<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
IRIDIUM LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4800 52-2025291
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) 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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<S> <C> <C>
DELAWARE 4800 [TO BE APPLIED FOR]
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) 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 ROAMING LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4800 [TO BE APPLIED FOR]
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) 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)
<TABLE>
<S> <C> <C>
DELAWARE 4800 [TO BE APPLIED FOR]
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) 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 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)
------------------------
with a copy 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE(1) PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Senior Notes due 2005, Series A/EN............. 100% $283,794,000 $283,794,000 $85,998.18
14% Senior Notes due 2005, Series B/EN............. 100% $462,145,000 $462,145,000 $140,043.94
Guarantees of the Notes............................ 800,000,000 (2) (2) None
===============================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(f)(1), based upon the market value of the securities as
of July 16, 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.
================================================================================
<PAGE> 2
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 REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 21, 1997
PROSPECTUS [IRIDIUM LOGO]
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
IRIDIUM ROAMING LLC
IRIDIUM IP LLC
------------------------
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF 13% SENIOR NOTES DUE 2005, SERIES A/EN FOR EACH
$1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 13% SENIOR NOTES DUE 2005, SERIES A
AND
$1,000 IN PRINCIPAL AMOUNT OF 14% SENIOR NOTES DUE 2005, SERIES B/EN FOR EACH
$1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 14% SENIOR NOTES DUE 2005, SERIES B
------------------------
Iridium 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 (i) an aggregate principal amount of up to $300,000,000 of
13% Senior Notes due 2005, Series A/EN (the "Series A 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 13% Senior Notes
due 2005, Series A (the "Series A Original Notes" and, together with the Series
A Exchange Notes, the "Series A Notes") of the Issuers with the holders (the
"Series A Note Holders") thereof, and (ii) an aggregate principal amount of up
to $500,000,000 of 14% Senior Notes due 2005, Series B/EN (the "Series B
Exchange Notes" and, together with the Series A Exchange Notes, the "Exchange
Notes") of the Issuers, which will be registered under the Securities Act
pursuant to such Registration Statement, for a like principal amount of 14%
Senior Discount Notes due 2005, Series B (the "Series B Original Notes" and,
together with the Series B Exchange Notes, the "Series B Notes") of the Issuers
with the holders (the "Series B Note Holders" and, together with the Series A
Note Holders, the "Holders") thereof. The Series A Original Notes and the Series
B Original Notes are referred to herein as the "Original Notes." The Original
Notes and the Exchange Notes are referred to herein as the "Notes." Each of the
Series A Original Notes, the Series A Exchange Notes, the Series B Original
Notes and the Series B Exchange Notes is referred to herein as a "Series" of
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 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 respective indentures governing the Original Notes for
which they may be exchanged. Interest on the Series A Exchange Notes will, and
interest on the Series A Original Notes does, accrue at the rate of 13% per
annum, and interest on the Series B Exchange Notes will, and interest on the
Series B Original Notes does, accrue at a rate of 14% per annum. Interest on
each Series of 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 July 15, 2000, either Issuer may redeem in the aggregate up
to 33 1/3% of the original aggregate principal amount of each Series of Notes,
with the cash proceeds to Iridium of one or more Equity Offerings (as defined),
at a redemption price equal to 113.5% of the principal amount of any Series A
Notes being redeemed, or 115.0% of the principal amount of any Series B Notes
being redeemed, in each case 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 Series A Notes or the Series B
Notes being redeemed, as the case may be, must remain outstanding after each
such redemption. See "Description of Notes -- Optional Redemption."
(Continued on next page)
SEE "RISK FACTORS" ON PAGE 17 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
Upon the occurrence of a Change of Control (as defined), each holder of the
Notes may require the Issuers to repurchase all or a portion of such 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 all existing and future
unsecured 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 Indentures (as defined), 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 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 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 March 31, 1997, after giving pro forma effect to the issuance of the
principal amount of the Original Notes and the application of a portion of the
net proceeds therefrom to the permanent reduction of the Guaranteed Bank
Facility (as defined), the Iridium Parties would have had outstanding
approximately $1,455 million of unsecured senior Indebtedness (including the
Original Notes) and approximately $240 million in Indebtedness that is
subordinated to the Original Notes. 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 July 16, 1997 pursuant to an
offering (the "Original Offering") of (i) Units (the "Units"), comprised of the
Series A Original Notes and warrants (the "IWCL Warrants") to purchase Class A
Common Stock of Iridium World Communications Ltd. ("IWCL"), and (ii) the Series
B 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 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 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 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 "Description of
Notes -- Registration Rights." 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 , 1997, 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 obligations 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 , 1997
i
<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.
As a result of an initial public offering of the Class A Common Stock, par
value $.01 per share, of IWCL, the publicly held member of Iridium (the "IWCL
IPO"), and the use of the net proceeds thereof to purchase Class 1 Interests (as
defined), on June 13, 1997, Iridium became subject to the periodic reporting and
other informational requirements of the Securities Exchange Act of 1934, as
amended (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 Section 13 or
15(d) of the Exchange Act, they will file with the Commission, and provide the
Trustees 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 Section 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 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.
ii
<PAGE> 5
IRIDIUM and [IRIDIUM LOGO] are registered trademarks and servicemarks of
Iridium LLC.
On May 9, 1997, Iridium effected a 75 for 1 subdivision (the "Class 1
Interest Subdivision") of its Class 1 Membership Interests (the "Class 1
Interests"). Unless otherwise indicated, all information contained in this
Prospectus regarding the number of outstanding Class 1 interests of Iridium and
the beneficial ownership thereof reflects the Class 1 Interest Subdivision and
does not give effect to the issuance of Class 1 Interests by Iridium upon the
exercise of outstanding warrants (including the LLC Interest Warrants (as
defined)).
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.
iii
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................................................................... 1
Risk Factors......................................................................... 17
IRIDIUM's Ownership Structure and Strategic Investors................................ 46
Use of Proceeds...................................................................... 48
Capitalization....................................................................... 49
The Exchange Offer................................................................... 50
Selected Financial Data.............................................................. 58
Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 59
Business............................................................................. 63
Regulation of IRIDIUM................................................................ 84
Principal Contracts for the Development of the IRIDIUM System........................ 93
Management........................................................................... 100
Interest Ownership of Certain Beneficial Owners and Management....................... 112
Certain Relationships and Related Transactions of IRIDIUM............................ 113
IRIDIUM's Investors, Number of Class 1 Interests Owned, Percentage Ownership and
Principal Gateway Service Territories.............................................. 117
Description of IRIDIUM LLC Limited Liability Company Agreement....................... 122
Certain Matters Regarding Relationship of IWCL and IRIDIUM........................... 129
Description of Other Indebtedness.................................................... 132
Description of Notes................................................................. 137
Exchange and Registration Rights Agreement........................................... 169
Tax Considerations................................................................... 172
Plan of Distribution................................................................. 177
Validity of Notes.................................................................... 178
Experts.............................................................................. 178
Glossary............................................................................. 179
Index to Financial Statements........................................................ F-1
</TABLE>
<PAGE> 7
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 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 is also the principal investor in
Iridium, having provided direct investments and guarantees totaling over $1.0
billion. In addition, Motorola has conditionally agreed to guarantee up to an
additional $350 million of borrowings under the Guaranteed Bank Facility
described below. Iridium's other strategic investors include leading wireless
communications service providers from around the world, as well as experienced
satellite manufacturers and experienced launch providers.
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,
although Iridium received all of the net proceeds from the Original Offering.
Capital has no assets and does not conduct any operations. Iridium IP LLC and
Iridium Roaming LLC (the "Initial Guarantors" and, together with Capital and
Iridium, the "Iridium Parties"), each a Delaware limited liability company and a
wholly owned subsidiary of Iridium, have guaranteed the Original Notes and will
guarantee the Exchange Notes.
Iridium's principal executive offices are 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 paging services ("IRIDIUM Services") are
primarily designed to serve customers who place the greatest value on global
mobile communications services.
1
<PAGE> 8
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 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. For a more detailed description
of Iridium's 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 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
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<PAGE> 9
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 11
gateways, although it will be able to provide full global service with fewer
gateways. Each of these 11 gateways will be owned, operated and financed by one
or more investors in Iridium or their affiliates.
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 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. 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
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<PAGE> 10
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 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
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<PAGE> 11
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
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 and Iridium's
strategic investors have collectively invested, or committed to invest,
approximately $3.46 billion in Iridium, including equity, debt, guarantees and
the Reserve Capital Call (as defined). These investments represent approximately
79% of Iridium's projected total funding needs through the end of September
1998, the month Iridium expects to commence commercial operations, and
approximately 68% 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). 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, 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 Iridium 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 Iridium. In connection with the IWCL IPO, IWCL was admitted as a member of
Iridium and IWCL owns approximately 8.5% of the outstanding Class 1 Interests.
See "Certain Matters Regarding Relationship of IWCL 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. As of
June 18, 1997, seventeen satellites had been produced, seven additional
satellites were in final assembly and testing and additional satellites were
being produced at a rate of approximately five per month. The first five IRIDIUM
satellites were launched on May 5, 1997, the next seven IRIDIUM satellites were
launched on June 18, 1997 and an additional five IRIDIUM satellites were
launched on July 9, 1997. In early July, the IRIDIUM System logged its first
test paging message from orbiting satellites. The initial satellite launch had
been scheduled to occur in January 1997, but was postponed until May 1997
following the failure of a Delta II launch vehicle, the same type of launch
vehicle McDonnell Douglas is using for Iridium satellite launches. Motorola has
informed Iridium that it is in the process of reworking the original launch
schedule and currently
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<PAGE> 12
believes that the new planned launch schedule should permit Iridium to meet its
planned September 1998 commencement of commercial operations for the IRIDIUM
System and that there will be no price adjustment under the Space System
Contract, the Operations and Maintenance Contract or the Terrestrial Network
Development Contract as a result of the initial launch delay. See "Risk
Factors -- Potential for Delay and Cost Overruns -- Deployment of Satellites"
and "-- Satellite Launch Risks -- Number of Launches; Compressed Launch
Schedule."
On July 18, 1997, Iridium was informed by Motorola that Motorola has lost
communications with one of the IRIDIUM satellites launched on July 9, 1997.
Iridium was advised by Motorola that should loss of the 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 other 16 satellites
orbiting the Earth continue to function within normal parameters. 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 the Iridium North America
(Tempe, Arizona) and Nippon Iridium Corporation (Nagano, Japan) gateway
facilities is substantially complete and the telecommunications equipment is
being installed at both locations. Equipment procurement has commenced for seven
other gateways pursuant to gateway equipment purchase agreements with Motorola.
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 Radiocommunications 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. Three final and
four experimental licenses to build and operate gateways have been received,
including a final license with respect to the Iridium North America gateway in
Tempe, Arizona. 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 license covering IRIDIUM Satellite Services in
the United States and 11 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.
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<PAGE> 13
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, 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,
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<PAGE> 14
including Nuova Telespazio, Lockheed Martin, Raytheon, McDonnell Douglas,
Khrunichev and China Aerospace.
Capitalize on the strengths of its strategic investors. A number of
Iridium's 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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<PAGE> 15
SOURCES AND USES OF FUNDS BY IRIDIUM
The following table describes the estimated sources and uses of funds by
Iridium from its inception through the end of September 1998 (the month 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)............ $ 750
The Original Notes Offering(3)...... 745
Guaranteed Bank Facility(4)......... 650
14 1/2% Senior Subordinated Notes
due to Members in 2006(5)......... 238
Series A Class 2 Interests(6)....... 31
Class 1 Interests(7)................ 1,951
------
Total Pre-operational
Sources...................... $4,365
======
<CAPTION>
USE OF FUNDS
- ------------------------------------
<S> <C>
Space System Contract(8)............ $3,450
Terrestrial Network Development
Contract(9)....................... 176
Business Support Systems and other
Expenditures(10).................. 114
Net Interest and Financing
Costs(11)......................... 246
Net Expenses and Working
Capital(11)(12)................... 379
------
Total Pre-operational Net
Uses......................... $4,365
======
</TABLE>
- ---------------
(1) Assumes that the IRIDIUM System will commence commercial operations in
September 1998. Iridium anticipates total cash needs of $5.1 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 is seeking bank financing in addition to the
Guaranteed Bank Facility and the Secured Bank Facility in order to meet its
expected funding requirements following the commencement of commercial
operations. Such additional bank financing likely will require credit
support from Iridium's 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 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, with respect to a senior bank facility in a
principal amount up to $750 million (the "Secured Bank Facility"), to be
secured by substantially all of Iridium's assets and the Reserve Capital
Call (as defined). Seventeen of Iridium's investors have made varying
reserve capital call commitments to purchase an aggregate of 18,206,550
Class 1 Interests at $13.33 per Class 1 Interest for an aggregate purchase
price of approximately $243 million (the "Reserve Capital Call"). See
"Description of Iridium LLC Limited Liability Company Agreement -- Capital
Contributions; Reserve Capital Call." The availability of the Secured Bank
Facility is subject to
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<PAGE> 16
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. Borrowings under the Secured Bank Facility would
mature on December 31, 1998, subject to Iridium's right to extend such
maturity until June 30, 1999 if it can demonstrate by October 31, 1998 that
it has sufficient available or committed funding for the projected capital
and operating expenses under Iridium's business plan through such extended
maturity. See "Description of Other Indebtedness." There can be no
assurance that the Secured Bank Facility will be available to Iridium.
(3) Reflects the net proceeds of the Original Offering received directly or
indirectly by Iridium, after deducting discounts and commissions and
expenses of the Original Offering. See "Use of Proceeds."
(4) As of May 31, 1997, Iridium had drawn $735 million under a $750 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"). Pursuant to a Memorandum
of Understanding, dated July 11, 1997, between Iridium and Motorola (the
"Motorola MOU"), Iridium will permanently reduce the commitment of the bank
lenders in the Guaranteed Bank Facility and the corresponding Motorola
Guarantee by approximately $95 million with the proceeds of the Original
Offering. See "Use of Proceeds." In connection with the Motorola Guarantee,
Motorola received a security interest in substantially all of Iridium's
assets. Pursuant to the Motorola MOU, Motorola released that security
interest prior to the issuance of the Original Notes. See "Description of
Other Indebtedness." The Guaranteed Bank Facility matures in August 1998.
Iridium believes that it will be able to extend this facility until after
the Stated Maturity (as defined) of the Notes. Pursuant to the Motorola
MOU, Motorola agreed to extend the Motorola Guarantee until after such
Stated Maturity if the Guaranteed Bank Facility is so extended. There can
be no assurance, however, that the bank lenders will agree to extend the
term of the Guaranteed Bank Facility. Pursuant to the Motorola MOU,
Motorola has conditionally agreed that, after giving effect to any
permanent reduction of the Guaranteed Bank Facility to approximately $655
million as described above in this note (4), 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"). For a
description of the Motorola MOU and the Motorola Additional Guarantee see
"Certain Relationships and Related Transactions of Iridium -- Motorola
Related Matters -- MOU and Agreement Regarding Guarantee." There can be no
assurance that the bank lenders will 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."
(5) These notes were issued with warrants to purchase 4,997,292 Class 1
Interests at a price of $.01 per Interest. See "Description of Other
Indebtedness."
(6) The Series A Class 2 Interests pay a 14 1/2% dividend which, at the option
of Iridium, 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.
(7) Includes approximately $223 million net proceeds to Iridium from the
issuance of Class 1 Interests in connection with the IWCL IPO consummated
on June 13, 1997. Includes $60 million due from South Pacific Iridium
Holdings Limited ("SPI"), an affiliate of P.T. Bakrie Communications
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 and elected its right to
defer 60% of the total purchase price. Under the terms of the purchase
agreement, 10% of the total purchase price must be paid by November 15,
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<PAGE> 17
1997 and the remaining 50% by May 15, 1998. The outstanding amount due will
increase to approximately $70 million in the event SPI elects in full its
right to defer a portion of the purchase price. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(8) As of March 31, 1997, Iridium had incurred $2,284 million of this amount.
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 March 31, 1997, Iridium had incurred $64 million of this amount. The
total cost of the Terrestrial Network Development Contract is estimated to
be approximately $270 million, with approximately $94 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 March 31, 1997, Iridium had incurred $28 million of this amount. See
"Risk Factors -- Risks Associated with Principal Supply Contracts."
(11) Based on interest payment obligations (using the interest rates applicable
to the Notes and assumed interest rates and borrowing levels in the case of
other borrowings) and Iridium's estimates of associated costs, including
the expenses of the Exchange Offer. 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 $210 million.
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<PAGE> 18
THE EXCHANGE OFFER
The Exchange Offer......... The Issuers are offering to exchange (the "Exchange
Offer") (i) up to $300,000,000 aggregate principal
amount of 13% Senior Notes due 2005, Series A/EN
(the "Series A Exchange Notes"), which have been
registered under the Securities Act, for up to
$300,000,000 aggregate principal amount of
outstanding 13% Senior Notes due 2005, Series A
(the "Series A Original Notes") and (ii) up to
$500,000,000 aggregate principal amount of 14%
Senior Notes due 2005, Series B/EN (the "Series B
Exchange Notes" and, together with the Series A
Exchange Notes, the "Exchange Notes"), which have
been registered under the Securities Act, for up to
$500,000,000 aggregate principal amount of
outstanding 14% Senior Notes due 2005, Series B
(the "Series B Original Notes" and, together with
the Series A Original Notes, the "Original Notes").
Upon consummation of the Exchange Offer, the terms
of each Series of Exchange Notes will be
substantially identical in all material respects
(including principal amount, interest rate,
maturity and ranking) to the terms of the related
Series of 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.
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 , 1997 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.
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<PAGE> 19
Conditions to the Exchange
Offer.................... 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.
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........... See "The Exchange Offer -- How to Tender."
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. See "Tax
Considerations."
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 July
16, 1997, among the Iridium Parties, 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 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 July 16, 1997, among the
Iridium Parties and State Street Bank and Trust
Company, as Trustee (the "Series A Trustee"),
relating to the Series A Original Notes and the
Series A Exchange Notes (the "Series A Indenture"),
or the indenture, dated as of July 16, 1997, among
the Iridium Parties and State Street Bank and Trust
Company, as Trustee (the "Series B Trustee" and,
together with the Series A Trustee, the "Trustees")
relating to the Series B Original Notes and the
Series B Exchange Notes (the "Series B Indenture"
and, together with the Series A Indenture, the
"Indentures"), as applicable. 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 related 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."
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<PAGE> 20
TERMS OF THE NOTES
The Exchange Offer applies to (i) $300,000,000 aggregate principal amount
of the Series A Original Notes and (ii) $500,000,000 aggregate principal amount
of the Series B Original Notes. The form and terms of the Exchange Notes are the
same as the form and terms of the Original Notes for which they may be exchanged
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
respective Original Notes and will be entitled to the benefits of the respective
Indenture. See "Description of Notes."
Issuers.................... Iridium LLC, a Delaware limited liability company,
and Iridium Capital Corporation, a Delaware
corporation.
Maturity Date.............. July 15, 2005.
Principal Amount of Series
A Notes.................... $300,000,000.
Principal Amount of Series
B Notes.................... $500,000,000.
Interest Payment Dates..... Interest will accrue on the Series A Notes at an
annual rate of 13%, and interest will accrue on the
Series B Notes at an annual rate of 14%, in each
case from the date of issuance of the Original
Notes (the "Issue Date"). Interest on each Note
will be payable semi-annually in arrears on January
15 and July 15 of each year, commencing January 15,
1998.
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 Series A Notes or the Series B Notes with
the cash proceeds to Iridium of one or more Equity
Offerings (as defined) at a redemption price equal
to 113.5% of the principal amount of any Series A
Notes being redeemed, or 115.0% of the principal
amount of any Series B Notes being redeemed, in
each case 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 each Series
of Original Notes must remain outstanding (in the
form of Original Notes, Exchange Notes or a
combination thereof, as the case may be)
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
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<PAGE> 21
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 that comply with the
other covenants included in the Indentures. 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 Original Notes are, and the Exchange 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 Guaranties" and "-- Certain
Covenants -- Future Guarantor Subsidiaries."
Ranking.................... The Original Notes are, and the Exchange Notes will
be, senior obligations of the Issuers. The Original
Notes do, and the Exchange Notes will, rank pari
passu in right of payment with all existing and
future unsecured Indebtedness of the Issuers, other
than any Subordinated Obligations. The Original
Notes are, and the Exchange 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 Guaranties will be unsecured, senior
obligations of the Guarantor Subsidiaries. As of
March 31, 1997, after giving pro forma effect to
the issuance of the Original Notes and the
application of a portion of the net proceeds
therefrom to the permanent reduction of the
Guaranteed Bank Facility, the Iridium Parties would
have had outstanding approximately $1,455 million
in unsecured senior Indebtedness (including the
principal amount of the Notes) and approximately
$240 million in Indebtedness that is subordinated
to the Notes. See "Use of Proceeds," "Description
of Other Indebtedness" and "Risk
Factors -- Significant Additional Funding Needs."
Restrictive Covenants...... The Indentures governing the Notes limit (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 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 Indentures 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
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<PAGE> 22
"Description of Notes -- Certain Covenants" and
"-- Merger and Consolidation."
Registration Rights........ Pursuant to the Exchange and Registration Rights
Agreement, the Iridium Parties agreed (i) to file a
registration statement within 15 days after the
Issue Date (which was July 16, 1997) with respect
to an offer to exchange each Series of Original
Notes for a series of notes of the Issuers with
terms identical in all material respects to each
such Series of Original Notes and (ii) to use their
reasonable efforts to cause the registration
statement to be declared effective by the
Commission within 52 days after the Issue Date. The
Registration Statement of which this Prospectus
forms a part was filed on July 21, 1997 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. In certain
circumstances, the Issuers and the Guarantor
Subsidiaries are required to provide a shelf
registration statement to cover resales of the
Original Notes by certain holders. 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."
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 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 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 (as defined)
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 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 17.
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<PAGE> 23
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 Series A Notes or the Series B Notes. Through March 31, 1997,
Iridium had realized cumulative net losses of approximately $170 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 1998. Through March 31, 1997, Iridium had made payments totaling
$2,284 million to Motorola under the Space System Contract and payments totaling
$64 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 or positive cash flow or become profitable. 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 funding requirements of approximately $4.365
billion through September 1998, the month Iridium expects to commence commercial
operations, and $5.1 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 to Iridium of the IWCL IPO were
approximately $223 million. As of June 13, 1997, Iridium had equity investments
of $1.982 billion, including the net proceeds of the IWCL IPO and $60 million
due from South Pacific Iridium Holdings Limited ("SPI") pursuant to the terms of
a definitive purchase agreement. At June 13, 1997, debt equaled approximately
$1.0 billion, including the $750 million credit facility with a syndicate of
banks (the "Guaranteed Bank Facility") under which $735 million had been drawn
as of May 31, 1997. Borrowings under the Guaranteed Bank Facility are guaranteed
by Motorola (the "Motorola Guarantee"). Pursuant to the Motorola MOU, Iridium
and Motorola agreed that Iridium will permanently reduce the Guaranteed Bank
Facility by an amount equal to the excess of the net proceeds of certain
offerings of senior notes of Iridium (including the Original Notes) over $650
million (equal to approximately $95 million in the case of the Original
Offering). In addition, pursuant to the Motorola MOU, Motorola has conditionally
agreed that, after giving effect to the Original Notes offering and any
permanent reduction in the Guaranteed Bank Facility resulting therefrom,
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 in August 1998.
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 Notes if the Guaranteed Bank Facility is so
extended. Iridium believes it will be able to amend the Guaranteed Bank Facility
to extend its maturity, and it would be able to amend the Guaranteed Bank
Facility if it so requests. There can be no assurance, however, that the bank
lenders will 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
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<PAGE> 24
available. See "Certain Relationships and Related Transactions of
Iridium -- Motorola Related Matters -- Motorola MOU and Agreement Regarding
Guarantee" and "Description of Other Indebtedness."
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 senior bank facility in a principal amount up to
$750 million (the "Secured Bank Facility"), to be secured by substantially all
of Iridium's assets. The availability of the Secured Bank Facility is subject to
significant conditions, including execution of satisfactory definitive
documentation, 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 December 31,
1998, subject to Iridium's right to extend such maturity until June 30, 1999 if
it can demonstrate by October 31, 1998 that it has sufficient available or
committed funding for the projected capital and operating expenses under its
business plan through such extended maturity. See "Description of Other
Indebtedness." Assuming approximately $650 million of borrowings under the
Guaranteed Bank Facility (extended as discussed above) and full utilization of
the Secured Bank Facility, Iridium expects to have sufficient cash to meet its
anticipated funding requirements through September 1998, the month Iridium
expects to commence commercial operations. Iridium is seeking other senior 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
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 March 31, 1997, after giving effect to the issuance
of the Original Notes and the application of a portion of the net proceeds
therefrom, to the permanent reduction of the Guaranteed Bank Facility, the
Issuers and the Initial Guarantors would have had outstanding approximately
$1,455 million in aggregate principal amount of unsecured senior Indebtedness
(including the Notes) and approximately $240 million in aggregate principal
amount of Indebtedness that is subordinated to the Notes. See "Use of Proceeds."
As of March 31, 1997, none of the Issuers and the Initial Guarantors had any
secured Indebtedness outstanding. Iridium expects to incur secured Indebtedness
in an aggregate principal amount of $750 million pursuant to the Secured Bank
Facility as well as other secured Indebtedness permitted by the Indentures. See
"Description of Other Indebtedness" and "Description of Notes -- Certain
Covenants -- Limitation on Liens." 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 Indentures, the Guaranteed
Bank Facility and the Motorola MOU, and to restrictions expected to be contained
in 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 and Related Transactions of Iridium -- Motorola MOU and
Agreement Regarding Guarantee," and "Description of Notes -- Certain
Covenants -- Limitation on Indebtedness" and "-- Limitation on Liens."
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<PAGE> 25
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 Indentures and the Guaranteed Bank Facility, and
expected to be contained in the Secured Bank Facility and other debt
instruments. Among other things, such covenants limit or prohibit (or, in the
case of the Secured Bank Facility, are expected to 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 expected to be
secured by substantially all of the assets of Iridium and the Reserve Capital
Call. 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" 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, technical capabilities, funding needs, financing sources,
pricing, launch schedule, commercial operations schedule 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 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 Offering Memorandum; (iii) there will be no increased
costs resulting from excusable delays under the Space System Contract, the
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
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<PAGE> 26
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; and (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.
With regard to the statements concerning the expected size of the
addressable market for Iridium's target markets, set forth under "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 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 in 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 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."
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<PAGE> 27
Deployment of Satellites
The launch of the first five IRIDIUM satellites occurred on May 5, 1997 on
a McDonnell Douglas Delta II launch vehicle. This launch had been scheduled for
January 1997 but was delayed on four successive days and then postponed until
May 1997 following a launch failure involving the McDonnell Douglas Delta II
launch vehicle (which is the type of launch vehicle that McDonnell Douglas is
using for the IRIDIUM satellites). The first one-day delay was as a result of a
software problem at Motorola's satellite communications control facility, the
second one-day delay was as a result of a microwave link failure at the
Vandenberg Air Force base, the third one-day delay was as a result of a manual
water valve not being opened for cooling of the launch pad and the fourth
one-day delay was as a result of a problem with the insulation on the side of
the Delta II launch vehicle. The milestone date for the first launch under the
Space System contract was January 29, 1997. Motorola has informed Iridium that
it is in the process of reworking the original launch schedule with its launch
service providers and currently believes its new planned launch schedule should
permit Iridium to meet its planned September 1998 commencement of commercial
operations. The second launch under the new launch schedule occurred on June 18,
1997 using Khrunichev's Proton launch vehicle, which carried seven IRIDIUM
satellites. The third launch occurred on July 9, 1997 on a McDonnell Douglas
Delta II launch vehicle, which carried five IRIDIUM satellites. There can be no
assurance, however, that succeeding launches will proceed on the new schedule or
that the space segment will be operational on schedule. The reworked launch
schedule will require that there are no additional significant launch delays and
that all three launch providers -- McDonnell Douglas, Khrunichev and China Great
Wall -- are able to provide launch services as currently planned. The new launch
schedule will be more compressed than the original schedule and several
intermediate milestones of the Space System Contract, in addition to the first
launch, are expected to occur after their contract milestone dates before
Motorola is able to return to the original contract schedule. This compression
of the launch schedule will add 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. See "Principal Contracts for the
Development of the IRIDIUM System."
