie
/s/ HASAN M. BINLADIN Director January 14, 1998
- ----------------------------------------
Hasan M. Binladin
/s/ ULF BOHLA Director January 14, 1998
- ----------------------------------------
Ulf Bohla
Director January , 1998
- ----------------------------------------
Gordon J. Comerford
Director January , 1998
- ----------------------------------------
Atilano de Oms Sobrinho
</TABLE>
II-8
<PAGE> 227
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<C> <S> <C>
/s/ ROBERT A. FERCHAT Director January 14, 1998
- ----------------------------------------
Robert A. Ferchat
/s/ ALBERTO FINOL Director January 14, 1998
- ----------------------------------------
Alberto Finol
/s/ EDWARD GAMS Director January 14, 1998
- ----------------------------------------
Edward Gams
Director January , 1998
- ----------------------------------------
Kazuo Inamori
/s/ S. H. KHAN Director January 14, 1998
- ----------------------------------------
S. H. Khan
Director January , 1998
- ----------------------------------------
Anatoli I. Kiselev
/s/ RICHARD L. LESHER Director January 14, 1998
- ----------------------------------------
Richard L. Lesher
/s/ GEORGE S. MEDAWAR Director January 14, 1998
- ----------------------------------------
George S. Medawar
Director January , 1998
- ----------------------------------------
John F. Mitchell
/s/ JUNG L. MOK Director January 14, 1998
- ----------------------------------------
Jung L. Mok
Director January , 1998
- ----------------------------------------
Giuseppe Morganti
Director January , 1998
- ----------------------------------------
J. Michael Norris
Director January , 1998
- ----------------------------------------
Yusai Okuyama
Director January , 1998
- ----------------------------------------
John M. Scanlon
/s/ THEODORE H. SCHELL Director January 14, 1998
- ----------------------------------------
Theodore H. Schell
/s/ WILLIAM A. SCHREYER Director January 14, 1998
- ----------------------------------------
William A. Schreyer
/s/ SRIBHUMI SUKHANETR Director January 14, 1998
- ----------------------------------------
Sribhumi Sukhanetr
/s/ TAO-TSUN SUN Director January 14, 1998
- ----------------------------------------
Tao-Tsun Sun
</TABLE>
II-9
<PAGE> 228
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<C> <S> <C>
/s/ YOSHIHARU YASUDA Director January 14, 1998
- ----------------------------------------
Yoshiharu Yasuda
Director January , 1998
- ----------------------------------------
Wang Mei Yue
</TABLE>
II-10
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Washington, District of
Columbia, on January 14, 1998.
IRIDIUM CAPITAL CORPORATION
By: /s/ EDWARD F. STAIANO
-----------------------------------
Edward F. Staiano
Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Edward F. Staiano, Robert
W. Kinzie and F. Thomas Tuttle, acting individually, as his attorney-in-fact and
agent, with full power of substitution, for him in any and all capacities, to
sign the registration statement on Form S-4 of Iridium Capital Corporation and
any and all amendments thereto under the Securities Act of 1933, including any
and all pre-effective or post-effective amendments, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as he
might or could do in person, and hereby ratifies, approves and confirms all that
his said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following persons
in the capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---------------------------------------- -------------------------------- -----------------
<C> <S> <C>
/s/ EDWARD F. STAIANO Chairman and Chief Executive January 14, 1998
- ---------------------------------------- Officer
Edward F. Staiano
/s/ ROY GRANT Chief Financial Officer January 14, 1998
- ----------------------------------------
Roy Grant
/s/ ROBERT W. KINZIE Director January 14, 1998
- ----------------------------------------
Robert W. Kinzie
</TABLE>
II-11
<PAGE> 230
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- --------------------------------------------------------------------- ------------
<C> <S> <C>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as of July
29, 1996, as amended: Incorporated by reference to Exhibit 10.1 to
the Registration Statement on Form S-1 of Iridium World
Communications Ltd. ("IWCL") and Iridium LLC (Registration Nos.
333-23419 and 333-23419-01) (the "Form S-1").........................
3.2 Articles of Incorporation of Iridium Capital Corporation:
Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Iridium LLC, Iridium Capital Corporation
("Capital"), Iridium Roaming LLC ("Roaming"), and Iridium IP LLC
("IP") (Registration Nos. 333-31741, -01, -02 and -03) (the "1997
Form S-4")...........................................................
3.3 By-Laws of Iridium Capital Corporation: Incorporated by reference to
Exhibit 3.3 to the 1997 Form S-4.....................................
3.4 Amended and Restated Limited Liability Company Agreement of Iridium
Roaming LLC.*........................................................
3.5 Amended and Restated Limited Liability Company Agreement of Iridium
IP LLC.*.............................................................
3.6 Limited Liability Company Agreement of Iridium Operating LLC.*.......
4.1.1 Indenture dated as of July 16, 1997 relating to Iridium LLC's and
Iridium Capital Corporation's 13% Senior Notes due 2005, Series A,
and 13% Senior Notes due 2005, Series A/EN: Incorporated by reference
to Exhibit 4.1 to the 1997 Form S-4..................................
4.1.2 First Supplemental Indenture dated as of December 19, 1997 relating
to Iridium Operating LLC's and Iridium Capital Corporation's 13%
Senior Notes due 2005, Series A, and 13% Senior Notes due 2005,
Series A/EN.*........................................................
4.2 Forms of Series A Note and Series A/EN Note: Incorporated by
reference to Exhibit 4.1 to the 1997 Form S-4........................
4.3.1 Indenture dated as of July 16, 1997 relating to Iridium LLC's and
Iridium Capital Corporation's 14% Senior Notes due 2005, Series B,
and 14% Senior Notes due 2005, Series B/EN: Incorporated by reference
to Exhibit 4.2 to the 1997 Form S-4..................................
4.3.2 First Supplemental Indenture dated as of December 19, 1997 relating
to Iridium Operating LLC's and Iridium Capital Corporation's 14%
Senior Notes due 2005, Series B, and 14% Senior Notes due 2005,
Series B/EN.*........................................................
4.4 Forms of Series B Note and Series B/EN Note: Incorporated by
reference to Exhibit 4.2 to the 1997 Form S-4........................
4.5.1 Indenture dated as of October 17, 1997 relating to Iridium LLC's and
Iridium Capital Corporation's 11 1/4% Senior Notes due 2005,
Series C.*...........................................................
4.5.2 First Supplemental Indenture dated as of December 19, 1997 relating
to Iridium Operating LLC's and Iridium Capital Corporation's 11 1/4%
Senior Notes due 2005, Series C.*....................................
4.6 Forms of Series C Note and Series C/EN Note: contained in an exhibit
to Exhibit 4.5.1.*...................................................
5.1 Opinion of Sullivan & Cromwell.*.....................................
10.1 Form of Interest Exchange Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.2 to the Form S-1............
</TABLE>
II-12
<PAGE> 231
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- --------------------------------------------------------------------- ------------
<C> <S> <C>
10.2 Form of amended and restated Management Services Agreement between
IWCL, Iridium LLC and Iridium Operating LLC.*........................
10.3 Form of 1997 Subscription Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.4 to the Form S-1............
10.4 Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January 14,
1997: Incorporated by reference to Exhibit 10.6 to the Form S-1.+....
10.5 Communications System Operations & Maintenance Contract between
Iridium LLC and Motorola, Inc. effective July 29, 1993, as amended
and conformed on January 14, 1997: Incorporated by reference to
Exhibit 10.7 to the Form S-1.+.......................................
10.6 Terrestrial Network Development Contract between Iridium LLC and
Motorola, Inc. effective January 1, 1993, as amended and conformed on
January 14, 1997: Incorporated by reference to Exhibit 10.8 to the
Form S-1.+...........................................................
10.7 Amendment No. 3 to the Terrestrial Network Development Contract
between Iridium LLC and Motorola, Inc. effective June 20, 1997:
Incorporated by reference to Exhibit 10.7 to the 1997 Form S-4.+.....
10.8 Support Agreement between Iridium LLC and Motorola, Inc.:
Incorporated by reference to Exhibit 10.9 to the Form S-1............
10.9 Agreement, executed as of December 16, 1996, between Andersen
Consulting LLC and Iridium LLC relating to the development of
business support systems: Incorporated by reference to Exhibit 10.10
to the Form S-1.+....................................................
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of Iridium:
Incorporated by reference to Exhibit 10.11 to the Form S-1...........
10.11 Form of Warrant issued in respect of 14 1/2% Senior Subordinated
Discount Notes: Incorporated by reference to Exhibit 10.13 to the
Form S-1.............................................................
10.12 Warrant to purchase Series M Class 2 Interests dated July 29, 1993,
as amended: Incorporated by reference to Exhibit 10.13 to the Form
S-1..................................................................
10.13 Form of Gateway Authorization Agreement: Incorporated by reference to
Exhibit 10.14 to the Form S-1........................................
10.14 Guaranteed Bank Facility: Incorporated by reference to Exhibit 10.15
to the Form S-1......................................................
10.15 Amendment dated December 19, 1997 to Guaranteed
Bank Facility.**.....................................................
10.16 Motorola Agreement regarding Guarantee: Incorporated by reference to
Exhibit 10.16 to the Form S-1........................................
10.17 Amended and Restated Agreement regarding Guarantee: Incorporated by
reference to Exhibit 10.17 to the 1997 Form S-4......................
10.18 Memorandum of Understanding with Motorola, Inc: Incorporated by
reference to Exhibit 10.18 to the 1997 Form S-4......................
10.19 Form of Share Issuance Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.17 to the Form S-1...........
10.20 Purchase Agreement in respect of Series C Notes, dated October 9,
1997.*...............................................................
10.21 Exchange and Registration Rights Agreement: contained in an annex to
Exhibit 10.20.*......................................................
</TABLE>
II-13
<PAGE> 232
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- --------------------------------------------------------------------- ------------
<C> <S> <C>
10.22 Iridium LLC Option Plan: Incorporated by reference to Exhibit 10.5 to
the Form S-1.++......................................................
10.23 Iridium LLC Selected Senior Officers' Supplementary Retirement Plan:
Incorporated by reference to Exhibit 10.27 to the 1997 Form S-4......
10.24 Agreement between Mr. Staiano and Iridium LLC: Incorporated by
reference to Exhibit 10.28 to the 1997 Form S-4......................
10.25 Asset Transfer Agreement.*...........................................
10.26 Consent of Arthur Andersen LLP to Contract Assignment.*..............
10.27 Consent of Motorola Inc. to Contract Assignment.*....................
10.28 Credit Agreement among Iridium Operating LLC, Chase Securities Inc.,
Barclays Capital, The Chase Manhattan Bank and Barclays Bank PLC,
dated as of December 19, 1997.**
10.29 Conditions Precedent to the Disbursement of the Term Loans under
Section 2.01(a) of the Credit Agreement.**
10.30 Regulatory and Technical Conditions Precedent to availability of
funding under the Credit Agreement.**
10.31 Form of Assignment and Acceptance under the Credit Agreement.**
10.32 Form of Pledge and Security Agreement among Iridium Operating LLC,
each of the Subsidiaries and The Chase Manhattan Bank.**
10.33 Form of Parent Security Agreement between Iridium LLC and The Chase
Manhattan Bank.**
10.34 Form of Subsidiary Guarantee Agreement between each of the Subsidiary
Guarantors and The Chase Manhattan Bank.**
10.35 Form of Subsidiary Guarantee Assumption Agreement.**
10.36 Form of Depositary Agreement between Iridium Operating LLC and The
Chase Manhattan Bank.**
10.37 Form of Motorola Consent under the Credit Agreement among Motorola,
Iridium Operating LLC and The Chase Manhattan Bank.**
10.38 Form of Motorola Pledge Agreement between Motorola, Inc. and The
Chase Manhattan Bank.**
10.39 Form of Progress Certificate (Pre-Commercial Activation) under the
Credit Agreement.**
10.40 Form of Verification of Independent Technical Advisor under the
Credit Agreement.**
10.41 Form of Progress Certificate (Post-Commercial Activation) under the
Credit Agreement.**
10.42 Form of Borrowing Request under the Credit Agreement.**
11 Statement re Computation of Per Share Earnings.*.....................
12 Statement Regarding Computation of Ratios.*..........................
21 Subsidiaries of the Registrants.*....................................
23.1 Consent of KPMG Peat Marwick LLP.*...................................
23.2 Consent of Sullivan & Cromwell: contained in Exhibit 5.1.............
24 Power of Attorney: Contained on signature pages......................
25.1 Statement on Form T-1 of Eligibility of Trustee respecting the Series
A Indenture: Incorporated by reference to Exhibit 25.1 to the 1997
Form S-4.............................................................
</TABLE>
II-14
<PAGE> 233
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- --------------------------------------------------------------------- ------------
<C> <S> <C>
25.2 Statement on Form T-1 of Eligilibity of Trustee respecting the Series
B Indenture: Incorporated by reference to Exhibit 25.2 to the 1997
Form S-4.............................................................
25.3 Statement on Form T-1 of Eligibility of Trustee respecting the Series
C Indenture.*........................................................
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal and Notice of Guaranteed Delivery.**...
99.2 Form of Letter to Clients.**.........................................
99.3 Form of Letter to Nominees.**........................................
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
+ Confidential treatment previously granted in connection with the Form S-1 or
the 1997 Form S-4.
++ Management Compensation Plan.
II-15
<PAGE> 1
EXHIBIT 3.4
LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM ROAMING LLC
This amended and restated LIMITED LIABILITY COMPANY AGREEMENT OF
IRIDIUM ROAMING LLC, dated as of January 12, 1998 (this "Agreement"), is made by
IRIDIUM OPERATING LLC, a Delaware limited liability company, and the sole member
(the "Member") of Iridium Roaming LLC (the "Company").
WHEREAS, Iridium LLC (the "Parent"), a Delaware limited liability
company and the parent of the Member, formed the Company on June 15, 1997 as a
limited liability company pursuant to and in accordance with the Delaware
Limited Liability Company Act (6 Del. C. Section 18-101, et seq.), as amended
from time to time (the "Act"); and
WHEREAS, pursuant to the Asset Transfer Agreement, dated December 18,
1997, between Parent and Member, all Parent's right, title and interest in the
Company was transferred to the Member:
NOW THEREFORE, the Member hereby establishes the following:
1. Name. The name of the Company is IRIDIUM ROAMING LLC. The business
of the Company may be conducted under any other name deemed necessary or
desirable by the Member in order to comply with local law.
2. Purpose. The purpose for which the Company is organized is any
lawful purpose permitted pursuant to the Act, including, but not limited to,
entering into terrestrial wireless roaming agreements with terrestrial wireless
service providers and system operators ("Roaming Agreements") in support of the
Member's wireless communications business.
3. Registered Office. The address of the registered office of the
Company in the State of Delaware is c/o The Corporation Trust Company, 1209
Orange Street, City of Wilmington, County of New Castle, Delaware.
<PAGE> 2
4. Registered Agent. The name and address of the registered agent of
the Company for service of process on the Company in the State of Delaware is
The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware.
5. Member. The name and the business, residence or mailing address of
the Member is as follows:
Name Address
IRIDIUM OPERATING LLC 1575 Eye Street, N.W.
Washington, D.C. 20005
6. Powers; Authorized Officers; Authorized Signatories. The power and
authority to manage and conduct the business and affairs of the Company shall be
vested in the sole Member, acting through its Authorized Officers. The
Authorized Officers are, and each of them hereby is, designated as an authorized
person within the meaning of the Act, to execute, deliver and file any
certificates (and any amendments or restatements thereof) necessary for the
Company to do business in a jurisdiction in which the Company may wish to
conduct business. Subject to paragraph 7, any Authorized Officer shall have the
power and authority to do any and all acts necessary or convenient to or for the
furtherance of the purpose described herein, including all powers, statutory or
otherwise, possessed by the Member under the laws of the State of Delaware.
Subject to paragraph 7, any decisions regarding any matter involving or
affecting the Company shall be made by any Authorized Officer, acting singly or
jointly.
7. Restriction on Powers. Notwithstanding any other provision of this
Agreement and any provision of law, the Company shall not, without the written
consent of the Chairman or the Vice Chairman and Chief Executive Officer of the
Member, (a) dissolve or liquidate, in whole or in part, or institute proceedings
to be adjudicated bankrupt or insolvent, (b) consent to the institution of
bankruptcy or insolvency proceedings against it or to reorganization or relief
under any applicable federal or state law relating to bankruptcy or insolvency,
(c) file a petition seeking reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, (d) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or a part of its property, (e) make a general
assignment for the benefit of creditors, (f) admit in writing its inability to
pay its debts generally as they become due, (g) take any corporate action in
furtherance of the actions set forth in clauses (a) through (f) of this
paragraph 7, or (h) admit additional members.
-2-
<PAGE> 3
8. Authorized Officers. For Purposes of this Agreement the term
Authorized Officers shall mean the Chairman, Vice Chairman and Chief Executive
Officer, any Vice President, the Secretary or any Assistant Secretary of the
Member.
9. Liability of Member. The Member shall not have any liability for the
obligations or liabilities of the Company except to the extent provided in the
Act.
10. Amendment. This Agreement may not be changed or amended or
observance of any provisions by the Company waived without the consent of any of
the Chairman or the Vice Chairman and Chief Executive Officer of the Member
11. Governing Law. This Agreement shall be governed by, and construed
under, the laws of the State of Delaware, all rights and remedies being governed
by said laws.
12. Dissolution. The Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of the following: (a) December 31, 2095, (b)
the written consent of the Member, (c) the bankruptcy or dissolution of the
Member or (d) the entry of a decree of judicial dissolution under Section 18-802
of the Act.
13. Membership Interests. Interests in the Company shall be of a single
class and shall be represented by certificates (the "Interests"). The total
number of Interests which the Company has the authority to issue is 100.
Interests may not be issued without the consent of any of the Chairman or the
Vice Chairman and Chief Executive Officer of the Member. The Interests shall be
governed by, and shall be "securities" for the purposes of, Article 8 of the
Uniform Commercial Code.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has duly executed this Limited Liability Company Agreement as of the
12th day of January, 1998.
IRIDIUM OPERATING LLC
By_____________________
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 3.5
LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM IP LLC
This amended and restated LIMITED LIABILITY COMPANY AGREEMENT OF
IRIDIUM IP LLC, dated as of January 12, 1998 (this "Agreement"), is made by
IRIDIUM OPERATING LLC, a Delaware limited liability company, and the sole member
(the "Member") of Iridium IP LLC (the "Company").
WHEREAS, Iridium LLC (the "Parent"), a Delaware limited liability
company and the parent of the Member, formed the Company on February 25, 1997 as
a limited liability company pursuant to and in accordance with the Delaware
Limited Liability Company Act (6 Del. C. Section 18-101, et seq.), as amended
from time to time (the "Act"); and
WHEREAS, pursuant to the Asset Transfer Agreement, dated December 18,
1997, between Parent and Member, all Parent's right, title and interest in the
Company was transferred to the Member:
NOW THEREFORE, the Member hereby establishes the following:
1. Name. The name of the Company is IRIDIUM IP LLC. The business of the
Company may be conducted under any other name deemed necessary or desirable by
the Member in order to comply with local law.
2. Purpose. The purpose for which the Company is organized is any
lawful purpose permitted pursuant to the Act, including, but not limited to,
securing and holding trademark registrations in support of the Member's wireless
communications business.
3. Registered Office. The address of the registered office of the
Company in the State of Delaware is c/o The Corporation Trust Company, 1209
Orange Street, City of Wilmington, County of New Castle, Delaware.
<PAGE> 2
4. Registered Agent. The name and address of the registered agent of
the Company for service of process on the Company in the State of Delaware is
The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware.
5. Member. The name and the business, residence or mailing address of
the Member is as follows:
Name Address
IRIDIUM IP LLC 1575 Eye Street, N.W.
Washington, D.C. 20005
6. Powers; Authorized Officers; Authorized Signatories. The power and
authority to manage and conduct the business and affairs of the Company shall be
vested in the sole Member, acting through its Authorized Officers. The
Authorized Officers are, and each of them hereby is, designated as an authorized
person within the meaning of the Act, to execute, deliver and file any
certificates (and any amendments or restatements thereof) necessary for the
Company to do business in a jurisdiction in which the Company may wish to
conduct business. Subject to paragraph 7, any Authorized Officer shall have the
power and authority to do any and all acts necessary or convenient to or for the
furtherance of the purpose described herein, including all powers, statutory or
otherwise, possessed by the Member under the laws of the State of Delaware.
Subject to paragraph 7, any decisions regarding any matter involving or
affecting the Company shall be made by any Authorized Officer, acting singly or
jointly.
7. Restriction on Powers. Notwithstanding any other provision of this
Agreement and any provision of law, the Company shall not, without the written
consent of the Chairman or the Vice Chairman and Chief Executive Officer of the
Member, (a) dissolve or liquidate, in whole or in part, or institute proceedings
to be adjudicated bankrupt or insolvent, (b) consent to the institution of
bankruptcy or insolvency proceedings against it or to reorganization or relief
under any applicable federal or state law relating to bankruptcy or insolvency,
(c) file a petition seeking reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, (d) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or a part of its property, (e) make a general
assignment for the benefit of creditors, (f) admit in writing its inability to
pay its debts generally as they become due, (g) take any corporate action in
furtherance of the actions set forth in clauses (a) through (f) of this
paragraph 7, or (h) admit additional members.
-2-
<PAGE> 3
8. Authorized Officers. For Purposes of this Agreement the term
Authorized Officers shall mean the Chairman, Vice Chairman and Chief Executive
Officer, any Vice President, the Secretary or any Assistant Secretary of the
Member.
9. Liability of Member. The Member shall not have any liability for the
obligations or liabilities of the Company except to the extent provided in the
Act.
10. Amendment. This Agreement may not be changed or amended or
observance of any provisions by the Company waived without the consent of any of
the Chairman or the Vice Chairman and Chief Executive Officer of the Member
11. Governing Law. This Agreement shall be governed by, and construed
under, the laws of the State of Delaware, all rights and remedies being governed
by said laws.
12. Dissolution. The Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of the following: (a) December 31, 2095, (b)
the written consent of the Member, (c) the bankruptcy or dissolution of the
Member or (d) the entry of a decree of judicial dissolution under Section 18-802
of the Act.
13. Membership Interests. Interests in the Company shall be of a single
class and shall be represented by certificates (the "Interests"). The total
number of Interests which the Company has the authority to issue is 100.
Interests may not be issued without the consent of any of the Chairman or the
Vice Chairman and Chief Executive Officer of the Member. The Interests shall be
governed by, and shall be "securities" for the purposes of, Article 8 of the
Uniform Commercial Code.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has duly executed this Limited Liability Company Agreement as of the
12th day of January, 1998.
IRIDIUM OPERATING LLC
By_____________________
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 3.6
LIMITED LIABILITY COMPANY
AGREEMENT
OF
IRIDIUM OPERATING LLC
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
MEMBERS, MANAGER-DIRECTORS, OFFICERS AND MEETINGS.............................. 1
Section 1.1 Formation and Name................................................................... 1
Section 1.2 Place of Business and Office: Registered Agent...................................... 1
Section 1.3 Purpose.............................................................................. 2
Section 1.4 Fiscal Year.......................................................................... 2
Section 1.5 Directors: Number, Appointment, Removal, Qualifications,
Etc.................................................................................. 2
(a) Board of Directors................................................................... 2
(b) Alternate Directors.................................................................. 2
(c) Removal and Resignation.............................................................. 2
(d) Assumption and Acceptance of Powers and Duties....................................... 3
Section 1.6 Members.............................................................................. 3
(a) Initial Members...................................................................... 3
(b) Rights and Obligations............................................................... 3
(c) Investment Company Restrictions...................................................... 3
(d) Annual Meetings...................................................................... 3
(e) Special Meetings..................................................................... 3
(f) Place of Meetings.................................................................... 3
(g) Notice............................................................................... 4
(h) Members List......................................................................... 4
(i) Quorum............................................................................... 4
(j) Adjourned Meetings................................................................... 4
(k) Vote Required........................................................................ 5
(l) Proxies.............................................................................. 5
(m) Action by Written Consent............................................................ 5
(n) Record Dates......................................................................... 6
(o) Communications Equipment............................................................. 6
Section 1.7 Liability of Members and Directors................................................... 6
Section 1.8 Certain Duties and Liabilities of Members and Directors.............................. 6
(a) Duties of Members and Directors...................................................... 6
(b) Limitations on Liability of Members, Directors and Officers.......................... 7
Section 1.9 Reliance by Third Parties............................................................ 7
Section 1.10 Organizational Expenses.............................................................. 7
Section 1.11 Seal of IOC.......................................................................... 7
Section 1.12 Ratification and Authorization of Certain Actions.................................... 7
ARTICLE II
MANAGEMENT AND OPERATIONS.......................................... 7
Section 2.1 Power and Authority of Members....................................................... 7
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Section 2.2 Power and Authority of Directors..................................................... 7
Section 2.3 Directors: Meetings, Committees, and Delegation..................................... 8
(a) Annual and Special Meetings.......................................................... 8
(b) Representation of Certain Members.................................................... 8
(c) Committees........................................................................... 9
(d) Committee Rules...................................................................... 9
(e) Communications Equipment............................................................. 10
(f) Waiver of Notice and Presumption of Assent........................................... 10
(g) Action by Written Consent............................................................ 10
(h) Tax Consequences to the Members...................................................... 10
Section 2.4 Compensation of the Directors........................................................ 10
Section 2.5 Officers............................................................................. 10
(a) Establishment, Nomination and Election............................................... 10
(b) Removal.............................................................................. 11
(c) Compensation......................................................................... 11
Section 2.6 Interested Directors................................................................. 11
(a) Contracts Permitted.................................................................. 11
(b) Quorum............................................................................... 11
Section 2.7 Books and Records.................................................................... 11
(a) Books and Records to be Kept......................................................... 11
(b) Inspection of Books and Records...................................................... 12
(c) Rights to Inspect.................................................................... 12
(d) Interest Register as Evidence........................................................ 12
Section 2.8 Indemnification...................................................................... 12
(a) Third Party Actions, Suits and Proceedings........................................... 12
(b) Actions by or in Right of IOC........................................................ 13
(c) Procedure for Indemnification........................................................ 13
(d) Rights Non-Exclusive................................................................. 14
(e) Insurance............................................................................ 14
(f) Expenses............................................................................. 14
(g) Employees and Agents................................................................. 14
(h) Contract Rights...................................................................... 14
(i) Merger or Consolidation, Other....................................................... 14
Section 2.9 Special Rights of IWCL............................................................... 15
ARTICLE III
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS............................. 16
Section 3.1 Form of Contribution................................................................. 16
Section 3.2 Contributions by the Members......................................................... 16
Section 3.3 Allocation of Distributions.......................................................... 16
Section 3.4 Interests as Personal Property....................................................... 16
ARTICLE IV
INTERESTS AND OTHER SECURITIES........................................ 16
Section 4.1 Interests and Authorization.......................................................... 16
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Section 4.2 Specific Rights Associated with Interests............................................ 16
(a) Voting Rights........................................................................ 16
(b) Liquidation Rights................................................................... 16
(c) Dividends and Distributions.......................................................... 17
(d) Minimum Dividends.................................................................... 17
(e) Accounting........................................................................... 17
(f) Legal Funds.......................................................................... 17
(g) Record Dates......................................................................... 17
Section 4.3 Fractional Interests................................................................. 17
Section 4.4 Certificates for Interests........................................................... 18
ARTICLE V
DISSOLUTION AND WINDING UP.......................................... 18
Section 5.1 Dissolution.......................................................................... 18
Section 5.2 Resignation of Members............................................................... 19
Section 5.3 Winding Up........................................................................... 19
ARTICLE VI
TRANSFERS.................................................. 19
Section 6.1 Board Approval Required.............................................................. 19
Section 6.2 Obligations of Transferees and Transferors........................................... 19
Section 6.3 Inapplicability of Article........................................................... 19
Section 6.4 Substituted Members.................................................................. 19
Section 6.5 Pledge of Interests.................................................................. 20
ARTICLE VII
ADMISSION OF ADDITIONAL MEMBERS....................................... 20
Section 7.1 Initial Member....................................................................... 20
Section 7.2 Admission of Additional Members...................................................... 20
(a) Admission of Members................................................................. 20
(b) Time of Admission.................................................................... 20
(c) Required Contribution................................................................ 21
ARTICLE VIII
GATEWAY RIGHTS OF IRIDIUM LLC CLASS 1 MEMBERS................................ 21
Section 8.1 Access Rights of Iridium LLC Class 1 Members......................................... 21
Section 8.2 Parent to Provide Gateway Service Territory Information.............................. 21
ARTICLE IX
GENERAL PROVISIONS.............................................. 21
Section 9.1 Amendments to the Agreement.......................................................... 21
(a) General.............................................................................. 21
(b) Amendments Affecting Indemnification................................................. 21
(c) Amendments Affecting Article VIII.................................................... 22
(d) Amendments to Annexes by Secretary................................................... 22
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Section 9.2 Governing Law; Severability.......................................................... 22
Section 9.3 Jurisdiction and Service of Process Arbitration...................................... 22
Section 9.4 Power of Attorney and Other Authorizations........................................... 23
Section 9.5 Actions of Members................................................................... 24
Section 9.6 Notices.............................................................................. 24
Section 9.7 Counterparts......................................................................... 24
ARTICLE X
RATIFICATION AND AUTHORIZATION OF CERTAIN ACTIONS............................................................... 24
Section 10.1. Formation of IOC........................................................................ 24
Section 10.2. Asset Transfer Agreement................................................................ 24
Section 10.3. Management Services Agreement........................................................... 25
Section 10.4. Guaranteed Credit Facility.............................................................. 25
Section 10.5. Secured Bank Facility................................................................... 25
ARTICLE XI
CERTAIN DEFINITIONS............................................. 26
</TABLE>
ANNEXES
Annex A Initial Directors and Officers
Annex B Interests
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LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM OPERATING LLC
This LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") of IRIDIUM
OPERATING LLC ("IOC") is dated as of December 18, 1997 and is agreed to by the
undersigned.
RECITALS
A. On June 14, 1993, Iridium, Inc. was formed as a corporation under
the laws of the State of Delaware and commenced operations on July 29, 1993.
B. On July 16, 1996, Iridium LLC, was organized as a limited liability
company pursuant to 6 Del. C. Section 18-101, et seq. (the "Delaware Act").
C. On July 29, 1996, Iridium, Inc. was merged with and into Iridium
LLC, pursuant to 8 Del. C. Section 264, with Iridium LLC as the surviving entity
("Parent").
D. On or about October 23, 1997, Iridium LLC formed IOC pursuant to the
Delaware Act.
E. Parent wishes to enter, and IOC wishes to adopt, this Agreement as
IOC's governing document.
F. Certain terms shall have the meanings assigned in ARTICLE XI hereof.
NOW, THEREFORE, this Agreement is hereby adopted as follows:
ARTICLE I
MEMBERS, MANAGER-DIRECTORS, OFFICERS AND MEETINGS
Section 1.1 Formation and Name. The name of IOC is Iridium Operating
LLC. The business of IOC may be conducted under any other name deemed necessary
or desirable by the Members. The rights and liabilities of the current and
future Members shall be as provided in the Delaware Act, except as provided in
this Agreement.
Section 1.2 Place of Business and Office: Registered Agent. IOC shall
maintain a registered office in the State of Delaware at The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The principal executive office of IOC shall be 1575 Eye
Street, N.W., Washington, D.C. 20006 or such other place as the Board of
Directors may determine. The name and address of IOC's registered agent in the
State of Delaware is The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
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Section 1.3 Purpose. IOC is organized for the purpose of acquiring,
owning and managing a low-earth orbit satellite space system to be delivered
under the Space System Contract between Motorola, Inc. and Parent (which may be
assigned to IOC) and any successor or replacement space system, and the
management of the access to any use of such space system, and the engagement in
activities necessary, appropriate or incidental to the foregoing by the Members
or their Affiliates.
Section 1.4 Fiscal Year. The fiscal year of IOC (the "Fiscal Year")
shall be fixed by resolution of the Members.
Section 1.5 Directors: Number, Appointment, Removal, Qualifications,
Etc.
(a) Board of Directors. There shall initially be a Board of Directors
comprised of twenty-four (24) Directors. For so long as Parent is the majority
member of IOC, IOC shall cause the number of Directors to be equal to the number
of directors on the board of directors of Parent as such number of directors of
Parent changes from time to time, including, without limitation, changes in the
number of Directors of Parent resulting from the issuance of Class 2 membership
interests of Parent. Parent shall, as long as Parent is the majority member of
IOC, appoint each person serving as a member of the board of directors of Parent
to serve as a member of the Board of Directors of IOC. The persons listed in
Annex A hereto as Directors are hereby designated by Parent as the initial Board
of Directors of IOC. In addition, the chairman of the board of directors of
Parent shall be a member of the Board of Directors of IOC and shall serve as the
chairman of the Board of Directors of IOC and each Vice Chairman of the board of
directors of Parent shall serve as a Vice Chairman of the Board of Directors of
IOC. Directors appointed pursuant to this Agreement shall be Managers for
purposes of the Delaware Act.
(b) Alternate Directors. For each person appointed to serve as an
alternate to a Director of Parent, IOC shall cause each director to be appointed
as an alternate to such Director of IOC, to act for and fulfill the obligations
of such Director in the event that such Director is unable to attend any meeting
of the Board of Directors of IOC or any committee thereof. Any such alternates
shall be specified in writing by Parent to the secretary of IOC. Any appointment
of an alternate Director shall automatically be changed to the extent there is a
corresponding change in the comparable appointment of an alternate to the
Parent's board of directors.
(c) Removal and Resignation. As long as Parent is the majority member
of IOC, a Director shall be removed with or without cause, simultaneously with
and to the extent such Director has been removed from the board of directors of
Parent, and IOC shall take the appropriate legal action to cause such removal. A
Director may not otherwise be removed except as provided in the Delaware Act.
If, as a result of the removal, resignation or death of any member of the Board
of Directors, or a vacancy occurs in the Board of Directors, such vacancy shall
be filled to the extent and with the same person that the comparable vacancy on
the board of directors of Parent has been filled.
(d) Assumption and Acceptance of Powers and Duties. Any Director
designated pursuant to this Section 1.5, and any alternate acting for such
Director, shall assume the powers,
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duties and obligations of a Director as provided under this Agreement, and of a
Manager under the Delaware Act. Any person designated as a Director, and any
alternate, shall be deemed to have agreed to accept such Director's rights and
authority herein and to perform and discharge such Director's duties and
obligations hereunder by performing any act in the capacity of a Director
(including but not limited to participating in any meeting of the Board of
Directors or executing any written consent of the Board of Directors), and such
rights, authority, duties and obligations shall continue until such Director's
successor is designated or until such Director's earlier resignation or removal
in accordance with this Agreement.
Section 1.6 Members.
(a) Initial Members. The sole initial Member of IOC is Parent.
(b) Rights and Obligations. A Member shall have the rights, powers,
duties and obligations provided herein and in the Delaware Act.
(c) Investment Company Restrictions. Each Member organized in the
United States covenants and agrees that it will not make a public offering of
its own securities if as a result of such offering, IOC will become an entity
controlled by an investment company registered under the Investment Company Act
of 1940, as amended.
(d) Annual Meetings. An annual meeting of the Members shall be held
each year within One Hundred Twenty (120) days after the close of the
immediately preceding fiscal year of IOC for the purpose of conducting such
proper business as may come before the meeting. The date, time and place of the
annual meeting shall be determined by the Vice Chairman and Chief Executive
Officer of IOC; provided, that if the Vice Chairman and Chief Executive Officer
does not act, the Board of Directors shall determine the date, time and place of
such meeting; and provided, further, that such annual meeting shall occur as
nearly as practicable coincident in date, time and place with the annual meeting
of the members of the Parent. The annual meeting of the Members may be held
within or outside of the State of Delaware.
(e) Special Meetings. Special meetings of the Members may be called for
any purpose and may be held at such time and place, within or outside of the
State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the Board of Directors, the chairman of the Board of Directors, the Vice
Chairman and Chief Executive Officer or the holders of not less than a majority
of the outstanding Interests.
(f) Place of Meetings. The Directors may designate any place, either
within or outside of the State of Delaware, as the place of meeting for any
annual meeting of Directors or for any special meeting called by the Directors;
provided, that the annual meeting of Directors shall be held at the same
location as the annual meeting of Parent. If no designation is made, or if a
special meeting is otherwise called, the place of meeting shall be the principal
executive office of IOC.
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(g) Notice. Whenever Members are required or permitted to take action
at a meeting, written notice stating the place, date, time, and, in the case of
special meetings, the purpose or purposes of such meeting, shall be given to
each Member entitled to vote at such meeting and to each Director not less than
ten (10) nor more than sixty (60) days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the Directors, the chairman of the Board of Directors, the Vice Chairman and
Chief Executive Officer or the Secretary. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid,
addressed to the Member at his, her or its address as the same appears on the
records of IOC. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
(h) Members List. The officer having responsibility for maintaining the
records referred to in Section 2.7 shall make, at least ten (10) days before
every meeting of the Members, a complete list of the Members entitled to vote at
such meeting arranged in alphabetical order, showing the address of each Member
and the Interest of each Member. Such list shall be open to the examination of
any Member, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting for the duration thereof, and may be inspected by
any Member who is present.
(i) Quorum. The Members holding a majority of the Interests entitled to
vote, present in person or represented by proxy, shall constitute a quorum at
all meetings of the Members. If a quorum is not present, the Members holding a
majority of the Interests present in person or represented by proxy at the
meeting, and entitled to vote at the meeting, may adjourn the meeting to a place
and time specified by such majority. When a quorum is once present to commence a
meeting of Members, it is not broken by the subsequent withdrawal of any Members
or their proxies.
(j) Adjourned Meetings. If at any meeting of Members there shall be,
with respect to a particular matter, less than a quorum present, the Members
present in person or by proxy and entitled to vote may without further notice,
following the completion of such action, if any, with respect to other matters
as the Members present in person or by proxy and constituting a quorum to vote
there on such matters desire to take, adjourn the meeting from time to time
until a quorum with respect to such matter shall be present. When a meeting is
adjourned to another time and place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. At the adjourned meeting IOC may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Member entitled to vote at the meeting.
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(k) Vote Required. When a quorum is present, the affirmative vote of
the majority of Interests present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
Members, unless the question is one upon which by express provisions of an
applicable law or of this Agreement a different vote is required, in which case
such express provision shall govern and control the voting requirements on such
subject matter.
(l) Proxies. Each Member entitled to vote at a meeting of Members or to
express consent or dissent to any action in writing without a meeting may
authorize another person to act for him or her by proxy, but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the membership Interest itself or an interest in IOC generally. Any
proxy is suspended when the person executing the proxy is present at a meeting
of Members and elects to vote, except that when such proxy is coupled with an
interest and the fact of the interest appears on the face of the proxy, the
agent named in the proxy shall have all voting and other rights referred to in
the proxy, notwithstanding the presence of the person executing the proxy. At
each meeting of the Members, and before any voting commences, all proxies filed
at or before the meeting shall be submitted to and examined by the secretary or
a person designated by the secretary, and no Interests may be represented or
voted under a proxy that has been found to be invalid or irregular.
(m) Action by Written Consent. Unless otherwise provided in this
Agreement or in the Delaware Act, any action required to be taken at any annual
or special meeting of Members, or any action which may be taken at any annual or
special meeting of such Members, may be taken without a meeting, without prior
notice and without a vote, if a written consent setting forth the action so
taken and bearing the dates of signature of the Members who signed the consent,
is signed by the holders of not less than the minimum Interests that would be
necessary to authorize or take such action at a meeting at which all Interests
entitled to vote were present and voted and is delivered to IOC by delivery to
its registered office in the State of Delaware, or IOC's principal place of
business, or an officer or agent of IOC having custody of the books in which
proceedings of meetings of the Members are recorded. Delivery made to IOC's
registered office shall be by hand or by certified or registered mail, return
receipt requested; provided, that no consent delivered by certified or
registered mail shall be deemed delivered until such consent is actually
received at the registered office. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take any action referred to therein unless, within
sixty (60) days of the earliest dated consent delivered to IOC as required by
this section, a written consent signed by the holders of Interests sufficient to
take such action is recorded. Prompt notice of the taking of the action without
a meeting by less than unanimous written consent shall be given to those Members
who have not consented in writing. Any action taken pursuant to such written
consent of the Members shall have the same force and effect as if taken by the
Members at a meeting.
(n) Record Dates. For purposes of determining the Members entitled to
notice of or to vote at a meeting of Members or to give approvals without a
meeting as provided in
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Section 1.6(m), the Board of Directors may set a record date, which shall not be
less than ten (10) nor more than sixty (60) days before the date of the meeting,
or, in the event that approvals are sought without a meeting, the date by which
Members are requested in writing by the Board of Directors to give such
approvals.
(o) Communications Equipment. The Members may participate in and act at
any meeting of such Members through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 1.7 Liability of Members and Directors. No Member or Director
shall have any liability under this Agreement or under the Delaware Act except
as provided herein or as required by the Delaware Act. Except as required by the
Delaware Act, the debts, obligations and liabilities of IOC, whether arising in
contract, tort or otherwise (including without limitation those arising as
member, owner or shareholder of another company, partnership or entity), shall
be solely the debts, obligations and liabilities of IOC, and no Member or
Director shall be obligated personally for any such debt, obligation or
liability of IOC solely by reason of being a Member or acting as a Director of
IOC. No Member or Director shall be liable for any debts, obligations and
liabilities, whether arising in contract, tort or otherwise, of any other Member
or Director.
Section 1.8 Certain Duties and Liabilities of Members and Directors.
(a) Duties of Members and Directors. Except as otherwise specifically
provided in this Agreement, the duties and obligations owed to IOC and to the
Members by the directors and officers of IOC, and any such duties that may be
owed by any Member or any Affiliates of any Member, shall be the same as the
duties and obligations owed to a corporation organized under the Delaware
General Corporation Law by its directors and officers and such duties that may
be owed to such corporation by any similarly situated stockholder or affiliate
thereof, respectively. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a Member or a
Director shall not be liable to IOC or its Members for monetary damages for a
breach of fiduciary duty and any repeal or modification of this Section 1.8(a)
shall not adversely affect any right or protection of a Director or Member of
IOC existing at the time of such repeal or modification.
(b) Limitations on Liability of Members, Directors and Officers. To the
extent that any Member, Director or officer has duties (including fiduciary
duties) and liabilities relating thereto to IOC or to a Member, (i) any such
Member, Director or officer acting under this Agreement shall not be liable to
IOC or to any such other Member for the Member's, Director's or Officer's good
faith reliance on the provisions of this Agreement, the records of IOC and such
information, opinions, reports or statements presented to IOC by any of IOC's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the Member, Officer or Director reasonably believes are
within such other person's professional or expert competence and who has been
selected with reasonable care by or on behalf of IOC, and, (ii) the Member's,
Director's or officer's duties and liabilities are restricted by the provisions
of
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this Agreement to the extent that such provisions restrict the duties and
liabilities of the Members, Directors or officers otherwise existing at law or
in equity.
Section 1.9 Reliance by Third Parties. Persons dealing with IOC are
entitled to rely conclusively upon the power and authority of the Directors and
officers as herein set forth. Persons dealing with IOC are entitled to rely
conclusively upon a certificate of any secretary or assistant secretary as to
the incumbency of any Director, officer or other personnel of IOC.
Section 1.10 Organizational Expenses. IOC shall be solely responsible
for the expenses of organizing IOC.
Section 1.11 Seal of IOC. The Board of Directors may adopt a seal,
alter such seal at its pleasure and authorize it to be used by causing it or a
facsimile to be affixed or impressed or reproduced in any other manner.
Section 1.12 Ratification and Authorization of Certain Actions. The
actions of the officers of IOC, including the preparation of the Asset Transfer
Agreement in the form attached as Exhibit "1" (the "Asset Transfer Agreement"),
with respect to the transfer of assets and liabilities from Parent to IOC are
hereby ratified and approved and such officers are further authorized to execute
and deliver the Asset Transfer Agreement simultaneously herewith.
ARTICLE II
MANAGEMENT AND OPERATIONS
Section 2.1 Power and Authority of Members. The Members shall manage
IOC only through the Board of Directors. The Members, in their capacity as such,
shall have no authority or right to act on behalf of or bind IOC in connection
with any matter.
Section 2.2 Power and Authority of Directors. The business and affairs
of IOC shall be managed by or under the direction of the Board of Directors,
except as otherwise provided in this Agreement. The Board of Directors shall
have the power on behalf and in the name of IOC to carry out any and all of the
objects and purposes of IOC contemplated by Section 1.3 and to perform all acts
which they may deem necessary or advisable in connection therewith.
The Members agree that all determinations, decisions and actions made
or taken by the Board of Directors (or their designee) shall be conclusive and
absolutely binding upon IOC, the Members (but only in their capacity as such)
and their respective successors, assigns and personal representatives.
Section 2.3 Directors: Meetings, Committees, and Delegation.
(a) Annual and Special Meetings. An annual meeting of the Board of
Directors shall be held without notice other than this provision immediately
after, and at the same place as, the annual meeting of Members (or execution by
all Members of a unanimous written consent in lieu
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thereof). At the annual meeting of the Board of Directors, the Directors shall,
by resolution duly adopted by a majority of the Directors present and voting,
elect a chairman of the Board of Directors who, in accordance with Section 2.5,
shall also serve as chief executive officer of IOC and who, as provided in
Section 1.5(a) shall be the same person serving as chairman of the board of
directors of Parent. Regular meetings, other than the annual meeting of the
Board of Directors, shall be held without notice at such time and at such place
as shall from time to time be determined by resolution of the Board of
Directors. Special meetings of the Board of Directors may be called by or at the
request of any Director on at least forty-eight (48) hours notice to each
Director, either personally, by telephone, by mail or by telegraph. A majority
of the total number of Directors shall constitute a quorum for the transaction
of business. The vote of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors, unless a previous
resolution of the Board of Directors requires approval by more than a simple
majority of a quorum (a "supermajority") to take such action, in which case the
vote of such supermajority shall be the act of the Board of Directors; such
supermajority requirement shall remain in effect unless amended by a vote of
such supermajority of Directors; provided, however, that at any meeting held
during any period in which Directors of Parent have been elected by holders of
Series C Class 2 Interests of Parent, in their capacity as such, the vote
required to approve any merger, liquidation, sale, lease, conveyance or transfer
of IOC or all or substantially all of its assets or to approve or recommend to
the Members any changes in the capital structure or in the rights of any
interests or security of IOC or to approve the incurrence of any debt of IOC
which debt would exceed Ten Million Dollars ($10,000,000) or any amendments to
this Agreement which would have a material effect on any of the Members, shall
require the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of
all of the Directors. If a quorum is not present at any meeting of the Board of
Directors, the Directors present at such meeting may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.
(b) Representation of Certain Members. IOC shall give each of Raytheon
Company ("Raytheon") and Lockheed Martin Corporation ("Lockheed Martin") (in
each case so long as it has complied in all material respects with the terms of
Parent's Limited Liability Company Agreement and has not Transferred any of its
Class 1 Interests in Parent other than in a Transfer referred to in clause (i)
of the definition of Exempt Transfer in the 1993 Stock Purchase Agreement)
written notice of each meeting of the Board of Directors at the same time and in
the same manner as notice is given to the Directors, and IOC shall permit a
representative of each of Raytheon and Lockheed Martin to attend as a
non-participating observer all meetings of the Board of Directors; provided,
that in the case of telephonic meetings conducted in accordance with this
Agreement and applicable law, each of Raytheon and Lockheed Martin need receive
only actual notice thereof at least forty-eight (48) hours prior to any such
meeting, and each of their representatives shall be given the opportunity to
listen to such telephonic meetings. Raytheon and Lockheed Martin shall
designate, in writing to IOC, their respective representatives under this
Section 2.3(b) (which representatives upon written notice to IOC can be changed
by the appointing party from time to time; provided, that the individuals so
designated must be the same individuals designated by those parties as
representatives to the board of directors of Parent). Each representative shall
be entitled to receive all written materials and other information (including,
without limitation, copies of meeting minutes) given to Directors in connection
with such meetings
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at the same time such materials and information are given to the Directors. If
IOC proposes to take any action by written consent in lieu of a meeting of the
Board of Directors, IOC shall give written notice thereof to each of the
representatives of Raytheon and Lockheed Martin prior to the effective date of
such consent describing in reasonable detail the nature and substance of such
action.
(c) Committees. There shall exist the same committees of the Board of
Directors, as there may be committees of the board of directors of Parent. Each
such committee shall have the same authority, rights and responsibilities as
such committees of the board of directors of Parent and the members thereof
shall be the same as the members of such committees of the board of directors of
Parent. If there are alternate members authorized to serve on a committee of the
board of directors of Parent, those individuals shall also be alternates
authorized to serve on the comparable committee of the Board of Directors. No
such committee of the Board of Directors shall have the power or authority to
amend this Agreement, adopt any agreement of merger or consolidation, recommend
to the Members the sale, lease or exchange of all or substantially all of IOC's
property and assets, recommend to the Members a dissolution of IOC or revocation
of a dissolution, and, unless a resolution of the Board of Directors or this
Agreement expressly so provides, no such committee shall have the power or
authority to declare a dividend or other distribution or to authorize the
issuance of Interests. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
(d) Committee Rules. Each committee of Directors may fix its own rules
of procedure and shall hold its meetings as provided by such rules, except as
may otherwise be provided by a resolution of the Board of Directors designating
such committee. Unless otherwise provided in such a resolution, the presence of
at least a majority of the members of the committee shall be necessary to
constitute a quorum. In the event that a committee member and that committee
member's alternate, if any, is or are absent or disqualified, the committee
member or members present at any meeting and not disqualified from voting,
whether or not such committee member or members constitute a quorum, may
unanimously appoint another Director to act at the meeting in place of any such
absent or disqualified committee member.
(e) Communications Equipment. The Directors or any committee thereof
may participate in and act at any meeting of such Directors or committee through
the use of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in the meeting pursuant to this section shall constitute presence
in person at the meeting.
(f) Waiver of Notice and Presumption of Assent. Any Director or any
member of a committee of the Board of Directors who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the
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secretary of IOC immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
(g) Action by Written Consent. Unless otherwise restricted by this
Agreement or the Delaware Act, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all the Directors or members of the committee thereof, as
the case may be, consent thereto in writing, and the writing is filed with the
minutes of proceedings of the Board of Directors or committee.
(h) Tax Consequences to the Members. At the request of any Director,
the Board of Directors shall consider, as part of any determination, decision or
action, the tax consequences to any member of Parent that result from any
proposed action by IOC.
Section 2.4 Compensation of the Directors. No Director shall be
entitled to any compensation for services as a Director.
Section 2.5 Officers.
(a) Establishment, Nomination and Election. The offices and Officers of
IOC shall be identical in all respects to the offices and officers of Parent and
the individuals holding such offices at Parent shall also hold the same offices
at IOC. Any change in an office or officer at Parent shall automatically result
in a corresponding change at IOC. Vacancies shall be automatically filled or new
offices created and filled when corresponding action has been taken at Parent.
Each Officer shall hold office until a successor is duly elected and qualified
or until his or her earlier death, resignation or removal as hereinafter
provided. The initial Officers of IOC are set forth in Annex A.
(b) Removal. Any Officer elected by the Directors shall automatically
be removed to the extent such Officer has been removed as an officer of Parent,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
(c) Compensation. No Officer shall be entitled to any compensation for
services as an Officer.
Section 2.6 Interested Directors.
(a) Contracts Permitted. No contract or transaction between IOC and one
or more of its Directors or Officers, or between IOC and any other limited
liability company, corporation, partnership, association, or other organization
in which one or more of its managers, directors or officers, are Directors or
Officers of IOC, or have a financial interest, shall be void or voidable solely
for this reason, or solely because the Director or Officer is present at or
participates in the meeting of the Board or committee which authorizes the
contract or transaction, or solely because his, her or their votes are counted
for such purpose, if (I) the material facts as to such Director's or Officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes
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the contract or transaction by the affirmative vote of a majority of the
disinterested Directors, even though the number of disinterested Directors is
less than a quorum, (ii) the material facts as to the relationship or interest
and as to the contract or transaction are disclosed or are known to the Members
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the Members, or (iii) the contract or
transaction is fair as to IOC as of the time it is authorized, approved or
ratified by the Board of Directors, a committee or the Members. For purpose of
this Section 2.6 all contracts (and the transactions contemplated thereby) that
are assigned to and assumed by IOC pursuant to the Asset Transfer Agreement
shall be conclusively deemed to be in compliance herewith without any further
action by any Person.
(b) Quorum. Interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee,
which authorizes the contract or transaction.
Section 2.7 Books and Records.
(a) Books and Records to be Kept. IOC shall keep (I) correct and
complete books and records of account, (ii) minutes of the proceedings of
meetings of the Members, the Board of Directors and any committee thereof, and
(iii) a current list of the Directors and Officers and their residence
addresses. IOC shall also keep at its principal executive office a record
containing the names and addresses of all Members, the total Interests held by
each Member and the dates when they respectively became the owners of record
thereof (the "Members' Interest Register"). Any of the foregoing books, minutes
or records may be in written form or in any other form capable of being
converted into written form within a reasonable time. The financial statements
of IOC shall be audited at the end of each fiscal year by an internationally
recognized firm of independent certified public accountants based in the United
States.
(b) Inspection of Books and Records. Any Member, in person or by
attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the Members' Interest Register of IOC and its other books
and records, and to make copies of extracts therefrom. A proper purpose shall
mean any purpose reasonably related to such Person's interest as a Member. In
every instance where an attorney or other agent shall be the Person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the Member. The demand under oath shall be directed to
IOC at its registered office in the State of Delaware or at its principal place
of business.
(c) Rights to Inspect. Any Director shall have the right to examine the
Members' Interest Register of IOC and its other books and records for a purpose
reasonably related to his or her position as a Director. Any member of Parent
shall have the right to examine IOC's Members' Interest Register and its other
books and records for a purpose reasonably related to his, her or its position
as a member of Parent.
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(d) Interest Register as Evidence. The Members' Interest Register shall
be the only evidence as to who are the Members entitled to vote in person or by
proxy at any meeting of Members.
Section 2.8 Indemnification.
(a) Third Party Actions, Suits and Proceedings. Each person who was or
is made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of IOC), (hereinafter a
"Proceeding") by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a Director or Officer of IOC, or is
or was serving at the request of IOC as a manager, director, officer, employee,
or agent of another limited liability company or of a corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified and held harmless
by IOC, against all expenses (including attorneys' fees) judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such Proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of IOC, and, with respect to the subject matter of any Proceeding, had
no reasonable cause to believe such person's conduct was unlawful. The
termination of any Proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contender or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of IOC,
and, with respect to any Proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(b) Actions by or in Right of IOC. IOC shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed Proceeding by or in the right of IOC to procure a judgment in its
favor by reason of the fact that such person, or a person of whom he or she is
the legal representative, is or was a Director or Officer of IOC, or is or was
serving at the request of IOC as a manager or director, officer, employee, or
agent of another limited liability company or of a corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such Proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of IOC and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to IOC unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such Proceeding was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) Procedure for Indemnification. Any indemnification of a Director or
Officer of IOC under Section 2.8(a) or 2.8(b) or advance of expenses under
Section 2.8(f) shall be made promptly, and in any event within thirty (30) days,
upon the written request of the Director or Officer. If a determination by IOC,
by action of its Board of Directors, that the Director or Officer is entitled to
indemnification pursuant to this Section 2.8 is required, and IOC fails to
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respond within sixty (60) days to a written request for indemnity, IOC shall be
deemed to have approved the request. If IOC denies a written request for
indemnification or advancing of expenses, in whole or in part, or if payment in
full pursuant to such request is not made within thirty (30) days, the right to
indemnification or advances as granted by this Section 2.8 shall be enforceable
by the Director or Officer in any court of competent jurisdiction. Such person's
costs and expenses incurred in connection with successfully establishing his or
her right to indemnification, in whole or in part, in any such action shall also
be indemnified by IOC. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to IOC) that the claimant has not met the standards of
conduct which make it permissible under the Delaware Act for IOC to indemnify
the claimant for the amount claimed, but the burden of such defense shall be on
IOC. Neither the failure of IOC (including its Directors, independent legal
counsel or Members) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware Act, nor an actual determination by IOC (including its Directors,
independent legal counsel or Members) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(d) Rights Non-Exclusive. The rights to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 2.8 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Agreement, other agreements, vote of Members or disinterested
Directors or otherwise.
(e) Insurance. IOC may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a Director, Officer, employee,
or agent of IOC or was serving at the request of IOC as a manager, officer,
employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not IOC would have the power to indemnify such person against such
liability under this Section 2.8.