Following the January 1997 launch failure involving the McDonnell Douglas
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. Iridium and Motorola intend to amend the Space System Contract to
reflect the new planned launch schedule. 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 has lost
communications with an IRIDIUM satellite, confirmed through technical analysis
on Thursday, July 17, 1997. The satellite, one of the five launched on July 9,
1997, was in a parking orbit awaiting its ascent to final mission orbit. Iridium
was advised by Motorola that should loss of the 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 with respect to that satellite would not occur in the
future, or that such an event would not in the future have a significant adverse
affect on Iridium.
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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 11 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 are behind
schedule with equipment procurement for their gateways. While Iridium believes
that it is probable 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. See
"-- Reliance on Motorola, Gateway Owners and Other Third Parties."
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 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.
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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 that is being
developed or that will have to be developed 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 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."
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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. In addition, 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). Also, 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 than
Iridium anticipates. 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 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
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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.
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, Iridium Roaming LLC has entered into
three 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.
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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 McDonnell Douglas,
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 McDonnell Douglas Delta II launch vehicle. This launch had been scheduled for
January 1997 but was delayed on four successive days and then postponed until
May 1997 as a result of the United States government's decision to temporarily
postpone launches of the McDonnell Douglas Delta II launch vehicle (which is the
type of launch vehicle that McDonnell Douglas is using for IRIDIUM satellites)
following a launch failure involving the McDonnell Douglas Delta II launch
vehicle. The first one-day delay was as a result of a software problem at
Motorola's satellite communications control facility, the second one-day delay
was as a result of a microwave link failure at the Vandenberg Air Force base,
the third one-day delay was as a result of a manual water valve not being opened
for cooling of the launch pad and the fourth one-day delay was as a result of a
problem with the insulation on the side of the Delta II launch vehicle. Motorola
has informed Iridium that it is in the process of reworking the original launch
schedule with its launch service providers and that it currently believes its
new launch schedule should permit Iridium to meet its planned September 1998
commencement of commercial operations. The new launch schedule will be more
compressed than the original schedule and several intermediate milestones of the
Space System Contract, in addition to the first launch, are expected to occur
after their contract milestone dates before Motorola is able to return to the
original contract schedule. This compression of the launch schedule will add
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 new 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 under the new
launch schedule occurred on June 18, 1997 using Khrunichev's Proton launch
vehicle, which carried seven IRIDIUM satellites. The third launch occurred on
July 9, 1997 on a McDonnell Douglas Delta II launch vehicle, which carried five
IRIDIUM 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 those five satellites. The satellite was in a parking
orbit awaiting its ascent to final mission orbit. Iridium was advised by
Motorola that, should loss of the 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
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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 vehicle which has not been launched since
October 1993. 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 McDonnell Douglas 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 reworked launch schedule will require that there are no additional
significant launch delays and that all three launch providers -- McDonnell
Douglas, 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 McDonnell Douglas, Khrunichev and China Great
Wall being able to provide launch services on a timely basis.
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
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years. 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 has lost communications
with an IRIDIUM satellite, confirmed through technical analysis on Thursday,
July 17, 1997. The satellite, one of the five launched on July 9, 1997, was in a
parking orbit awaiting its ascent to final mission orbit. Iridium was advised by
Motorola that should loss of the 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 as to the occurrence of
anomalies in the future, or as to their effect on Iridium.
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
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
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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.
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
Radiocommunications Conference ("WRC") under the International Telecommunication
Union (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 Federal Communications Commission (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." It is
expected that the availability of the Secured Bank Facility will be conditioned
on, among other things, obtaining and maintaining regulatory approvals to be
specified in definitive documentation for such 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 FAA, which must certify
that the IRIDIUM avionics equipment meets minimum performance standards, and it
may be 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 11 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
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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 expected 11 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.
Each gateway must be licensed by the jurisdiction in which it is located.
Three final and four experimental licenses to build and operate gateways have
been received. The final licenses have been granted for the gateways in the
United States (Tempe), Thailand (Bangkok) and Taiwan (Taipei) and permit the
gateways to engage in commercial operations. The experimental licenses have been
granted for the gateways in Korea (Seoul), Brazil (Rio De Janeiro), Russia
(Moscow), Japan (Nagano) and Italy (Fucino) and permit the gateways to test
their links between the IRIDIUM satellites and terrestrial services. One of the
remaining three unlicensed gateways -- the gateway in India (Bombay) -- is under
construction in the expectation that it will be licensed. Iridium expects that
the gateway in India will be completed in March 1998. The gateways to be located
in China (Beijing) and Saudi Arabia (Jeddah) have not received licenses or
commenced construction. 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 twelve countries have granted conditional licenses for the
use of IRIDIUM Satellite Services in their country. These twelve countries are
the United States, Australia, Canada, Venezuela, New Zealand, Taiwan, Thailand,
Cook Islands, Guatemala, San Marino, Afghanistan and Micronesia. 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 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. While Iridium believes that all required licenses will
be obtained in a substantial majority of these countries by September 1998,
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
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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.
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 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 Potential
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 the final stages of 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 U.S.-licensed MSS systems (including the IRIDIUM System) to five. 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
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representing all 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 radioastronomers 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 I-CO 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), TRW,
Inc. (on behalf of Odyssey), 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 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 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 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
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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. One other proposed MSS system, ICO, and
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. Moreover, it is expected that GSM-based
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 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
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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
20 countries around the world. SkyTel operates by forwarding paging messages via
satellite 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, 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
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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."
Iridium 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 which they operate; 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. Several gateways are late in complying with some of these
conditions. 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 ICRS functionality and
enhanced call intercept modifications being negotiated with Iridium will require
all gateway operators to sign agreements with Motorola for this functionality.
No such agreements have been signed. 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'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 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 provide sufficient economic or
contractual incentive for service providers 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
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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 have entered into 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 March 31, 1997, Iridium had paid $2.284
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 McDonnell Douglas 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 reworked launch schedule will require that there are no additional
significant launch delays and that all three launch providers -- McDonnell
Douglas, Khrunichev and China Great Wall -- are able to provide launch services
as currently planned. The second launch under the new launch schedule occurred
on June 18, 1997 using Khrunichev's Proton launch vehicle, which carried seven
IRIDIUM satellites. The third launch occurred on July 9, 1997 on a McDonnell
Douglas Delta II launch vehicle, which carried five IRIDIUM satellites. Iridium
and Motorola intend to amend the Space System Contract to reflect the new
planned launch schedule. 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 "-- 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 has lost
communications with an IRIDIUM satellite, confirmed through technical analysis
on Thursday, July 17, 1997. The satellite, one of the five launched on July 9,
1997, was in a parking orbit awaiting its ascent to final mission orbit. Iridium
was advised by Motorola that should loss of the 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.
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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 has also entered into the Operations and Maintenance Contract with
Motorola 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 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
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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 has also entered into the Terrestrial Network Development Contract
with Motorola, 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 $270 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
Since Iridium expects to provide telecommunications services in almost
every country, it is 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. 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
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, is 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 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
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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.
Motorola is the creator and developer of the concept of the IRIDIUM System, the
principal supplier to Iridium, a founding investor of Iridium, a gateway owner,
Iridium'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, the guarantor
of Iridium's borrowings under its Guaranteed Bank Facility. See "Description of
Other Indebtedness."
Although Motorola does not by itself control 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 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
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 Iridium entered into the Space System Contract, the Operations
and Maintenance Contract and the Terrestrial Network Development Contract after
extensive negotiations. Iridium, however, 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, and the proceeds of
the Offering will be used primarily to make milestone payments to Motorola under
the Space System Contract and the Terrestrial Network Development Contract. See
"Use of Proceeds," "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
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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 consists of representatives of certain of the world's
leading telecommunications companies. Almost all of the members of the Iridium
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 expectations.
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
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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. 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.
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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 all 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 obligations of Iridium under the Guaranteed Bank
Facility rank pari passu with Iridium's obligations under the Notes. 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 rank pari passu with
the 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 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
are 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 Notes could be
satisfied or, if any such assets remain, such assets might be insufficient to
satisfy such claims fully. See "Description of Notes."
As of March 31, 1997, after giving pro forma effect to the issuance of the
Original Notes and the application of a portion of the net proceeds therefrom to
the permanent reduction of the Guaranteed Bank Facility, the Iridium Parties
would have had outstanding approximately $1,455 million in aggregate principal
amount of unsecured senior Indebtedness (including the principal amount of the
Original Notes) and approximately $240 million in aggregate principal amount of
Indebtedness that is subordinated to the Notes. See "Use of Proceeds." As of
March 31, 1997, none of the Iridium Parties had any secured Indebtedness
outstanding. Iridium expects to incur additional secured Indebtedness in an
aggregate principal amount of $750 million pursuant to the Secured Bank Facility
and other secured Indebtedness permitted by the Indentures. See "Description of
Other Indebtedness." Under the Indentures, Iridium and its subsidiaries will be
permitted to incur additional
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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 includes, and the Secured Bank Facility is
expected to include, certain covenants that, among other things, will 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 is expected to contain 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 projected capital and operating
expenses. 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.
CERTAIN CONSEQUENCES RELATED TO ORIGINAL ISSUE DISCOUNT
The Original Notes were issued at a substantial discount from their
principal amount at maturity. If a bankruptcy is commenced by or against an
Issuer or Guarantor Subsidiary under the United States Bankruptcy Code, the
claim of a holder of Notes against such Issuer or Guarantor Subsidiary with
respect to the principal amount thereof may be limited to an amount equal to the
sum of (i) the initial offering price for the Original Notes and (ii) that
portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the United States Bankruptcy Code. Any
original issue discount that was not amortized as of any such bankruptcy filing
would constitute "unmatured interest."
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, at the time it issued the Notes, (a) incurred such indebtedness with the
intent to hinder, delay or defraud creditors, or (b)(i) received less than
reasonably equivalent value or fair consideration and (ii)(A) were insolvent at
the time of such incurrence, (B) were rendered insolvent by reason of such
incurrence (and the application of the proceeds thereof), (C) were engaged or
were about to engage in a business or transaction for which the assets remaining
with the Issuers constituted unreasonably small capital to carry on their
business, or (D) intended to incur, or believed that they would incur, debts
beyond their 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,
in the alternative, subordinate the Notes to existing and future indebtedness of
that Issuer. 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 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
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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 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 Notes and the
application of the net proceeds therefrom, Iridium was and, in the case of the
Exchange Notes, 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 Original Notes have, and the holders of the Exchange
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 Indentures contain
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 would result in a default
under the Indentures. 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. The Issuers' ability to redeem the Notes may also be limited by
restrictions imposed by any other debt obligations that may then be in effect
and compliance with applicable securities laws. An event constituting a Change
of Control may cause an event of default under new Bank Credit Agreements (as
defined), upon which event of default all amounts outstanding under the Bank
Credit Agreements may become due and payable. 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 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
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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 "Description of
Notes -- Registration Rights."
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IRIDIUM'S OWNERSHIP STRUCTURE AND STRATEGIC INVESTORS
Iridium 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
Iridium, was formed on June 14, 1991. On July 29, 1996, Iridium, Inc. was merged
with and into Iridium, with Iridium as the surviving entity. 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
Notes, does not conduct any business.
IWCL was incorporated by Iridium 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 Iridium.
IWCL's only asset is its interest in Iridium and its only activity is
participating in the management of Iridium.
The following is a chart of Iridium's ownership structure:
[There appears here a chart showing the ownership of Iridium, its subsidiaries
and the strategic investors in Iridium.]
The above chart reflects percentage ownership in outstanding Class 1
Interests only.
For additional information on IWCL's governance arrangements and its
relationship with Iridium, see "Governance of IWCL and Relationship with
Iridium." For information regarding the potential Asset Drop-Down Transaction
(as defined) and the substitution of the resulting subsidiary of Iridium for the
obligations of Iridium under the Notes, see "Description of Notes -- Merger and
Consolidation" and "Description of Other Indebtedness -- Secured Bank Facility."
Capital, a newly formed 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, although Iridium received all of
the net proceeds of the Original Notes. Capital has no significant assets and
does not conduct any operations. Iridium IP LLC, a Delaware limited liability
company and a wholly owned subsidiary of Iridium, holds the worldwide trademark
registrations for Iridium. Iridium Roaming LLC, 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.
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<PAGE> 53
IRIDIUM'S STRATEGIC INVESTORS
Iridium's strategic investors 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 $3.46 billion in Iridium, including equity, debt and guarantees,
representing approximately 79% of Iridium's projected total funding needs
through the end of September 1998, the month Iridium expects to commence
commercial operations, and approximately 68% 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
"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.
Iridium'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, 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 its 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 IRIDIUM 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
47
<PAGE> 54
telephones, will manufacture and sell subscriber equipment for use with the
IRIDIUM System. See "Iridium 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. The net
proceeds to Iridium (directly or indirectly) from the Original Offering
(including the proceeds from IWCL for the purchase by IWCL of warrants to
purchase Class 1 Interests of Iridium (the "LLC Interest Warrants") issued in
connection with the Original Offering) were approximately $745 million. Iridium
will use approximately $650 million in net proceeds from the Original Offering
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. Pending such use, Iridium intends to temporarily
reduce the amount outstanding under the revolving Guaranteed Bank Facility to
zero and to invest the remainder in short-term investment grade debt securities.
Iridium will use approximately $95 million to permanently reduce the commitment
of the bank lenders under the Guaranteed Bank Facility and correspondingly
reduce the Motorola Guarantee. See "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> 55
CAPITALIZATION
IRIDIUM
The following table sets forth as of March 31, 1997: (i) the capitalization
of Iridium; (ii) the capitalization of Iridium as adjusted to reflect the
issuance and sale by Iridium of Class 1 Interests to IWCL in connection with the
IWCL IPO consummated on June 13, 1997 and the 7,500,000 Class 1 Interests
purchased by South Pacific Iridium Holdings Limited on May 30, 1997; and (iii)
the capitalization pro forma as adjusted to give effect to the net proceeds of
the Original Offering.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Guaranteed Bank Facility................... $ 665,000 $ 665,000 $ 655,000(1)
13% Senior Notes due 2005, Series A(2)..... -- -- 275,681
14% Senior Notes due 2005, Series B........ -- -- 477,145
14 1/2% Senior Subordinated Notes due to
Members in 2006.......................... 240,178 240,178 240,178
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, 49,268 interests issued and
outstanding; 35,878 interests issued
and outstanding....................... 49,268 35,878 35,878
Series B, 1 interest issued and
outstanding........................... -- -- --
Series C, 75 interests issued and
outstanding........................... -- -- --
Class 1 Interests, 225,000,000 interests
authorized, 120,836,025 interests issued
and outstanding and 141,219,150 interests
issued and outstanding, as adjusted...... 1,674,869 2,011,859 2,028,972(2)
Deficit accumulated during the development
stage.................................... (169,768) (169,768) (169,768)
Adjustment for minimum pension liability... (733) (733) (733)
---------- ---------- --------
Total members' equity............ 1,553,636 1,877,236 1,894,349
---------- ---------- --------
Total capitalization............. $2,458,814 $ 2,782,414 $ 3,542,353
========== ========== ========
</TABLE>
- ---------------
(1) Reflects the maximum of $750 million permitted to be outstanding under the
Guaranteed Bank Facility immediately prior to the consummation of the
Original Offering and application of $95 million of the net proceeds
therefrom to permanently reduce the Guaranteed Bank Facility to $655
million. Does not reflect any temporary reduction in the Guaranteed Bank
Facility resulting from the application of the net proceeds of the Original
Offering. See "Use of Proceeds."
(2) Gives pro forma effect to the Original Offering and the allocation of a
portion of the net proceeds therefrom to the LLC Interest Warrants.
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<PAGE> 56
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were originally issued and sold on July 16, 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 by the Iridium Parties in connection with the sale of the Original
Notes (the "Exchange and Registration Rights Agreement"), the Iridium Parties
agreed to file with the Commission a registration statement (an "Exchange Offer
Registration Statement") relating to an exchange offer (a "Required 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 identified 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 Required
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 Staff, 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, as Initial
Purchasers of the Original Notes (the "Initial Purchasers"), 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 10 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 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 (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 Registration Statement or, if applicable, the Shelf Registration
Statement, (ii) the Registration Statement, or, if applicable, the Shelf
Registration Statement, have not been declared effective by the Commission, or
(iii) the Exchange Offer has not been consummated or the Registration Statement
or the Shelf Registration Statement ceases to remain effective, 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."
50
<PAGE> 57
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"), (i) $1,000 in principal amount of
Series A/EN Exchange Notes for each $1,000 in principal amount of Series A
Original Notes and (ii) $1,000 in principal amount of Series B/EN Exchange Notes
for each $1,000 in principal amount of Series B 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
respective 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 Staff 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.
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<PAGE> 58
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.
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 , 1997, 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 State
Street Bank and Trust Company (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. A holder of an Original Note may tender the same by
(i) properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Original Notes being tendered
and any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure described
below), to the Exchange Agent at its address set forth on the back cover of this
Prospectus on or prior to the Expiration Date or (ii) complying with the
guaranteed delivery procedures described below.
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<PAGE> 59
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.
Book-Entry Transfer. The Exchange Agent will make a request to establish
an account with respect to the Original Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Original Notes by causing the Book-Entry
Transfer Facility to transfer such Original Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Original Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address specified on the back cover
page of this Prospectus on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
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 tendered, and stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange 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
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<PAGE> 60
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.
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 not a broker-dealer that owns Original Notes
acquired directly from an Iridium Party or an affiliate of an Iridium Party,
that it is acquiring the Exchange Notes offered hereby in the ordinary course of
such Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such 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.
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<PAGE> 61
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 the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) 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.
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,
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<PAGE> 62
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 (the "Trust
Indenture Act") of the Indenture pursuant to which such Original Notes were
issued.
EXCHANGE AGENT
State Street Bank and Trust Company, the Trustee under each of the
Indentures, 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.
SOLICITATION OF TENDERS; EXPENSES
The Issuers 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 Issuers
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 Issuers 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 $500,000.
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
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<PAGE> 63
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 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.
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SELECTED FINANCIAL DATA
The following selected financial data of Iridium 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 Iridium
(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 Iridium as of March 31, 1997 and for the three
months ended March 31, 1996 and 1997 are derived from the unaudited condensed
consolidated financial statements of Iridium. 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 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 Iridium and notes thereto included
herein.
<TABLE>
<CAPTION>
PERIOD PRIOR TO
INITIAL CAPITAL PERIODS FOLLOWING INITIAL
CONTRIBUTION DATE(1) CAPITAL CONTRIBUTION DATE
----------------------------- --------------------------------------------- THREE MONTHS
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31, ENDED MARCH 31,
YEAR ENDED TO TO ----------------------------- -----------------
DEC. 31, 1992 JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1996 1997
------------- ------------- ------------- ------- ------- ------- ------ -------
(DOLLARS IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<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 8,410 36,054
Interest Income............. -- -- 390 4,252 5,226 2,395 1,234 126
Provision for income
taxes..................... -- -- 173 1,525 1,684 4,589 487 --
------ ------ ------ ------- ------- ------- ------ -------
Net Loss.................... $ 8,773 $ 5,309 $ 6,924 $14,834 $23,645 $73,598 $7,663 35,928
====== ====== ====== ======= ======= ======= ====== =======
Net Loss per Class 1
Interest.................. $ -- $ -- $ .43 $ .38 $ .27 $ .64 $ .07 $ .32
====== ====== ====== ======= ======= ======= ====== =======
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 $7,975 $54,640
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
DECEMBER 31, --------------------------------------------
------------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(5) AS ADJUSTED(6)
------- -------- -------- ---------- ---------- ---------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash
equivalents........... $ -- $ 23,496 $202,391 $ 51,332 $ 1,889 $ 15,659 $ 339,259 $1,074,198
System under
construction.......... $ -- 275,000 646,000 1,448,000 2,376,884 2,395,597 2,395,597 2,395,597
Total assets............ $ -- 299,886 851,809 1,505,383 2,434,081 2,483,505 2,807,105 3,567,044
Long-term debt (net of
discount)............. $ -- -- -- -- 735,904 905,178 905,178 1,648,004
Total Members' equity
(deficit)............. $(9,530) $294,308 $795,813 $1,404,610 $1,572,029 $1,553,636 $1,877,236 $1,894,349
</TABLE>
- ---------------
(1) These amounts reflect certain costs incurred by Motorola prior to July 29,
1993, which were reimbursed by Iridium.
(2) Iridium 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, 1996 and the quarter ended March 31, 1997 because earnings
were inadequate to cover fixed charges by approximately $8,773,000,
$12,060,000, $13,309,000, $21,961,000, $97,136,000 and $54,640,000,
respectively.
(5) As adjusted to reflect (i) the purchase by IWCL of 12,000,000 Class 1
Interests in connection with the IWCL IPO at an aggregate purchase price of
approximately $225 million less $2 million in IWCL IPO expenses paid by
Iridium and (ii) the purchase of 7,500,000 Class 1 Interests by South
Pacific Iridium Holdings Limited at an aggregate purchase price of $100
million.
(6) Pro forma as adjusted to give effect to the Original Offering and the
allocation of a portion of the net proceeds therefrom to the issuance of the
LLC Interest Warrants.
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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 Iridium's financial
statements and notes thereto included elsewhere in this Prospectus.
Capital is a wholly owned subsidiary of Iridium. Capital has no significant
assets and does not conduct any operations. IWCL acts as a member of Iridium and
has no other business. IWCL's sole asset is its Class 1 Interests in Iridium.
LIQUIDITY AND CAPITAL RESOURCES
Funding Requirements
Iridium is a development stage company and as such will require substantial
amounts of continued outside financing to acquire and develop its assets and
commence operations. Iridium and Motorola have entered into (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 $270 million over the 1996 to 1999
period. 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 to the Space System Contract, the
Terrestrial Network Development Contract and the Operations and Maintenance
Contract 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. 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."
Through March 31, 1997, Iridium has incurred expenditures totaling $2.284
billion to Motorola under the Space System Contract in respect of completed
milestones and payments totaling $64 million under the Terrestrial Network
Development Contract. Based on current estimates and
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<PAGE> 66
the current planned schedule, Iridium's expected future cash requirements by
year under the contracts through December 31, 1999 are approximately as follows:
<TABLE>
<CAPTION>
1998
1997 ------------- 1999
---- (IN MILLIONS) ----
<S> <C> <C> <C>
Space System Contract.......................... $577 $ 589 --
Terrestrial Network Development Contract....... 68 47 $ 91
Operations and Maintenance Contract............ -- 140 538
</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
"Offering Memorandum 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 total funding requirements of approximately $4.365 billion through
September 1998, the month Iridium expects to commence commercial operations, and
$5.1 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 June 13, 1997, Iridium had equity investments of $1.982 billion,
including the net proceeds of the IWCL IPO and $60 million due from South
Pacific Iridium Holdings Limited pursuant to the terms of a definitive purchase
agreement. At June 13, 1997, debt equaled approximately $1.0 billion, including
the $750 million Guaranteed Bank Facility, under which $735 million had been
drawn as of May 31, 1997. Borrowings under the Guaranteed Bank Facility are
guaranteed pursuant to the Motorola Guarantee. Pursuant to the Motorola MOU,
Iridium and Motorola have agreed that Iridium will permanently reduce the
Guaranteed Bank Facility by an amount equal to the excess of the net proceeds of
certain offerings of senior notes of Iridium (including the Original Offering)
over $650 million (approximately $95 million). In addition, pursuant to the
Motorola MOU, Motorola has conditionally agreed that, after giving effect to the
offering of the Original Notes and any permanent reduction in the Guaranteed
Bank Facility resulting therefrom, 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 in August 1998. Pursuant to the Motorola MOU,
Motorola has agreed to extend the Motorola Guarantee (including the Motorola
Additional Guarantee, if committed) until after the Stated Maturity of the Notes
if the Guaranteed Bank Facility is so extended. Iridium believes it will be able
to amend the Guaranteed Bank Facility to increase its amount and to extend its
maturity, and it would be able to amend the Guaranteed Bank Facility if it so
requests. There can be no assurance that the bank lenders will agree to increase
the amount of the Guaranteed Bank Facility or to extend the term of the
Guaranteed Bank Facility, or that any such other identical credit facility will
be available. See "Description of Other Indebtedness" and "Certain Relationships
and Related Transactions of Iridium -- Motorola Related Matters."
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<PAGE> 67
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 the Secured Bank Facility in a principal amount up to
$750 million, to be secured by substantially all of Iridium's assets. The
availability of the Secured Bank Facility is subject to significant conditions,
including execution of satisfactory definitive documentation, 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 December 31, 1998, subject to
Iridium's right to extend such maturity until June 30, 1999 if it can
demonstrate by October 31, 1998 that it has sufficient available or committed
financing for its projected capital and operating expenses under its business
plan through such extended maturity. See "Description of Other Indebtedness."
After giving effect to the Original Offering, and assuming approximately $641
million of borrowings under the Guaranteed Bank Facility (extended as discussed
above) and full utilization of the Secured Bank Facility, Iridium expects to
have sufficient cash to meet its anticipated funding requirements through
September 1998, the month Iridium expects to commence commercial operations.
Iridium is seeking 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 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 do not reflect any contingency amounts and therefore those
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. See "Certain Matters Regarding Relationship of IWCL
and Iridium -- Share Issuance Agreement."
In connection with the Secured Bank Facility, the bank lenders will require
a security interest in substantially all of Iridium's assets and the Reserve
Capital Call. The bank lenders also will require that the membership interests
in Iridium, 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, Iridium expects to enter into a
transaction whereby Iridium will establish a new wholly-owned subsidiary and
transfer all or substantially all of its assets and liabilities to that
subsidiary with Iridium remaining as a holding company for the new entity.
Iridium would then pledge all of the membership interests in the new entity to
the bank lenders in connection with the Secured Bank Facility. The new entity is
expected to be a member-managed limited liability company with Iridium acting as
the sole member and would assume Iridium's obligations with respect to the
Notes. See "Description of Notes -- Merger and Consolidation."
As a result of Iridium's outstanding debt, the Notes 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 or 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."
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, which amounted to approximately $12.4 million from the initial
capital contribution
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date to March 31, 1997. During the same period, Iridium recorded a net loss of
$155.0 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 Iridium to Motorola pursuant to a reimbursement agreement.
As a development stage company, Iridium has incurred losses since its
inception 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 date of delivery in orbit of
each such satellite. 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 $2.35 billion through March 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 March 31,
1997, marketing, general and administrative expenses were approximately $159.3
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 current interest cost being capitalized during 1995 and 1996 and
will likely have similar results in 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 related to the 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
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. See "Tax
Considerations -- United States Federal Income Taxation."
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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 and
launch of the next seven IRIDIUM satellites occurred on June 18, 1997. The third
launch, which included five satellites, occurred July 9, 1997; however, on July
18, 1997, Iridium was informed by Motorola, Inc. ("Motorola") that it had lost
communication with one of those 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 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 11 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 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
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(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.
- 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.
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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 Nuova Telespazio, Lockheed Martin, Raytheon,
McDonnell Douglas, Khrunichev and China Aerospace.
Capitalize on the strengths of its strategic investors. A number of
Iridium's 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.
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.
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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, Iridium
Roaming LLC has entered into three 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 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.
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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 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
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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 hand-held, 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 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. For a discussion of the forward
looking nature of Iridium's estimates and various of the factors which could
cause actual addressable markets to differ materially from these estimates see
"Risk Factors -- Risk of Error in Forward Looking Statements."
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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 and paging 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
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
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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 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.
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.
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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.
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
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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 crosslink antennas.