(f) Expenses. Expenses incurred by any Officer or Director described in
Section 2.8(a) or 2.8(b) in defending a Proceeding shall be paid by IOC in
advance of such Proceeding's final disposition upon receipt of an undertaking by
or on behalf of the Director or Officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
IOC. Such expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
(g) Employees and Agents. Persons who are not covered by the foregoing
provisions of this Section 2.8 and who are or were Members, employees or agents
of IOC, or who are or were serving at the request of IOC as employees or agents
of another limited liability company, corporation, partnership, joint venture,
trust or other enterprise, may be indemnified to the extent authorized at any
time or from time to time by the Board of Directors.
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(h) Contract Rights. The provisions of this Section 2.8 shall be deemed
to be a contract right between IOC and each Director or Officer who serves in
any such capacity at any time while this Section 2.8 and the relevant provisions
of the Delaware Act or other applicable law are in effect, and any repeal or
modification of this Section 2.8 or any such law shall not affect any rights or
obligations then existing with respect to any state of facts or Proceeding then
existing. The indemnification and other rights provided for in this Section 2.8
shall inure to the benefit of the heirs, executors and administrators of any
person entitled to such indemnification. Except as provided in Section 2.8(c)
hereof, IOC shall indemnify any such person seeking indemnification in
connection with a Proceeding initiated by such person only if such Proceeding
was authorized by the Directors.
(i) Merger or Consolidation, Other. For purposes of this Section 2.8,
references to "IOC" shall include, in addition to the resulting company, any
constituent company (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its managers, directors, officers, and
employees or agents, so that any person who is or was a manager, director,
officer, employee or agent of such constituent company, or is or was serving at
the request of such constituent company as a director, officer, employee or
agent of another company, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Section 2.8 with respect to the
resulting or surviving company as he or she would have with respect to such
constituent company if its separate existence had continued. For purposes of
this Section 2.8, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan; and references to "serving
at the request of IOC" shall include any service as a Manager, Director,
Officer, employee or agent of IOC which imposes duties on, or involves services
by, such Manager, Director, Officer, employee, or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of IOC"
as referred to in this section.
Section 2.9 Special Rights of IWCL. During the IWCL Special Rights
Period, IOC shall not take any of the following actions, or permit any of the
following actions to occur, without the consent of one of the Directors
designated by IWCL:
(a) Make any material amendments or modifications to this Agreement;
(b) Approve any business plan of IOC that would result in any material
change in the purpose of IOC as set forth in Section 1.3 of this Agreement or
otherwise change IOC's business so that it varies materially from the business
purpose contemplated by Section 1.3 of this Agreement;
(c) Acquire other than in the ordinary course of business of IOC, (i) a
controlling interest or a majority of the voting stock or equity of any
corporation or other entity that would be a Significant Subsidiary (as such term
is defined in Rule 405 under the United States Securities
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Act of 1933, or any successor rule thereto, or (ii) any other assets if the
aggregate fair market value thereof is greater than $50 million;
(d) Sell, lease (as lessor) exchange or otherwise dispose of all or
substantially all of the assets of IOC (other than to a person controlled by IOC
or Parent);
(e) Cause the dissolution and/or liquidation of IOC;
(f) Take any action for the (i) commencement of a voluntary case with
respect to IOC under any applicable bankruptcy, insolvency or similar law now or
hereafter in effect, (ii) consent to the entry of any order for relief in an
involuntary case under any such law with respect to IOC to the extent that the
giving of withholding of such consent is within IOC's discretion, (iii) consent
to the appointment or taking possession by a receiver, liquidator, assignee,
custodian trustee, sequestrator (or similar official) of IOC or of any
substantial part of IOC's property, or (iv) making by IOC of a general
assignment for the benefit of creditors.
ARTICLE III
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
Section 3.1 Form of Contribution. The contribution with respect to a
Member of IOC may, as determined by the Board of Directors in its discretion, be
in cash, property, or other legal consideration.
Section 3.2 Contributions by the Members. There shall be contributed to
the capital of IOC, with respect to each Person who purchases an Interest, an
amount equal to the net purchase price to IOC for such Interest (such amount
being such Person's capital contribution to IOC). Members, in their capacity as
Members of IOC, shall not be required to make any additional contributions to
IOC except as required by law.
Section 3.3 Allocation of Distributions. The distributions of IOC shall
be allocated entirely to the Members pro rata in proportion to their percentage
ownership of all outstanding Interests.
Section 3.4 Interests as Personal Property. Each Member hereby agrees
that its Interests shall for all purposes be personal property. A Member has no
interest in specific IOC property.
ARTICLE IV
INTERESTS AND OTHER SECURITIES
Section 4.1 Interests and Authorization. The Interests in IOC shall be
represented by certificates, unless otherwise specified by resolution of the
Board of Directors.
Section 4.2 Specific Rights Associated with Interests.
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(a) Voting Rights. All voting rights of the Members shall be vested
exclusively in the Members. Members shall vote in proportion to the number of
Interests owned by each such Member upon all matters upon which Members have the
right to vote. Except as otherwise provided herein and in the Delaware Act, an
action to be taken by Members shall be deemed to have been taken if approved by
Members representing a majority of the votes cast in respect of such action.
(b) Liquidation Rights. Each Member shall be entitled to receive all
distributions to the holders of Interests in any liquidation, dissolution or
winding up of IOC pro rata on proportion to their percentage ownership of all
outstanding Interests.
(c) Dividends and Distributions. To the extent permitted under the
Delaware Act, distributions or dividends (hereinafter referred to as
"Dividends") may be paid on the Interests as and when decided by the Board of
Directors of IOC, in their discretion. When deciding whether to pay a Dividend
to Parent the Board of Directors of IOC shall consider the total tax liability
of members of Parent in respect of their Class 1 Interests (as defined in
Parent's Limited Liability Company Agreement), including the tax liability of
Class 1 Members (as therein defined) in countries other than the home country of
each Class 1 Member.
(d) Minimum Dividends. If the board of directors of Parent is required
to declare or pay a dividend at any time pursuant to Section 3.07(c) of the
Parent's Limited Liability Agreement, the Board of Directors of IOC shall then
be required, to the extent IOC has funds legally available therefore, to
promptly pay a Dividend in the same amount (the "Minimum Dividend"). To the
extent that IOC has insufficient funds legally available to pay the Minimum
Dividend in any year, the Minimum Dividend that the Board of Directors of IOC
shall be required to pay in subsequent years shall be increased by the amount of
such shortfall. Any amounts required to be paid as Minimum Dividends shall be
paid prior to the payment of any other monetary distribution to IOC's Members.
(e) Accounting. Each time the Board of Directors pays a Dividend, it
shall determine the amount of such distribution that is from retained earnings
and the amount that constitutes a return of capital for accounting purposes and
will make a record of such determination in the minutes of the appropriate Board
meeting.
(f) Legal Funds. A Member shall not be entitled to receive any Dividend
with respect to any Dividend payment date (and any such Dividend shall not be
considered due and payable), until such time as IOC has funds legally available
for the payment of such Dividend to its Members pursuant to the terms of this
Agreement and the Delaware Act, and notwithstanding any provision of Section
18-607 of the Delaware Act to the contrary, until such time the Member shall not
have the status of a creditor of IOC, or the remedies available to a creditor of
IOC.
(g) Record Dates. For purposes of determining the Members entitled to
receive payment of any Dividend, the Board of Directors may set a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted, and which shall not be more than sixty (60) days before such
action. If no record date is fixed, the record date for determining
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Members for any such purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
Notwithstanding any provision to the contrary contained in this Agreement, IOC
shall not pay a Dividend to any Member on account of any of its interests if
such Dividend would violate Section 18-607 of the Delaware Act or other
applicable law.
Section 4.3 Fractional Interests. IOC may, but shall not be required
to, issue fractions of an Interest. If it does not issue fractions of a
Interest, it shall (I) arrange for the disposition of fractional Interests by
those entitled thereto, (ii) pay in cash the fair value of fractions of an
Interest as of the time when those entitled to receive such fractions are
determined, or, (iii) issue scrip or warrants in registered form (either
represented by a Certificate or uncertificated) or in bearer form (represented
by a Certificate) which shall entitle the holder to receive a full Interest upon
the surrender of such scrip or warrants aggregating a full Interest. A
certificate for a fractional Interest or an uncertificated fractional Interest
shall, but scrip or warrants shall not unless otherwise provided therein,
entitle the holder to exercise voting rights, to receive dividends or
distributions thereon and to participate in any of the assets of IOC in the
event of liquidation. The Board of Directors may cause scrip or warrants to be
issued subject to the conditions that they shall become void if not exchanged
for Certificates representing the full Interests or uncertificated full
Interests before a specified date, or subject to the conditions that the
Interests for which scrip or warrants are exchangeable may be sold by IOC and
the proceeds thereof distributed to the holders of scrip or warrants, or subject
to any other conditions which the Board of Directors may impose.
Section 4.4 Certificates for Interests. The Interests of IOC shall be
represented by Certificates, provided that the Board of Directors may provide by
resolution or resolutions that some or all of any or all Interests of the
classes or series of its Interests shall be uncertificated. Any such resolution
shall not apply to Interests represented by a Certificate until such Certificate
is surrendered to IOC. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of Interests represented by Certificates and
upon request every holder of uncertificated Interests shall be entitled to have
a Certificate signed by, or in the name of, IOC, by the chairman of the Board of
Directors, or any Vice Chairman or the president or any vice-president, and by
the treasurer or any assistant treasurer, or the secretary or any assistant
secretary of IOC representing the number of Interests registered in Certificate
form. Any or all the signatures on the Certificate may be a facsimile. In case
any Officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a Certificate shall have ceased to be such
Officer, transfer agent or registrar before such Certificate is issued, it may
be issued by IOC with the same effect as if he or she were such Officer,
transfer agent or registrar at the date of issue.
ARTICLE V
DISSOLUTION AND WINDING UP
Section 5.1 Dissolution. IOC shall be dissolved and its affairs wound
up upon the adoption of a resolution by sixty-six and two-thirds percent (66
2/3%) of the entire Board of
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Directors that it is deemed advisable in the judgment of the Board of Directors
that IOC be dissolved followed by the affirmative vote at a meeting duly called
for such purpose of sixty-six and two-thirds percent (66 2/3%) of the Interests
approving the dissolution; provided, that the resolution of the Board of
Directors authorizing a proposed dissolution may provide that notwithstanding
authorization or consent to the proposed dissolution by the Members, the Board
of Directors may abandon such proposed dissolution without further action by the
Members.
Section 5.2 Resignation of Members. A Member may resign from IOC only
by transferring its Interests pursuant to Article VI hereof. No Member shall be
able to resign or be deemed to resign if it ceases to be a Member due to
bankruptcy or for any other reason (a "Former Member") except upon the consent
of sixty-six and two-thirds percent (66 2/3%) of the other Members, if IOC
continues, pursuant to Section 5.1(b) or otherwise, to exist. Such Former
Member, if not permitted or deemed to resign, shall not be entitled to any of
the rights granted to a Member hereunder or under applicable law but shall be,
to the extent not otherwise provided by this Agreement or applicable law,
entitled to receive distributions and allocations of items of income, gain,
loss, deduction, expense and credit as if such Former Member continued to be a
Member hereunder.
Section 5.3 Winding Up. Upon dissolution of IOC, IOC's affairs shall be
wound up by the chairman of the Board of Directors (as liquidating trustee) or,
if there is no chairman of the Board of Directors, by the person who may be
elected by a vote of the Members. Upon the winding up of IOC, any amounts
permitted to be distributed to Members shall be distributed to the Members in
proportion to the number of Interests held by each such Member.
ARTICLE VI
TRANSFERS
Section 6.1 Board Approval Required. Except as otherwise provided in
this Agreement, a Person shall not transfer Interests without the prior approval
of a majority of the Directors.
Section 6.2 Obligations of Transferees and Transferors. Each Person
that becomes the owner of Interests pursuant to any Transfer shall execute an
agreement in form and substance satisfactory to IOC which shall include such
Person's agreement to be bound by the provisions of this Agreement. No Transfer
shall relieve a party hereto of its contractual obligations under this Agreement
or relieve any Indirect Owner of its contractual obligations under its Agreement
of Indirect Owner unless the relief of such obligations is approved by the
holders of at least 66 2/3% of the then outstanding Interests.
Section 6.3 Inapplicability of Article. Article VI shall not apply to a
Transfer by any Person of any ownership interest in a Member.
Section 6.4 Substituted Members. Unless otherwise provided in this
Agreement, a transferee of any Interest shall not become a substituted Member
without the consent of a "majority in interest" of the non-transferring Members,
which consent may be given or withheld
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in the discretion of the Members, whether or not reasonable. Unless and until a
transferee becomes a Member pursuant to this Section 6.4, the transferee shall
not be entitled to any of the rights granted to a Member hereunder or under
applicable law, other than the right to receive distributions and allocations of
items of income, gain, loss, deduction, expense, and credit as if such
transferee were a Member. However, such transferee shall be bound by any
limitations and obligations contained herein with respect to Members.
Section 6.5 Pledge of Interests. Notwithstanding anything herein to the
contrary, Members may pledge Interests to secure indebtedness for borrowed money
and related obligations owing to the respective lenders (or their agent or
designee) in connection with indebtedness incurred by IOC for the development
and/or operation of its business, provided that such pledge is either (i)
approved by the Board of Directors or (ii) made to the lenders or an agent for
such lenders in connection with the Secured Bank Facility (as defined in Section
10.5). Notwithstanding anything in Article VI or elsewhere in this Agreement to
the contrary, the pledgee of such Interests shall be permitted to exercise and
enforce all of its rights and remedies in respect of such Interests under the
relevant pledge or security agreement or other relevant instruments pursuant to
which such pledge was created, including but not limited to the sale or transfer
of such Interests, without approval of the Board of Directors or any other
approval under this Agreement, provided that, upon such sale or transfer, such
transferee shall agree to be bound by the provisions of this Agreement. In
addition, except as specified in the provisions of the immediate preceding
sentence, Section 7.2 of this Agreement shall not apply to the admission of such
transferee as a new Member in connection with the exercise or enforcement of
such right and remedies by such pledgee and without limiting the foregoing, such
transferee shall not be required to make any contribution pursuant to Section
7.2(c).
ARTICLE VII
ADMISSION OF ADDITIONAL MEMBERS
Section 7.1 Initial Member. The sole original Member of IOC shall be
the Parent.
Section 7.2 Admission of Additional Members.
(a) Admission of Members. With the consent of Members holding a
majority of the Interests, the Board of Directors may at any time cause IOC to
admit additional Members ("Additional Members").
(b) Time of Admission. An Additional Member shall be deemed admitted as
a Member upon the later of the written request by such Person that the Members'
Interest Register reflect such admission and the execution by such Person of
this Agreement or a counterpart hereof whereby such person agrees to be bound by
the provisions of this Agreement, and the time such person is listed as a Member
in the Members' Interest Register of IOC and a Certificate evidencing such
person's ownership of such Interest is issued.
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<PAGE> 25
(c) Required Contribution. The Board of Directors shall determine what,
if any, contribution the Additional Member needs to make and the number of
Interests to be issued to such Member.
ARTICLE VIII
GATEWAY RIGHTS OF IRIDIUM LLC CLASS 1 MEMBERS
Section 8.1 Access Rights of Iridium LLC Class 1 Members. IOC hereby
acknowledges the rights granted to each Iridium LLC Class 1 Member pursuant to
Article VIII of the Iridium LLC Agreement and agrees that it shall not take any
action that Parent could not take in contravention of such rights. In addition,
IOC hereby authorizes each Iridium LLC Class 1 Member and its Affiliates, to the
extent permitted by applicable law (including United States law), to provide
Gateway Services and to retain Service Providers (and act as a Service Provider)
in the Gateway Service Territory allocated to such Iridium LLC Class 1 Member on
the Iridium LLC Gateway Service Territory Allocation Schedule most recently
provided to IOC by Parent pursuant to Section 8.2 and to construct an unlimited
number of Gateways in such Gateway Service Territory. IOC will not authorize any
other Person to provide Gateway Services, construct Gateways, act as a Service
Provider, or retain Service Providers in any Iridium LLC Class 1 Member's
Gateway Service Territory except on a basis consistent with the allocations set
forth in the Iridium LLC Gateway Service Territory Allocation Schedule most
recently provided to IOC by Parent.
Section 8.2 Parent to Provide Gateway Service Territory Information.
Parent hereby agrees to provide IOC with an Iridium LLC Gateway Service
Territory Allocation Schedule, no later ten (10) days from the date of this
Agreement and no later ten (10) days following the date of each amendment,
modification or other change to the Iridium LLC Gateway Service Territory
Allocation Schedule. IOC shall not be responsible to any Person for errors or
omissions in any Iridium LLC Gateway Service Territory Allocation Schedule.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Amendments to the Agreement.
(a) General. This Agreement may not be changed or amended or the
observance of any provisions by IOC waived without the consent of the Board of
Directors.
(b) Amendments Affecting Indemnification. Notwithstanding the
provisions of Section 9.1(a), no amendments to the provisions of Section 2.8 may
be made without the consent of any party whose rights thereunder are directly
affected by such amendment(s).
(c) Amendments Affecting Article VIII. Notwithstanding the provisions
of section 9.1(a), for so long as the Parent is the majority member of IOC no
amendments to the provisions
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<PAGE> 26
of Article VIII may be made unless an amendment having the same intent has been
made to the Iridium LLC Agreement.
(d) Amendments to Annexes by Secretary. The secretary of IOC is
permitted to amend the annexes to this Agreement to reflect changes in the
information contained therein without obtaining a separate consent of the
Members.
Section 9.2 Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Delaware without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware. In particular, it shall be construed to the maximum extent possible to
comply with all of the terms and conditions of the Delaware Act. If,
nevertheless, it shall be determined by a court of competent jurisdiction that
any provision or wording of this Agreement shall be invalid or unenforceable
under said Act or other applicable law, such invalidity or unenforceability
shall not invalidate this entire Agreement. In that case, this Agreement shall
be construed so as to limit any term or provision so as to make it enforceable
or valid within the requirements of any applicable law, and, in the event such
term or provision cannot be so limited, this Agreement shall be construed to
omit such invalid or unenforceable provisions.
Section 9.3 Jurisdiction and Service of Process Arbitration. Any suit,
action or proceeding against any party with respect to this Agreement may be
brought in a court of the United States sitting in the State of Delaware or, if
jurisdiction is lacking in such a court, in a court of record in the State of
Delaware, and each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may have, whether now or in the future,
to the laying of venue in, or to the jurisdiction of, any and each of such
courts for the purpose of any such suit, action, proceeding or judgment and
further waives any claim that any such suit, action, proceeding or judgment has
been brought in an inconvenient forum, and the party hereby submits to such
jurisdiction. The party hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of
Delaware may be made upon The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801, or such alternate process agent in the United States
designated with respect to the party in a writing delivered to IOC (the "Process
Agent") and the party hereby irrevocably appoints the Process Agent in its name,
place and stead to receive and forward such service of any and all such writs,
process and summonses and agrees that the failure of the Process Agent to give
any notice of any such service of process to such party shall not impair or
affect the validity of such service or of any judgment based thereon. If the
Process Agent is no longer able to so act for any reason whatsoever, the party
agrees to appoint a substitute process agent, which substitute process agent
shall thereafter be deemed to be the Process Agent hereunder, and to give notice
of such appointment to IOC. If the party is a Government, it hereby irrevocably
waives any and all claims of sovereign immunity in connection with the
execution, performance and enforcement of this Agreement and other immunities
which may relate to this Agreement, including, without limitation, with respect
to service of process, submission to jurisdiction, attachment and execution on
property. In the event the foregoing provisions of this Section 9.3 are for any
reason unenforceable or otherwise do not permit a party to become subject to the
jurisdiction of the courts contemplated hereby, then in the
21
<PAGE> 27
event any dispute arises in connection with the interpretation or implementation
of this Agreement which the parties are unable to resolve within sixty (60)
days, (i) any party may submit the dispute for arbitration in Stockholm, Sweden
in accordance with the Rules of the Arbitration Institute of the Stockholm
Chamber of Commerce with instructions that the arbitration be conducted in the
English language, (ii) the arbitration award shall be final and binding on the
parties and shall be enforced in accordance with its terms, and, (iii) the
arbitration fee shall be borne by the party as designated by the arbitration
award. In the course of such arbitration, this Agreement shall be continuously
performed except with respect to the part hereof which is the subject of, or
which is directly and substantially affected by, the arbitration. In any such
arbitration proceeding, any legal proceeding to enforce any arbitration award
and any other legal action between or among the parties hereto pursuant to or
relating to this Agreement or the transactions contemplated hereby, each party
expressly waives the defense of sovereign immunity and any other defense based
on the fact or allegation that it is an agency or instrumentality of a sovereign
state. Any award of the arbitrators shall be enforceable by any court having
jurisdiction over the party against which the award has been rendered and such
award shall be enforceable in accordance with the United Nations Convention on
the Reciprocal Enforcement of Arbitral Awards (1958).
Section 9.4 Power of Attorney and Other Authorizations and appoint any
vice president of IOC and the secretary of IOC as the true and lawful
representative and attorney-in-fact of such party, in the name, place and stead
of such party, with full power of substitution, to make, execute, sign and file
a Certificate of Formation, any amendment thereof and such other instruments,
documents and certificates which may from time to time be required by the laws
of the United States of America, the State of Delaware or any other state or
country in which IOC shall determine to do business or any political subdivision
or agency thereof, to effectuate, implement and continue the valid and
subsisting existence or qualification to do business of IOC or in connection
with any tax returns, filings or related matters.
Such representative and attorney-in-fact shall not, however, have any
right, power or authority to amend or modify this Agreement when acting in such
capacities.
The power of attorney granted hereby is coupled with an interest and
shall survive and not be affected by the subsequent dissolution, incapacity or
disability of such Member.
Each Director is hereby deemed to be an authorized person within the
meaning of the Delaware Act. The execution, delivery and filing of the
Certificate of Formation of IOC by IOC is hereby authorized, approved and
ratified. The Directors are hereby authorized to execute, deliver and file any
amendment to and restatements of the Certificate of Formation of IOC that are
required or permitted by the Delaware Act and any and all certificates or
documents required by the Delaware Act.
Section 9.5 Actions of Members. Except as otherwise stated in this
Agreement or as required by law, any act of a party that may be or is required
to be taken under either this Agreement or the Delaware Act may be taken by
their respective duly authorized officers.
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<PAGE> 28
Section 9.6 Notices. All notices and other communications provided for
in this Agreement shall be in writing, shall be in the English language and
shall be sufficiently given if made to the Company by hand delivery, telecopier,
by express courier service (charges prepaid), or by registered or certified mail
(postage prepaid and return receipt requested) to the following address:
Iridium Operating Company LLC
1575 Eye Street, NW
Washington, D.C. 20005
U.S.A.
Attention: General Counsel
Phone: (202) 326-5600
Facsimile: (202) 408-3761
or at such other address as the Company shall have furnished in writing to any
Member. All such notices and other communications shall be deemed to have been
duly given when delivered by hand, if personally delivered, five business days
after being deposited with an express courier service (charges prepaid) or after
being deposited in the mail, postage prepaid, if delivered by mail, or when
receipt is acknowledged (by a facsimile machine or otherwise), if telecopied.
Section 9.7 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
ARTICLE X
RATIFICATION AND AUTHORIZATION OF CERTAIN ACTIONS
Section 10.1. Formation of IOC. The actions of the Officers of Parent
and the Officers with respect to the formation of IOC are hereby ratified and
approved.
Section 10.2. Asset Transfer Agreement. The Officers are, and each of
them hereby is, authorized, for and on behalf of IOC, to execute and deliver the
Asset Transfer Agreement between Parent and IOC, dated the date hereof (the
"Asset Transfer Agreement"), and the Officers are, and each of them hereby is,
authorized, for and on behalf of IOC to take any action as may be necessary to
satisfy IOC's obligations, or exercise its rights, under the Asset Transfer
Agreement, and the signature of any such Officer to any document executed in
connection therewith shall be conclusive, as to the approval of IOC of the form
and substance of such document.
Section 10.3. Management Services Agreement. The Officers are, and each
of them hereby is, authorized, for and on behalf of IOC, to execute and deliver
the Management Services Agreement between Parent, IWCL and IOC, dated the date
hereof (the "Management Services
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<PAGE> 29
Agreement"), and the Officers are, and each of them hereby is, authorized, for
and on behalf of IOC to take any action as may be necessary to satisfy IOC's
obligations, or exercise its rights, under the Management Services Agreement,
and the signature of any such Officer to any document executed in connection
therewith shall be conclusive, as to the approval of IOC of the form and
substance of such document.
Section 10.4. Guaranteed Credit Facility. The Officers are, and each of
them hereby is, authorized, for and on behalf of IOC, to execute and deliver an
amendment ("Amendment No. 1") to the Credit Agreement, dated as of August 21,
1996, among the Parent, Chase Securities, Inc. and Barclays Capital, a division
of Barclays Bank PLC (as successor to BZW), The Chase Manhattan Bank, as
Administrative Agent, Barclays Bank PLC, as Documentation Agent, and the lenders
thereunder (the "Guaranteed Credit Facility"), which has the general effect of
substituting IOC for Parent as the borrower under the Guaranteed Credit
Facility, extending the term thereof until approximately June 30, 1999 and
making other arrangements in connection therewith, in form and substance
satisfactory to the Officer or Officers executing and delivering such Amendment
No. 1, and the Officers are, and each of them hereby is, authorized, for and on
behalf of IOC to take any action as may be necessary to satisfy IOC's
obligations, or exercise its rights, under the Guaranteed Credit Facility, as
amended by Amendment No. 1, and the signature of any such Officer to any
document executed in connection therewith shall be conclusive, as to the
approval of IOC of the form and substance of such document.
Section 10.5. Secured Bank Facility. The Officers are, and each of them
hereby is, authorized, for and on behalf of IOC, to execute and deliver a Credit
Agreement among IOC, Chase Securities, Inc. and Barclays Capital, a division of
Barclays Bank PLC, The Chase Manhattan Bank, as Administrative Agent, Barclays
Bank PLC, as Documentation Agent, and the lenders thereunder (the "Secured Bank
Facility"), and secured by all of the assets of IOC and Parent's Interests in
IOC, for financing, in the principal amount of up to $1.0 billion, the
development, construction and operation of the IRIDIUM System, on terms
negotiated by the Parent and IOC and in form and substance satisfactory to the
Officer or Officers executing and delivering such Secured Bank Facility,
provided that such Secured Bank Facility is executed and delivered by January
30, 1998; and the Officers are, and each of them hereby is, authorized, for and
on behalf of IOC to take any action as may be necessary to satisfy IOC's
obligations, or exercise its rights, under the Secured Bank Facility, including
without limitation, executing and delivering security agreements, depositary
agreements, promissory notes, certificates and all other agreements and
instruments related to the Secured Bank Facility, and that the signature of any
such Officer to any document executed in connection therewith shall be
conclusive, as to the approval of IOC of the form and substance of such
document; and all action taken by the board of directors of Parent or any
committee thereof and any officer of Parent in connection with the Secured Bank
Facility to the extent not inconsistent with this Section 10.5 is hereby
ratified and approved.
ARTICLE XI
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
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<PAGE> 30
"Affiliate" means any person that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the person specified.
"Agreement" means this Limited Liability Company Agreement as it may be
amended, restated or supplemented from time to time.
"Certificates" means with respect to an Interest, the certificate
therefor in fully registered definitive form.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Director" means any person authorized to act as a director of IOC
pursuant to Section 1.5.
"Gateway" means a terrestrial interconnection point between the IRIDIUM
Satellite System and a public switched telephone network.
"Gateway Services" means all services necessary and incident to the
provision of wireless telecommunications services using the Iridium Satellite
System.
"Gateway Service Territory" means a geographic territory allocated to a
Person for the purpose of providing Gateway Services.
"Government" means any nation or government, any state or other
political subdivision thereof, any ministry thereof, any wholly-owned Person
thereof, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Interests" means Interests authorized under Section 4.1.
"IOC" means Iridium Operating LLC, a limited liability company
organized under the laws of the State of Delaware.
"IRIDIUM LLC Agreement" means the Limited Liability Company Agreement
of Iridium LLC, dated as of July 26, 1996, as amended to the date hereof and as
amended from time to time hereafter.
"Iridium LLC Class 1 Member" means any Person that holds owns one or
more class 1 membership interests in Parent and is admitted as a member of
Parent for purposes of the Parent's limited liability company agreement, as such
agreement may be amended from time to time.
"Iridium LLC Gateway Service Territory Allocation Schedule" means the
schedule provided by Parent pursuant to Section 8.02 listing the geographic
territories allocated to Iridium LLC Class 1 Members pursuant to the limited
liability company agreement of Parent, as such agreement may be amended from
time to time.
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<PAGE> 31
"IRIDIUM Satellite System" means the low-earth orbit satellite space
system to be delivered under the Space System Contract.
"IRIDIUM Services" means wireless telecommunications services that are
provided, directly or indirectly, through the IRIDIUM System.
"IRIDIUM System" means the global wireless communications system
encompassing the Iridium Satellite System, the Gateways, the terrestrial
wireless interprotocol roaming infrastructure (designed to facilitate roaming
among the Iridium Satellite System and terrestrial wireless systems) and the
subscriber equipment designed to provide mobile access to the Iridium Satellite
System and the interprotocol roaming structure.
"IWCL" means Iridium World Communications Ltd., a Bermuda corporation,
and any successor to all or substantially all of its assets.
"IWCL Change of Control" means an event or series of events not
approved either by members of Parent owning a majority of the Parent Class 1
Membership interests or by a majority of the Board of Directors of Parent, at a
time when IWCL owns Parent Class 1 Membership Interests representing less than
50% of the outstanding Parent Class 1 Membership Interests, as a result of which
(a) any "person" or "group" (as such terms are defined in Section 12(d) and
14(d) of the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than Parent becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 30% of IWCL's outstanding common stock (or equivalent securities), (b) IWCL
consolidates with or merges into another corporation or conveys, transfers or
leases all or substantially all of its assets to any person, or any corporation
consolidates with or merges into IWCL, in either event pursuant to a transaction
in which IWCL's outstanding common stock is changed into or exchanged for cash,
securities or other property, other than any transaction (i) between IWCL and
either Parent, an affiliate of Parent or a wholly-owned subsidiary of Parent, or
(ii) after which the shareholders who beneficially owned IWCL's common stock
immediately before such transaction beneficially own at least 50% of the
outstanding voting stock of the surviving entity and no person beneficially owns
more than 30% of the outstanding voting stock of the surviving entity, or (c)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the board of directors of IWCL (together with any new
directors whose election by the board of directors of IWCL or whose nomination
for election was approved by a vote of 66 2/3% of the members of the board of
directors of IWCL's then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of IWCL then in office.
"IWCL Reduction in Interest" means the sale or other disposition by
IWCL or Parent of Class 1 Membership Interests which results in a reduction of
the ownership interest of IWCL from five percent or more of the total
outstanding Parent Class 1 Membership Interests to below such percent.
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<PAGE> 32
"IWCL Special Rights Period" means the period commencing on the first
date on which IWCL's Parent Class 1 Membership Interests represent five percent
or more of the total outstanding Parent Class 1 Membership Interests and ending
on the date of delivery by Parent of an Iridium Bermuda Termination Notice.
"IWCL Special Rights Termination Event" means the occurrence of an IWCL
Change of Control or an IWCL Bermuda Reduction in Interest.
"IWCL Termination Notice" means a written notice from Parent to IWCL
following an IWCL Special Rights Termination Event.
"Managers" means those persons appointed or elected by the members to
be managers of IOC in accordance with the Delaware Act.
"Member" means any Person that holds an Interest in the Company and is
admitted as a member of IOC pursuant to the provisions of this Agreement, in its
capacity as a member of IOC.
"1993 Stock Purchase Agreement" means the Stock Purchase Agreement,
dated as of July 19, 1993, between Iridium, Inc. and China Great Wall Industry
Corporation, Iridium Africa Corporation, Iridium Canada, Inc., Iridium Middle
East Corporation, Khrunichev Enterprise, Lockheed Corporation, Motorola, Inc.,
Muidiri Investments BVI, Ltd., Nippon Iridium Corporation, Raytheon Company,
Sprint Corporation, Pacific Electric Wire & Cable Co., Ltd., STET - Societa
Finanziaria Telefonica per Azioni, and Thai Satellite Telecommunications Co.,
Ltd.
"Officer" means persons designated as such pursuant to Section 2.5.
"Person" shall mean a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
"Service Provider" means any provider of IRIDIUM Services to end
customers.
"Space System Contract" means the Space System Contract between Parent
and Motorola entered into in July 1992, as amended.
"Subsidiary" means any corporation or other entity of which the shares
of outstanding capital stock or other interests possessing the voting power
(under ordinary circumstances) in electing the board of directors are, at the
time as of which any determination is being made, owned by IOC either directly
or indirectly through Subsidiaries.
"Transfer" means to sell, transfer, assign, pledge or otherwise
encumber or dispose of (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law), directly or indirectly;
provided, that a lien arising with respect to Interests in connection
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<PAGE> 33
with a general lien on all or substantially all of the assets of the holder of
Interests shall not constitute a Transfer.
Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Additional Members" 7.2
"Amendment No. 1" 10.4
"Asset Transfer Agreement" 10.2
"Delaware Act" Preamble
"Fiscal Year" 1.4
"Former Member" 5.2
"Guaranteed Credit Facility" 10.4
"Lockheed Martin" 2.3(b)
"Management Services Agreement" 10.3
"Members' Interest Register" 2.7(a)
"Parent" Preamble
"Proceeding" 2.8(a)
"Process Agent" 9.3
"Raytheon" 2.3(b)
"Secured Bank Facility" 10.5
</TABLE>
28
<PAGE> 34
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
MEMBER:
WITNESS IRIDIUM LLC
/s/ Kevin Lavin By: /s/ Roy Grant
- ---------------------------------- ------------------------------
Name: Kevin Lavin Name: Roy Grant
--------------------------- ----------------------------
Title: Assistant General-- Title: Vice President--Chief
Counsel--Corporate Matters Financial Officer
-------------------------- ---------------------------
29
<PAGE> 35
ANNEX A
INITIAL DIRECTORS
Robert W. Kinzie
George S. Medawar
Robert A. Ferchat
Wang Mei Yue
S.H. Kahn
Hasan M. Binladin
Alberto Finol
Edward F. Staiano
Anatoli I. Kiselev
Jung L. Mok
Gordon Comerford
Edward Gams
John F. Mitchell
Kazuo Inamori
Yoshiharu Yasuda
Tao-Tsun Sun
Theodore H. Schell
Giuseppe Morganti
Sribhumi Sukhanetr
Ulf Bohla
Aburizal Bakrie
Atilano de Oms Sobrinho
Georg Kellinghusen
J. Michael Norris
Yusai Okuyama
John M. Scanlon
William A. Schreyer
<PAGE> 36
INITIAL OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C>
Robert W. Kinzie - Chairman
Edward F. Staiano - Vice President and Chief Financial Officer
Mauro Sentinelli - Executive Vice President - Marketing and Distribution
Leo Mondale - Senior Vice President - Strategic Planning and Business
Development
O. Bruce Dale - Vice President - Network Operations
Lauri J. Fitz-Pegado - Vice President - Global Gateway Relations
Mark Gercenstein - Vice President - Business Operations
Roy Grant - Vice President - Chief Financial Officer
Dale F. Hogg - Vice President - Human Resources
Francis Latapie - Vice President - Government Affairs
Neal F. Meehan - Vice President - Aeronautics
Larry G. Rands - Vice President - Engineering
F. Thomas Tuttle - Vice President, General Counsel and Secretary
Robert N. Beury, Jr. - Assistant Secretary and Deputy General Counsel
Richard L. Lesher - Vice Chairman and Independent Company Director
</TABLE>
2
<PAGE> 37
ANNEX B
INTERESTS
<TABLE>
<CAPTION>
Name and Business Address Interest
<S> <C>
Iridium LLC 100%
1575 Eye Street, N.W.
Washington, D.C. 20005
</TABLE>
<PAGE> 1
EXHIBIT 4.1.2
IRIDIUM OPERATING LLC
as Successor To
IRIDIUM LLC
13% Senior Notes due 2005, Series A
Guaranteed by Iridium Roaming LLC and Iridium IP LLC
--------------------------------------------
FIRST SERIES A NOTE SUPPLEMENTAL INDENTURE
Dated as of December 19, 1997
--------------------------------------------
State Street Bank and Trust Company,
Trustee
--------------------------------------------
Supplementing the Series A Note Indenture Dated
as of July 16, 1997 among Iridium LLC, Iridium Capital Corporation,
Iridium Roaming LLC, Iridium IP LLC and
State Street Bank and Trust Company, Trustee
<PAGE> 2
This FIRST SERIES A NOTE SUPPLEMENTAL INDENTURE, dated as of
December 19, 1997 (the "Supplemental Indenture"), is made by and among Iridium
LLC, a Delaware limited liability company ("Iridium"), Iridium Operating LLC, a
Delaware limited liability company ("Operating"), Iridium Capital Corporation, a
Delaware corporation ("Capital"), Iridium Roaming LLC, a Delaware limited
liability company ("Roaming"), Iridium IP LLC, a Delaware limited liability
company ("IP") and State Street Bank and Trust Company, as Trustee (the
"Trustee").
WHEREAS, Iridium, Capital, Roaming and IP have heretofore made,
executed and delivered to the Trustee an Indenture, dated as of July 16, 1997
(the "Indenture"), between Iridium, Capital, Roaming and IP and the Trustee,
providing for the issuance by Iridium and Capital of up to $300,000,000
aggregate principal amount of 13% Senior Notes Due 2005, Series A (the "Series A
Notes") and the guarantee of the Series A Notes by Roaming and IP (the
"Guarantees" and, together with the Notes, the "Securities"). Capitalized terms
used herein but not defined herein shall have the meanings ascribed thereto in
the Indenture.
WHEREAS, in connection with the closing of a Bank Credit Agreement
and contemporaneously with the execution of this Supplemental Indenture, Iridium
will convey or transfer substantially all of its assets to Operating, a
Wholly-Owned Restricted Subsidiary of Iridium, in order to facilitate the pledge
of such assets to the agent for the lenders under such Bank Credit Agreement.
Such conveyance or transfer by Iridium of substantially all of its assets to
Operating being an Asset Drop-Down Transaction.
<PAGE> 3
WHEREAS, Section 5.01 of the Indenture provides that in the event of
an Asset Drop-Down Transaction, the Wholly-Owned Restricted Subsidiary of
Iridium to which substantially all or all of the assets of Iridium are conveyed
or transferred, shall expressly assume, by a supplemental indenture to the
Indenture, executed and delivered to the Trustee in form satisfactory to the
Trustee, all the obligations of Iridium under this Indenture.
WHEREAS, upon the consummation of such Asset Drop-Down Transaction
Operating shall be a Successor Company.
WHEREAS, Section 5.01 of the Indenture provides that, in connection
with the Asset Drop-Down Transaction, (i) the Successor Company shall succeed,
and be substituted for, and may exercise every right and power of, Iridium under
the Indenture and the Securities and (ii) Iridium shall be released from all
obligations and covenants under the Indenture and the Securities.
WHEREAS, Section 9.01 of the Indenture provides that the Note
Issuers, the Guarantor Subsidiaries and the Trustee may amend the Indenture or
the Securities without notice to, or consent of, any Holder in order to comply
with Article V.
WHEREAS, Operating is executing and delivering to the Trustee this
Supplemental Indenture in accordance with Section 5.01 of the Indenture.
WHEREAS, all acts and things necessary to make this Supplemental
Indenture a valid, binding and legal agreement according to its terms have been
done and performed, including the delivery by Iridium to the Trustee of an
Officer's Certificate and
-2-
<PAGE> 4
an Opinion of Counsel, each stating that the conveyance or transfer of
substantially all or all of the assets of Iridium to Operating complies with the
Indenture.
WHEREAS, the execution of this Supplemental Indenture has in all
respects been duly authorized.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Operating hereby covenants and agrees with the Trustee, for the
equal and proportionate benefit of the respective Holders, as follows:
1. Operating hereby expressly assumes, from and after July 16, 1997,
the due and punctual payment of the principal of and interest on all the
Securities and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by Iridium
under the Indenture. Operating is a limited liability company organized and
existing under the laws of the State of Delaware.
2. Operating shall, from and after July 16, 1997, by virtue of the
aforesaid assumption and the delivery of this Supplemental Indenture, succeed
to, and be substituted for, and may exercise every right and power, and be
subject to all the duties and obligations, of Iridium under the Indenture and
the Securities with the same effect as if Operating had been named as Iridium in
the Indenture and the Securities.
3. Iridium shall, from and after the date hereof, by virtue of the
aforesaid assumption by Operating and the delivery of this Supplemental
Indenture, be released from all obligations and covenants under the Indenture
and the Securities.
-3-
<PAGE> 5
4. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5. This Supplemental Indenture supplements the Indenture and shall
be a part and subject to all the terms thereof. Except as supplemented hereby,
the Indenture shall continue in full force and effect.
6. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
7. This Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
8. This Supplemental Indenture shall be effective as of the date
hereof.
9. The recitals contained herein shall be taken as statements of
Operating and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Supplemental Indenture.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
IRIDIUM LLC
By: /s/ Robert W. Kinzie
-------------------------
Name: Robert W. Kinzie
Title: Chairman
IRIDIUM OPERATING LLC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM CAPITAL CORPORATION
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM IP LLC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM ROAMING LCC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Chi C. Ma
------------------------
Name: Chi C. Ma
Title: Assistant Vice President
-5-
<PAGE> 1
EXHIBIT 4.3.2
IRIDIUM OPERATING LLC
as Successor To
IRIDIUM LLC
14% Senior Notes due 2005, Series B
Guaranteed by Iridium Roaming LLC and Iridium IP LLC
--------------------------------------------
FIRST SERIES B NOTE SUPPLEMENTAL INDENTURE
Dated as of December 19, 1997
--------------------------------------------
State Street Bank and Trust Company,
Trustee
--------------------------------------------
Supplementing the Series B Note Indenture Dated
as of July 16, 1997 among Iridium LLC, Iridium Capital Corporation,
Iridium Roaming LLC, Iridium IP LLC and
State Street Bank and Trust Company, Trustee
<PAGE> 2
This FIRST SERIES B NOTE SUPPLEMENTAL INDENTURE, dated as of
December 19, 1997 (the "Supplemental Indenture"), is made by and among Iridium
LLC, a Delaware limited liability company ("Iridium"), Iridium Operating LLC, a
Delaware limited liability company ("Operating"), Iridium Capital Corporation, a
Delaware corporation ("Capital"), Iridium Roaming LLC, a Delaware limited
liability company ("Roaming"), Iridium IP LLC, a Delaware limited liability
company ("IP") and State Street Bank and Trust Company, as Trustee (the
"Trustee").
WHEREAS, Iridium, Capital, Roaming and IP have heretofore made,
executed and delivered to the Trustee an Indenture, dated as of July 16, 1997
(the "Indenture"), between Iridium, Capital, Roaming and IP and the Trustee,
providing for the issuance by Iridium and Capital of up to $500,000,000
aggregate principal amount of 14% Senior Notes Due 2005, Series B (the "Series B
Notes") and the guarantee of the Series B Notes by Roaming and IP (the
"Guarantees" and, together with the Notes, the "Securities"). Capitalized terms
used herein but not defined herein shall have the meanings ascribed thereto in
the Indenture.
WHEREAS, in connection with the closing of a Bank Credit Agreement
and contemporaneously with the execution of this Supplemental Indenture, Iridium
will convey or transfer substantially all of its assets to Operating, a
Wholly-Owned Restricted Subsidiary of Iridium, in order to facilitate the pledge
of such assets to the agent for the lenders under such Bank Credit Agreement.
Such conveyance or transfer by Iridium of substantially all of its assets to
Operating being an Asset Drop-Down Transaction.
<PAGE> 3
WHEREAS, Section 5.01 of the Indenture provides that in the event of
an Asset Drop-Down Transaction, the Wholly-Owned Restricted Subsidiary of
Iridium to which substantially all or all of the assets of Iridium are conveyed
or transferred, shall expressly assume, by a supplemental indenture to the
Indenture, executed and delivered to the Trustee in form satisfactory to the
Trustee, all the obligations of Iridium under this Indenture.
WHEREAS, upon the consummation of such Asset Drop-Down Transaction
Operating shall be a Successor Company.
WHEREAS, Section 5.01 of the Indenture provides that, in connection
with the Asset Drop-Down Transaction, (i) the Successor Company shall succeed,
and be substituted for, and may exercise every right and power of, Iridium under
the Indenture and the Securities and (ii) Iridium shall be released from all
obligations and covenants under the Indenture and the Securities.
WHEREAS, Section 9.01 of the Indenture provides that the Note
Issuers, the Guarantor Subsidiaries and the Trustee may amend the Indenture or
the Securities without notice to, or consent of, any Holder in order to comply
with Article V.
WHEREAS, Operating is executing and delivering to the Trustee this
Supplemental Indenture in accordance with Section 5.01 of the Indenture.
WHEREAS, all acts and things necessary to make this Supplemental
Indenture a valid, binding and legal agreement according to its terms have been
done and performed, including the delivery by Iridium to the Trustee of an
Officer's Certificate and
-2-
<PAGE> 4
an Opinion of Counsel, each stating that the conveyance or transfer of
substantially all or all of the assets of Iridium to Operating complies with the
Indenture.
WHEREAS, the execution of this Supplemental Indenture has in all
respects been duly authorized.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Operating hereby covenants and agrees with the Trustee, for the
equal and proportionate benefit of the respective Holders, as follows:
1. Operating hereby expressly assumes, from and after July 16, 1997,
the due and punctual payment of the principal of and interest on all the
Securities and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by Iridium
under the Indenture. Operating is a limited liability company organized and
existing under the laws of the State of Delaware.
2. Operating shall, from and after July 16, 1997, by virtue of the
aforesaid assumption and the delivery of this Supplemental Indenture, succeed
to, and be substituted for, and may exercise every right and power, and be
subject to all the duties and obligations, of Iridium under the Indenture and
the Securities with the same effect as if Operating had been named as Iridium in
the Indenture and the Securities.
3. Iridium shall, from and after the date hereof, by virtue of the
aforesaid assumption by Operating and the delivery of this Supplemental
Indenture, be released from all obligations and covenants under the Indenture
and the Securities.
-3-
<PAGE> 5
4. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5. This Supplemental Indenture supplements the Indenture and shall
be a part and subject to all the terms thereof. Except as supplemented hereby,
the Indenture shall continue in full force and effect.
6. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
7. This Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
8. This Supplemental Indenture shall be effective as of the date
hereof.
9. The recitals contained herein shall be taken as statements of
Operating and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Supplemental Indenture.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
IRIDIUM LLC
By: /s/ Robert W. Kinzie
----------------------------
Name: Robert W. Kinzie
Title: Chairman
IRIDIUM OPERATING LLC
By: /s/ F. Thomas Tuttle
----------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM CAPITAL CORPORATION
By: /s/ F. Thomas Tuttle
----------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM IP LLC
By: /s/ F. Thomas Tuttle
----------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM ROAMING LCC
By: /s/ F. Thomas Tuttle
----------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Chi C. Ma
----------------------------
Name: Chi C. Ma
Title: Assistant Vice President
-5-
<PAGE> 1
EXHIBIT 4.5.1
==============================================
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
11 1/4% Senior Notes due 2005, Series C
Guaranteed by Iridium Roaming LLC
and Iridium IP LLC
-----------------------------------------------------------------------
SERIES C NOTE INDENTURE
Dated as of October 17, 1997
-----------------------------------------------------------------------
State Street Bank and
Trust Company,
Trustee
==============================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
RECITALS OF THE ISSUERS
<S> <C>
ARTICLE I Definitions and Incorporation by Reference
SECTION 1.01. Definitions............................................................................. 1
SECTION 1.02. Other Definitions....................................................................... 23
SECTION 1.03. Incorporation by Reference of Trust Indenture Act....................................... 24
SECTION 1.04. Rules of Construction................................................................... 24
ARTICLE II The Notes
SECTION 2.01. Form and Dating......................................................................... 25
SECTION 2.02. Execution and Authentication............................................................ 26
SECTION 2.03. Registrar and Paying Agent.............................................................. 27
SECTION 2.04. Paying Agent To Hold Money in Trust..................................................... 27
SECTION 2.05. Holder Lists............................................................................ 28
SECTION 2.06. Transfer and Exchange................................................................... 28
SECTION 2.07. Replacement Notes....................................................................... 30
SECTION 2.08. Outstanding Notes....................................................................... 30
SECTION 2.09. Temporary Notes......................................................................... 31
SECTION 2.10. Cancellation............................................................................ 31
SECTION 2.11. Defaulted Interest...................................................................... 31
SECTION 2.12. CUSIP Numbers........................................................................... 31
SECTION 2.13. Book-Entry Provisions for Global Notes.................................................. 31
SECTION 2.14. Special Transfer Provisions............................................................. 33
ARTICLE III Redemption
SECTION 3.01. Notices to Trustee...................................................................... 36
SECTION 3.02. Selection of Securities to be Redeemed.................................................. 36
SECTION 3.03. Notice of Redemption.................................................................... 36
SECTION 3.04. Effect of Notice of Redemption.......................................................... 37
SECTION 3.05. Deposit of Redemption Price............................................................. 37
SECTION 3.06. Notes Redeemed in Part.................................................................. 37
SECTION 3.07. Optional Redemption..................................................................... 38
ARTICLE IV Covenants
SECTION 4.01. Payment of Notes........................................................................ 38
SECTION 4.02. SEC Reports............................................................................. 38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 4.03. Limitation on Indebtedness.............................................................. 39
SECTION 4.04. Limitation on Restricted Payments....................................................... 41
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
Subsidiaries................................................................ 44
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock...................................... 46
SECTION 4.07. Limitation on Transactions with Affiliates.............................................. 47
SECTION 4.08. Change of Control....................................................................... 48
SECTION 4.09. Compliance Certificate.................................................................. 49
SECTION 4.10. [Reserved].............................................................................. 49
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries..................................................... 49
SECTION 4.12. Limitation on Liens..................................................................... 49
SECTION 4.13. Limitation on Lines of Business......................................................... 50
SECTION 4.14. Limitation on Business Activities of Capital............................................ 50
SECTION 4.15. Future Guarantor Subsidiaries........................................................... 50
SECTION 4.16. Maintenance of Insurance................................................................ 50
ARTICLE V Successor Companies
SECTION 5.01. When Issuers May Merge or Transfer Assets............................................... 51
ARTICLE VI Defaults and Remedies
SECTION 6.01. Events of Default....................................................................... 53
SECTION 6.02. Acceleration............................................................................ 55
SECTION 6.03. Other Remedies.......................................................................... 55
SECTION 6.04. Waiver of Past Defaults................................................................. 56
SECTION 6.05. Control by Majority..................................................................... 56
SECTION 6.06. Limitation on Suits..................................................................... 56
SECTION 6.07. Rights of Holders to Receive Payment.................................................... 56
SECTION 6.08. Collection Suit by Trustee.............................................................. 57
SECTION 6.09. Trustee May File Proofs of Claim........................................................ 57
SECTION 6.10. Priorities.............................................................................. 57
SECTION 6.11. Undertaking for Costs................................................................... 57
SECTION 6.12. Waiver of Stay or Extension Laws........................................................ 58
SECTION 6.13. Restoration of Rights and Remedies...................................................... 58
ARTICLE VII Trustee
SECTION 7.01. Duties of Trustee....................................................................... 58
SECTION 7.02. Rights of Trustee....................................................................... 59
SECTION 7.03. Individual Rights of Trustee............................................................ 60
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 7.04. Trustee's Disclaimer.................................................................... 60
SECTION 7.05. Notice of Defaults...................................................................... 60
SECTION 7.06. Reports by Trustee to Holders........................................................... 60
SECTION 7.07. Compensation and Indemnity.............................................................. 61
SECTION 7.08. Replacement of Trustee.................................................................. 62
SECTION 7.09. Successor Trustee by Merger............................................................. 62
SECTION 7.10. Eligibility; Disqualification........................................................... 63
SECTION 7.11. Preferential Collection of Claims Against Issuers....................................... 63
ARTICLE VIII Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Notes; Defeasance............................................. 63
SECTION 8.02. Conditions to Defeasance................................................................ 64
SECTION 8.03. Application of Trust Money.............................................................. 65
SECTION 8.04. Repayment to Note Issuers............................................................... 66
SECTION 8.05. Indemnity for Government Securities..................................................... 66
SECTION 8.06. Reinstatement........................................................................... 66
ARTICLE IX Amendments
SECTION 9.01. Without Consent of Holders.............................................................. 66
SECTION 9.02. With Consent of Holders................................................................. 67
SECTION 9.03. Compliance with Trust Indenture Act..................................................... 68
SECTION 9.04. Revocation and Effect of Consents and Waivers........................................... 68
SECTION 9.05. Notation on or Exchange of Notes........................................................ 68
SECTION 9.06. Trustee To Sign Amendments.............................................................. 68
ARTICLE X Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees.................................................................. 69
SECTION 10.02. Limitation on Liability................................................................ 70
SECTION 10.03. Successors and Assigns................................................................. 71
SECTION 10.04. No Waiver.............................................................................. 71
SECTION 10.05. Modification........................................................................... 71
SECTION 10.06. Initial Guarantors; Execution of Supplemental Indenture for
Future Guarantor Subsidiaries............................................... 71
ARTICLE XI Miscellaneous
SECTION 11.01. Trust Indenture Act Controls........................................................... 72
SECTION 11.02. Notices................................................................................ 72
SECTION 11.03. Communication by Holders with Other Holders............................................ 73
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 11.04. Certificate and Opinion as to Conditions Precedent..................................... 73
SECTION 11.05. Statements Required in Certificate or Opinion.......................................... 73
SECTION 11.06. When Notes Disregarded................................................................. 74
SECTION 11.07. Rules by Trustee Paying Agent and Registrar............................................ 74
SECTION 11.08. Legal Holidays......................................................................... 74
SECTION 11.09. Governing Law.......................................................................... 74
SECTION 11.10. No Recourse Against Others............................................................. 74
SECTION 11.11. Successors............................................................................. 74
SECTION 11.12. Multiple Originals..................................................................... 74
SECTION 11.13. Table of Contents; Headings............................................................ 74
Exhibit A - Form of Face of Initial Note
Exhibit B - Form of Face of Exchange Note
Exhibit C - Form of Certificate to be Delivered upon
Termination of Regulation S Restricted Period
Exhibit D - Form of Certificate to be Delivered in Connection
with Transfers to Non-QIB Institutional Accredited
Investors
Exhibit E - Form of Certificate for Transfer to Rule 144A Global Notes
Exhibit F - Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S
Exhibit G - Form of Supplemental Indenture
Schedule I - Other Existing Affiliate Agreements
</TABLE>
iv
<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310 (a)(1).............................................................................. 7.10
(a)(2).............................................................................. 7.10
(a)(3).............................................................................. N.A.
(a)(4).............................................................................. N.A.
(b)................................................................................. 7.08; 7.10
(c)................................................................................. N.A.
311 (a).................................................................................
7.11
(b)................................................................................. 7.11
(c)................................................................................. N.A.
312 (a).................................................................................
2.05
(b)................................................................................. 11.03
(c)................................................................................. 11.03
313 (a)................................................................................
7.06
(b)(1).............................................................................. N.A.
(b)(2).............................................................................. 7.06
(c)................................................................................. 11.02
(d)................................................................................. 7.06
314 (a)................................................................................
4.02; 4.09
(b)................................................................................. N.A.
(c)(1).............................................................................. 11.04
(c)(2).............................................................................. 11.04
(c)(3).............................................................................. N.A.
(d)................................................................................. N.A.
(e)................................................................................. 11.05
(f)................................................................................. 4.09
315 (a).................................................................................
7.01
(b)................................................................................. 7.05; 11.02
(c)................................................................................. 7.01
(d)................................................................................. 7.01
(e)................................................................................. 6.11
316 (a)(last sentence).................................................................. 11.06
(a)(1)(A)........................................................................... 6.05
(a)(1)(B)........................................................................... 6.04
(a)(2).............................................................................. N.A.
(b)................................................................................. 6.07
317 (a)(1).............................................................................. 6.08
(a)(2).............................................................................. 6.09
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
(b)................................................................................. 2.04
318 (a).................................................................................
11.01
</TABLE>
N.A. means Not Applicable.
- ------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE> 8
INDENTURE dated as of October 17, 1997, among IRIDIUM LLC, a
Delaware limited liability company ("Iridium"), IRIDIUM CAPITAL CORPORATION, a
Delaware corporation ("Capital" and, together with Iridium, the "Note Issuers"),
as joint and several obligors, IRIDIUM ROAMING LLC and IRIDIUM IP LLC, as
guarantors hereunder (the "Initial Guarantors", and together with the Note
Issuers, the "Issuers") and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
bank and trust company (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Note
Issuers' 11 1/4% Senior Notes due 2005, Series C (the "Initial Notes") and, when
and if issued pursuant to a registered exchange for Initial Notes, the Note
Issuers' 11 1/4% Senior Notes due 2005, Series C (the "Exchange Notes") and, if
and when issued pursuant to a Private Exchange for Initial Notes, the Note
Issuers' 11 1/4% Senior Notes due 2005, Series C (the "Private Exchange Notes",
and, together with the Exchange Notes and the Initial Notes, the "Notes").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the execution and delivery of
this Indenture to provide for the issuance of $300,000,000 aggregate principal
amount of the Initial Notes issuable as provided in this Indenture. Pursuant to
the terms of a Purchase Agreement dated October 9, 1997 (the "Purchase
Agreement") among the Issuers, Chase Securities Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and BT Alex. Brown Incorporated, the Note Issuers
have agreed to issue and sell up to $300,000,000 aggregate principal amount of
the Initial Notes. All things necessary to make this Indenture a valid agreement
of the Issuers, in accordance with its terms, have been done, and the Issuers
have done all things necessary to make the Notes, when executed by the Issuers
and authenticated and delivered by the Trustee hereunder and duly issued by the
Issuers, the valid obligations of the Issuers as hereinafter provided.
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such Person
merges with or into or consolidates with or becomes a Restricted Subsidiary of
such specified Person and (ii) Indebtedness secured by a Lien encumbering any
asset acquired by such specified Person, which Indebtedness or Lien was not
Incurred in anticipation of, and was outstanding prior to, such merger,
consolidation or acquisition.
<PAGE> 9
2
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of Voting Stock, by contract or otherwise; provided, however, that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control. The terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, (a) no individual
shall be an Affiliate of Iridium solely by reason of his or her being a
director, officer or employee of IWCL, Iridium or any Subsidiary of either and
(b) none of the Restricted Subsidiaries shall be Affiliates of Iridium.
"Agreement Regarding Guarantee" means the Agreement Regarding
Guarantee between Iridium and Motorola, dated as of August 21, 1996, as amended
and restated as of July 11, 1997, and as further amended from time to time.
"Asset Disposition" means any transfer, conveyance, sale,
lease or other disposition (collectively, any "disposition") by Iridium or any
Restricted Subsidiary (including any disposition by means of a consolidation,
merger or similar transaction) but excluding a disposition by a Restricted
Subsidiary to Iridium or a Wholly-Owned Restricted Subsidiary or by Iridium to a
Wholly-Owned Restricted Subsidiary of (i) shares of Capital Stock of a
Restricted Subsidiary, (ii) all or substantially all of the assets of Iridium or
any Restricted Subsidiary representing a division or line of business or (iii)
other assets or rights of Iridium or any of its Restricted Subsidiaries other
than a disposition (a) in the ordinary course of business, (b) that constitutes
a Restricted Payment which is permitted under Section 4.04, (c) that is subject
to Article V herein, or (d) that constitutes the grant, establishment or
exercise of any Lien permitted pursuant to Section 4.12; provided, however, that
a transaction described in clauses (i), (ii) and (iii) shall constitute an Asset
Disposition only to the extent that the aggregate consideration for all such
transfers, conveyances, sales, leases or other dispositions exceeds $10,000,000
in any 12-month period.
"Attributable Indebtedness" in respect of a Sale and Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Notes, compounded annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Leaseback Transaction (including any period
for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness (or
scheduled redemption or similar payment with respect to Disqualified Stock)
multiplied by the amount of such payment by (ii) the sum of all such payments.
<PAGE> 10
3
"Bank Credit Agreement" means any one or more credit
agreements (which may include or consist of revolving credit agreements or
similar arrangements) between Iridium and/or any Subsidiary and one or more
banks or other financial institutions providing financing for the business of
Iridium and its Subsidiaries, and as any such agreement may be amended from time
to time. The Guaranteed Bank Facility shall be, and the Secured Bank Facility
(when executed and delivered by all the parties thereto) shall be, Bank Credit
Agreements.
"Board of Directors" means the Board of Directors of Iridium
or any committee thereof duly authorized to act on behalf of such Board.
"Build-out" means the construction, acquisition, improvement,
operation and development (including all costs related thereto) of the IRIDIUM
System up to the occurrence of Commercial Activation and the construction,
acquisition, improvement and development (including all costs related thereto)
thereafter of contemplated enhancements to the IRIDIUM System described in the
Offering Memorandum.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in Massachusetts or New York State are
authorized or required by law to close.
"Capital" means Iridium Capital Corporation, a Delaware
corporation, and any successor Person to Capital.
"Capital Lease Obligation" means an obligation that is
required to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP. The amount of Indebtedness
represented by a Capital Lease Obligation will be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity thereof
will be the date of the last scheduled payment of rent or any other amount due
under the relevant lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means (i) in the case of a
corporation, corporate stock issued by such Person, (ii) in the case of an
association or business entity, any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock issued by
such Person, (iii) in the case of a partnership, partnership interests (whether
general or limited) issued by such Person, (iv) in the case of a limited
liability company, membership interests issued by such Person, (v) any other
interest or participation that confers on another Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person, and (vi) any rights (other than debt securities convertible into, or
exchangeable for, Capital Stock), warrants or options to purchase any of the
foregoing.
"Change of Control" means the occurrence of any of the
following:
<PAGE> 11
4
(a) one or more Dispositions which cause the amount of Capital
Stock of Iridium held directly by Motorola to be reduced by more than
50% as compared to its direct holding of Capital Stock in Iridium as of
July 16, 1997 (in each such case without giving effect to any rights,
warrants or options to purchase Capital Stock of Iridium, unless
exercised prior thereto);
(b) the first day on which Iridium fails to own, of record and
beneficially, 100% of the Capital Stock of Capital (other than
directors' qualifying shares);
(c) any sale, lease, or other transfer (in one transaction or
in a series of related transactions) is made by Iridium or its
Restricted Subsidiaries of all or substantially all of the assets of
Iridium and its Restricted Subsidiaries to any Person (other than in
connection with the Asset Drop-Down Transaction (as defined in Section
5.01(b)); or
(d) the adoption of a plan relating to the liquidation or
dissolution of Iridium or Capital.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to result from (x) the acquisition by IWCL, Motorola or any wholly owned
subsidiary of Motorola of substantially all the assets of Iridium, (y) the Asset
Drop-Down Transaction or any transfer of assets or merger reversing the
Asset-Drop-Down Transaction or (z) the merger of Iridium with and into IWCL,
Motorola or any wholly owned subsidiary of Motorola.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Activation" means the date on which Iridium
commences generally available commercial service on the IRIDIUM System.
"Consolidated Cash Flow" of Iridium means for any period the
Consolidated Net Income of Iridium and the consolidated Restricted Subsidiaries
for such period increased by (i) Consolidated Interest Expense of Iridium and
the consolidated Restricted Subsidiaries for such period, plus (ii) Consolidated
Income Tax Expense of Iridium and the consolidated Restricted Subsidiaries for
such period, plus (iii) the consolidated depreciation and amortization expense
included in the income statement of Iridium and the consolidated Restricted
Subsidiaries for such period (including any depreciation of any asset that
represents depreciation in respect of previously capitalized interest), plus
(iv) other non-cash charges of Iridium and the consolidated Restricted
Subsidiaries for such period deducted from consolidated revenues in determining
Consolidated Net Income for such period, minus (v) non-cash items of Iridium and
the consolidated Restricted Subsidiaries for such period which increased
consolidated revenues in determining Consolidated Net Income for such period,
minus (vi) the consolidated amortization expense related to payments made by
Iridium and the Restricted Subsidiaries to Motorola
<PAGE> 12
5
pursuant to the Operations and Maintenance Contract included in the income
statement of Iridium and the consolidated Restricted Subsidiaries for such
period.
"Consolidated Income Tax Expense" of any Person means for any
period the consolidated provision for income taxes of such Person and its
consolidated Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP or, so long as such Person is treated
as a partnership or other pass through entity for United States federal income
tax purposes, the Tax Amount paid by such Person during such period.
"Consolidated Interest Expense" for any Person means for any
period the consolidated interest expense included in a consolidated income
statement (without deduction of interest income) of such Person and its
consolidated Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without limitation or
duplication (or, to the extent not so included, with the addition of), (i) the
amortization of Indebtedness discounts; (ii) any payments or fees with respect
to letters of credit, bankers' acceptances or similar facilities; (iii) fees
with respect to Interest Rate or Currency Protection Agreements; (iv) Preferred
Stock dividends of such Person (other than with respect to Disqualified Stock)
declared and paid or payable; (v) accrued Disqualified Stock dividends of such
Person and all Restricted Subsidiaries of such Person, whether or not declared
or paid; (vi) interest on Indebtedness Guaranteed by such Person; (vii) the
portion of any rental obligation allocable to interest expense; and (viii)
capitalized interest.
"Consolidated Net Income" of any Person means for any period
the consolidated net income (or loss) of such Person and its consolidated
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP; provided, however, that there is excluded therefrom (to
the extent not already excluded therefrom) (i) the net income (or loss) of any
Person acquired by such Person or a Restricted Subsidiary of such Person in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (ii) the net income (but not the net loss) of any Restricted
Subsidiary of such Person which Restricted Subsidiary is subject to restrictions
which prevent the payment of dividends or the making of distributions to such
Person, but only to the extent of such restrictions, (iii) the net income (or
loss) of any Person that is not a Restricted Subsidiary (including any
Unrestricted Subsidiary) except to the extent of the amount of dividends or
other distributions actually paid to such Person by such other Person during
such period, (iv) gains or losses on Asset Dispositions by Iridium or any
Restricted Subsidiary, (v) all extraordinary gains and losses, (vi) the
cumulative effect of changes in accounting principles in the year of adoption of
such changes, (vii) non-cash gains or losses resulting from fluctuations in
currency exchange rates, and (viii) the tax effect of any of the items described
in clauses (i) through (vii) above; provided further, however, that for purposes
of any determination pursuant to Section 4.04, there shall be deducted from the
Consolidated Net Income of Iridium and the Restricted Subsidiaries for such
period an amount equal to the Tax Amount paid by Iridium during such period.
<PAGE> 13
6
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its consolidated Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP, less amounts
attributable to Disqualified Stock of such Person; provided, however, that, with
respect to Iridium, adjustments following the date of the Indenture to the
accounting books and records of Iridium in accordance with Accounting Principles
Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise
resulting from the acquisition of control of Iridium by another Person shall not
be given effect to.
"Consolidation" means the consolidation of the accounts of
each of the Restricted Subsidiaries with those of the Issuers in accordance with
GAAP consistently applied; provided, however, that "Consolidation" shall not
include consolidation of the accounts of any Unrestricted Subsidiary, but the
interest of the Issuers or any Restricted Subsidiary in an Unrestricted
Subsidiary shall be accounted for as an investment. The term "Consolidated" or
"consolidated" has a correlative meaning.
"Debt to Capital Ratio" means on any date of determination for
Iridium and its Restricted Subsidiaries, on a consolidated basis, the ratio
(expressed as a percentage) of Outstanding Indebtedness on such date to Total
Invested Capital on such date.
"Debt to Cash Flow Ratio" means on any date of determination
(the "Determination Date") for Iridium and its Restricted Subsidiaries, on a
consolidated basis, the ratio of Outstanding Indebtedness on the Determination
Date to Consolidated Cash Flow for the four most recently completed fiscal
quarters immediately preceding the Determination Date (the "Measurement Period")
determined on a pro forma basis as if any Indebtedness to be Incurred had been
Incurred and the proceeds thereof had been applied on the first day of the
Measurement Period; provided, however, that in making such computations, (i) the
Consolidated Interest Expense attributable to interest on any proposed
Indebtedness bearing a floating interest rate shall be computed on a pro forma
basis as if the rate in effect on such Determination Date had been the
applicable rate for the entire Measurement Period, (ii) the Consolidated
Interest Expense attributable to interest on any Indebtedness under a revolving
credit facility shall be computed based upon the average daily balance of such
Indebtedness during such Measurement Period, (iii) in the event Iridium or any
of its Restricted Subsidiaries has made asset dispositions or acquisitions of
assets not in the ordinary course of business (including acquisitions of other
Persons by merger, consolidation or purchase of Capital Stock) or has repaid
Indebtedness or Incurred additional Indebtedness during or after such
Measurement Period, such computation shall be made on a pro forma basis as if
the asset dispositions, acquisitions, repayment or incurrence had taken place on
the first day of such Measurement Period, (iv) the net proceeds of the
Indebtedness to be Incurred shall be deemed to have been applied on the first
day of such Measurement Period to acquire direct obligations of the United
States government having a maturity most closely approximating the maturity of
the Indebtedness to be incurred (or Indebtedness incurred during or after such
Measurement Period); provided, however, that the adjustment in this clause (iv)
shall not be made if, and to the extent, that application of such net
<PAGE> 14
7
proceeds has otherwise been fully reflected in the computation, and (v) the
actual application of the net proceeds of Indebtedness Incurred during or after
such Measurement Period shall be given pro forma effect as if such application
had taken place on the first day of such Measurement Period.
"Default" means an event that is, or after the passing of time
or the giving of notice or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit
A or Exhibit B attached hereto that do not include the information called for by
footnote 1 thereof.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
as the Depositary with respect to the Notes, until a successor shall have been
appointed and becomes such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
"Disposition" means (i) the sale, transfer or other conveyance
by Motorola or any of its Subsidiaries (other than to a wholly owned Subsidiary
of Motorola) of (a) Iridium's membership interests or (b) equity interests in
any entity (an "intermediate entity") which owns, directly or indirectly,
Iridium's membership interests or (ii) the issue and sale by any such
intermediate entity of its equity securities to one or more third parties if and
to the extent the proceeds of such issue and sale are distributed by such
intermediate entity to Motorola or any of its Subsidiaries.
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock, or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the earlier of the Stated Maturity of the Notes or the date
on which no Notes remain outstanding. Disqualified Stock does not include any
Capital Stock that is not otherwise Disqualified Stock if by its terms the
holders have the right to require the issuer to repurchase such stock upon a
Change of Control (or upon events substantially similar to a Change of Control).
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A-3" or higher or "A-" or
higher according to Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group (or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) respectively, at the time as of which any investment or rollover therein
is made.
<PAGE> 15
8
"Equity Offering" means an offering made on a primary basis of
Capital Stock (other than Disqualified Stock) of IWCL or Iridium that results in
Net Cash Proceeds to IWCL or Iridium, as the case may be, provided, however, if
any such offering is an offering of the Capital Stock of IWCL only the Net Cash
Proceeds thereof that are contributed to Iridium shall be taken into
consideration for the purposes of this definition.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act) and the rules and regulations thereunder.
"Exchange and Registration Rights Agreement" means the
Exchange and Registration Rights Agreement dated as of October 17, 1997 by and
among the Issuers and the Initial Purchasers, as such agreement may be amended,
modified, or supplemented from time to time in accordance with the terms
thereof.
"Exchange Offer Registration Statement" means the registration
statement to be filed by the Issuers and any Guarantor Subsidiaries with the SEC
with respect to an offer to exchange the Initial Notes for another series of
notes of the Issuers with substantially identical terms to the Initial Notes.
"Existing Affiliate Agreements" means (i) the Space System
Contract, (ii) the Terrestrial Network Development Contract, (iii) the
Operations and Maintenance Contract, (iv) the Agreement Regarding Guarantee, (v)
the Master Subscription Agreement, (vi) the Interest Exchange Agreement, (vii)
the Share Issuance Agreement, (viii) the Management Services Agreement, (ix) the
Motorola MOU and any subordination agreement contemplated thereunder, (x) the
agreement or agreements among Iridium, Motorola and other parties thereto
providing for the development, manufacture and sale of individual subscriber
equipment to be used in the IRIDIUM System, which agreement or agreements are to
be executed and delivered after the Issue Date as a condition to borrowings
under the Secured Bank Facility, and (xi) any other agreements with Affiliates
or Related Persons of Iridium, existing on the Issue Date and listed on Schedule
I to this Indenture.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or otherwise organized under the
laws of any jurisdiction other than the United States of America, any state
thereof or the District of Columbia and substantially all of whose consolidated
assets are located primarily outside of the United States of America.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of
<PAGE> 16
9
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP.
"Global Note" means a Note that is in the form of Exhibit A or
Exhibit B hereto that includes the information called for by footnote 1 thereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted Average Life to maturity of not more
than one year from the date of Investment therein.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person (the "primary obligor") through an agreement enforceable by or for the
benefit of the holder of such Indebtedness and any such obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness, (ii)
to purchase property, securities or services for the purpose of assuring the
holder of such Indebtedness of the payment of such Indebtedness, (iii) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness, or (iv) to act as a co-obligor with such Person on its
Indebtedness (and "Guaranteed" and "Guaranteeing" shall have meanings
correlative to the foregoing); provided, however, that the Guarantee by any
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
"Guaranteed Bank Facility" means the credit facility
established by the credit agreement dated as of August 21, 1996 by and among
Iridium and certain lenders providing for an unsecured $750 million revolving
credit facility, as amended from time to time.
"Guarantor Subsidiary" means any Person that has issued a
Subsidiary Guaranty by execution and delivery of this Indenture, including each
of the Initial Guarantors.
"Holders" means the registered holders from time to time of
the Notes.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation including by acquisition of
<PAGE> 17
10
Subsidiaries or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred" and "Incurring" have meanings correlative to the
foregoing); provided, however, that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an Incurrence of such Indebtedness and that neither the accrual of
interest nor the accretion of original issue discount shall be deemed an
Incurrence of Indebtedness. Notwithstanding the foregoing, Iridium may elect to
treat all or any portion of revolving credit debt of Iridium or a Subsidiary as
being Incurred from and after any date beginning the date the revolving credit
commitment is extended to Iridium or a Subsidiary, by furnishing notice thereof
to the Trustee, and any borrowings or reborrowings by Iridium or a Subsidiary
under such commitment up to the amount of such commitment designated by Iridium
as Incurred shall not be deemed to be new Incurrences of Indebtedness by Iridium
or such Subsidiary; provided, however, that in such event the undrawn portion of
any such revolving credit debt shall be deemed to be outstanding Indebtedness
until such time as the commitment thereunder is terminated. The accretion of
principal of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such Person
and whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including any such obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue by more than 30 days or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) all Receivables Sales of such Person, together with any
obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith, (vii)
all obligations to redeem or repurchase outstanding Disqualified Stock issued by
such Person, (viii) all Attributable Indebtedness, (ix) every obligation under
Interest Rate or Currency Protection Agreements of such Person, (x) every
obligation of the type referred to in clauses (i) through (ix) of another Person
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the fair market value of such property or assets and
the amount of the obligation so secured and (xi) every obligation of the type
referred to in clauses (i) through (x) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed.
The "amount" or "principal amount" of Indebtedness at any time of determination
as used herein represented by (a) any Indebtedness issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with GAAP, (b) any
Receivables Sale, shall be the amount of
<PAGE> 18
11
the unrecovered capital or principal investment of the purchaser (other than
Iridium or a Wholly-Owned Restricted Subsidiary) thereof, excluding amounts
representative of yield or interest earned on such investment, (c) any
Disqualified Stock, shall be the maximum fixed redemption or repurchase price in
respect thereof, (d) any Capital Lease Obligation, shall be determined in
accordance with the definition thereof and (e) any Permitted Interest Rate or
Currency Protection Agreement, shall be zero. In no event shall Indebtedness
include any liability for taxes. For purposes of determining any particular
amount of Indebtedness, Guarantees or Liens with respect to letters of credit
supporting Indebtedness otherwise included in the determination of a particular
amount shall not be included. The term "Indebtedness" does not include any
obligations of Iridium or any Restricted Subsidiary (x) under the Space System
Contract, the Operations and Maintenance Contract or the Terrestrial Network
Development Contract (including any agreed upon deferrals of payment obligations
thereunder) or (y) in respect of amounts owing to gateway operators and other
service providers in connection with the clearinghouse system to be established
and operated by Iridium (as described under "Business--The IRIDIUM
System--Business Support Systems" in the Offering Memorandum).
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm of nationally recognized standing that is, in the
judgment of the Board of Directors, qualified to perform the task for which it
has been engaged and disinterested and independent with respect to the Note
Issuers and their Subsidiaries and Affiliates.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Initial Guarantors" means Iridium Roaming LLC and Iridium IP
LLC, each a Delaware limited liability company.
"Initial Purchasers" means Chase Securities Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and BT Alex. Brown Incorporated.
"Interest Exchange Agreement" means the Interest Exchange
Agreement among Iridium and IWCL, dated June 9, 1997, as amended from time to
time.
"Interest Rate or Currency Protection Agreement" of any Person
means any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Indebtedness issued by, any other Person, including any payment on a
Guarantee of any
<PAGE> 19
12
obligation of such other Person, but excluding any loan, advance or extension of
credit to an employee of Iridium or any Restricted Subsidiary in the ordinary
course of business, accounts receivable and other commercially reasonable
extensions of trade credit. A delay in the purchase of any of Iridium's Capital
Stock under a purchase or similar agreement shall not be deemed to be an
Investment by Iridium in the purchaser.
"Investment Grade Rating" means a rating equal to or higher
than "Baa3" (or the equivalent) by Moody's Investors Service, Inc. (or any
successor to the rating agency business thereof) and "BBB-" (or the equivalent)
by Standard & Poor's Ratings Group (or any successor to the rating agency
business thereof).
"Iridium" means Iridium LLC, a Delaware limited liability
corporation, and any successor Person to Iridium.
"IRIDIUM System" means Iridium's global mobile wireless
communications system as described in the Offering Memorandum.
"Issue Date" means the date on which the Notes are first
issued and delivered.
"Issuers" means the parties named as such in this Indenture
until a successor replaces one or more of such parties pursuant to the
applicable provisions of this Indenture and, thereafter, includes such successor
and, for purposes of any provision contained herein and required by the TIA,
each other obligor on the indenture securities (within the meaning of the TIA).
In particular, upon execution and delivery of this Indenture, the "Issuers"
shall mean Iridium, Capital and the Initial Guarantors.
"IWCL" means Iridium World Communication Ltd., a Bermuda
company, and any successor Person to IWCL.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, Receivables Sale,
deposit arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability), encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the foregoing
or any Sale and Leaseback Transaction).
"Liquidated Damages" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
<PAGE> 20
13
"LLC Agreement" means the Limited Liability Company Agreement
of Iridium, dated as of July 29, 1996, as amended from time to time.
"Management Services Agreement" means the Management Services
Agreement between Iridium and IWCL, dated as of June 9, 1997, as amended from
time to time.
"Marketable Securities" means: (i) Government Securities; (ii)
any time deposit account, money market deposit and certificate of deposit
maturing not more than 270 days after the date of acquisition issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper maturing not more
than 270 days after the date of acquisition issued by a corporation (other than
an Affiliate of Iridium) with a rating, at the time as of which any investment
therein is made, of "P-1" or higher according to Moody's Investors Service, Inc.
or "A-1" or higher according to Standard & Poor's Ratings Group (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)); (iv) any
banker's acceptances or money market deposit accounts issued or offered by an
Eligible Institution; (v) repurchase obligations with a term of not more than
seven days for Government Securities entered into with an Eligible Institution;
and (vi) any fund investing exclusively in investments of the types described in
clauses (i) through (v) above.
"Master Subscription Agreement" means the Agreement between
Iridium and IWCL, dated as of June 30, 1997, as amended from time to time,
pursuant to which IWCL has agreed to sell shares of its Class B Common Stock to
Iridium.
"Motorola" means Motorola, Inc., a Delaware corporation, and
any successor Person to Motorola.
"Motorola Additional Guarantee" means the commitment by
Motorola pursuant to the Motorola MOU to guarantee up to an additional $350
million of Indebtedness (inclusive of principal and interest), under the
Guaranteed Bank Facility or another credit agreement on identical terms, in
excess of the Motorola Guarantee.
"Motorola Guarantee" means the guarantee by Motorola of up to
$750 million of Indebtedness under the Guaranteed Bank Facility.
"Motorola MOU" means the Memorandum of Understanding, dated as
of July 11, 1997, between Iridium and Motorola, as amended from time to time.
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or Marketable Securities received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses,
<PAGE> 21
14
commissions and other fees and expenses Incurred and all federal, state,
provincial, foreign and local taxes (including taxes payable upon payment or
other distribution of funds from a foreign subsidiary to Iridium or another
Subsidiary of Iridium) required to be accrued as a liability as a consequence of
such Asset Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Indebtedness which is secured by such assets in accordance
with the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition, (iv) appropriate amounts to be provided by
such Person or any Restricted Subsidiary thereof, as the case may be, as a
reserve in accordance with GAAP against any liabilities associated with such
assets and retained by such Person or any Restricted Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, in each case
as determined by the Board of Directors, in its reasonable good faith judgment
evidenced by a resolution filed with the Trustee; provided, however, that any
reduction in such reserve within twelve months following the consummation of
such Asset Disposition will be treated for all purposes of this Indenture and
the Notes as a new Asset Disposition at the time of such reduction with Net
Available Proceeds equal to the amount of such reduction, and (v) any
consideration for an Asset Disposition (which would otherwise constitute Net
Available Proceeds) that is required to be held in escrow pending determination
of whether a purchase price adjustment will be made, but amounts under this
clause (v) will become Net Available Proceeds at such time and to the extent
such amounts are released to such Person.
"Net Cash Proceeds," with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale, net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Non-U.S. Person" means a Person who is not a U.S. Person, as
such term is defined in Rule 902 of the Securities Act.
"Offer to Purchase" means a written offer (the "Offer") sent
by the Note Issuers by first class mail, postage prepaid, to each Holder at his
address appearing in the note register on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined in accordance with Section
4.06 of this Indenture). Unless otherwise required by applicable law, the Offer
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase which shall be, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of Notes within five Business
Days after the Expiration Date. The Note Issuers shall notify the
<PAGE> 22
15
Trustee in writing at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Note
Issuers' obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Note Issuers or, at the Note Issuers' request, by the Trustee in the name
and at the expense of the Note Issuers. The Offer shall contain information
concerning the business of Iridium and its Subsidiaries which Iridium in good
faith believes shall enable such holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum shall include (i) the most
recent annual and quarterly financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to this Indenture
(which requirements may be satisfied by delivery of such documents together with
the Offer), (ii) a description of material developments in Iridium's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring Iridium to make the
Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring Iridium to
make the Offer to Purchase and (iv) any other information required by applicable
law to be included therein). The Offer shall contain all instructions and
materials necessary to enable such holders to tender Notes pursuant to the Offer
to Purchase.
"Offering Memorandum" means the offering memorandum, dated
October 9, 1997, relating to the offering of the Initial Notes.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer, the Secretary or any Assistant Secretary of such Person.
"Officers' Certificate" means a certificate signed by two
Officers.
"Operations and Maintenance Contract" means the IRIDIUM System
Operations and Maintenance Contract between Iridium and Motorola, dated as of
July 29, 1993, as amended from time to time.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to Iridium.
"Outstanding Indebtedness" means the aggregate consolidated
principal amount (or the accreted value in the case of any Indebtedness issued
at a discount) of Indebtedness of Iridium and its Restricted Subsidiaries, on a
consolidated basis, outstanding as of the date of determination.
"pari passu", when used with respect to the ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
means that each such Indebtedness (a) either (i) is not subordinated in right of
payment to any other Indebtedness of such Person or
<PAGE> 23
16
(ii) is subordinate in right of payment to the same Indebtedness of such Person
as is the other and is so subordinate to the same extent and (b) is not
subordinate in right of payment to the other or to any Indebtedness of such
Person as to which the other is not so subordinate.
"Permitted Interest Rate or Currency Protection Agreement" of
any Person means any Interest Rate or Currency Protection Agreement entered into
with one or more financial institutions that is designed to protect such Person
against fluctuations in interest rates or currency exchange rates with respect
to Indebtedness Incurred and which shall have a notional amount no greater than
the payments due with respect to the Indebtedness being hedged thereby, or with
respect to obligations or receivables denominated in foreign currencies, and not
for purposes of speculation.
"Permitted Investment" means an Investment by Iridium or any
Restricted Subsidiary (i) in any Person as a result of which such Person becomes
a Restricted Subsidiary, the primary business of which is to engage in all or a
portion of a Related Business, (ii) in Marketable Securities, (iii) in Permitted
Interest Rate or Currency Protection Agreements, (iv) made as a result of the
receipt of noncash consideration from an Asset Disposition that was made
pursuant to and in compliance with Section 4.06 herein, (v) consisting of loans
or advances to employees of Iridium or any Restricted Subsidiary made in the
ordinary course of business not to exceed $2,000,000 in the aggregate
outstanding at any one time and (vi) in any Person for a purpose which is
related, ancillary or complementary to the businesses of Iridium and the
Restricted Subsidiaries on the date such Investment is made; provided that the
aggregate amount of Investments made pursuant to this clause (vi) and then
outstanding does not exceed $100,000,000. The amount of Investments outstanding
pursuant to clause (vi) of the prior sentence shall be included in the
calculation of the aggregate amount of Restricted Payments made since July 16,
1997 pursuant to Section 4.04.
"Permitted Liens" means:
(i) Prior to Commercial Activation, Liens to secure
up to $750,000,000 in principal amount of Indebtedness
permitted to be incurred pursuant to Section 4.03(b)(i);
(ii) After Commercial Activation, Liens to secure up
to $1,700,000,000 in principal amount of Indebtedness
(inclusive of the Indebtedness secured by the Liens described
in clause (i) above and any secured Indebtedness which
refinanced such Indebtedness) permitted to be Incurred
pursuant to Section 4.03;
(iii) Liens in favor of Holders of the Notes, the
holders of the Exchange Notes and the Trustee;
<PAGE> 24
17
(iv) Liens in favor of the Issuers or a Wholly-Owned
Restricted Subsidiary;
(v) Liens on property at the time such Person or any
of its Subsidiaries acquires such property, including any
acquisition by means of a merger or consolidation with or into
such Person or a Subsidiary of such Person, other than any
property delivered pursuant to the Space System Contract or
the Operations and Maintenance Contract; provided, however,
that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition;
provided further, however, that the Liens may not extend to
any other property owned by such Person or any of its
Subsidiaries;
(vi) other than in connection with Indebtedness, any
Lien arising in the ordinary course of business (a) to secure
payments of workers' compensation, unemployment insurance,
pension or other social security or retirement benefits, or to
secure the performance of bids, tenders, leases, progress
payments, contracts (other than for the payment of money) or
to secure public or statutory obligations of Iridium or any
Restricted Subsidiary, or to secure surety or appeal bonds to
which Iridium or any Restricted Subsidiary is a party, (b)
imposed by law dealing with materialmen's, mechanics',
workmen's, repairmen's, warehousemen's landlords', vendors' or
carriers' Liens created by law, or deposits or pledges which
are not yet due or, if due, the validity of which is being
contested in good faith by Iridium or any Restricted
Subsidiary by appropriate proceedings promptly instituted and
diligently conducted and against which Iridium has established
appropriate reserves in accordance with GAAP, (c) rights of
financial institutions to set off and chargeback arising by
operation of law, (d) rights, if any, of gateway operators and
other service providers to setoff and chargeback arising under
agreements between Iridium and any such Person in respect of
clearinghouse services provided by Iridium to such Person, and
(e) similar Liens;
(vii) servitudes, licenses, easements, encumbrances,
restrictions, rights-of-way and rights in the nature of
easements or similar charges which shall not in the aggregate
materially adversely impair the use of the subject property by
Iridium or a Restricted Subsidiary;
(viii) zoning and building by-laws and ordinances,
municipal bylaws and regulations, and restrictive covenants,
which do not materially interfere with the use of the subject
property by Iridium or a Restricted Subsidiary;
(ix) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature incurred in the ordinary
course of business;
<PAGE> 25
18
(x) Liens existing on the Issue Date;
(xi) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided,
however, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor;
(xii) any interest in or title of a lessor to any
property subject to a Capital Lease Obligation which is
permitted under this Indenture; and
(xiii) Liens incurred in the ordinary course of
business of the Issuers and the Restricted Subsidiaries with
respect to obligations that do not exceed $10,000,000 at any
one time outstanding and that:
(a) are not incurred in connection with the
borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary
course of business); and
(b) do not in the aggregate materially
detract from the value of the property or materially
impair the use thereof in the operation of business
by Iridium and the Restricted Subsidiaries.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" of any Person means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note that is due or overdue or is to become due
at the relevant time (except when used in Section 2.02 hereof).
"Private Exchange" means the offer by the Note Issuers,
pursuant to the Exchange and Registration Rights Agreement, to the Initial
Purchasers to issue and deliver to each Initial Purchaser, in exchange for the
Initial Notes held by the Initial Purchaser as part of its initial distribution,
a like aggregate principal amount of Private Exchange Notes.
<PAGE> 26
19
"Private Placement Legend" means the legend set forth under
the caption Restricted Note Legend in the form of the Initial Note in Exhibit A
hereto.
"Ratings Agencies" means Standard & Poor's Rating Group and
Moody's Investors Services, Inc. or any successor to the respective credit
rating businesses thereof.
"Receivables" means receivables, chattel paper, instruments,
documents or intangibles evidencing or relating to the right to payment of money
in respect of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables
of such Person (pursuant to a purchase facility or otherwise), other than (x)
any sale of Receivables by such Person as to which (i) such Person is neither
directly or indirectly liable (as guarantor or otherwise) nor provides credit
support of any kind and (ii) the purchaser of such Receivables has no recourse
to any assets or property of such Person or (y) in connection with a disposition
of the business operations of such Person relating thereto or a disposition of
defaulted Receivables for purpose of collection and not as a financing
arrangement.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of Iridium or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that except in the case
of a Refinancing of the Guaranteed Bank Facility after any extension thereof (as
contemplated by the Motorola MOU) (i) such Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced, (iii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus accrued and unpaid
interest and fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced and (iv) in the event the Indebtedness
being Refinanced constitutes a Subordinated Obligation, the Refinancing
Indebtedness is subordinated to the Notes to at least the same extent as the
Indebtedness being Refinanced; provided further, however, that Refinancing
Indebtedness shall not include Indebtedness of the Issuers or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
<PAGE> 27
20
"Registered Exchange Offer" shall have the meaning set forth
in the Exchange and Registration Rights Agreement.
"Related Business" means the business of developing, owning,
engaging in and dealing with all or any part of the business of the provision of
telecommunications services and businesses and (i) reasonably related extensions
thereof, including but not limited to the manufacture, purchase, ownership,
operation, leasing, licensing, financing and selling of, and generally dealing
in or with, communications satellites, earth stations, gateways, ground
infrastructure and subscriber equipment, used or intended for use with
telecommunications services and businesses and (ii) any other activities that
are reasonably related to the provision of telecommunications services and
businesses.
"Related Person" of any Person means any other Person directly
or indirectly owning (a) 5% or more of the outstanding Capital Stock of such
Person or (b) 5% or more of the combined voting power of the Voting Stock of
such Person.
"Reserve Capital Call" means the agreement of each of
Iridium's members to purchase additional Class I Interests in Iridium pursuant
to Section 4.02 of the LLC Agreement.
"Restricted Subsidiary" means any Subsidiary of Iridium,
whether existing on or after the Issue Date, unless such Subsidiary is an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating
to property now owned or hereafter acquired by Iridium or a Restricted
Subsidiary whereby Iridium or such Restricted Subsidiary transfers such property
to a Person and Iridium or such Restricted Subsidiary leases it from such
Person.
"SEC" means the Securities and Exchange Commission and any
successor agency.
"Secured Indebtedness" means any Indebtedness of either Note
Issuer secured by a Lien.
"Secured Indebtedness" of any Guarantor Subsidiary has a
correlative meaning.
"Securities Act" means the Securities Act of 1933, as amended
(or any successor act) and the rules and regulations thereunder.
"Share Issuance Agreement" means the Share Issuance Agreement
between Iridium and IWCL, dated as of June 9, 1997, as amended from time to
time.
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act as in effect on the Issue Date.
<PAGE> 28
21
"Space System Contract" means the Iridium Space System
Contract between Iridium and Motorola, dated as of July 29, 1993, as amended
from time to time.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of either
Note Issuer (whether outstanding on the Issue Date or thereafter Incurred) which
is subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect. Iridium's 14 1/2% Senior Subordinated Notes due 2006
shall be Subordinated Obligations.
"Subsidiary" of any Person means (i) a corporation more than
50% of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries of such Person, directly or indirectly, has at least
a majority ownership and power to direct the policies, management and affairs
thereof.
"Subsidiary Guaranty" means any Guarantee of the Notes which
may from time to time be executed and delivered pursuant to the terms of this
Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in this
Indenture.
"Tax Amount" means the aggregate amount of distributions
required to be made by Iridium to its members under Section 3.07(c) of the LLC
Agreement (or a successor provision relating to distributions by Iridium with
respect to members' U.S. tax liability). Notwithstanding anything to the
contrary, Tax Amount shall not include taxes resulting from Iridium's
reorganization as or change in the status to a corporation.
"Terrestrial Network Development Contract" means the
Terrestrial Network Development Contract between Iridium and Motorola, entered
into June, 1995, as amended from time to time.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Total Invested Capital" means, as of any date of
determination, the sum of (a) Total Pro Forma Consolidated Indebtedness as of
such date and (b) $1,982,000,000 plus the aggregate proceeds received by Iridium
or any Restricted Subsidiary in respect of the issuance of
<PAGE> 29
22
Capital Stock of Iridium, including the fair value of property other than cash
(as determined in good faith by the Board of Directors in a resolution filed
with the Trustee), less any redemptions of, or dividends or other distributions
on, Capital Stock of Iridium (other than any Tax Amount or any dividend or
distribution in Capital Stock) made after the Issue Date and on or prior to the
date of determination.
"Total Pro Forma Consolidated Indebtedness" means, as of any
date of determination, after giving effect to any Indebtedness to be Incurred by
Iridium and its Restricted Subsidiaries on a consolidated basis on such date and
the application of the proceeds therefrom, the aggregate amount of Outstanding
Indebtedness as of such date determined on a consolidated basis in accordance
with GAAP and which would appear on the consolidated balance sheet of Iridium.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of Iridium
designated as such by the Board of Directors as set forth below where (a)
neither Iridium nor any of its other Subsidiaries (other than another
Unrestricted Subsidiary) (1) provides credit support for, or Guarantee of, any
Indebtedness of such Subsidiary or any Subsidiary of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness), (2) is
directly or indirectly liable for any Indebtedness of such Subsidiary or any
Subsidiary of such Subsidiary, or (3) has any obligation to make additional
Investments (other than Permitted Investments) in such Subsidiary or any
Subsidiary of such Subsidiary (other than, with respect to clauses (1) and (2)
above, in the case of any Indebtedness of Iridium or any Restricted Subsidiary,
the proceeds of which were received by Iridium or a Restricted Subsidiary, that
is permitted under Section 4.03 as to which the Unrestricted Subsidiary provides
a Guarantee) and (b) such Subsidiary and each Subsidiary of such Subsidiary has
at least one director on its board of directors that is not a director or
executive officer of Iridium or any Restricted Subsidiary, and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary to be an Unrestricted Subsidiary by filing a resolution to such
effect with the Trustees unless such Subsidiary or any Subsidiary of such
Subsidiary owns any Capital Stock or Indebtedness of, or owns or holds any Lien
(other than a Permitted Lien) on any property of, Iridium or any other
Subsidiary of Iridium which is not a Subsidiary of the Subsidiary to be so
designated or otherwise an Unrestricted Subsidiary; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) immediately after giving
<PAGE> 30
23
effect to such designation, Iridium could incur an additional $1.00 of
Indebtedness pursuant to the first sentence of paragraph (a) under Section 4.03;
and provided further, however, that Iridium could make a Restricted Payment in
an amount equal to the greater of the fair market value and the book value of
such Subsidiary pursuant to Section 4.04 and such amount is thereafter treated
as a Restricted Payment for the purpose of calculating the aggregate amount
available for Restricted Payments thereunder. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary by filing a
resolution to such effect with the applicable Trustee, provided that,
immediately after giving effect to such designation, Iridium could incur an
additional $1.00 of Indebtedness pursuant to the first sentence of paragraph (a)
under Section 4.03 and such Subsidiary (as well as each of Iridium and the other
Guarantor Subsidiaries) complies with Section 4.15 as if such Subsidiary were a
newly created Subsidiary. Notwithstanding the foregoing, neither Capital nor any
of its Subsidiaries may be Unrestricted Subsidiaries.
"Vendor Financing Facility" means any agreements between
Iridium and/or any Subsidiary of Iridium and one or more vendors or lessors of
equipment to Iridium and/or any Subsidiary (or any affiliate of any such vendor
or lessor) providing financing for the acquisition by Iridium or any such
Subsidiary of equipment or services from any such vendor or lessor.
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly-Owned Restricted Subsidiary" means, with respect to
Iridium, a Restricted Subsidiary of Iridium all of the outstanding Capital Stock
or other ownership interests of which (other than Capital Stock constituting
directors' qualifying shares or interests held by directors or shares or
interests required to be held by foreign nationals, in each case to the extent
mandated by applicable law) are owned by Iridium or by one or more Wholly-Owned
Restricted Subsidiaries of Iridium, or by Iridium and one or more Wholly-Owned
Restricted Subsidiaries of Iridium.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction".........................................4.07
"Agent Members..................................................2.13
"Asset Drop-Down Transaction"...................................5.01(b)
"Bankruptcy Law"................................................6.01
"Class A Common Stock".........................................Recitals
"covenant defeasance option"....................................8.01(b)
"Custodian".....................................................6.01
<PAGE> 31
24
"Event of Default"..............................................6.01
"Exchange Notes"...........................................Introduction
"Global Notes"..................................................2.01(c)
"Initial Notes"............................................Introduction
"Insurance Proceeds"............................................4.16
"legal defeasance option".......................................8.01(b)
"Legal Holiday"................................................11.08
"Notes"....................................................Introduction
"Obligations"..................................................10.01
"Paying Agent"..................................................2.03
"Private Exchange Notes....................................Introduction
"Purchase Agreement............................................Recitals
"QIBs"..........................................................2.01(b)
"Registrar".....................................................2.03
"Regulation S Permanent Global Notes"...........................2.01(c)
"Regulation S Restricted Period"................................2.01
"Regulation S Notes Exchange Date"..............................2.01(c)
"Regulation S Temporary Global Notes"...........................2.01(c)
"Restricted Payment"............................................4.04
"Rule 144A".....................................................2.01(b)
"Rule 144A Global Note".........................................2.01(b)
"Successor Companies"...........................................5.01
"Transfer Restricted Security"..................................2.06
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture Securityholder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Issuers and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
<PAGE> 32
25
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular unless the context otherwise requires;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness of either Note Issuer or
a Guarantor Subsidiary, as the case may be, merely by virtue of its
nature as unsecured Indebtedness; and
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP and accretion of principal on such
security shall be deemed to be the Incurrence of Indebtedness.
ARTICLE II
The Notes
SECTION 2.01. Form and Dating. (a) The Initial Notes and the
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A, which is hereby incorporated in and expressly made a part of
this Indenture, and as otherwise provided in this Article II. Any Exchange Notes
and Private Exchange Notes and the Trustee's certificate of authentication
thereon shall be substantially in the form of Exhibit B, which is incorporated
in and expressly made a part of this Indenture, and as otherwise provided in
this Article II. The Notes may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which any Issuer is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Note Issuers). Each Note shall be dated the date of its
authentication. The terms of the Notes set forth in Exhibit A and B hereto are
part of the terms of this Indenture. The Notes shall be issuable only in
registered form without coupons and only in denominations of $1,000 and any
integral multiple of thereof. The Initial Notes are being offered and sold by
the Note Issuers pursuant to the Purchase Agreement.
(b) Initial Notes offered and sold to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") in
accordance with Rule 144A under the Securities Act (such rule or any successor
provision thereto, "Rule 144A") as provided in the
<PAGE> 33
26
Purchase Agreement, shall be issued on the Issue Date initially in the form of
one or more permanent global Notes in registered form, substantially in the form
set forth in Exhibit A hereto (the "Rule 144A Global Notes"), deposited with the
Trustee, as custodian for the Depositary, duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of any Rule 144A Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
(c) Initial Notes offered and sold in offshore transactions in
reliance on Regulation S as provided in the Purchase Agreement, shall be issued
initially on the Issue Date in the form of one or more temporary global Notes in
registered form, substantially in the forms set forth in Exhibit A hereto (the
"Regulation S Temporary Global Notes"). The Regulation S Temporary Global Notes
shall be registered in the name of, and held by, a temporary certificate holder
designated by Chase Securities Inc. until the 40th day after the later of the
commencement of the distribution of the Initial Notes and the Issue Date (the
"Regulation S Restricted Period") with respect to the offer and sale of the
Initial Notes (the "Regulation S Notes Exchange Date"). Iridium shall promptly
notify the Trustee in writing of the occurrence of the Regulation S Notes
Exchange Date and, within a reasonable time after the Regulation S Notes
Exchange Date, upon receipt by the Trustee and Iridium of one or more
certificates substantially in the form set forth in Exhibit C hereto from one or
more Holders of interests in the applicable Regulation S Temporary Global Notes,
the Issuers shall execute, and the Trustee shall authenticate and deliver, one
or more permanent global Notes in registered form, substantially in the form set
forth in Exhibit A hereto (the "Regulation S Permanent Global Notes", and
together with the related Regulation S Temporary Global Notes, the "Regulation S
Global Notes") in exchange for the Regulation S Temporary Global Notes of like
tenor and amount. The Regulation S Global Note and Rule 144A Global Note are
referred to herein as the "Global Notes."
SECTION 2.02. Execution and Authentication. An Officer shall
sign the Notes for each of the Note Issuers by manual or facsimile signature.
Any reference herein to the execution of a Note by a Subsidiary Guarantor shall
be interpreted as a reference to the endorsement by such Subsidiary Guarantor of
its Subsidiary Guaranty with respect thereto.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates such Note, such Note shall be
valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Notes
for original issue in an aggregate principal amount of up to $300,000,000 and
(2) Exchange Notes for issue only in a Registered Exchange Offer and Private
Exchange Notes only in a Private Exchange, each pursuant to the Exchange and
Registration Rights Agreement, for a like principal amount of Initial Notes
exchanged pursuant thereto, in each case upon a written order of the Note
Issuers
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signed by an Officer of each Note Issuer. Such order shall specify the amount of
the Notes to be authenticated, the date on which the original issue of Notes is
to be authenticated and whether the Notes are to be Initial Notes, Exchange
Notes or Private Exchange Notes. The aggregate principal amount of Notes
outstanding at any time may not exceed $300,000,000 except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to Iridium to authenticate the Notes. Any such appointment shall be
evidenced by an instrument signed by an authorized officer of the Trustee, a
copy of which shall be furnished to Iridium. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Registrar, Paying Agent or agent for service of notices and
demands.
Upon execution and delivery of the Indenture, the Initial
Notes shall be endorsed by each of the Initial Guarantors to evidence their
Guaranties of the obligations thereunder.
The Issuers, the Trustee and any agent of the Issuers or the
Trustee may treat the person in whose name any Note is registered as the owner
of such Note for the purpose of receiving payment of principal of and (subject
to the provisions of this Indenture and the Notes with respect to record dates)
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and neither the Issuers, the Trustee nor any agent of the
Issuers or the Trustee shall be affected by notice to the contrary.
SECTION 2.03. Registrar and Paying Agent. The Note Issuers
shall maintain an office or agency in the Borough of Manhattan, City of New York
where Notes may be presented for registration of transfer or for exchange (the
"Registrar") and an office or agency where Notes may be presented for payment
(the "Paying Agent"). The Registrar shall keep a register of the Notes and of
their transfer and exchange. The Note Issuers may have one or more co-registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Note Issuers shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a party to this
Indenture, which shall incorporate the applicable terms of the TIA. The
agreement shall implement the provisions of this Indenture that relate to such
agent. The Note Issuers shall notify the Trustee in writing of the name and
address of any such agent. If the Note Issuers fail to maintain a Registrar or
Paying Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation and indemnity therefor pursuant to Section 7.07. The Note Issuers
or any of their domestically incorporated Wholly-Owned Restricted Subsidiaries
may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Note Issuers initially appoint the Trustee as Registrar
and Paying Agent in connection with the Notes. The office of the Registrar and
Paying Agent for purposes of this Section 2.03 shall be at 61 Broadway, 15th
Floor, New York, New York 10006.
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The Note Issuers initially appoint The Depository Trust
Company to act as Depositary with respect to the Global Notes.
Iridium may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided that no
such removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Note
Issuers and such successor Registrar or Paying Agent, as the case may be, and
delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the Trustee may resign as
Paying Agent or Registrar only if the Trustee also resigns as Trustee in
accordance with Section 7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Note, the Note Issuers shall
deposit with the Paying Agent (or if a Note Issuer or a domestically organized
Wholly-Owned Restricted Subsidiary is acting as Paying Agent, segregate and hold
in trust for the benefit of the Persons entitled thereto) a sum sufficient to
pay such principal and interest when so becoming due. The Note Issuers shall
require each Paying Agent (other than the Trustee) to agree in writing that the
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal of or interest on
the Notes and shall notify the Trustee of any default by the Note Issuers in
making any such payment, if a Note Issuer or a domestically organized
Wholly-Owned Restricted Subsidiary acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund. The Note
Issuers at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by a
Note Issuer or a domestically organized Wholly-Owned Restricted Subsidiary in
trust for the payment of principal or interest on any Note and remaining
unclaimed for two years after such principal and interest has become due and
payable shall, subject to the requirements of applicable escheat laws, be paid
to Iridium at its request, or, if then held by a Note Issuer or such a
Subsidiary, shall be discharged from such trust; and the Holders shall
thereafter, as unsecured general creditors, look only to the Note Issuers for
payment thereof, and all liability of the Paying Agent with respect to such
money shall thereupon cease.
SECTION 2.05. Holder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar,
Iridium shall furnish, or cause the Registrar to furnish, to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Holders.
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SECTION 2.06. Transfer and Exchange. The Notes shall be issued
in registered form and shall be transferable only upon the surrender of a Note
for registration of transfer. When a Note is presented to the Registrar or a
co-registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401(l) of the Uniform
Commercial Code are met, as stated to the Registrar in an opinion of counsel if
requested by the Registrar. When Notes are presented to the Registrar or a
co-registrar with a request to exchange them for an equal principal amount of
Notes of other denominations, the Registrar shall make the exchange as requested
if the same requirements are met. To permit registration of transfers and
exchanges, the Issuers shall execute and the Trustee shall authenticate Notes at
the Registrar's or co-registrar's request. The Note Issuers may require payment
of a sum sufficient to pay all taxes, assessments or other governmental charges
in connection with any transfer or exchange pursuant to this Section. The Note
Issuers shall not be required to make and the Registrar need not register
transfers or exchanges of Notes selected for redemption (except, in the case of
Notes to be redeemed in part, the portion thereof not to be redeemed) or any
Notes for a period of 15 days before a selection of Notes to be redeemed or 15
days before an Interest Payment Date.
Prior to the due presentation for registration of transfer of
any Note, the Issuers, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Issuers, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
Any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interest in such Global Note may
be effected only through a book-entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in such
Global Note shall be required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to
this Section 2.06 shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
During the period beginning on the later of the Issue Date and
the last date on which any of the Issuers or any Affiliate of the Issuers was
the owner of an Initial Note (or any predecessor Note) and ending on the date
two years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) from any such date, any
Initial Note issued or owned during the period set forth above, as the case may
be, and any Note issued upon registration of transfer of, or in exchange for, or
in lieu of, such Initial Note, shall be deemed a "Transfer Restricted Security"
and shall be subject to the restrictions on transfer provided in the Private
Placement Legend; provided, however, that the term "Transfer Restricted
Security" shall not include (a) any Initial Note which is issued upon transfer
of, or in exchange for, any Note which is not a Transfer Restricted Security or
(b) any Initial Note as to
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which such restrictions on transfer have been terminated in accordance with this
Section 2.06. Any Transfer Restricted Security shall bear the Private Placement
Legend.
Every Transfer Restricted Security shall be subject to the
restrictions on transfer set forth in Section 2.01 and Section 2.14 and shall
bear the Private Placement Legend and the Holder of each Transfer Restricted
Security or Holder of a beneficial interest therein, by such Holder's or
holder's acceptance thereof, agrees to be bound by such restrictions on
transfer.
The restrictions imposed by Section 2.01 and Section 2.14 upon
the transferability of any particular Transfer Restricted Security shall cease
and terminate and the Private Placement Legend shall no longer be necessary (a)
in the case of a Regulation S Global Note, on the Regulation S Note Exchange
Date or (b) in the case of a Rule 144A Global Note or Definitive Note, on (x)
the later of two years (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision thereunder) after the
later of the Issue Date or the last date on which any Issuer or any Affiliate of
any Issuer was the owner of such Transfer Restricted Security (or any
predecessor of such Transfer Restricted Security) or (y) (if earlier) if and
when such Transfer Restricted Security has been sold pursuant to an effective
registration statement under the Securities Act or, unless the Holder thereof is
an Affiliate of any Issuer, transferred pursuant to Rule 144 or Rule 904 under
the Securities Act (or any successor provision). Iridium shall inform the
Registrar in writing of the effective date of any registration statement
registering any Transfer Restricted Securities under the Securities Act.
SECTION 2.07. Replacement Notes. If a mutilated Note is
surrendered to the Registrar or if the Holder of a Note claims that the Note has
been lost, destroyed or wrongfully taken, the Note Issuers shall issue, the
Guarantor Subsidiaries shall execute and the Trustee shall authenticate a
replacement Note if the requirements of Section 8-405 of the Uniform Commercial
Code are met, such that the Holder (i) satisfies Iridium or the Trustee within a
reasonable time after he has notice of such loss, destruction or wrongful taking
and the Registrar does not register a transfer prior to receiving such
notification that such requirements are met, (ii) makes such request to Iridium
or the Trustee prior to the Note being acquired by a bona fide purchaser and
(iii) satisfies any other reasonable requirements of the Trustee including, if
requested, an opinion of counsel for the Holder to the effect that the Holder
has complied with the requirements of this Section 2.07. If required by the
Trustee or Iridium, such Holder shall furnish an indemnity bond sufficient in
the judgment of the Trustee or Iridium, as the case may be, to protect the
Issuers, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss that any of them may suffer if a Note is replaced. Iridium and the
Trustee may charge the Holder for their expenses in replacing a Note. In the
event any such mutilated, lost, destroyed or wrongfully taken Note has become or
is about to become due and payable, the Issuers in its discretion may pay such
Note instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the
Issuers.
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The provisions of this Section 2.07 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, lost, destroyed or wrongfully taken
Notes.
SECTION 2.08. Outstanding Notes. Notes outstanding at any time
are all Senior Notes authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
as not outstanding. A Note does not cease to be outstanding because an Issuer or
an Affiliate of an Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee and Iridium receive proof satisfactory to them
that the replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Notes (or portions thereof) to be redeemed or maturing, as the case may
be, and the Paying Agent is not prohibited from paying such money to the Holders
on that date pursuant to the terms of this Indenture, then on and after that
date such Notes (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes which the Trustee knows or has
reason to know are so owned shall be disregarded.
SECTION 2.09. Temporary Notes. Until Definitive Notes and
Global Notes are ready for delivery, the Issuers may prepare and the Trustee
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of Definitive Notes but may have variations that Iridium considers
appropriate for temporary Notes. Without unreasonable delay, the Issuers shall
prepare and the Trustee shall authenticate Definitive Notes and deliver them in
exchange for temporary Notes upon surrender of such temporary Notes at the
office or agency of the Note Issuers, without charge to the Holder.
SECTION 2.10. Cancellation. A Note Issuer at any time may
deliver Notes to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel and destroy (subject to the record retention requirements of the Exchange
Act) all Notes surrendered for registration of transfer, exchange, payment or
cancellation unless Iridium directs the Trustee to deliver canceled Notes to
Iridium. The Issuers may not issue new Notes to replace Notes they have
redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall
not authenticate Notes in place of canceled Notes other than pursuant to the
terms of this Indenture.
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SECTION 2.11. Defaulted Interest. If the Issuers default in a
payment of interest on the Notes, the Issuer shall pay the defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Issuers may pay the defaulted interest to the persons who are
Holders on a subsequent special record date. The Note Issuers shall fix or cause
to be fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly mail or cause to be mailed to
each Holder a notice that states the special record date, the payment date and
the amount of defaulted interest to be paid.
The Issuers may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements (if applicable) of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Note Issuers
to the Trustee of the proposed payment pursuant to this paragraph, such manner
of payment shall be deemed practicable by the Trustee.