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
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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 and the
next seven IRIDIUM satellites were launched on June 18, 1997. An additional five
IRIDIUM satellites were launched on July 9, 1997; however, on July 18, 1997,
Iridium was informed by Motorola that it had lost communication with one of
those satellites. See "Risk Factors -- Satellite Launch Risks." Under the Space
System Contract, Motorola has completed 34 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 13
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. By June 18, 1997, seventeen satellites had been produced, seven
additional satellites were in final assembly and testing and additional
satellites were being produced at a rate of approximately five per month.
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.
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
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March 2C through China Great Wall; Proton through Khrunichev; and Delta II
through McDonnell Douglas.
- 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.
- McDonnell Douglas Corporation. McDonnell Douglas has contracted to
provide the majority of the launches for the initial deployment of the
space segment utilizing its 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 McDonnell Douglas 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 McDonnell Douglas Delta II launch
vehicle (which is the type of launch vehicle that McDonnell Douglas is using for
the IRIDIUM satellites). The first one-day delay was as a result of a software
problem at Motorola's satellite communications control facility, the second
one-day delay was as a result of a microwave link failure at the Vandenberg Air
Force base, the third one-day delay was as a result of a manual water valve not
being opened for cooling of the launch pad and the fourth one-day delay was as a
result of a problem with the insulation on the side of 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 (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 it is in the process of
reworking the original launch schedule as a result of the initial delays and
that it currently believes its new launch schedule should permit Iridium to meet
its planned September 1998 commencement of commercial operations. This reworked
launch schedule assumes that there are no additional significant launch delays
and that all three launch providers -- McDonnell Douglas, Khrunichev and China
Great Wall -- are able to provide launch services as currently planned. The
reworked launch schedule also creates risks because it has compressed the time
otherwise available for testing. The second launch under the new launch schedule
occurred on June 18, 1997 using Khrunichev's Proton launch vehicle, which
carried seven IRIDIUM satellites. The third launch occurred on July 9, 1997 on a
McDonnell Douglas Delta II launch vehicle, which carried five IRIDIUM
satellites. There can be no assurance
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that succeeding launches will proceed on the new schedule or that the space
segment will be operational on schedule. See "Risk Factors -- Risk of Delay and
Cost Overruns." On July 18, 1997, Iridium was informed by Motorola that Motorola
has lost communications with an IRIDIUM satellite, confirmed through technical
analysis on Thursday, July 17, 1997. The satellite, one of the five launched on
July 9, 1997, was in a parking orbit awaiting its ascent to final mission orbit.
The other 16 satellites orbiting the Earth continue to function within normal
parameters. Iridium was advised by Motorola that should loss of the 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. 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. 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 Iridium. 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 its equity
investors or their affiliates. Iridium expects these gateway service territories
to be served initially through 11 gateways. Iridium has entered into Gateway
Authorization Agreements with all investors or their affiliates having
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gateway service territory allocations. Each Gateway Authorization Agreement
obligates the gateway operator to use its reasonable best efforts to perform,
among other obligations, the following with respect to its designated territory:
(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 eleven 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. Capacity requirements vary from gateway
to gateway, based on PSTN interface requirements and the number and availability
of switching trunks, as well as projections regarding the number of calls
originated by IRIDIUM subscribers within the gateway service territory and the
number of calls over the IRIDIUM System originated from or terminated in the
gateway service territory's PSTN. The construction of the Iridium North America
(Tempe, Arizona) and Nippon Iridium Corporation (Nagano, Japan) gateway
facilities is substantially complete and the telecommunications equipment is now
being installed at both locations. Equipment procurement has commenced for seven
other gateways pursuant to gateway equipment purchase agreements with Motorola.
Two gateways are behind schedule with equipment procurement for their gateways.
While Iridium believes that it is probable 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,
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including at least one TRC, and its version of the alphanumeric pager will have
an initial retail price of approximately $500. IWCL 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 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."
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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
ICRS 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. At the end of this authentication process
(which is expected to be completed in seconds), the home network knows to
forward a call to the customer to the visited network for completion and the
visited network has 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 will pay a monthly
subscription fee and a fee for calls made over the IRIDIUM System. Customers
"homed" on a cellular network will pay a feature charge to Iridium that will be
significantly below the monthly subscription fee, but they will pay an
additional roaming premium for calls made over the IRIDIUM System. 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.
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.
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
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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
=================================================================================
1996: - Additional $300 million raised
- Full-scale IRIDIUM satellite manufacture begins
- $750 million Guaranteed Bank Facility established
- Kyocera begins development of Iridium phones
- Construction of gateways begins
=================================================================================
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
- Original Offering completed
- Secured Bank Facility expected to be established
- Master control facility substantially complete
- Significant portion of satellite launches expected to occur
- Gateway construction expected to continue and initial testing to begin
- Prototype phones expected to be available for testing with in-orbit satellites
- Significant progress expected in obtaining service providers, roaming
agreements and L-band licenses
---------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<C> <S>
---------------------------------------------------------------------------------
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, TRW, on behalf of Odyssey, 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, 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, formerly known as
Inmarsat-P. Many of the investors in Inmarsat, including numerous state-owned
telecommunications companies, have announced that they will 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.
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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 underserved or not
served by existing or future cellular systems.
Odyssey, a 12-satellite MEO system, has been proposed by TRW. The proposed
system would offer mobile satellite service globally and would be based on CDMA
digital modulation technology. TRW has announced an expected in-service date of
2001, with full service available in 2002. 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, two 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 North America to provide fixed and mobile voice and data
services to briefcase-sized mobile terminals and carmounted units. 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 car-mounted units. The Asian Cellular
Satellite ("ACeS") has proposed a one- or two-satellite GEO satellite systems
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. The Asia Pacific Mobile Telecommunications
Satellite ("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. Sataphone 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 AsiaPacific 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 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
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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."
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 20 countries around the world. SkyTel
operates by forwarding paging messages via satellite 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.
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EMPLOYEES
As of April 30, 1997, Iridium had approximately 217 full-time employees.
None of Iridium's employees are covered by a collective bargaining agreement.
Iridium's management considers its relations with its employees to be good.
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. The
backup control facility is located on one floor of a building owned by Nuova
Telespazio and pictured on the inside front cover of this Offering Memorandum.
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 Radiocommunications 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 companies. 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 order to operate
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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, recognizing equipment that has been type
approved or certified by other countries, and allowing 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. Three final and five
experimental licenses to build and operate gateways have been received. The
final licenses have been granted for the gateways in the United States (Tempe),
Thailand (Bangkok) and Taiwan (Taipei) and permit the gateways to engage in
commercial operations, including use of the gateway links with the IRIDIUM
satellites. The experimental licenses have been granted for the gateways in
Korea (Seoul), Brazil (Rio De Janeiro), Russia (Moscow), Japan (Nagano) and
Italy (Fucino) and permit the gateways to test their links between the IRIDIUM
satellites and terrestrial services. One of the remaining three unlicensed
gateways -- the gateway in India (Bombay) -- is under
construction in the expectation that it will be licensed. Iridium expects that
the gateway in India will be completed in March 1998. The gateways to be located
in China (Beijing) and Saudi Arabia (Jeddah) have not received licenses or
commenced construction. 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, twelve administrations have granted either full or conditional
licenses for the provision of IRIDIUM Satellite Services in their respective
countries. The twelve countries are the United States, Australia, Canada,
Venezuela, New Zealand, Taiwan, Cook Islands, Guatemala, San Marino, Thailand,
Afghanistan and Micronesia. 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
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in September 1998. See "Description of 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. Any
significant change to the operating parameters of the IRIDIUM satellites could
require an application for modification of the current FCC license. Any such
application could be subject to competing applications and there can be no
assurance that it would be granted at all, or that it would not be subject to an
auction process. 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, and also have appealed the FCC decision which adopts
qualification standards for the applicants. 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 Motorola Satellite Communications,
Inc., a wholly owned subsidiary of Motorola, which is contractually bound to
operate it 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
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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 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. radioastronomy 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 many European
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countries -- especially EU members -- are expected to follow these
recommendations. These recommendations 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"). If the participating countries can reach agreements covering
the IRIDIUM System and the IRIDIUM subscriber equipment, it will facilitate (i)
the free circulation of subscriber equipment and (ii) universal handset type
approvals. Absent such multilateral agreements, IRIDIUM subscriber equipment
circulation from country to country would require numerous bilateral agreements.
While substantial work has progressed to date on developing these standards for
IRIDIUM subscriber equipment, there can be no assurance that these standards
will ever be established or approved on time.
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 Principal Supply Contracts -- Amendments to Principal
Contracts."
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 aeronautical navigation satellite system, GLONASS,
operates in a frequency band that 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 operations of GLONASS. In addition,
even when not operating co-channel, out-of-band emission limits protect GLONASS
operations from harmful interference. Iridium believes that a bilateral
coordination agreement between Russia and the United States is in the final
stages of negotiation, under which Russia would agree to move the GLONASS
system's operations to frequencies below
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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.
radioastronomy 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 all of the 15 U.S. radioastronomy sites. Iridium
believes that Motorola will be able to demonstrate that Iridium's operations
will not materially and adversely affect the ability of radioastronomers 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 radioastronomy sites that observe in the 1.6 GHz band. Iridium
believes there are approximately 13 other countries that have such
radioastronomy sites observing in that band. Iridium and Motorola have commenced
coordination discussions with numerous non-U.S. radioastronomy sites. While
Iridium believes that it will be able to demonstrate that IRIDIUM's operations
will not materially and adversely affect the ability of radioastronomers 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.
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
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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 United States government has indicated that CALEA
imposes requirements on the IRIDIUM System similar to the requirements that the
United States government has requested to be implemented by the cellular
industry. Discussions with the United States 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.
Motorola has obtained authorization to export the IRIDIUM satellites,
including associated launch support equipment, currently scheduled to be
launched in Kazakhstan on Khrunichev's
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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 two other competitive MSS systems to operate in the
1610-1626.5 MHZ band. These were the Globalstar system, proposed by
Loral/Qualcomm Partnership, L.P. ("Loral/Qualcomm"), and the Odyssey system,
proposed by TRW. The Globalstar, Odyssey, 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, Odyssey and
Globalstar were granted shared use of the bands 1610-1621.35 MHZ and 2483.5-2500
MHZ. All three competitive systems have been licensed to operate; and they are
not mutually exclusive.
At the same time the FCC authorized the IRIDIUM, Globalstar and Odyssey
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, Globalstar and Odyssey Systems.
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 Allocation ("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 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,
Globalstar, and Odyssey systems are proposed to operate.
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,
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an IRIDIUM gateway needs to route traffic between the IRIDIUM System and the
international PSTN. For a country to send a call originating in its PSTN to the
IRIDIUM System, it must send the call via its international network to the
nearest IRIDIUM gateway, which may be in a neighboring 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 international 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 the country in which the gateway is
located.
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 update their international switches (and
domestic ones, if necessary) to include the IRIDIUM country code and signaling
point codes.
It is also important that each IRIDIUM gateway be granted, by the country
in which the gateway is located: (i) any necessary and appropriate international
carrier status to route traffic to and from the country in which it is located;
(ii) the right to route IRIDIUM System traffic through the PSTN as an
international carrier and not as an end user (classification as an international
carrier, versus an end user, would enable IRIDIUM gateways to negotiate with
other carriers on a carrier-to-carrier basis); and (iii) the right to route
traffic using leased lines.
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 have entered into the Space System Contract, the
Operations and Maintenance Contract and the Terrestrial Network Development
Contract. In addition, Iridium has entered into a Gateway Authorization
Agreement with each of its investors that has been allocated a gateway service
territory. Iridium has also entered into contracts 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 the contracts. Each
of these contracts has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part and prospective investors are urged to read
the exhibits for a complete understanding of the terms of these 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." Capitalized terms used in the
following summary that are defined in the contracts have the meanings ascribed
to them in the contracts.
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
In order to provide 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, Iridium has entered into the Operations and Maintenance
Contract 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 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
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in determining the coverage and capacity factors, so that the required
performance of the Space Segment under the contract would be reduced while the
affected satellites were repaired or replaced.
TERRESTRIAL NETWORK DEVELOPMENT CONTRACT
Iridium and Motorola have entered into the 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 $270
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 has entered into a contract with Andersen Consulting, LLP
("Andersen") 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
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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 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
Iridium has granted certain exclusive rights to most of its equity
investors to be gateway operators in specified gateway service territories. Each
investor who has been allocated a gateway service territory has entered into a
Gateway Authorization Agreement with Iridium. See "-- Gateway Authorization
Agreements." The allocation of gateway service territories is subject to any
applicable antitrust laws. The allocation of gateway rights to any investor in
Iridium 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 Iridium's Limited Liability Company Agreement, including
obligations to fund committed amounts to Iridium. See "-- Gateway Authorization
Agreements" for a description of the terms of the Gateway Authorization
Agreements.
Each investor in Iridium that is allocated a gateway service territory has
been granted under Iridium's Limited Liability Company Agreement 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 Iridium.
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
Iridium has entered into a Gateway Authorization Agreement with each of its
investors that has been allocated a gateway service territory. 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 the 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 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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MANAGEMENT
IRIDIUM AND CAPITAL
The following table sets forth information concerning the executive
officers and directors of Iridium as of July 11, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------------
<S> <C> <C>
Robert W. Kinzie(1)............... 63 Chairman of the Board
Edward F. Staiano................. 61 Vice Chairman of the Board and Chief Executive
Officer
Leo Mondale....................... 38 Senior Vice President -- Marketing & Strategic
Planning
O. Bruce Dale..................... 54 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 -- Treasurer and acting Chief
Financial Officer
Dale F. Hogg...................... 55 Vice President -- Human Resources
Francis Latapie................... 55 Vice President -- Government Affairs
Neal F. Meehan.................... 55 Vice President -- Aeronautics
Larry G. Rands.................... 56 Vice President -- Engineering
F. Thomas Tuttle.................. 55 Vice President, General Counsel & Secretary
Robert N. Beury, Jr. ............. 44 Assistant Secretary and Deputy General Counsel
Richard L. Lesher(2)(3)(4)........ 63 Vice Chairman of the Board and Independent
Company Director
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).............. 62 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)
Georg Kellinghusen(4)............. 50 Director (designated by Vebacom Holdings, Inc.)
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)........ 63 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)........ 64 Director (designated by Iridium Italia)
J. Michael Norris................. 50 Director (designated by Motorola)
Yusai Okuyama(2)(4)............... 65 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).......... 64 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)................ 55 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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The following table sets forth information concerning the executive
officers and Directors of Iridium Capital as of July 11, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Robert W. Kinzie..................... 63 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>
Set forth below is information concerning each director and executive
officer of 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 Iridium are designated by the Members and serve until the Member
has designated a successor. There are no family relationships between any
officers and directors of Iridium.
Executive Officers of Iridium and Capital
EDWARD F. STAIANO -- Vice Chairman and Chief Executive Officer of Iridium
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.
LEO MONDALE -- Senior Vice President -- Marketing and Strategic Planning of
Iridium 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
Iridium. 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 of Iridium 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.
LAURI J. FITZ-PEGADO -- Vice President -- Global Gateway Relations since
May 1997. Prior to joining Iridium, 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 of Iridium since
August 1992. Prior to joining Iridium, 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
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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 -- Treasurer and acting Chief Financial Officer
of Iridium since April 30, 1997 and Vice President -- Treasurer since November
1996. Chief Financial Officer of Capital since June 18, 1997. Prior to joining
Iridium, 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 of Iridium since August
1996 and Director of Human Resources since August 1994. Before joining Iridium,
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 of Iridium since
October 1996. From January 1996 until October 1996, Mr. Latapie served as
Executive Director, Government Affairs of Iridium. Before joining Iridium, 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 of Iridium since April
1997. Prior to joining Iridium, 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 of Iridium 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 of
Iridium since April 1996. Mr. Tuttle had been employed by Iridium as Assistant
Secretary since January 1994 and as Deputy General Counsel since November 1993.
Secretary of Capital since June 18, 1997. Before joining Iridium, 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.
ROBERT N. BEURY JR. -- Assistant Secretary and Deputy General Counsel of
Iridium since April 1996 and Assistant Secretary since January 1995. Mr. Beury
has been employed by Iridium 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 of Iridium since October 1991 and
Chief Executive Officer from October 1991 to January 1, 1997. Director of
Iridium Capital since June 18, 1997. Prior to joining Iridium, Mr. Kinzie was
the Director of Strategic Planning for Intelsat from 1987 to 1991.
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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 of Iridium 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.
HASAN M. BINLADIN -- Director of Iridium since January 1996. During the
past five years, Mr. Binladin has served as Senior Vice President of the Saudi
Binladin Group.
ULF BOHLA -- Director of Iridium 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 of Iridium 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 of Iridium 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 of Iridium 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 of Iridium 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 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 of Iridium 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 of Iridium 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
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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 of Iridium 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.
GEORG KELLINGHUSEN -- Director of Iridium since July 1997; member of the
Related Party Contracts Committee. Dr. Kellinghusen has been a member of the
Board of Vebacom GmbH since August 1996. From 1989 to 1996, Dr. Kellinghusen was
affiliated with Varta AG, most recently as the Chairman of the Board of
Varta-Bosch Autobatterien GmbH. Prior to joining Varta AG, Dr. Kellinghusen
served as Controller, Commercial Director and Director, German-Language Books
Production Division, for Bertelsmann AG.
S. H. KHAN -- Director of Iridium 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 Mutal Fund and India Fund.
ANATOLI I. KISELEV -- Director of Iridium 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 of Iridium 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.
JOHN F. MITCHELL -- Director of Iridium 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 of Iridium 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 of Iridium since April 1996; member of the
Banking and Financing Committee, the Audit Committee and the Related Party
Contracts Committee. Since
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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 of Iridium 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 of Iridium 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 of Iridium 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 of Iridium 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 of Iridium. 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 of Iridium 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.
TAO-TSUN SUN -- Director of Iridium 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 of Iridium since January 1996; member of the
Banking and Financing Committee, the Compensation Committee and the Related
Party Contracts Committee.
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<PAGE> 112
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 of Iridium 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, 1996 to those persons who were, at December 31, 1996,
Iridium's Chief Executive Officer and the four next most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS(A) COMPENSATION OPTIONS/SARS PAYOUT COMPENSATION
- ------------------------- ---- -------- -------- ------------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Kinzie......... 1996 $372,194 $117,669 $1,596(b) 90,000 -- $7,819(c)
Chairman & Former Chief
Executive Officer
Jerrold D. Adams......... 1996 301,772 98,010 -- 75,000 -- 4,500(d)
Former President &
Chief Operating
Officer
Paul V. Daverio.......... 1996 234,236 46,580 -- 45,000 -- 4,500(d)
Former Chief Financial
Officer
Leo Mondale.............. 1996 220,561 100,000 -- 45,000 -- 4,500(d)
Senior Vice
President --
Marketing &
Strategic Planning
Mark Gercenstein......... 1996 201,692 62,909 -- 45,000 -- 4,500(d)
Vice President --
Business Operations
</TABLE>
- ---------------
(a) Through the fiscal year ending December 31, 1995 Iridium 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 Iridium 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. As of December 31, 1996, the
amount in each participant's account was: Mr. Kinzie -- $715,941, Mr.
Adams -- $566,501, Mr. Daverio -- $258,179, Mr. Mondale -- $337,771, and
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<PAGE> 113
Mr. Gercenstein -- $328,945. Mr. Adams received the balance of his account
on February 1, 1997. For all other executive officers these amounts will
continue to earn interest until paid in 1999.
(b) Amount paid representing reimbursement of federal income taxes due to income
imputed by reason of life insurance provided.
(c) Value of term life insurance ($3,319) and Iridium matching contribution to
401(k) plan ($4,500).
(d) Iridium matching contributions to 401(k) plan.
Mr. Adams retired on February 1, 1997. Pursuant to the terms of the
Selected Senior Officer's Supplemental Retirement Plan, Mr. Adams elected to
receive an immediate cash payment in the amount of $2,649,957 (the value of the
annuity to which he was entitled under the plan). The Compensation Committee of
the Iridium Board permitted Mr. Adams to receive the amount in his Iridium Long
Range Incentive Plan account ($569,806) and permitted him to retain his vested
options to purchase 16,275 Class 1 Interests at a price of $13.33 per Class 1
Interest pursuant to the Iridium Option Plan as provided in the plan with
respect to retirement, provided that Mr. Adams entered into a non-competition
agreement.
Mr. Daverio resigned from IWCL and Iridium, effective April 1, 1997. The
Compensation Committee of the Iridium Board permitted Mr. Daverio to receive the
amount in his Iridium Long Range Incentive Plan account ($264,956), permitted
him to retain his vested options to purchase 12,000 Class 1 Interests at a price
of $13.33 per Class 1 Interest pursuant to the Iridium Option Plan as provided
with respect to retirement, and granted him a severance payment equal to his
salary through December 31, 1997 ($164,333), provided that Mr. Daverio enter
into a non-competition agreement.
On January 2, 1997, Edward F. Staiano became Chief Executive Officer and
Vice Chairman of the Iridium 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, Iridium has agreed to provide Dr. Staiano, at its
expense, with a car, a furnished apartment in Washington, D.C. and access to a
corporate jet aircraft. Iridium 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
$13.33 per Interest. The options vest, pro rata, over a period of five years.
Vested options may be exercised at any time after a public offering. Dr.
Staiano's options will continue to vest even if his employment is terminated by
Iridium, other than for cause, so long as he is not retained or employed by a
competitor. Dr. Staiano does not receive an annual bonus or participate in
Iridium's retirement plans.
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<PAGE> 114
Option Grants
The following table sets forth the options granted for the fiscal year
ended December 31, 1996 for each named executive officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE
TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS/SARS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OF OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($)
- -------------------- ------------ ------------ ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Kinzie.... 90,000 12.3 $ 13.33 12/31/05 $ 754,670 $ 1,912,490
Jerrold D. Adams.... 75,000 10.3 $ 13.33 12/31/05 628,890 1,593,740
Paul V. Daverio..... 45,000 6.2 $ 13.33 12/31/05 377,335 956,245
Leo Mondale ........ 45,000 6.2 $ 13.33 12/31/05 377,335 956,245
Mark Gercenstein.... 45,000 6.2 $ 13.33 12/31/05 377,335 956,245
</TABLE>
Year End Option/SAR Table
The following table shows certain information with respect to stock options
held as of December 31, 1996 by the named executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS/SAR
SHARE AT FISCAL YEAR-END AT FISCAL YEAR END
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Kinzie.... -- $-- -- 90,000 --
Jerrold D. Adams.... -- -- -- 75,000 -- --
Paul V. Daverio..... -- -- -- 45,000 -- --
Leo Mondale......... -- -- -- 45,000 -- --
Mark Gercenstein.... -- -- -- 45,000 -- --
</TABLE>
Compensation Committee Interlocks and Insider Participation
Iridium's Compensation Committee determines the compensation of Iridium's
executive officers consistent with guidelines established by the Iridium Board.
The members of Iridium's Compensation Committee for the fiscal year ending
December 31, 1996 were Alberto Finol, George S. Medawar, John F. Mitchell, Jung
L. Mok, Sribhumi Sukhanetr, Wang Mei Yue and Yoshiharu Yasuda. The Iridium
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. See "Certain Relationships and Related Transactions of
Iridium." Messrs. Mitchell and Finol serve as the Chairman and Deputy Chairman
of IWCL, respectively.
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<PAGE> 115
Pension Plan
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000....................... $ 36,964 $ 49,286 $ 61,607 $ 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>
Iridium maintains the Iridium LLC Pension Plan (the "Pension Plan") for the
benefit of its employees. The Pension Plan is a defined benefit plan and is
qualified under the provisions of the U.S. Internal Revenue Code related to such
plans. Benefits payable under the Pension Plan are computed on the basis of a
single life annuity payable at age 65 and are subject to a partial offset by
Social Security payments. Compensation taken into account for purposes of
computing the benefits payable under the Pension Plan generally includes final
average salary, bonuses and qualified salary deferrals. Although the U.S.
Internal Revenue Code of 1986, as amended, limits the amount of covered
compensation under the Pension Plan to $150,000 subject to adjustment (the
"Compensation Cap"), the table above also reflects benefits payable under a
supplemental retirement income plan (the "Supplemental Plan") established by
Iridium for the benefit of employees whose compensation exceeds the Compensation
Cap or whose benefit would be limited by Section 415 of the U.S. Internal
Revenue Code. Benefits under the Supplemental Plan are calculated in the same
manner as the Pension Plan. Under the Supplemental Plan, Iridium will pay the
employee an amount which together with the amounts due under the Pension Plan
will equal what the employee would have received under the Pension Plan if the
Compensation Cap was not in effect. Mr. Kinzie has five years of credited
service; Mr. Adams has retired as of February 1, 1997, and is currently
collecting a pension on the basis of seven years of credited service under the
Pension Plan; Mr. Daverio had three years of credited service at the time of his
resignation; Mr. Mondale has six years of credited service; and Mr. Gercenstein
has 11 years of credited service. Messrs. Kinzie, Adams, Mondale and Gercenstein
participate in the Pension Plan but do not participate in the Supplemental Plan.
Prior to his resignation, Mr. Daverio participated in both the Pension Plan and
the Supplemental Plan.
Iridium 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. Iridium also pays to
the participant or to the proper taxing authorities an amount sufficient to pay
the income taxes arising from the purchase of the annuity for the participant. A
participant also has the option of receiving a lump sum equal to the purchase
price of the annuity. As with the annuity Iridium pays the income taxes arising
from the payment of the lump sum. Based on salary levels at January 1, 1997 and
average short term incentive plan bonuses for the last five years, the estimated
annual benefit payable if the recipient elected an annuity would be: Mr. Kinzie
$200,339,
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<PAGE> 116
Mr. Mondale $127,248 and Mr. Gercenstein $112,462. On February 1, 1997 Mr. Adams
retired and received a lump sum payment in lieu of an annuity.
Employment Arrangements
Motorola had entered into an individual agreement with Robert W. Kinzie
providing him with a right to reemployment with Motorola should he become
unemployed by Iridium because Iridium was no longer a viable business entity or
because his services were no longer desired by Iridium for reasons other than
misconduct (as the term is defined by Motorola policy). This agreement was in
effect until December 31, 1996.
On January 2, 1997, Edward F. Staiano became Chief Executive Officer and
Vice Chairman of the Iridium 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, Iridium has agreed to provide Dr. Staiano, at its
expense, with a car, a furnished apartment in Washington, D.C. and access to a
corporate jet aircraft. Iridium 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 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 Iridium Option
Plan (described elsewhere) except that 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 Iridium's pension plans.
IRIDIUM Option Plan
Iridium has established a plan under which executive officers and managers
of Iridium are awarded options to purchase Class 1 Interests of Iridium (the
"Option Plan"). The Option Plan covers 2,625,000 Class 1 Interests. The Option
Plan also permits the award of stock appreciation rights in connection with any
grant of options. As of July 8, 1997, options covering 1,977,525 Class 1
Interests had been granted at an exercise price of $13.33 per Class 1 Interest.
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 and do not include the options issuable to Mr. Lesher and Mr. Schreyer
effective upon their appointment as directors of IWCL and Iridium. If an award
under the Option Plan expires, or is terminated, surrendered or canceled, the
Class 1 Interests subject to such award are added to the number of Class 1
Interests 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 Class 1 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 Class 1
Interest 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 Iridium Board prior to the sale cease to constitute a
majority of the Iridium Board. Once vested an option may be exercised at any
time after a Public Offering. The term "Public Offering" includes a registered
public offering by
110
<PAGE> 117
Iridium or another entity which is a special purpose member of Iridium. The IWCL
IPO constituted a Public Offering under the Option Plan.
The plan was established in April 1996 and all options granted to date have
an exercise price of $13.33 per Class 1 Interest. Except for Dr. Staiano, under
the Option Plan, a participant whose employment is terminated by Iridium
forfeits any unvested options. There are exceptions for death, retirement and
certain other situations. Dr. Staiano's options will continue to vest even if
his employment is terminated by Iridium, other than for cause, so long as he is
not retained or employed by a competitor.