SECTION 2.12. CUSIP Numbers. The Note Issuers in issuing the
Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders,
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
shall not be affected by any defect in or omission of such numbers.
SECTION 2.13. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Note or the nominee of such Depositary
and (ii) be delivered to the Trustee as custodian for such Depositary and (iii)
bear the Global Securities legend as set forth in Exhibits A and B hereto.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under such Global Note, and the Depositary may be treated by the Issuers, the
Trustee and any agent of the Issuers or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers
of such Global Note in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in a Global Note
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 2.14. Except as otherwise provided in Section
2.14, beneficial owners of interests in a Global Note may obtain Definitive
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Notes in exchange for their beneficial interests in a Global Note only if (i)
the Note Issuers notify the Trustee in writing that the Depositary is no longer
willing or able to act as Depositary for such Global Note or the Depositary
ceases to be a "clearing agency" registered under the Exchange Act, at a time
when the Depositary is required to be so registered in order to act as
Depositary, and, in each case, a successor depositary is not appointed by the
Note Issuers within 90 days of such notice, (ii) the Note Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Definitive Notes or (iii) an Event of Default has occurred and is continuing and
the Registrar has received a request from the Depositary to effect such
exchange.
(c) In connection with any transfer of a portion of the
beneficial interest in a Global Note pursuant to Section 2.13(b) or Section
2.14, the Registrar shall reflect on its books and records the date and a
decrease in the principal amount of such Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Issuers shall execute, and the Trustee shall authenticate
and deliver, one or more Definitive Notes of like tenor and amount.
(d) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other corresponding Global Note will, upon transfer, cease to be an interest in
such Note and become an interest in the other corresponding Note and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interest in such other
corresponding Note for as long as it remains such an interest.
(e) In connection with the transfer of an entire Global Note
to beneficial owners pursuant to subsection (b) of this Section, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Issuers shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in such Global Note, an equal aggregate principal amount of Definitive
Notes of authorized denominations.
(f) Any Definitive Note delivered in exchange for an interest
in a Global Note pursuant to subsection (b) or subsection (e) of this Section
shall, unless the circumstances provided in Section 2.14(a)(i)(x) exist or
except as otherwise provided in Section 2.14(e), bear the applicable legend
regarding transfer restrictions applicable to the Definitive Note set forth in
Exhibit A.
(g) The registered holder of a Global Note may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
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SECTION 2.14. Special Transfer Provisions.
Unless and until an Initial Note or an interest therein is
transferred or exchanged under an effective registration statement under the
Securities Act, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of an interest in a Transfer Restricted Security to any IAI
which is not a QIB (excluding Non-U.S. Persons) that is consistent with the
Private Placement Legend:
(i) The Registrar shall register the transfer of any
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is at least two years after the later of the
Issue Date and the last date on which any of Issuers or an Affiliate of
the Issuers was the owner of such Note or (y) the proposed transferee
has delivered to the Registrar a certificate substantially in the form
set forth in Exhibit D hereto.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in a Rule 144A Global Note seeking to
transfer a Definitive Note to another Person, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of
such Rule 144A Global Note in an amount equal to the principal amount
of the beneficial interest in such Rule 144A Global Note to be
transferred, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, one or more Definitive Notes of like tenor
and amount.
(iii) An IAI which is not a QIB and not a Non-U.S.
Person shall only hold Definitive Notes.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial Note to
a QIB (other than a Non-U.S. Person):
(i) If the Note to be transferred consists of (x)
Definitive Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has delivered to
the Trustee a certificate substantially in the form set forth in
Exhibit E hereto or (y) an interest in the Rule 144A Global Note, the
transfer of such interest may be effected only through the book entry
system maintained by the Depository.
(ii) If the Note to be transferred consists of
Definitive Notes, upon receipt by the Trustee of instructions given in
accordance with the Depositary's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the Rule 144A Global Note in
an amount
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equal to the principal amount of the Definitive Note, to be
transferred, and the Trustee shall cancel the Definitive Note so
transferred.
(c) Transfers of Interests in the Regulation S Global Note to
U.S. Persons. The following provisions shall apply with respect to any transfer
of an interest in the Regulation S Global Note to U.S. Persons:
(i) If the beneficial interest to be transferred is in
a Regulation S Temporary Global Note, transfers by an owner of a
beneficial interest in such Regulation S Global Note to a transferee
who takes delivery of such interest through the corresponding Rule 144A
Global Note will be made only upon the receipt by the Trustee from the
transferor of a certificate substantially in the form of Exhibit E
hereto to the effect that such transfer is being made to a Person whom
the transferor reasonably believes is a QIB within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A.
(ii) If the beneficial interest to be transferred is in
a Regulation S Permanent Global Note, the Registrar shall register the
transfer of any such Note without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an interest in a Note to
a Non-U.S. Person:
(i) The Registrar shall register any proposed transfer
to any Non-U.S. Person if the Note to be transferred is a Definitive
Note or an interest in a Rule 144A Global Note only upon receipt of a
certificate substantially in the form set forth in Exhibit F hereto
from the proposed transferor. Prior to the termination of the
Regulation S Restricted Period, any Non-U.S. person shall be delivered
a beneficial interest in the corresponding Regulation S Temporary
Global Note.
(ii) (x) If the proposed transferor is an Agent
Member holding a beneficial interest in the Rule 144A Global Note, upon
receipt by the Registrar of (1) the documents required by paragraph (i)
of this paragraph (d) and (2) instructions in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of such Rule 144A Global Note in an amount equal to
the principal amount of the beneficial interest in such Rule 144A
Global Note to be transferred and (y) upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the
corresponding Regulation S Global Note in an amount equal to the
principal amount of the Definitive Note or such Rule 144A Global Note,
as the case may be, to be transferred, and the Registrar shall cancel
the Definitive Note so transferred or decrease the principal amount of
such Rule 144A Global Note, as the case may be.
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(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i) the Private Placement Legend is no longer required pursuant to
Section 2.01 and Section 2.06 or (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Issuers and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) General. By its acceptance of any Note, or any beneficial
interest in any Global Note, bearing the Private Placement Legend, each Holder
of such Note or holder of such beneficial interest acknowledges the restrictions
on transfer of such Note set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Note only as provided in
this Indenture. The Registrar shall not register a transfer of any Note unless
such transfer complies with the restrictions on transfer of such Note set forth
in this Indenture. In connection with any transfer of Notes to an IAI, each such
Holder or beneficial owner agrees by its acceptance of the Notes to furnish the
Registrar or the Note Issuers such certifications, legal opinions or other
information as such Person may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided, that the
Registrar shall not be required to determine (but may rely on a determination
made by the Note Issuers with respect to) the sufficiency of any such
certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.13 or this Section
2.14. The Issuers shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If either Note Issuer elects
to redeem Notes pursuant to Section 3.07, it shall notify the Trustee in writing
of the redemption date and the principal amount of Notes to be redeemed.
The Note Issuer shall give each notice to the Trustee provided
for in this Section at least 30 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate from the Note Issuer to the effect that such redemption
shall comply with the conditions herein. If fewer than all the Notes are to be
redeemed, the record date relating to such redemption shall be selected by
Iridium and given to the Trustee, which record date shall be not less than 15
days after the date of notice to the Trustee
<PAGE> 44
37
(unless a shorter period shall be acceptable to the Trustee). Any such notice
may be canceled by notice in writing to the Trustee at any time prior to notice
of such redemption being mailed to any Holder and shall thereby be void and of
no effect.
SECTION 3.02. Selection of Securities to be Redeemed. If fewer
than all the Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed pro rata or by lot or by such other method as the Trustee in its sole
discretion deems to be fair and appropriate. The Trustee shall make the
selection from outstanding Notes not previously called for redemption. The
Trustee may select for redemption portions of the principal of Notes that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions
of this Indenture that apply to Notes called for redemption also apply to
portions of Notes called for redemption. The Trustee shall notify the Note
Issuers promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption. Any notice of redemption
shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Notes are to be
redeemed, the certificate numbers and principal amounts of the
particular Notes to be redeemed;
(6) that, unless the Note Issuers default in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Notes (or
portion thereof) called for redemption ceases to accrue on and after
the redemption date;
(7) the CUSIP number, if any, printed on the Notes being
redeemed;
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes; and
(9) that if a Note is to be redeemed in part, only the portion
of the principal amount (equal to $1,000 or an integral multiple
thereof) of such Note to be redeemed and that a new Note in the
aggregate principal amount equal to the unredeemed portion thereof
shall be issued without charge to the holder.
<PAGE> 45
38
At either Note Issuer's request (which may be revoked at any
time in writing prior to the time at which the Trustee shall have given such
notice to the Holders), the Trustee shall give the notice of redemption in the
applicable Note Issuer's name and at the Note Issuer's expense. In such event,
the Note Issuer shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued interest, if any, to the redemption date; provided that
if the redemption date is after a regular record date and on or prior to the
interest payment date, the accrued interest shall be payable to the Holder of
the redeemed Notes registered on the relevant record date. If mailed in the
manner provided herein, the notice shall be conclusively presumed to have been
given whether or not the Holder receives such notice. Failure to give notice or
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. At least one
Business Day prior to the redemption date, the applicable Note Issuer shall
deposit with the Paying Agent (or, if a Note Issuer or a Subsidiary is the
Paying Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date other than Notes or portions of Notes called for redemption which have been
delivered by such Note Issuer to the Trustee for cancellation.
SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note
that is redeemed in part, the Issuers shall execute and the Trustee shall
authenticate for the Holder (at the Note Issuers' expense) a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. Optional Redemption. (a) Except as set forth in
Section 3.07(b), the Notes may not be redeemed prior to July 15, 2002. On and
after that date, either Note Issuer may redeem the Notes in whole or in part at
the following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of redemption), if redeemed during the 12-month
period commencing on July 15 of the years set forth below:
<PAGE> 46
39
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2002......................................................... 105.625%
2003......................................................... 102.813%
2004 and thereafter.......................................... 100.000%
</TABLE>
(b) In addition, at any time on or prior to July 15, 2000,
either Note Issuer may redeem in the aggregate up to 33-1/3% of the original
aggregate principal amount of Notes with the proceeds of one or more Equity
Offerings at a redemption price (expressed as a percentage of principal amount
thereof) of 111.250% plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption); provided, however, that at
least 66-2/3% of the original aggregate principal amount of the Notes being
redeemed must remain outstanding after each such redemption.
ARTICLE IV
Covenants
SECTION 4.01. Payment of Notes. The Note Issuers, as joint and
several obligors, shall promptly pay the principal of and interest and
Liquidated Damages, if any, on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal, interest and Liquidated Damages,
if any, shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to
timely pay all principal, interest and Liquidated Damages, if any, then due and
the Trustee or the Paying Agent, as the case may be, and is not prohibited from
paying such money to the Holders on that date pursuant to the terms of this
Indenture.
The Note Issuers, as joint and several obligors, shall pay
interest on overdue principal at the rate specified therefor in the Notes, and
shall pay interest on overdue installments of interest and Liquidated Damages,
if any, at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that Iridium may
not be required to be or remain subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, Iridium shall file with the SEC, and provide
the Trustees and Holders and prospective Holders (upon request) with the annual
reports and the information, documents and other reports which are specified in
Sections 13 and 15(d) of the Exchange Act.
In addition, for so long as any Notes remain outstanding,
unless the Note Issuers are subject to Section 13 or 15(d) of the Exchange Act,
Iridium shall furnish to the Holders and
<PAGE> 47
40
to prospective investors in the Notes, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
The foregoing shall not require Capital or any Guarantor
Subsidiary to file, provide or furnish with or to any Person any report or
information separate from any report or information filed, provided or furnished
by Iridium to the extent Capital or any Guarantor Subsidiary would not be
required to do so under Section 13 or 15(d) of the Exchange Act or pursuant to
Rule 144A(d)(4) under the Securities Act.
SECTION 4.03. Limitation on Indebtedness.
(a) Iridium shall not, and shall not permit any Restricted
Subsidiary to, Incur any Indebtedness (including any Acquired Indebtedness)
unless (i) immediately after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the Debt
to Cash Flow Ratio would be less than 4.0 to 1.0 and (ii) if such Indebtedness
is Incurred by a Restricted Subsidiary, such Restricted Subsidiary is a
Guarantor Subsidiary. Notwithstanding the foregoing, prior to June 30, 2000,
Iridium, Capital and any other Restricted Subsidiary that is a Guarantor
Subsidiary may Incur Indebtedness if immediately after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Debt to Capital Ratio would be less than 65%.
(b) Notwithstanding the foregoing paragraph (a), Iridium,
Capital and any other Restricted Subsidiary that is a Guarantor Subsidiary may
Incur the following Indebtedness:
(i) Indebtedness Incurred under any one or more Bank Credit
Agreements, Vendor Financing Facilities or other agreements or
arrangements to finance the Build-out of the IRIDIUM System; provided,
however, that Indebtedness Incurred pursuant to this clause (i), other
than Indebtedness Incurred pursuant to a Bank Credit Agreement or
Vendor Financing Facility, shall not have a Stated Maturity earlier
than the Stated Maturity of the Notes, and shall not be mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or be
redeemable at the option of the holder thereof, in whole or in part,
prior to the Stated Maturity of the Notes (other than pursuant to
provisions which are substantially similar to those contained in
Section 4.08 which permit the holders of such Indebtedness to require
the issuer thereof to repurchase or repay such Indebtedness upon a
Change of Control (or an event substantially similar thereto) or to
make an offer to purchase as a result of the occurrence of an Asset
Disposition (or an event substantially similar thereto) or receipt of
insurance proceeds);
(ii) After Commercial Activation, Indebtedness under any one
or more Bank Credit Agreements or other agreements or arrangements to
finance working capital requirements of Iridium and any Refinancing
Indebtedness in respect of such Indebtedness; provided, however, at the
time of the Incurrence of such Indebtedness and after giving effect
thereto, the aggregate principal amount of all Indebtedness Incurred
pursuant to this clause (ii) and then outstanding does not exceed
$950,000,000;
<PAGE> 48
41
(iii) Indebtedness Incurred under any one or more Bank Credit
Agreements, Vendor Financing Facilities or other agreements or
arrangements that is guaranteed pursuant to the Motorola Additional
Guarantee; provided, however, at the time of Incurrence of such
Indebtedness and after giving effect thereto, the aggregate principal
amount of all Indebtedness incurred pursuant to this clause (iii) and
then outstanding does not exceed $350,000,000;
(iv) Indebtedness owed by Iridium to Capital or any
Wholly-Owned Restricted Subsidiary that is a Guarantor Subsidiary or
Indebtedness owed by Capital or any Wholly-Owned Restricted Subsidiary
that is a Guarantor Subsidiary to Iridium or to Capital or another
Wholly-Owned Restricted Subsidiary that is a Guarantor Subsidiary;
provided, however, that upon either (x) the transfer or other
disposition by Capital, such Wholly-Owned Restricted Subsidiary or
Iridium of any Indebtedness so permitted to a Person other than
Iridium, Capital or another Wholly-Owned Restricted Subsidiary that is
a Guarantor Subsidiary or (y) the issuance, sale, lease, transfer or
other disposition of shares of Capital Stock (including by
consolidation or merger, but not including directors' qualifying shares
or interests required to be held by foreign nationals, in each case to
the extent mandated by applicable law) of such Wholly-Owned Restricted
Subsidiary or Capital to a Person other than Iridium, Capital or
another such Wholly-Owned Restricted Subsidiary, the provisions of this
clause (iv) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred by the issuer
thereof at the time of such issuance, sale, lease, transfer or other
disposition;
(v) Refinancing Indebtedness Incurred to Refinance
Indebtedness Incurred pursuant to Section 4.03(a) or pursuant to clause
(i), (ii), (iii), (vii) or (viii) or this clause (v) of this Section
4.03(b);
(vi) Indebtedness consisting of Permitted Interest Rate or
Currency Protection Agreements;
(vii) Indebtedness represented or evidenced by the Notes, the
Exchange Notes and the Subsidiary Guaranties;
(viii) Indebtedness outstanding on the Issue Date (other than
the Guaranteed Bank Facility and other Indebtedness described in clause
(i), (ii), (iii), (iv) or (vii) of this Section 4.03(b));
(ix) Indebtedness consisting of performance and other similar
bonds and reimbursement obligations Incurred in the ordinary course of
business securing the performance of contractual, franchise or license
obligations of Iridium, Capital or a Restricted Subsidiary, or in
respect of a letter of credit obtained to secure such performance; and
<PAGE> 49
42
(x) Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of Iridium, Capital and other
Restricted Subsidiaries that are Guarantor Subsidiaries outstanding on
the date of such Incurrence (without duplication and other than
Indebtedness permitted by clauses (i) through (ix) above or Section
4.03(a)) does not exceed $100,000,000.
(c) For purposes of determining compliance with this covenant,
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness Iridium, Capital and the other Restricted Subsidiaries
are permitted to Incur, Iridium, Capital or such Restricted Subsidiary, as the
case may be, shall have the right, in Iridium's sole discretion, to classify
such item of Indebtedness at the time of its Incurrence and shall only be
required to include the amount and type of such Indebtedness under the clause
permitting the Indebtedness as so classified.
SECTION 4.04. Limitation on Restricted Payments. (a) Iridium
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to:
(i) declare or pay any dividend or make any distribution on or
in respect of its Capital Stock (including any payment in connection
with any merger or consolidation involving the Note Issuers), except
dividends or distributions payable solely in its Capital Stock (other
than Disqualified Stock) and cash to the extent required to pay for
fractional shares of such Capital Stock or payable to Iridium or
another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than the Note Issuers or other Restricted
Subsidiaries, to its other shareholders on a pro rata basis or on a
basis that results in the receipt by the Note Issuers or a Restricted
Subsidiary of dividends or distributions of equal or greater value);
(ii) purchase, redeem, retire or otherwise acquire for value
any Capital Stock of Iridium or any Restricted Subsidiary held by
Persons other than Iridium or another Restricted Subsidiary;
(iii) purchase, repurchase, redeem, defease, acquire or retire
for value, or otherwise make any principal payment on, any Subordinated
Obligations prior to the scheduled maturity, scheduled repayment or
scheduled sinking fund payment thereof (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the
date of acquisition, or any purchase, repurchase, redemption or other
acquisition or prepayment thereof in connection with any Refinancing
thereof permitted pursuant to clause (v) of paragraph (b) of Section
4.03); or
(iv) make any Investment (other than a Permitted Investment)
in any Person (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement, Investment or
payment being herein referred to as a "Restricted
<PAGE> 50
43
Payment"), if at the time Iridium or such Restricted Subsidiary makes
such Restricted Payment: (1) a Default has occurred and is continuing
(or would result therefrom); (2) Iridium could not Incur at least $1.00
of additional Indebtedness pursuant to the terms of the first sentence
of paragraph (a) of Section 4.03; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments declared or made
subsequent to the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income of Iridium
accrued during the period (treated as one accounting period)
from the beginning of the fiscal quarter immediately following
the fiscal quarter during which July 16, 1997 occurs to the
end of the most recent fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, in case such Consolidated Net Income
is a deficit, minus 100% of such deficit); provided, however,
that the aggregate amount calculated pursuant to this clause
(A) (if such aggregate amount is a negative amount) shall be
reset to zero on the first date on which the Notes are
assigned an Investment Grade Rating by both Rating Agencies;
(B) the aggregate Net Cash Proceeds received by
Iridium from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other
than an issuance or sale to a Restricted Subsidiary and other
than an issuance or sale to an employee stock ownership plan
or to a trust established by Iridium or any Restricted
Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of Iridium is
reduced on the balance sheet of Iridium upon the conversion or
exchange (other than by a Restricted Subsidiary) subsequent to
the Issue Date of any Indebtedness of Iridium convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of Iridium (less the amount of any cash, or the fair value of
any other property or assets of Iridium or any Restricted
Subsidiary, distributed by Iridium upon such conversion or
exchange); and
(D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances or
other transfers of assets, in each case to Iridium or any
Restricted Subsidiary from Unrestricted Subsidiaries, and (ii)
the portion (proportionate to Iridium's equity interest in
such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary (as evidenced by a resolution of
the Board of Directors in the manner set forth in Section
4.04(c)) at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that
the foregoing sum does not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously
made (and treated as a Restricted Payment) by Iridium or any
Restricted Subsidiary in such Unrestricted Subsidiary.
<PAGE> 51
44
(b) Notwithstanding the foregoing, Iridium may
(i) subject to clause (vii) below, pay any dividend on Capital
Stock of any class within 60 days after the declaration thereof if, on
the date when the dividend was declared, Iridium could have paid such
dividend in accordance with the foregoing provisions;
(ii) repurchase any Capital Stock from Persons who were
formerly officers, managers or employees of Iridium or any of its
Subsidiaries (or from IWCL in connection with or relating to a
repurchase by IWCL of its Capital Stock from such Persons), provided,
however, that the aggregate amount of all such repurchases made
pursuant to this clause (ii) shall not exceed $2,000,000, plus the
aggregate cash proceeds received by Iridium since July 16, 1997 from
the issuance of its Capital Stock to officers, managers and employees
of Iridium or any of its Subsidiaries (or from IWCL in connection with
or relating to such an issuance by IWCL to such Persons);
(iii) Refinance, and permit its Restricted Subsidiaries to
Refinance, any Indebtedness otherwise permitted to be Refinanced by
clause (v) of paragraph (b) under Section 4.03.
(iv) during the period Iridium is treated as a partnership for
U.S. federal income tax purposes and after such period to the extent
relating to the liability for such period, make distributions in
respect of members' or partners' income tax liability with respect to
Iridium (whether directly incurred or indirectly incurred after the
Asset Drop-Down Transaction) in an amount not to exceed the Tax Amount;
(v) make distributions to IWCL to pay IWCL's ordinary and
reasonable operating expenses related to Iridium, as set forth in an
Officers' Certificate delivered to the Trustee;
(vi) repurchase any Capital Stock pursuant to Section 11.03 of
the LLC Agreement in the event a member of Iridium fails to pay any of
the amounts required by a Reserve Capital Call;
(vii) make any Restricted Payment by exchange for, or out of
the proceeds of the substantially concurrent sale of, or capital
contribution in respect of, Capital Stock of Iridium (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of Iridium or an employee stock ownership plan or to a trust
established by Iridium or any of its Subsidiaries for the benefit of
their employees);
(viii) make any Restricted Payment pursuant to the Interest
Exchange Agreement, the Share Issuance Agreement, the Master
Subscription Agreement or the Management Services Agreement; and
<PAGE> 52
45
(ix) make other Restricted Payments in an aggregate amount not
to exceed $10,000,000.
Any Restricted Payment made pursuant to clauses (ii), (iii), (iv),
(vii), (viii) and (ix) of the immediately preceding paragraph shall be excluded
from the calculation of the aggregate amount of Restricted Payments made since
the Issue Date; provided, however, that the Net Cash Proceeds from the issuance
of Capital Stock pursuant to clauses (ii) and (vii) of the immediately preceding
paragraph shall be excluded from the calculation of amounts under clause (B) of
the second preceding paragraph. A dividend or distribution by a Restricted
Subsidiary in respect of its Capital Stock shall only be deemed to be a
Restricted Payment to the extent such dividend or distribution is paid to
entities other than Iridium and the Restricted Subsidiaries.
(c) The net proceeds from the issuance of shares of Capital Stock upon
conversion of Indebtedness shall be deemed to be an amount equal to (i) the
accreted value of such Indebtedness on the date of such conversion and (ii) the
additional consideration, if any, received by Iridium upon such conversion
thereof, less any cash payment on account of fractional shares. The amount of
all Restricted Payments (other than cash) shall be the fair market value
(evidenced by a resolution of the Board of Directors determined in good faith
and set forth in an Officers' Certificate delivered to the Trustee) on the date
of the Restricted Payment of the asset(s) proposed to be transferred by Iridium
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, Iridium shall
deliver to the Trustee an Officers' Certificate identifying each Restricted
Payment made by Iridium during such fiscal quarter and stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.04 were computed, which calculations may
be based upon Iridium's latest available financial statements. If Iridium makes
a Restricted Payment which, at the time of the making of such Restricted
Payment, would in the good faith determination of Iridium be permitted under
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to Iridium's financial statements affecting Consolidated Net
Income for any period.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. Iridium shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions to Iridium or any Restricted Subsidiary on its Capital Stock or
with respect to any other interest or participation in, or measured by, its
profits, (ii) pay any Indebtedness owed to Iridium or any Restricted Subsidiary,
(iii) make any loans or advances to Iridium or any Restricted Subsidiary or (iv)
transfer any of its property or assets to Iridium or any Restricted Subsidiary,
except:
(1) any encumbrance or restriction pursuant to an agreement
relating to the Guaranteed Bank Facility or any other agreement in
effect at or entered into on the Issue Date, or any encumbrance or
restriction imposed pursuant to this Indenture or the Notes
<PAGE> 53
46
(or similar limitations pursuant to other notes issued by Iridium, or
indentures relating thereto, that are substantially similar to those
set forth in this Indenture), or any agreement relating to the Secured
Bank Facility;
(2) any encumbrance or restriction pursuant to an agreement
relating to any Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired and its Subsidiaries;
(3) any encumbrance or restriction pursuant to (x) an
agreement or instrument pursuant to which Indebtedness which Refinances
Indebtedness Incurred pursuant to an agreement referred to in clause
(1) or (2) or this clause (3) is Incurred or contained in any amendment
to an agreement or instrument referred to in clause (1) or (2) of this
clause (3), or (y) Indebtedness described in clause (i), (ii) or (iii)
of paragraph (b) of Section 4.03 and permitted Refinancing Indebtedness
with respect thereto; provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement, instrument or
amendment referred to in clause (x) above are, taken as a whole, no
more restrictive in any material respect than the encumbrances and
restrictions contained in the predecessor agreements (as determined by
the chief financial officer of Iridium in good faith and evidenced by a
certificate filed with the Trustee);
(4) any encumbrance or restriction contained in security
agreements or mortgages securing Indebtedness, or under any documents
providing for Capital Lease Obligations, of a Restricted Subsidiary
which are not prohibited by Section 4.12 herein to the extent such
encumbrances or restrictions restrict the assignment or transfer of the
property or assets subject to such security agreements or mortgages, or
subject to such Capital Lease Obligations;
(5) any encumbrance or restriction existing under or by reason
of applicable law or regulations;
(6) customary non-assignment provisions of any licensing
agreement or of any lease but only to the extent such provisions
restrict the transfer of the license, lease or the property thereunder;
(7) any encumbrance or restriction contained in contracts for
sales of assets otherwise permitted by this Indenture;
(8) with respect to a Restricted Subsidiary, any encumbrance
or restriction imposed pursuant to an agreement that has been entered
into for the sale of all or substantially all of the Capital Stock of
such Restricted Subsidiary; provided, however, that after giving effect
to such transaction no Default shall have occurred or be continuing,
that such restriction terminates if such transaction is not consummated
and
<PAGE> 54
47
that such consummation or abandonment of such transaction occurs within
one year of the date such agreement was entered into;
(9) any encumbrance or restriction, with respect to a
Restricted Subsidiary that is not a Restricted Subsidiary on the date
of this Indenture, in existence at the time such Person becomes a
Restricted Subsidiary and not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary; and
(10) any restriction on the sale or other disposition of
assets or property securing Indebtedness as a result of a Permitted
Lien on such assets or property.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary
Stock. (a) Iridium shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, make any Asset Disposition unless:
(i) Iridium or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including the value of all non-cash
consideration) of the shares and assets subject to such Asset
Disposition, as determined by the Board of Directors in good faith and
evidenced by a resolution filed with the Trustee;
(ii) at least 80% of the consideration therefor received by
Iridium or such Restricted Subsidiary, as the case may be, consists of
cash or Marketable Securities (provided that an amount equal to the
fair value (as determined in good faith by the Board of Directors as
evidenced by a resolution filed with the Trustee) of assets utilized or
to be utilized in a Related Business and received by Iridium or any
Restricted Subsidiary in connection with any Asset Disposition shall be
treated as cash solely for purposes of this clause (ii)) or the
assumption of Indebtedness of Iridium (other than Indebtedness that is
a Subordinated Obligation) or the Restricted Subsidiary, as the case
may be, and the release of Iridium or such Restricted Subsidiary, as
the case may be, from all liability on the Indebtedness assumed; and
(iii) all Net Available Proceeds, less any amounts invested
within 180 days of such disposition (or committed by such 180th day for
investment pursuant to a written agreement which commits such
investment within 180 days after the date of such agreement) in assets
that comply with Section 4.13, are applied within 180 days of such
Asset Disposition (1) first, to the permanent repayment or reduction of
Indebtedness then outstanding under any Bank Credit Agreement or Vendor
Financing Facility, to the extent such agreement or facility would
require such application or prohibit payments pursuant to the following
clause (2), (2) second, to the extent of remaining Net Available
Proceeds, to make an Offer to Purchase outstanding Notes at a purchase
price in cash equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest and Liquidated Damages, if any, to the date
of purchase and, to the extent required by the terms thereof, any other
Indebtedness of Iridium or a Restricted Subsidiary that ranks pari
passu with
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the Notes at a purchase price no greater than 100% of the principal
amount thereof plus accrued and unpaid interest and liquidated damages,
if any, to the date of purchase and (3) third, to the extent of any
remaining Net Available Proceeds after application of clauses (1) and
(2) of this Section 4.06(a)(iii), to the repayment of other
Indebtedness of Iridium or Indebtedness of a Restricted Subsidiary, to
the extent permitted under the terms thereof. To the extent any Net
Available Proceeds remain after such uses, Iridium and the Restricted
Subsidiaries may use such amounts for any purposes not prohibited by
this Indenture. Notwithstanding the foregoing, (x) these provisions
shall not apply to any Asset Disposition which constitutes a transfer,
conveyance, sale, lease or other disposition of all or substantially
all of Iridium's, Capital's or a Guarantor Subsidiary's properties or
assets as described under Article V and (y) Iridium shall not be
required to repurchase or redeem Notes pursuant to clause (2) of this
Section 4.06(a)(iii) until Net Available Proceeds from all Asset
Dispositions in the aggregate, less (x) any amounts invested within 180
days of such dispositions (or committed by such 180th day for
investment pursuant to a written agreement which commits such
investment within 180 days after the date of such agreement) in a
Related Business, (y) any amounts applied pursuant to clause (1) above
and (z) any amounts previously applied pursuant to clause (1), (2) or
(3) of this Section 4.06(a)(iii), are greater than $10,000,000.
(b) The Note Issuers shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Notes
pursuant to this Section 4.06. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this covenant, the
Issuers shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached their obligations described under Section
4.06 by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a)
Iridium shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into any transaction (including the purchase, sale, lease
or exchange of any property or the rendering of any service) with any Affiliate
or Related Person of Iridium (other than Iridium or a Wholly-Owned Restricted
Subsidiary) that involves consideration in excess of $5,000,000 (an "Affiliate
Transaction") on terms (i) that, taken as a whole, are less favorable to Iridium
or such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $10,000,000, are not in
writing and have not been approved either by a majority of the members of the
Board of Directors having no material direct or indirect financial interest in
or with respect to such Affiliate Transaction or by the Related Party Contracts
Committee, as defined by the LLC Agreement (if appropriate under Iridium's
Bylaws or the LLC Agreement). In addition, if such Affiliate Transaction is an
Asset Disposition involving any Affiliate or Related Person of Iridium (other
than Iridium or a Wholly-Owned Restricted Subsidiary) for an aggregate
consideration in excess of $25,000,000, a fairness opinion to the effect that
such transaction is fair (from a financial point of view) to Iridium or the
Restricted Subsidiary, as applicable, must be obtained
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from an Independent Financial Advisor or, with respect to
telecommunications-related matters, a recognized expert in the satellite
telecommunications industry.
(b) The provisions of the paragraph (a) of this Section
4.07(a) shall not apply to:
(i) employee benefit or compensation arrangements entered into
in the ordinary course of business and approved by the Board of
Directors;
(ii) transactions solely between or among Iridium and the
Restricted Subsidiaries;
(iii) Restricted Payments permitted by Section 4.04;
(iv) Investments by IWCL, an Affiliate or Related Person of
Iridium or Capital in the Capital Stock (other than Disqualified Stock)
of Iridium or any Restricted Subsidiary; and
(v) a transaction pursuant to an Existing Affiliate Agreement,
including any amendments thereto entered into after the Issue Date,
provided that the terms of any such amendment are not, taken as a
whole, less favorable to Iridium than the terms of the relevant
agreement prior to such amendment.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require the Note Issuers
to repurchase all or any part of such Holder's Notes at a purchase price in cash
equal to 101% of the principal amount of the Notes, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date in accordance with the terms of this
Indenture); provided, however, that notwithstanding the occurrence of a Change
of Control, the Note Issuers shall not be obligated to purchase any Note
pursuant to this Section 4.08 to the extent that the Note Issuers have exercised
their rights to redeem such Note as described in Section 3.07.
(b) Within 30 days following any Change of Control, the Note
Issuers shall mail a notice to each Holder with a copy to the Trustees stating,
among other things: (1) that a Change of Control has occurred and that such
Holder has the right to require the Note Issuers to purchase all or any portion
of such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase (subject to the right of Holders of
record on a record date to receive interest due on the relevant interest payment
date in accordance with the terms of this Indenture); (2) the circumstances and
relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization, each after
giving effect to such Change of Control); (3) the repurchase date (which shall
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (4) the instructions determined by the Note Issuers, consistent
with this Section 4.08, that a Holder must follow in order to have its Notes or
any portion thereof purchased.
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(c) The Note Issuers shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Notes
pursuant to this Section 4.08. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.08,
the Note Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations described
above by virtue thereof.
SECTION 4.09. Compliance Certificate. The Note Issuers shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Note Issuers an Officers' Certificate complying with Section 314(a)(4) of the
TIA and stating that in the course of the performance by the signers of their
duties as Officers of the Note Issuers they would normally have knowledge of any
Default or Event of Default and, if such signer does know of such a Default or
Event of Default, the certificate shall describe such Default or Event of
Default with particularity and describe what actions, if any, the Note Issuers
propose to take with respect to such Default or Event of Default.
SECTION 4.10. [Reserved]
SECTION 4.11. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries. Iridium shall not, and shall not permit any
Restricted Subsidiary to, issue, transfer, convey, sell or otherwise dispose of
any shares of Capital Stock of a Restricted Subsidiary or securities convertible
or exchangeable into Capital Stock of a Restricted Subsidiary to any person
other than Iridium, Capital or a Wholly-Owned Restricted Subsidiary except (i)
in a transaction consisting of a sale of all the Capital Stock of such
Restricted Subsidiary and that complies with Section 4.06 to the extent such
provisions apply; (ii) if required, the issuance, transfer, conveyance, sale or
other disposition of directors' qualifying shares or of interests required to be
held by foreign nationals, in each case to the extent mandated by applicable
law; (iii) in a transaction in which, or in connection with which, Iridium or a
Restricted Subsidiary acquires at the same time sufficient Capital Stock of such
Restricted Subsidiary to at least maintain the same percentage ownership
interest it had prior to such transaction; (iv) any grant, establishment or
exercise of any Lien permitted under Section 4.12; and (v) Disqualified Stock of
a Restricted Subsidiary Incurred to Refinance Disqualified Stock of such
Restricted Subsidiary; provided, however, that the amounts of the redemption
obligations of such Disqualified Stock may not exceed the amounts of the
redemption obligations of, and such Disqualified Stock shall have redemption
obligations no earlier than those required by, the Disqualified Stock being
Refinanced.
SECTION 4.12. Limitation on Liens. (a) Iridium shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien on any of its property or assets (including Capital
Stock), whether owned on the Issue Date or thereafter acquired, unless
contemporaneously therewith effective provision is made to secure the Notes
equally and ratably with such obligation for so long as such obligation is so
secured. The preceding sentence shall not require Iridium or any Restricted
Subsidiary to equally and ratably secure the Notes if the Lien consists of
Permitted Liens.
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(b) Any Lien created for the benefit of the Holders of the
Notes pursuant to Section 4.12(a) shall provide by its terms that such Lien
shall be automatically and unconditionally released and discharged upon the
earlier of the release and discharge of the Lien which gave rise to the
obligation to secure the Notes and the release and discharge of this Indenture.
SECTION 4.13. Limitation on Lines of Business. Iridium shall
not, and shall not permit any Restricted Subsidiary to, engage in any business
other than a Related Business.
SECTION 4.14. Limitation on Business Activities of Capital.
Capital shall not hold any material assets, become liable for any material
obligations, engage in any trade or business, or conduct any business activity,
other than the issuance of Capital Stock to Iridium or any Wholly-Owned
Restricted Subsidiary, the Incurrence of Indebtedness as a co-obligor or
guarantor of Indebtedness Incurred by Iridium (including the Notes) that is
permitted to be Incurred by Iridium pursuant to Section 4.03 (provided that the
net proceeds of such Indebtedness are retained or utilized by Iridium or loaned
to one or more of Iridium's Restricted Subsidiaries other than Capital), and
activities incidental thereto. Neither Iridium nor any Restricted Subsidiary
(other than Capital) shall engage in any transactions with Capital in violation
of the immediately preceding sentence.
SECTION 4.15. Future Guarantor Subsidiaries. Iridium shall
cause each Subsidiary created or acquired after the Issue Date (other than an
Unrestricted Subsidiary or a Foreign Subsidiary) to execute and deliver to the
Trustee a supplemental indenture, substantially in the form of Exhibit D,
pursuant to which such Subsidiary shall Guarantee payment of the Notes. Iridium
may cause any Foreign Subsidiary to execute and deliver a Subsidiary Guaranty in
accordance with the provisions of this Indenture. Each Subsidiary Guaranty shall
be limited to an amount not to exceed the maximum amount that can be Guaranteed
by that Subsidiary without rendering the Subsidiary Guaranty, as it relates to
such Subsidiary, voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer or similar laws affecting the rights of creditors
generally. In addition, the Note Issuers shall not, and shall not permit any of
the Guarantor Subsidiaries to, make any Investment in any Subsidiary that is not
a Guarantor Subsidiary unless either (i) such Investment is permitted by Section
4.04 or (ii) such Subsidiary executes and delivers a Subsidiary Guaranty in
accordance with the provisions of this Indenture.
SECTION 4.16. Maintenance of Insurance. Iridium shall procure
and maintain insurance with financially sound and reputable insurance companies
in such amounts, with such deductibles and covering such risks as is customarily
carried by companies engaged in a business or businesses similar to Iridium and
owning properties in localities where Iridium and the Restricted Subsidiaries
operate, including without limitation in-orbit insurance.
Within 30 days following the Issue Date and within 30 days
following any date on which Iridium renews or obtains insurance, Iridium shall
deliver to the Trustee an insurance certificate certifying the amount of
insurance then renewed or obtained and an Officers' Certificate stating that
such insurance, together with any other insurance, complies with this
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Section 4.16. In addition, Iridium shall cause to be delivered to the Trustee no
less than once each year an insurance certificate setting forth the amount of
insurance then carried, which insurance certificate shall entitle the Trustee to
(i) notice of any claim under any such insurance policy; and (ii) at least 30
days' notice from the provider of such insurance prior to the cancellation of
any such insurance.
In the event that Iridium receives any proceeds of any
in-orbit insurance, such proceeds shall constitute "Insurance Proceeds."
Promptly following the receipt of any Insurance Proceeds, Iridium shall apply
such Insurance Proceeds in accordance with Section 4.06(a)(iii) (treating such
Insurance Proceeds as Net Available Proceeds thereunder); provided, however,
that Insurance Proceeds shall only be required to be so applied to the extent
that the aggregate amount of all Insurance Proceeds received by Iridium exceeds
$10,000,000 in any 12-month period.
ARTICLE V
Successor Companies
SECTION 5.01. When Issuers May Merge or Transfer Assets. (a)
Neither Note Issuer shall consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to any Person unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia or the laws of Bermuda and the Successor Company (if not
Iridium) shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of Iridium under the Notes and this
Indenture;
(ii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Subsidiary as a result of
such transaction as having been Incurred by such Successor Company or
such Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness under Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth of Iridium immediately
prior to such transaction; and
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(v) Iridium shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The requirements of clause (iii) above shall not apply where Iridium merges with
or into, or conveys, transfers or leases, in one transaction or a series of
transactions, all or substantially all of its assets to, any Person with no
outstanding Indebtedness (other than Indebtedness which is also Indebtedness of
Iridium).
(b) Iridium may within six months of the Issue Date convey or
transfer in one transaction or a series of related transactions, all or
substantially all its assets to a Wholly-Owned Restricted Subsidiary of Iridium
upon compliance with clauses (i) and (v) of the preceding paragraph (and without
complying with clauses (ii) through (iv), inclusive, of the preceding paragraph)
(the "Asset Drop-Down Transaction").
(c) Iridium shall not permit any Guarantor Subsidiary to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person unless: (i) the resulting, surviving or transferee Person (if not
such Subsidiary) is a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of the
United States of America, or any State thereof, the District of Columbia or the
laws of Bermuda, and such Person expressly assumes, by a guaranty agreement, in
a form satisfactory to the Trustee, all the obligations of such Subsidiary, if
any, under its related Subsidiary Guaranty (except to the extent it would not
otherwise have been required to provide a Subsidiary Guaranty); (ii) immediately
after giving effect to such transaction on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default has occurred and is
continuing under this Indenture; and (iii) Iridium has delivered to the Trustee
an Officer's Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such guaranty agreement, if any, complies
with this Indenture.
(d) The Successor Company shall be the successor to Iridium
and shall succeed to, and be substituted for, and may exercise every right and
power of, Iridium, Capital or any Guarantor Subsidiary, respectively, under this
Indenture, the Notes and the related Subsidiary Guaranty, as applicable, and the
predecessor Iridium, Capital or Guarantor Subsidiary, respectively (other than
in the case of a lease), shall be released from all obligations and covenants
under this Indenture and the Notes or the related Subsidiary Guaranty, as
applicable.
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ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) a default occurs in any payment of interest or Liquidated
Damages, if any, on any Note when the same becomes due and payable, and
such default continues for a period of 30 days;
(2) a default occurs in the payment of the principal of any
Note when the same becomes due and payable at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or
otherwise;
(3) either Note Issuer fails to comply with Section 5.01;
(4) either Note Issuer fails to comply with Section 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.16 (in
each case, other than a failure to purchase Notes when required under
Section 4.06 or 4.08) and such failure continues for 30 days after the
notice specified in the penultimate paragraph of this Section 6.01;
(5) any Note Issuer or Guarantor Subsidiary fails to comply
with any of its agreements in the Notes or this Indenture (other than
those referred to in clause (1), (2), (3) or (4) above) and such
failure continues for 60 days after the notice specified in the
penultimate paragraph 6.01;
(6) any Note Issuer or Significant Subsidiary fails to pay any
Indebtedness of such Person within any applicable grace period after
final maturity or the acceleration of any such Indebtedness by the
holders of such Indebtedness because of a default and the total amount
of such Indebtedness unpaid or accelerated exceeds $10,000,000 or its
foreign currency equivalent at the time;
(7) any Note Issuer or Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors; or
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(E) takes any comparable action under any foreign
laws relating to insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against any Note Issuer or
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of any Note Issuer or
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of any Note
Issuer or Significant Subsidiary; or
(D) or any similar relief is granted under foreign
laws;
and the order or decree remains unstayed and in effect for 60 days;
(9) the rendering of any final judgment or decree (not subject
to appeal) in excess of $10,000,000 or its foreign currency equivalent
(net of amounts paid within 30 days of such judgment or decree under
any insurance, indemnity, bond, surety or similar instrument) against
any Note Issuer or Significant Subsidiary by a court or other
adjudicatory authority of competent jurisdiction to the extent which
such Note Issuer or Significant Subsidiary, as applicable, is not
insured by a third Person and such judgment or decree remains
outstanding and is not discharged, waived or stayed within 30 days
after the notice specified in the penultimate paragraph of this Section
6.01;
(10) any Subsidiary Guaranty ceases to be in full force and
effect (except as contemplated by the terms thereof) or any Guarantor
Subsidiary shall deny or disaffirm its obligations under this Indenture
or any Subsidiary Guaranty;
(11) termination by Motorola of the Space System Contract
prior to delivery thereunder by Motorola of the Space System (as
defined therein), provided that such termination has not been contested
by Iridium in accordance with the Space System Contract or by
appropriate proceedings and, if such termination is so contested,
within 180 days of such notice such termination has not been withdrawn
or declared ineffective by any recognized court or mediator; or
(12) termination by Motorola of the Operation and Maintenance
Contract, or Motorola ceases to be the operator of the IRIDIUM System
prior to the Stated Maturity of the Notes, in each such case for a
period of more than 30 days.
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The foregoing shall constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4), (5) or (9) shall not constitute an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes notify the Note Issuers of the Default and the
Note Issuers do not cure such Default within the time specified in clauses (4),
(5), or (9) hereof after receipt of such notice.
The Note Issuers shall deliver to the Trustee, within 30 days
thereof, written notice in the form of an Officers' Certificate of any Event of
Default under clause (3), (6), (7) or (10) and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause
(4), (5), (8), (9), (11) or (12), its status and what action Iridium is taking
or proposes to take in respect thereof.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to
either Note Issuer) occurs and is continuing, the Trustee by notice to the Note
Issuers, or the Holders of at least 25% in principal amount of the outstanding
Notes by notice to the Note Issuers and the Trustee, may declare the principal
of and accrued but unpaid interest and Liquidated Damages, if any, on all of the
Notes to be due and payable. Upon such a declaration, such principal, interest
and Liquidated Damages, if any, shall be due and payable immediately. If an
Event of Default specified in Section 6.01(7) or 6.01(8) with respect to either
Note Issuer occurs and is continuing, the principal of and interest and
Liquidated Damages, if any, on all the Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. The Holders of a majority in principal amount of the
Notes by notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair
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the right or remedy or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All available remedies are
cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Notes by written notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Note or (ii) a Default in respect
of a provision that under Section 9.02 cannot be amended without the consent of
each Holder affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the outstanding Notes may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Holders or would involve the Trustee in personal liability.
Prior to taking any action hereunder, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to this Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Notes then outstanding make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the Notes
do not give the Trustee a direction inconsistent with the request
during such 60-day period.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Notes held by such
Holder, on or after the respective due dates expressed in the
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Notes, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Note Issuers for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents and take such other
actions, including participating as a member, voting or otherwise, of any
committee of creditors appointed in the matter, as may be necessary or advisable
in order to have the claims of the Trustee and the Holders allowed in any
judicial proceedings relative to the Note Issuers, any Guarantor Subsidiary,
their respective creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
Nothing herein shall be deemed to empower the Trustee to
authorize or consent to, or accept or adopt on behalf of any Holder, any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money or
property from the Issuers pursuant to this Article VI, it shall pay out the
money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
THIRD: to Iridium.
The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Holder and the Note Issuers a notice that
states the record date, the payment date and amount to be paid.
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SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Note Issuers, a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 or a suit by Holders of more than 10% in principal
amount of the Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuers
(to the extent either may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture, any
of the Subsidiary Guaranties or any of the Notes; and the Issuers (to the extent
that either may lawfully do so) hereby expressly waive all benefit or advantage
of any such law, and shall not hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law had been enacted.
SECTION 6.13. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Issuers, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Issuers, Trustee and Holders shall continue as though no
such proceeding had been instituted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section and Section 7.02(e);
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a written
direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a)
The Trustee may conclusively rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers created in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction.
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuers or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Note Issuers'
use of the proceeds from the Notes, it shall not be responsible for the use or
application of any monies received by a Paying Agent other than the Trustee, and
it shall not be responsible for any statement of the Issuers in this Indenture
or in any document issued in connection with the sale of the Notes or in the
Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder notice of such Default within the earlier of 90 days after it occurs or
30 days after it is known to a Trust Officer or written notice of it is received
by the Trustee. Except in the case of a Default in payment of principal of,
premium
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and Liquidated Damages, if any, or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with May 15, 1998, and in any event
prior to July 15, 1998, in each year, the Trustee shall mail to each Holder a
brief report dated as of July 15, 1998, that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report shall be transmitted). The
Trustee shall also comply with TIA Section 313(b) and TIA Section 313(c).
A copy of each report at the time of its mailing to Holders
shall be filed with the SEC and each stock exchange (if any) on which the Notes
are listed. The Note Issuers agrees to notify promptly the Trustee whenever the
Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Note Issuers
shall pay to the Trustee, Paying Agent and Registrar from time to time
reasonable compensation for its services as agreed between the Note Issuers and
the Trustee, Paying Agent and Registrar. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuers
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and other professionals. Any costs and expenses associated
with the Registered Exchange Offer or Private Offer shall be paid by the Note
Issuers. The Note Issuers shall indemnify the Trustee, Paying Agent, Registrar,
and each of their officers, directors and employees (each in their respective
capacities), for and hold each of them harmless against any and all loss,
liability or expense (including attorneys' fees) incurred by them without
negligence or bad faith on their part in connection with the administration of
this trust and the performance of their duties hereunder, including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the acceptance, exercise or performance of any of its powers
or duties hereunder. The Trustee, Paying Agent and Registrar shall notify the
Note Issuers of any claim for which they may seek indemnity promptly upon
obtaining knowledge thereof; provided, however that any failure so to notify the
Note Issuers shall not relieve the Note Issuers of their indemnity obligations
hereunder except to the extent the Issuers shall have been adversely affected
thereby. The Note Issuers shall defend the claim and the indemnified party shall
provide reasonable cooperation at the Note Issuers' expense in the defense. Such
indemnified parties may have separate counsel and the Note Issuers shall pay the
fees and expenses of such counsel; provided, however that the Note Issuers shall
not be required to pay such fees and expenses if it assumes such indemnified
parties' defense and, in such indemnified parties' reasonable judgment, there is
no conflict of interest between the Note Issuers and such parties in connection
with such defense. The Note Issuers need not pay for any settlement made without
their written consent. The Note Issuers need not reimburse any expense
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or indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own wilful misconduct, negligence or bad faith.
The Note Issuers' payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee, Paying Agent or
Registrar incurs expenses after the occurrence of a Default specified in Section
6.01(7) or 6.01(8) with respect to the Issuers, the expenses are intended to
constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Note Issuers in writing. The Holders of a
majority in principal amount of the Notes may remove the Trustee by so notifying
the Note Issuers and the Trustee and may appoint a successor Trustee with the
consent of the Note Issuers, which shall not be unreasonably withheld. The Note
Issuers shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Note Issuers or by
the Holders of a majority in principal amount of the Notes and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Note Issuers shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Note Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
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Notwithstanding the replacement of the Trustee pursuant to
this Section, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Issuers are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Issuers. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Notes; Defeasance. (a)
When (i) either Note Issuer delivers to the Trustee all outstanding Notes (other
than Notes replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and either Note Issuer irrevocably deposits with the Trustee funds or Government
Securities on which payment of principal and interest when due shall be
sufficient to pay at maturity or upon redemption all outstanding Notes,
including interest thereon to maturity or such redemption date (other than Notes
replaced pursuant to Section 2.07), as certified to the Trustee by a nationally
recognized firm of independent accountants, and if in
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either case the Note Issuers pay all other sums payable hereunder by the Note
Issuers including, but not limited to fees and expenses of the Trustee and its
counsel, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of either Note Issuer accompanied by an Officers'
Certificate and an Opinion of Counsel.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Note
Issuers at any time may terminate (i) all its obligations under the Notes and
this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15,
4.16, 5.01(a)(ii), 5.01(a)(iii) and 5.01(a)(iv) and the operation of Sections
6.01(4), 6.01(5) (with respect to obligations that have been defeased), 6.01(6),
6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with respect
to Significant Subsidiaries only), 6.01(9), 6.01(10), 6.01(11) and 6.01(12)
("covenant defeasance option"). The Note Issuers may exercise their legal
defeasance option notwithstanding their prior exercise of its covenant
defeasance option. If the Note Issuers exercise their legal defeasance option or
their covenant defeasance option, each Guarantor Subsidiary shall be released
from all of its obligations with respect to its Subsidiary Guaranty (and no
Restricted Subsidiary (other than Capital) will thereafter be obligated to
execute, deliver or endorse any Note; nor shall any such execution, delivery or
endorsement thereafter bind any Restricted Subsidiary).
If the Note Issuers exercise their legal defeasance option,
payment of the Notes may not be accelerated because of an Event of Default. If
the Note Issuers exercise their covenant defeasance option, payment of the Notes
may not be accelerated because of an Event of Default specified in Sections
6.01(4), 6.01(5) (with respect to obligations that have been defeased), 6.01(6),
6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with respect
to Significant Subsidiaries only), 6.01(9), 6.01(10), 6.01(11) and 6.01(12) or
because of the failure of the Note Issuers to comply with Sections 5.01(ii),
5.01(iii) and 5.01(iv).
Upon satisfaction of the conditions set forth herein and upon
request of either Note Issuer, the Trustee shall acknowledge in writing the
discharge of those obligations that have been discharged, released, satisfied or
defeased.
(c) Notwithstanding clauses (a) and (b) above, the Note
Issuers' obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04,
8.05 and 8.06 shall survive until the Notes have been paid in full. Thereafter,
the Note Issuers' obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Note Issuers may
exercise their legal defeasance option or its covenant defeasance option only
if:
(1) either Note Issuer irrevocably deposits in trust with the
Trustee money and/or Government Securities for the payment of
principal, premium and Liquidated Damages, if any, and interest on the
Notes to maturity or redemption, as the case may be;
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(2) the Note Issuers deliver to the Trustee a certificate from
a nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when due and
without reinvestment on the deposited Government Securities plus any
deposited money without investment shall provide cash at such times and
in such amounts as shall be sufficient to pay principal and interest
when due on all the Notes to maturity or redemption, as the case may
be;
(3) 90 days pass after the deposit is made and during the
90-day period no Default specified in Section 6.01(7) or 6.01(8) with
respect to either Note Issuer occurs which is continuing at the end of
the period;
(4) the deposit does not constitute a default under any other
agreement binding on either Note Issuer;
(5) the Note Issuers deliver to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, unless such trust shall be
registered under and act as exempt from registration thereunder;
(6) in the case of the legal defeasance option, the Note
Issuers shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Note Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of this Indenture there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Note
Issuers shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(8) the Note Issuers delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article VIII have been complied with.
Anything in this Section 8.02 to the contrary notwithstanding,
the Trustee shall deliver or pay to Iridium from time to time upon the request,
in writing, by either Note Issuer any cash in dollars or Government Securities
held by it as provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
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written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
Before or after a deposit, the Note Issuers may make
arrangements satisfactory to the Trustee for the redemption of Notes at a future
date in accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or Government Securities deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from Government
Securities through the Paying Agent and in accordance with this Indenture to the
payment of principal of and interest on the Notes.
SECTION 8.04. Repayment to Note Issuers. The Trustee and the
Paying Agent shall promptly turn over to Iridium upon request any excess money
or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to Iridium upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Holders entitled to the money must look to the Issuers for
payment as general creditors.
SECTION 8.05. Indemnity for Government Securities. The Note
Issuers shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited Government Securities or the
principal and interest received on such Government Securities other than any
tax, fee or other charge which by law is for the account of the Holders.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or Government Securities in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Note Issuers' obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article VIII until such time as the Trustee or Paying
Agent is permitted to apply all such money or Government Securities in
accordance with this Article VIII; provided, however, that, if the Note Issuers
have made any payment of interest on or principal of any Notes because of the
reinstatement of its obligations, the Note Issuers shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
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ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Note Issuers,
the Guarantor Subsidiaries and the Trustee may amend this Indenture or the
Securities without notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Section 4.15 or Article V;
(3) to provide for uncertificated Securities in addition to or
in place of Notes; provided, however, that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code or
in a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
(4) to add further Subsidiary Guaranties with respect to the
Notes or to release Guarantor Subsidiaries when permitted by the terms
hereof, or to secure the Notes;
(5) to add to the covenants of the Note Issuers for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Note Issuers;
(6) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the
rights of any Holder; and
(8) to provide for the issuance and authorization of the
Exchange Notes or Private Exchange Notes.
After an amendment under this Section becomes effective, the
Note Issuers shall mail to Holders a notice briefly describing such amendment.
The failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Note Issuers, the
Guarantor Subsidiaries and the Trustee may amend this Indenture or the Notes
without notice to any Holder but with the written consent of the Holders of at
least a majority in principal amount of the Notes. The Holders of at least a
majority in principal amount of the Notes may waive compliance by the Note
Issuers or any Guarantor Subsidiary with any provision or covenant of this
Indenture or the Notes. However, without the consent of each Holder of an
outstanding Note, an amendment or waiver may not:
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(1) reduce the amount of Notes whose Holders must consent to
an amendment or waiver;
(2) reduce the rate of or extend the time for payment of
interest or Liquidated Damages on any such Note;
(3) reduce the principal of or extend the Stated Maturity of
any such Note;
(4) reduce the premium payable upon the redemption of any Note
or change the time at which any Note may be redeemed in accordance with
Article III;
(5) make any Note payable in money other than that stated in
such Note;
(6) impair the right of any Holder to receive payment of
principal of and premium, Liquidated Damages and interest on such
Holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such Holder's
Notes.