The Option Plan provides that each outstanding option to acquire a Class 1
Interest shall automatically become an option to acquire a share of Class A
Common Stock at the same exercise price then in effect. IWCL has agreed that
upon the exercise of any options, it will issue to Iridium, for delivery to an
exercising option holder, the number of shares of Class A Common Stock covered
by the exercised options and Iridium has agreed to simultaneously deliver to
IWCL a like number of Class 1 Interests. The exercise price of the option will
be paid to Iridium and will represent payment for the Class A Common Stock by
the exercising option holder and for the Class 1 Interests by IWCL. See
"Governance of IWCL and Relationship with Iridium -- Share Issuance Agreement."
All options and stock appreciation rights issued in the future shall relate to
shares of Class A Common Stock. The Change in Control vesting provision will
continue to apply to Changes in Control of Iridium.
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.
111
<PAGE> 118
INTEREST OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Iridium's Class 1 Interests as of the date of this Offering
Memorandum (i) by each person known by Iridium to own beneficially more than
five percent of its Class 1 Interests and (ii) by all of Iridium's executive
officers and directors (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) ....................... 41,343,292 28.41%
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)............................... 228,450 *
</TABLE>
- ---------------
* Less than 1%.
(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
Offering Memorandum 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 26,533,425
Class 1 Interests held directly by Motorola and 4,309,687 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. See "Dilution."
(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) Up to 2,625,000 Class 1 Interests may be issued pursuant to the Iridium
Option Plan. As of the date of this Offering Memorandum, options covering an
aggregate of 1,541,400 Class 1 Interests had been granted to Iridium's
executive officers and directors. Such options will become exercisable
following consummation of the IWCL IPO as and to the extent they become
vested. See "Management -- IRIDIUM Option Plan."
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<PAGE> 119
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, computers, 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 Iridium's largest member,
owning directly and indirectly approximately 23% of the Class 1 Interests in
Iridium. The Iridium Board and its management 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 has guaranteed up to $750 million of Iridium'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 Iridium entered into an Agreement Regarding
Guarantee (the "Original Agreement Regarding Guarantee"), under which (among
other things) Iridium 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 Iridium Board and as security for
Iridium's reimbursement obligation under the Original Agreement Regarding
Guarantee, Iridium granted to Motorola a security interest in substantially all
of its assets.
In connection with the Original Notes offering, Iridium and Motorola
entered 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 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) Iridium agreed that, to the extent the
net proceeds to Iridium of senior note offerings prior to December 31, 1997
(including the Original Offering) exceed $650 million, it will 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); (iv) Motorola agreed to
release its security interest in Iridium's assets granted pursuant to the
Original Agreement Regarding Guarantee;
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(v) Iridium 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 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 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 Iridium 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
Iridium; (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 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 LLC Agreement be amended to provide Motorola
with additional governance rights if the Motorola Exposure exceeds $750 million.
Under the Agreement Regarding Guarantee, Iridium agreed (i) 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) except in situations in which the Motorola Exposure is $275 million or less
and certain other conditions are satisfied, not to take certain actions without
Motorola's approval; and (iii) to 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 senior notes of Iridium (including the
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).
"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.
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Motorola Conflicts of Interest
Motorola has and may have various conflicts of interest with Iridium and
its members. 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 -- Risk of Highly Leveraged Capital Structure; Risk of Default on
Existing Commitments" and "-- 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 are expected to comprise most of Iridium's expenses and the
proceeds of the Offerings 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."
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. 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.
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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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IRIDIUM'S INVESTORS, NUMBER OF CLASS 1 INTERESTS OWNED,
PERCENTAGE OWNERSHIP AND PRINCIPAL GATEWAY SERVICE TERRITORIES
Set forth below is a summary of the investors in Iridium, 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
June 13, 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 8.5 Not Applicable
Iridium Africa Corporation...... 3,000,000 2.1 Africa (excluding Morocco and
Egypt) and Turkey
Iridium Andes -- Caribe......... 4,350,000 3.1 South America and Caribbean(4)
Iridium Brasil Ltda............. 2,824,725 2.0 South America and Caribbean(4)
Iridium Canada, Inc. ........... 5,250,000(5) 3.7 North America(3)
Iridium China (Hong Kong)
Ltd. ......................... 5,250,000 3.7 China, Mongolia, Hong Kong and
Macau
Iridium India Telecom Limited... 5,250,000 3.7 Indian Subcontinent
Iridium Italia S.p.A............ 5,550,000 3.9 Certain countries in Europe
including Belgium, Denmark,
France, Greece, Italy,
Luxembourg, the Netherlands
and Switzerland(4)
Iridium Middle East
Corporation................... 6,000,000 4.3 Middle East, Morocco, Egypt and
Central Asia
Khrunichev State Research and
Production Center............. 6,133,125 4.3 Russia and eight other republics
of the Commonwealth of
Independent States
Motorola, Inc. ................. 26,533,425(5) 18.8 North America(3), Mexico(6) and
Central America, South America
and Caribbean(4)
Nippon Iridium (Bermuda)
Limited....................... 15,750,000 11.2 Japan
Pacific Electric Wire & Cable
Co., Ltd. .................... 5,250,000 3.7 Indonesia, Brunei, Papua New
Guinea, the Philippines and
Taiwan
SK Telecom...................... 5,250,000(5) 3.7 North Korea and South Korea
South Pacific Iridium Holdings
Limited....................... 7,500,000 5.3 Certain countries in the South
Pacific region including
Australia and New Zealand
Sprint Iridium, Inc. ........... 5,250,000 3.7 North America(3)
Thai Satellite
Telecommunications Co.,
Ltd. ......................... 5,250,000 3.7 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 8.8 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 1.1 Not Applicable
Raytheon Company................ 900,000 0.7 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 "IWCL -- 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 April 30, 1997, SK Telecom and Sprint Iridium, Inc. each owned 13,550
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 9,206 Series Class 2 Interests.
(6) It is anticipated that the Mexican gateway service territory initially will
be served by the North American gateway equipment.
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 "Governance of IWCL and Relationship with 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,
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.
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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, Nuova Telespazio, for work related to the backup
system control facility, gateways and other portions of the IRIDIUM System. See
"Business -- Status of IRIDIUM System Development and Implementation." 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.
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,
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discrete semiconductors and integrated circuits, defense and aerospace
electronics, automotive and industrial electronics, computers, 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 is 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 anticipated 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 Telecommunications Co.,
Ltd. has been allocated a gateway service territory consisting of Cambodia,
Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam.
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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 IRIDIUM LLC LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary of certain provisions of the Limited Liability
Company Agreement of Iridium LLC, dated as of July 29, 1996, as amended (the
"LLC Agreement"). This summary does not purport to be a complete description of
the LLC Agreement, and is qualified in its entirety by reference to the LLC
Agreement which is available upon request from 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 Limited Liability Company Act (the "Delaware Act") on
July 16, 1996. Iridium, Inc., a Delaware corporation and the predecessor of
Iridium, was formed on June 14, 1991. On July 29, 1996, Iridium, Inc. was merged
with and into Iridium, with Iridium as the surviving entity. Iridium's purpose
is to acquire, own and manage the IRIDIUM System.
THE IRIDIUM BOARD; COMMITTEE STRUCTURE AND MANAGEMENT
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. The day-to-day activities of Iridium
are managed by its officers, subject to the supervision of the Iridium Board.
The officers are nominated and elected by the Iridium Board. The LLC Agreement
requires that the Chairman of the Iridium 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
Iridium 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 Iridium Board may act through one or more committees established by the
LLC Agreement or by resolution, with each committee having the powers of the
Iridium Board to the extent provided in the LLC Agreement or the relevant
resolution. The LLC Agreement establishes the following four committees, which
are the only existing committees of the Iridium Board:
Banking and Financing Committee. This committee is authorized
generally to supervise matters relating to the financing of Iridium. The
committee must consist of not fewer than eight directors.
Related Party Contract Committee. This committee consists of all
directors of Iridium 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 Iridium Board, who are not officers or
employees of Iridium. The committee has the authority to review, and
provide recommendations relating to the compensation and benefits of
managerial employees and has authority to administer the Iridium Option
Plan (unless the Iridium Board appoints a substitute committee).
Audit Committee. This committee is required to review, and make
recommendations regarding, Iridium's internal accounting and financial
controls, including the preparation of
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financial statements and the engagement of independent public accountants.
The committee must consist of two or more directors, appointed by the
Iridium Board, who are not officers or employees of Iridium.
See "-- Classes of Membership Interests -- Series B and Series C Class 2
Interests" for certain special rights with respect to the Iridium 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 IRIDIUM
The LLC Agreement provides that IWCL will have certain special membership
rights during the IWCL Special Rights Period (as defined). See "Certain Matters
Regarding Relationship of IWCL and Iridium -- 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 Iridium, (ii) one
Director of Iridium designated by IWCL shall be elected Vice Chairman of the
Iridium Board and (iii) one Director of Iridium designated by IWCL shall be a
member of each committee of the Iridium Board. Pursuant to the LLC Agreement,
IWCL will not be entitled to appoint more than two directors to 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 LLC Agreement, under the Delaware Act or
otherwise, during the IWCL Special Rights Period, 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 Iridium designated by
IWCL: (i) make any material amendments or modifications to the LLC Agreement;
(ii) approve any business plan of Iridium that would result in any material
change in the purpose of Iridium as set forth in the LLC Agreement or otherwise
change Iridium's business so that it varies materially from the business purpose
contemplated by the LLC Agreement; (iii) acquire, other than in the ordinary
course of business of Iridium, (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 of 1933) 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
Iridium (other than to a person controlled by Iridium); (v) cause the
dissolution and/or liquidation of Iridium; or (vi) take certain bankruptcy or
insolvency related actions with respect to Iridium.
CLASSES OF MEMBERSHIP INTERESTS
The Members' interests in Iridium are divided into two classes: "Class 1
Interests" which represent the common equity of Iridium and "Class 2 Interests"
which represent the preferred equity of Iridium. The 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. At June 13, 1997 there were
141,219,150 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. See "Dilution."
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 Iridium,
through February 28, 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.
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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 April 30, 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 April 30, 1997 there are 36,305
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, Iridium 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 Iridium 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 Iridium 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 Iridium 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 Iridium 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 Iridium 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 Iridium 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 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.
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MERGER
The 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 Iridium 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 Iridium 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 Iridium 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 Iridium.
The LLC Agreement requires the Iridium 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 Iridium'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 Iridium Board may, at any time, cause Iridium to admit additional
Members upon conditions determined by the Iridium Board. Subject to certain
exceptions, if Iridium authorizes the issuance or sale of any Class 1 Interests,
Iridium 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 LLC Agreement contains significant restrictions on the ability of a
Member to transfer any Interests in Iridium. Prior to making any transfer of
Interests in Iridium (other than certain transfers to affiliates), the person
seeking to make such transfer must notify Iridium 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 Iridium 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, Iridium may elect to purchase all (but not less than all) of the
Interests to be transferred upon the terms and conditions of the proposed
transfer and, if Iridium 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
Interests to be transferred on a pro rata basis.
The LLC Agreement provides that as long as Motorola is the principal
supplier to Iridium and/or Motorola or one of its subsidiaries is the holder for
the benefit of Iridium 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 Iridium and neither Motorola nor one of its
subsidiaries is the holder for the benefit of Iridium 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.
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CAPITAL CONTRIBUTIONS; RESERVE CAPITAL CALL
Contributions to the capital of Iridium, with respect to each Member who
purchases an Interest, are made in an amount equal to the net purchase price to
Iridium for such Interest (such amount being such Member's capital contribution
to Iridium). The 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 Iridium
at all times. Members generally are not required to make additional capital
contributions to Iridium other than in connection with the Reserve Capital Call.
Seventeen Members of Iridium 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 Iridium.
The treasurer of Iridium is required to provide such a notice on the date on
which the treasurer has first determined that Iridium 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 LLC Agreement provides Iridium 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. The Commitment Letter in respect
of the Secured Bank Facility contemplates that the Reserve Capital Call will be
pledged to the lenders under the Secured Bank Facility and that Iridium 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 Iridium. Pursuant to the 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 Iridium
until all of the assets and capital of Iridium 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 Iridium have only the duties set forth
in the LLC Agreement. The 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 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 the Director
derived an improper personal benefit.
The 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 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 Iridium) by reason of the fact that such person was serving in such
capacity, provided that such person acted in good faith
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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
proceedings, had no reasonable cause to believe such person's conduct was
unlawful. The LLC Agreement further provides that Iridium will indemnify the
Directors, officers and other persons serving in similar capacities at the
request of Iridium 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
awarded pursuant to a court order.
ALLOCATIONS OF PROFITS AND LOSSES; TAX MATTERS PARTNER
The profits and losses of Iridium 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 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 Iridium 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
Iridium.
AMENDMENTS TO THE LLC AGREEMENT; MEETINGS
The LLC Agreement may not be changed or amended, nor may the observance of
any provision of the LLC Agreement be waived, without the consent of Class 1
Members holding not less than 66 1/3% of the outstanding Class 1 Interests. This
general approval requirement for amendments to the LLC Agreement is subject to
certain exceptions including, among others:
Iridium Board. The provision of the LLC Agreement granting to the
Members the right to elect members of the Iridium 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 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 1/3% of the
Directors serving on the Related Party Contracts Committee and (ii) 66 1/3%
of the non-interested Members.
Capital Contributions. Certain provisions of the 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 Iridium Board, and other provisions of the LLC
Agreement covering Members' capital contributions may be amended only with
the consent of Iridium and each Member whose rights and obligations
thereunder are directly affected by such amendment.
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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 Iridium 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 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 Iridium.
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 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 -- Marketing and Distribution -- Gateway Owners and
Operators," "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 LLC Agreement. In the event that such rights are terminated 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 LLC Agreement.
DISSOLUTION; WINDING-UP
The LLC Agreement provides that Iridium 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 Iridium Board that Iridium 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;
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(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 LLC Agreement to continue the business of Iridium
(such right to be exercised by the affirmative consent of both (a) a majority of
the Iridium 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.
CERTAIN MATTERS REGARDING RELATIONSHIP OF IWCL AND IRIDIUM
IWCL was formed to act as a member of Iridium. 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 or one of Iridium's other members. At least two members of
the IWCL Board will at all times be persons not currently employed by or
affiliated with Iridium or Motorola or any other member of Iridium owning more
than five percent of the outstanding Class 1 Interests (the "Independent Company
Directors"). See "Management."
PARTICIPATION IN THE GOVERNANCE OF IRIDIUM
Iridium is governed by the Iridium Board. The members of Iridium may manage
Iridium only through their election of Directors, and have no authority, in
their capacity as members, to act on behalf of Iridium. IWCL has waived the
limitation on liability provided by the Delaware Act. The other members of
Iridium 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 Iridium. Notwithstanding IWCL's unlimited liability with respect to
Iridium, 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 Iridium LLC
Limited Liability Company Agreement -- Limitations on Liability."
The LLC Agreement provides that IWCL will have certain special membership
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 Iridium 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 Iridium owning a majority of the Class 1 Interests
or by a majority of the Iridium 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 Securities Exchange Act of 1934 (the "Exchange
Act")) other than Iridium 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 Iridium, an affiliate of Iridium or a wholly-owned subsidiary of Iridium,
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
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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.
During the IWCL Special Rights Period (i) IWCL shall be entitled to
designate two Independent Company Directors as Directors of Iridium, (ii) one
Director of Iridium designated by IWCL shall be elected Vice Chairman of the
Iridium Board and (iii) one Director of Iridium designated by IWCL shall be a
member of each committee of the Iridium Board. Pursuant to the LLC Agreement,
IWCL will not be entitled to appoint more than two Directors to 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 LLC Agreement, under the Delaware Act or
otherwise, during the IWCL Special Rights Period, 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 Iridium designated by IWCL
("IWCL's Special Rights Consent"): (i) make any material amendments or
modifications to the LLC Agreement; (ii) approve any business plan of Iridium
that would result in any material change in the purpose of Iridium as set forth
in the LLC Agreement or otherwise change Iridium's business so that it varies
materially from the business purpose contemplated by the LLC Agreement; (iii)
acquire, other than in the ordinary course of business of Iridium, (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 Iridium (other than to a person controlled by Iridium); (v) cause
the dissolution and/or liquidation of Iridium; or (vi) take certain bankruptcy
or insolvency related actions with respect to Iridium.
EXCHANGE RIGHTS OF IRIDIUM MEMBERS
Pursuant to an Interest Exchange Agreement between Iridium 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 LLC Agreement
it will permit holders of Class 1 Interests of Iridium 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 Iridium LLC 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 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 Iridium. No exchange shall
take place unless approved by Iridium, pursuant to authorization of Directors
representing at least 66 2/3% of the Iridium Board. The Exchange Date is the
90th day following the first fiscal quarter in which Iridium 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 LLC
Agreement and any Gateway Authorization Agreement to which it is a party.
Iridium and IWCL have the right to defer exchanges under the Interest Exchange
Agreement if doing so is in the best interests of Iridium 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 United States Securities and Exchange 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
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Stock in the manner specified by those 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 Iridium, acting pursuant to authorization of
Directors representing at least 66 2/3% of the Iridium 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
Iridium.
SHARE ISSUANCE AGREEMENT
IWCL and Iridium have entered into a Share Issuance Agreement governing
offerings of securities by IWCL. IWCL's participation in the Original Offering,
including the issuance of the Warrants, the Warrant Shares and IWCL's obligation
to purchase LLC Interest Warrants, is governed by the Share Issuance Agreement.
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 Iridium.
IWCL will not issue any securities except pursuant to the Share Issuance
Agreement (or pursuant to warrants, such as the Warrants, issued in accordance
therewith), the Interest Exchange Agreement and the Global Ownership Program
described below. IWCL has agreed that if requested by Iridium 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 Iridium.
If IWCL sells Class A Common Stock pursuant to the Share Issuance
Agreement, Iridium 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 Iridium directs IWCL to issue
securities other than Class A Common Stock, Iridium 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. Iridium 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. IWCL also has agreed to issue Class A
Common Stock pursuant to the Share Issuance Agreement in connection with the
IRIDIUM Option Plan. Iridium will issue to IWCL one Class 1 Interest for each
share of Class A Common Stock issued by IWCL in connection with the IRIDIUM
Option Plan (subject to anti-dilution adjustments).
GLOBAL OWNERSHIP PROGRAM
IWCL and Iridium have commenced a 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 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
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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 Iridium
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 anti-dilution adjustments. At the
time of issuance of any shares of Class B Common Stock, IWCL will acquire from
Iridium 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 LLC Agreement
provides that if any portion of the purchase price for an interest in Iridium is
payable after the issuance of the interest, the Iridium Board may restrict the
rights otherwise incident to the holding of such interest. IWCL may require
Iridium to repurchase Class 1 Interests in an amount corresponding to any Class
B Common Stock repurchased by IWCL. Iridium 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.
MANAGEMENT SERVICES AGREEMENT
IWCL and Iridium have entered into a Management Services Agreement pursuant
to which Iridium has agreed to supervise and manage the day-to-day operations of
IWCL and IWCL has agreed to allow Iridium to do so. Iridium 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
Iridium written instructions, not inconsistent with the terms of the Management
Services Agreement, with respect to matters arising under the agreement and
Iridium is required to follow such instructions. Among other things, Iridium
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.
Iridium has no authority under the Management Services Agreement to give any
notice or to approve any matter under the LLC Agreement on behalf of IWCL,
including, but not limited to, IWCL's Special Rights Consent. Iridium 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 Iridium LLC Limited Liability Company
Agreement." Iridium will receive no fees or expense reimbursement for its
services under the Management Services Agreement. The Management Services
Agreement is only terminable with the consent of both Iridium and IWCL, except
that Iridium has the right to terminate the agreement after the occurrence of an
IWCL Change of Control. See "-- Participation in the Governance of Iridium."
DESCRIPTION OF OTHER INDEBTEDNESS
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
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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
March 31, 1997, Iridium had $735 million in principal amount of borrowings
outstanding under the Guaranteed Bank Facility.
Motorola Guarantee. Iridium's borrowings under the Guaranteed Bank
Facility are guaranteed by Motorola (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) will be permanently reduced by
the net proceeds to Iridium of certain offerings of senior notes of Iridium
prior to or on December 31, 1997 (including the Original Offering), to the
extent the aggregate amount of such net proceeds exceed $650 million (provided
that the Guaranteed Bank Facility is not required to be reduced below $275
million). See "Certain Relationships and Related Transactions of
Iridium -- Motorola Related Matters -- Motorola MOU and Agreement Regarding
Guarantee." Such net proceeds in the case of the Original Offering are
approximately $95 million. A portion of the net proceeds of the Original
Offering will be used to temporarily reduce outstanding borrowings under the
Guaranteed Bank Facility to zero, pending the ultimate use of such proceeds
primarily to make milestone payments in connection with the construction and
deployment of the IRIDIUM System.
The Guarantee Agreement contains covenants by Motorola, including a
requirement to provide notice of defaults relating to Motorola and its
subsidiaries under the Guaranteed Credit 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.
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 Original Notes offering, Motorola will
guarantee up to an additional $350 million of borrowings made prior to February
28, 1999 under the Guaranteed Bank Facility (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 August,
1998; 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 $745 million. Pursuant to the Motorola MOU,
Motorola has agreed to extend the Motorola Guarantee until after the stated
maturity of the Notes. Based on that agreement, Iridium believes it will be able
to amend the Guaranteed Bank Facility to extend its maturity until after the
stated maturity of the Notes (subject to the automatic acceleration provision
described above relating to borrowings in excess of $745 million, as may be
modified in connection with any increase in the size of the Guaranteed Bank
Facility); however, there can be no assurance that the Guaranteed Facility
Lenders will agree to the extension.
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. Iridium's obligation under the
Original Agreement Regarding Guarantee to reimburse Motorola for any drawing
under the Guarantee Agreement was secured by a security interest in
substantially all of the assets of Iridium. Pursuant to the Motorola MOU,
Motorola agreed to release its security interest in Iridium's assets on or prior
to the Issue Date.
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
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established by the Federal Reserve Bank of New York, plus .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 Iridium of at least (1) 20%
of the aggregate voting equity interests of Iridium, assuming full exercise of
any warrants or full conversion of any convertible securities issued to Motorola
or any of its subsidiaries (whether or not currently exercisable or convertible)
but not giving effect to the dilutive effect of any sales of equity interests,
or (2) 15% of the aggregate voting equity interests of Iridium. Pursuant to the
Motorola MOU, Iridium is required to use its reasonable efforts to modify the
event of default described in clause (vii) above, prior to December 31, 1997, to
provide that no such event of default would occur if Motorola retained, free and
clear of all liens, at least 13,266,713 Class I Interests (as such number may be
adjusted by stock splits, stock dividends, etc.). Certain defaults under the
Guaranteed Bank Facility are subject to specified cure periods.
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 Original Notes offering and the Motorola MOU, Iridium
and Motorola amended and restated the Original Agreement Regarding Guarantee (as
amended and restated, the "Agreement Regarding Guarantee"). Pursuant to the
Agreement Regarding Guarantee, 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 cove-
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nants of Iridium, the compensation to Motorola for the Motorola Guarantee and
potential 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.
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 $240 million at March
31, 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 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 107.5% 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
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 declare ineffective by any
court or mediator having jurisdiction.
SECURED BANK FACILITY
Commitment Letter -- General. Iridium has obtained a commitment letter,
dated June 16, 1997, from Chase Securities Inc., Chase, Barclays and BZW, the
investment banking division of Barclays (as amended by a letter dated July 11,
1997, from Chase Securities Inc., Chase, Barclays and BZW, the "Commitment
Letter"), to provide a $750 million senior secured interim revolving credit
facility (the "Secured Bank Facility"). Availability of the Secured Bank
Facility is subject to numerous conditions. See "-- Conditions" below.
Accordingly, no assurance can be given that the Secured Bank Facility will be
available to Iridium.
Maturity and Prepayment. The Secured Bank Facility would mature on
December 31, 1998; provided that Iridium may extend the maturity to June 30,
1999 if it can demonstrate by October 31, 1998 that it has sufficient available
funding to meet its business plan through the extended maturity. The Secured
Bank Facility would be subject to mandatory prepayment as a result of certain
debt or equity issuances, asset dispositions, insurance recoveries and certain
other events. Amounts prepaid pursuant to any marketing prepayment provisions
could not be reborrowed.
Ranking and Collateral. Iridium's obligations under the Secured Bank
Facility would be senior obligations of Iridium and would rank, except with
respect to collateral as described below, pari passu in right of payment to the
Notes. In addition, Iridium's obligations under the Secured Bank Facility would
be secured by a pledge of substantially all of Iridium's assets, including the
obligations of certain of Iridium's members pursuant to the Reserve Capital
Call, all of Iridium's rights under the Space System Contract and the Operations
and Maintenance Contract, as well as Iridium's rights to access the facilities
of gateway providers and all of its rights, if any, to FCC licenses and other
foreign and domestic governmental authorizations and licenses. As secured debt,
the Secured Bank Facility would be effectively senior to the Notes and other
senior indebtedness of Iridium to the
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extent of the assets securing the Secured Bank Facility. See "Risk
Factors -- Ranking of the Notes."
The Commitment Letter requires that the membership interests in Iridium, or
in any company to which all or substantially all of Iridium's assets are
transferred, also be pledged as security under the Secured Bank Facility. In
connection with the granting of such security interest, Iridium expects to
contribute all or substantially all of its assets, including those listed above,
to a wholly-owned subsidiary (the "Operating Subsidiary") in exchange for equity
interests in the Operating Subsidiary and the assumption of most of Iridium's
liabilities (including the obligations of Iridium under the Notes). See
"Description of Notes -- Merger and Consolidation." Such equity interests in the
Operating Subsidiary would then be pledged to the lenders under the Secured Bank
Facility.
Interest and Fees. Based on the Commitment Letter, borrowings under the
Secured Bank Facility would bear interest, at the option of Iridium, at either
(i) the 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. The Secured Bank Facility is subject to
numerous conditions, including the execution of definitive documentation
satisfactory to Chase and Barclays and the other lenders under such Facility,
completion of a satisfactory review of Iridium's marketing and distribution
strategy and insurance requirements. The Commitment Letter further provides that
loans under the Secured Bank Facility would be made available in three 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 the initial loan under the Secured
Bank Facility, Iridium must have issued or have outstanding $1,875 million
aggregate amount of unsecured debt, of which not more than $350 million may
represent conditional agreement commitments of Motorola to either provide such
financing or guarantees with respect thereto.
Stage 1 of the Secured Bank Facility, expected to become available on or
about January 1, 1998, would provide for loans up to $350 million in aggregate
principal amount. Stage 2 of the Secured Bank Facility, expected to become
available on or about April 1, 1998, would provide 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, would provide for loans in a principal
amount of up to an additional $200 million. The three 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."
Representations and Covenants. The Commitment Letter provides for
representations and covenants customary for similar facilities, including, but
not limited to, a requirement to obtain satisfactory insurance, and limitations
on mergers, asset dispositions and acquisitions, liens, incurrence of additional
indebtedness, restricted payments, capital expenditures, scope of business and
certain transactions with affiliates. In addition, the Secured Bank Facility is
expected to contain a total debt to capitalization covenant and a covenant to
maintain committed or available funding
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sources through the term of the Secured Bank Facility to meet Iridium's
projected capital and operating expenses. The Commitment Letter also requires
restrictions on the utilization of the Reserve Capital Call and modifications or
prepayments of certain other debt instruments.
Events of Default. The Commitment Letter provides that events of default
under the Secured Bank Facility will include: (i) failure to pay interest,
principal or other amounts with respect to the Secured Bank Facility; (ii)
breach by Iridium, Motorola, certain of their subsidiaries, or any other project
party (defined to include all Iridium members) of its obligations under
specified project-related documents; (iii) certain events of bankruptcy,
insolvency or reorganization 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 certain other project
parties to obtain or maintain necessary telecommunications or other regulatory
approvals; and (vii) 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.
The Secured Bank Facility will be negotiated with Chase and Barclays.