(7) modify the Subsidiary Guaranties (except as contemplated
by the terms thereof or of this Indenture) in any manner adverse to the
Holders; or
(8) make any change in Section 6.04, Section 6.07 or the third
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Note Issuers shall mail to Holders a notice briefly describing such amendment.
The failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Notes shall comply with the TIA as then in
effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. However, any such Holder or subsequent Holder
may revoke the consent or waiver as to such Holder's Note or portion of the Note
if the Trustee receives the notice of revocation before the date the amendment
or waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Holder. An amendment or waiver becomes effective once the
consents from the Holders
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of the requisite percentage in principal amount of outstanding Notes are
received by the Notes Issuers or the Trustee.
The Note Issuers may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Notes. If an
amendment changes the terms of a Note, the Trustee may require the Holder of the
Note to deliver it to the Trustee. The Trustee may place an appropriate notation
on the Note regarding the changed terms and return it to the Holder.
Alternatively, if the Note Issuers or the Trustee so determines, the Note
Issuers in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing any
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture and
complies with the provisions hereof (including Section 9.03).
ARTICLE X
Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees. Each Guarantor
Subsidiary hereby jointly and severally unconditionally and irrevocably
guarantees, as a primary obligor and not merely as a surety, to each Holder and
to the Trustee and its successors and assigns (a) the full and punctual payment
of principal of and interest and Liquidated Damages on the Notes when due,
whether at maturity, by acceleration, by redemption or otherwise, and all other
monetary obligations of the Note Issuers under this Indenture (including
obligations to the Trustee) and the Notes and (b) the full and punctual
performance within applicable grace periods of all other obligations of the
Issuers whether for expenses, indemnification or otherwise under this Indenture
and the Notes (all the foregoing being hereinafter collectively called the
"Obligations"). Each Guarantor Subsidiary further agrees that the Obligations
may be extended or renewed, in whole or in part, without notice or further
assent from each such Guarantor
<PAGE> 78
71
Subsidiary, and that each such Guarantor Subsidiary shall remain bound under
this Article X notwithstanding any extension or renewal of any Obligation.
Each Guarantor Subsidiary waives presentation to, demand of,
payment from and protest to the Note Issuers of any of the Obligations and also
waives notice of protest for nonpayment. Each Guarantor Subsidiary waives notice
of any default under the Notes or the Obligations. The obligations of each
Guarantor Subsidiary hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Note Issuers or any other Person under this Indenture, the
Notes or any other agreement or otherwise; (b) any extension or renewal of any
thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Notes or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Obligations or
any of them; (e) the failure of any Holder or Trustee to exercise any right or
remedy against any other guarantor of the Obligations; or (f) any change in the
ownership of such Guarantor Subsidiary, except as provided in Section 10.02(b).
Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
The obligations of each Guarantor Subsidiary hereunder shall
not be subject to any reduction, limitation, impairment or termination for any
reason (except based on actual payment or performance or any release or
termination contemplated by this Indenture), including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Guarantor Subsidiary herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Notes or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Obligations,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of, or would
otherwise operate as a discharge of, a surety as a matter of law or equity.
Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of principal of or interest on
any Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Note Issuers or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor Subsidiary by virtue hereof, upon the failure of the Note Issuers to
pay the principal of or interest on any Obligation when and
<PAGE> 79
72
as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Obligation, each
Guarantor Subsidiary hereby promises to and shall, upon receipt of written
demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the
Holders or the Trustee an amount equal to the sum of (i) the unpaid principal
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Note Issuers to the Holders and the Trustee.
Each Guarantor Subsidiary agrees that it shall not be entitled
to any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations. Each
Guarantor Subsidiary further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article VI for
the purposes of any Subsidiary Guaranty herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Guarantor Subsidiary for the purposes of this Section.
Each Guarantor Subsidiary also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the
Trustee or any Holder in enforcing any rights under this Section.
SECTION 10.02. Limitation on Liability. (a) Any term or
provision of this Indenture to the contrary notwithstanding, the maximum,
aggregate amount of the obligations guaranteed hereunder by any Guarantor
Subsidiary shall not exceed the maximum amount that can be hereby guaranteed
without rendering this Indenture, as it relates to any Guarantor Subsidiary,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.
(b) This Subsidiary Guaranty as to any Guarantor Subsidiary
shall terminate and be of no further force or effect and such Guarantor
Subsidiary shall be released from its obligations in respect of this Subsidiary
Guaranty upon (i) the sale or other transfer (x) by such Guarantor Subsidiary of
all or substantially all of its assets or (y) of all of the Capital Stock of
such Guarantor Subsidiary, to a Person other than Iridium or a Subsidiary of
Iridium; provided, however, that such sale or transfer shall be deemed to
constitute an Asset Disposition and the Note Issuers shall comply with its
obligations under Section 4.06; (ii) the designation by Iridium of such
Guarantor Subsidiary as an Unrestricted Subsidiary in accordance with this
Indenture; (iii) reorganization of such Guarantor Subsidiary as a Foreign
Subsidiary; or (iv) upon satisfaction of the requirements of Section 5.01(d) or
8.01(b), as the case may be, that would permit such a release.
SECTION 10.03. Successors and Assigns. This Article X shall be
binding upon each Guarantor Subsidiary and its successors and assigns and shall
enure to the benefit of the
<PAGE> 80
73
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges conferred upon that party in this Indenture and in the Notes shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 10.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article X shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article X at
law, in equity, by statute or otherwise.
SECTION 10.05. Modification. No modification, amendment or
waiver of any provision of this Article X, nor the consent to any departure by
any Guarantor Subsidiary therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Guarantor Subsidiary in any case
shall entitle such Guarantor Subsidiary to any other or further notice or demand
in the same, similar or other circumstances.
SECTION 10.06. Initial Guarantors; Execution of Supplemental
Indenture for Future Guarantor Subsidiaries. Each Restricted Subsidiary which is
required to become, or is designated by Iridium to become, a Guarantor
Subsidiary pursuant to Section 4.15 shall promptly execute and deliver to the
Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to
which such Subsidiary shall become a Guarantor Subsidiary under this Article X
and shall guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Note Issuers shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Subsidiary Guaranty of such Guarantor
Subsidiary is a legal, valid and binding obligation of such Guarantor
Subsidiary, enforceable against such Guarantor Subsidiary in accordance with its
terms.
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
<PAGE> 81
74
SECTION 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail or by national
overnight courier service addressed as follows:
if to any of the Issuers:
c/o Iridium LLC
1575 Eye Street, N.W.
Washington, DC 20006
Attention: General Counsel
Facsimile: (202) 408-3761
if to the Trustee:
State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Attention: Mr. Shawn George
Facsimile: (617) 664-5371
The Issuers or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at such Holder's address as it appears on the registration books
of the Registrar and shall be sufficiently given if so mailed by first class
mail within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it, except that any such notice to
the Trustee must be received by a Trust Officer to be duly given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice.
SECTION 11.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
<PAGE> 82
75
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Issuers to the Trustee to take
or refrain from taking any action under this Indenture, the Note Issuers shall,
if requested by the Trustee, furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee and complying with Section 11.05 stating
that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have
been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee and complying with Section 11.05 stating
that, in the opinion of such counsel, all such conditions precedent
have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Notes Disregarded. In determining whether
the Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Issuers or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Issuers shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Notes outstanding at the time shall be considered
in any such determination.
SECTION 11.07. Rules by Trustee Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
<PAGE> 83
76
SECTION 11.08. Legal Holidays. If a payment date is not a
Business Day, payment shall be made on the next succeeding day that is a
Business Day, and no interest shall accrue for the intervening period. If a
regular record date is not a Business Day, the record date shall not be
affected.
SECTION 11.09. Governing Law. THIS INDENTURE AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.10. No Recourse Against Others. A director,
officer, employee, incorporator or member or stockholder, as such, of Iridium
shall not have any liability for any obligations of any Issuer under the Notes
or this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Notes. Such waiver will not constitute a
waiver of liabilities under the federal securities laws if it is the view of the
SEC that such a waiver would be against public policy.
SECTION 11.11. Successors. All agreements of the Issuers in
this Indenture and the Notes shall bind their successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 84
77
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
IRIDIUM LLC
by /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM CAPITAL CORPORATION
by /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM ROAMING LLC
by /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM IP LLC
by /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee
by /s/ Paul D. Allen
-------------------------
Name: Paul D. Allen
Title: Vice President
<PAGE> 85
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
[Global Note Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS
OR THEIR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1)
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.(1)
[Restricted Note Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES
- ----------
(1) These paragraphs should only be added if the Security is issued in
global form.
<PAGE> 86
2
ACT (IF AVAILABLE), AND, IN EACH CASE (A) THROUGH (E), IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS AND SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES
(A) THROUGH (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
11 1/4% SENIOR NOTE DUE 2005, SERIES C
No. CUSIP No. [ ]
$[ ]
IRIDIUM LLC, a Delaware limited liability corporation and IRIDIUM
CAPITAL CORPORATION, a Delaware corporation, as joint and several obligors,
promise to pay to [ ], or registered assigns, the principal sum of $[__________]
on July 15, 2005.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
<PAGE> 87
3
Additional provisions of this Note are set forth on the other side
of this Note.
Dated: October 17, 1997
IRIDIUM LLC
By:_________________________
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By:_________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture,
By:_______________________
Authorized Signatory
<PAGE> 88
4
Guaranteed pursuant to the Indenture:
IRIDIUM ROAMING LLC
By:________________________
Name:
Title:
IRIDIUM IP LLC
By:_________________________
Name:
Title:
<PAGE> 89
5
FORM OF REVERSE SIDE OF INITIAL NOTE
11 1/4% Senior Note due 2005, Series C
1. Interest.
IRIDIUM LLC, a Delaware limited liability company ("Iridium") and
IRIDIUM CAPITAL CORPORATION, a Delaware corporation ("Capital" and together with
Iridium, the "Note Issuers"), as joint and several obligors, and IRIDIUM ROAMING
LLC and IRIDIUM IP LLC (together, the "Guarantor Subsidiaries", and together
with the Note Issuers, the "Issuers"), promise to pay interest on the principal
amount of the Notes at the rate per annum shown above. Iridium will pay interest
in cash semi-annually in arrears on January 15 and July 15 of each year (each an
"Interest Payment Date"), commencing January 15, 1998. Interest payable on the
Notes shall be computed on the basis of a 360-day year comprised of 30-day
months.
2. Method of Payment.
The Note Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered holders at the close of business
on the Record Date immediately preceding the interest payment date even if the
Notes are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender the Notes to the Trustee to
collect principal payments. The Note Issuers shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Note
Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Note Issuers may
deliver any such interest payment to the Trustee or to a holder at the holder's
registered address.
3. Paying Agent and Registrar
Initially, STATE STREET BANK AND TRUST COMPANY, a Massachusetts
banking corporation ("Trustee"), will act as Paying Agent and Registrar. Iridium
may appoint and change any Paying Agent, Registrar or co-registrar without
notice to the Holders. Iridium, Capital or any of Iridium's domestically
incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. Indenture and Guarantees.
The Note Issuers issued the Notes under an Indenture dated as of
October 17, 1997 (the "Indenture"), among the Note Issuers, as joint and several
obligors, the Guarantor Subsidiaries (as defined in the Indenture) and the
Trustee. Capitalized terms used herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Notes include those stated in
the Indenture and those made part of such Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
obligations of the Note Issuers limited in aggregate principal amount to
$300,000,000. Payment on each Note is guaranteed on a senior basis, jointly and
severally, by the Guarantor Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 90
6
5. Optional Redemption.
Except as described in the next succeeding paragraph, the Notes will
not be redeemable at the option of the Note Issuers prior to July 15, 2002. On
and after such date, the Notes will be redeemable, at either Note Issuer's
option, in whole or in part, at any time upon not less than 30 nor more than 60
days' prior notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption), if redeemed during the
12-month period commencing on July 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
2002 105.625%
2003 102.813%
2004 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to July
15, 2000, either Note Issuer may redeem in the aggregate up to 33-1/3% of the
original aggregate principal amount of the Notes with the cash proceeds to
Iridium of one or more Equity Offerings, at a redemption price (expressed as a
percentage of principal amount thereof) of 111.250% plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption); provided, however, that at least 66-2/3% of the original aggregate
principal amount of the Notes must remain outstanding after each such
redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion deems to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
7. Subsidiary Guaranties.
The Initial Guarantors will provide Subsidiary Guaranties on the
Issue Date. In the event that, after the Issue Date, Iridium acquires or creates
a Subsidiary other than a Foreign Subsidiary, Iridium will cause such Subsidiary
(unless such Subsidiary is an Unrestricted Subsidiary) to, jointly and
severally, as primary obligors and not merely as sureties, irrevocably Guarantee
on a senior unsecured basis the performance and punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all obligations of
the Note Issuers under the Indenture and the Notes issued pursuant thereto.
Iridium may cause any Foreign Subsidiary to execute and deliver a Subsidiary
Guaranty in accordance with the provisions of the Indenture, in which case such
Foreign Subsidiary will be a "Guarantor Subsidiary" for purposes of the
Indenture. Each Subsidiary Guaranty will be limited in amount to an amount not
to exceed the maximum amount that can be Guaranteed by the applicable Guarantor
Subsidiary without rendering such Subsidiary Guaranty voidable under applicable
law relating to fraudulent conveyance or fraudulent
<PAGE> 91
7
transfer or similar laws affecting the rights of creditors generally.
A Subsidiary Guaranty will be released upon (i) the sale of all of
the Capital Stock, or all or substantially all of the assets, of the applicable
Guarantor Subsidiary (in each case to an entity other than to Iridium or a
Subsidiary of Iridium), (ii) the designation by Iridium of the applicable
Guarantor Subsidiary as an Unrestricted Subsidiary, in each case in compliance
with the Indenture, (iii) the reorganization of the applicable Guarantor
Subsidiary as a Foreign Subsidiary or (iv) upon satisfaction of the requirements
of Section 5.01(d) (merger) or 8.01(b) (defeasance) of the Indenture.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, each Holder will have
the right to require the Note Issuers to repurchase all or any part of such
Holder's Notes at a purchase price in cash equal to 101% of the principal amount
of the Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase.
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall, subject to the requirements of
applicable escheat laws, pay the money back to the Note Issuers at its written
request unless an abandoned property law designates another Person. After any
such payment, Holders entitled to the money must look only to the Note Issuers
and not to the Trustee for payment.
12. Legal Defeasance and Covenant Defeasance.
The Note Issuers at any time may terminate all their obligations
under the Notes and the Indenture upon satisfaction of certain conditions
specified in the Indenture, except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and
to maintain a registrar and paying agent in respect of the Notes. The Note
Issuers at any time may terminate their obligations under certain restrictive
covenants. If the Note Issuers exercise their legal defeasance option or their
covenant defeasance option, each Guarantor Subsidiary will be released from all
of its obligations with respect to its Subsidiary Guaranty (and no Restricted
Subsidiary (other than Capital) will thereafter be obligated to execute,
deliver, or endorse any Note; nor shall any such execution, delivery or
endorsement thereafter bind any Restricted Subsidiary).
<PAGE> 92
8
13. Amendment and Waiver.
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default and its consequences or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding. Without the consent of any
Holder, the Note Issuers and the Trustee may amend the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of either Note Issuer under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to add further Subsidiary Guaranties with respect to such
Notes, to release Guarantor Subsidiaries when permitted by such Indenture, to
secure such Notes, to add to the covenants of the Note Issuers for the benefit
of the Holders of such Notes or to surrender any right or power conferred upon
the Note Issuers, to make any change that does not adversely affect the rights
of any Holder of such Notes or to comply with any requirement of the SEC in
connection with the qualification of such Indenture under the TIA.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of Iridium and its Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue capital stock of
subsidiaries, to sell assets, to permit restrictions on dividends and other
payments by subsidiaries to Iridium, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates, to
maintain insurance or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions. The Note Issuers
must report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default under the Indenture occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Notes by notice to the Note Issuers and the Trustee in writing may
declare the principal of and accrued but unpaid interest on and Liquidated
Damages, if any, on all the Notes to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Note Issuer occurs and is continuing, the principal of and Liquidated Damages,
if any, and interest on all the Notes will become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. Under certain circumstances, the Holders of a majority in
principal amount of the Notes then outstanding may rescind any such acceleration
with respect to the Notes and its consequences.
16. No Recourse Against Others.
No director, officer, employee, incorporator or member of Iridium,
as such, will have any liability for any obligations of the Note Issuers or any
Guarantor Subsidiary under the Notes or the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability (such waiver
will not constitute a waiver of liabilities under the Federal securities laws,
however, if it is the view of the SEC that such a waiver would be against public
policy).
17. Registration Rights.
Pursuant to the Exchange and Registration Rights Agreement, the
Issuers will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the holders of Notes shall, subject
<PAGE> 93
9
to certain limitations, have the right to exchange Initial Notes for the
Exchange Notes or Private Exchange Notes, which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Notes. The Holders shall be entitled to receive certain
liquidated damages in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Exchange and Registration Rights Agreement.
18. Trustee Dealings with the Note Issuers
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Note Issuers or its Affiliates and may otherwise deal with the Note
Issuers or its Affiliates with the same rights it would have if it were not
Trustee.
19. Governing Law
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Note Issuers have caused CUSIP numbers to
be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
<PAGE> 94
10
THE NOTE ISSUERS WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF
THIS NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20006
ATTENTION: GENERAL COUNSEL
<PAGE> 95
11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Note on the books of the Note Issuers. The agent may substitute
another to act for him or her.
___________________________________
Date:________________ Your Signature:______________
Signature Guarantee:_______________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
___________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 96
12
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $ principal amount of Notes held in (check
applicable space) _________________ book-entry or ________________ definitive
form by the undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above), subject to the restrictions
in Article II of the Indenture;
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Notes and the last date, if any, on which such Notes were owned by the
Note Issuers or any Affiliate of the Note Issuers, the undersigned confirms that
such principal amount of Notes are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW:
(1) [ ] to the Issuers; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933)
that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction meeting
the requirements of Rule 904 under the Securities Act of 1933;
or
(5) [ ] inside the United States to an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is an institutional investor acquiring in
a transaction exempt from the registration requirements of the
Securities Act.
<PAGE> 97
13
Unless one of the boxes is checked, the Issuers or the Trustee will refuse
to register any of the Notes evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Issuers or the Trustee may require,
prior to registering any such transfer of the Notes, such legal opinions,
certifications and/or other information satisfactory to each of them to
confirm that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the
Securities Act of 1933.
______________________________
Signature
Signature Guarantee:
______________________________ ______________________________
Signature must be guaranteed Signature
______________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Note
Issuers as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:________ ______________________
Signature
NOTICE: To be executed by
an executive officer
This certificate is in addition to any other certificates that may be required
under the Indenture.
<PAGE> 98
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE(1)
The following increases or decreases in this Global Note have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal amount
Amount of decrease Amount of increase of this Global Signature of
in Principal in Principal Note authorized officer
Date of Amount of this Amount of this following such of Trustee or
Exchange Global Note Global Note decrease or increase Notes Custodian
- -------- ------------------ ------------------ -------------------- ------------------
</TABLE>
- ----------
(1) This schedule should only be added if the Security is issued in global
form.
<PAGE> 99
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Note Issuers
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
[ ]
Date:__________ Your Signature:___________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:_____________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE> 100
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
OR PRIVATE EXCHANGE NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS
OR THEIR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
11 1/4% SENIOR NOTE DUE 2005, SERIES C
No. CUSIP No. [ ]
$[ ]
IRIDIUM LLC, a Delaware limited liability corporation and IRIDIUM
CAPITAL CORPORATION, a Delaware corporation, as joint and several obligors,
promise to pay to [ ], or registered assigns, the principal sum of $[ ] on July
15, 2005.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
<PAGE> 101
2
Additional provisions of this Note are set forth on the other side
of this Note.
Dated:
IRIDIUM LLC
By:_________________________
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By:_________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture,
By:_________________________
Authorized Signatory
<PAGE> 102
3
FORM OF REVERSE SIDE OF EXCHANGE NOTE
11 1/4% Senior Note due 2005, Series C
1. Interest.
IRIDIUM LLC, a Delaware limited liability company ("Iridium") and
IRIDIUM CAPITAL CORPORATION, a Delaware corporation ("Capital" and together with
Iridium, the "Note Issuers"), as joint and several obligors, and IRIDIUM ROAMING
LLC and IRIDIUM IP LLC (together, the "Guarantor Subsidiaries", and together
with the Note Issuers, the "Issuers"), promise to pay interest on the principal
amount of the Notes at the rate per annum shown above. Iridium will pay interest
in cash semi-annually in arrears on January 15 and July 15 of each year (each an
"Interest Payment Date"), commencing January 15, 1998. Interest payable on the
Notes shall be computed on the basis of a 360-day year comprised of 30-day
months.
2. Method of Payment.
The Note Issuers shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered holders at the close of business
on the Record Date immediately preceding the interest payment date even if the
Notes are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender the Notes to the Trustee to
collect principal payments. The Note Issuers shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Note
Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Note Issuers may
deliver any such interest payment to the Trustee or to a holder at the holder's
registered address.
3. Paying Agent and Registrar
Initially, STATE STREET BANK AND TRUST COMPANY, a Massachusetts
banking corporation ("Trustee"), will act as Paying Agent and Registrar. Iridium
may appoint and change any Paying Agent, Registrar or co-registrar without
notice to the Holders. Iridium, Capital or any of Iridium's domestically
incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. Indenture and Guarantees.
The Note Issuers issued the Notes under an Indenture dated as of
October 17, 1997 (the "Indenture"), among the Note Issuers, as joint and several
obligors, the Guarantor Subsidiaries (as defined in the Indenture) and the
Trustee. Capitalized terms used herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Notes include those stated in
the Indenture and those made part of such Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
obligations of the Note Issuers limited in aggregate principal amount to
$300,000,000. Payment on each Note is guaranteed on a senior basis, jointly and
severally, by the Guarantor Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 103
4
5. Optional Redemption.
Except as described in the next succeeding paragraph, the Notes will
not be redeemable at the option of the Note Issuers prior to July 15, 2002. On
and after such date, the Notes will be redeemable, at either Note Issuer's
option, in whole or in part, at any time upon not less than 30 nor more than 60
days' prior notice mailed by first-class mail to each Holder's registered
address, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption), if redeemed during the
12-month period commencing on July 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
2002 105.625%
2003 102.813%
2004 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to July
15, 2000, either Note Issuer may redeem in the aggregate up to 33-1/3% of the
original aggregate principal amount of the Notes with the cash proceeds to
Iridium of one or more Equity Offerings, at a redemption price (expressed as a
percentage of principal amount thereof) of 111.250% plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption); provided, however, that at least 66-2/3% of the original aggregate
principal amount of the Notes must remain outstanding after each such
redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion deems to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
7. Subsidiary Guaranties.
The Initial Guarantors will provide Subsidiary Guaranties on the
Issue Date. In the event that, after the Issue Date, Iridium acquires or creates
a Subsidiary other than a Foreign Subsidiary, Iridium will cause such Subsidiary
(unless such Subsidiary is an Unrestricted Subsidiary) to, jointly and
severally, as primary obligors and not merely as sureties, irrevocably Guarantee
on a senior unsecured basis the performance and punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all obligations of
the Note Issuers under the Indenture and the Notes issued pursuant thereto.
Iridium may cause any Foreign Subsidiary to execute and deliver a Subsidiary
Guaranty in accordance with the provisions of the Indenture, in which case such
Foreign Subsidiary will be a "Guarantor Subsidiary" for purposes of the
Indenture. Each Subsidiary Guaranty will be limited in amount to an amount not
to exceed the maximum amount that can be Guaranteed by the applicable Guarantor
Subsidiary without rendering such Subsidiary Guaranty voidable under applicable
law relating to fraudulent conveyance or fraudulent
<PAGE> 104
5
transfer or similar laws affecting the rights of creditors generally.
A Subsidiary Guaranty will be released upon (i) the sale of all of
the Capital Stock, or all or substantially all of the assets, of the applicable
Guarantor Subsidiary (in each case to an entity other than to Iridium or a
Subsidiary of Iridium), (ii) the designation by Iridium of the applicable
Guarantor Subsidiary as an Unrestricted Subsidiary, in each case in compliance
with the Indenture, (iii) the reorganization of the applicable Guarantor
Subsidiary as a Foreign Subsidiary, or (iv) upon satisfaction of the
requirements of Section 5.01(d) (merger) or 8.01(b) (defeasance) of the
Indenture.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, each Holder will have
the right to require the Note Issuers to repurchase all or any part of such
Holder's Notes at a purchase price in cash equal to 101% of the principal amount
of the Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase.
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall, subject to the requirements of
applicable escheat laws, pay the money back to the Note Issuers at its written
request unless an abandoned property law designates another Person. After any
such payment, Holders entitled to the money must look only to the Note Issuers
and not to the Trustee for payment.
12. Legal Defeasance and Covenant Defeasance.
The Note Issuers at any time may terminate all their obligations
under the Notes and the Indenture upon satisfaction of certain conditions
specified in the Indenture, except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and
to maintain a registrar and paying agent in respect of the Notes. The Note
Issuers at any time may terminate their obligations under certain restrictive
covenants. If the Note Issuers exercise their legal defeasance option or their
covenant defeasance option, each Guarantor Subsidiary will be released from all
of its obligations with respect to its Subsidiary Guaranty (and no Restricted
Subsidiary (other than Capital) will thereafter be obligated to execute,
deliver, or endorse any Note; nor shall any such execution, delivery or
endorsement thereafter bind any Restricted Subsidiary).
<PAGE> 105
6
13. Amendment and Waiver.
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default and its consequences or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding. Without the consent of any
Holder, the Note Issuers and the Trustee may amend the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of either Note Issuer under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to add further Subsidiary Guaranties with respect to such
Notes, to release Guarantor Subsidiaries when permitted by such Indenture, to
secure such Notes, to add to the covenants of the Note Issuers for the benefit
of the Holders of such Notes or to surrender any right or power conferred upon
the Note Issuers, to make any change that does not adversely affect the rights
of any Holder of such Notes or to comply with any requirement of the SEC in
connection with the qualification of such Indenture under the TIA.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of Iridium and its Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue capital stock of
subsidiaries, to sell assets, to permit restrictions on dividends and other
payments by subsidiaries to Iridium, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates, to
maintain insurance or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions. The Note Issuers
must report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default under the Indenture occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Notes by notice to the Note Issuers and the Trustee in writing may
declare the principal of and accrued but unpaid interest on and Liquidated
Damages, if any, on all the Notes to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Note Issuer occurs and is continuing, the principal of and Liquidated Damages,
if any, and interest on all the Notes will become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. Under certain circumstances, the Holders of a majority in
principal amount of the Notes then outstanding may rescind any such acceleration
with respect to the Notes and its consequences.
16. No Recourse Against Others.
No director, officer, employee, incorporator or member of Iridium,
as such, will have any liability for any obligations of the Note Issuers or any
Guarantor Subsidiary under the Notes or the Indenture or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of Notes by accepting a Note waives and releases all such liability (such waiver
will not constitute a waiver of liabilities under the Federal securities laws,
however, if it is the view of the SEC that such a waiver would be against public
policy).
17. Registration Rights.
Pursuant to the Exchange and Registration Rights Agreement, the
Issuers will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the holders of Notes shall, subject
<PAGE> 106
7
to certain limitations, have the right to exchange Initial Notes for the
Exchange Notes or Private Exchange Notes, which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Notes. The Holders shall be entitled to receive certain
liquidated damages in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Exchange and Registration Rights Agreement.
18. Trustee Dealings with the Note Issuers
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Note Issuers or its Affiliates and may otherwise deal with the Note
Issuers or its Affiliates with the same rights it would have if it were not
Trustee.
19. Governing Law
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Note Issuers have caused CUSIP numbers to
be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
THE NOTE ISSUERS WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF
THIS NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20006
ATTENTION: GENERAL COUNSEL
<PAGE> 107
8
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Note on the books of the Note Issuers. The agent may substitute
another to act for him.
_________________________________
Date:_____________ Your Signature:_________________________
Signature Guarantee:_________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
___________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 108
9
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE(1)
The following increases or decreases in this Global Note have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal amount
Amount of decrease Amount of increase of this Global Signature of
in Principal in Principal Note authorized officer
Date of Amount of this Amount of this following such of Trustee or
Exchange Global Note Global Note decrease or increase Notes Custodian
- -------- ------------------ ------------------ -------------------- ------------------
</TABLE>
- ----------
(1) This Schedule should only be added if the Security is issued in global
form.
<PAGE> 109
10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Note Issuers
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Note purchased by the
Note Issuers pursuant to Section 4.06 or 4.08 of the Indenture, state the
amount: $
Date:___________________ Your Signature:______________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:__________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE> 110
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
UPON TERMINATION OF RESTRICTED PERIOD
Iridium LLC
Iridium Capital Corporation
State Street Bank and Trust Company
c/o State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Re: Iridium LLC and Iridium Capital Corporation (the "Note Issuers")
11 1/4% Senior Notes due 2005, Series C (the "Notes")
Ladies and Gentlemen:
This letter relates to Notes represented by a temporary global note
certificate (the "Temporary Certificate"). Pursuant to Section 2.01 of the
Indenture dated as of October 17, 1997 relating to the Notes (the "Indenture"),
the undersigned hereby certifies that (1) the undersigned is the beneficial
owner of $[__________] principal amount of initial Notes represented by the
Temporary Certificate and (2) the undersigned is a Non-U.S. person (as defined
in the Indenture) to whom the initial Notes could be transferred in accordance
with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as
amended. Accordingly, you are hereby requested to transfer the principal amount
of initial Notes represented by the Temporary Certificate into a permanent
global certificate, all in the manner provided by the Indenture.
You and the Note Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:_________________________
Authorized Signature
<PAGE> 111
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO NON-QIB
INSTITUTIONAL ACCREDITED INVESTORS
Transferee Letter of Representation
Iridium LLC
Iridium Capital Corporation
State Street Bank and Trust Company
c/o State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of October 17,
1997 in regard of the 11 1/4% Senior Notes due 2005, Series C (the "Notes")
among Iridium LLC and Iridium Capital Corporation, as joint and several obligors
(the "Note Issuers"), Iridium Roaming LLC and Iridium IP LLC (the "Initial
Guarantors," and together with the Note Issuers, the "Issuers") and State Street
Bank and Trust Company as Trustee. Capitalized terms used but not defined herein
will have the meaning given them in the Indenture.
This certificate is delivered to request a transfer of $[__________]
principal amount of the Notes.
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:_____________________________
Address:_____________________________
Taxpayer ID Number:_____________________________
The undersigned represents and warrants to you that:
1. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act")) purchasing for its own account or for the
account of such an institutional "accredited investor" Notes in a transaction
exempt from the registration requirements of the Securities Act. The undersigned
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of its investment in the Notes and
invests in or purchase securities similar to the Notes in the normal course of
our business. The undersigned and any accounts for which it is acting are each
able to bear the economic risk of its investment.
2. The undersigned understands that the Notes have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. The undersigned agrees on its own
behalf and on behalf of any investor account for which it is purchasing Notes to
offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the
<PAGE> 112
2
last date on which the Issuers or any affiliate of an Issuer was the owner of
such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Issuers, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) in a transaction
complying with the requirements of Rule 144A under the Securities Act, to a
person it reasonably believes is a qualified institutional buyer under Rule 144A
(a "QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offshore transactions meeting the requirements of Rule 903 or
Rule 904 under the Securities Act or (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor", in a transaction exempt from the
registration requirements of the Securities Act (if available) and, in each case
(a) through (e), in accordance with all applicable securities laws of the states
of the United States and other jurisdictions. The foregoing restrictions on
resale will not apply subsequent to the Resale Restriction Termination Date. If
any resale or other transfer of the Notes is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Issuers and the Trustee, which shall provide, among other
things, that the transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Issuers
and the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Notes pursuant to clause
(d) or (e) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Issuers and the
Trustee.
TRANSFEREE:_________________________
BY:_________________________
<PAGE> 113
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR
TRANSFER TO RULE 144A GLOBAL SECURITY
BEARING A SECURITIES ACT LEGEND
Iridium LLC and
Iridium Capital Corporation
State Street Bank and Trust Company
c/o State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
[date]
Re: Iridium LLC and Iridium Capital Corporation (the "Note Issuers") 11
1/4% Senior C Notes due 2005, Series C (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of October 17,
1997 in regard of the Notes among the Note Issuers, as joint and several
obligors, and IRIDIUM Roaming LLC and Iridium IP LLC (the "Initial Guarantors,"
and together with the Note Issuers, the "Issuers") and State Street Bank and
Trust Company as Trustee. Capitalized terms used but not defined herein will
have the meaning given them in the Indenture.
This letter relates to $[______] aggregate principal amount of the
Notes which are held in [the form of a beneficial interest in the Regulation S
Temporary Global Note (CINS No. __________) with the Depositary in the name of
the undersigned] [definitive form].
The undersigned has requested transfer of such Notes to a Person who
will take delivery thereof in the form of a beneficial interest in the Rule 144A
Global Note (CUSIP No. ___________). In connection with such transfer, the
undersigned does hereby confirm that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and on the
Notes and pursuant to and in accordance with Rule 144A under the U.S. Securities
Act of 1933, as amended, and accordingly, the undersigned represents that:
1. the Notes are being transferred to a transferee that the
undersigned reasonably believes is purchasing the Notes for its own
account or one or more accounts with respect to which the transferee
exercises sole investment discretion; and
<PAGE> 114
2
2. the undersigned reasonably believes that transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A, in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States or any other jurisdiction.
[NAME OF TRANSFEROR]
By:___________________________
Name:
Title:
Dated:_______________________
<PAGE> 115
EXHIBIT F
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
[date]
Iridium LLC and
Iridium Capital Corporation
State Street Bank and Trust Company
c/o State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Attention: Corporate Trust Department
Re: Iridium LLC and Iridium Capital Corporation (the "Note Issuers")
11 1/4% Senior Notes due 2005, Series C (the "Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of October 17,
1997 in regard of the Notes among the Note Issuers, as joint and several
obligors, and Iridium Roaming LLC and Iridium IP LLC (the "Initial Guarantors,"
and together with the Note Issuers, the "Issuers") and State Street Bank and
Trust Company as Trustee. Capitalized terms used but not defined herein will
have the meaning given them in the Indenture.
In connection with our proposed sale of $[__________] aggregate
principal amount of the Notes, the undersigned confirms that such sale has been
effected pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
undersigned represents that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or the undersigned and any person
acting on its behalf reasonably believed that the transferee was outside
the United States or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither the
undersigned nor any person acting on its behalf knows that the transaction
has been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 904(b) of Regulation S, as
applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during the restricted period and
the provisions of Rule 903(c)(2) or Rule 904(c)(1) of Regulation S are
applicable thereto, the undesigned confirms that such sale has been made in
<PAGE> 116
2
accordance with the applicable provisions of Rule 903(c)(2) or Rule 904(c)(1),
as the case may be.
You and the Note Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
____________________________
[Name of Transferor]
By:____________________________
Authorized Signature
Name:
Title:
Date:
Upon transfer, the Notes should be registered in the name of the new beneficial
owner as follows:
Name:___________________________
Address:________________________
Taxpayer ID Number:_____________
<PAGE> 117
EXHIBIT G
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
[ ], among [NEW GUARANTOR SUBSIDIARY] (the "New Guarantor Subsidiary"), a
subsidiary of [IRIDIUM OR CAPITAL] (or its successor), a
______________________ (the "Note Issuers"), IRIDIUM LLC, a Delaware
limited liability company and IRIDIUM CAPITAL CORPORATION, a Delaware
corporation, on behalf of themselves and the Guarantor Subsidiaries (the
"Existing Guarantor Subsidiaries") under the Indenture referred to below,
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts bank and trust
company, as trustee under the indenture referred to below (the "Trustee")
W I T N E S S E T H :
WHEREAS Iridium LLC, a Delaware limited liability company and
Iridium Capital Corporation a Delaware corporation, as joint and several
obligors, have heretofore executed and delivered to the Trustee an Indenture
(the "Indenture"), dated as of October 17, 1997, providing for the issuance of
an aggregate principal amount of up to $300,000,000 of 11 1/4% Senior Notes due
2005, Series C (the "Notes") and the Initial Guarantors agreed to guarantee
those obligations;
WHEREAS Section 4.15 of the Indenture provides that under certain
circumstances the Note Issuers are required to cause the New Guarantor
Subsidiary to execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee
all of the Note Issuers' obligations under the Notes pursuant to a Subsidiary
Guaranty on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Note Issuers and Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Note Issuers, the Existing Guarantor Subsidiaries and
the Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Notes as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as otherwise
herein expressly provided or unless the context otherwise requires: (i) the
terms and expressions used herein shall have the same meanings as corresponding
terms and expressions used in the Indenture; and (ii) the words "herein,"
"hereof" and "hereby" and other words of similar import used in this Supplement
refer to this Supplement as a whole and not to any particular section hereof.
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
Guarantee the Note Issuers' obligations under the Notes on the terms and subject
to the conditions set forth in Article X of the Indenture and to be bound by all
other applicable provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions
<PAGE> 118
2
thereof shall remain in full force and effect. This Supplemental Indenture shall
form a part of the Indenture for all purposes, and every holder of Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
<PAGE> 119
3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR SUBSIDIARY],
By:_________________________
Name:
Title:
IRIDIUM LLC, on behalf
of itself and the Existing
Guarantor Subsidiaries,
By:_________________________
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By:_________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
as Trustee,
By:_________________________
Name:
Title:
<PAGE> 120
SCHEDULE I
Support Agreement, dated as of July 15, 1992 between Motorola and Iridium, as
amended.
<PAGE> 1
EXHIBIT 4.5.2
IRIDIUM OPERATING LLC
as Successor To
IRIDIUM LLC
11 1/4% Senior Notes due 2005, Series C
Guaranteed by Iridium Roaming LLC and Iridium IP LLC
--------------------------------------------
FIRST SERIES C NOTE SUPPLEMENTAL INDENTURE
Dated as of December 19, 1997
--------------------------------------------
State Street Bank and Trust Company,
Trustee
--------------------------------------------
Supplementing the Series C Note Indenture Dated
as of October 17, 1997 among Iridium LLC, Iridium Capital Corporation,
Iridium Roaming LLC, Iridium IP LLC and
State Street Bank and Trust Company, Trustee
<PAGE> 2
This FIRST SERIES C NOTE SUPPLEMENTAL INDENTURE, dated as of
December 19, 1997 (the "Supplemental Indenture"), is made by and among Iridium
LLC, a Delaware limited liability company ("Iridium"), Iridium Operating LLC, a
Delaware limited liability company ("Operating"), Iridium Capital Corporation, a
Delaware corporation ("Capital"), Iridium Roaming LLC, a Delaware limited
liability company ("Roaming"), Iridium IP LLC, a Delaware limited liability
company ("IP") and State Street Bank and Trust Company, as Trustee (the
"Trustee").
WHEREAS, Iridium, Capital, Roaming and IP have heretofore made,
executed and delivered to the Trustee an Indenture, dated as of October 17, 1997
(the "Indenture"), between Iridium, Capital, Roaming and IP and the Trustee,
providing for the issuance by Iridium and Capital of up to $300,000,000
aggregate principal amount of 11 1/4% Senior Notes Due 2005, Series C (the
"Series C Notes") and the guarantee of the Series C Notes by Roaming and IP (the
"Guarantees" and, together with the Notes, the "Securities"). Capitalized terms
used herein but not defined herein shall have the meanings ascribed thereto in
the Indenture.
WHEREAS, in connection with the closing of a Bank Credit Agreement
and contemporaneously with the execution of this Supplemental Indenture, Iridium
will convey or transfer substantially all of its assets to Operating, a
Wholly-Owned Restricted Subsidiary of Iridium, in order to facilitate the pledge
of such assets to the agent for the lenders under such Bank Credit Agreement.
Such conveyance or transfer by Iridium of substantially all of its assets to
Operating being an Asset Drop-Down Transaction.
<PAGE> 3
WHEREAS, Section 5.01 of the Indenture provides that in the event of
an Asset Drop-Down Transaction, the Wholly-Owned Restricted Subsidiary of
Iridium to which substantially all or all of the assets of Iridium are conveyed
or transferred, shall expressly assume, by a supplemental indenture to the
Indenture, executed and delivered to the Trustee in form satisfactory to the
Trustee, all the obligations of Iridium under this Indenture.
WHEREAS, upon the consummation of such Asset Drop-Down Transaction
Operating shall be a Successor Company.
WHEREAS, Section 5.01 of the Indenture provides that, in connection
with the Asset Drop-Down Transaction, (i) the Successor Company shall succeed,
and be substituted for, and may exercise every right and power of, Iridium under
the Indenture and the Securities and (ii) Iridium shall be released from all
obligations and covenants under the Indenture and the Securities.
WHEREAS, Section 9.01 of the Indenture provides that the Note
Issuers, the Guarantor Subsidiaries and the Trustee may amend the Indenture or
the Securities without notice to, or consent of, any Holder in order to comply
with Article V.
WHEREAS, Operating is executing and delivering to the Trustee this
Supplemental Indenture in accordance with Section 5.01 of the Indenture.
WHEREAS, all acts and things necessary to make this Supplemental
Indenture a valid, binding and legal agreement according to its terms have been
done and performed, including the delivery by Iridium to the Trustee of an
Officer's Certificate and
-2-
<PAGE> 4
an Opinion of Counsel, each stating that the conveyance or transfer of
substantially all or all of the assets of Iridium to Operating complies with the
Indenture.
WHEREAS, the execution of this Supplemental Indenture has in all
respects been duly authorized.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Operating hereby covenants and agrees with the Trustee, for the
equal and proportionate benefit of the respective Holders, as follows:
1. Operating hereby expressly assumes, from and after October 17,
1997, the due and punctual payment of the principal of and interest on all the
Securities and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by Iridium
under the Indenture. Operating is a limited liability company organized and
existing under the laws of the State of Delaware.
2. Operating shall, from and after October 17, 1997, by virtue of
the aforesaid assumption and the delivery of this Supplemental Indenture,
succeed to, and be substituted for, and may exercise every right and power, and
be subject to all the duties and obligations, of Iridium under the Indenture and
the Securities with the same effect as if Operating had been named as Iridium in
the Indenture and the Securities.
-3-
<PAGE> 5
3. Iridium shall, from and after the date hereof, by virtue of the
aforesaid assumption by Operating and the delivery of this Supplemental
Indenture, be released from all obligations and covenants under the Indenture
and the Securities.
4. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5. This Supplemental Indenture supplements the Indenture and shall
be a part and subject to all the terms thereof. Except as supplemented hereby,
the Indenture shall continue in full force and effect.
6. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York but without giving effect to
applicable principles of conflicts of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
7. This Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
8. This Supplemental Indenture shall be effective as of the date
hereof.
9. The recitals contained herein shall be taken as statements of
Operating and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Supplemental Indenture.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
IRIDIUM LLC
By: /s/ Robert W. Kinzie
-------------------------
Name: Robert W. Kinzie
Title: Chairman
IRIDIUM OPERATING LLC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM CAPITAL CORPORATION
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM IP LLC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
IRIDIUM ROAMING LCC
By: /s/ F. Thomas Tuttle
------------------------
Name: F. Thomas Tuttle
Title: Vice President, Secretary and
General Counsel
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Chi C. Ma
------------------------
Name: Chi C. Ma
Title: Assistant Vice President
-5-
<PAGE> 1
EXHIBIT 5.1
[SULLIVAN & CROMWELL LETTERHEAD]
January 15, 1997
Iridium Operating LLC,
Iridium Capital Corporation,
Iridium Roaming LLC,
Iridium IP LLC,
1575 Eye Street, N.W.,
Washington, D.C. 20005.
Dear Sirs:
In connection with the registration under the Securities Act
of 1933 (the "Act") of (i) $300,000,000 principal amount of 11 1/4% Senior Notes
due 2005, Series C/EN (the "Exchange Notes") of Iridium Operating LLC, a
Delaware limited liability company ("Iridium"), and its wholly-owned subsidiary
Iridium Capital Corporation, a Delaware corporation (together with Iridium, the
"Note Issuers"), and (ii) the Guarantees of the Exchange Notes (the
"Guarantees") by Iridium Roaming LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Iridium ("Roaming"), and Iridium IP LLC, a Delaware
limited
<PAGE> 2
Iridium Operating LLC -2-
Iridium Capital Corporation
Iridium Roaming LLC
Iridium IP LLC
liability company and a wholly-owned subsidiary of Iridium (together with
Roaming, the "Guarantor Subsidiaries") we, as your counsel, have examined such
corporate records, certificates and other documents, and such questions of law,
as we have considered necessary or appropriate for the purposes of this opinion.
The Exchange Notes and the Guarantees are to be issued pursuant to an Indenture
dated October 17, 1997 of the Note Issuers, Subsidiary Guarantors and State
Street Bank and Trust Company, as Trustee, as supplemented by a First
Supplemental Indenture dated December 18, 1997 (such indenture, as supplemented,
the "Indenture"). The Exchange Notes and the Guarantees are collectively
referred to herein as the "Securities."
Upon the basis of such examination, we advise you that, in our
opinion, when the Registration Statement has become effective under the Act, the
terms of the Securities and of their issuance and sale have been duly
established in conformity with the Indenture so as not to violate any applicable
law or result in a default under or breach of any agreement or instrument
binding upon any of the Note Issuers or the Guarantor Subsidiaries and so as to
comply with any requirement or restriction imposed by any court or governmental
body having jurisdiction over any of the Note Issuers or the Guarantor
<PAGE> 3
Iridium Operating LLC -3-
Iridium Capital Corporation
Iridium Roaming LLC
Iridium IP LLC
Subsidiaries, and the Securities have been duly executed and authenticated in
accordance with the Indenture and issued and sold as contemplated in the
Registration Statement, (i) the Exchange Notes will constitute valid and legally
binding obligations of the Note Issuers, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, and (ii) the Guarantees will constitute valid and legally binding
obligations of the Guarantor Subsidiaries, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
In rendering the foregoing opinion, we are expressing no
opinion as to Federal or state laws relating to fraudulent transfers.
The foregoing opinion is limited to the laws of the State of
New York and the General Corporation Law and Limited Liability Company Act of
the State of Delaware, and we are expressing no opinion as to the effect of the
laws of any other jurisdiction.
<PAGE> 4
Iridium Operating LLC -4-
Iridium Capital Corporation
Iridium Roaming LLC
Iridium IP LLC
We have relied as to certain matters on information obtained
from public officials, officers of the Note Issuers and Guarantor Subsidiaries
and other sources believed by us to be responsible, and we have assumed that the
Indenture has been duly authorized, executed and delivered by the Trustee, an
assumption which we have not independently verified.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading
"Validity of the Securities" in the Prospectus. In giving such consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 10.2
MANAGEMENT SERVICES AGREEMENT
as amended and restated on December 18, 1997
by and among
IRIDIUM WORLD COMMUNICATIONS LTD.
and
IRIDIUM LLC
and
IRIDIUM OPERATING LLC
<PAGE> 2
ARTICLE 1
<TABLE>
<S> <C>
GENERAL DUTIES OF MANAGER WITH RESPECT TO IWCL ............................... 2
1.1 General Duties of Manager ............................................ 2
1.2 Iridium Termination Right with Respect to IWCL ....................... 2
1.3 Treasury ............................................................. 2
1.4 Legal; Indemnification ............................................... 3
1.5 Accounting System .................................................... 5
1.6 Books and Records of IWCL ............................................ 5
1.7 Tax Returns and Elections; Payment of Tax Liabilities ................ 5
1.8 Administration of Borrowing Documentation ............................ 6
1.9 Insurance ............................................................ 6
1.10 Licenses and Permits ................................................. 6
1.11 Investor Relations ................................................... 6
1.12 Public Relations ..................................................... 6
1.13 Securities Law and Other Filings ..................................... 6
1.14 Other ................................................................ 6
1.15 Personnel; Payment of Outside Directors' Fees and Expenses ........... 7
1.16 IWCL Board's Right to Deliver Instructions ........................... 7
1.17 Manager's Right to Request Instructions .............................. 7
1.18 Financial Statements; Periodic Reports ............................... 7
1.19 Interested Transactions .............................................. 8
1.20 Section 2.09(b) Actions .............................................. 8
1.21 Reserved Actions ..................................................... 8
1.22 Fees and Charges ..................................................... 8
ARTICLE 2
GENERAL DUTIES OF MANAGER WITH RESPECT TO OPERATING .......................... 9
2.1 General Duties of Manager ............................................ 9
2.2 Authority of Officers ................................................ 9
2.3 Administration of Contracts for the Development, Commercialization and
Operation of the IRIDIUM System ...................................... 9
2.4 Termination with Respect to Operating ................................ 10
2.5 Treasury ............................................................. 10
2.6 Legal; Indemnification ............................................... 10
2.7 Accounting System .................................................... 12
2.8 Books and Records of Operating ....................................... 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
2.9 Tax Returns and Elections; Payment of Tax Liabilities ................ 12
2.10 Administration of Borrowing Documentation ............................ 12
2.11 Insurance ............................................................ 13
2.12 Licenses and Permits ................................................. 13
2.13 Investor Relations ................................................... 13
2.14 Public Relations ..................................................... 13
2.15 Securities Law and Other Filings ..................................... 13
2.16 Financial Statements; Periodic Reports ............................... 13
2.17 Other ................................................................ 14
2.18 Reserved Actions ..................................................... 14
ARTICLE 3
OBLIGATIONS OF OPERATING WITH RESPECT TO IRIDIUM ............................. 14
3.1 Obligation to Fund Operations of Iridium ............................. 14
3.2 Payment Procedure .................................................... 16
3.3 Iridium LLC Reserve Capital Call ..................................... 16
ARTICLE 4
MISCELLANEOUS ................................................................ 16
4.1 Standards for Performance of Services ................................ 16
4.2 Term ................................................................. 16
4.3 Assignment ........................................................... 17
4.4 Non-Recourse ......................................................... 17
4.5 Major Decisions ...................................................... 17
4.6 Independent Contractor; Limited Agency ............................... 17
4.7 Counterparts ......................................................... 18
4.8 Binding on Successors ................................................ 18
4.9 Severability ......................................................... 18
4.10 Notices .............................................................. 18
4.11 Captions ............................................................. 19
4.12 Choice of Law ........................................................ 19
4.13 Jurisdiction and Service of Process .................................. 19
4.14 Authority ............................................................ 19
4.15 Entire Agreement ..................................................... 20
4.16 Amendments ........................................................... 20
</TABLE>
<PAGE> 4
MANAGEMENT SERVICES AGREEMENT
This amended and restated MANAGEMENT SERVICES AGREEMENT
("Agreement") is dated as of December 18, 1997 and is made by and among IRIDIUM
LLC, a Delaware limited liability company ("Iridium" or the "Manager"), Iridium
Operating LLC, a Delaware limited liability company ("Operating") and IRIDIUM
WORLD COMMUNICATIONS LTD., a Bermuda company ("IWCL"). Iridium, Operating and
IWCL are sometimes referred to herein collectively as the "Parties" and each
individually as a "Party".
WHEREAS, Iridium was organized pursuant to a Limited Liability
Company Agreement dated as of July 29, 1996, as amended (the "LLC Agreement");
WHEREAS, Iridium is developing and commercializing the IRIDIUM
System, a wireless communications system designed to provide global wireless
telecommunications services;
WHEREAS, in order to facilitate, among other things, a commercial
bank financing (the "Secured Bank Facility") of the IRIDIUM System, Iridium will
transfer substantially all of its assets, including but not limited to its
rights in the IRIDIUM System, to Operating (the "Asset Transfer"), a
wholly-owned subsidiary of Iridium, and Iridium will pledge all of its
membership interests in Operating to an agent for a consortium of lenders
providing the Secured Bank Facility (the "Secured Lenders") as security for
borrowings under such facility;
WHEREAS, Iridium's employees and consultants and its rights and
obligations under certain agreements, including but not limited to its leases on
certain properties and its insurance and employee benefit agreements, will not
be transferred to Operating in connection with the Asset Transfer;
WHEREAS, Operating, with the support of Iridium, will be able to
manage the development and commercialization of the IRIDIUM System;
WHEREAS, after the Asset Transfer Iridium will not have access to
the funds it has raised for the development and management of the IRIDIUM
System; its ability to generate revenue independently will be limited and,
therefore, it will be necessary for Operating to provide Iridium with the funds
sufficient to satisfy the obligations incident to the management of the IRIDIUM
System and the businesses related thereto, including but not limited to the
funds necessary for Iridium to satisfy its obligations to IWCL and Operating
under this Agreement;
<PAGE> 5
WHEREAS, IWCL has been established to serve as an entity through
which Iridium will obtain access to the equity capital markets and through which
special financial transactions will be conducted; and
WHEREAS, the Parties hereto desire to enter into this Agreement
pursuant to which (i) Iridium shall supervise and manage the day-to-day
operations of Operating and IWCL and (ii) Operating shall provide Iridium with
funds sufficient to operate and manage the IRIDIUM System and the businesses
related thereto, on the terms set forth herein;
NOW THEREFORE in consideration of the mutual covenants and
agreements hereinafter set forth, the Parties hereto agree as follows:
ARTICLE 1
GENERAL DUTIES OF MANAGER WITH RESPECT TO IWCL
1.1 General Duties of Manager. From and after the date hereof until
the earlier of the date (the "IWCL Termination Date") (i) on which IWCL and
Iridium mutually agree that this Agreement shall terminate with respect to IWCL
or (ii) specified by Iridium in an IWCL Termination Notice (as defined below)
pursuant to Section 1.2, the Manager shall, subject to the direction and
oversight of the Board of Directors of IWCL (the "IWCL Board") and any committee
thereof, and subject to the Manager observing and complying with the Memorandum
of Association and Bye-Laws of IWCL, supervise and manage the day-to-day
operations of IWCL. The Manager shall implement or cause to be implemented all
policy decisions relating to the operations of IWCL approved by the IWCL Board
or any committee thereof and shall conduct or cause to be conducted the business
and affairs of IWCL in accordance with and as limited by this Agreement. The
Manager shall have the authority on behalf of IWCL to take all actions and make
all decisions (including and in addition to those described in Sections 1.2
through 1.14 and 1.18) other than as provided in Sections 1.19 through 1.21.
1.2 Iridium Termination Right with Respect to IWCL. Iridium shall
have the right within 120 days after the occurrence of an Iridium Bermuda Change
of Control (as defined in the LLC Agreement), to terminate all obligations of
Iridium to IWCL under this Agreement by giving written notice to IWCL (the "IWCL
Termination Notice") stating the date on which such termination of this
Management Agreement shall become effective.
1.3 Treasury. The Manager shall administer all of IWCL's treasury
functions including collection and disbursement of funds and management of
receivables and payables. IWCL's funds shall not be commingled with the
Manager's funds.
2--
<PAGE> 6
1.4 Legal; Indemnification. (a) Legal Affairs. The Manager shall
administer all of IWCL's legal affairs including any litigation by, against or
involving IWCL.
(b) Indemnification. Iridium shall indemnify and hold harmless IWCL
and each of IWCL's officers, directors, employees and consultants (each an "IWCL
Indemnified Party") against any losses, claims, damages or liabilities to which
such indemnified party may become subject, under the United States Securities
Act of 1933, as amended (the "Securities Act"), or otherwise, that directly or
indirectly arise out of or are related to IWCL's participation in the management
and business of Iridium, including but not limited to capital raising activities
conducted at the request of Iridium, and will reimburse such IWCL Indemnified
Party for any legal or other expenses reasonably incurred by such IWCL
Indemnified Party in connection with investigating or defending any such action
or claim, as such losses, damages, liabilities or expenses are incurred;
provided, however, that Iridium shall not be liable in any such case to any IWCL
Indemnified Party to the extent that any such loss, claim, damage or liability
arises out of or is based upon an intentional act or omission of the indemnified
party which was contrary to any written instruction or request of Iridium or
which amounted to willful misconduct on the part of such IWCL Indemnified Party.