Pursuant to the Motorola MOU, Motorola has requested certain revisions to the
Commitment Letter as a condition to its willingness to support Iridium's effort
to obtain the Secured Bank Facility. There can be no assurance that the Secured
Bank Facility will be obtained, or if obtained, will not contain terms or
conditions different from those discussed in this Prospectus. Such terms and
conditions may be adverse to Iridium.
Chase Securities Inc., an Initial Purchaser, is an affiliate of Chase.
DESCRIPTION OF NOTES
GENERAL
The Series A Original Notes have been, and the Series A Exchange Notes will
be, issued under an Indenture, dated as of July 16, 1997 (the "Series A Note
Indenture"), among the Iridium Parties and State Street Bank and Trust Company,
as trustee (the "Series A Note Trustee"). The Series B Notes have been, and the
Series B Exchange Notes will be, issued under an Indenture, dated as of July 16,
1997 (the "Series B Note Indenture" and, together with the Series A Note
Indenture, the "Indentures") among the Iridium Parties and State Street Bank and
Trust Company, as trustee (the "Series B Note Trustee" and, together with the
Series A Note Trustee, the "Trustees"). A copy of each Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, and will be made 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 Indentures 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 Indentures, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"). Capitalized terms used herein and not
otherwise defined have the meanings set forth in the section "-- Certain
Definitions" below; provided, however, that references in this "Description of
Notes" section to "Exchange Notes" shall mean any notes issued in exchange for
the Original Notes pursuant to the Registration Rights Agreement.
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 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
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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.
As of the Issue Date, 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
Indentures. Any Unrestricted Subsidiaries (including Foreign Subsidiaries
designated as such) will not be subject to the restrictive covenants contained
in the Indentures.
TERMS OF THE NOTES
The Series A Original Notes are, and the Series A 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 Series A Note bears or
will bear interest at the rate per annum applicable to the Series A Notes shown
on the front cover of this Prospectus from the Issue Date or from the most
recent date to which interest has been paid or provided for, payable
semiannually in arrears on January 15 and July 15 of each year, commencing on
January 15, 1998, to Holders of Series A Notes of record at the close of
business on the January 1 or July 1 immediately preceding the applicable
interest payment date.
The Series B Original Notes are, and the Series B Exchange will be,
unsecured senior obligations of the Issuers, limited to $500 million aggregate
principal amount, and will mature on July 15, 2005. Each Series B Note bears or
will bear interest at the rate per annum applicable to the Series B Notes shown
on the front cover of this Prospectus from the Issue Date or from the most
recent date to which interest has been paid or provided for, payable
semiannually in arrears on January 15 and July 15 of each year, commencing on
January 15, 1998, to Holders of Series B Notes of record at the 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 Original Notes
are not, and the Exchange Notes will not be, redeemable at the option of the
Issuers prior to July 15, 2002. On and after such date, the Notes of each Series
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 such Series 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 the
applicable Series 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>
SERIES A NOTE SERIES B NOTE
REDEMPTION REDEMPTION
YEAR PRICE PRICE
-------------------------------------------------- ------------- -------------
<S> <C> <C>
2002.............................................. 106.750% 107.500%
2003.............................................. 103.375% 103.750%
2004 and thereafter............................... 100.000% 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 each Series 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 113.5%, in the case of a redemption
of Series A Notes, or 115.0%, in the case of a redemption of Series B Notes,
plus accrued and unpaid
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interest and Liquidated Damages, if any, to the redemption date (subject to the
right of record Holders of the applicable Series 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); provided, however, that at least 66 2/3% of
the original aggregate principal amount of the Series A Notes or the Series B
Notes, as the case may be, 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 applicable Trustee on a pro rata basis, by lot or
by such other method as the applicable 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 Original Notes is, and the Indebtedness
evidenced by the Exchange 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
all existing and future senior Indebtedness of the Issuers. 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 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 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 the
assets securing such Indebtedness. See "Risk Factors -- Possible
Unenforceability of Subsidiary Guaranties."
As of March 31, 1997, after giving pro forma effect to the issuance of the
Original Notes and the application of the proceeds therefrom, the Issuers and
the Initial Guarantors would have had outstanding $1,455 million in aggregate
principal amount of unsecured senior Indebtedness (including the Notes) and
approximately $240 million in aggregate principal amount of Indebtedness that is
subordinated to the Notes. See "Use of Proceeds." As of March 31, 1997, none of
the Iridium Parties had any secured Indebtedness outstanding. Iridium expects to
incur secured Indebtedness in an aggregate principal amount of $750 million
pursuant to the Secured Bank Facility. See "Description of Other Indebtedness."
SUBSIDIARY GUARANTIES
Iridium Roaming LLC and Iridium IP LLC (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
each 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
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and deliver a Subsidiary Guaranty in accordance with the provisions of the
Indentures, in which case such Foreign Subsidiary will be a "Guarantor
Subsidiary" for purposes of the Indentures. 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 Trustees 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 applicable Trustee, the applicable
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 applicable
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 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 Indentures;
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 the Issue
Date (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 hereafter defined)); 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.
Within 30 days following any Change of Control, the Issuers will mail a
notice to each Holder with a copy to the Trustees stating, among other things:
(1) that a Change of Control has occurred
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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
Indentures, but that could change the ownership, increase the amount of
indebtedness outstanding at such time or otherwise affect Iridium's capital
structure or credit ratings.
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. Moreover, the exercise by the Holders of
their right to require the Issuers to repurchase the Notes could cause a default
under such indebtedness, even if the Change of Control itself does not, due to
the financial effect of such repurchase on the Issuers. Finally, 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. The Issuers' failure to
purchase Notes in connection with a Change of Control would result in a default
under the applicable Indenture.
CERTAIN COVENANTS
Each 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%.
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(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 Indentures 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 $950.0 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 Indebtedness and after giving
effect thereto, the aggregate amount of all Indebtedness incurred pursuant
to this clause (iii) and then outstanding does not exceed $350.0 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;
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(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 Note 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 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 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
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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 the
Issue Date 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
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 the Issue Date 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
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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 Trustees;
(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 (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.
(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 Trustees) 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 Trustees 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 Indentures, such Restricted Payment will be deemed to have
been made in compliance with the Indentures 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
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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 Indentures or the Notes 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 Incurred pursuant to clause (i), (ii) or (iii) of
paragraph (b) of the covenant described above under "-- Limitation on
Indebtedness"; 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
Trustees);
(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 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
Indentures, 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.
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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 Trustees;
(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 Trustees) 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, 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 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 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 Indentures.
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.
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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 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
(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.
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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 Series A Notes
or Series B 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
related 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
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
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 Trustees supplemental
indentures pursuant to which such Subsidiary will Guarantee payment of the
Notes. Iridium may cause any Foreign Subsidiary to execute and deliver a
Subsidiary Guaranty in accordance with the provisions of the Indentures. 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, each 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 such
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 Original 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
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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
Trustees 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 Indentures. In addition,
Iridium will cause to be delivered to the Trustees no less than once each year
an insurance certificate setting forth the amount of insurance then carried,
which insurance certificate will entitle the Trustees 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 each
Indenture provides 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 laws of Bermuda and
the Successor Company (if not Iridium) expressly assumes, by an indenture
supplemental thereto, executed and delivered to the applicable Trustee, in form
satisfactory to such Trustee, all the obligations of Iridium under such
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 such 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 such Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction and such supplemental indenture (if any)
comply with such 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).
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
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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").
Each Indenture provides 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 related 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 such Indenture; and (iii) Iridium
has delivered to such 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 related 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 Indentures, 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
Indentures 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 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 each Indenture as:
(i) a default in any payment of interest or Liquidated Damages, if
any, on any Note issued under such Indenture when due, continued for 30
days;
(ii) a default in the payment of principal of any Note issued under
such Indenture 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 such Indenture);
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(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
issued under such Indenture or in such 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 such Indenture or Notes
issued thereunder 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 such 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
(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 an Indenture until the Trustee thereunder or the Holders
of 25% in principal amount of the outstanding applicable 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 an Indenture occurs and is continuing, the
applicable Trustee or the Holders of at least 25% in principal amount of the
outstanding applicable Notes by notice to the Note Issuers may declare the
principal of and accrued but unpaid interest on and Liquidated Damages, if any,
on all the Notes issued pursuant to such Indenture 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 Series A
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Notes or Series B Notes, as the case may be, then outstanding may rescind any
such acceleration with respect to the Notes and its consequences.
Subject to the provisions of each Indenture relating to the duties of the
Trustee thereunder, in case an Event of Default occurs and is continuing, such
Trustee will be under no obligation to exercise any of the rights or powers
under such Indenture at the request or direction of any of the relevant Holders
unless such Holders have offered to such 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 an Indenture
or the related Notes unless (i) such Holder has previously given the applicable
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the Series A Notes or Series B Notes, as the case may
be, then outstanding have requested the applicable Trustee to pursue the remedy,
(iii) such Holders have offered the applicable Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the applicable 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 Series A Notes or Series B Notes, as the case may be,
then outstanding have not given the applicable 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 Series A Notes or Series B
Notes, as the case may be, then outstanding are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the applicable Trustee or of exercising any trust or power conferred on the
applicable Trustee. The applicable Trustee, however, may refuse to follow any
direction that conflicts with law or the applicable Indenture or that such
Trustee determines is unduly prejudicial to the rights of any other Holder
thereunder or that would involve such Trustee in personal liability. Prior to
taking any action under an Indenture, the applicable 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.
Each Indenture provides that if a Default occurs and is continuing under
such Indenture and is known to the applicable Trustee, such 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 such 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 applicable 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 applicable Holders. In addition, the Note Issuers are
required to deliver to each Trustee, within 120 days after the end of each
fiscal year, a certificate indicating whether the signers thereof know of any
Default under the applicable Indenture that occurred during the previous year.
The Issuers also are required to deliver to each Trustee, within 30 days after
the occurrence thereof, written notice of any event which would constitute
certain Defaults under the applicable Indenture, their status and what action
the Issuers are taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, each Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Series A Notes
or Series B Notes, as the case may be, 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 Series A Notes
or Series B Notes, as the case may be, then outstanding. However, without the
consent of each Holder of an outstanding Series A Note or Series B Note, as the
case may be, 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
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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 each Trustee may amend
the applicable 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 such Indenture (as contemplated under
"-- Merger and Consolidation" in connection with the Asset Drop-Down Transaction
or otherwise), to provide for uncertificated Series A Notes or Series B Notes,
as the case may be, in addition to or in place of certificated Series A Notes or
Series B Notes, as the case may be (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 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 Commission in connection
with the qualification of such Indenture under the Trust Indenture Act.
The consent of the Holders is not necessary under either 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 an Indenture becomes effective, the Issuers are
required to mail to the applicable 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 applicable
Indenture. Upon any transfer or exchange, the applicable 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 applicable 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 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
Series A Notes or the Series B Notes, as the case may be, and the related
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
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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 applicable maturity date. In order to exercise either
defeasance option, the Note Issuers must irrevocably deposit in trust (the
"defeasance trust") with the applicable 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 such 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 such 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 Indentures 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 TRUSTEES
State Street Bank and Trust Company is the Series A Note Trustee under the
Series A Note Indenture and Series B Note Trustee under the Series B Note
Indenture and has been appointed by the Issuers as Registrar and Paying Agent
with regard to each Series of Notes.
GOVERNING LAW
Each Indenture provides that it and the Notes thereunder will be 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.
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"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 applicable 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.
"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."
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"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 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
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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 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
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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.
"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 Original Notes pursuant to the Registration Rights
Agreement, including the Series A Exchange Notes and the Series B Exchange Notes
covered by this Prospectus.
"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
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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 Indentures.
"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.
"Holders" means the registered holders from time to time of Series A Notes
or Series B Notes, as the case may be.
"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
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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 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 Note
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.
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"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 Original Notes were 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 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 "Government of IWCL and
Relationship with 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
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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 Indentures 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.
"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 applicable 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 applicable 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 each Trustee in writing at least 15
Business Days (or such shorter period as is acceptable to such 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 applicable 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
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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
applicable Trustee pursuant to each 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 applicable Trustee. The counsel may be an employee of or
counsel to Iridium or such 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 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 Trustees;
(iv) Liens in favor of the Note 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
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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 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 Note
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
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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.
"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.
"Registration Statement" means the registration statement to be filed after
the Issue Date by the Iridium Parties with the Commission with respect to the
offer to exchange the Original Notes for another series of notes of the Issuers
with substantially identical terms to the Notes (including the Registration
Statement of which this Prospectus forms a part).
"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.
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"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 Note 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).
"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 Series A Notes or the
Series B Notes, as the case may be, which may from time to time be executed and
delivered pursuant to the terms of the applicable Indenture. Each such
Subsidiary Guaranty will be in the form prescribed in the applicable Indenture.
"Tax Amount" means the aggregate amount of tax distributions required to be
made by Iridium to its members under the 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.
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"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
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
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 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 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
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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 is 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 entered into the Exchange
and Registration Rights Agreement on July 16, 1997, in connection with the
issuance of the Original Notes. Pursuant to the Exchange and Registration Rights
Agreement, the Iridium Parties agreed to (i) file with the Commission on or
prior to 15 days after the Issue Date an Exchange Offer Registration Statement
relating to the Required Exchange Offer and (ii) use their reasonable efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act no later than 52 days after the Issue Date (provided that if
the 52nd day is not a business day, the first business day thereafter) and to
consummate the Required Exchange Offer no later than 82 days after the Issue
Date (provided that if the 82nd 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 are required to offer to the holders
of Transfer Restricted Securities of each Series who are not prohibited by any
law or policy of the Commission from participating in the Required Exchange
Offer the opportunity to exchange their Transfer Restricted Securities for a new
issue of notes that are identical in all material respects to the Notes of the
Series being exchanged (except that the such notes will not contain terms with
respect to transfer restrictions). Pursuant to the Exchange and Registration
Rights Agreement the Iridium Parties have agreed to use their reasonable efforts
to keep the Required 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 Required Exchange Offer is mailed to
the holders of the Original 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 Required
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 Staff of 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 (such period to be extended if the
above-referenced 20 business day period is extended pursuant to applicable law)
after the commencement of the Exchange Offer, (iii) any Initial Purchaser 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
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Offer, (iv) any applicable law or interpretations do not permit any holder of
Original Notes to participate in the Exchange Offer, (v) any Holder that
participates in the Exchange Offer notifies Iridium within 10 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 file with the Commission a 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 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.
Unless the Required Exchange Offer would not be permitted by applicable law
or a policy of the Commission, the Iridium Parties are required pursuant to the
Exchange and Registration Rights Agreement to commence the Required Exchange
Offer and to use their reasonable efforts to consummate the Required 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 as promptly as practicable (but in no event later
than the later of (i) 150 days after the Issue Date and (ii) 60 days after such
filing obligation arises as specified in the Exchange and Registration Rights
Agreement), and thereafter will use their reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act 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 or for a period of one year in the event the Shelf Registration Statement
is requested by the Initial Purchasers. If (a) 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 relevant date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) Iridium Parties fail to consummate the Required Exchange Offer
within 30 days (such period to be extended if the above referenced 20 business
day period is extended pursuant to applicable law) 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 Notes
constituting Transfer Restricted Securities, with respect to the first 15-day
period immediately following the occurrence of such Registration Default in an
amount equal to $.05 per week per $1,000 principal amount of such 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
$.10 per week per $1,000 principal amount of such Notes with respect to each
subsequent 30-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 such 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.
170
<PAGE> 177
Each holder of Original Notes who wishes to exchange Original Notes for
Exchange Notes in the Exchange Offer is 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 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 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. See "The Exchange Offer."
Holders of Original Notes will be required to make certain representations
to the Iridium Parties in order to participate in the 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
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 Required 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 Required Exchange Offer.
171
<PAGE> 178
TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a general summary of the U.S. federal income tax
consequences of the Exchange Offer.
This summary is for general informational purposes only, and is based upon
the tax laws of the United States as in effect on the date of this Prospectus,
which are subject to change. Each holder should consult its own tax advisor as
to the United States or other tax consequences of the Exchange Offer.
EXCHANGE OFFER
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 therefore immediately before such exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the 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 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
, 1997, all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
The Issuers will not 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 Issuers 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
172
<PAGE> 179
pay all expenses incident to the Exchange Offer (including the reasonable
expenses of 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 NOTES
The validity of the Exchange Notes offered hereby will be passed on for the
Iridium Parties by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of Iridium LLC 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.
173
<PAGE> 180
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
174
<PAGE> 181
"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 and facsimile
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
"LLC Agreement"............ the agreement, dated as of July 29, 1996, entered
into by the investors in Iridium, and pursuant to
which Iridium is organized
"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
175
<PAGE> 182
"near polar orbit"......... a flight path which generally follows the earth's
longitudinal lines and crosses both poles during
each orbit
"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
"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
176
<PAGE> 183
"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
177
<PAGE> 184
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<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 March 31, 1997.................. F-20
Unaudited Condensed Consolidated Statements of Loss for the three months ended March
31, 1996 and 1997 and for the period from June 14, 1991 (Inception) through March
31, 1997........................................................................... F-21
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997 and for the period from June 14, 1991 (Inception) through
March 31, 1997..................................................................... F-22
Notes to Unaudited Condensed Consolidated Financial Statements....................... F-23
</TABLE>
- ---------------
NOTE - Iridium Capital Corporation ("Capital") was formed and capitalized by
Iridium LLC on June 16, 1997. Other than with respect to the Notes,
Capital, Roaming or IP has no significant assets, liabilities (actual or
contingent) or operations. 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 assets, liabilities
(actual or contingent) or operations, except as covered in the
consolidated financial statements of Iridium LLC.
F-1
<PAGE> 185
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
<PAGE> 186
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> 187
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> 188
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> 189
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> 190
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 ("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> 191
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> 192
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> 193
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 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 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> 194
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 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 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 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 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> 195
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> 196
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> 197
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 are tied to the
completion of milestones specified in the contract. During 1996, Iridium and
Motorola
F-14
<PAGE> 198
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 to
purchase an aggregate of 9,165,000 Class 1 Interests be issued to all gateway
owners. The
F-15
<PAGE> 199
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 occur 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 addition, Iridium recorded an additional minimum pension
liability adjustment of ($1,065,000) and
F-16
<PAGE> 200
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$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>
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
F-17
<PAGE> 201
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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,
F-18
<PAGE> 202
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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> 203
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT INTEREST DATA)
AS OF MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 15,659
Due from affiliates........................................................... 4,347
Prepaid expenses and other current assets..................................... 8,029
-----------
Total current assets.................................................. 28,035
Property and equipment -- net................................................... 3,057
System under construction....................................................... 2,395,597
Other assets.................................................................... 56,816
-----------
Total assets.......................................................... $ 2,483,505
==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses......................................... $ 18,756
Accounts payable to member.................................................... 75
-----------
Total current liabilities............................................. 18,831
Guaranteed bank facility........................................................ 665,000
Long-term debt due to Members................................................... 240,178
Other liabilities............................................................... 5,860
-----------
Total liabilities..................................................... 929,869
-----------
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, 49,268 interests issued and outstanding;
liquidation value of $49,268.............................................. 49,268
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 interests
issued and outstanding..................................................... 1,674,869
Deficit accumulated during the development stage.............................. (169,768)
Adjustment for minimum pension liability...................................... (733)
-----------
Total Members' equity................................................. 1,553,636
-----------
Total liabilities and Members' equity................................. $ 2,483,505
==========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-20
<PAGE> 204
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT INTEREST DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH PERIOD FROM
31, JUNE 14, 1991
--------------------------- (INCEPTION) THROUGH
1996 1997 MARCH 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
Operating expenses
Sales, general and administrative............. $ 8,410 $ 36,054 $ 174,186
Other income
Interest income............................... 1,234 126 12,389
------------ ------------ --------------
Loss before provision for income taxes.......... 7,176 35,928 161,797
Provision for income taxes...................... 487 -- 7,971
------------ ------------ --------------
Net loss........................................ $ 7,663 $ 35,928 $ 169,768
============ ============ ==============
Preferred dividend requirement.................. -- 2,291
------------ ------------
Net loss applicable to Class 1 Interests........ $ 7,663 $ 38,219
============ ============
Net loss per Class 1 Interest................... $ 0.07 $ 0.32
============ ============
Weighted average interests used in computing net
loss per Class 1 Interest..................... 117,505,200 120,836,025
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-21
<PAGE> 205
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS ENDED JUNE 14, 1991
MARCH 31, (INCEPTION)
----------------------- THROUGH
1996 1997 MARCH 31, 1997
---------- ---------- ---------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss............................................. $ (7,663) $ (35,928) $ (169,768)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization..................... 134 231 2,536
Expense recognized from warrants issued in
connection with debt guarantee.................. -- 17,536 43,255
Changes in assets and liabilities:
Decrease (increase) in prepaids and other
current assets............................... 163 (875) (8,029)
Increase in due from affiliates................. -- (871) (4,347)
Increase in other assets........................ (1,200) (13,465) (29,838)
Increase in accounts payable and accrued
expenses..................................... 414 819 18,756
Increase (decrease) in accounts payable to
member....................................... (58) (488) 75
Increase (decrease) in other liabilities........ 1,490 (1,788) 5,127
---------- ---------- -------------
Net cash used in operating activities........ (6,720) (34,829) (142,233)
---------- ---------- -------------
Cash Flows From Investing Activities:
Purchases of property and equipment.................. (268) (1,224) (5,594)
Additions to system under construction............... (270,755) (109,439) (2,358,196)
---------- ---------- -------------
Net cash used in investing activities........ (271,023) (110,663) (2,363,790)
---------- ---------- -------------
Cash Flows From Financing Activities:
Net proceeds from issuance of Class 1 and Class 2
Interests......................................... 139,298 -- 1,649,128
Gross proceeds from issuance of senior subordinated
notes and warrants................................ 110,195 -- 238,453
Borrowings under bank line of credit................. -- 160,000 665,000
Deferred financing costs............................. (302) (738) (30,899)
---------- ---------- -------------
Net cash provided by financing activities.... 249,191 159,262 2,521,682
---------- ---------- -------------
Increase (decrease) in cash and cash equivalents....... (28,552) 13,770 15,659
Cash and Cash Equivalents, beginning of period......... 51,332 1,889 --
---------- ---------- -------------
Cash and Cash Equivalents, end of period............... $ 22,780 $ 15,659 $ 15,659
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
F-22
<PAGE> 206
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. 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 ("Iridium") as of March 31, 1997, and the results of
their operations and cash flows for the three month periods ended March 31, 1997
and 1996, and the period from June 14, 1991 (inception) through March 31, 1997.
These condensed consolidated financial statements are unaudited, and do not
include all related footnote disclosures. The results of operations for the
three months ended March 31, 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.
2. WARRANTS ISSUED TO MEMBER
In accordance with the Guarantee Agreement between Iridium and Motorola, an
additional 20,343 warrants to purchase 1,525,725 Class 1 Interests were earned
by Motorola during the three months ended March 31, 1997. Iridium recognized
$17,536,000 as expense during the three months ended March 31, 1997 to reflect
the fair market value of the warrants earned by Motorola.
3. SERIES A, CLASS 2 INTERESTS
Iridium paid 2,291,000 in-kind dividends to holders of Series A, Class 2
interests during the three month period ended March 31, 1997.
4. SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended March 31, 1997 and 1996, $18,712,000 and
$799,000, respectively, of interest expense was incurred and capitalized to the
system under construction. Interest paid was $2,453,000 during the three months
ended March 31, 1997, and no amounts were paid for interest during the three
months ended March 31, 1996.
There were no income taxes paid during the three months ended March 31,
1997, and the amount paid for income taxes was $499,000 during the three months
ended March 31, 1996.
5. TRANSACTION 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 is negotiating a variety of
pending and anticipated amendments and interpretations to the Terrestrial
Network Development Contract ("TNDC") with Motorola which are estimated to
approximate an aggregate of an additional $110 million under the TNDC. Iridium
expects that such amendments to the TNDC will be completed during the remainder
of 1997.
F-23
<PAGE> 207
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. 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 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 impact on the computation or manner of presentation of its loss
per Class 1 Interest data as currently or previously presented under APB 15.
7. SUBSEQUENT EVENTS
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 P.T.
Bakrie Communications Corporation ("Bakrie") pursuant to which Bakrie has agreed
to acquire from Iridium 7,500,000 Class 1 Interests at $13.33 per interest. The
transaction is scheduled to close on May 30, 1997 with 40% of the total purchase
price payable on that date, 10% on November 15, 1997 and 50% on May 15, 1998. In
connection with its investment in Iridium, Bakrie will be allocated the South
Pacific gateway service territory.
On June 13, 1997, Iridium World Communications Ltd. ("IWCL"), a
wholly-owned subsidiary of Iridium, consummated an initial public offering (the
"Offering") of 12,000,000 shares of its Class A Common Stock for net proceeds of
approximately $225 million. Pursuant to the 1997 Subscription Agreement between
Iridium and IWCL, the net proceeds of the Offering were used to purchase
12,000,000 Class I 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.
F-24
<PAGE> 208
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
IRIDIUM ROAMING LLC
IRIDIUM IP LLC
[IRIDIUM LOGO](R)
The Exchange Agent for the Exchange Offer is
STATE STREET BANK AND TRUST COMPANY
Facsimile Transmissions:
(617) 664-5371
(Eligible Institutions Only)
<TABLE>
<S> <C>
By Registered or Certified Mail By Hand or Overnight Delivery
Corporate Trust Department Corporate Trust Department, Fourth Floor
Post Office Box 778 Two International Plaza
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02102-0078
</TABLE>
FOR INFORMATION CALL:
(617) 664-5204
UNTIL 1997 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> 209
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 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.
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 of 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.*
3.3 By-Laws of Iridium Capital Corporation.*
3.4 Limited Liability Company Agreement of Iridium Roaming LLC.*
3.5 Limited Liability Company Agreement of Iridium IP LLC.*
4.1 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.*
4.2 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.*
4.3 Forms of Series A Note and Series A/EN Note: contained in an exhibit to
Exhibit 4.1.*
4.4 Forms of Series B Note and Series B/EN Note: contained in an exhibit to
Exhibit 4.2.*
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
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 of the Form S-1.
10.2 Form of Management Services Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.3 of the Form S-1.
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 of 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 of the Form S-1.+
10.7 Amendment No. 3 to the Terrestrial Network Development Contract between
Iridium LLC and Motorola, Inc. effective , 1997.++**
10.8 Support Agreement between Iridium LLC and Motorola, Inc.: Incorporated by
reference to Exhibit 10.9 of 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 of 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 referenced 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 Waiver No. 1 to Credit Agreement, dated as of June 25, 1997.*
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.*
10.18 Memorandum of Understanding with Motorola, Inc.*
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 Units and Series B Notes, dated July 11,
1997.*
10.21 Iridium LLC Senior Secured Interim Credit Facility Commitment Letter, dated
June 16, 1997.*
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------------------------------------------------------------
<C> <S>
10.22 Amendment to Senior Secured Interim Credit Facility Commitment Letter, dated
July 10, 1997*
10.23 Iridium LLC Senior Secured Interim Credit Facility Summary of Indicative
Terms and Conditions.*
10.24 Unit Agreement, dated as of July 16, 1997.*
10.25 Exchange and Registration Rights Agreement: contained in an annex to Exhibit
10.20.*
10.26 Iridium Option Plan: Incorporated by reference to Exhibit 10.5 to the Form
S-1.+++
10.27 Iridium LLC Selected Senior Officers' Supplementary Retirement Plan.*+++
10.28 Agreement between Mr. Staiano and Iridium LLC.**+++
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.**
24 Powers of Attorney.
25 Statement on Form T-1 of Eligibility of Trustee.**
27 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Clients.**
99.4 Form of Letter to Nominees.**
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
+ Confidential treatment previously granted in connection with the Form S-1.
++ Confidential treatment to be sought.
+++ 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 sells
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
<PAGE> 212
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 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.
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.
<PAGE> 213
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 JULY 18, 1997.