(c) Proceedings. Promptly after receipt by an IWCL Indemnified Party
of notice of the commencement of any action, suit or proceeding as to which a
claim in respect thereof is to be made against Iridium under this Section, the
IWCL Indemnified Party shall notify Iridium in writing of the commencement
thereof, but the omission so to notify Iridium shall not relieve Iridium from
any liability which it may have to any indemnified party otherwise than under
Section 1.4(b). In case any such action shall be brought against any IWCL
Indemnified Party and it shall notify Iridium of the commencement thereof,
Iridium shall be entitled to participate therein and, to the extent that it
shall wish, to assume the defense thereof, with counsel reasonably satisfactory
to such IWCL Indemnified Party (which shall not, except with the consent of the
IWCL Indemnified Party, be counsel to Iridium), and, after notice from Iridium
to such IWCL Indemnified Party of its election so to assume the defense thereof,
Iridium shall not be liable to such IWCL Indemnified Party under this Section
1.4 for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such IWCL Indemnified Party, in connection with the
defense thereof other than reasonable costs of investigation. Iridium shall not,
without the written consent of each IWCL Indemnified Party affected thereby,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of each such IWCL Indemnified Party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or
3--
<PAGE> 7
on behalf of any such IWCL Indemnified Party. No IWCL Indemnified Party shall
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution has been or may be sought hereunder without the
prior written consent of Iridium.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 1.4 is for any reason held to be unenforceable although applicable
in accordance with its terms, Iridium shall contribute to the losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by any IWCL Indemnified Party in such proportion as
shall be appropriate to reflect (i) the relative benefits received, directly or
indirectly, by Iridium on the one hand and the IWCL Indemnified Party on the
other hand, with respect to IWCL's participation in the management and business
of Iridium, including but not limited to capital raising activities conducted at
the request of Iridium, and (ii) the relative fault of Iridium on the one hand
and the IWCL Indemnified Party on the other, with respect to the acts or
omissions which resulted in such loss, liability, claim, damage or expense, or
action in respect thereof, as well as any other relevant equitable
considerations. Iridium and IWCL agree that it would not be just and equitable
if contribution pursuant to this Section 1.4 were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from Iridium if Iridium was not guilty of such
fraudulent misrepresentation.
(e) Bye-Law Indemnification. To the extent that (i) IWCL is required
to pay or reimburse any director, secretary or other officer of IWCL, or any of
their heirs, executors or administrators (each, a "Bye-Law Indemnified Party"),
pursuant to the indemnification provided by Bye-Law 30 of IWCL's Bye-Laws (the
"Bye-Law Indemnity") and (ii) such Bye-Law Indemnified Party is not otherwise
entitled to indemnification by, or contribution from, Iridium pursuant to this
Section 1.4 or the LLC Agreement, the Manager shall, on behalf of IWCL, promptly
pay the amount due to such Bye-Law Indemnified Party pursuant to the Bye-Law
Indemnity. In addition, to the extent that (i) IWCL is required to conditionally
advance funds to cover expenses incurred by any Bye-Law Indemnified Party
pursuant to the provisions of Bye-Law 30 of IWCL's Bye-Laws and (ii) such
Bye-Law Indemnified Party is not otherwise entitled to the advancement of such
funds pursuant to the LLC Agreement, the Manager shall, on behalf of IWCL,
promptly advance funds to the Bye-Law Indemnified Party to cover such expenses
upon receipt of an undertaking by or on behalf of the Bye-Law Indemnified Party
to repay such advanced funds to the Manager if it shall ultimately be determined
that such Bye-Law Indemnified Party is not entitled to the Bye-Law Indemnity.
4--
<PAGE> 8
The indemnity and contribution obligations in this Section 1.4 are
solely obligations of Iridium and no recourse may be had thereunder against any
member, director, officer, employee or agent of Iridium.
1.5 Accounting System. On behalf of IWCL, the Manager shall maintain
a system of accounting established and administered in accordance with generally
accepted accounting principles consistently applied and a set of audit
procedures that are consistent with generally accepted auditing standards.
1.6 Books and Records of IWCL. The Manager shall maintain the books
of account and other records of IWCL including without limitation all tax
returns, financial statements, contracts and licenses of IWCL at all times at
the Manager's principal executive offices or at such other place or places
approved by the IWCL Board. The Manager shall maintain the books of account of
IWCL on an accrual basis in accordance with generally accepted accounting
principles consistently applied. The Manager agrees that, to the extent required
under Bermuda law or IWCL's Memorandum of Association or Bye-Laws, each
stockholder of IWCL (a "Stockholder") shall have the right at all reasonable
times during normal business hours to examine the books of account of IWCL. Such
right may be exercised through any agent or employee of a Stockholder designated
by it or by an independent public accountant designated by such Stockholder.
1.7 Tax Returns and Elections; Payment of Tax Liabilities. The
Manager shall cause IWCL's certified public accountants (the "IWCL Accountants")
to prepare the tax returns of IWCL, and the Manager shall use all reasonable
efforts to cause the IWCL Accountants to prepare such tax returns as soon as
reasonably practicable after the end of each fiscal year of IWCL. The Manager
shall use all reasonable efforts to cause such tax returns to be filed on a
timely basis and shall, promptly after the receipt thereof from such IWCL
Accountants, deposit such copies with IWCL's permanent records. The Manager
shall make all elections required or permitted to be made by IWCL under
applicable law, consistent with any instructions issued by the IWCL Board. In
the event that IWCL is required to pay any tax or similar governmental charge
and IWCL does not have sufficient funds available to pay such tax or charge, the
Manager shall pay to the appropriate authority the amount of such tax or
governmental charge (the "Tax Advance") on behalf of IWCL upon receipt of an
undertaking by IWCL to promptly repay the Manager for the Tax Advance (in whole
or in installments) immediately upon the availability of funds for such purpose;
provided that, in any fiscal year, the Manager shall not be required to provide
aggregate Tax Advances for the payment of U.S. federal, state and local income
tax liabilities of IWCL in an amount greater than the amount of the Minimum
Dividend (as defined in the LLC Agreement) for such fiscal year (without
adjustment for any shortfall in Minimum Dividend payments for previous years).
5--
<PAGE> 9
1.8 Administration of Borrowing Documentation. The Manager shall
administer IWCL's obligations and responsibilities under any loan documents and
related security and other documents relating to borrowings of IWCL, including
without limitation submitting certificates required of IWCL thereunder and
administering IWCL's compliance with all loan covenants and obligations under
such loan documents.
1.9 Insurance. The Manager shall implement IWCL's insurance program,
including procuring and maintaining any and all insurance required to be
maintained by IWCL pursuant to any agreement to which IWCL is a party. The
Manager also shall be responsible for administering all claims and making all
collections on behalf of IWCL under insurance policies covering IWCL. The
Manager shall be named as an additional insured or a named insured, as
appropriate, under each of the insurance policies which include IWCL as a named
or additional insured.
1.10 Licenses and Permits. The Manager shall use all reasonable
efforts to cause IWCL to obtain, and the Manager shall monitor and maintain
compliance with, all permits, licenses and governmental approvals necessary or
desirable for the conduct of IWCL's business. Where permits must be obtained,
modified or renewed by IWCL, the Manager shall prepare any application, filing
or notice relating thereto, shall cause such materials to be submitted to, and
shall represent IWCL in contacts with, the appropriate governmental agency, and
shall perform all ministerial or administrative acts necessary for timely
issuance and the continued effectiveness thereof.
1.11 Investor Relations. The Manager shall be responsible for all
matters relating to the relations between IWCL and its Stockholders and other
investors, including but not limited to, promptly providing the notice of an
annual general meeting, or a special general meeting, of IWCL as required by
IWCL's Bye-Laws, upon receipt of written notice from IWCL Board of the
scheduling of such meetings. The Manager shall appoint, and oversee the
performance of, the registrar and transfer agent or agents for IWCL's common
stock.
1.12 Public Relations. The Manager shall be responsible for all
public and community relations matters of IWCL.
1.13 Securities Law and Other Filings. The Manager shall be
responsible for making all filings required with respect to IWCL (i) under any
applicable securities laws, including without limitation the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Bermuda
Companies Act of 1981, as amended, and (ii) to any securities exchange or market
on which any of IWCL's securities are listed or traded.
1.14 Other. The Manager shall as promptly as practicable after
obtaining knowledge thereof inform the IWCL Board of any event, action or
condition
6--
<PAGE> 10
that the Manager believes is reasonably likely to have a material effect on the
operations or financial condition of IWCL. In addition, the Manager shall
provide any other assistance or services reasonably requested by IWCL in
connection with the management of IWCL.
1.15 Personnel; Payment of Outside Directors' Fees and Expenses. (a)
The Manager shall provide and make available as necessary all professional,
supervisory, managerial, administrative and other personnel as are necessary to
perform its obligations hereunder, which personnel may be employees of the
Manager and/or its affiliates. Such personnel shall be qualified and experienced
in the duties to which they are assigned.
(b) The Manager shall pay the directors of IWCL who also serve as
directors of Iridium pursuant to Section 1.05(a) of the LLC Agreement an annual
fee in the amount authorized by the Board of Directors of Iridium (the "Iridium
Board") from time to time and shall reimburse such directors for any expenses
incurred by such directors in attending any meetings of IWCL Board or any
committee thereof, or any meetings of the Iridium Board or the Operating Board
(as defined below), or any committee of either.
1.16 IWCL Board's Right to Deliver Instructions. IWCL, by action of
IWCL Board, may from time to time deliver to the Manager written instructions
with respect to matters arising under this Agreement and the Manager shall
follow such instructions, provided that such instructions are consistent with
the terms and conditions of this Agreement.
1.17 Manager's Right to Request Instructions. At any time, the
Manager may, if it reasonably deems it necessary or appropriate, request written
instructions from IWCL Board within a reasonable period prior to the necessity
for taking action with respect to any matter contemplated by this Agreement, and
may defer action thereon pending receipt of such written instructions. Actions
taken by the Manager, its officers, employees and representatives in accordance
with the written instructions of IWCL Board, or failure to act by such persons
pending the receipt of such written instructions, shall be deemed to be proper
conduct within the scope of the Manager's authority under this Agreement.
1.18 Financial Statements; Periodic Reports. (a) The Manager shall
have prepared and shall furnish to the IWCL Board as soon as practicable, but in
any event within 90 days after the end of each fiscal year of IWCL, an audited
consolidated balance sheet of IWCL as at the end of such fiscal year and audited
statements of income and results of operations and cash flows of IWCL for such
fiscal year (including notes thereto), setting forth in each case (in
comparative form) corresponding figures for the preceding fiscal year. Such
financial statements shall be accompanied by the report
7--
<PAGE> 11
thereon of the IWCL Accountants to the effect that such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior years (except as otherwise specified in
such report). The Manager shall use all reasonable efforts to conduct the
business of IWCL so that such report of the IWCL Accountants will not contain
any qualifications as to the scope of the audit or with respect to IWCL's
compliance with generally accepted accounting principles consistently applied,
except for changes in methods of accounting in which such IWCL Accountants
concur.
(b) The Manager shall prepare and furnish to IWCL Board as soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter, a report of IWCL consisting of an unaudited consolidated balance sheet
as at the end of such quarter and an unaudited statement of operations, setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal quarter. All such reports shall be certified by the Manager to
be correct and complete, to fairly present in all material respects the
consolidated financial condition of IWCL at the date shown and the results of
its operations for the period then ended and to have been prepared in accordance
with generally accepted accounting principles consistently applied except for
year end adjustments. The reports for each calendar quarter shall include a
narrative discussion prepared by the Manager describing the business and
operations of IWCL during the preceding quarter.
1.19 Interested Transactions. The Manager shall have no authority to
give any notice, to consent to the taking of any action under, or otherwise to
act on behalf of IWCL with respect to, any matter under the LLC Agreement,
unless the Manager has received written instructions from the IWCL Board or
authorization from the IWCL Board to act on behalf of IWCL as to any specific
matter or classes of matters.
1.20 Section 2.09(b) Actions. Notwithstanding any other provision of
this Agreement, the Manager shall have no authority to consent or approve on
behalf of IWCL any of the actions set forth in Section 2.09(b) of the LLC
Agreement.
1.21 Reserved Actions. The Manager shall have no authority to take
any action on behalf of IWCL to the extent such action may only be taken by IWCL
under Bermuda law or IWCL's Memorandum of Association or Bye-Laws.
1.22 Fees and Charges. The Manager shall perform the services to be
performed hereunder free of any charge to IWCL and all of the costs and expenses
associated with the performance of all services hereunder shall be paid or
reimbursed by the Manager including, without limitation, the funds required to
be paid or advanced pursuant to Section 1.4 (subject, in the case of Section
1.4(e) to each Bye-Law Indemnified Party's repayment obligation), the fees and
expenses of the IWCL Accountants, the funds required to be advanced pursuant to
Section 1.7 (subject to
8--
<PAGE> 12
IWCL's repayment obligation), the costs of the insurance referred to in Section
1.9, the fees and costs of the filings referred to in Section 1.13 and the
directors' fees and expenses referred to in Section 1.15.
ARTICLE 2
GENERAL DUTIES OF MANAGER WITH RESPECT TO OPERATING
2.1 General Duties of Manager. From and after the date hereof until
the earlier of the date (the "Operating Termination Date") (i) on which
Operating and Iridium mutually agree that this Agreement shall terminate with
respect to Operating or (ii) specified by Iridium in an Operating Termination
Notice (as defined below) pursuant to Section 2.4, the Manager shall, subject to
the direction and oversight of the Board of Directors of Operating (the
"Operating Board") or any committee thereof and subject to the Manager observing
and complying with the Limited Liability Company Agreement of Iridium Operating
LLC dated December 18, 1997 (the "Operating LLC Agreement"), supervise and
manage the day-to-day operations of Operating. The Manager shall implement or
cause to be implemented all policy decisions relating to the operations of
Operating approved by the Operating Board or any committee thereof and shall
conduct or cause to be conducted the business and affairs of Operating in
accordance with and as limited by this Agreement. The Manager shall have the
authority on behalf of Operating to take all actions and make all decisions
(including and in addition to those described in Sections 2.4 through 2.17).
2.2 Authority of Officers. Pursuant to Section 2.5 of the Operating
LLC Agreement the offices and officers of Operating shall be identical in all
respects to the offices and officers of Iridium and the individuals holding such
offices of Iridium shall also hold the same offices of Operating (each such
individual, an "Officer"). In addition, the Operating LLC Agreement provides
that no officer of Operating shall be entitled to any compensation for services
as an officer of Operating. Iridium and Operating expect that the contracts and
agreements of Operating that Iridium will administer pursuant to this Agreement
will require that certain actions be taken by officers of Operating.
Accordingly, Operating and Iridium hereby agree that all actions taken by the
Officers pursuant to Article 2 of this Agreement shall be actions taken in each
such Officer's capacity as an officer of Operating.
2.3 Administration of Contracts for the Development,
Commercialization and Operation of the IRIDIUM System. The Manager shall
administer all of Operating's obligations and responsibilities under any
contract for the development, commercialization and operation of the IRIDIUM
System, including without limitation (i) the following contracts with Motorola,
Inc.: Space System Contract, the Terrestrial Network Development Contract, the
Operations and
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Maintenance Contract, the Memorandum of Understanding and the Amended and
Restated Agreement Regarding Guarantee, (ii) the Gateway Authorization
Agreements with each of the Iridium Gateway operators and (iii) the IBSS
contract with Anderson Consulting LLP. Such obligations and responsibilities
shall include, without limitation, monitoring the performance of the other
parties to such contracts and taking such action as may be necessary to (i)
ensure performance by the other parties to such contracts and (ii) preserve the
rights of Operating under such contracts.
2.4 Termination with Respect to Operating. Iridium shall have the
right at any time after any Transfer (as defined in the Operating LLC Agreement)
of Interests (as defined in the Operating LLC Agreement) by Iridium, to
terminate all obligations of Iridium to Operating, and all obligations of
Operating to Iridium, under this Agreement by giving written notice to Operating
(the "Operating Termination Notice") stating the date on which such termination
of this Agreement shall become effective.
2.5 Treasury. The Manager shall administer all of the treasury
functions of Operating and its subsidiaries, including collection and
disbursement of funds and management of receivables and payables.
2.6 Legal; Indemnification. (a) Legal Affairs. The Manager shall
administer all of the legal affairs of Operating and its subsidiaries including
any litigation by, against or involving Operating or any of its subsidiaries.
(b) Indemnification. Operating shall indemnify and hold harmless
Iridium and each of its officers, directors, employees and consultants (each an
"Iridium Indemnified Party") against any losses, claims, damages or liabilities
to which such Iridium Indemnified Party may become subject, under the Securities
Act or otherwise, that directly or indirectly arise out of or are related to
Iridium's participation in the management and business of Iridium and Operating,
including (but not limited to) capital raising activities of Operating and
operation of the IRIDIUM System, and will reimburse such Iridium Indemnified
Party for any legal or other expenses reasonably incurred by such Iridium
Indemnified Party in connection with investigating or defending any such action
or claim, as such losses, damages, liabilities or expenses are incurred;
provided, however, that Operating shall not be liable in any such case to any
Iridium Indemnified Party to the extent that any such loss, claim, damage or
liability arises out of or is based upon any act or omission which amounted to
willful misconduct on the part of such Iridium Indemnified Party.
(c) Proceedings. Promptly after receipt by an Iridium Indemnified
Party of notice of the commencement of any action, suit or proceeding as to
which a claim in respect thereof is to be made against Operating under this
Section 2.6, the Iridium Indemnified Party shall notify Operating in writing of
the commencement thereof, but the omission so to notify Operating shall not
relieve Operating from any liability
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which it may have to any indemnified party otherwise than under Section 2.6(b).
In case any such action shall be brought against any Iridium Indemnified Party
and it shall notify Operating of the commencement thereof, Operating shall be
entitled to participate therein and, to the extent that each shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such Iridium
Indemnified Party (which shall not, except with the consent of the Iridium
Indemnified Party, be counsel to Operating). Operating shall not, without the
written consent of each Iridium Indemnified Party affected thereby, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of each such Iridium Indemnified Party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any such Iridium
Indemnified Party. No Iridium Indemnified Party shall effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution has been or may be sought hereunder without the prior written
consent of Operating.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 2.6 is for any reason held to be unenforceable although applicable
in accordance with its terms, Operating shall contribute to the losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by any Iridium Indemnified Party in such proportion
as shall be appropriate to reflect (i) the relative benefits received, directly
or indirectly, by Operating on the one hand and the Iridium Indemnified Party on
the other hand, with respect to the management and business of Operating,
including but not limited to capital raising activities of Operating, and (ii)
the relative fault of Operating on the one hand and the Iridium Indemnified
Party on the other, with respect to the acts or omissions which resulted in such
loss, liability, claim, damage or expense, or action in respect thereof, as well
as any other relevant equitable considerations. Iridium and Operating agree that
it would not be just and equitable if contribution pursuant to this Section 2.6
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from Operating if Operating was not guilty of such fraudulent
misrepresentation.
(e) LLC Agreement. To the extent that (i) Iridium is required to pay
or reimburse any director, secretary or other officer of Iridium or any other
person, or any of their heirs, executors or administrators (each, an "Iridium
LLC Indemnified Party"), pursuant to the indemnification provided by Section
2.08 of the LLC Agreement (the
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"Iridium Indemnity") and (ii) such Iridium LLC Indemnified Party is not
otherwise entitled to indemnification by, or contribution from, Operating
pursuant to this Section 2.6 or the Operating LLC Agreement, Operating shall, on
behalf of Iridium, promptly pay the amount due to such Iridium LLC Indemnified
Party pursuant to the Iridium Indemnity. In addition, to the extent that (i)
Iridium is required to conditionally advance funds to cover expenses incurred by
any Iridium LLC Indemnified Party pursuant to the provisions of the LLC
Agreement and (ii) such Iridium LLC Indemnified Party is not otherwise entitled
to the advancement of such funds pursuant to this Section 2.6 or the Operating
LLC Agreement, Operating shall, on behalf of Iridium, promptly advance funds to
the Iridium LLC Indemnified Party to cover such expenses upon receipt of an
undertaking by or on behalf of such Iridium LLC Indemnified Party to repay such
advanced funds to Operating if it shall ultimately be determined that such
Iridium LLC Indemnified Party is not entitled to the Iridium Indemnity.
The indemnity and contribution obligations in this Section 2.6 are
solely obligations of Operating and no recourse may be had thereunder against
any member, director, officer, employee or agent of Operating.
2.7 Accounting System. On behalf of Operating, the Manager shall
maintain a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied and a set of audit
procedures that are consistent with generally accepted auditing standards.
2.8 Books and Records of Operating. The Manager shall maintain the
books of account and other records of Operating (including without limitation
all tax returns, financial statements, contracts and licenses of Operating) at
Operating's principal executive offices or at such other place or places
approved by the Operating Board or any committee thereof. The Manager shall
maintain the books of account of Operating on an accrual basis in accordance
with generally accepted accounting principles consistently applied.
2.9 Tax Returns and Elections; Payment of Tax Liabilities. The
Manager shall cause Operating's certified public accountants (the "Operating
Accountants"), which shall be selected by the Operating Board, to prepare any
tax returns of Operating, and the Manager shall use all reasonable efforts to
cause the Operating Accountants to prepare such tax returns as soon as
reasonably practicable after the end of each relevant fiscal period of
Operating. The Manager shall use all reasonable efforts to cause such tax
returns to be filed on a timely basis and shall, promptly after the receipt
thereof from such Operating Accountants, deposit such copies with Operating's
permanent records. The Manager shall make all elections required or permitted to
be made by Operating under applicable law, consistent with any instructions
issued by the Operating Board.
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2.10 Administration of Borrowing Documentation. The Manager shall
administer Operating's obligations and responsibilities under any loan documents
and related security and other documents relating to borrowings of Operating.
Such obligations and responsibilities shall include, without limitation,
submitting certificates required of Operating under such loan documents and
administering Operating's compliance with all loan covenants and obligations
under such loan documents.
2.11 Insurance. The Manager shall implement Operating's insurance
program, including procuring and maintaining any and all insurance required by
the Operating Board or required to be maintained by Operating pursuant to any
agreement to which Operating is a party. The Manager also shall be responsible
for administering all claims and making all collections on behalf of Operating
under insurance policies covering Operating. The Manager shall be named as an
additional insured or a named insured, as appropriate, under each of the
insurance policies which includes Operating as a named or additional insured.
2.12 Licenses and Permits. The Manager shall use all reasonable
efforts to cause Operating to obtain, and the Manager shall monitor and assist
Operating in maintaining compliance with, all permits, licenses and governmental
approvals necessary or desirable for the conduct of Operating's business. Where
permits must be obtained, modified or renewed by Operating, the Manager shall
prepare any application, filing or notice relating thereto, shall cause such
materials to be submitted to, and shall represent Operating in contacts with,
the appropriate governmental agency, and shall perform all ministerial or
administrative acts necessary on the part of Operating for timely issuance and
the continued effectiveness thereof.
2.13 Investor Relations. The Manager shall be responsible for all
matters relating to the relations between Operating and its lenders and security
holders.
2.14 Public Relations. The Manager shall be responsible for all
public and community relations matters of Operating.
2.15 Securities Law and Other Filings. The Manager shall be
responsible for making all filings required with respect to Operating (a) under
any applicable securities laws, including without limitation the Securities Act
and the Exchange Act, and (b) by any securities exchange or market on which any
of Operating's securities are listed or traded.
2.16 Financial Statements; Periodic Reports. (a) The Manager shall
have prepared and shall furnish to the Operating Board as soon as practicable,
but in any event within 90 days after the end of each fiscal year of Operating,
an audited consolidated balance sheet of Operating as at the end of such fiscal
year and audited statements of income and results of operations and cash flows
of Operating for such fiscal
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year (including notes thereto), setting forth in each case (in comparative form)
corresponding figures for the preceding fiscal year. Such financial statements
shall be accompanied by the report thereon of the Operating Accountants to the
effect that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years (except as otherwise specified in such report). The Manager shall
use all reasonable efforts to conduct the business of Operating so that such
report of the Operating Accountants will not contain any qualifications as to
the scope of the audit or with respect to Operating's compliance with generally
accepted accounting principles consistently applied, except for changes in
methods of accounting in which such Operating Accountants concur.
(b) The Manager shall prepare and furnish to the Operating Board as
soon as practicable, and in any event within 45 days after the end of each
fiscal quarter, a report of Operating consisting of an unaudited consolidated
balance sheet as at the end of such quarter and an unaudited statement of
operations, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal quarter. The reports for each calendar quarter
shall include a narrative discussion prepared by the Manager describing the
business and operations of Operating during the preceding quarter.
2.17 Other. The Manager shall as promptly as practicable after
obtaining knowledge thereof inform Operating of any event, action or condition
that the Manager believes is reasonably likely to have a material effect on the
operations or financial condition of Operating. In addition, the Manager shall
provide any other assistance or services reasonably requested by Operating in
connection with the management of Operating.
2.18 Reserved Actions. The Manager shall have no authority to take
any action on behalf of Operating to the extent such action may only be taken by
Operating under applicable law or the Operating LLC Agreement.
ARTICLE 3
OBLIGATIONS OF OPERATING WITH RESPECT TO IRIDIUM
3.1 Obligation to Fund Operations of Iridium. Operating shall
provide Iridium sufficient funds, in the currency or currencies and in the
amount specified to Operating by Iridium from time to time, for Iridium to
manage the business and operations of Operating and its subsidiaries as
contemplated by Article 2, including but not limited to the development,
commercialization and operation of the IRIDIUM System (the "Iridium Management
Expenses"), including, but not limited to, the funds necessary to satisfy:
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(i) Employees, Consultants and Directors. Iridium's
obligations to its employees, consultants and directors, including payroll
obligations, obligations under employee benefit plans, obligations under
employment agreements, obligations under the LLC Agreement and obligations
for fringe benefits, statutory benefits and other reasonable, ordinary and
necessary employee costs and expenses;
(ii) Office Space & Equipment. (A) Iridium's obligations or
other reasonable, ordinary and necessary expenses under leases or similar
agreements covering office space and office equipment, including leases or
agreements for real property, furniture, computers, copiers, telephones,
facsimile machines, lighting, files, and other office equipment ("Office
Space & Equipment"), (B) Iridium's obligations or other reasonable,
ordinary and necessary expenses in connection with the purchase of Office
Space & Equipment and (C) Iridium's obligations or other reasonable,
ordinary and necessary expenses incident to operating and maintaining
Office Space & Equipment, including build-out, utilities and maintenance;
(iii) Sales, General Operating and Administrative Expenses.
Iridium's obligations or other reasonable, ordinary and necessary expenses
arising from sales, general operations and administration, including
without limitation costs associated with accounting, maintenance of books
and records, administration of accounts, acquisition and maintenance of
licenses and permits, development and maintenance of investor and public
relations, marketing meetings of the Iridium Board and committees thereof
and travel and entertainment and reasonable ordinary and necessary legal
expenses;
(iv) Insurance. Iridium's obligations or other reasonable,
ordinary and necessary expenses under its insurance contracts, including
insurance maintained pursuant to this Agreement, on behalf of the
directors and officers of IWCL, Operating and Iridium and in respect of
the IRIDIUM System or other business or operations of Operating;
(v) Iridium Agreements. Iridium's obligations and all
reasonable, ordinary and necessary expenses under (A) this Agreement, (B)
the Iridium LLC Agreement, (C) the Share Issuance Agreement, dated June 9,
1997, between Iridium and IWCL, (D) the Interest Exchange Agreement, dated
June 9, 1997, between Iridium and IWCL, (E) the 1997 Subscription
Agreement, dated June 9, 1997, between Iridium and IWCL, (F) the Purchase
Agreement, dated June 9, 1997, among Iridium, IWCL and the Underwriters
named therein with respect to IWCL's initial public offering, (G) the
Purchase Agreement, dated July 11, 1997, among Iridium, IWCL, Iridium
Capital Corporation, Iridium Roaming LLC, Iridium IP LLC and the Initial
Purchasers named therein with respect to the
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Series A Units and the Series B Notes (including the Registration Rights
Agreement attached thereto), (H) the Purchase Agreement, dated October 9,
1997, among Iridium, Iridium Capital Corporation, Iridium Roaming LLC,
Iridium IP LLC and the Initial Purchasers named therein (including the
Registration Rights Agreement), (I) any other agreements or contracts of
Iridium related to the development, commercialization and operation of the
IRIDIUM System;
provided that the Iridium Management Expenses shall not include expenses
incurred in connection with the physical construction, operation, maintenance or
insurance of any satellite system other than the satellite system to be
delivered under the Space System Contract between Iridium and Motorola, Inc.,
effective July 29, 1993, as amended from time to time, and any other satellite
system to be owned by Operating.
3.2 Payment Procedure. Operating shall promptly pay the Iridium
Management Expenses as specified by Iridium as such expenses are incurred either
(i) by advancing funds for such expenses to Iridium for payment thereof by
Iridium or (ii) by making payment on behalf of Iridium to third parties.
3.3 Iridium LLC Reserve Capital Call. Each of Iridium and Operating
hereby agrees that, in the event that the members of Iridium purchase additional
membership interests in Iridium pursuant to Section 4.02 of the LLC Agreement
and the proceeds from such sale of additional membership interests in Iridium
are transferred to the Secured Lenders pursuant to the terms of any security
agreement in respect of the Secured Bank Facility, each of Iridium and Operating
will consider, and account for, such proceeds as a capital contribution from
Iridium to Operating and Operating shall be deemed to have received such capital
contribution.
ARTICLE 4
MISCELLANEOUS
4.1 Standards for Performance of Services. (a) The Manager shall
perform its obligations hereunder in a prudent and efficient manner.
(b) The Manager shall use all reasonable efforts to perform its
obligations hereunder in accordance with all applicable laws, regulations,
codes, permits, licenses and standards, and (with respect to its obligations
under Article 2) in accordance with covenants and limitations imposed by
agreements or instruments relating to any borrowing by Operating.
4.2 Term. (a) With respect to the obligations of Iridium to IWCL,
and the obligations of IWCL to Iridium, this Agreement shall terminate on the
IWCL
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Termination Date (as defined in Section 1.1). Notwithstanding any other
provision of this Agreement, no such termination shall affect any rights of IWCL
against Iridium, or Iridium against IWCL, in respect of any breach by Iridium of
any provision of this Agreement or any rights of Iridium hereunder and no
termination under Section 1.2 shall affect any obligation to the extent accruing
or relating to activity prior to the IWCL Termination Date.
(b) With respect to the obligations of Iridium to Operating, and the
obligation of Operating to Iridium, this Agreement shall terminate on the
Operating Termination Date (as defined in Section 2.1). Notwithstanding any
other provisions of this Agreement, no such termination shall affect any rights
of Iridium against Operating, or Operating against Iridium, in respect of any
breach by Operating, or Iridium, of any provision of this Agreement and no such
termination under Section 2.2 shall affect any obligation to the extent accruing
or relating to activity prior to the Operating Termination Date.
4.3 Assignment. Neither IWCL nor Operating may assign, transfer,
convey or delegate in any manner any of their respective duties and obligations
under this Agreement without the prior written consent of Iridium, except that
nothing herein shall be construed to limit the right of Operating to grant a
security interest in its rights under this Agreement in favor of lenders to
Operating under the Secured Bank Facility. Iridium may not assign, transfer,
convey or delegate in any manner its duties and obligations to IWCL under this
Agreement without the prior written consent of IWCL. Iridium may not assign,
transfer, convey or delegate in any manner its duties and obligations to
Operating under this Agreement without the prior written consent of Operating.
Iridium shall have no authority to provide consent under this Section on behalf
of IWCL or Operating provided that employment by Iridium of any accountant, law
firm, consultant or other person in the course of performing its obligations
hereunder shall not constitute an assignment of this Agreement.
4.4 Non-Recourse. Each representation, warranty, undertaking and
agreement made in this Agreement on the part of each of the Parties hereto was
not made or intended to be made as a personal or individual representation,
undertaking or agreement on the part of any past, present, or future general or
limited partner of any Party or any such Party's incorporator, stockholder,
director, officer, employee or agent or of any such person's incorporators,
stockholders, directors, officers, employees, agents or partners, and no
personal or individual liability or responsibility is assumed by, nor shall any
recourse at any time be asserted or enforced against, any past, present, or
future general or limited partner of any Party or any such partner's
incorporator, stockholder, director, officer, employee or agent or against any
such person's incorporators, stockholders, directors, officers, employees,
agents or partners, all of which recourse (whether in common law, in equity, by
statute or otherwise) is hereby forever waived and released. It is intended by
the Parties hereto that the Manager shall be solely responsible
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for its performance of its obligations under this Agreement and each of IWCL and
Operating expressly waives any obligation it may have now or in the future
against any individual officer, employee or agent of the Manager who performs or
omits to perform any actions hereunder on behalf of the Manager.
4.5 Major Decisions. The Manager shall not be obligated to perform
its duties or obligations hereunder to the extent that, but only to the extent
that, the performance of such duties or obligations is subject to the
authorization of IWCL Board or the Operating Board and such authorization has
not been obtained.
4.6 Independent Contractor; Limited Agency. The Manager shall be an
independent contractor with respect to the performance of its obligations to
IWCL hereunder. In no event shall the relationship between IWCL and the Manager
be construed as a partnership or joint venture for any purpose. Neither the
Manager nor its employees or other agents employed by the Manager in connection
with the performance of its obligations hereunder shall be deemed to be agents
of IWCL, except to the extent of the agency created hereunder pursuant to the
authority granted to the Manager under Article 1.
4.7 Counterparts. This Agreement may be executed in several
counterparts and all such counterparts shall constitute one Agreement, binding
on the Parties hereto, notwithstanding that all of the parties are not signatory
to the original or the same counterpart.
4.8 Binding on Successors. This Agreement shall be binding upon and
shall inure to the benefit of the successors and permitted assigns of the
Parties.
4.9 Severability. In the event any one or more of the provisions
contained in this Agreement should be rendered invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The Parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid, legal and enforceable
provisions, the economic effect of which come as close as possible to that of
such invalid, illegal or unenforceable provisions.
4.10 Notices. All notices under this Agreement shall be in writing
and shall be given to the person entitled thereto, by personal service, or by
certified or registered mail, return receipt requested, posted to the address
for that person set forth below or at any other address that it specifies in
writing, with a copy sent by facsimile. Any such notice shall be deemed given on
the earlier of (i) the date delivered, when so given by personal service, (ii)
the fourth day after the date mailed, when so given by certified or registered
mail, and (iii) the date a transmission confirmation document is received from
the person notified, when sent by facsimile.
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IWCL: Iridium World Communications Ltd.
1575 Eye Street, N.W.
Washington, D.C. 20006
Attention: General Counsel
Operating: Iridium Operating LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
Attention: General Counsel
The Manager: Iridium LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
Attention: General Counsel
4.11 Captions. Article and section titles or captions contained in
this Agreement are inserted only as a matter of convenience and for reference.
The titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
4.12 Choice of Law. This Agreement shall be construed under the laws
of the State of Delaware as if this Agreement were executed in and to be
performed entirely within the State of Delaware.
4.13 Jurisdiction and Service of Process. Any suit, action or
proceeding against any party with respect to this Agreement may be brought in a
court of the United States sitting in the State of Delaware or, if jurisdiction
is lacking in such a court, in a court of record in the State of Delaware, and
each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may have, whether now or in the future, to the laying of
venue in, or to the jurisdiction of, any and each of such courts for the purpose
of any such suit, action, proceeding or judgment and further waives any claim
that any such suit, action, proceeding or judgment has been brought in an
inconvenient forum, and the party hereby submits to such jurisdiction. Each
party hereto hereby agrees that service of all writs, process and summonses in
any such suit, action or proceeding brought in the State of Delaware may be made
upon The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801, or such alternate process agent in the United States designated with
respect to the party in a writing delivered to the other party (the "Process
Agent") and each of the parties hereto hereby irrevocably appoints the Process
Agent in its name, place and stead to receive and forward such service of any
and all such writs, process and summonses and agrees that the failure of the
Process Agent to
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give any notice of any such service of process to such party shall not impair or
affect the validity of such service or of any judgment based thereon. If the
Process Agent is no longer able to so act for any reason whatsoever, the party
agrees to appoint a substitute process agent, which substitute process agent
shall thereafter be deemed to be the Process Agent hereunder, and to give notice
of such appointment to the other party.
4.14 Authority. Each individual executing this Agreement on behalf
of an entity represents and warrants that he or she has full authority to
execute this Agreement on behalf of such entity and the execution of this
Agreement and entry into this transaction by the undersigned has been duly
authorized by such entity.
4.15 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter herein
contained and supersedes all agreements, representations, warranties,
statements, provisions, and undertakings, whether oral or written, with respect
to the subject matter hereof.
4.16 Amendments. This Agreement may be amended or modified only with
the written consent of each of the Parties; provided that the Manager shall have
no authority to provide such consent on behalf of IWCL or Operating.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
IRIDIUM LLC
By: /s/ Roy Grant
--------------------------------------
Vice President -- Chief Financial Officer
IRIDIUM WORLD COMMUNICATIONS LTD.
By: /s/ Robert W. Kinzie
--------------------------------------
Director
IRIDIUM OPERATING LLC
By: /s/ F. Thomas Tuttle
--------------------------------------
Vice President, General Counsel and Secretary
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EXHIBIT 10.20
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
$300,000,000 11 1/4% Senior Notes due 2005, Series C
PURCHASE AGREEMENT
October 9, 1997
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER
AND SMITH INCORPORATED
BT ALEX. BROWN INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Ladies and Gentlemen:
Iridium LLC, a Delaware limited liability company ("Iridium"), and
Iridium Capital Corporation, a Delaware corporation and a wholly owned
subsidiary of Iridium ("Capital" and, together with Iridium, the "Note
Issuers"), propose to issue and sell $300,000,000 aggregate principal amount of
11 1/4% Senior Notes due 2005, Series C (the "Notes"). The Notes will be
guaranteed (the "Guarantees") on a senior unsecured basis by Iridium Roaming LLC
and Iridium IP LLC (collectively, the "Guarantor Subsidiaries" and, together
with the Note Issuers, the "Issuers"). The Notes and the Guarantees are
collectively referred to herein as the "Securities"). The Notes will be issued
pursuant to an Indenture to be dated as of October 17, 1997 (the "Indenture")
among the Note Issuers, the Guarantor Subsidiaries and State Street Bank and
Trust Company, as trustee (the "Trustee"). The Issuers hereby confirm their
agreement with Chase Securities Inc. ("CSI"), Merrill Lynch, Pierce, Fenner and
Smith Incorporated and BT Alex. Brown Incorporated (collectively, the "Initial
Purchasers") concerning the purchase of the Notes from the Note Issuers by the
several Initial Purchasers.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption therefrom. The Issuers will prepare an
offering memorandum dated the date hereof (the "Offering Memorandum") setting
forth information concerning the Issuers and the Securities. Copies of the
Offering Memorandum will be delivered by the Issuers to the Initial
<PAGE> 2
Purchasers pursuant to the terms of this Agreement. Any references herein to the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Issuers hereby confirm that they have
authorized the use of the Offering Memorandum in connection with the offering
and resale of the Notes by the Initial Purchasers in accordance with Section 2.
Holders of the Notes (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Note
Issuers and the Guarantor Subsidiaries will agree to file with the Securities
and Exchange Commission (the "Commission") (i) a registration statement under
the Securities Act (the "Exchange Offer Registration Statement") registering an
issue or series of senior notes of the Note Issuers (the "Exchange Notes") which
are identical in all material respects to the Notes (except that the issue of
Exchange Notes will not contain terms with respect to transfer restrictions),
and (ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Issuers. Each
of the Issuers, jointly and severally, represent and warrant to, and agree with,
the several Initial Purchasers on and as of the date hereof and the Closing Date
(as defined in Section 3) that:
(a) The Offering Memorandum, as of the date hereof does not, and on
the Closing Date will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that
the Issuers make no representation or warranty as to information contained
in or omitted from the Offering Memorandum in reliance upon and in
conformity with written information relating to the Initial Purchasers
furnished to Iridium by or on behalf of any Initial Purchaser specifically
for use therein (the "Initial Purchasers' Information").
(b) The Offering Memorandum, as of the date hereof, contains all of
the information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective purchaser
pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with
the agreements set forth therein, it is not necessary, in connection with
the issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
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Indentures under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(d) Each of Iridium, Iridium Roaming LLC and Iridium IP LLC has been
duly formed and is validly existing as a limited liability company in good
standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which its respective ownership or lease of property or the
conduct of its businesses requires such qualification, and has all power
and authority necessary to own or hold its properties and to conduct the
businesses in which it is engaged, except where the failure to so qualify
or have such power or authority would not have a material adverse effect
on the condition (financial or otherwise), or in the earnings, business
affairs or business prospects of Iridium, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"). Iridium's only
subsidiaries are Capital, Iridium Roaming LLC and Iridium IP LLC.
(e) Capital has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware, is
duly qualified to do business and is in good standing as foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification, and
has all power and authority necessary to own or hold its properties and to
conduct the businesses in which it is engaged, except where the failure to
so qualify or have such power or authority would not, singularly or in the
aggregate, have a Material Adverse Effect. Capital has no subsidiaries.
(f) Iridium has an authorized capitalization as set forth in the
Offering Memorandum under the heading "Capitalization". All of the
outstanding shares of capital stock or limited liability company
interests, as the case may be, of Capital and the Guarantor Subsidiaries
have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly by Iridium, free and clear of any
lien, charge, encumbrance, security interest, restriction upon voting or
transfer or any other claim of any third party.
(g) The Issuers have full right, power and authority to execute and
deliver this Agreement, the Indenture, the Registration Rights Agreement,
the Securities, the Exchange Notes and the Private Exchange Notes (as
defined in the Registration Rights Agreement), if any (collectively, the
"Transaction Documents") to the extent a party thereto and to perform
their obligations hereunder and thereunder.
(h) This Agreement has been duly authorized, executed and delivered
by the Issuers.
(i) The Registration Rights Agreement has been duly authorized by
the Note Issuers and the Guarantor Subsidiaries and, when duly executed
and delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of the Note Issuers
and the Guarantor Subsidiaries enforceable against the Note Issuers and
the Guarantor Subsidiaries in accordance with its terms, subject, as
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<PAGE> 4
to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; provided
that no representation or warranty is made with respect to any provision
of such agreement purporting to require indemnification of, or
contribution to, the liability, losses, damages or claims of any person to
the extent that such provision may be limited by applicable law.
(j) The Indenture has been duly authorized by the Note Issuers and
the Guarantor Subsidiaries and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Note Issuers and the
Guarantor Subsidiaries enforceable against the Note Issuers and the
Guarantor Subsidiaries in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(k) The Notes, the Exchange Notes, the Private Exchange Notes, if
any, and the Guarantees have been duly authorized by the Note Issuers and
the Guarantor Subsidiaries and, when the Notes, the Exchange Notes and
Private Exchange Notes, if any, and the Guarantees have been duly
executed, authenticated, issued and delivered as provided in the Indenture
and paid for as provided herein, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations of
the Note Issuers and the Guarantor Subsidiaries, as the case may be,
entitled to the benefits of the Indenture and enforceable against the Note
Issuers and the Guarantor Subsidiaries, as the case may be, in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(l) Each of the Transaction Documents and the Limited Liability
Company Agreement of Iridium LLC, dated as of July 29, 1996, as amended
(the "LLC Agreement"), described in the Offering Memorandum conforms in
all material respects to the description thereof contained in the Offering
Memorandum, provided however, that the Issuers make no representation or
warranty as to whether this Agreement conforms to the description thereof
contained in the Offering Memorandum.
(m) The execution, delivery and performance by each of the Issuers
of each of the Transaction Documents to which it is a party, the issuance,
authentication, sale and delivery of the Securities, the Exchange Notes
and the Private Exchange Notes, if any, and compliance by the Issuers with
the terms thereof and the consummation of the transactions contemplated by
the Transaction Documents will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Issuers pursuant to, any
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<PAGE> 5
material indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Issuers are a party or by
which the Issuers are bound or to which any of the property or assets of
the Issuers are subject (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated by this Agreement or the
Transaction Documents), nor will such actions result in any violation of
the provisions of the charter, by-laws, certificate of formation or
limited liability company agreement of the Issuers or any statute or any
judgment, order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over the Issuers or any of
their properties or assets; and no consent, approval, authorization or
order of, or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance by the Issuers of each of the Transaction Documents, the
issuance, authentication, sale and delivery of the Securities, the
Exchange Notes and the Private Exchange Notes, if any, and compliance by
the Issuers with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date and (ii) as may be required to be obtained or made under the
Securities Act and applicable state securities laws as provided in the
Registration Rights Agreement. As used herein, a "Repayment Event" means
any event or conditions which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by Iridium.
(n) The accountants who certified the financial statement and the
consolidated financial statements included in the Offering Memorandum are
independent public accountants within the meaning of the Securities Act
and the regulations thereunder. The financial statement and the
consolidated financial statements included in the Offering Memorandum,
together with the related notes, present fairly the financial position of
Iridium, Iridium's predecessor and their respective consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity, members' equity and cash flows of Iridium, Iridium's
predecessor and their respective consolidated subsidiaries for the periods
specified; said financial statement and the consolidated financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved, except, in the case of the interim financial
statements, for the absence of complete footnote disclosure and customary
year-end adjustments. The selected financial data included in the Offering
Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statement and the consolidated financial statements included in the
Offering Memorandum.
(o) Except for matters which are described in the Offering
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or
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<PAGE> 6
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of Iridium, threatened, against or affecting Iridium, which
would be required to be disclosed in a registration statement with respect
to the Securities on Form S-1 under the Securities Act, or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the Transaction Documents or the
performance by Iridium of its obligations hereunder or thereunder; all
pending legal or governmental proceedings to which Iridium is a party or
of which any of its property or assets is the subject which are not
described in the Offering Memorandum, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.
(p) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities, the Exchange Notes or
the Private Exchange Notes, if any, pursuant to the Transaction Documents,
or suspends the sale of the Securities, the Exchange Notes or the Private
Exchange Notes, if any, in any jurisdiction; no injunction, restraining
order or order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to the Issuers which would
prevent or suspend the issuance or sale of the Securities, the Exchange
Notes, or the Private Exchange Notes, if any, or the use of the Offering
Memorandum in any jurisdiction; and the Issuers have complied with any and
all requests by any securities authority in any jurisdiction for
additional information to be included in the Offering Memorandum.
(q) None of the Issuers is (i) in violation of its by-laws,
certificate of formation, certificate of incorporation or limited
liability company agreement, as the case may be, (ii) in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) in violation in
any material respect of any law, ordinance, governmental rule, regulation
or court decree to which it or its property or assets may be subject,
except for any default or violation that would not result in a Material
Adverse Effect.
(r) Except as disclosed in the Offering Memorandum or as would not
have a Material Adverse Effect, (i) Iridium possesses or has the right to
benefit from such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by Iridium and (ii) Iridium
is in compliance with the current terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except where
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
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<PAGE> 7
Material Adverse Effect; and Iridium has not received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect. This representation does not extend to Governmental
Licenses required for Iridium to conduct its business as proposed to be
conducted, most of which have not been obtained.
(s) Each of the Issuers believes that it is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum, will not be, an "investment company" or an entity "controlled"
by a company registered as an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act").
(t) Iridium maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reason able intervals and appropriate
action is taken with respect to any differences.
(u) Iridium has insurance as required by Section 4.17 of the
Indenture.
(v) Except as described in the Offering Memorandum or as would not
have a Material Adverse Effect, Iridium owns or possesses or reasonably
believes it can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, but excluding any required regulatory
licenses or approvals), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property"), or that it
can contract on reasonable terms with third parties who can acquire the
Intellectual Property necessary to carry on the business now operated by
Iridium or described in the Offering Memorandum, and Iridium has not
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of
Iridium and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(w) Iridium has good and marketable title to all real property it
owns; Iridium has good title to all other properties owned by it free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (i) are described
in the Offering Memorandum or (ii) would not, singly or in the
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<PAGE> 8
aggregate, reasonably be expected to have a Material Adverse Effect; and
all of the leases and subleases material to the business of Iridium and
under which Iridium holds properties described in the Offering Memorandum,
are in full force and effect, and Iridium has no notice of any material
claim of any sort that has been asserted by anyone adverse to the rights
of Iridium under any of the leases or subleases mentioned above, or
affecting or questioning the rights of Iridium to the continued possession
of the leased or subleased premises under any such lease or sublease,
except such as would not reasonably be expected to have a Material Adverse
Effect.
(x) No labor dispute with the employees of any of the Issuers exists
or, to the knowledge of the Issuers, is imminent.
(y) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of any of the Issuers which could reasonably be
expected to have a Material Adverse Effect; each such employee benefit
plan (other than a multiemployer plan) is in compliance in all material
respects with applicable law, including ERISA and the Code; the Issuers
have not incurred and do not expect to incur liability under Title IV of
ERISA with respect to the termination of, or withdrawal from, any pension
plan for which any of the Issuers would have any liability; and each such
pension plan (other than a multiemployer plan) that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which could reasonably be expected to cause the loss of such
qualification.
(z) Except as described in the Offering Memorandum and except as
would not, singly or in the aggregate, result in a Material Adverse
Effect, (i) Iridium is not in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (ii) Iridium has
all permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with its requirements, (iii) there
are no pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or
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proceedings relating to any Environmental Law against Iridium and (iv)
there are no events or circumstances that might reasonably be expected or
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting Iridium relating to Hazardous Materials or any Environmental
Laws.
(aa) Except as disclosed in the Offering Memorandum and except as
would not reasonably be expected to have a Material Adverse Effect, to the
best of the Issuers' knowledge, none of the parties to (i) the Gateway
Authorization Agreements, (ii) the Space System Contract, (iii) the
Operations and Maintenance Contract, (iv) the Iridium Business Support
System Contract with Andersen Consulting, (v) the Terrestrial Network
Development Contract, (vi) the Support Agreement between Iridium and
Motorola, (vii) the Amended and Restated Agreement Regarding Guarantee,
(viii) the Motorola MOU and (ix) the LLC Agreement (collectively, the
foregoing are herein called the "Principal Agreements"), is in breach of,
or in default in the performance or observance of, any material
obligation, term, covenant or condition contained therein. Each of the
Principal Agreements that Iridium has previously delivered to the Initial
Purchasers is a true and correct copy, and there have been no additional
amendments, alterations, modifications or waivers thereto or in the
exhibits or schedules thereto. Iridium has duly and validly authorized,
executed and delivered each of the Principal Agreements to which it is a
party and, to the best of the Issuers' knowledge, the other parties to
each of the Principal Agreements have duly and validly executed and
delivered each of the Principal Agreements and, assuming due and valid
authorization, execution and delivery by such other parties, each of the
Principal Agreements is a valid and legally binding agreement of Iridium,
enforceable against Iridium in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; provided
that no representation or warranty is made with respect to any provision
of any Principal Agreement purporting to require indemnification of, or
contribution to, the liability losses, damages or claims of any person to
the extent that such provision may be limited by applicable laws.
(bb) The Federal Communications Commission (the "FCC") has
authorized Motorola, Inc. (Motorola, Inc., together with its subsidiaries,
"Motorola") to construct a mobile satellite system capable of operating in
the 1616 to 1626.5 MHz frequency bands, consistent with the technical
specifications set forth in its application, the FCC's rules and the
conditions set forth in the FCC's Orders and Authorization (DA 95-131),
released January 31, 1995, DA 95-372, released February 28, 1995, FCC
96-279, released June 27, 1996, DA 96-1789, released October 30, 1996.
(cc) None of the Issuers is a party to any contract, agreement or
understanding with any person that would give rise to a valid claim
against the Initial Purchasers for a brokerage commission, finder's fee or
like payment in connection with the offering and sale of the Securities.
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(dd) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(ee) None of the Issuers, any of its affiliates or any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in Regulation S under the Securities Act
("Regulation S")), and all such persons have complied and will comply with
the offering restrictions requirement of Regulation S to the extent
applicable. No representation is herein made with respect to any Initial
Purchaser, any affiliate thereof or any person acting on its behalf, or
with respect to any obligation thereof.
(ff) None of the Issuers or any of its affiliates has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of
the Securities in a manner that would require registration of the
Securities under the Securities Act.
(gg) None of the Issuers or any of its affiliates or any other
person acting on its or their behalf has engaged, in connection with the
offering of the Notes, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act. No
representation is herein made with respect to any Initial Purchaser, any
affiliate thereof or any person acting on its behalf, or with respect to
any obligation thereof.
(hh) There are no securities of the Issuers registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
listed on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system.
(ii) The Issuers have not taken and will not take, directly or
indirectly, any action prohibited of them by Regulation M under the
Exchange Act in connection with the offering of the Notes.
(jj) The statements (including the assumptions described therein)
included in the Offering Memorandum relating to Iridium's operations,
expected markets, size of expected addressable markets for mobile
satellite services, expected technical capabilities, expected funding
needs, expected financing sources, expected pricing, expected launch
schedule, expected commercial operations schedule, the estimate of the
last year in which Iridium will have negative cash flow and a net increase
in year-end borrowings and expected future regulatory approvals as well as
information concerning expected characteristics of competing systems and
expected actions of third parties such as equipment suppliers, gateway
operators, service providers and roaming partners were made by Iridium
with a reasonable basis and reflect Iridium's good faith estimate of the
matters described therein.
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(kk) The Issuers have complied with, and are and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder or is exempt
therefrom.
(ll) Since the respective dates as of which information is given in
the Offering Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change in the condition (financial or otherwise),
or in the earnings, business affairs or business prospects of any of the
Issuers, whether or not arising in the ordinary course of business, (ii)
the Issuers have not incurred any liability or obligation, direct or
contingent, other than in the ordinary course of business which is
material with respect to Iridium, (iii) the Issuers have not entered into
any transaction, other than in the ordinary course of business which is
material with respect to Iridium, and (iv) there has not been any change
in the capital stock, membership interests or long-term debt of the
Issuers other than fluctuations in revolving credit agreements, or any
dividend or distribution of any kind declared, paid or made by the Issuers
on any class of their capital stock or membership interests. Launch delays
shall not be covered by this representation.
(mm) Iridium is a "reporting issuer" as defined in Rule 902(l) under
the Securities Act.
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Issuers agree to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agree to purchase from the
Issuers, the principal amount of Notes (together with the related Guarantees)
set forth opposite the name of such Initial Purchaser on Schedule 1 hereto at a
purchase price of 97.75% of the principal amount of the Notes (together with
accrued interest, if any, from October 17, 1997). The Issuers shall not be
obligated to deliver any of the Securities except upon payment for all of the
Securities to be purchased as provided herein.
(b) The Initial Purchasers have advised the Issuers that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, the Issuers that (i) it is purchasing the Securities pursuant to a private
sale exempt from registration under the Securities Act, (ii) neither it nor any
of its affiliates or any person acting on its or their behalf has solicited
offers for, or offered or sold, and no such person will solicit offers for, or
offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and no such person has
engaged, and no such person will engage, in any directed selling efforts within
the meaning of Rule 902 under the Securities Act in connection with any of the
Securities, and all such persons have and will comply with the offering
restrictions and requirements of Regulation S, (iii) it has solicited and will
solicit offers for the Securities only from, and has offered or sold and will
offer, sell or deliver the Securities,
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as part of its initial offering, only (A) to persons whom it reasonably believes
to be qualified institutional buyers ("Qualified Institutional Buyers") as
defined in Rule 144A under the Securities Act, or if any such person is buying
for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and in each case,
in transactions in accordance with Rule 144A and (B) in transactions outside the
United States to persons who are not U.S. Persons (as defined in Rule 902 under
the Securities Act) and to whom the Initial Purchasers reasonably believe offers
and sales of the Securities may be made in reliance on Rule 903 under the
Securities Act in transactions meeting the requirements of Regulation S, and
(iv) that it is a Qualified Institutional Buyer. Each Initial Purchaser,
severally and not jointly, agrees that, prior to or simultaneously with the
confirmation of sale by such Initial Purchaser to any purchaser of any of the
Securities purchased by such Initial Purchaser pursuant hereto, such Initial
Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and
any amendment or supplement thereto that the Issuers shall have furnished to
such Initial Purchaser prior to the date of such confirmation of sale). In
addition to the foregoing, each Initial Purchaser acknowledges and agrees that
the Issuers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Sections 5(d) and (g), counsel for the Issuers and for
the Initial Purchasers, respectively, may rely upon the accuracy of the
representations and warranties of the Initial Purchasers and their compliance
with their agreements contained in this Section 2, and each Initial Purchaser
hereby consents to such reliance. CSI will advise Iridium of the completion of
the distribution of the Securities pursuant to Regulation S. Each Initial
Purchaser severally agrees that, at or prior to confirmation of sale of
Securities (other than a sale pursuant to Rule 144A), it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Each Initial Purchaser severally represents that it has not entered into and
agrees that it will not enter into any contractual arrangement with respect to
the distribution or delivery of the Securities, except with its affiliates or
with the prior written consent of Iridium.