IRIDIUM LLC
By: /s/ ROBERT W. KINZIE
-----------------------------------
Robert W. Kinzie
Chairman
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
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
* Chairman Iridium LLC July 18, 1997
- ---------------------------------------------
Robert W. Kinzie
* Vice Chairman and Chief July 18, 1997
- --------------------------------------------- Executive Officer of Iridium
Edward F. Staiano LLC; acting chief executive
officer of Iridium Roaming LLC
and Iridium IP LLC
/s/ ROY GRANT Vice President-Treasurer and July 18, 1997
- --------------------------------------------- acting Chief Financial Officer
Roy Grant of Iridium LLC; acting chief
financial officer of Iridium
Roaming LLC and Iridium IP LLC
* Vice Chairman of Iridium LLC July 18, 1997
- ---------------------------------------------
Richard L. Lesher
* Director July 18, 1997
- ---------------------------------------------
Hasan M. Binladin
* Director July 18, 1997
- ---------------------------------------------
Ulf Bohla
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
* Director July 18, 1997
- ---------------------------------------------
Gordon J. Comerford
* Director July 17, 1997
- ---------------------------------------------
Atilano de Oms Sobrinho
* Director July 17, 1997
- ---------------------------------------------
Robert A. Ferchat
* Director July 17, 1997
- ---------------------------------------------
Alberto Finol
* Director July 17, 1997
- ---------------------------------------------
Edward Gams
Director July , 1997
- ---------------------------------------------
Kazuo Inamori
* Director July 17, 1997
- ---------------------------------------------
Georg Kellinghusen
* Director July 17, 1997
- ---------------------------------------------
S. H. Khan
Director July , 1997
- ---------------------------------------------
Anatoli I. Kiselev
* Director July 17, 1997
- ---------------------------------------------
George S. Medawar
* Director July 17, 1997
- ---------------------------------------------
John F. Mitchell
* Director July 17, 1997
- ---------------------------------------------
Jung L. Mok
* Director July 17, 1997
- ---------------------------------------------
Giuseppe Morganti
* Director July 17, 1997
- ---------------------------------------------
J. Michael Norris
* Director July , 1997
- ---------------------------------------------
Yusai Okuyama
* Director July 17, 1997
- ---------------------------------------------
John M. Scanlon
* Director July 17, 1997
- ---------------------------------------------
Theodore H. Schell
* Director July 17, 1997
- ---------------------------------------------
William A. Schreyer
* Director July 17, 1997
- ---------------------------------------------
Sribhumi Sukhanetr
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
* Director July 17, 1997
- ---------------------------------------------
Tao-Tsun Sun
* Director July , 1997
- ---------------------------------------------
Yoshiharu Yasuda
* Director July 17, 1997
- ---------------------------------------------
Wang Mei Yue
*By: /s/ F. THOMAS TUTTLE Director July 17, 1997
- ---------------------------------------------
F. Thomas Tuttle
Attorney in Fact
</TABLE>
<PAGE> 216
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 July 18, 1997.
IRIDIUM CAPITAL CORPORATION
By: /s/ EDWARD F. STAIANO
-----------------------------------
Edward F. Staiano
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
/s/ EDWARD F. STAIANO Chairman and Chief July 18, 1997
- --------------------------------------------- Executive Officer
Edward F. Staiano
/s/ ROY GRANT Chief Financial Officer July 18, 1997
- ---------------------------------------------
Roy Grant
/s/ ROBERT W. KINZIE Director July 18, 1997
- ---------------------------------------------
Robert W. Kinzie
</TABLE>
<PAGE> 217
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 of
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.*............
3.3 By-Laws of Iridium Capital Corporation.*..............................
3.4 Limited Liability Company Agreement of Iridium Roaming LLC.*..........
3.5 Limited Liability Company Agreement of Iridium IP LLC.*...............
4.1 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.*..............................
4.2 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.*..............................
4.3 Forms of Series A Note and Series A/EN Note: contained in an exhibit
to Exhibit 4.1.*......................................................
4.4 Forms of Series B Note and Series B/EN Note: contained in an exhibit
to Exhibit 4.2.*......................................................
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 of the Form S-1.............
10.2 Form of Management Services Agreement between IWCL and Iridium LLC:
Incorporated by reference to Exhibit 10.3 of the Form S-1.............
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 of 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 of the
Form S-1.+............................................................
10.7 Amendment No. 3 to the Terrestrial Network Development Contract
between Iridium LLC and Motorola, Inc. effective ,
1997.++**.............................................................
10.8 Support Agreement between Iridium LLC and Motorola, Inc.: Incorporated
by reference to Exhibit 10.9 of the Form S-1..........................
</TABLE>
<PAGE> 218
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C>
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 of 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 referenced 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 Waiver No. 1 to Credit Agreement, dated as of June 25, 1997.*.........
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.*..................
10.18 Memorandum of Understanding with Motorola, Inc.*......................
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 Units and Series B Notes, dated July
11, 1997.*............................................................
10.21 Iridium LLC Senior Secured Interim Credit Facility Commitment Letter,
dated June 16, 1997.*.................................................
10.22 Amendment to Senior Secured Interim Credit Facility Commitment Letter,
dated July 10, 1997*..................................................
10.23 Iridium LLC Senior Secured Interim Credit Facility Summary of
Indicative Terms and Conditions.*.....................................
10.24 Unit Agreement, dated as of July 16, 1997.*...........................
10.25 Exchange and Registration Rights Agreement: contained in an annex to
Exhibit 10.20.*.......................................................
10.26 Iridium Option Plan: Incorporated by reference to Exhibit 10.5 to the
Form S-1.+++..........................................................
10.27 Iridium LLC Selected Senior Officers' Supplementary Retirement
Plan.*+++.............................................................
10.28 Agreement between Mr. Staiano and Iridium LLC.**+++...................
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.**.....................................
24 Powers of Attorney....................................................
25 Statement on Form T-1 of Eligibility of Trustee.**....................
</TABLE>
<PAGE> 219
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C>
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal.**......................................
99.2 Form of Notice of Guaranteed Delivery.**..............................
99.3 Form of Letter to Clients.**..........................................
99.4 Form of Letter to Nominees.**.........................................
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
+ Confidential treatment previously granted in connection with the Form S-1.
++ Confidential treatment to be sought.
+++ Management Compensation Plan.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
IRIDIUM CAPITAL CORPORATION
FIRST. The name of the corporation is Iridium Capital
Corporation.
SECOND. The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH. The total number of shares which the corporation
shall have authority to issue is 100 shares of Common Stock, and all such
shares are to be without par value.
FIFTH. The name and mailing address of the incorporator is
Lee Ann Anderson McCall, 125 Broad Street, New York, New York 10004.
SIXTH. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal by-laws of the corporation.
<PAGE> 2
SEVENTH. Elections of directors need not be by written ballot
except and to the extent provided in the by-laws of the corporation.
EIGHTH. Any action required or permitted to be taken by the
holders of Common Stock of the corporation, including but not limited to the
election of directors, may be taken by written consent or consents but only if
such consent or consents are signed by all holders of Common Stock.
NINTH. A director of the corporation shall not be liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as the same may hereafter be amended.
No amendment, modification or repeal of this Article NINTH shall adversely
affect any right or protection of a director that exists at the time of such
amendment, modification or repeal.
IN WITNESS WHEREOF, I have signed this certificate of
incorporation this 12th day of June, 1997.
s/ Lee Ann Anderson McCall
----------------------------
Lee Ann Anderson McCall
-2-
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
IRIDIUM CAPITAL CORPORATION
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such date, time and
place either within or without the State of Delaware as may be designated by
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the Board, if any,
the Vice Chairman of the Board, if any, the President or the Board of
Directors, to be held at such date, time and place either within or without the
State of Delaware as may be stated in the notice of the meeting. A special
meeting of stockholders shall be called by the Secretary upon the written
request, stating the purpose of the meeting, of stockholders who together own
of record a majority of the outstanding shares of each class of stock entitled
to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may be adjourned from time to time, to reconvene at the same
or some other place, and notice need not be given of any such adjourned meeting
if the time and place thereof are announced at the meeting at
<PAGE> 2
which the adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty 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 stockholder of record entitled to vote at the
meeting.
Section 1.5. Quorum. At each meeting of stockholders, except
where otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of stock entitled
to vote on a matter at the meeting, present in person or represented by proxy,
shall constitute a quorum. In the absence of a quorum of the holders of any
class of stock entitled to vote on a matter, the holders of such class so
present or represented may, by majority vote, adjourn the meeting of such class
from time to time in the manner provided by Section 1.4 of these by-laws until
a quorum of such class shall be so present or represented. Shares of its own
capital stock belonging on the record date for the meeting to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence
of the President by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors, or in the absence
of such designation by a chairman chosen at the meeting. The Secretary, or in
the absence of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant Secretary
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in
the certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by such stockholder which has voting power upon the matter in question.
Each stockholder entitled to vote at a meeting
-2-
<PAGE> 3
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder 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, regardless of whether the interest with which
it is coupled is an interest in the stock itself or an interest in the
Corporation generally. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. In all other
matters, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the
stockholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
certificate of incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than
sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A
-3-
<PAGE> 4
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders 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.
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<PAGE> 5
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten 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 during the whole time thereof and may be inspected by any
stockholder who is present.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business
and affairs of the Corporation shall be managed by or under the direction of
the Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of one or
more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Board of Directors
or to the President or the Secretary of the Corporation. Such resignation
shall take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any director or the entire Board of Directors may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors. Unless otherwise provided in the certificate
of incorporation or these by-laws, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class or
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<PAGE> 6
from any other cause may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director. Any
director elected or appointed to fill a vacancy shall hold office until the
next annual meeting of the stockholders and his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State of Delaware
and at such times as the Board may from time to time determine, and if so
determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.5. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the Board of Directors, or any
committee designated by the Board, may participate in a meeting of the Board or
of such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this by-law shall constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors one-third of the entire Board shall
constitute a quorum for the transaction of business. The vote of a majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board unless the certificate of incorporation or these by-laws shall
require a vote of a greater number. In case at any meeting of the Board a
quorum shall not be present, the members of the Board present may adjourn the
meeting from time to time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if any, or in
the absence of the Chairman of the Board by the Vice Chairman of the Board, if
any, or in the absence of the Vice Chairman of the Board by the President, or
in their absence by a chairman chosen at the meeting.
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<PAGE> 7
The Secretary, or in the absence of the Secretary an Assistant Secretary, shall
act as secretary of the meeting, but in the absence of the Secretary and any
Assistant Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless
otherwise restricted by the certificate of incorporation or these by-laws, 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
members of the Board or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 2.9. Compensation of Directors. Unless otherwise
restricted by the certificate of incorporation or these by-laws, the Board of
Directors shall have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in these by-laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to the
following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by law to be submitted to
stockholders for approval, (ii) adopting, amending or repealing these By-Laws
or (iii) removing or indemnifying directors.
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<PAGE> 8
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each
committee shall conduct its business in the same manner as the Board conducts
its business pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable
after the annual meeting of stockholders in each year, the Board of Directors
shall elect a President and a Secretary, and it may, if it so determines, elect
from among its members a Chairman of the Board and a Vice Chairman of the
Board. The Board may also elect one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers and such other officers as the Board may deem
desirable or appropriate and may give any of them such further designations or
alternate titles as it considers desirable. Any number of offices may be held
by the same person unless the certificate of incorporation or these by-laws
otherwise provide.
Section 4.2. Term of Office; Resignation; Removal; Vacancies.
Unless otherwise provided in the resolution of the Board of Directors electing
any officer, each officer shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
officer may resign at any time upon written notice to the Board or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. The
Board may remove any officer with or without cause at any time. Any such
removal shall be without prejudice to the contractual rights of such officer,
if any, with the Corporation, but the election of an officer shall not of
itself create contractual rights. Any vacancy occurring in any office of the
Corporation by
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<PAGE> 9
death, resignation, removal or otherwise may be filled by the Board at any
regular or special meeting.
Section 4.3. Powers and Duties. The officers of the
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in these by-laws or in a resolution of the Board
of Directors which is not inconsistent with these by-laws and, to the extent
not so stated, as generally pertain to their respective offices, subject to the
control of the Board. The Secretary shall have the duty to record the
proceedings of the meetings of the stockholders, the Board of Directors and any
committees in a book to be kept for that purpose. The Board may require any
officer, agent or employee to give security for the faithful performance of his
or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman or Vice Chairman of the Board of Directors, if
any, or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
representing the number of shares of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature 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 the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of
the lost, stolen or destroyed certificate, or such owner's legal
representative, to give the Corporation a
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<PAGE> 10
bond sufficient to indemnify it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting 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. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent permitted by law
any person made or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person or such person's testator or intestate is or was a
director, officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director, officer or
employee. Expenses, including attorneys' fees, incurred by any such person in
defending any such action, suit or proceeding shall be paid or
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<PAGE> 11
reimbursed by the Corporation promptly upon receipt by it of an undertaking of
such person to repay such expenses if it shall ultimately be determined that
such person is not entitled to be indemnified by the Corporation. The rights
provided to any person by this by-law shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any person
arising at any time with respect to events occurring prior to such amendment.
For purposes of this by-law, the term "Corporation" shall include any
predecessor of the Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a consolidation or
merger; the term "other enterprise" shall include any corporation, partnership,
joint venture, trust or employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
by a person with respect to an employee benefit plan which such person
reasonably believes to be in the interest of the participants and beneficiaries
of such plan shall be deemed to be action not opposed to the best interests of
the Corporation.
Section 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, 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 of Directors or
committee thereof which authorizes the contract or transaction, or solely
because his or her or their votes are counted for such purpose, if: (1) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the Board or the committee, and
the Board or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (2) the material facts as
to his or her relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and
the contract or transaction is
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<PAGE> 12
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or 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 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of Directors, but
the stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
ADOPTED this 16th day of June, 1997
/s/ LEE ANN ANDERSON MCCALL
---------------------------
Lee Ann Anderson McCall
Sole Incorporator
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<PAGE> 1
EXHIBIT 3.4
LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM ROAMING LLC
This LIMITED LIABILITY COMPANY AGREEMENT OF IRIDIUM ROAMING
LLC dated as of June 15, 1997 (this "Agreement") is made by IRIDIUM LLC, a
Delaware limited liability company, and the sole member (the "Member") of
Iridium Roaming LLC (the "Company").
WHEREAS, the Member has formed the Company 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 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.
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.
<PAGE> 2
5. Member. The name and the business, residence or
mailing address of the Member is as follows:
Name Address
---- -------
IRIDIUM LLC 1401 H 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.
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.
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<PAGE> 3
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.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, has duly executed this Limited Liability Company Agreement as of
the 15th day of June, 1997.
IRIDIUM LLC
By /s/ ROBERT W. KINZIE
---------------------
Name: Robert W. Kinzie
Title: Chairman
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<PAGE> 1
EXHIBIT 3.5
LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM IP LLC
This LIMITED LIABILITY COMPANY AGREEMENT OF IRIDIUM IP
LLC dated as of February 28, 1997 (this "Agreement") is made by IRIDIUM LLC, a
Delaware limited liability company, and the sole member (the "Member") of
Iridium IP LLC (the "Company").
WHEREAS, the Member has formed the Company 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 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, 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.
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.
<PAGE> 2
5. Member. The name and the business, residence or
mailing address of the Member is as follows:
Name Address
---- -------
IRIDIUM LLC 1401 H 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.
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.
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<PAGE> 3
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.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, has duly executed this Limited Liability Company Agreement as of
the 28th day of February, 1997.
IRIDIUM LLC
By /s/ ROBERT W. KINZIE
---------------------
Name: Robert W. Kinzie
Title: Chairman
-3-
<PAGE> 1
EXHIBIT 4.1
========================================================
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
13% Senior Notes due 2005, Series A
Guaranteed by Iridium Roaming LLC
and Iridium IP LLC
--------------------------------------------------------
SERIES A NOTE INDENTURE
Dated as of July 16, 1997
--------------------------------------------------------
State Street Bank and
Trust Company,
Trustee
========================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
RECITALS OF THE ISSUERS
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
The Series A Notes
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.07. Replacement Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.08. Outstanding Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.09. Temporary Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13. Book-Entry Provisions for Global Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.14. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.02. Selection of Securities to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.06. Series A Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.05. Limitation on Restrictions on Distributions
from Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.07. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.08. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.09. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.10. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.11. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.12. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.13. Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.14. Limitation on Business Activities of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.15. Future Guarantor Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.16. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE V
Successor Companies
SECTION 5.01. When Issuers May Merge or Transfer Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.13. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.11. Preferential Collection of Claims Against Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Series A Notes; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.03. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.04. Repayment to Note Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.05. Indemnity for Government Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.04. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.05. Notation on or Exchange of Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
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SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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ARTICLE X
Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.02. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.03. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.04. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.05. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.06. Initial Guarantors; Execution of
Supplemental Indenture for Future
Guarantor Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.03. Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.06. When Series A Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Rules by Trustee Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
Exhibit A - Form of Face of Initial Series A Note
Exhibit B - Form of Face of Exchange Series A 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 Series A
Notes
Exhibit F - Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S
Exhibit G - Form of Supplemental Indenture
v
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Schedule I - Other Existing Affiliate Agreements
vi
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C> <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
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
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N.A. means Not Applicable.
- -------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE> 10
INDENTURE dated as of July 16, 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' 13% Senior Notes due 2005, Series A (the "Initial Series A Notes")
and, when and if issued pursuant to a registered exchange for Initial Series A
Notes, the Note Issuers' 13% Senior Notes due 2005, Series A (the "Exchange
Series A Notes") and, if and when issued pursuant to a Private Exchange for
Initial Series A Notes, the Note Issuers' 13% Senior Notes due 2005, Series A
(the "Private Exchange Series A Notes", and, together with the Exchange Series
A Notes and the Initial Series A Notes, the "Series A Notes").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the execution and delivery of
this Indenture to provide for the issuance of up to $300,000,000 aggregate
principal amount of the Initial Series A Notes issuable as provided in this
Indenture. Pursuant to the terms of a Purchase Agreement dated July 11, 1997
(the "Purchase Agreement") among the Issuers, Iridium World Communications Ltd.
("IWCL"), Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the Note Issuers have agreed to issue and sell 300,000 units (the
"Units"), each Unit consisting of $1000 principal amount of the Initial Series
A Notes and one warrant (the "Warrants"), which represents the right to
purchase 5.2 shares (the "Warrant Shares") of Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock") of IWCL, issuable pursuant to the
terms of a Warrant Agreement dated as of July 16, 1997 (the "Warrant
Agreement") between IWCL and State Street Bank and Trust Company, as the
warrant agent (the "Warrant Agent"), and $500,000,000 aggregate principal
amount of 14% Senior Notes due 2005, Series B (the "Initial Series B 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 Series A 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 Series A 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
<PAGE> 11
2
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 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 Series A 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
<PAGE> 12
3
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.
"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 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 and 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.
<PAGE> 13
4
"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 the Issue Date (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> 14
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.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its consolidated Restricted
Subsidiaries determined on a consolidated
<PAGE> 15
6
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 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.
<PAGE> 16
7
"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 Series A Notes" means Series A 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 Series A 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 Series A 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 Series A Notes or
the date on which no Series A 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
<PAGE> 17
8
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 July 16, 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" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration
statement to be filed by the Issuers with the SEC with respect to an offer to
exchange the Initial Series A Notes for another series of notes of the Issuers
with substantially identical terms to the Initial Series A 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 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, (x) the Motorola MOU and any
subordination agreement entered into pursuant thereto, 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 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
<PAGE> 18
9
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 Series 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 Series A 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 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
<PAGE> 19
10
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 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
<PAGE> 20
11
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. and Merrill
Lynch, Pierce, Fenner & Smith 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 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
<PAGE> 21
12
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 Units 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 Iridium.
"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.
"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
<PAGE> 22
13
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.
"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 $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, 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
<PAGE> 23
14
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 Series A 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 Series A 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 Series A Notes
within five Business Days after the Expiration Date. The Note Issuers shall
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 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
<PAGE> 24
15
therein). The Offer shall contain all instructions and materials necessary to
enable such holders to tender Series A Notes pursuant to the Offer to Purchase.
"Offering Memorandum" means the offering memorandum, dated as
of July 11, 1997, relating to the offering of the Units and the Initial Series
B 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 (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
<PAGE> 25
16
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 the
Issue Date 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 Series A
Notes, the Trustee, the holders of the Series B Notes and the
trustee under the Series B Indenture;
(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
<PAGE> 26
17
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;
(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
<PAGE> 27
18
(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 Series A Note means the principal of the
Series A Note plus the premium, if any, payable on the Series A Note that is
due or overdue or is to become due at the relevant time.
"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 Series A Notes held by the Initial Purchaser as part of its initial
distribution, a like aggregate principal amount of Private Exchange Series A
Notes.
"Private Placement Legend" means the legend set forth under
the caption Restricted Series A Note Legend in the form of the Initial Series A
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.
<PAGE> 28
19
"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 Series A 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.
"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
<PAGE> 29
20
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.
"Series B Indenture" means the Indenture, dated as of July 16,
1997, among the Issuers and State Street Bank and Trust Company, as amended or
supplemented from time to time, relating to the Series B Notes.
"Series B Notes" means the Initial Series B Notes and any
notes issued in exchange therefor pursuant to the Exchange and Registration
Rights Agreement.
"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).
"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 Series A 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
<PAGE> 30
21
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 Series A
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 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.
<PAGE> 31
22
"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 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)
<PAGE> 32
23
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.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ---------
<S> <C>
"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
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Exchange Series A Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
"Global Series A Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(c)
"Initial Series A Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
"Initial Series B Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Insurance Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16
"legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Private Exchange Series A Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
"Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"QIBs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Regulation S Permanent Global Series A Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(c)
"Regulation S Restricted Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Regulation S Series A Notes Exchange Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(c)
"Regulation S Temporary Global Series A Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(c)
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Rule 144A Global Series A Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Series A Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
"Successor Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
"Transfer Restricted Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
</TABLE>
<PAGE> 33
24
<TABLE>
<S> <C>
"Units" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrants" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
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 Series A 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.
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
<PAGE> 34
25
(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 Series A Notes
SECTION 2.01. Form and Dating. (a) The Initial Series A
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 Series A Notes and Private Exchange Series A 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 Series A
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 Series A Note shall be dated the date of its
authentication. The terms of the Series A Notes set forth in Exhibit A and B
hereto are part of the terms of this Indenture. The Series A 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 Series A Notes are
being offered and sold by the Note Issuers pursuant to the Purchase Agreement.
(b) Initial Series A 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 Purchase
Agreement, shall be issued on the Issue Date initially in the form of one or
more permanent global Series A Notes in registered form, substantially in the
form set forth in Exhibit A hereto (the "Rule 144A Global Series A 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 Series A 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 Series A 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 Series A Notes in registered form, substantially in the forms
set forth in Exhibit A hereto (the "Regulation S Temporary Global Series A
Notes"). The Regulation S Temporary Global Series A 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 Series A Notes and the Issue Date (the "Regulation
S Restricted Period") with respect to the offer and sale of the Initial Series
A Notes (the "Regulation S Series A Notes Exchange Date"). Iridium shall
<PAGE> 35
26
promptly notify the Trustee in writing of the occurrence of the Regulation S
Series A Notes Exchange Date and, within a reasonable time after the Regulation
S Series A 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 Series A Notes, the Issuers shall execute, if not already executed, and
the Trustee shall authenticate and deliver, if not already authenticated and
delivered, one or more permanent global Series A Notes in registered form,
substantially in the form set forth in Exhibit A hereto (the "Regulation S
Permanent Global Series A Notes", and together with the related Regulation S
Temporary Global Series A Notes, the "Regulation S Global Series A Notes"), or
increase the beneficial ownership interest therein if already executed,
authenticated and delivered, in exchange for the Regulation S Temporary Global
Series A Notes of like tenor and amount. The Regulation S Global Series A Note
and Rule 144A Global Series A Note are referred to herein as the "Global Series
A Notes." Notwithstanding the foregoing, the Issuers may execute, and the
Trustee may authenticate and deliver Regulation S Permanent Global Series A
Notes in $0 aggregate principal amount at the time of issuance of the
Regulation S Temporary Global Series A Notes.
SECTION 2.02. Execution and Authentication. An Officer shall
sign the Series A Notes for each of the Note Issuers by manual or facsimile
signature. Any reference herein to the execution of a Series 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 Series A Note no longer
holds that office at the time the Trustee authenticates such Series A Note,
such Series A Note shall be valid nevertheless.
A Series A Note shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication on
the Series A Note. The signature shall be conclusive evidence that the Series
A Note has been authenticated under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Series
A Notes for original issue in an aggregate principal amount of up to
$300,000,000 and (2) Exchange Series A Notes for issue only in a Registered
Exchange Offer and Private Exchange Series A Notes only in a Private Exchange,
each pursuant to the Exchange and Registration Rights Agreement, for a like
principal amount of Initial Series A Notes exchanged pursuant thereto, in each
case upon a written order of the Note Issuers signed by an Officer of each Note
Issuer. Such order shall specify the amount of the Series A Notes to be
authenticated, the date on which the original issue of Series A Notes is to be
authenticated and whether the Series A Notes are to be Initial Series A Notes,
Exchange Series A Notes or Private Exchange Series A Notes. The aggregate
principal amount of Series A 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 Series A Notes. Any such appointment
shall be evidenced by an instrument
<PAGE> 36
27
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 Series A 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
Series A 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 Series A Note is registered as
the owner of such Series A Note for the purpose of receiving payment of
principal of and (subject to the provisions of this Indenture and the Series A
Notes with respect to record dates) interest on such Series A Note and for all
other purposes whatsoever, whether or not such Series A 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 Series A Notes may be presented for registration of transfer or for
exchange (the "Registrar") and an office or agency where Series A Notes may be
presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Series A 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 Series A Notes. The office of the
Registrar and Paying Agent for purposes of this Section 2.03 shall be at 61
Broadway, Concourse Level, New York, New York 10006.
The Note Issuers initially appoint The Depository Trust
Company to act as Depositary with respect to the Global Series A 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
<PAGE> 37
28
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 Series A 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 Series A 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 Series A 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.
SECTION 2.06. Transfer and Exchange. The Series A Notes
shall be issued in registered form and shall be transferable only upon the
surrender of a Series A Note for registration of transfer. When a Series 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 Series A Notes are
<PAGE> 38
29
presented to the Registrar or a co-registrar with a request to exchange them
for an equal principal amount of Series A 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 Series A 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 Series A Notes selected for redemption (except, in
the case of Series A Notes to be redeemed in part, the portion thereof not to
be redeemed) or any Series A Notes for a period of 15 days before a selection
of Series A Notes to be redeemed or 15 days before an Interest Payment Date.
Prior to the due presentation for registration of transfer of
any Series A Note, the Issuers, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the Person in whose name a Series A Note is
registered as the absolute owner of such Series A Note for the purpose of
receiving payment of principal of and interest, if any, on such Series A Note
and for all other purposes whatsoever, whether or not such Series A 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 Series A Note shall, by acceptance of
such Global Series A Note, agree that transfers of beneficial interest in such
Global Series A Note may be effected only through a book-entry system
maintained by the Holder of such Global Series A Note (or its agent), and that
ownership of a beneficial interest in such Global Series A Note shall be
required to be reflected in a book entry.
All Series A 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 Series A 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 Series A Note (or any predecessor Series A 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 Series A Note issued or owned during the period
set forth above, as the case may be, and any Series A Note issued upon
registration of transfer of, or in exchange for, or in lieu of, such Initial
Series A 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 Series A Note which is issued upon transfer of, or
in exchange for, any Series A Note which is not a Transfer Restricted Security
or (b) any Initial Series A Note as to 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.
<PAGE> 39
30
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 Series A Note, on the Regulation S Series
A Note Exchange Date or (b) in the case of a Rule 144A Global Series A Note or
Definitive Series A 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 Series A Notes. If a mutilated
Series A Note is surrendered to the Registrar or if the Holder of a Series A
Note claims that the Series A 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 Series A 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 Series A 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 Series A Note is replaced. Iridium
and the Trustee may charge the Holder for their expenses in replacing a Series
A Note. In the event any such mutilated, lost, destroyed or wrongfully taken
Series A Note has become or is about to become due and payable, the Issuers in
its discretion may pay such Series A Note instead of issuing a new Series A
Note in replacement thereof.