(c) Each Initial Purchaser, severally and not jointly, agrees that
(i) it has not offered or sold, and will not offer or sell, in the United
Kingdom by means of any document, any Securities offered hereby, other than to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities
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<PAGE> 13
Regulations 1995 (the "Regulations"), (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 and the Regulations
with respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issuance of the Securities if
that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to
whom the document may otherwise lawfully be issued or passed on.
(d) The Issuers acknowledge and agree that, subject to the
restrictions herein, the Initial Purchasers may sell Securities to any affiliate
of an Initial Purchaser and that any such affiliate may sell Securities
purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of the
Notes and payment for the Notes shall be made at the offices of Milbank, Tweed,
Hadley & McCloy, Washington, D.C., or at such other place as shall be agreed
upon by the Initial Purchasers and the Issuers, at 10:00 A.M., New York City
time, on October 17, 1997, or at such other time or date, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchasers
and the Issuers (such date and time of payment and delivery being referred to
herein as the "Closing Date"). The Initial Purchasers and the Issuers have
determined that is it not feasible to close at an earlier date.
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuers by wire or book-entry transfer of
immediately available funds to such account or accounts as the Issuers shall
specify prior to the Closing Date or by such other means as the parties hereto
shall agree prior to the Closing Date against delivery to the Initial Purchasers
of the certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery,
the Securities sold to Qualified Institutional Buyers and pursuant to Regulation
S shall be in global form, registered in the name of DTC (as hereinafter
defined) or its nominee and in such denominations as CSI on behalf of the
Initial Purchasers shall have requested in writing not less than two full
business days prior to the Closing Date. The Issuers agree to make one or more
global certificates evidencing the Securities available for inspection by CSI on
behalf of the Initial Purchasers in New York, New York or Washington, D.C. at
least 24 hours prior to the Closing Date.
4. Further Agreements of the Issuers. Except in the case of clauses
(e), (k) and (l), for the shorter of (i) the six month period immediately
following the date of the Offering Memorandum and (ii) the period from the date
of the Offering Memorandum to the date the first Exchange Notes are issued, each
of the Issuers agrees with each of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from
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<PAGE> 14
time to time) in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; to advise the
Initial Purchasers promptly of any order preventing or suspending the use
of the Offering Memorandum, of any suspension of the qualification of the
Securities for offering or sale in any jurisdiction and of the initiation
or threatening of any proceeding for any such purpose; and to use its
reasonable efforts to prevent the issuance of any such order preventing or
suspending the use of the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to obtain the lifting
thereof at the earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of the
Offering Memorandum (and any amendments or supplements thereto) as may be
reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers
and counsel for the Initial Purchasers and not to effect any such
amendment or supplement to which the Initial Purchasers shall reasonably
object by notice to the Issuers after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the Notes
by the Initial Purchasers, any event shall occur or condition exist as a
result of which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Issuers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request of
such holders or such prospective purchasers, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless
Iridium is then subject to and in compliance with Section 13 or 15(d) of
the Exchange Act (the foregoing agreement being for the benefit of the
holders from time to time of the Securities and prospective purchasers of
the Securities designated by such holders);
(f) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request, in cooperation with the Initial
Purchasers, to qualify the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may designate and to continue such qualifications in effect for
so long as required for the resale of the Securities; and to arrange for
the determination of the
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<PAGE> 15
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchasers may reasonably request; provided
that no Issuer shall be obligated to qualify as a foreign corporation or
dealer in any jurisdiction in which it is not so qualified, to subject
itself to taxation or other governmental fees and charges in respect of
any jurisdiction to which it is not otherwise subject or to file a general
consent to service of process in any jurisdiction;
(g) to reasonably assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for
the Securities to be eligible for clearance and settlement through The
Depository Trust Company ("DTC"), the Euroclear System and Cedel Bank,
societe anonyme;
(h) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as such term is defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require
registration of the Securities under the Securities Act;
(i) except following the effectiveness of a registration statement
with respect to the Securities, Exchange Notes or the Private Exchange
Notes, if any, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on their behalf to,
solicit any offer to buy or offer to sell the Securities by means of any
form of general solicitation or general advertising within the meaning of
Regulation D, by means of any directed selling efforts (as defined in Rule
902 under the Securities Act) in connection with the Securities or in any
manner involving a public offering within the meaning of Section 4(2) of
the Securities Act; and not to offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any securities under circumstances
where such offer, sale, contract or disposition would cause the exemption
afforded by Section 4(2) of the Securities Act to cease to be applicable
to the offering and sale of the Securities to the Initial Purchasers as
contemplated by this Agreement and the Offering Memorandum nothing in this
clause (i) shall apply to any action or inaction by an Initial Purchaser
or any affiliate thereof;
(j) for a period of 45 days from the date of the Offering
Memorandum, not to, directly or indirectly, offer for sale, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, or file a
registration statement for, or announce any offer, sale, contract for sale
of or other disposition of any debt securities issued or guaranteed by any
of the Issuers or any of their subsidiaries (other than the Securities,
Exchange Notes and the Private Exchange Notes, if any, or pursuant to the
Registration Rights Agreement), without the prior written consent of the
Initial Purchasers;
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<PAGE> 16
(k) during the period from the Closing Date until two years after
the Closing Date or the effectiveness of a registration statement with
respect to the Securities, without the prior written consent of the
Initial Purchasers, not to, and to use reasonable efforts not permit any
of its affiliates (as defined in Rule 144 under the Securities Act) which
it controls to, resell any of the Securities that have been reacquired by
them, except for Securities purchased by the Issuers or any of their
affiliates and resold in a transaction registered under the Securities
Act;
(l) in connection with the offering of the Notes, until CSI on
behalf of the Initial Purchasers shall have notified the Issuers of the
completion of the resale of the Securities, not to, and to cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers
has a beneficial interest, any Securities, or attempt to induce any person
to purchase any Securities; and not to, and to cause its affiliated
purchasers not to, make bids or purchase for the purpose of creating
actual, or apparent, active trading in or of raising the price of the
Securities;
(m) to furnish to each of the Initial Purchasers on or prior to the
Closing Date hereof a copy of the independent accountants' report included
in the Offering Memorandum signed by the accountants rendering such
report; and
(n) to apply the net proceeds from the sale of the Securities as set
forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Issuers contained herein, to the accuracy
of the statements of the Issuers and their officers made in any certificates
delivered pursuant hereto, to the performance by the Issuers of their
obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial
Purchasers may agree; and no stop order suspending the sale of the
Securities in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to Iridium on or prior to the Closing Date that the Offering
Memorandum, as amended or supplemented, contains an untrue statement of a
fact which, in the opinion of counsel for the Initial Purchasers specified
herein, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is
necessary to
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<PAGE> 17
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents
and the transactions contemplated thereby, shall be satisfactory in all
material respects to the Initial Purchasers, and the Issuers shall have
furnished to the Initial Purchasers all documents and information that
they or their counsel may reasonably request to enable them to pass upon
such matters.
(d) Sullivan & Cromwell shall have furnished to the Initial
Purchasers their written opinion and letter, as counsel to the Issuers,
addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B hereto.
(e) Steptoe & Johnson LLP shall have furnished to the Initial
Purchasers their written opinion, as regulatory counsel for Motorola
Satellite Communications as FCC license holder, addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set
forth in Annex C hereto.
(f) F. Thomas Tuttle, Esq. shall have furnished to the Initial
Purchasers his written opinion, as General Counsel of Iridium, addressed
to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, substantially
to the effect set forth in Annex D hereto.
(g) The Initial Purchasers shall have received from Milbank, Tweed,
Hadley & McCloy, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchasers may reasonably require, and the Issuers shall have
furnished to such counsel such documents and information as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(h) The Initial Purchasers shall have received from Goldberg,
Godles, Wiener & Wright, regulatory counsel for the Initial Purchasers,
such opinion or opinions, dated the Closing Date, with respect to such
matters as the Initial Purchasers may reasonably require, and the Issuers
shall have furnished to such counsel such documents and information as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(i) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Initial Letter") of KPMG Peat Marwick LLP, addressed to the
Initial Purchasers and dated the date hereof, containing statements and
information of the type ordinarily included in accountants "comfort
letters" with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
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<PAGE> 18
(j) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of KPMG Peat Marwick LLP, addressed to
the Initial Purchasers and dated the Closing Date (i) confirming that they
are independent public accountants with respect to the Issuers within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA and
its interpretations and rulings thereunder, (ii) stating, as of the date
of the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more
than three business days prior to the date of the Bring-Down Letter), that
the conclusions and findings of such accountants with respect to the
financial information and other matters covered by the Initial Letter are
accurate and (iii) confirming in all material respects the conclusions and
findings set forth in the Initial Letter.
(k) As of the Closing Date, there shall not have been, since the
date hereof or since the respective dates as of which information is given
in the Offering Memorandum, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of Iridium, whether or not arising in the ordinary course of
business, and the Initial Purchasers shall have received a certificate of
the President or a Vice President of Iridium and of the chief financial or
chief accounting officer of Iridium, dated as of Closing Date, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Date, and (iii) each of the Issuers, as the case may be, has
complied with all agreements and satisfied all conditions on its part to
be performed or satisfied at or prior to Closing Date pursuant hereto.
Launch delays shall not be covered by this condition.
(l) The Initial Purchasers shall have received a certificate, dated
the Closing Date, of the President or Vice President of Motorola, in form
and substance satisfactory to counsel for the Initial Purchasers, as to
the accuracy of the statements attributed to Motorola in the Offering
Memorandum, and to such other matters relating to Motorola as counsel for
the Initial Purchasers may reasonably request, substantially to the effect
set forth in Annex E hereto.
(m) The Initial Purchasers shall have received a counterpart of the
Registration Rights Agreement which shall have been executed and delivered
by a duly authorized officer of each of the Issuers.
(n) The Indenture shall have been duly executed and delivered by the
Note Issuers, the Guarantor Subsidiaries and the Trustee, and the Notes
shall have been duly executed and delivered by the Issuers and duly
authenticated by the Trustee.
(o) The Notes shall have been approved by the NASD for trading in
the PORTAL Market.
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<PAGE> 19
(p) If any event shall have occurred that requires the Issuers under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(q) There shall not have occurred any invalidation of Rule 144A or
Regulation S under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act or
the Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Securities as contemplated hereby.
(r) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any material adverse change in the condition (financial or
otherwise), or in the earnings, business affairs or business prospects of
Iridium, whether or not arising in the ordinary course of business, the
effect of which, in any such case described above, is, in the judgment of
the Initial Purchasers, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by this Agreement
and the Offering Memorandum (exclusive of any amendment or supplement
thereto).
(s) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body which would, as of the Closing Date, prevent the issuance
or sale of the Securities, the Exchange Notes, or the Private Exchange
Notes, if any, as contemplated by the Offering Memorandum; and no
injunction, restraining order or order of any other nature by any federal
or state court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale as contemplated by
the Offering Memorandum of the Securities, the Exchange Notes or the
Private Exchange Notes, if any.
(t) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Initial
Notes or the Securities by Moody's Investors Service Inc. or Standard and
Poor's Ratings Group and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its
rating of the Initial Notes or the Securities.
(u) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market System or the over-the-counter market shall have
been suspended or materially limited, or minimum prices shall have been
established on any such exchange or market by the Commission or
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<PAGE> 20
the Nasdaq National Market by any such exchange or by any other regulatory
body or governmental authority having jurisdiction, or trading in any
securities of the Issuers on any exchange or in the over-the-counter
market shall have been suspended or (ii) any moratorium on commercial
banking activities shall have been declared by federal or New York state
authorities or (iii) an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or a
material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) the effect of which, in the
case of this clause (iii), is, in the judgment of the Initial Purchasers,
so material and adverse as to make it impracticable to market the
Securities or to enforce contracts for the sale of the Securities on the
terms and in the manner contemplated by this Agreement and in the Offering
Memorandum.
6. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
Issuers prior to delivery of and payment for the Securities if, prior to that
time, any of the events described in Section 5(q), (r), (s), (t) or (u) shall
have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to
purchase the principal amount of the Notes (and the related Guarantees) which
the defaulting Initial Purchaser agreed but failed to purchase in the respective
proportions which the principal amount of Notes set forth opposite the name of
each remaining non-defaulting Initial Purchaser in Schedule 1 bears to the
aggregate principal amount of Notes set forth opposite the names of all the
remaining non-defaulting Initial Purchasers in Schedule 1 hereto; provided,
however, that the remaining non-defaulting Initial Purchasers shall not be
obligated to purchase any of the Notes on such Closing Date if the total
principal amount of Notes which the defaulting Initial Purchasers agreed but
failed to purchase on such date exceeds one-eleventh of the aggregate principal
amount of Notes to be purchased on such Closing Date and any remaining
non-defaulting Initial Purchaser shall not be obligated to purchase more than
110% of the principal amount of Notes which it agreed to purchase on such
Closing Date. If the foregoing maximums are exceeded, the remaining
non-defaulting Initial Purchasers or those other purchasers satisfactory to the
Initial Purchasers who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Notes to be purchased on such Closing Date.
(b) If, after giving effect to any arrangements for the purchase of
the Notes of a defaulting Initial Purchaser by the non-defaulting Initial
Purchasers as provided in subsection (a) above, the aggregate principal amount
of such Notes which remain unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Notes, then this Agreement shall thereupon terminate
without liability on the part of any non-defaulting Initial Purchaser or the
Issuers, except for the expenses to be borne by the Issuers as provided in
Section 8 and 12 and the indemnity and contribution agreement in Sections 9 and
10, but nothing herein shall relieve a defaulting Initial Purchaser from
liability for its default. If other purchasers are obligated or agree to
purchase the Notes of a defaulting or withdrawing Initial Purchaser, either the
non-
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<PAGE> 21
defaulting Initial Purchasers or the Note Issuers may postpone the Closing
Date for up to seven full business days in order to effect any changes that in
the opinion of counsel for the Note Issuers or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or arrangement, and the Note Issuers agree to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If this Agreement
shall have been terminated pursuant to Section 6 or due to the failure of the
Issuers to fulfill a condition stated in Section 5, the Issuers shall reimburse
the Initial Purchasers for such out-of-pocket expenses (including reasonable
fees and disbursements of counsel) as shall have been reasonably incurred by the
Initial Purchasers in connection with this Agreement and the proposed purchase
and resale of the Notes. If this Agreement is terminated pursuant to Section 7
by reason of the default of one or more of the Initial Purchasers, the Issuers
shall not be obligated to reimburse any Initial Purchaser on account of such
expenses.
9. Indemnification. (a) The Issuers shall, jointly and severally,
indemnify and hold harmless each Initial Purchaser and its affiliates, and each
person, if any, who controls any Initial Purchaser within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(a) and Section 10 as an Initial Purchaser), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, without limitation, any loss, claim, damage, liability or
action relating to purchases and sales of the Securities), to which that Initial
Purchaser may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Offering Memorandum
or in any amendment or supplement thereto or in any information provided to the
holders of the Securities pursuant to Rule 144A(d)(4) under the Securities Act
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuers shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchasers' Information.
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Issuers and their respective affiliates, and
each person, if any, who controls the Issuers within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(b) and Section 10 as the Issuers), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Issuers may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as
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such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Initial Purchasers' Information, and shall
reimburse the Issuers for any legal or other expenses reasonably incurred by the
Issuers in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced by such failure; and, provided, further,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 9 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof; provided, however, that an indemnified party shall
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of
independent counsel to the indemnified party) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based upon advice of independent counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
22
<PAGE> 23
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any action
effected without its written consent. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
10. Contribution. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by or on behalf of the Issuers without duplication, on the one hand,
and the total discounts and commissions received by the Initial Purchasers with
respect to the Securities purchased under this Agreement, on the other, bear to
the total gross proceeds from the sale of the Securities under this Agreement,
in each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Issuers or
information supplied by the Issuers on the one hand or to any Initial
Purchasers' Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contributions pursuant to this
Section 10 were to be determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 10 shall be deemed to include, for purposes of
this Section 10, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or preparing to
defend any such action or claim. Notwithstanding the provisions of this Section
10, no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total price at which the Securities purchased by it and
resold to investors were offered to investors exceeds the amount of any damages
which such Initial Purchaser has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or
23
<PAGE> 24
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute as provided
in this Section 10 are several in proportion to their respective purchase
obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 9 and 10 with respect to affiliates and controlling persons of the
Issuers and the Initial Purchasers and in Section 4(e) with respect to holders
and prospective purchasers of the Securities. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
12. Expenses. The Issuers agree with the Initial Purchasers to pay
(a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities and any taxes payable in that connection; (b) the
costs incident to the preparation, printing and distribution of the Offering
Memorandum and any amendments or supplements thereto; (c) the costs of
reproducing and distributing each of the Transaction Documents; (d) the costs
incident to the preparation, printing and delivery of the certificates
evidencing the Securities, including stamp duties and transfer taxes, if any,
payable upon issuance of the Securities; (e) the fees and expenses of the
Issuers' counsel and independent accountants; (f) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(f) and of preparing, printing and distributing Blue Sky
Memoranda (including related fees and expenses of counsel for the Initial
Purchasers); (g) any fees charged by rating agencies for rating the Securities;
(h) the fees and expenses of the Trustee and any paying agents (including
related fees and expenses of any counsel to such parties); and (i) all expenses
and application fees incurred in connection with the application for the
inclusion of the Securities on the PORTAL Market and the approval of the
Securities for book-entry transfer by DTC. Except as provided in this Section 12
and Section 8, the Initial Purchasers shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Issuers and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Issuers or
the Initial Purchasers pursuant to this Agreement or any certificate delivered
pursuant hereto shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
of them or any of their respective affiliates, officers, directors, employees,
representatives, agents or controlling persons.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
24
<PAGE> 25
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: Stephanie Cuskley (telecopier no.: (212)
270-0994); or
(b) if to the Note Issuers or Guarantor Subsidiaries, shall be
delivered or sent by mail or telecopy transmission to c/o Iridium LLC at
1575 Eye Street N.W., Washington, D.C. 20005, Attention: General Counsel
(telecopier no.: 202-408-3761);
provided that any notice to an Initial Purchaser or Issuer pursuant to Section
9(c) shall also be delivered or sent by mail to such Initial Purchaser or Issuer
at its address set forth on the signature page hereof. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof. The Issuers shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Initial Purchasers
by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in the
"Description of Notes" section of the Offering Memorandum and (c) except where
otherwise expressly provided, the term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act.
16. Initial Purchasers' Information. The parties hereto acknowledge
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Offering
Memorandum: (i) the last paragraph on the front cover page concerning the terms
of the offering by the Initial Purchasers; (ii) the legend on the first inside
cover page concerning over-allotment and trading activities by the Initial
Purchasers; and (iii) the statements concerning the Initial Purchasers contained
in the third, fourth, fifth, sixth, tenth and eleventh paragraph and the second
sentence of the sixth paragraph under the heading "Plan of Distribution".
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
25
<PAGE> 26
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Issuers and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
IRIDIUM LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM CAPITAL CORPORATION
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM ROAMING LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM IP LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
26
<PAGE> 27
Accepted:
CHASE SECURITIES INC.
By____________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
MERRILL LYNCH, PIERCE, FENNER
AND SMITH INCORPORATED
By____________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
5500 Sears Tower
Chicago, Illinois 60606
Attention: M. Gray Stevens
BT ALEX. BROWN INCORPORATED
By________________________
Authorized Signatory
Address for notices pursuant to Section 9(c ):
130 Liberty Street, 30th Floor
New York, New York 10006
Attention: Jerald McConnell
27
<PAGE> 28
SCHEDULE 1
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Notes
------------------ -------------------------
<S> <C>
Chase Securities Inc. $120,000,000
Merrill Lynch, Pierce, Fenner
and Smith Incorporated 120,000,000
BT Alex. Brown Incorporated 60,000,000
------------
Total $300,000,000
</TABLE>
28
<PAGE> 29
ANNEX A
Iridium LLC
Iridium Capital Corporation
$300,000,000 11 1/4% Senior Notes due 2005, Series C
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of October 17, 1997
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER
AND SMITH INCORPORATED
BT ALEX. BROWN INCORPORATED
c/o Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Ladies and Gentlemen:
Iridium LLC, a Delaware limited liability company ("Iridium"), and
Iridium Capital Corporation, a Delaware corporation ("Capital" and, together
with Iridium, the "Issuers"), propose, jointly and severally, to issue and sell
to Chase Securities Inc. ("CSI"), Merrill Lynch, Pierce, Fenner and Smith
Incorporated and BT Alex. Brown Incorporated (collectively, the "Initial
Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated October 9, 1997 (the "Purchase Agreement"),
$300,000,000 aggregate principal amount of Notes (the "Notes"). The Notes will
be fully guaranteed on an unsecured, senior basis by Iridium Roaming LLC and
Iridium IP LLC (collectively, the "Guarantor Subsidiaries"). Capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Issuers agree with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the Notes,
the Exchange Notes (as defined herein) and the Private Exchange Notes (as
defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers and the Guarantor
Subsidiaries shall, at their cost and expense, (i) prepare and, not later than
90 days (or, if such day is not a business day, the first business day
thereafter) following the date of original issuance of the Notes (the "Issue
Date"), file with the Commission a registration statement (the "Exchange Offer
Registration Statement") on Form S-1 or Form S-4 under the Securities Act, if
use of such form is then available, with respect to a proposed offer to the
Holders (the "Registered Exchange Offer") to issue and deliver to the Holders,
in exchange for the Notes a like aggregate principal
<PAGE> 30
amount of debt securities of the Issuers that are identical in all material
respects to the Notes (the debt securities issued in exchange for the Notes are
referred to herein as the "Exchange Notes"), except the Exchange Notes shall not
contain terms with respect to transfer restrictions, (ii) use their reasonable
efforts to cause the Exchange Offer Registration Statement to become effective
under the Securities Act no later than 180 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 210 days after the
Issue Date (or if the 180th day or 210th day is not a business day, the first
business day thereafter) and (iii) use their reasonable efforts to keep the
Exchange Offer Registration Statement effective for not less than 20 business
days (or longer, if required by applicable law or otherwise extended by the
Issuers at their option) after the date on which notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period"). The Exchange Notes will be issued under the
Indenture or another indenture (the "Exchange Notes Indenture") among the
Issuers, the Guarantor Subsidiaries and the Trustee or such other bank or trust
company, as trustee (the "Exchange Notes Trustee"), such indenture to be
identical in all material respects to the Indenture, except the Exchange Notes
shall not contain terms with respect to transfer restrictions (as described
above). If the Issuers and the Guarantor Subsidiaries effect the Registered
Exchange Offer, the Issuers and the Guarantor Subsidiaries will be entitled to
close the Registered Exchange Offer 20 business days after the commencement
thereof; provided, however, that the Issuers have accepted all the Notes
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
As soon as practicable after the effectiveness of the Exchange Offer
Registration Statement, unless the Registered Exchange Offer would not be
permitted by applicable law or the Commission's policy, the Issuers and the
Guarantor Subsidiaries shall commence the Registered Exchange Offer, it being
the objective of such Registered Exchange Offer to enable each Holder electing
to exchange Notes for Exchange Notes that correspond to the Notes originally
held by such Holder (assuming that such Holder (a) is not an affiliate (as
defined in Rule 144 under the Securities Act) of the Issuers, the Guarantor
Subsidiaries or an Exchanging Dealer (as defined herein) not complying with the
requirements of the next sentence, (b) is not an Initial Purchaser holding Notes
that have, or that are reasonably likely to have, the status of an unsold
allotment in an initial distribution, (c) will acquire the Exchange Notes in the
ordinary course of such Holder's business and (d) has no arrangements or
understandings with any person to participate in the distribution of the
Exchange Notes (within the meaning of the Securities Act)), to transfer such
Exchange Notes from and after their receipt without any limitations or
restrictions on transfer under the Securities Act and without material
restrictions on transfer under the securities laws of no less than one-half of
the several states of the United States. The Issuers, the Guarantor
Subsidiaries, the Initial Purchasers and each Exchanging Dealer acknowledge
that, pursuant to interpretations by the Commission's staff of Section 5 of the
Securities Act and in the absence of an applicable exemption therefrom, (a) each
Holder that is a broker-dealer electing to exchange Notes, acquired for its own
account as a result of market-making activities or other trading activities, for
Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth (i) in Annex A hereto on the
cover of the prospectus forming part of the Exchange Offer Registration
Statement, (ii) in Annex B hereto in the forepart of the Exchange Offer
Registration Statement and in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section of the prospectus forming a
2
<PAGE> 31
part of the Exchange Offer Registration Statement, (iii) in Annex C hereto in
the "Plan of Distribution" section of such prospectus forming part of the
Exchange Offer Registration Statement and (iv) in Annex D hereto in the letter
of transmittal delivered pursuant to the Registered Exchange Offer, in
connection with a sale of any such Exchange Notes received by such Exchanging
Dealer pursuant to the Registered Exchange Offer and (b) an Initial Purchaser
that elects to sell Exchange Notes acquired in exchange for Notes constituting
any portion of an unsold allotment is required to deliver a prospectus
containing the information required by Items 507 or 508 of Regulation S-K under
the Securities Act, as applicable, in connection with such sale.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Notes acquired by it that have, or that are reasonably likely
to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Issuers shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Notes in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the Notes
held by such Holder (the "Private Exchange"), a like aggregate principal amount
of debt securities of the Issuers (the "Private Exchange Notes") that are
identical in all material respects to the Exchange Notes that correspond to the
Notes originally held by such Holder, except for the transfer restrictions
relating to such Private Exchange Notes. The Private Exchange Notes will be
issued under the same indenture as the Exchange Notes, and the Issuers shall use
their reasonable efforts to cause the Private Exchange Notes to bear the same
CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail, or cause to be mailed, to each Holder a copy of the
prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(c) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(d) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Issuers shall:
(a) accept for exchange all Notes validly tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
3
<PAGE> 32
(b) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes so accepted for exchange; and
(c) cause the Trustee or the Exchange Notes Trustee, as the case may
be, to authenticate and deliver to each Holder, Exchange Notes or Private
Exchange Notes, as the case may be, that correspond to the Notes
originally held by such Holder equal in principal amount to the Notes of
such Holder so accepted for exchange therefor.
The Issuers shall use their reasonable efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, as may be necessary, in the opinion of counsel for
the Exchanging Dealers or for the Issuers, in order to permit such prospectus to
be used by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell Exchange Notes; provided that (i) in the case
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer, such period shall be the lesser of 180 days and the
date on which all Exchanging Dealers have sold all Exchange Notes held by them
and (ii) the Issuers shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Notes for a period of not less than 90 days after the consummation
of the Registered Exchange Offer. The Indenture or the Exchange Notes Indenture,
as the case may be, shall provide that the Notes, the Exchange Notes and the
Private Exchange Notes, if any, shall vote and consent together on all matters
as one class and that none of the Notes, the Exchange Notes or the Private
Exchange Notes will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and Private Exchange will accrue
interest from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes (within the meaning of the Securities Act),
(iii) such Holder is not an affiliate (as defined in Rule 405 under the
Securities Act) of the Issuers or the Guarantor Subsidiaries or, if such Holder
is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(iv) if such Holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the Exchange Notes, and (v) if such
Holder is a broker-dealer, that it will receive Exchange Notes for its own
account in exchange for Notes that were acquired as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
4
<PAGE> 33
Notwithstanding any other provisions hereof, the Issuers and the
Guarantor Subsidiaries will use their reasonable efforts to ensure that (i) any
Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the date of such
prospectus or supplement, as the case may be, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that in no such case shall the Issuers
be responsible for information concerning any Initial Purchaser of the Notes,
provided in writing by any Initial Purchaser to the Issuers, included in the
Exchange Offer Registration Statement, the prospectus contained therein, or any
amendment or supplement thereto, as the case may be.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Issuers
determine upon the advice of their outside counsel that they are not permitted
to effect the Registered Exchange Offer as contemplated by Section 1 hereof,
(ii) any Notes validly tendered pursuant to the Registered Exchange Offer are
not exchanged for Exchange Notes within 30 days after the commencement of the
Registered Exchange Offer, (iii) any Initial Purchaser so requests within 90
days after the consummation of the Registered Exchange Offer with respect to
Notes or Private Exchange Notes which are not eligible to be exchanged for
Exchange Notes in the Registered Exchange Offer and are held by it following the
consummation of the Registered Exchange Offer, (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, (v) any Holder that participates in the Registered Exchange
Offer notifies Iridium within 20 business days after the consummation of the
Registered Exchange Offer that it did not receive freely transferable Exchange
Notes in exchange for validly tendered Notes, or (vi) the Issuers so elect, then
the following provisions shall apply:
(a) The Issuers and the Guarantor Subsidiaries shall use their
reasonable efforts to file, on or prior to 60 days after so required and
requested pursuant to this Section 2 (or, if such day is not a business day, the
first business day thereafter) with the Commission, and thereafter use their
reasonable efforts to cause to be declared effective under the Securities Act on
or prior to 60 days after such filing is made (or, if such day is not a business
day, the first business day thereafter) a shelf registration statement on an
appropriate form under the Securities Act relating to the offer and sale of the
Transfer Restricted Notes (as defined below) by the Holders thereof from time to
time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); provided, however, that no Holder (other than an Initial Purchaser)
shall be entitled to have the Notes held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by all
the
5
<PAGE> 34
provisions of this Agreement applicable to such Holder (including certain
indemnification obligations).
(b) The Issuers and the Guarantor Subsidiaries shall use their
reasonable efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Notes for a period ending on the earlier of (i)
two years from the Issue Date or such shorter period that will terminate when
all the Transfer Restricted Notes covered by the Shelf Registration Statement
have been sold pursuant thereto or for a period of one year in the event the
Shelf Registration Statement is requested by the Initial Purchasers pursuant to
Section 2(iii) and (ii) the date on which the Notes become eligible for resale
pursuant to Rule 144 under the Securities Act (in any such case, such period
being called the "Shelf Registration Period").
(c) Notwithstanding any other provisions hereof, the Issuers and the
Guarantor Subsidiaries will use their reasonable efforts to ensure that (i) any
Shelf Registration Statement and any amendment thereto and any prospectus
forming part thereof and any supplement thereto complies in all material
respects with the Securities Act and the rules and regulations of the Commission
thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in
either case, other than with respect to information included therein in reliance
upon or in conformity with written information furnished to the Issuers by or on
behalf of any Holder specifically for use therein (the "Holders' Information")),
as of its effective date, does not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any amendment or supplement to
such prospectus (in either case, other than with respect to Holders'
Information), does not, as of its date, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Notes will suffer damages if the Issuers and the
Guarantor Subsidiaries fail to fulfill their obligations described under Section
1 or Section 2, as applicable, and that it would not be feasible to ascertain
the extent of such damages. Accordingly, if (i) an Exchange Offer Registration
Statement covering the Notes is not filed with the Commission on or prior to 90
days after the Issue Date (or, if such day is not a business day, the first
business day thereafter) or a Shelf Registration Statement covering the Notes is
not filed with the Commission on or prior to 60 days after the date such filing
is requested or required to be made pursuant to Section 2 (or, if such day is
not a business day, the first business day thereafter) (ii) an Exchange Offer
Registration Statement covering the Notes is not declared effective within 180
days after the Issue Date (or if the 180th day is not a business day, the first
business day thereafter) or a Shelf Registration Statement covering the Notes is
not declared effective within 60 days after such filing is made (or, if such day
is not a business day, the first business day thereafter) (each such date, the
"Effectiveness Target Date"), (iii) the Registered Exchange Offer covering the
Notes is not consummated within 30 days after the Effectiveness Target Date, or
(iv) a Shelf Registration Statement or an Exchange Offer Registration Statement
covering the Notes, is filed and declared
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<PAGE> 35
effective within the period ending on the Effectiveness Target Date but shall
thereafter cease to be effective (at any time that the Issuers are obligated to
maintain the effectiveness thereof) or useable without being succeeded within 30
days by an additional Registration Statement covering the Notes filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Issuers and the Guarantor Subsidiaries will be
obligated to pay liquidated damages to each Holder of Transfer Restricted Notes,
during the first 90-day period immediately following the occurrence of one or
more of such Registration Defaults, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Notes held by such Holder until
(i) the Registration Statement covering the Notes is filed, (ii) an Exchange
Offer Registration Statement covering the Notes is declared effective and the
Registered Exchange Offer covering the Notes is consummated, (iii) a Shelf
Registration Statement covering the Notes is declared effective or (iv) the
applicable Registration Statement covering the Notes again becomes effective, as
the case may be. The liquidated damages will increase by an additional $.05 per
week per $1,000 principal amount of Transfer Restricted Notes, which are Notes,
held by each Holder during each subsequent 90-day period until the date on which
all such Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 amount of Notes. Following the
cure of all Registration Defaults, the accrual of liquidated damages will cease.
As used herein, the term "Transfer Restricted Notes" means (i) each Note until
the date on which such Note has been exchanged for a freely transferable
corresponding Exchange Note in the Registered Exchange Offer, (ii) each Note or
Private Exchange Note until the date on which it has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Note or Private Exchange Note until the
date on which it is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3, the Issuers and the
Guarantor Subsidiaries shall not be required to pay liquidated damages to a
Holder of Transfer Restricted Notes (i) if such Holder failed to comply with its
obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n) or (ii) if a holder of such
Transfer Restricted Notes was, at any time while the Registered Exchange Offer
was pending, eligible to exchange, and did not validly tender, such Transfer
Restricted Notes for freely transferable corresponding Exchange Notes in such
Exchange Offer.
(b) A Registration Default referred to in Section 3(a)(iv) shall be
deemed not to have occurred and be continuing in relation to the applicable
Shelf Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited or,
if required by the rules and regulations under the Securities Act, quarterly
unaudited financial information with respect to the Issuers where such
post-effective amendment is not yet effective and needs to be declared effective
to permit Holders to use the related prospectus or (y) for a period not to
exceed an aggregate of 45 days in any calendar year, other material events or
developments with respect to the Issuers that would need to be described in such
Shelf Registration Statement or the related prospectus and (ii) in the case of
clause (y), the Issuers are proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
such events; provided, however, that in no event
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<PAGE> 36
shall the Issuers be required to disclose the business purpose for such
suspension if the Issuers determine in good faith that such business purpose
must remain confidential. Notwithstanding the foregoing, the Issuers shall not
be required to pay Liquidated Damages with respect to the Notes of Holder if the
failure arises from the Issuers' failure to file, or cause to become effective,
a Shelf Registration Statement within the time periods specified in this Section
3 by reason of the failure of such Holder to provide such information as (i) the
Issuers may reasonably request, with reasonable prior written notice, for use in
the Shelf Registration Statement or any prospectus included therein to the
extent the Issuers reasonably determine that such information is required to be
included therein by applicable law, (ii) the NASD or the Commission may request
in connection with such Shelf Registration Statement or (iii) is required to
comply with the agreements of such Holder as contained in Section 4(n) to the
extent compliance thereof is necessary for the Shelf Registration Statement to
be declared effective.
(c) The Issuers shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default relating to the Notes. The Issuers and the Guarantor Subsidiaries shall
pay the liquidated damages due on the Transfer Restricted Notes by depositing
with the Paying Agent (which may not be either of the Issuers for these
purposes), in trust, for the benefit of the Holders thereof, prior to 10:00
a.m., New York City time, on the next interest payment date specified by the
Indenture and the Notes, sums sufficient to pay the liquidated damages then due.
The Liquidated Damages due shall be payable on each interest payment date
specified by the Indenture and the Notes to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(d) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Notes by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and remain effective and the
Registered Exchange Offer to be consummated, in each case to the extent required
by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior
to the effectiveness thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use their reasonable efforts to reflect in
each such document, when so filed with the Commission, such comments as any
Initial Purchaser may reasonably propose within three business days after being
sent a draft thereof; (ii) include the information set forth in Annex A hereto
on the cover, in Annex B hereto on the forepart of the Registration Statement
and in the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section of
the prospectus forming a part of the Exchange Offer
8
<PAGE> 37
Registration Statement, and include the information set forth in Annex D hereto
in the Letter of Transmittal delivered pursuant to the Registered Exchange
Offer; (iii) if requested by any Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; and (iv) in the
case of a Shelf Registration Statement, include the names of the Holders who
propose to sell Notes pursuant to such Shelf Registration Statement as selling
securityholders.
(b) The Issuers shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for
additional information; (provided, however, that with respect to any
requests prior to the effectiveness of the Registration Statement, the
Issuers shall be required to give written notice only to the Initial
Purchasers and their counsel).
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Issuers of any notification with respect to
the suspension of the qualification of the Notes, the Exchange Notes or
the Private Exchange Notes for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein
in order that the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(c) The Issuers and the Guarantor Subsidiaries will make every
reasonable effort to obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of any Registration Statement.
(d) The Issuers will furnish to each Holder of Transfer Restricted
Notes included within the coverage of any Shelf Registration Statement, without
charge, at least one conformed copy of such Shelf Registration Statement and any
post-effective amendment
9
<PAGE> 38
thereto, including financial statements and schedules and, if any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(e) The Issuers will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Notes included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Issuers consent, subject to the provisions of
this Agreement, to the use of such prospectus or any amendment or supplement
thereto by each of the selling Holders of Transfer Restricted Notes in
connection with the offer and sale of the Transfer Restricted Notes covered by
such prospectus or any amendment or supplement thereto during the Shelf
Registration Period.
(f) The Issuers will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Issuers will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, as promptly as practicable
deliver to each Initial Purchaser, each Exchanging Dealer and such other persons
that are required to deliver a prospectus following the Registered Exchange
Offer, without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement and
any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer
or other persons may reasonably request; and the Issuers consent, subject to the
provisions of this Agreement, to the use of such prospectus or any amendment or
supplement thereto by any such Initial Purchaser, Exchanging Dealer or other
persons required to deliver a prospectus during and following the Exchange Offer
Registration Period or Shelf Registration Period in each case in the form most
recently provided to each such person by the Issuers.
(h) Prior to the effective date of any Registration Statement, the
Issuers and the Guarantor Subsidiaries will use their reasonable efforts to
register or qualify, or cooperate with the Holders of Notes, Exchange Notes or
Private Exchange Notes included therein and their respective counsel in
connection with the registration or qualification of, such Notes, Exchange Notes
or Private Exchange Notes for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holder reasonably requests in writing and
do any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Notes, Exchange Notes or Private Exchange
Notes covered by such Registration Statement; provided that neither Issuer will
be required to qualify to do business in any jurisdiction where it is not then
so qualified, to subject itself to taxation or other governmental fees or
charges in respect of any jurisdiction in which it is not otherwise subject or
to take any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
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<PAGE> 39
(i) The Issuers and the Guarantor Subsidiaries will cooperate with
the Holders of Notes, Exchange Notes or Private Exchange Notes to facilitate the
timely preparation and delivery of certificates representing Notes, Exchange
Notes or Private Exchange Notes to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing prior to
sales of Notes, Exchange Notes or Private Exchange Notes pursuant to such
Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Issuers are required to maintain an effective
Registration Statement, as promptly as practicable the Issuers and the Guarantor
Subsidiaries will prepare and file with the Commission a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to holders of the Notes or purchasers of the Exchange Notes or Private Exchange
Notes from a Holder, the prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except, in each case, for an untrue statement of material
fact or omission of a material fact made in reliance upon and in conformity with
written information furnished to the Issuers by or on behalf of the Holders
specifically for use therein).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Notes, the Exchange
Notes or Private Exchange Notes, as the case may be, and provide the Trustee
with printed certificates for the Notes, the Exchange Notes or the Private
Exchange Notes, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
(l) The Issuers and the Guarantor Subsidiaries will comply with all
applicable rules and regulations of the Commission to the extent and so long as
they are applicable to the Registered Exchange Offer, the Private Exchange or
the registration effected pursuant to a Shelf Registration Statement and will
make generally available to their securityholders as soon as practicable after
the effective date of the applicable Registration Statement an earning statement
satisfying the provisions of Section 11(a) of the Securities Act; provided that
in no event shall such earning statement be delivered later than 45 days after
the end of a 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first month of Iridium's first fiscal quarter commencing
after the effective date of the applicable Registration Statement, which
statement shall cover such 12-month period.
(m) The Issuers and the Guarantor Subsidiaries will cause the
Indenture or the Exchange Note Indenture, as the case may be, to be qualified
under the Trust Indenture Act as required by applicable law in a timely manner.
(n) The Issuers and the Guarantor Subsidiaries may require each
Holder of Transfer Restricted Securities to be registered pursuant to any Shelf
Registration Statement to furnish to the Issuers such information concerning the
Holder and the distribution of such Transfer Restricted Notes as the Issuers may
from time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Issuers may exclude from such registration the
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<PAGE> 40
Transfer Restricted Notes of any Holder that fails to furnish such information
within a reasonable time after receiving such request. Each such Holder agrees
to notify the Issuers as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Issuers or of the
occurrence of any event, in either case, as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such Holder or such Holder's intended method of
distribution of such Transfer Restricted Notes, or omits to state a material
fact regarding such Holder or such Holder's intended method of distribution of
such Transfer Restricted Notes, required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and promptly to furnish to the Issuers any additional information
required to correct and update any previously furnished information or required
so that such prospectus shall not contain, with respect to such Holder or the
distribution of such Transfer Restricted Notes, an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Each such Holder shall comply with the provisions
of the Securities Act applicable to such Holder with respect to the disposition
by such Holder of Transfer Restricted Notes, covered by such registration
statement in accordance with the intended methods of disposition by such Holder
set forth in such registration statement.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Notes to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Notes that, upon receipt of any notice
from the Issuers pursuant to Section 4(b)(ii) through (v), such Holder will
discontinue disposition of such Transfer Restricted Notes until such Holder's
receipt of copies of the supplemental or amended prospectus contemplated by
Section 4(j) or until advised in writing (the "Advice") by the Issuers that the
use of the applicable prospectus may be resumed. If the Issuers shall give any
notice under Section 4(b)(ii) through (v) during the period that the Issuers are
required to maintain an effective Registration Statement (the "Effectiveness
Period"), such Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of such notice to
and including the date when each seller of Transfer Restricted Notes covered by
such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an amended
or supplemental prospectus is required) or (y) the Advice (if no amended or
supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuers and
the Guarantor Subsidiaries shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and take
all such other action, if any, as Holders of a majority in aggregate principal
amount of the Notes, Exchange Notes and Private Exchange Notes being sold, taken
as a single class, or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Notes, Exchange Notes or
Private Exchange Notes pursuant to such Shelf Registration Statement; provided,
however, that the Issuers shall not be required to enter into such agreement
more than once with respect to all the Notes and may delay entering into such
agreement until the consummation of any underwritten public offering which such
Issuers shall have then undertaken.
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<PAGE> 41
(q) In the case of a Shelf Registration Statement, the Issuers and
the Guarantor Subsidiaries shall (i) make reasonably available for inspection by
a representative of, and Special Counsel (as defined below) acting for, Holders
of a majority in aggregate principal amount of the Notes, Exchange Notes and
Private Exchange Notes being sold, taken as a single class, and any underwriter
participating in any disposition of Notes, Exchange Notes or Private Exchange
Notes pursuant to such Shelf Registration Statement, all relevant financial and
other records, pertinent corporate documents and properties of the Issuers and
the Guarantor Subsidiaries and their subsidiaries and (ii) use their reasonable
efforts to have their officers, directors, employees, accountants and counsel
supply all relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection with such
Shelf Registration Statement, in each case, as is customary for similar due
diligence investigations.
(r) In the case of a Shelf Registration Statement, the Issuers and
the Guarantor Subsidiaries shall, if requested in writing by Holders of a
majority in aggregate principal amount of the Notes, Exchange Notes and Private
Exchange Notes being sold, taken as a single class, their Special Counsel or the
managing underwriters (if any) in connection with such Shelf Registration
Statement, use their reasonable efforts to cause (i) their counsel to deliver an
opinion relating to the Shelf Registration Statement and the Notes, Exchange
Notes or Private Exchange Notes, as applicable, in customary form, (ii) their
officers to execute and deliver all customary documents and certificates
requested by Holders of a majority in aggregate principal amount of the Notes,
Exchange Notes and Private Exchange Notes being sold, taken as a single class,
their Special Counsel or the managing underwriters (if any) and (iii) their
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as contemplated,
and only if permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. The Issuers and the Guarantor Subsidiaries
will bear all expenses incurred in connection with the performance of their
obligations under Sections 1, 2, 3 and 4 and the Issuers and the Guarantor
Subsidiaries will reimburse the Initial Purchasers and the Holders for the
reasonable fees and disbursements of one firm of attorneys chosen by the Holders
of a majority in aggregate principal amount of the Notes, the Exchange Notes and
the Private Exchange Notes to be sold, taken as a single class, pursuant to each
Registration Statement (the "Special Counsel") acting for the Initial Purchasers
or Holders in connection with the Registered Exchange Offer or a Shelf
Registration, if applicable, it being understood that the Issuers and the
Guarantor Subsidiaries shall not be responsible for the fees and disbursements
of more than one counsel employed at any one time.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Issuers and the Guarantor Subsidiaries shall, jointly and
severally, indemnify and hold harmless each Holder (including, without
limitation, any such Initial Purchaser or Exchanging Dealer) and its affiliates,
and each person, if any, who controls such Holder within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6 and Section 7 as a Holder)
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<PAGE> 42
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases and sales of Notes, Exchange
Notes or Private Exchange Notes), to which that Holder may become subject,
whether commenced or threatened, under the Securities Act, the Exchange Act, any
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Holder promptly upon demand for any legal or other expenses reasonably
incurred by that Holder in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Issuers and the
Guarantor Subsidiaries shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Holders' Information; and provided, further, that with respect to any such
untrue statement in or omission from any related preliminary prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder to the extent that such loss, claim, damage, liability or
action of or with respect to such Holder results from the fact that both (A) a
copy of the final prospectus was not sent or given to such person at or prior to
the written confirmation of the sale of such Notes, Exchange Notes or Private
Exchange Notes to such person and (B) the untrue statement in or omission from
the related preliminary prospectus was corrected in the final prospectus unless,
in either case, such failure to deliver the final prospectus was a result of
non-compliance by the Issuers and the Guarantor Subsidiaries with Section 4(d),
4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Issuers, the Guarantor Subsidiaries, their
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls any Issuer and the Guarantor
Subsidiaries within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6(b) and Section 7 as the
Issuers), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Issuers may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Issuers by such
Holder, and shall reimburse the Issuers for any legal or other expenses
reasonably
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<PAGE> 43
incurred by the Issuers in connection with investigating or defending or
preparing to defend against or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that no such Holder shall be liable for any
indemnity claims hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Notes, Exchange Notes or Private Exchange Notes
pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent. No
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<PAGE> 44
indemnifying party shall, without the prior written consent of the indemnified
party (which consent shall not be unreasonably withheld), effect any settlement
of any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuers from the offering and sale of the Notes, on the
one hand, and a Holder with respect to the sale by such Holder of Notes,
Exchange Notes or Private Exchange Notes, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers on
the one hand and such Holder on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Issuers on the one hand and a Holder on the
other with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Notes (before
deducting expenses) received by or on behalf of the Issuers without duplication
as set forth in the table on the cover of the Offering Memorandum, on the one
hand, bear to the total proceeds received by such Holder with respect to its
sale of Notes, Exchange Notes or Private Exchange Notes, on the other. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Issuers or information
supplied by the Issuers on the one hand or to any Holders' Information supplied
by such Holder on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7 were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Notes, Exchange Notes or the Private Exchange Notes shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Notes, Exchange Notes or the Private Exchange Notes sold by
such indemnifying party to any purchaser exceeds the amount of any damages which
such indemnifying party has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the
16
<PAGE> 45
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Rules 144 and 144A. The Issuers and the Guarantor Subsidiaries
shall use their reasonable efforts to file the reports required to be filed by
them under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Issuers and the Guarantor Subsidiaries are not required to file
such reports, they will, upon the written request of any Holder of Transfer
Restricted Notes, make publicly available other information so long as necessary
to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The
Issuers and the Guarantor Subsidiaries covenant that they will take such further
action as any Holder of Transfer Restricted Notes may reasonably request, all to
the extent required from time to time to enable such Holder to sell Transfer
Restricted Notes without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Notes, the Issuers shall deliver to such
Holder a written statement as to whether they have complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Issuers to register any of their securities pursuant to
the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Notes covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Notes
included in such offering, subject to the approval of the Issuers (which
approval shall not be unreasonably withheld or delayed), and such Holders shall
be responsible for all underwriting commissions and discounts in connection
therewith; provided, however, that the Issuers shall not be obligated to arrange
for more than one underwritten offering during the period that such Shelf
Registration Statement is required to be effective pursuant to this Agreement).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, lock-up agreements, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Issuers have obtained the written consent of Holders of a majority in aggregate
principal amount of the Notes, Exchange Notes and Private Exchange Notes.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose Notes, Exchange Notes and Private Exchange Notes are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority in
aggregate principal amount of the Notes, the Exchange
17
<PAGE> 46
Notes and Private Exchange Notes being sold by such Holders pursuant to such
Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to Iridium in accordance with the provisions of this Section 10(b), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Chase Securities Inc., Merrill Lynch, Pierce, Fenner and
Smith Incorporated and BT Alex. Brown Incorporated;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to any Issuer or a Guarantor Subsidiary, initially at the
address of the Issuer set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Issuers and their successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the Commission and the New York Stock
Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning
set forth in Rule 405 under the Securities Act and (c) except where otherwise
expressly provided, the term "affiliate" has the meaning set forth in Rule 405
under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.
18
<PAGE> 47
(h) No Piggyback on Registrations. Neither the Issuers nor any of
their security holders (other than the Holders of Transfer Restricted Notes in
such capacity) shall have the right to include any securities of the Issuers in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Notes.
(i) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement or the application thereof is held by a court
of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
19
<PAGE> 48
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchasers.
Very truly yours,
IRIDIUM LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM CAPITAL CORPORATION
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM ROAMING LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
IRIDIUM IP LLC
By /s/ F. Thomas Tuttle
______________________________
Name: F. Thomas Tuttle
Title: Vice President,
General Counsel
and Secretary
20
<PAGE> 49
Accepted:
CHASE SECURITIES INC.
By David Fass
--------------------------
Authorized Signatory
MERRILL LYNCH, PIERCE, FENNER
AND SMITH INCORPORATED
By Lisa Craig
--------------------------
Authorized Signatory
BT ALEX. BROWN INCORPORATED
By Arthur H. Penn
--------------------------
Authorized Signatory
21
<PAGE> 50
ANNEX A TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuers and the Guarantor Subsidiaries have agreed
that, for a period of 180 days after the Expiration Date (as defined herein),
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution".
<PAGE> 51
ANNEX B TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
2
<PAGE> 52
ANNEX C TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Issuers and the Guarantor
Subsidiaries have agreed that, for a period of 180 days after the Expiration
Date, they will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, until
___________________, 1998, all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.(1)
None of the Issuers or the Guarantor Subsidiaries will receive any
proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes
received by broker-dealers for their own account pursuant to the Registered
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Registered Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers and
the Guarantor Subsidiaries will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Issuers and the Guarantor Subsidiaries have agreed to pay all expenses incident
to the Registered Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- --------
1 In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Registered Exchange Offer prospectus.
3
<PAGE> 53
ANNEX D TO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ________________________________________
Address: ________________________________________
________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
4
<PAGE> 54
ANNEX B
FORM OF OPINION AND LETTER OF
SULLIVAN & CROMWELL TO BE
DELIVERED PURSUANT TO
SECTION 5(d)
<PAGE> 55
ANNEX C
FORM OF OPINION OF STEPTOE & JOHNSON LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(e)
<PAGE> 56
ANNEX D
FORM OF OPINION OF GENERAL COUNSEL OF IRIDIUM
TO BE DELIVERED PURSUANT TO
SECTION 5(f)
<PAGE> 57
ANNEX E
FORM OF CERTIFICATE OF
VICE PRESIDENT OF MOTOROLA
TO BE DELIVERED PURSUANT TO
SECTION 5(l)
<PAGE> 1
EXHIBIT 10.25
ASSET TRANSFER AGREEMENT
BETWEEN
IRIDIUM LLC
AND
IRIDIUM OPERATING LLC
DATED AS OF DECEMBER 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION........................................................................................... 1
ARTICLE I
DEFINITIONS AND INTERPRETIVE RULES
Section 1.01. Definitions................................................................. 1
Section 1.02. General Interpretive Rules.................................................. 3
ARTICLE II
ASSIGNMENT AND ASSUMPTION
Section 2.01. Assignment of Assets........................................................ 4
Section 2.02. Assumption of Liabilities................................................... 4
Section 2.03. Issuance of Membership Interests............................................ 4
Section 2.04. Exact Effective Time........................................................ 4
ARTICLE III
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ASSIGNOR
Section 3.01. Organization and Qualification.............................................. 4
Section 3.02. Authority................................................................... 4
Section 3.03. No Conflicts, Filings and Violations of Regulations......................... 5
Section 3.04. No Consents or Violations of Contracts, etc................................. 5
Section 3.05. Ownership of Assets......................................................... 5
Section 3.06. Litigation.................................................................. 5
Section 3.07. Investment Intent........................................................... 5
Section 3.08. Condition of the Assets..................................................... 5
Section 3.09. Unknown Liabilities......................................................... 5
Section 3.10. No Indemnity................................................................ 6
Section 3.11. Contracts................................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ASSIGNEE
Section 4.01. Organization and Qualification.............................................. 6
Section 4.02. Authority................................................................... 6
Section 4.03. Investment Intent........................................................... 6
ARTICLE V
EMPLOYEES
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 5.01. Employees................................................................... 6
ARTICLE VI
COVENANTS
Section 6.02. Consents and Approvals Relating to Liabilities.............................. 7
Section 6.03. Taxes and Recording Fees.................................................... 7
Section 6.04. Expenses.................................................................... 7
Section 6.05. Commercial Best Efforts..................................................... 7
Section 6.06. Compliance with Applicable Bulk Transfer Laws............................... 8
Section 6.07. Books and Records........................................................... 8
Section 6.08. Further Assurances.......................................................... 8
ARTICLE VII
CONDITIONS
Section 7.01. Representations and Warranties.............................................. 8
Section 7.02. Performance of Obligations.................................................. 9
Section 7.03. Consents of Third Parties................................................... 9
Section 7.04. Assumption of Liabilities of Assignor....................................... 9
Section 7.05. Insurance Coverage.......................................................... 9
ARTICLE VIII
CLOSING
Section 8.01. Closing..................................................................... 9
Section 8.02. Documents to be Delivered by Assignor....................................... 9
Section 8.03. Documents to be Delivered by Assignee....................................... 10
ARTICLE IX
TERMINATION
Section 9.01. Termination................................................................. 10
Section 9.02. Effect of Termination....................................................... 10
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Amendments.................................................................. 11
Section 10.02. Extension; Waiver........................................................... 11
Section 10.03. Governing Law............................................................... 11
Section 10.04. No Third Party Beneficiaries................................................ 11
Section 10.05. Power of Attorney........................................................... 11
Section 10.06. Notices..................................................................... 11
Section 10.07. Severability................................................................ 12
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 10.08. Counterparts................................................................ 12
Section 10.09. Entire Agreement............................................................ 12
</TABLE>
3
<PAGE> 5
ASSET TRANSFER AGREEMENT
This ASSET TRANSFER AGREEMENT ("AGREEMENT") is made as of
December 18, 1997, by and between IRIDIUM LLC, a Delaware limited liability
company ("ASSIGNOR" or "IRIDIUM"), and IRIDIUM OPERATING LLC, a newly-formed
Delaware limited liability company ("ASSIGNEE" or "OPERATING").
INTRODUCTION
Assignor is the sole parent company of Iridium Capital
Corporation, a Delaware corporation ("IRIDIUM CAPITAL"), Iridium Roaming LLC, a
Delaware limited liability company ("IRIDIUM ROAMING"), and Iridium IP LLC, a
Delaware limited liability company ("IRIDIUM IP").
Assignor desires to reorganize its business structure (the
"REORGANIZATION") by, among other things, forming a limited liability company,
Assignee, which shall then become a wholly-owned subsidiary of Assignor, and
transferring substantially all its assets and liabilities to Assignee, including
without limitation its interest in Iridium Capital, Iridium Roaming and Iridium
IP.
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, agree as follows:
ARTICLE
I
DEFINITIONS AND INTERPRETIVE RULES
Section 1.01. Definitions.
In this Agreement:
"AGREEMENT" means this Asset Transfer Agreement, as executed
by the parties hereto as of the date first written above, and the attached
Schedules, and if amended as permitted hereby, as so amended.
"ASSETS" means those assets, tangible and intangible, to the
extent owned or leased by the Assignor as of the Closing Date, listed in
Schedule 1.01A.
"ASSIGN" includes to assign, transfer or convey.
"ASSUME" includes to assume, accept, become obligated or
otherwise agree to pay, perform or discharge a liability, debt or obligation.
<PAGE> 6
"BEST EFFORTS" means all efforts that are commercially
reasonable to take.
"BOOKS AND RECORDS" means all books, records and files
relating to the Assignor's business, Assets or Liabilities, including Permits,
employee records, logs, manuals, instruction materials, plans, drawings, product
and manufacturers' warranties, accounting, financial and billing records,
computer software and programs, in each case whether or not in written or
electronic format.
"CLOSING" and "CLOSING DATE" have the meanings set forth in
Section 8.01.
"CONSENT" means, with respect to the Assignment of a Contract
or Permit, the consent, approval, waiver or contract amendment necessary to
Assign such contract or Permit pursuant to its terms or applicable law.
"CONTRACT" means any contract, agreement, lease or Insurance
Policy entered into between Assignor and any third party listed in Schedule
1.01A.
"ENCUMBRANCE" means any charge, claim, equitable interest,
lien, option, pledge, security interest, right of first refusal or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income, or the exercise of any other attribute of ownership.
"EXCLUDED ASSETS" means those assets, tangible and intangible,
to the extent owned or leased by the Assignor as of the Closing Date, listed in
Schedule 1.01B, and any other assets of Assignor not listed in Schedules 1.01A
and 1.01B.
"EXCLUDED LIABILITIES" means those liabilities and obligations
of Assignor, as of the Closing Date, listed in Schedule 1.01D.
"GATEWAY OPERATOR" means any business entity which has entered
into an agreement entitled "Gateway Authorization Agreement" with Assignor.
"IWCL" means Iridium World Communications Ltd., a Bermuda
company.
"INCLUDING" means "including but not limited to."
"INSURANCE POLICIES" means all insurance policies of Assignor
as of the Closing Date insuring the Assets, operations or personnel of the
Assignor or indemnifying losses or liabilities of the Assignor or its personnel,
including satellite insurance, launch insurance, control facility insurance,
general liability insurance, directors' and officers' liability insurance,
employment practices liability insurance, executive life insurance, crime
insurance, auto insurance, property insurance and workmen's compensation
insurance.
"LIABILITIES" means those liabilities and obligations of
Assignor as of the Closing Date, fixed or contingent, known or unknown, accrued
or current, listed on Schedule 1.01C.
2
<PAGE> 7
"MANAGEMENT SERVICES AGREEMENT" means the Management Services
Agreement, as amended and restated on December 18, 1997, by and among IWCL,
Assignor and Assignee, as amended from time to time.
"MATERIAL ADVERSE EFFECT" means, with respect to an entity, an
event, effect, change or circumstances that is materially adverse to the assets,
liabilities, business or financial condition of such entity.
"PERMITS" means all licenses, permits and other authorizations
issued by any federal, state, local, foreign or other governmental authority,
agency or instrumentality.
"SERVICE PROVIDER" means any business entity which has entered
into an agreement with a Gateway Operator pursuant to which such entity shall
provide telecommunications services and interconnections between the Gateway
Operator's facilities and end-user subscribers, directly or indirectly, and
billing services in connection with the furnishing of such telecommunications
services. "Service Provider" includes any Gateway Operator which also directly
provides telecommunications services to or billing services in regard to
subscribers.
"SPACE SYSTEM UNDER CONSTRUCTION" means the worldwide
telecommunications system being developed, created, built, installed, operated
and maintained by Assignor, directly and pursuant to Contracts, including all of
its satellites, whether delivered, in orbit or to be delivered under Contracts,
all Assignor's telecommunications facilities, equipment and software used in
connection with such system, all inventories of equipment, materials, work in
progress, goods, supplies owned by Assignor and used in the development,
creation, building, installation, operation and maintenance of such system, all
rights and privileges under Contracts and all purchase orders for such
facilities, equipment and software, and all Permits, which are related to the
development, creation, building, installation, operation or maintenance of such
system, but not including any Excluded Assets.
"TAXES" means all taxes, levies, assessments, duties, license
fees or other charges, including income, franchise, sales, profits, excise,
recording, transfer, gross receipts, use, real or personal property, gains,
payroll, withholding, social security, stamp or ad valorem taxes, imposed upon
Assignor or its Assets by any taxing authority of any federal, state, local or
foreign jurisdiction which are due and unpaid as of the Closing Date.
Section 1.02. General Interpretive Rules. For purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in this Article include the plural,
the singular and variations of similar import; (ii) the use of any gender herein
shall be deemed to include the other genders; (iii) references herein to
"Articles," and "Sections" and "Schedules," without reference to a document, are
to designated Articles and Sections of, and to Schedules to, this Agreement;
(iv) the words "herein," "hereof," "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular provision; and (v)
references to the "date of this Agreement" and the "date hereof" refers to the
date first written above.
3
<PAGE> 8
ARTICLE II
ASSIGNMENT AND ASSUMPTION
Section 2.01. Assignment of Assets. At the Closing, Assignor
shall Assign to Assignee, and Assignee shall accept, acquire and receive from
Assignor, all of Assignor's right, title and interest in and to the Assets,
subject to any Encumbrances that may exist on the Assets.
Section 2.02. Assumption of Liabilities. At the Closing, in
consideration of the Assets to be transferred to Assignee hereunder, Assignee
shall Assume the Liabilities and Assignor shall be relieved of the Liabilities,
as provided in Section 6.02. The Assumption of Liabilities by Assignee shall not
defeat, impair or limit in any way any right or remedy of Assignee to contest or
dispute the validity or amount of any Liability or to assert any defense
thereto.
Section 2.03. Issuance of Membership Interests. At the
Closing, Assignee shall issue and deliver all of its authorized membership
interests to Assignor.
Section 2.04. Exact Effective Time. Unless otherwise expressly
provided herein, the exact effective time of the Assignment of the Assets by
Assignor under Section 2.01, the acceptance of the Assets by Assignee under
Section 2.01, the assumption of the Liabilities by Assignee under Section 2.02
and the release of Assignor from the Liabilities under Section 2.02, which is
stated herein to be "at the Closing," shall, subject to the satisfaction of the
conditions set forth in Article VII, be 12:01 a.m. of the morning of the Closing
Date.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ASSIGNOR
Assignor represents and warrants to Assignee as follows:
Section 3.01. Organization and Qualification. Assignor is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. Assignor has all requisite power and
authority to own, lease and operate the assets owned and leased by it, and to
carry on its business as now being conducted. Assignor is duly qualified to do
business and is in good standing in each jurisdiction in which the property is
owned, leased or operated by it, or the nature of the business conducted by it,
makes such qualification necessary.
Section 3.02. Authority. Assignor has the requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by Assignor of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Assignor, and no other proceedings on the part of Assignor are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement, when duly executed and delivered by Assignor and Assignee, shall
constitute the valid and binding obligation of Assignor.
4
<PAGE> 9
Section 3.03. No Conflicts, Filings and Violations of
Regulations. Except as set forth in Schedule 3.03, neither the execution,
delivery or performance of this Agreement by Assignor nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the articles of organization and limited liability
company agreement of Assignor, (ii) require any filing with, or Permit,
authorization, consent or approval of any court, tribunal, agency or other
governmental or regulatory authority, or (iii) violate any order, injunction,
decree, statute, rule or regulation applicable to Assignor or by which any Asset
of Assignor is bound or affected except, in the case of clause (iii), for
violations or other occurrences that would not prevent or delay consummation of
this Agreement or the transactions contemplated hereby in any material respect,
including, without limitation, the transfer of the Assets and Liabilities to the
Assignee, and would not, individually or in the aggregate, have a Material
Adverse Effect on Assignor.
Section 3.04. No Consents or Violations of Contracts, etc.
Neither the execution, delivery or performance of this Agreement by Assignor nor
the consummation of the transactions contemplated hereby will (i) except as set
forth in Schedule 3.04, require the Consent of any third party or (ii) result in
a violation or breach of, or constitute (with or without due notice of lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of any lien or other
encumbrance on any Asset pursuant to, any Contract, note, bond, mortgage or
other instrument or obligation to which Assignor is a party or by which any of
its assets may be bound, except for violations or other occurrences that would
not prevent or delay consummation of this Agreement or the transactions
contemplated hereby in any material respect and would not, individually or in
the aggregate, have a Material Adverse Effect on Assignor.
Section 3.05. Ownership of Assets. Subject to the Liabilities,
to receipt of the Consents contemplated by Schedules 3.03 and 3.04 each of which
Consents has been duly obtained and is in full force and effect, and to Sections
3.09 and 3.10, Assignee will acquire all right, title and interest of Assignor
in and to the Assets at Closing.
Section 3.06. Litigation. Except as set forth in Schedule
3.06, to the knowledge of Assignor, there are no actions, suits, claims, or
proceedings pending or, threatened against Assignor, before any court, tribunal,
governmental body, commission, agency or arbitrator.
Section 3.07. Investment Intent. Assignor will acquire the
membership interests of Assignee pursuant to this Agreement for its own account
for the purpose of investment and not with a view to the distribution thereof.
Section 3.08. Condition of the Assets. ASSIGNOR MAKES (i) NO
REPRESENTATION OR WARRANTY AS TO ANY OF THE ASSETS AND ASSIGNS THEM IN "AS IS,
WHERE IS" CONDITION; (ii) NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE; OR
(iii) NO WARRANTY OF TITLE.
Section 3.09. Unknown Liabilities. Assignor does not warrant
the absence of unknown debts, liabilities, obligations, Encumbrances, rights,
claims or causes of action (whether absolute, accrued, contingent or otherwise).
If any exist, they shall be Assumed by Assignee.
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<PAGE> 10
Section 3.10. No Indemnity. Assignor and Assignee agree that
Assignor shall have no obligation to indemnify Assignee or any of its successors
or assigns, or contribute to Assignee or any of its successors or assigns, for
any losses, claims, damages or liabilities to which Assignee or any of its
successors or assigns may become subject that, directly or indirectly, arise out
of or are related to the transactions contemplated hereby, including any
obligation of Assignee in respect of the Assets and Liabilities Assigned to and
Assumed by Assignee hereunder.
Section 3.11. Contracts. Schedule 1.01.A contains an accurate
and complete list of the Assets to be Assigned hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ASSIGNEE
Assignee represents and warrants to Assignor as follows:
Section 4.01. Organization and Qualification. Assignee is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. Assignee has all requisite power and
authority to own, lease and operate the Assets to be assigned to it hereunder
and to carry on the business associated with the Assets. Assignee is duly
qualified and licensed to do business and in good standing in each jurisdiction
which makes such qualification necessary.
Section 4.02. Authority. Assignee has the requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by Assignee of the transactions contemplated
hereby, have been duly authorized by all necessary action on the part of
Assignee, and no other proceedings on the part of Assignee are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
or thereby. This Agreement, when duly executed and delivered by Assignee and
Assignor, shall constitute the valid and binding obligation of Assignee.
Section 4.03. Investment Intent. Assignee will acquire the
shares of Iridium Capital and the membership interests of Iridium Roaming and
Iridium IP pursuant to this Agreement for its own account for the purpose of
investment and not with a view to the distribution thereof.
ARTICLE V
EMPLOYEES
Section 5.01. Employees. This Agreement does not provide for
the transfer to Assignee of any of Assignor's employees or consultants. Such
employees and consultants shall render services to Assignee on and after the
Closing Date pursuant to the Management Services Agreement.
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<PAGE> 11
ARTICLE VI
COVENANTS
Section 6.01. Consents Relating to Assets.
(a) By Closing, Assignor shall have obtained all Consents of
third parties necessary to Assign to the Assignee the Contracts listed in
Schedule 3.04.
(b) If Assignor is unable to fully comply with Section 6.01(a)
by Closing, but the parties nonetheless proceed to Closing based on one or more
waivers (such waiver or waivers to be in writing) by Assignee, Assignor shall
use its Best Efforts to comply with Section 6.01(a) following Closing unless
Assignee expressly relieves Assignor of such obligation in writing. If any
Consent is obtained after Closing, Assignor shall promptly complete the
Assignment to Assignee without payment of further consideration by Assignee to
Assignor.
Section 6.02. Consents and Approvals Relating to Liabilities.
(a) Assignee shall execute and deliver all instruments and
other documents, and take such other actions as Assignor may reasonably request
in order that, as of the Closing Date, Assignee shall have fully Assumed all of
the Liabilities and Assignor shall have been fully relieved of the Liabilities.
(b) If Assignee is unable to fully comply with Section 6.02(a)
by the Closing, but the parties nonetheless proceed to Closing based on one or
more waivers by Assignor in writing, Assignee shall use its Best Efforts to
comply with Section 6.02(a) following Closing unless Assignor expressly relieves
Assignee of such obligation in writing. If after Closing Assignee is able to
fully Assume any Liability and to have Assignor relieved of such Liability,
Assignee shall promptly complete the process without payment of further
consideration from Assignor to Assignee.
(c) If Assignee is unable to fully comply with Section 6.02(a)
so that Assignor continues to be obligated under any Liability, Assignee shall
timely pay, perform and discharge each such Liability of Assignor or indemnify
Assignor for any payment it makes or cost it incurs in regard to such Liability,
as the case may be.
Section 6.03. Taxes and Recording Fees. All Taxes and special
assessments, if any, payable with respect to any of the property included in the
Assets, shall be paid by Assignee. All transfer taxes and recording and filing
fees, if any, incurred in connection with the transfer of the Assets pursuant to
this Agreement shall be paid by Assignee.
Section 6.04. Expenses. All costs and expenses that remain
outstanding as of the Closing Date, including legal, accounting and other
professional fees, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by Assignee.
Section 6.05. Commercial Best Efforts. Each of the parties
agrees to use its Best Efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary,
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<PAGE> 12
proper or advisable to consummate, as promptly as practicable, the transactions
contemplated hereby. Each of the parties agrees to cooperate fully with the
other in assisting it to comply with this Agreement.
Section 6.06. Compliance with Applicable Bulk Transfer Laws.
Without admitting the applicability of the bulk transfer law of any
jurisdiction, the parties have agreed to waive the compliance with such laws.
Losses incurred as a result of noncompliance with any applicable bulk transfer
law shall be borne by Assignee.
Section 6.07. Books and Records. The parties acknowledge that
(i) some of the Books and Records held by Assignor on the Closing Date should be
retained by Assignor to enable it to perform various obligations and services
for which it will be responsible after the Closing Date regarding, by way of
example, its employees and real estate leases, and (ii) some should be
transferred by Assignor to Assignee to enable Assignee to perform various
obligations and services for which it will be responsible after the Closing Date
regarding, by way of example, the Contracts. Accordingly, the parties agree that
on and after the Closing Date they shall review the Books and Records held by
Assignor on the Closing Date and come to an agreement regarding which Books and
Records should be retained by Assignor and which should be transferred to
Assignee, consistent with their respective obligations after the Closing Date.
If any Books and Records held by Assignor on the Closing Date are needed by both
parties, each party agrees that, on and after the Closing Date, it shall take
such action as may be required (including making copies of any such Books and
Records) to share or provide the other with access to such Books and Records.
Section 6.08. Further Assurances. The parties shall execute
and deliver such further instruments and shall take such other actions as each
of them may reasonably request of the other in order to effectuate the intent
and purposes of this Agreement. Without limiting the generality of the preceding
sentence, at any time and from time to time on or after the Closing Date, (i) at
the request of Assignee, Assignor shall execute and deliver to Assignee such
other instruments of transfer and take such other actions as Assignee may
reasonably deem necessary or desirable in order to more effectively transfer to
Assignee and to confirm Assignee's right, title and interest in the Assets and
to place Assignee in control of the Assets and to enable the Assignee to
exercise and enjoy all of the Assets; and (ii) at the request of Assignor,
Assignee shall execute and deliver to Assignor or to third parties all
instruments and other documents and take such other actions as Assignor may
reasonably deem necessary or desirable in order to have Assignee fully Assume
the Liabilities and to have Assignor fully relieved of the Liabilities.
8
<PAGE> 13
ARTICLE VII
CONDITIONS
The respective obligations of Assignor and Assignee to proceed to
Closing shall be subject to the satisfaction or waiver, on or prior to the
Closing Date, of the following conditions:
Section 7.01. Representations and Warranties. The
representations and warranties of both parties contained in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date.
Section 7.02. Performance of Obligations. Each party shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to Closing, including the obligations set
forth in Sections 6.01 and 6.02. Each document evidencing or incident to an
action required to be taken hereunder by one party shall have been reasonably
satisfactory in form and substance to the party and each party shall have
received such originals or copies of such documents as it may reasonably
request.
Section 7.03. Consents of Third Parties. The parties to the
Contracts listed in Schedule 3.04 shall have Consented to the Assignment of such
Contracts pursuant to this Agreement, and such Consent shall remain in full
force and effect and not be subject to any condition that has not been waived or
satisfied.
Section 7.04. Assumption of Liabilities of Assignor. The
parties to the Liabilities listed in Schedule 3.04 whose Consent is required for
the Assignee to Assume the Liabilities and for the Assignor to be relieved of
the Liabilities shall have Consented thereto.
Section 7.05. Insurance Coverage. Assignee shall have
received, in respect of each Insurance Policy, an endorsement or other written
instrument to the effect that, upon completion of the transactions contemplated
by this Agreement, (i) Assignee and its directors, officers, employees, property
and interests will be covered by the Insurance Policies to the same extent and
upon the same policy terms that Assignor and its directors, officers, employees,
property and interests were covered prior to the Closing Date and (ii) Assignor,
Iridium Capital, Iridium Roaming and Iridium IP and their respective directors,
officers, employees, property and interests will retain the insurance coverage
to the same extent and upon the same policy terms that they had immediately
prior to the Closing Date.
ARTICLE VIII
CLOSING
Section 8.01. Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place (i) at the offices of
Holland & Knight LLP, 2100 Pennsylvania Avenue, N.W., Suite 400, Washington,
D.C. at 6:00 p.m. local time on December 18, 1997, or as soon as practicable
following the satisfaction (or waiver) of the conditions set forth in Article
VII or (ii) at such other place, time and date as the parties shall mutually
agree (the "Closing Date").
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<PAGE> 14
Section 8.02. Documents to be Delivered by Assignor. At or
prior to Closing, Assignor shall deliver the following documents to Assignee:
(a) the Consents required by Sections 7.03 and 7.04;
(b) the endorsements or other written instruments required by
Section 7.05;
(c) certificates or another written instrument evidencing the
transfer of all of the outstanding shares of Iridium Capital, duly executed, and
any other instrument, duly executed, as may be required under the by-laws or
other organizational documents or any shareholder agreement to effectuate the
transfer of such shares;
(d) certificates or another written instrument evidencing the
transfer of all of the outstanding membership interests of Iridium Roaming and
Iridium IP, duly executed and any such other instrument, duly executed, as may
be required under the by-laws, limited liability company agreements or other
organizational documents or any membership agreement to effectuate the transfer
of such membership interests;
(e) all bills of sale, assignments and other instruments or
documents as Assignee may reasonably request to evidence, perfect or complete
the Assignment the ownership of the Assets from Assignor to Assignee;
(f) a good standing certificate for Assignor from the
Secretary of State of Delaware dated no more than 30 days prior to the Closing
Date.
(g) First Series A Note Supplemental Indenture dated as of
December 18, 1997;
(h) First Series B Note Supplemental Indenture dated as of
December 18, 1997;
(i) First Series C Note Supplemental Indenture dated as of
December 18, 1997;
Section 8.03. Documents to be Delivered by Assignee. At or
prior to Closing, Assignee shall deliver the following documents to the
Assignor:
(a) a certificate or another written instrument evidencing the
transfer of all of the outstanding membership interests in Assignee, registered
in the name of "Iridium LLC"; and
(b) a good standing certificate for Assignee from the
Secretary of State of Delaware dated no more than 30 days prior to the Closing
Date.
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<PAGE> 15
ARTICLE IX
TERMINATION
Section 9.01. Termination. This Agreement may be terminated at
any time prior to Closing by the mutual consent of Assignor and Assignee, upon
written notice to the other.
Section 9.02. Effect of Termination. If this Agreement is
terminated pursuant to this Article, it shall be void and of no further force
and effect, and there shall be no further liability or obligation on the part of
either party.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Amendments. This Agreement may be amended by
the parties at any time during the term of this Agreement. To be effective, any
such amendment must be by an instrument in writing signed by both parties.
Section 10.02. Extension; Waiver. Either party entitled to the
benefits hereof may (i) extend the time for the performance of any obligation of
the other party, (ii) waive a breach of a representation or warranty by the
other party, or (iii) waive compliance by the other party with any covenant,
requirement or condition contained herein. Any such extension or waiver shall be
valid only if set forth in a written instrument signed by the party giving the
extension or waiver.
Section 10.03. Governing Law. This Agreement shall be
governed, construed and enforced in accordance with the laws of the District of
Columbia.
Section 10.04. No Third Party Beneficiaries. This Agreement is
not intended to confer any rights or remedies upon any person other than the
parties hereto.
Section 10.05. Power of Attorney. For the limited purposes of
transferring the Assets and Liabilities, Assignor hereby constitutes and
appoints Assignee as Assignor's true and lawful attorney, with full power of
substitution, in Assignor's name and stead, to demand, enforce and receive any
Asset Assigned hereunder and to pay, defend and discharge all of the Liabilities
Assumed hereunder, and to give receipts and releases for and in respect of the
same, and any part thereof, and from time to time, to institute and prosecute in
Assignor's name, or otherwise, at the expense of and for the benefit of
Assignee, its successors and assigns, any proceeding at law, in equity, or
otherwise, which Assignee, its successors and assigns, may deem proper for the
collection or reduction to possession of any Asset or the payment and discharge
of any Liability, or for the collection and enforcement of any claim or right of
any kind hereby Assigned or Assumed, or intended so to be, and to do all
reasonable acts and things in relation to the Assets and the Liabilities.
Assignor hereby acknowledges and declares that the foregoing powers are coupled
with an interest and are and shall be irrevocable by Assignor in any manner, or
for any reason whatsoever.
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<PAGE> 16
Section 10.06. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (if receipt is confirmed) or mailed by certified mail (return receipt
requested) to the parties at the following addresses or telephone numbers (or at
such other address or telephone number for a party as shall be specified by like
notice):
(a) if to Assignor, to
Iridium LLC
1575 Eye Street, N.W.
Washington, D.C. 20005
Attention: General Counsel
Telecopy: (202) 408-3761
(b) if to Assignee, to
Iridium Operating LLC
1575 Eye Street, N.W.
Washington, D.C. 20005
Attention: General Counsel
Telecopy (202) 408-3761
Section 10.07. Severability. Any provision of this Agreement
which is held invalid or unenforceable shall be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining provisions of this Agreement.
Section 10.08. Counterparts. This Agreement may be executed in
two or more counterparts, which together shall be deemed an original, and shall
constitute one and the same instrument.
Section 10.09. Entire Agreement. This Agreement, and the
assignments, novation agreements and other agreements provided herein,
constitute the entire agreement, and supersede any prior agreement, both written
and oral, between the parties with respect to the subject matter hereof and
thereof.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
ASSIGNOR:
WITNESS: IRIDIUM LLC
/s/ Kevin Lavin By: /s/ F. Thomas Tuttle
- --------------------------------- ------------------------------
Name: Kevin Lavin Name: F. Thomas Tuttle
Title: Assistant General Title: Vice President, General
Counsel--Corporate Matters Counsel and Secretary
ASSIGNEE:
WITNESS: IRIDIUM OPERATING LLC
/s/ Kevin Lavin By: /s/ Royal Grant
- --------------------------------- -------------------------------
Name: Kevin Lavin Name: Roy Grant
Title: Assistant General Title: Vice President--Chief
Counsel--Corporate Matters Financial Officer
13
<PAGE> 18
SCHEDULES
Schedule 1.01A Assets
Schedule 1.01B Excluded Assets
Schedule 1.01C Liabilities
Schedule 1.01D Excluded Liabilities
Schedule 3.03 No Conflicts, Filings, etc.
Schedule 3.04 Required Consents
Schedule 3.06 Litigation
<PAGE> 19
SCHEDULE 1.01A
ASSETS
I. Contracts Requiring Consent
A. Motorola Agreements:
Space System Contract
Operations & Maintenance Contract
Mutual Non-Disclosure Agreement
Terrestrial Network Development Contract (except as
specified on Schedule 1.01D)
Support Agreement with Motorola
Amended and Restated Agreement Regarding
Guarantee (except as specified on Schedule 1.01D)
Memorandum of Understanding, dated as of July 11,
1997
Indemnification Agreement, dated as of July 11, 1997
B. Gateway Authorization Agreements:
Iridium Africa
Iridium Sud America Ltd. (Brasil)
Iridium Canada
China Great Wall Corporation (China)
Infrastructure Leasing and Financial Services Ltd.
(India)
STET - Societa Finanziera Telefonica Per Azioni
(Italy)
Iridium Middle East (UAE, Bahrain, Cyprus, Canary
Islands, Saudi Arabia and South Africa)
Khrunichev State Research and Production Space
Center (Russia)
Nippon Iridium Corporation (Japan)
Pacific Electric Wire & Cable Co. Ltd. (Taiwan,
Indonesia and Philippines)
SK Telecom (Korea)
South Pacific Iridium Holdings Limited (Australia)
Thai Satellite (Thailand)
Vebacom GmbH (Germany)
Sprint Iridium, Inc. (SW U.S.A.)
Motorola (U.S.A.)
C. Other Contracts
AlliedSignal Avionics, Inc.
Anderson Consulting LLP
Bay Networks USA, Inc.
Bell Communications Research, Inc.
Booz, Allen & Hamilton, Inc.
<PAGE> 20
Compaq Computer Corporation
Sun Microsystems, Inc.
Swiss PTT and Unisource Carrier Services AG
II. Contracts Not Requiring Consent
A. Motorola Agreements:
Engineering Assistance Agreement
B. Other Contracts:
AlliedSignal, Inc. Contract No. 97001CR
The Guidry Group
III. Other Assets
a. All of the outstanding shares of Iridium Capital.
b. All of the outstanding membership interests of
Iridium Roaming.
c. All of the outstanding membership interests of
Iridium IP.
d. The Space System Under Construction.
e. Cash in the following accounts, provided that cash in the
aggregate amount of Five Million Dollars ($5,000,000) shall remain in such
accounts following the Closing Date.
<TABLE>
<CAPTION>
Crestar Bank NA Citibank Delaware Citibank Landmark ILR
1445 New York Avenue, N.W. One Penns Way 425 Park Avenue, 22nd Floor
Washington, D.C. 20005-2108 New Castle, Delaware 19720 New York, New York 10022
Account Numbers: Account Number: Account Number:
- --------------- -------------- --------------
<S> <C> <C>
206657137; 206657145; 206657439 406092067 509877
</TABLE>
f. The accounts receivable identified in Assignor's Books and
Records as of the Closing Date, including (i) receivables and account listings
other than cash advances to employees, (ii) the GBS deployment receivables, and
(iii) the VAT receivable:
g. The following deposits, prepaid expenses, costs, accruals
and amounts paid in the amounts designated on Assignor's Books and Records as of
the Closing Date, which are characterized as assets under generally accepted
accounting principles: (i) all costs and milestone payments associated with the
Space System Under Construction, (ii) the prepaid GBS deployment contract costs,
(iii) the debt issuance costs, (iv) the clearing house development costs, (v)
the aero ground subsystem costs, (vi) the DEU bank facility costs, (vii) the
global ownership program costs, (viii) the limited recourse facility costs, and,
(ix) the bridge loan financing costs.
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<PAGE> 21
h. All claims, suits, rights, and causes of action, including
the right to sue for prior infringement of any patent, copyright or trademark
which has accrued with respect to any of the Assets.
i. All rights under any contractual, express or implied
warranty or any warranty existing by operation of law with respect to any Asset
or any product or service delivered or to be delivered by any party to Assignor
under any Contract.
j. IBSS computer billing system; and
k. A perpetual, paid-up license to use and sublicense the use
of the trade name "Iridium" and intellectual property rights relating to the
Iridium System;
l. Permits, consents, authorizations, customer lists,
engineering drawings, test data and catalogues; and
3
<PAGE> 22
SCHEDULE 1.01B
EXCLUDED ASSETS
Assignor's automobile leases
Books and Records of Assignor
Employee benefit plans of Assignor
Assignor's rights under the Management Services Agreement, Interest Exchange
Agreement and Share Issuance Agreement
Lease for 1575 Eye Street, N.W., Washington, D.C.
Lease for 10803/10805 Parkridge Boulevard, Reston, Virginia
Lease Neva-Walker Properties, 1351 N. Alma School Road, Suite 150 and 160,
Chandler, Arizona 85224
Insurance Policies
Rights of Assignor under its insurance contracts as contemplated by Section 7.05
Cash in Assignor's bank accounts to the extent specified in Schedule
1.01A.III(e)
All other Assets of Assignor not listed on Schedule 1.01.A.
Any rights under the Excluded Liabilities to the extent specified in Schedule
1.01.D.
<PAGE> 23
SCHEDULE 1.01C
LIABILITIES
$300,000,000 13% Senior Notes due 2005, Series A
$500,000,000 14% Senior Notes due 2005, Series B
$300,000,000 11.25% Senior Notes due 2005, Series C
All outstanding 14.50% Senior Subordinated Discount Notes due 2006
Credit Agreement dated as of August 21, 1996 among Iridium LLC, Chase
Securities, Inc. and Barclays Capital, a division of Barclays Bank PLC (as
successor to BZW), The Chase Manhattan Bank, as Administrative Agent, Barclays
Bank, PLC, as Documentation Agent and the banks party thereto (the "Guaranteed
Credit Agreement") and the Revolving Credit Notes (as defined in the Guaranteed
Credit Agreement).
All accrued, current and future obligations and claims arising out of or
relating to the Assets listed on Schedule 1.01A hereto and the Liabilities
listed on this Schedule 1.01C, and the Guaranteed Credit Agreement, including
those that are unknown or contingent and also including all obligations and
claims arising out of or relating to the Reorganization, in each case to the
extent not specifically excluded by Schedule 1.01D hereto and any liability of
Assignor related to any representation or warranty made by Assignor in
connection therewith.
<PAGE> 24
SCHEDULE 1.01D
EXCLUDED LIABILITIES
Employment Plans and Agreements
Defined Contribution Plan
401(k) Profit Sharing Plan and Trust
Iridium LLC Pension Plan
Iridium LLC Option Plan of 1996
Iridium LLC Supplemental Retirement Income Plan
Iridium LLC Section 125 Cafeteria Plan
Employment Agreement with Mr. Kinzie
Employment Agreement with Mr. Staiano
Financing Agreements -- General
U.S. Purchase Agreement among IWCL, Iridium LLC and the U.S. Underwriters
participating in the initial public offering of IWCL's Class A Common Stock
International Purchase Agreement among IWCL, Iridium LLC and the International
Underwriters participating in the initial public offering of IWCL's Class A
Common Stock
1997 Subscription Agreement
Share Issuance Agreement
Interest Exchange Agreement
Purchase Agreement among IWCL, Iridium LLC, Iridium Capital Corporation, Iridium
IP LLC, Iridium Roaming LLC and the Initial Purchasers relating to the purchase
of (i) 300,000 Units consisting of $300,000,000 13% Senior Notes due 2005,
Series A and warrants to purchase shares of Class A Common Stock of IWCL and
(ii) $500,000,000 14% Senior Notes due 2005, Series B Unit Agreement
LLC Interest Warrant
Purchase Agreement among IWCL, Iridium LLC, Iridium Capital Corporation, Iridium
IP LLC, Iridium Roaming LLC and the Initial Purchasers relating to the purchase
of $300,000,000 11.25% Senior Notes due 2005, Series C
Financing Agreements -- Members
All 1993 Stock Purchase Agreements between Iridium Inc. and members of Iridium
LLC
<PAGE> 25
All 1994 Stock Purchase Agreements between Iridium Inc. and members of Iridium
LLC
All duly authorized, issued and outstanding warrants to purchase membership
interests in Iridium LLC (and to issue membership interests in Iridium LLC upon
exercise or conversion)
Iridium's obligation to issue warrants under Article 5 of the Terrestrial
Network Development Contract
Iridium's obligation to pay warrant compensation under Section 2 of the Amended
and Restated Agreement Regarding Guarantee, provided that the right (and the
corresponding obligation) to pay High Yield Equivalent Compensation (as defined
in the Amended and Restated Agreement Regarding Guarantee) in lieu of warrant
compensation shall not be an Excluded Liability
Iridium's obligation under Section 2 of the Amended and Restated Agreement
Regarding Guarantee to provide Motorola with an additional Banking and Finance
Committee member and the Series B, Class 2 interest (as described in the Amended
and Restated Agreement Regarding Guarantee), provided that Iridium's retention
of such obligation shall not affect Operating's obligation to provide Motorola
with an additional member of the Banking and Finance Committee of Operating
pursuant to Article II of the Limited Liability Company Agreement of Iridium
Operating LLC.
Iridium's obligation under Section 4 of the Amended and Restated Agreement
Regarding Guarantee to provide Motorola the protection rights listed in
subparagraphs (a), (b), (e), (f) and (g) of such Section 4, provided that
Iridium's retention of such obligations shall not affect Operating's obligation
to provide Motorola the protection rights listed in subparagraphs (c), (d), (e),
(g) and (h) of such Section 4
Iridium's acknowledgment and agreement under Section 9 of the Amended and
Restated Agreement Regarding Guarantee, provided that Operating shall be deemed
to have been made the same acknowledgment and agreement upon the Closing
Sales, General & Administrative
Lease for 1575 Eye Street, N.W., Washington, D.C.
Lease for 10803/10805 Parkridge Boulevard, Reston, Virginia
Obligations under Insurance Policies
Governance/Membership Arrangements
All current and future obligations of Assignee and claims against Assignee by
its members arising out of or relating to Assignee's obligations to its members
under the Limited Liability Company Agreement of Iridium LLC
2
<PAGE> 26
SCHEDULE 3.03
NO CONFLICTS, FILINGS, ETC.
Permits
None required to execute, deliver or perform the Agreement or to consummate the
transactions contemplated by the Agreement and no Permits held by Assignor.
<PAGE> 27
SCHEDULE 3.04
REQUIRED CONSENTS
The Contracts listed in Part I of Schedule 1.01A are incorporated
herein by this reference.
<PAGE> 28
SCHEDULE 3.06
LITIGATION
None.
<PAGE> 1
EXHIBIT 10.26
CONSENT TO ASSIGNMENT
OF CONTRACT
(IRIDIUM LLC AND ANDERSEN CONSULTING LLP)
This Consent to Assignment of Contract ("Consent") is entered into by
and among Andersen Consulting LLP, an Illinois limited liability partnership
("Andersen"), Iridium LLC, a Delaware limited liability company ("Iridium"), and
Iridium Operating LLC, a Delaware limited liability company ("Iridium
Operating").
RECITALS
A. Andersen and Iridium have entered into a Master Agreement dated
December 10, 1996, (such contract, all schedules, appendices and exhibits
thereto, all agreements, statements of work, documents or information
incorporated by reference therein and all prior amendments, waivers, change
orders, or addenda thereto collectively referred to herein as the "Contract").
B. Pursuant to the Asset Transfer Agreement dated December 18, 1997,
by and between Iridium and Iridium Operating ("Asset Transfer Agreement"),
Iridium will assign substantially all of its Assets and Liabilities, including
all of Iridium's rights and obligations under the Contract, to Iridium
Operating, subject to Andersen's execution of this Consent.
C. Iridium Operating has agreed to such assignment, and desires to
receive and assume substantially all of Iridium's Assets and Liabilities,
including the Contract and all of the rights and obligations of Iridium
thereunder.
D. Andersen has agreed to consent to the assignment and assumption of
the Contract pursuant to the terms and conditions herein and in the Asset
Transfer Agreement, and to a release of Iridium from its obligations under the
Contract.
NOW, THEREFORE, in consideration of the premises and consideration
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. Consent. Andersen hereby consents to the assignment, conveyance
and transfer of the Contract by Iridium to Iridium Operating, and acceptance and
assumption of the Contract by Iridium Operating pursuant to the terms and
conditions set forth herein and in the Asset Transfer Agreement. From and after
the Closing (i) Iridium Operating shall render all performance and be bound by
all obligations and duties of Iridium to Andersen under the Contract, (ii)
Iridium Operating shall have all of the rights of Iridium under the
<PAGE> 2
Contract, (iii) Andersen agrees to accept Iridium Operating's substitution for
Iridium under the Contract and Iridium Operating's performance under the
Contract in lieu of Iridium's performance regardless of whether the obligations
or rights accrued prior to or after the Closing, and (iv) Andersen agrees that
Iridium Operating shall have all rights of Iridium with respect to Anderson's
obligations, duties and performance under the Contract.
2. Release. Upon the Closing, Iridium shall be released from, and
Andersen shall be deemed to waive and relinquish each and every claim, suit,
cause of action or remedy against Iridium, and each debt, obligation or duty of
Iridium of any nature whatsoever, under and in connection with the Contract,
whether known or unknown, and whether or not previously asserted, including but
not limited to any claims, rights or remedies arising from any breach of any
Contract by Iridium; provided, however, it is expressly agreed by the parties
that subsequent to the Closing, Andersen may assert against Iridium Operating
any claim, suit, cause of action, remedy, debt, obligation or duty which may
have been owing from Iridium to Andersen on or before the Closing, provided
Andersen shall assert such claim or suit against Iridium Operating in the same
time and manner in which it would have been required to assert any such claim or
cause against Iridium but for the assignment and the provisions of this Consent,
and the assignment, Consent and Asset Transfer Agreement shall not be deemed to
have extinguished, extended or otherwise altered the time requirements for
assertion of any right of Andersen.
3. Validity and Enforceability. Andersen and Iridium each acknowledge
that the Contract is valid and enforceable and remains in full force and effect.
4. Limited Amendment. The Contract shall not be amended by this
Consent, provided that to the extent the terms of the Contract conflict with the
terms of this Consent, the terms of this Consent shall supersede the terms of
the Contract.
5. Additional Undertakings. Each of the parties agrees to execute and
deliver any and all additional instruments, documents, consents, approvals and
waivers as may be required or reasonably requested by any other party to
implement, perform and give full effect to the Asset Transfer Agreement and this
Consent.
6. General Terms.
6.1. This Consent shall be effective concurrent with the
Closing of the Asset Transfer Agreement.
2
<PAGE> 3
6.2. This Consent shall be interpreted in accordance with
the laws of the District of Columbia without giving effect to applicable
principles of conflicts of laws to the extent the application of the laws of
another jurisdiction would be required thereby.
6.3. This Consent constitutes the entire agreement of the
parties with respect to the subject matter hereof.
6.4. This Consent may be amended only in writing signed by
all the parties hereto.
6.5. Capitalized terms used in this Consent but not defined
herein shall have the same meaning as is ascribed to such terms in the Asset
Transfer Agreement.
6.6. This Consent may be executed in several counterparts,
which together shall constitute the entire agreement. For the purposes of
execution, delivery and validity of this Consent, a signature on a counterpart
sent by facsimile shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Consent as of the
18th day of December, 1997.
ANDERSEN CONSULTING LLP
By: /s/ Albert M. Krall
------------------------------
Name: Albert M. Krall
------------------------------
Title: Partner
------------------------------
IRIDIUM LLC
By: /s/ Robert W. Kinzie
------------------------------
Name: Robert W. Kinzie
------------------------------
Title: Chairman
------------------------------
IRIDIUM OPERATING LLC
By: /s/ Kevin J. Lavin
------------------------------
Name: Kevin J. Lavin
------------------------------
Title: Assistant Secretary
------------------------------
3
<PAGE> 1
EXHIBIT 10.27
CONSENT TO ASSIGNMENT
OF CONTRACTS
(IRIDIUM LLC AND MOTOROLA)
This Consent to Assignment of Contracts ("Consent") is entered into
by and among Motorola, Inc., a Delaware corporation ("Motorola"), Iridium LLC, a
Delaware limited liability company ("Iridium"), and Iridium Operating LLC, a
Delaware limited liability company ("Iridium Operating").
RECITALS
A. Motorola and Iridium have entered into the following
contracts (such contracts, all schedules, appendices and exhibits thereto, all
agreements, statements of work, documents or information incorporated by
reference therein and all prior amendments, waivers, change orders or addenda
thereto collectively referred to herein as the "Contracts"):
(i) Space System Contract effective July 29, 1993, as
amended and conformed on January 14, 1997;
(ii) Communications System Operations & Maintenance
Contract effective July 29, 1993, as amended and conformed on January 14, 1997;
(iii) Terrestrial Network Development Contract ("TNDC")
effective January 1, 1993, as amended and conformed on January 14, 1997; and as
amended by Amendment No. 3 to the TNDC effective June 20, 1997;
(iv) Mutual Non-Disclosure Agreement Concerning
Cooperative Discussions for the Iridium Communications System dated July 29,
1993;
(v) Engineering Assistance Agreement dated June 19, 1997;
(vi) Agreement Regarding Guarantee dated August 21, 1996,
as amended by the Amended and Restated Agreement Regarding Guarantee dated July
11, 1997 ("Restated Guarantee Agreement");
(vii) Gateway Authorization Agreement effective as of
December 31, 1994;
(viii) Support Agreement dated July 15, 1992;
<PAGE> 2
(ix) Memorandum of Understanding dated July 11, 1997
("MOU"); and
(x) Indemnification Agreement dated July 11, 1997.
B. Pursuant to the Asset Transfer Agreement dated December
___, 1997, by and between Iridium and Iridium Operating ("Asset Transfer
Agreement"), Iridium will assign substantially all of its Assets and
Liabilities, including all of Iridium's rights and obligations under the
Contracts, except as set forth herein and in Schedule 1.01.D of the Asset
Transfer Agreement (the Contracts, subject to such exception are collectively
referred to as the "Assigned Contracts"), to Iridium Operating, subject to
Motorola's execution of this Consent.
C. Iridium Operating has agreed to such assignment, and
desires to receive and assume substantially all of Iridium's Assets and
Liabilities, including the Assigned Contracts and all of the rights and
obligations of Iridium thereunder.
D. Motorola has agreed to consent to the assignment and
assumption of the Contracts pursuant to the terms and conditions herein and in
the Asset Transfer Agreement, and to a release of Iridium from its obligations
under the Assigned Contracts.
NOW, THEREFORE, in consideration of the premises and consideration
herein contained, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. Consent for Assignment. Except as indicated in paragraph 2 below
and in Schedule 1.01.D of the Asset Transfer Agreement, Motorola hereby consents
to the assignment, conveyance, and transfer of the Assigned Contracts by Iridium
to Iridium Operating, and acceptance and assumption of the Assigned Contracts by
Iridium Operating, pursuant to the terms and conditions set forth herein and in
the Asset Transfer Agreement. Except as indicated below, from and after the
Closing (i) Iridium Operating shall render all performance and be bound by all
obligations and duties of Iridium to Motorola under the Assigned Contracts, (ii)
Iridium Operating shall have all of the rights of Iridium under the Assigned
Contracts, (iii) Motorola agrees to accept Iridium Operating's substitution for
Iridium under the Assigned Contracts and Iridium Operating's performance under
the Assigned Contracts in lieu of Iridium's performance, regardless of whether
the obligations or rights accrued prior to or after the Closing, and, (iv)
Motorola agrees that Iridium Operating shall have all rights of Iridium with
respect to Motorola's obligations, duties and performance under the Assigned
Contracts.
2
<PAGE> 3
2. Obligations not being Assigned. Motorola does not consent to the
assignment, conveyance and transfer of the following obligations: (i) Iridium's
obligation to issue warrants under Article 5 of the TNDC, (ii) Iridium's
obligation to pay warrant compensation under Section 2 of the Restated Guarantee
Agreement or to provide Motorola with an additional Banking and Finance
Committee member and the Series B, Class 2 interest (as described in the
Restated Guarantee Agreement), provided that Iridium's retention of such
obligation shall not affect Operating's obligation to provide Motorola with an
additional member of the Banking and Finance Committee of Operating pursuant to
Article II of the Limited Liability Company Agreement of Iridium Operating LLC,
(iii) Iridium's obligation under Section 4 of the Restated Guarantee Agreement
to provide Motorola the protection rights listed in subparagraphs (a), (b), (f)
and (g) of such Section 4, provided that Iridium's retention of such obligations
shall not affect Operating's obligation to provide Motorola the protection
rights listed in subparagraphs (c), (d), (e), (g), and (h) of such Section 4,
(iv) Iridium's obligation under Section 7(a) of the MOU, provided that the
indebtedness limits in that Section will apply on a consolidated basis to
Iridium and its subsidiaries, and, (v) Iridium's acknowledgement and agreement
under Section 9 of the Restated Guarantee Agreement, provided that Operating
shall make the same acknowledgement and agreement upon the closing.
3. Release. Upon the Closing, Iridium shall be released from, and
Motorola shall be deemed to waive and relinquish each and every claim, suit,
cause of action or remedy against Iridium, and each debt, obligation or duty of
Iridium of any nature whatsoever, under and in connection with the obligations
assigned with respect to the Assigned Contracts, whether known or unknown, and
whether or not previously asserted, including but not limited to any claims,
rights or remedies arising from any breach of any of the obligations assigned
with respect to the Assigned Contracts by Iridium; provided, however, it is
expressly agreed by the parties that subsequent to the Closing, Motorola may
assert against Iridium Operating any claim, suit, cause of action, remedy, debt,
obligation or duty which may have been owing from Iridium to Motorola on or
before the Closing, provided Motorola shall assert such claim or suit against
Iridium Operating in the same time and manner in which it would have been
required to assert any such claim or cause against Iridium but for the
assignment and the provisions of this Consent, and the assignment, Consent and
Asset Transfer Agreement shall not be deemed to have extinguished, extended or
otherwise altered the time requirements for assertion of any right of Motorola.
4. Validity and Enforceability. Motorola and Iridium each acknowledge
that each of the Contracts is valid and enforceable and remains in full force
and effect.
3
<PAGE> 4
5. Limited Amendment. The Contracts shall be amended by this Consent
only to the extent that the terms of any of the Contracts conflict with the
terms of this Consent, in which case the terms of this Consent shall supersede
the terms of such Contract.
6. Additional Undertakings. Each of the parties agrees to execute and
deliver any and all additional instruments, documents, consents, approvals and
waivers as may be required or reasonably requested by any other party to
implement, perform and give full effect to the Asset Transfer Agreement and this
Consent.
7. General Terms.
7.1. This Consent shall be effective concurrent with the
Closing of the Asset Transfer Agreement.
7.2. This Consent shall be interpreted in accordance with
the laws of the District of Columbia without giving effect to applicable
principles of conflicts of laws to the extent the application of the laws of
another jurisdiction would be required thereby.
7.3. This Consent constitutes the entire agreement of the
parties with respect to the subject matter hereof.
7.4. This Consent may be amended only in writing signed by
all the parties hereto.
7.5. Capitalized terms used in this Consent but not defined
herein shall have the same meaning as is ascribed to such terms in the Asset
Transfer Agreement.
7.6. This Consent may be executed in several counterparts,
which together shall constitute the entire agreement. For the purposes of
execution, delivery and validity of this Consent, a signature on a counterpart
sent by facsimile shall be deemed an original.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Consent as of the
18th day of December, 1997.
MOTOROLA, INC.
By: /s/ Stephen Earhart
------------------------------
Name: Stephen Earhart
------------------------------
Title: Senior Vice President
------------------------------
IRIDIUM LLC
By: /s/ Roy Grant
------------------------------
Name: Roy Grant
------------------------------
Title: V.P. and C.F.O.
------------------------------
IRIDIUM OPERATING LLC
By: /s/ Kevin J. Lavin
------------------------------
Name: Kevin J. Lavin
------------------------------
Title: Assistant Secretary
------------------------------
5
<PAGE> 1
EXHIBIT 11
Iridium LLC
Exhibit 11 Supporting Calculations
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET LOSS APPLICABLE TO CLASS 1 INTERESTS:
Net Loss........................................... 14,834,000 23,645,000 73,598,000 24,232 84,095
Preferred Dividend Requirement..................... - - 3,652,000 1,580 1,317
----------- ----------- ----------- ----------- -----------
Net Loss applicable to Class 1 Interests........... 14,834,000 23,645,000 77,250,000 25,812 85,412
----------- ----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF CLASS 1 INTERESTS:
Weighted Average of Class 1 Interests Outstanding.. 520,537 1,175,505 1,601,541 120,821,421 141,219,180
Fully Diluted Adjustments:
Subscribed but not issued Class 1 Interests..... 609,787 412,273 5,779 14,604 -
Assumed exercise of Options and Warrants........ 6,979 12,258 65,839 6,060,205 15,074,424
Assumed Conversion Series A Class 2 Interest.... - - 10,693 699,400 688,461
----------- ----------- ----------- ----------- -----------
Weighted Average number of Class 1 Interests
assumed to be outstanding, assuming full
dilution........................................ 1,137,303 1,600,036 1,683,852 127,595,630 156,982,065
NET LOSS PER CLASS 1 INTEREST:
Primary............................................ 28.50 20.11 48.23 0.21 0.60
Fully Diluted...................................... 13.04 14.78 45.88 0.20 0.54
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1997
----------- -----------
<S> <C> <C>
NET LOSS APPLICABLE TO CLASS 1 INTERESTS:
Net Loss........................................... 41,735 167,949
Preferred Dividend Requirement..................... 2,419 4,924
----------- -----------
Net Loss applicable to Class 1 Interests........... 44,154 172,873
----------- -----------
WEIGHTED AVERAGE NUMBER OF CLASS 1 INTERESTS:
Weighted Average of Class 1 Interests Outstanding.. 119,523,754 130,065,304
Fully Diluted Adjustments:
Subscribed but not issued Class 1 Interests..... 938,835 -
Assumed exercise of Options and Warrants........ 3,843,771 13,519,580
Assumed Conversion Series A Class 2 Interest.... 226,359 869,544
Weighted average number of Class 1 Interests ----------- -----------
assumed to be outstanding, assuming full
dilution........................................ 124,532,719 144,454,428
NET LOSS PER CLASS 1 INTEREST:
Primary(1)......................................... 0.37 1.33
Fully Diluted(2)................................... 0.35 1.20
</TABLE>
(1) The assumed exercise of options and warrants in periods of net loss are
anti-dilutive and are not included in the computation and presentation
of primary loss per Class 1 Interest.
(2) The assumed exercise of options, warrants and conversion of Series A
Class 2 Interests are anti-dilutive but are included in the calculation
of fully diluted loss per Class 1 Interest in accordance with Regulation
S-K, Item 601(a)(11).
<PAGE> 1
EXHIBIT 12
IRIDIUM LLC
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
RATIO OF EARNINGS (LOSS)
TO FIXED CHARGES PERIODS FOLLOWING INITIAL CAPITAL CONTRIBUTION DATE
-------------------------- ----------------------------------------------------------------------
JANUARY 1, JULY 29, 1993 YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
YEAR ENDED 1993 TO ------------------------------- SEPTEMBER 30,
DECEMBER TO JULY 28, DECEMBER 31, -------------------
31, 1992 1993 1993 1994 1995 1996 1996 1997
----------- ----------- ------------- -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Capitalized Interest ..... - - - - 28,127 14,934 80,970
Portion of rent expense
representative of
Interest(1) ............ - - 54 264 342 398 290 2,443
----------- ----------- ------------- -------- ------- ------- ------ -------
Total fixed charges .... $ - - 54 264 342 28,525 15,224 83,413
=========== =========== =============
Earnings:
Loss before income
taxes .................. $ (8,773) (5,309) (6,751) (13,309) (21,961) (69,009) (36,135) (167,949)
Fixed charges, less
capitalized interest ... $ - - 54 264 342 398 290 2,443
Earnings (loss) adjusted
for fixed charges ...... $ (8,773) (5,309) (6,697) (13,045) (21,619) (68,611) (35,845) (165,506)
Ratio of earnings (loss) to
fixed charges ............ $ - - - - - - - -
Deficiency in earnings to
cover fixed charges ...... $ 8,773 5,309 6,751 13,309 21,961 97,136 51,069 248,919
</TABLE>
- ----------------------------
(1) One-third of rent expense is deemed to be representative of interest.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANTS
Subsidiaries of Iridium Operating LLC:
Iridium Capital Corporation
Iridium Roaming LLC
Iridium IP LLC
Subsidiaries of Iridium Capital Corporation:
None
Subsidiaries of Iridium Roaming LLC:
None
Subsidiaries of Iridium IP LLC:
None
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and Members
Iridium LLC:
We consent to the use of our report included herein and to the references
to our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
McLean, Virginia
January 15, 1998
<PAGE> 1
EXHIBIT 25.3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
<PAGE> 2
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(Name, address and telephone number of agent for service)
---------------------
IRIDIUM OPERATING LLC
(Exact name of obligor as specified in its charter)
DELAWARE 52-2066319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
(Address of principal executive offices) (Zip Code)
IRIDIUM CAPITAL CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 52-2048739
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
(Address of principal executive offices) (Zip Code)
IRIDIUM ROAMING LLC
(Exact name of guarantor as specified in its charter)
DELAWARE 52-2048734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
(Address of principal executive offices) (Zip Code)
<PAGE> 3
IRIDIUM IP LLC
(Exact name of guarantor as specified in its charter)
DELAWARE 52-2048736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
(Address of principal executive offices) (Zip Code)
11 1/4% SENIOR NOTES DUE 2005
SERIES C
(Title of indenture securities)
<PAGE> 4
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 5
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the day of January, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth A Smith
______________________________________
NAME: RUTH A SMITH
TITLE: VICE PRESIDENT
2
<PAGE> 6
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by IRIDIUM
OPERATING LLC, IRIDIUM CAPITAL CORPORATION, IRIDIUM ROAMING LLC AND IRIDIUM IP
LLC. of its 11 1/4% SENIOR NOTES DUE 2005, SERIES C, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth A Smith
_____________________________________
NAME: RUTH A SMITH
TITLE: VICE PRESIDENT
Dated: January __, 1998
3
<PAGE> 7
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .................. 1,380,475
Interest-bearing balances ........................................... 8,821,855
Securities ................................................................... 10,461,989
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and its Edge subsidiary ................ 6,085,138
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................ 5,597,831
Allowance for loan and lease losses ................................. 79,416
Allocated transfer risk reserve ..................................... 0
Loans and leases, net of unearned income and allowances ............. 5,518,415
Assets held in trading accounts .............................................. 917,895
Premises and fixed assets .................................................... 390,028
Other real estate owned ...................................................... 779
Investments in unconsolidated subsidiaries ................................... 34,278
Customers' liability to this bank on acceptances outstanding ................. 83,470
Intangible assets ............................................................ 227,659
Other assets ................................................................. 1,969,514
----------
Total assets ................................................................. 35,891,495
==========
LIABILITIES
Deposits:
In domestic offices ................................................. 8,095,559
Noninterest-bearing ........................................ 5,962,025
Interest-bearing ........................................... 2,133,534
In foreign offices and Edge subsidiary .............................. 14,399,173
Noninterest-bearing ........................................ 86,798
Interest-bearing ........................................... 14,312,375
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge subsidiary ............. 7,660,881
Demand notes issued to the U.S. Treasury and Trading Liabilities ............. 1,107,552
Other borrowed money ......................................................... 589,733
Subordinated notes and debentures ............................................ 0
Bank's liability on acceptances executed and outstanding ..................... 85,600
Other liabilities ............................................................ 1,830,593
Total liabilities ............................................................ 33,769,091
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................ 0
Common stock ................................................................. 29,931
Surplus ...................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) . 1,660,158
Cumulative foreign currency translation adjustments .......................... (4,868)
Total equity capital ......................................................... 2,122,404
----------
Total liabilities and equity capital ......................................... 35,891,495
</TABLE>
<PAGE> 8
4
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<PAGE> 9
5
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary,
to reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the ____ day of January, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth A Smith
--------------------------------
NAME RUTH A SMITH
TITLE VICE PRESIDENT
<PAGE> 10
2
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by IRIDIUM
OPERATING LLC, IRIDIUM CAPITAL CORPORATION, IRIDIUM ROAMING LLC AND IRIDIUM IP
LLC. of its 11 1/4% SENIOR NOTES DUE 2005, SERIES C, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By /s/ Ruth A Smith
-------------------------------
NAME RUTH A SMITH
TITLE VICE PRESIDENT
DATED: JANUARY __, 1998
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Iridium
LLC's financial statements for the period ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001051721
<NAME> IRIDIUM OPERATING LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,189
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,660
<PP&E> 3,060,644
<DEPRECIATION> 48,722
<TOTAL-ASSETS> 3,190,885
<CURRENT-LIABILITIES> 414,872
<BONDS> 1,015,513
0
38,511
<COMMON> 2,019,107
<OTHER-SE> (304,090)
<TOTAL-LIABILITY-AND-EQUITY> 3,190,885
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 169,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (167,949)
<INCOME-TAX> 0
<INCOME-CONTINUING> (167,949)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167,949)
<EPS-PRIMARY> (1.33)
<EPS-DILUTED> (1.20)
</TABLE>