Every replacement Series A Note is an additional obligation of
the Issuers.
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
Series A Notes.
<PAGE> 40
31
SECTION 2.08. Outstanding Series A Notes. Series A 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 Series A Note does not
cease to be outstanding because an Issuer or an Affiliate of an Issuer holds
the Series A Note.
If a Series 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 Series A 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 Series A 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 Series A 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 Series A Notes have concurred in any direction, waiver or consent,
Series A 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
Series A Notes which the Trustee knows or has reason to know are so owned shall
be disregarded.
SECTION 2.09. Temporary Series A Notes. Until Definitive
Series A Notes and Global Series A Notes are ready for delivery, the Issuers
may prepare and the Trustee shall authenticate temporary Series A Notes.
Temporary Series A Notes shall be substantially in the form of Definitive
Series A Notes but may have variations that Iridium considers appropriate for
temporary Series A Notes. Without unreasonable delay, the Issuers shall
prepare and the Trustee shall authenticate Definitive Series A Notes and
deliver them in exchange for temporary Series A Notes upon surrender of such
temporary Series A 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 Series A Notes to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee any Series A 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 Series A Notes surrendered for registration of transfer,
exchange, payment or cancellation unless Iridium directs the Trustee to deliver
canceled Series A Notes to Iridium. The Issuers may not issue new Series A
Notes to replace Series A Notes they have redeemed, paid or delivered to the
Trustee for cancellation. The Trustee shall not authenticate Series A Notes in
place of canceled Series A 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 Series A Notes, the Issuers 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 Series A 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
Series A 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 Series A 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
Series A 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 Series A
Notes.
(a) Each Global Series A Note initially shall (i) be
registered in the name of the Depositary for such Global Series A 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
Series A Note held on their behalf by the Depositary, or the Trustee as its
custodian, or under such Global Series A 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 Series A 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
Series A Note.
(b) Transfers of a Global Series A Note shall be limited
to transfers of such Global Series A Note in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in a Global Series A Note may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
2.14.
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Except as otherwise provided in Section 2.14, beneficial owners of interests in
a Global Series A Note may obtain Definitive Series A Notes in exchange for
their beneficial interests in a Global Series A 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 Series A 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 Series A 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 Series A 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 Series A Note in an amount
equal to the principal amount of the beneficial interest in the Global Series A
Note to be transferred, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, one or more Definitive Series A Notes of like tenor
and amount.
(d) Any beneficial interest in one of the Global Series A
Notes that is transferred to a person who takes delivery in the form of an
interest in the other corresponding Global Series A Note will, upon transfer,
cease to be an interest in such Series A Note and become an interest in the
other corresponding Series A Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interest in such other corresponding Series A Note for as long as it
remains such an interest.
(e) In connection with the transfer of an entire Global
Series A Note to beneficial owners pursuant to subsection (b) of this Section,
such Global Series A 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 Series A Note, an equal aggregate
principal amount of Definitive Series A Notes of authorized denominations.
(f) Any Definitive Series A Note delivered in exchange
for an interest in a Global Series A 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 Series A Note set forth in Exhibit A.
(g) The registered holder of a Global Series A 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 Series A Notes.
SECTION 2.14. Special Transfer Provisions.
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Unless and until an Initial Series A 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
Series A Note, whether or not such Series A 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 Series A
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 Series A Note
seeking to transfer a Definitive Series A 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 Series A Note in an amount
equal to the principal amount of the beneficial interest in such Rule
144A Global Series A Note to be transferred, and the Issuers shall
execute, and the Trustee shall authenticate and deliver, one or more
Definitive Series A 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 Series A Notes.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of an Initial
Series A Note to a QIB (other than a Non-U.S. Person):
(i) If the Series A Note to be transferred consists
of (x) Definitive Series A 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 Series A Note, the transfer of such interest may be effected
only through the book entry system maintained by the Depository.
(ii) If the Series A Note to be transferred consists
of Definitive Series A 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
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Global Series A Note in an amount equal to the principal amount of the
Definitive Note, to be transferred, and the Trustee shall cancel the
Definitive Series A Note so transferred.
(c) Transfers of Interests in the Regulation S Global
Series A Note to U.S. Persons. The following provisions shall apply with
respect to any transfer of an interest in the Regulation S Global Series A Note
to U.S. Persons:
(i) If the beneficial interest to be transferred is
in a Regulation S Temporary Global Series A Note, transfers by an
owner of a beneficial interest in such Regulation S Global Series A
Note to a transferee who takes delivery of such interest through the
corresponding Rule 144A Global Series A 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 Series A Note, the Registrar shall
register the transfer of any such Series A 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 Series A Note to a Non-U.S. Person:
(i) The Registrar shall register any proposed
transfer to any Non-U.S. Person if the Series A Note to be transferred
is a Definitive Series A Note or an interest in a Rule 144A Global
Series A 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 Series A Note.
(ii) (x) If the proposed transferor is an Agent
Member holding a beneficial interest in the Rule 144A Global Series A
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 Series A Note in an amount
equal to the principal amount of the beneficial interest in such Rule
144A Global Series A 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 Series A
Note in an amount equal to the principal amount of the Definitive
Series A Note or such Rule 144A Global Series A Note, as the case may
be, to be transferred, and the Registrar shall cancel
<PAGE> 45
36
the Definitive Series A Note so transferred or decrease the principal
amount of such Rule 144A Global Series A Note, as the case may be.
(e) Private Placement Legend. Upon the transfer,
exchange or replacement of Series A Notes not bearing the Private Placement
Legend, the Registrar shall deliver Series A Notes that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Series A Notes
bearing the Private Placement Legend, the Registrar shall deliver only Series A
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 Series A Note, or any
beneficial interest in any Global Series A Note, bearing the Private Placement
Legend, each Holder of such Series A Note or holder of such beneficial interest
acknowledges the restrictions on transfer of such Series A Note set forth in
this Indenture and in the Private Placement Legend and agrees that it will
transfer such Series A Note only as provided in this Indenture. The Registrar
shall not register a transfer of any Series A Note unless such transfer
complies with the restrictions on transfer of such Series A Note set forth in
this Indenture. In connection with any transfer of Series A Notes to an IAI,
each such Holder or beneficial owner agrees by its acceptance of the Series A
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 Series A Notes pursuant to Section 3.07, it shall notify the
Trustee in writing of the redemption date and the principal amount of Series A
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
<PAGE> 46
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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 Series A 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 (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 Series A Notes are to be redeemed, the Trustee shall select
the Series A 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 Series A Notes not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Series A 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 Series A Notes called for redemption also apply to portions of Series A
Notes called for redemption. The Trustee shall notify the Note Issuers
promptly of the Series A Notes or portions of Series A Notes to be redeemed.
SECTION 3.03. Notice of Redemption. Any notice of redemption
shall identify the Series A 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 Series A Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Series A Notes are
to be redeemed, the certificate numbers and principal amounts of the
particular Series A 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 Series A
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 Series A
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 Series A Notes; and
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(9) that if a Series 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 Series A Note to be redeemed and
that a new Series A Note in the aggregate principal amount equal to
the unredeemed portion thereof shall be issued without charge to the
holder.
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, Series A 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 Series A 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 Series A 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 Series A Notes to be redeemed
on that date other than Series A Notes or portions of Series A Notes called for
redemption which have been delivered by such Note Issuer to the Trustee for
cancellation.
SECTION 3.06. Series A Notes Redeemed in Part. Upon
surrender of a Series 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 Series A Note equal in principal amount to the unredeemed
portion of the Series A Note surrendered.
SECTION 3.07. Optional Redemption. (a) Except as set forth in
Section 3.07(b), the Series A Notes may not be redeemed prior to July 15, 2002.
On and after that date, either Note Issuer may redeem the Series A 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> 48
39
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
July 15, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.750%
July 15, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.375%
July 15, 2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00%
</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 Series A Notes with the proceeds of one
or more Equity Offerings at a redemption price (expressed as a percentage of
principal amount thereof) of 113.5% 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 Series A Notes being redeemed must remain outstanding after each
such redemption.
ARTICLE IV
Covenants
SECTION 4.01. Payment of Series A Notes. The Note Issuers,
as joint and several obligors, shall promptly pay the principal of and interest
and Liquidated Damages, if any, on the Series A Notes on the dates and in the
manner provided in the Series A 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 Series A
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 Series A Notes remain
outstanding, unless the Note Issuers are subject to Section 13 or 15(d) of the
Exchange Act, Iridium shall furnish to the
<PAGE> 49
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Holders and to prospective investors in the Series A 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 Series A 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 Series A 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;
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(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 Series A
Notes, the Subsidiary Guaranties, the Series B Notes, and Indebtedness
of the Guarantor Subsidiaries evidenced by their Guarantees relating
to the Series B Notes;
(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> 51
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(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> 52
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 the Issue Date 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 Series A 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> 53
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 the Issue Date 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> 54
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 Series
<PAGE> 55
46
A Notes, the Series B Indenture or the Series B Notes (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) or this clause (3), or (y) Indebtedness Incurred pursuant to
clause (i), (ii) or (iii) of paragraph (b) of Section 4.03; 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> 56
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 Series A
Notes at a purchase price in cash equal to 100% of the principal
amount of the Series A 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
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48
passu with the Series A 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 Series A 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 Series A
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
<PAGE> 58
49
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 Series A Notes at a
purchase price in cash equal to 101% of the principal amount of the Series A
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 Series A Note pursuant to this Section 4.08 to
the extent that the Note Issuers have exercised their rights to redeem such
Series A 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 Series A Notes at a purchase price in cash equal to 101% of
the principal amount of such Series A 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
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50
(4) the instructions determined by the Note Issuers, consistent with this
Section 4.08, that a Holder must follow in order to have its Series A Notes or
any portion thereof purchased.
(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 Series A
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 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
<PAGE> 60
51
acquired, unless contemporaneously therewith effective provision is made to
secure the Series A 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 Series A
Notes if the Lien consists of Permitted Liens.
(b) Any Lien created for the benefit of the Holders of the
Series A 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 Series A 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 Series A Notes and
the Series B 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 Series A
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
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52
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 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 Series A 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);
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(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
(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 Series A 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 Series A Notes or the
related Subsidiary Guaranty, as applicable.
ARTICLE VI
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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 Series A 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
Series A 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 Series A 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 Series A 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 Series A 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 Series A 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 Series A 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 Series A Notes to be due and payable. Upon such
a declaration, such principal and interest, 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 Series A 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 Series A 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 Series A Notes or to enforce the
performance of any provision of the Series A Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Series A 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
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not impair 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 Series A 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 Series 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 Series A 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 Series A 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
Series A 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
Series A 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 Series A Notes held by
such Holder, on or after the respective due dates expressed
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in the Series A 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 Series
A 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 Series A
Notes for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Series A 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
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Holder and the Note Issuers a notice that states the record date, the payment
date and amount to be paid.
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 Series A Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuers
(to the extent it 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 Series A Notes; and the Issuers (to
the extent that it may lawfully do so) hereby expressly waives 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:
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(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
(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.
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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.
(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 Series A 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 Series
A 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 Series A Notes, it shall not be accountable for the Note
Issuers' use of the proceeds from the Series A 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
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this Indenture or in any document issued in connection with the sale of the
Series A Notes or in the Series A 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 and Liquidated Damages, if any, or interest on any Series
A 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
Series A Notes are listed. The Note Issuers agrees to notify promptly the
Trustee whenever the Series A 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 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
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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 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 Series A 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 Series A 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
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Series A 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.
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 Series A 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 Series A Notes so
authenticated; and in case at that time any of the Series A Notes shall not
have been authenticated, any successor to the Trustee may authenticate such
Series A 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 Series A 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.
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ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Series A Notes;
Defeasance. (a) When (i) either Note Issuer delivers to the Trustee all
outstanding Series A Notes (other than Series A Notes replaced pursuant to
Section 2.07) for cancellation or (ii) all outstanding Series A 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
irrevncably 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 Series A Notes, including interest
thereon to maturity or such redemption date (other than Series A Notes replaced
pursuant to Section 2.07), as certified to the Trustee by a nationally
recognized firm of independent accountants, and if in 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 Series A
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 Series A 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 Series A Notes may not be accelerated because of an Event of
Default. If the Note Issuers exercise their covenant defeasance option,
payment of the Series A 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.
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(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 Series A 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
Series A Notes to maturity or redemption, as the case may be;
(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 Series A 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
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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
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 Series A 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 Series A 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 Series A Notes shall be revived and reinstated as though
no deposit
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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 Series A Notes because
of the reinstatement of its obligations, the Note Issuers shall be subrogated
to the rights of the Holders of such Series A Notes to receive such payment
from the money or Government Securities held by the Trustee or Paying Agent.
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 Series A Notes; provided, however, that the uncertificated
Series A Notes are issued in registered form for purposes of Section
163(f) of the Code or in a manner such that the uncertificated Series
A Notes are described in Section 163(f)(2)(B) of the Code;
(4) to add further Subsidiary Guaranties with respect to the
Series A Notes or to release Guarantor Subsidiaries when permitted by
the terms hereof, or to secure the Series A 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 Series A Notes or Private Exchange Series A 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.
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SECTION 9.02. With Consent of Holders. The Note Issuers, the
Guarantor Subsidiaries and the Trustee may amend this Indenture or the Series A
Notes without notice to any Holder but with the written consent of the Holders
of at least a majority in principal amount of the Series A Notes. The Holders
of at least a majority in principal amount of the Series A Notes may waive
compliance by the Note Issuers or any Guarantor Subsidiary with any provision
or covenant of this Indenture or the Series A Notes. However, without the
consent of each Holder of an outstanding Series A Note, an amendment or waiver
may not:
(1) reduce the amount of Series A 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 Series A Note;
(3) reduce the principal of or extend the Stated Maturity of
any such Series A Note;
(4) reduce the premium payable upon the redemption of any
Series A Note or change the time at which any Series A Note may be
redeemed in accordance with Article III;
(5) make any Series A Note payable in money other than that
stated in such Series A Note;
(6) impair the right of any Holder to receive payment of
principal of and premium, Liquidated Damages and interest on such
Holder's Series A 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 Series A 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.
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SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Series A 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 Series A Note shall bind
the Holder and every subsequent Holder of that Series A Note or portion of the
Series A Note that evidences the same debt as the consenting Holder's Series A
Note, even if notation of the consent or waiver is not made on the Series A
Note. However, any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Series A Note or portion of the Series A 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 of the requisite percentage in principal amount of
outstanding Series A 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 Series A Notes. If
an amendment changes the terms of a Series A Note, the Trustee may require the
Holder of the Series A Note to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Series A 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 Series A Note shall issue
and the Trustee shall authenticate a new Series A Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Series A 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).
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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 Series A 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 Series A 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 Series A 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 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 Series A 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 Series A 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 Series A
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
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any claim or demand or to enforce any remedy under this Indenture, the Series A
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 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
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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 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 Series A 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
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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.
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 20005
Attention: General Counsel
Facsimile: (202) 842-0006
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.
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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 Series A Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
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;
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(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 Series A Notes Disregarded. In
determining whether the Holders of the required principal amount of Series A
Notes have concurred in any direction, waiver or consent, Series A 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 Series A Notes which the Trustee knows are
so owned shall be so disregarded. Also, subject to the foregoing, only Series
A 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.
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 SERIES
A 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 Series
A 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 Series 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 Series A 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.
<PAGE> 86
77
SECTION 11.11. Successors. All agreements of the Issuers in
this Indenture and the Series A 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> 87
78
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
IRIDIUM LLC
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: Vice President-Treasurer and
acting Chief Financial Officer
IRIDIUM CAPITAL CORPORATION
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: Chief Financial Officer
IRIDIUM ROAMING LLC
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: acting chief financial officer
IRIDIUM IP LLC
by
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: acting chief financial officer
STATE STREET BANK AND TRUST
COMPANY, as Trustee
by /s/ SHAWN GEORGE
-------------------------
Name: Shawn George
Title: Assistant Secretary
<PAGE> 88
EXHIBIT A
FORM OF FACE OF INITIAL SERIES A NOTE
[Global Series A 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 Series A 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
NOT 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) EXCEPT (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 903 OR RULE 904 UNDER THE SECURITIES ACT, (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
- --------
(1) These paragraphs should only be added if the Security is issued in global
form.
<PAGE> 89
2
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH CASE (A)
THROUGH (F), 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), (E) OR (F) 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 (F), 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
13% SENIOR NOTE DUE 2005, SERIES A
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> 90
3
Additional provisions of this Series A Note are set forth on the other
side of this Series A 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 Series A Notes referred
to in the Indenture,
By:
-----------------------
Authorized Signatory
<PAGE> 91
4
Guaranteed pursuant to the Indenture:
IRIDIUM ROAMING LLC
By:
------------------------
Name:
Title:
IRIDIUM IP LLC
By:
-------------------------
Name:
Title:
<PAGE> 92
5
FORM OF REVERSE SIDE OF INITIAL SERIES A NOTE
13% Senior Note due 2005, Series A
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 Series A 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 Series A 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 Series A 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 Series A Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender the Series A 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 Series A Notes under an Indenture
dated as of July 16, 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 Series A 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. ss.ss. 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 Series A Notes are subject to all such terms, and
holders of Series A Notes are referred to the Indenture and the TIA for a
statement of them. The Series A Notes are obligations of the Note Issuers
limited in aggregate principal amount to $300,000,000. Payment on each Series A
Note is guaranteed on a senior basis, jointly and severally, by the Guarantor
Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 93
6
5. Optional Redemption.
Except as described in the next succeeding paragraph, the
Series A Notes will not be redeemable at the option of the Note Issuers prior
to July 15, 2002. On and after such date, the Series A 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> <C>
2002 106.750%
2003 103.375%
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 Series A 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 113.5% 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 Series A Notes must remain
outstanding after each such redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the
Series A 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 Series A Note of $1,000 in original
principal amount or less will be redeemed in part. If any Series A Note is to
be redeemed in part only, the notice of redemption relating to such Series A
Note will state the portion of the principal amount thereof to be redeemed. A
new Series A 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 Series A 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 Series A 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
<PAGE> 94
7
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.
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 Series A Notes at a purchase price in cash equal to 101% of the
principal amount of the Series A Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase.
9. Denominations; Transfer; Exchange
The Series A Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Series A 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 Series A Notes selected for redemption
(except, in the case of a Series A Note to be redeemed in part, the portion of
the Series A Note not to be redeemed) or to transfer or exchange any Series A
Notes for a period of 15 days prior to a selection of Series A Notes to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Series A 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 Series A 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 Series A Notes, to replace mutilated, destroyed,
lost or stolen Series A Notes and to maintain a registrar and paying agent in
respect of the Series A Notes. The Note Issuers at any time may terminate their
obligations under certain restrictive covenants.
<PAGE> 95
8
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 Series A Note; nor shall any such execution, delivery
or endorsement thereafter bind any Restricted Subsidiary).
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 Series
A 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 Series A 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 Series A Notes in
addition to or in place of certificated Series A Notes, to add further
Subsidiary Guaranties with respect to such Series A Notes, to release Guarantor
Subsidiaries when permitted by such Indenture, to secure such Series A Notes,
to add to the covenants of the Note Issuers for the benefit of the Holders of
such Series A 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 Series A 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 Series A 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 Series A 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 Series A Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Holders of Series A Notes may not enforce
the Indenture or the Series A Notes except as provided in the Indenture. Under
certain circumstances, the Holders of a majority in principal amount of the
Series A Notes then outstanding may rescind any such acceleration with respect
to the Series A 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 Series A 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 Series A Notes
<PAGE> 96
9
by accepting a Series 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 Series A Notes
shall, subject to certain limitations, have the right to exchange Initial
Series A Notes for the Exchange Series A Notes or Private Exchange Series A
Notes, which will be registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Series A
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 Series A 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 SERIES A 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 Series A 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 Series A 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 Series A 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 Series A Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
<PAGE> 97
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 SERIES A NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
ATTENTION: GENERAL COUNSEL
<PAGE> 98
11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Series A 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 Series A 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> 99
12
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $ principal amount of Series A 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 Series A Note held by the
Depository a Series A Note or Series A Notes in definitive, registered
form of authorized denominations and an aggregate principal amount
equal to its beneficial interest in such Global Series A 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 Series A Note or Series A Notes.
In connection with any transfer of any of the Series A 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 Series A Notes and the last date, if any, on which such Series
A Notes were owned by the Note Issuers or any Affiliate of the Note Issuers,
the undersigned confirms that such principal amount of Series A 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 903 or 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; or
(6) [ ] pursuant to another available exemption from the
registration requirements of the Securities Act of
1933.
<PAGE> 100
13
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Series A Notes evidenced by this certificate in
the name of any person other than the registered holder thereof;
provided, however, that if box (4), (5) or (6) is checked, the Issuers
or the Trustee may require, prior to registering any such transfer of
the Series A 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 Series A 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> 101
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SERIES A NOTE(1)
The following increases or decreases in this Global Series A
Note have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal amount Signature of
in Principal in Principal of this Global authorized officer
Date of Amount of this Amount of this Series A Note following such of Trustee or
Exchange Global Series A Note Global Series A Note decrease or increase Series A Notes Custodian
- -------- -------------------- -------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
(1) This schedule should only be added if the Security is issued in global
form.
<PAGE> 102
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Series A 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> 103
EXHIBIT B
FORM OF FACE OF EXCHANGE SERIES A NOTE
OR PRIVATE EXCHANGE SERIES A 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.(1)
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
13% SENIOR NOTE DUE 2005, SERIES A
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> 104
2
Additional provisions of this Series A Note are set forth on the other
side of this Series A 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 Series A Notes referred
to in the Indenture,
By:
---------------------------
Authorized Signatory
<PAGE> 105
3
FORM OF REVERSE SIDE OF EXCHANGE SERIES A NOTE
13% Senior Note due 2005, Series A
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 Series A 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 Series A 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 Series A 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 Series A Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender the Series A 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 Series A Notes under an Indenture
dated as of July 16, 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 Series A 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. ss.ss. 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 Series A Notes are subject to all such terms, and
holders of Series A Notes are referred to the Indenture and the TIA for a
statement of them. The Series A Notes are obligations of the Note Issuers
limited in aggregate principal amount to $300,000,000. Payment on each Series A
Note is guaranteed on a senior basis, jointly and severally, by the Guarantor
Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 106
4
5. Optional Redemption.
Except as described in the next succeeding paragraph, the
Series A Notes will not be redeemable at the option of the Note Issuers prior
to July 15, 2002. On and after such date, the Series A 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 106.750%
2003 103.375%
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 Series A 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 113.5% 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 Series A Notes must remain
outstanding after each such redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the
Series A 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 Series A Note of $1,000 in original
principal amount or less will be redeemed in part. If any Series A Note is to
be redeemed in part only, the notice of redemption relating to such Series A
Note will state the portion of the principal amount thereof to be redeemed. A
new Series A 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 Series A 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 Series A 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
<PAGE> 107
5
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.
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 Series A Notes at a purchase price in cash equal to 101% of the
principal amount of the Series A Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase.
9. Denominations; Transfer; Exchange
The Series A Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Series A 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 Series A Notes selected for redemption
(except, in the case of a Series A Note to be redeemed in part, the portion of
the Series A Note not to be redeemed) or to transfer or exchange any Series A
Notes for a period of 15 days prior to a selection of Series A Notes to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Series A 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 Series A 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 Series A Notes, to replace mutilated, destroyed,
lost or stolen Series A Notes and to maintain a registrar and paying agent in
respect of the Series A Notes. The Note Issuers at any time may terminate their
obligations under certain restrictive covenants.
<PAGE> 108
6
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 Series A Note; nor shall any such execution, delivery
or endorsement thereafter bind any Restricted Subsidiary).
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 Series
A 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 Series A 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 Series A Notes in
addition to or in place of certificated Series A Notes, to add further
Subsidiary Guaranties with respect to such Series A Notes, to release Guarantor
Subsidiaries when permitted by such Indenture, to secure such Series A Notes,
to add to the covenants of the Note Issuers for the benefit of the Holders of
such Series A 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 Series A 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 Series A 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 Series A 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 Series A Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Holders of Series A Notes may not enforce
the Indenture or the Series A Notes except as provided in the Indenture. Under
certain circumstances, the Holders of a majority in principal amount of the
Series A Notes then outstanding may rescind any such acceleration with respect
to the Series A 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 Series A 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 Series A Notes
<PAGE> 109
7
by accepting a Series 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 Series A Notes
shall, subject to certain limitations, have the right to exchange Initial
Series A Notes for the Exchange Series A Notes or Private Exchange Series A
Notes, which will be registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Series A
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 Series A 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 SERIES A 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 Series A 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 Series A 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 Series A 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 Series A Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
<PAGE> 110
8
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 SERIES A NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
ATTENTION: GENERAL COUNSEL
<PAGE> 111
9
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Series A 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 Series A 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> 112
10
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SERIES A NOTE(1)
The following increases or decreases in this Global Series A
Note have been made:
<TABLE>
<CAPTION>
Principal amount
Amount of decrease Amount of increase of this Global Signature of
in Principal in Principal Series A Note authorized officer
Date of Amount of this Amount of this following such of Trustee or
Exchange Global Series A Note Global Series A Note decrease or increase Series A Notes Custodian
- -------- -------------------- -------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
(1) This Schedule should only be added if the Security is issued in global
form.
<PAGE> 113
11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Series A 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 Series A 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> 114
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")
13% Senior Notes due 2005, Series A (the "Series A Notes")
Ladies and Gentlemen:
This letter relates to Series A Notes represented by a
temporary global note certificate (the "Temporary Certificate"). Pursuant to
Section 2.01 of the Indenture dated as of July 16, 1997 relating to the Series
A Notes (the "Indenture"), the undersigned hereby certifies that (1) the
undersigned is the beneficial owner of $[__________] principal amount of
initial Series A 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 Series A 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 Series A 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> 115
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 July
16, 1997 in regard of the 13% Senior Notes due 2005, Series A (the "Series A
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 Series A Notes.
Upon transfer, the Series A 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" Series A 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 Series A Notes and invests in or purchase securities similar to the Series
A 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 Series A 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
<PAGE> 116
2
undersigned agrees on its own behalf and on behalf of any investor account for
which it is purchasing Series A Notes to offer, sell or otherwise transfer such
Series A Notes prior to the date which is two years after the later of the date
of original issue and the last date on which the Issuers or any affiliate of an
Issuer was the owner of such Series A 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) or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act
and, in each case (a) through (f), 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 Series A 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 Series A
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 Series A Notes pursuant to clause
(d), (e) or (f) 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> 117
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")
13% Senior Notes due 2005, Series A (the "Series A Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of July
16, 1997 in regard of the Series A Notes among the Note Issuers, as joint and
several obligors, 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 Series A Notes which are held in [the form of a beneficial interest in
the Regulation S Temporary Global Series A Note (CINS No. __________) with the
Depositary in the name of the undersigned] [definitive form].
The undersigned has requested transfer of such Series A Notes
to a Person who will take delivery thereof in the form of a beneficial interest
in the Rule 144A Global Series A 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 Series A Notes are being transferred to a transferee
that the undersigned reasonably believes is purchasing the Series A
Notes for its own account or one or more accounts with respect to
which the transferee exercises sole investment discretion; and
<PAGE> 118
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> 119
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") 13% Senior Notes due 2005, Series A (the "Series A
Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of July
16, 1997 in regard of the Series A Notes among the Note Issuers, as joint and
several obligors, 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 Series A 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 Series A 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 903(b) or 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> 120
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 Series A Notes should be registered in the name of the new
beneficial owner as follows:
Name:
----------------------------
Address:
-------------------------
Taxpayer ID Number:
--------------
<PAGE> 121
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 July 16, 1997, providing for the issuance of an
aggregate principal amount of up to $300,000,000 of 13% Senior Notes due 2005,
Series A (the "Series A 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 is 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 Series A 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 Series A 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 Series A 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
<PAGE> 122
2
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions 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 Series A 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.
<PAGE> 123
3
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.
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> 124
SCHEDULE I
Support Agreement, dated as of July 15, 1992 between Motorola and
Iridium, as amended.
<PAGE> 1
EXHIBIT 4.2
=========================================================
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
14% Senior Notes due 2005, Series B
Guaranteed by Iridium Roaming LLC
and Iridium IP LLC
---------------------------------------------------------
SERIES B NOTE INDENTURE
Dated as of July 16, 1997
---------------------------------------------------------
State Street Bank and
Trust Company,
Trustee
=========================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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RECITALS OF THE ISSUERS
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
The Series B Notes
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.07. Replacement Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.08. Outstanding Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.09. Temporary Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13. Book-Entry Provisions for Global Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.14. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.02. Selection of Securities to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.06. Series B Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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SECTION 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV
Covenants
SECTION 4.01. Payment of Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.05. Limitation on Restrictions on Distributions
from Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.07. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.08. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.09. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.10. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.11. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.12. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.13. Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.14. Limitation on Business Activities of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.15. Future Guarantor Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.16. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE V
Successor Companies
SECTION 5.01. When Issuers May Merge or Transfer Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.13. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.11. Preferential Collection of Claims Against Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Series B Notes; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.03. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.04. Repayment to Note Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.05. Indemnity for Government Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.04. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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SECTION 9.05. Notation on or Exchange of Series B Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X
Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.02. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.03. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.04. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.05. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.06. Initial Guarantors; Execution of Supplemental Indenture for Future Guarantor Subsidiaries . . . . . . . 75
ARTICLE XI
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.03. Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.06. When Series B Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Rules by Trustee Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
Exhibit A - Form of Face of Initial Series B Note
Exhibit B - Form of Face of Exchange Series B 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 Series B
Notes
Exhibit F - Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S
iv
<PAGE> 6
Exhibit G - Form of Supplemental Indenture
Schedule I - Other Existing Affiliate Agreements
v
<PAGE> 7
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C> <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> 8
<TABLE>
<S> <C> <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> 9
INDENTURE dated as of July 16, 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' 14%
Senior Notes due 2005, Series B (the "Initial Series B Notes") and, when and
if issued pursuant to a registered exchange for Initial Series B Notes, the
Note Issuers' 14% Senior Notes due 2005, Series B (the "Exchange Series B
Notes") and, if and when issued pursuant to a Private Exchange for Initial
Series B Notes, the Note Issuers' 14% Senior Notes due 2005, Series B (the
"Private Exchange Series B Notes", and, together with the Exchange Series B
Notes and the Initial Series B Notes, the "Series B Notes").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the execution and delivery of this
Indenture to provide for the issuance of $500,000,000 aggregate principal
amount of the Initial Series B Notes issuable as provided in this Indenture.
Pursuant to the terms of a Purchase Agreement dated July 11, 1997 (the
"Purchase Agreement") among the Issuers, Iridium World Communications Ltd.
("IWCL"), Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, the Note Issuers have agreed to issue and sell up to
$500,000,000 aggregate principal amount of the Initial Series B Notes and
300,000 units (the "Units"), each Unit consisting of $1000 principal amount of
the 13% Senior Notes due, Series A (the "Initial Series A Notes") and one
warrant (the "Warrants"), which represents the right to purchase 5.2 shares
(the "Warrant Shares") of Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), of IWCL, issuable pursuant to the terms of a Warrant
Agreement dated as of July 16, 1997 (the "Warrant Agreement") between IWCL and
State Street Bank and Trust Company, as the warrant agent (the "Warrant
Agent"). 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 Series B 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
Series B Notes by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders, as follows:
<PAGE> 10
2
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.
"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.
<PAGE> 11
3
"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 Series B 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.
"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 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 and 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.
<PAGE> 12
4
"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:
(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 the
Issue Date (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
<PAGE> 13
5
(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 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
<PAGE> 14
6
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.
"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,
<PAGE> 15
7
(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 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 Series B Notes" means Series B 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 Series B 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 Series B 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
<PAGE> 16
8
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 Series B Notes or the date on which
no Series B 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 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 July 16, 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" shall have the meaning set forth in the Exchange
and Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration
statement to be filed by the Issuers with the SEC with respect to an offer to
exchange the Initial Series B Notes for another series of notes of the Issuers
with substantially identical terms to the Initial Series B 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
agreement or agreements among Iridium, Motorola and other parties thereto
providing for the development, manufacture and sale of individual subscriber
<PAGE> 17
9
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, (x) the Motorola MOU and any subordination
agreement entered into pursuant thereto, 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 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 Series B 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,
<PAGE> 18
10
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
Series B 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 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
<PAGE> 19
11
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 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.
<PAGE> 20
12
"Initial Guarantors" means Iridium Roaming LLC and Iridium IP LLC,
each a Delaware limited liability company.
"Initial Purchasers" means Chase Securities Inc. and Merrill Lynch,
Pierce, Fenner & Smith 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 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 Series B 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
<PAGE> 21
13
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 Iridium.
"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.
"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.
<PAGE> 22
14
"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 $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, 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 Series B 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
<PAGE> 23
15
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 Series B 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 Series
B Notes within five Business Days after the Expiration Date. The Note Issuers
shall 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 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 Series B Notes pursuant to the Offer to Purchase.
"Offering Memorandum" means the offering memorandum, dated as of
July 11, 1997, relating to the offering of the Initial Series B Notes and
Units.
<PAGE> 24
16
"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 (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
<PAGE> 25
17
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 the
Issue Date 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 Series B Notes, the
Trustee, the holders of the Series A Notes and the trustee under the
Series A Indenture;
(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
<PAGE> 26
18
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;
(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
<PAGE> 27
19
(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 Series B Note means the principal of the Series B
Note plus the premium, if any, payable on the Series B Note that is due or
overdue or is to become due at the relevant time.
"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
Series B Notes held by the Initial Purchaser as part of its initial
distribution, a like aggregate principal amount of Private Exchange Series B
Notes.
"Private Placement Legend" means the legend set forth under the
caption Restricted Series B Note Legend in the form of the Initial Series B
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
<PAGE> 28
20
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
Series B 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.
"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.
<PAGE> 29
21
"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.
"Series A Indenture" means the Indenture, dated as of July 16, 1997,
among the Issuers and State Street Bank and Trust Company, as amended or
supplemented from time to time, relating to the Series A Notes.
"Series A Notes" means the Initial Series A Notes and any notes
issued in exchange therefor pursuant to the Exchange and Registration Rights
Agreement.
"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).
"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
<PAGE> 30
22
payment to the Series B 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 Series B 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 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
<PAGE> 31
23
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 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
<PAGE> 32
24
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.
<PAGE> 33
25
<TABLE>
<CAPTION>
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ----------
<S> <C>
"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
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Exchange Series B Notes" . . . . . . . . . . . . . . . . . Introduction
"Global Series B Notes" . . . . . . . . . . . . . . . . . . . . 2.01(c)
"Initial Series A Notes" . . . . . . . . . . . . . . . . . . . . Recitals
"Initial Series B Notes" . . . . . . . . . . . . . . . . . . Introduction
"Insurance Proceeds" . . . . . . . . . . . . . . . . . . . . . . 4.16
"legal defeasance option" . . . . . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Private Exchange Series B Notes . . . . . . . . . . . . . . Introduction
"Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . Recitals
"QIBs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Regulation S Permanent Global Series B Notes" . . . . . . . . . 2.01(c)
"Regulation S Restricted Period" . . . . . . . . . . . . . . . . 2.01
"Regulation S Series B Notes Exchange Date" . . . . . . . . . . 2.01(c)
"Regulation S Temporary Global Series B Notes" . . . . . . . . . 2.01(c)
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . 4.04
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
"Rule 144A Global Series B Note" . . . . . . . . . . . . . . . . 2.01(b)
"Series B Notes" . . . . . . . . . . . . . . . . . . . . . . Introduction
"Successor Companies" . . . . . . . . . . . . . . . . . . . . . 5.01
"Transfer Restricted Security" . . . . . . . . . . . . . . . . . 2.06
"Units" . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Agent" . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Agreement" . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrants" . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Warrant Shares" . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
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:
<PAGE> 34
26
"Commission" means the SEC.
"indenture securities" means the Series B 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.
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.
<PAGE> 35
27
ARTICLE II
The Series B Notes
SECTION 2.01. Form and Dating. (a) The Initial Series B 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 Series B Notes and Private Exchange Series B 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 Series B 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 Series B Note shall be dated the date of its
authentication. The terms of the Series B Notes set forth in Exhibit A and B
hereto are part of the terms of this Indenture. The Series B 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 Series B Notes are
being offered and sold by the Note Issuers pursuant to the Purchase Agreement.
(b) Initial Series B 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 Purchase
Agreement, shall be issued on the Issue Date initially in the form of one or
more permanent global Series B Notes in registered form, substantially in the
form set forth in Exhibit A hereto (the "Rule 144A Global Series B 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 Series B 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 Series B 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 Series B Notes in registered form, substantially in the
forms set forth in Exhibit A hereto (the "Regulation S Temporary Global Series
B Notes"). The Regulation S Temporary Global Series B 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 Series B Notes and the Issue
Date (the "Regulation S Restricted Period") with respect to the offer and sale
of the Initial Series B Notes (the "Regulation S Series B Notes Exchange
Date"). Iridium shall promptly notify the Trustee in writing of the
occurrence of the Regulation S Series B Notes Exchange Date and, within a
reasonable time after the Regulation S Series B Notes Exchange Date, upon
receipt by the Trustee and Iridium of one or more certificates substantially
in the form set forth in Exhibit C
<PAGE> 36
28
hereto from one or more Holders of interests in the applicable Regulation S
Temporary Global Series B Notes, the Issuers shall execute, and the Trustee
shall authenticate and deliver, one or more permanent global Series B Notes in
registered form, substantially in the form set forth in Exhibit A hereto (the
"Regulation S Permanent Global Series B Notes", and together with the related
Regulation S Temporary Global Series B Notes, the "Regulation S Global Series
B Notes") in exchange for the Regulation S Temporary Global Series B Notes of
like tenor and amount. The Regulation S Global Series B Note and Rule 144A
Global Series B Note are referred to herein as the "Global Series B Notes."
SECTION 2.02. Execution and Authentication. An Officer shall sign
the Series B Notes for each of the Note Issuers by manual or facsimile
signature. Any reference herein to the execution of a Series B 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 Series B Note no longer holds
that office at the time the Trustee authenticates such Series B Note, such
Series B Note shall be valid nevertheless.
A Series B Note shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Series B
Note. The signature shall be conclusive evidence that the Series B Note has
been authenticated under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Series B
Notes for original issue in an aggregate principal amount of up to
$500,000,000 and (2) Exchange Series B Notes for issue only in a Registered
Exchange Offer and Private Exchange Series B Notes only in a Private Exchange,
each pursuant to the Exchange and Registration Rights Agreement, for a like
principal amount of Initial Series B Notes exchanged pursuant thereto, in each
case upon a written order of the Note Issuers signed by an Officer of each
Note Issuer. Such order shall specify the amount of the Series B Notes to be
authenticated, the date on which the original issue of Series B Notes is to be
authenticated and whether the Series B Notes are to be Initial Series B Notes,
Exchange Series B Notes or Private Exchange Series B Notes. The aggregate
principal amount of Series B Notes outstanding at any time may not exceed
$500,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to Iridium to authenticate the Series B 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 Series B 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.
<PAGE> 37
29
Upon execution and delivery of the Indenture, the Initial Series B
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 Series B Note is registered as the
owner of such Series B Note for the purpose of receiving payment of principal
of and (subject to the provisions of this Indenture and the Series B Notes
with respect to record dates) interest on such Series B Note and for all other
purposes whatsoever, whether or not such Series B 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 Series B Notes may be presented for registration of transfer or for
exchange (the "Registrar") and an office or agency where Series B Notes may be
presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Series B 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 Series B Notes. The office of the
Registrar and Paying Agent for purposes of this Section 2.03 shall be at 61
Broadway, Concourse Level, New York, New York 10006.
The Note Issuers initially appoint The Depository Trust Company to
act as Depositary with respect to the Global Series B 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;
<PAGE> 38
30
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 Series B 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 Series B 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 Series B 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.
SECTION 2.06. Transfer and Exchange. The Series B Notes shall be
issued in registered form and shall be transferable only upon the surrender of
a Series B Note for registration of transfer. When a Series B 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 Series B Notes are presented to the Registrar or a
co-registrar with a request to exchange them for an equal principal amount of
Series B Notes of other denominations, the Registrar shall make the exchange
as
<PAGE> 39
31
requested if the same requirements are met. To permit registration of
transfers and exchanges, the Issuers shall execute and the Trustee shall
authenticate Series B 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 Series B
Notes selected for redemption (except, in the case of Series B Notes to be
redeemed in part, the portion thereof not to be redeemed) or any Series B
Notes for a period of 15 days before a selection of Series B Notes to be
redeemed or 15 days before an Interest Payment Date.
Prior to the due presentation for registration of transfer of any
Series B Note, the Issuers, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the Person in whose name a Series B Note
is registered as the absolute owner of such Series B Note for the purpose of
receiving payment of principal of and interest, if any, on such Series B Note
and for all other purposes whatsoever, whether or not such Series B 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 Series B Note shall, by acceptance of such
Global Series B Note, agree that transfers of beneficial interest in such
Global Series B Note may be effected only through a book-entry system
maintained by the Holder of such Global Series B Note (or its agent), and that
ownership of a beneficial interest in such Global Series B Note shall be
required to be reflected in a book entry.
All Series B 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 Series B 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 Series B Note (or any predecessor Series B 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 Series B Note issued or owned during the
period set forth above, as the case may be, and any Series B Note issued upon
registration of transfer of, or in exchange for, or in lieu of, such Initial
Series B 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 Series B Note which is issued upon transfer of, or
in exchange for, any Series B Note which is not a Transfer Restricted Security
or (b) any Initial Series B Note as to 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.
<PAGE> 40
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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 Series B Note, on the Regulation S Series B
Note Exchange Date or (b) in the case of a Rule 144A Global Series B Note or
Definitive Series B 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 Series B Notes. If a mutilated Series B
Note is surrendered to the Registrar or if the Holder of a Series B Note
claims that the Series B 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 Series B 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 Series B 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 Series B Note is replaced.
Iridium and the Trustee may charge the Holder for their expenses in replacing
a Series B Note. In the event any such mutilated, lost, destroyed or
wrongfully taken Series B Note has become or is about to become due and
payable, the Issuers in its discretion may pay such Series B Note instead of
issuing a new Series B Note in replacement thereof.
Every replacement Series B Note is an additional obligation of the
Issuers.
<PAGE> 41
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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
Series B Notes.
SECTION 2.08. Outstanding Series B Notes. Series B 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 Series B Note does not
cease to be outstanding because an Issuer or an Affiliate of an Issuer holds
the Series B Note.
If a Series B 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 Series B 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 Series
B 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 Series B 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 Series B Notes have concurred in any direction, waiver or consent, Series B
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 Series B
Notes which the Trustee knows or has reason to know are so owned shall be
disregarded.
SECTION 2.09. Temporary Series B Notes. Until Definitive Series B
Notes and Global Series B Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Series B Notes.
Temporary Series B Notes shall be substantially in the form of Definitive
Series B Notes but may have variations that Iridium considers appropriate for
temporary Series B Notes. Without unreasonable delay, the Issuers shall
prepare and the Trustee shall authenticate Definitive Series B Notes and
deliver them in exchange for temporary Series B Notes upon surrender of such
temporary Series B 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
Series B Notes to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Series B 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 Series B Notes surrendered for registration of transfer,
exchange,
<PAGE> 42
34
payment or cancellation unless Iridium directs the Trustee to deliver canceled
Series B Notes to Iridium. The Issuers may not issue new Series B Notes to
replace Series B Notes they have redeemed, paid or delivered to the Trustee
for cancellation. The Trustee shall not authenticate Series B Notes in place
of canceled Series B Notes other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Issuers default in a
payment of interest on the Series B 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 Series B 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
Series B 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 Series B 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 Series B 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 Series B Notes.
(a) Each Global Series B Note initially shall (i) be registered in
the name of the Depositary for such Global Series B 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 Series B
Note held on their behalf by the Depositary, or the Trustee as its custodian,
or under such Global Series B 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 Series B 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
<PAGE> 43
35
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 Series B Note.
(b) Transfers of a Global Series B Note shall be limited to
transfers of such Global Series B Note in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in a Global Series B 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 Series B Note may obtain Definitive Series B Notes in
exchange for their beneficial interests in a Global Series B 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 Series B 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 Series B 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 Series B 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 Series B Note in an amount
equal to the principal amount of the beneficial interest in the Global Series
B Note to be transferred, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, one or more Definitive Series B Notes of like tenor
and amount.
(d) Any beneficial interest in one of the Global Series B Notes
that is transferred to a person who takes delivery in the form of an interest
in the other corresponding Global Series B Note will, upon transfer, cease to
be an interest in such Series B Note and become an interest in the other
corresponding Series B Note and, accordingly, will thereafter be subject to
all transfer restrictions, if any, and other procedures applicable to
beneficial interest in such other corresponding Series B Note for as long as
it remains such an interest.
(e) In connection with the transfer of an entire Global Series B
Note to beneficial owners pursuant to subsection (b) of this Section, such
Global Series B 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 Series B
Note, an equal aggregate principal amount of Definitive Series B Notes of
authorized denominations.
(f) Any Definitive Series B Note delivered in exchange for an
interest in a Global Series B Note pursuant to subsection (b) or subsection
(e) of this Section shall, unless the
<PAGE> 44
36
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 Series B Note set forth in Exhibit
A.
(g) The registered holder of a Global Series B 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 Series B Notes.
SECTION 2.14. Special Transfer Provisions.
Unless and until an Initial Series B 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 Series B
Note, whether or not such Series B 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 Series B 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 Series B Note seeking to
transfer a Definitive Series B 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 Series B Note in an amount equal to the principal amount of
the beneficial interest in such Rule 144A Global Series B Note to be
transferred, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, one or more Definitive Series B 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 Series B Notes.
<PAGE> 45
37
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Series B
Note to a QIB (other than a Non-U.S. Person):
(i) If the Series B Note to be transferred consists of (x)
Definitive Series B 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 Series B Note, the
transfer of such interest may be effected only through the book entry
system maintained by the Depository.
(ii) If the Series B Note to be transferred consists of
Definitive Series B 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 Series B
Note in an amount equal to the principal amount of the Definitive Note,
to be transferred, and the Trustee shall cancel the Definitive Series B
Note so transferred.
(c) Transfers of Interests in the Regulation S Global Series B Note
to U.S. Persons. The following provisions shall apply with respect to any
transfer of an interest in the Regulation S Global Series B Note to U.S.
Persons:
(i) If the beneficial interest to be transferred is in a
Regulation S Temporary Global Series B Note, transfers by an owner of a
beneficial interest in such Regulation S Global Series B Note to a
transferee who takes delivery of such interest through the corresponding
Rule 144A Global Series B 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 Series B Note, the Registrar shall register
the transfer of any such Series B 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 Series
B Note to a Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Series B Note to be transferred is a Definitive
Series B Note or an interest in a Rule 144A Global Series B Note only
upon receipt of a certificate substantially in the form set forth in
Exhibit F hereto from the proposed transferor. Prior
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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 Series B Note.
(ii) (x) If the proposed transferor is an Agent Member holding
a beneficial interest in the Rule 144A Global Series B 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 Series B Note in an amount equal to the principal amount of
the beneficial interest in such Rule 144A Global Series B 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 Series B
Note in an amount equal to the principal amount of the Definitive Series
B Note or such Rule 144A Global Series B Note, as the case may be, to be
transferred, and the Registrar shall cancel the Definitive Series B Note
so transferred or decrease the principal amount of such Rule 144A Global
Series B Note, as the case may be.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Series B Notes not bearing the Private Placement Legend, the
Registrar shall deliver Series B Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Series B Notes bearing
the Private Placement Legend, the Registrar shall deliver only Series B 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 Series B Note, or any
beneficial interest in any Global Series B Note, bearing the Private Placement
Legend, each Holder of such Series B Note or holder of such beneficial
interest acknowledges the restrictions on transfer of such Series B Note set
forth in this Indenture and in the Private Placement Legend and agrees that it
will transfer such Series B Note only as provided in this Indenture. The
Registrar shall not register a transfer of any Series B Note unless such
transfer complies with the restrictions on transfer of such Series B Note set
forth in this Indenture. In connection with any transfer of Series B Notes to
an IAI, each such Holder or beneficial owner agrees by its acceptance of the
Series B 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
<PAGE> 47
39
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 Series B Notes pursuant to Section 3.07, it shall notify the Trustee in
writing of the redemption date and the principal amount of Series B 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 Series B 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 (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 Series B Notes are to be redeemed, the Trustee shall select the
Series B 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 Series B Notes not
previously called for redemption. The Trustee may select for redemption
portions of the principal of Series B 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 Series B Notes called for redemption also apply to portions of
Series B Notes called for redemption. The Trustee shall notify the Note
Issuers promptly of the Series B Notes or portions of Series B Notes to be
redeemed.
SECTION 3.03. Notice of Redemption. Any notice of redemption shall
identify the Series B Notes to be redeemed and shall state:
(1) the redemption date;
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(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Series B Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Series B Notes are to be
redeemed, the certificate numbers and principal amounts of the particular
Series B 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 Series B 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 Series B 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 Series B Notes; and
(9) that if a Series B 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 Series B Note to be redeemed and that a new Series B
Note in the aggregate principal amount equal to the unredeemed portion
thereof shall be issued without charge to the holder.
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, Series B 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 Series B 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 Series B 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.
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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 Series B Notes to be redeemed
on that date other than Series B Notes or portions of Series B Notes called
for redemption which have been delivered by such Note Issuer to the Trustee
for cancellation.
SECTION 3.06. Series B Notes Redeemed in Part. Upon surrender of a
Series B 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
Series B Note equal in principal amount to the unredeemed portion of the
Series B Note surrendered.
SECTION 3.07. Optional Redemption. (a) Except as set forth in
Section 3.07(b), the Series B Notes may not be redeemed prior to July 15,
2002. On and after that date, either Note Issuer may redeem the Series B
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:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
July 15, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.500%
July 15, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.375%
July 15, 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 Series B Notes with the proceeds of one or more
Equity Offerings at a redemption price (expressed as a percentage of principal
amount thereof) of 115% 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 Series B Notes being redeemed must remain outstanding after each
such redemption.
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Series B Notes. The Note Issuers, as
joint and several obligors, shall promptly pay the principal of and interest
and Liquidated Damages, if any, on the Series B Notes on the dates and in the
manner provided in the Series B 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 Series B 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 Series B 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 to prospective investors in the
Series B 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
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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 Series B 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 Series B 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;
(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
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44
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 Series B Notes,
the Subsidiary Guaranties, the Series A Notes, and Indebtedness of the
Guarantor Subsidiaries evidenced by their Guarantees relating to the
Series A Notes;
(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
(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
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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 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
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46
immediately following the fiscal quarter during which the Issue Date
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 Series B 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.
(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;
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(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 the Issue Date 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
(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
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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 Series B Notes, the Series A
Indenture or the Series A Notes (or similar limitations pursuant to other
notes issued by Iridium, or indentures relating thereto, that are
substantially similar
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49
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) or this clause (3), or
(y) Indebtedness Incurred pursuant to clause (i), (ii) or (iii) of
paragraph (b) of Section 4.03; 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
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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 Series B Notes at a purchase price in cash equal to
100% of the principal amount of the Series B Notes plus accrued and
unpaid interest
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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 Series B 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 Series B
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 Series B 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
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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 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 Series B Notes at a
purchase price in cash equal to 101% of the principal amount of the Series B
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 Series B Note pursuant to this Section 4.08
to the extent that the Note Issuers have exercised their rights to redeem such
Series B 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 Series B Notes at a purchase price in cash equal
to 101% of the principal amount of such Series B 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
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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 Series B Notes or any portion thereof purchased.
(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 Series B 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 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
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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 Series B
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 Series B Notes if the
Lien consists of Permitted Liens.
(b) Any Lien created for the benefit of the Holders of the Series B
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 Series B 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
Series B Notes and the Series A 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 Series B
Notes. Iridium may cause any Foreign Subsidiary to execute and deliver a
Subshdiary 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
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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 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,
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executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of Iridium under the Series B 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
(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
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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 Series B 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 Series B Notes or the
related Subsidiary Guaranty, as applicable.
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 Series B 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 Series
B 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 Series B 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 Series B 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
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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
(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
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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 Series B Notes, in each such case for
a period of more than 30 days.
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 Series B 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 Series B Notes by notice to the Note Issuers and the Trustee, may
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declare the principal of and accrued but unpaid interest and Liquidated
Damages, if any, on all of the Series B 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 Series B 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 Series B 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 Series B Notes or to enforce the
performance of any provision of the Series B Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Series B 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 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 Series B 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 Series B 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 Series B 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 Series B Notes unless:
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(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 Series B
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 Series B
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 Series B Notes held by
such Holder, on or after the respective due dates expressed in the Series B
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
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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 Series B
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 Series B Notes
for principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Series B 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.
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 Series B Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuers (to
the extent it 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 Series B Notes; and the Issuers (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and
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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
(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);
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(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.
(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.
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(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
Series B 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 Series B
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 Series B Notes, it shall not be accountable for the Note
Issuers' use of the proceeds from the Series B 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 Series B Notes or in the Series B 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 and Liquidated Damages, if any, or interest on any
Series B 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
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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 Series B
Notes are listed. The Note Issuers agrees to notify promptly the Trustee
whenever the Series B 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 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 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.
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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 Series B 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 Series B 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 Series B 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.
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
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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 Series B 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 Series B Notes so
authenticated; and in case at that time any of the Series B Notes shall not
have been authenticated, any successor to the Trustee may authenticate such
Series B 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 Series B 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 Series B Notes; Defeasance.
(a) When (i) either Note Issuer delivers to the Trustee all outstanding
Series B Notes (other than Series B Notes replaced pursuant to Section 2.07)
for cancellation or (ii) all outstanding Series B 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 Series B Notes, including interest thereon to
maturity or such redemption date (other than Series B Notes replaced pursuant
to Section 2.07), as certified to the Trustee by a nationally recognized firm
of independent accountants, and if in 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
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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 Series B 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 Series B 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 Series B Notes may not be accelerated because of an Event of Default.
If the Note Issuers exercise their covenant defeasance option, payment of the
Series B 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 Series B 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 Series B
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 Series B 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
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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 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 Series B 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 Series B 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 Series B 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 Series B Notes because of the reinstatement of its obligations, the Note
Issuers shall be subrogated to the rights of the Holders of such Series B
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 Series B Notes; provided, however, that the uncertificated
Series B Notes are issued in registered form for purposes of Section
163(f) of the Code or in a manner such that the uncertificated Series B
Notes are described in Section 163(f)(2)(B) of the Code;
(4) to add further Subsidiary Guaranties with respect to the Series
B Notes or to release Guarantor Subsidiaries when permitted by the terms
hereof, or to secure the Series B 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
Series B Notes or Private Exchange Series B 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 Series
B Notes without notice to any Holder but with the written consent of the
Holders of at least a majority in principal amount of the Series B Notes. The
Holders of at least a majority in principal amount of the Series B
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Notes may waive compliance by the Note Issuers or any Guarantor Subsidiary
with any provision or covenant of this Indenture or the Series B Notes.
However, without the consent of each Holder of an outstanding Series B Note,
an amendment or waiver may not:
(1) reduce the amount of Series B 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 Series B Note;
(3) reduce the principal of or extend the Stated Maturity of any
such Series B Note;
(4) reduce the premium payable upon the redemption of any Series B
Note or change the time at which any Series B Note may be redeemed in
accordance with Article III;
(5) make any Series B Note payable in money other than that stated
in such Series B Note;
(6) impair the right of any Holder to receive payment of principal
of and premium, Liquidated Damages and interest on such Holder's Series B
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 Series B
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 Series B Notes shall comply with the TIA as then in
effect.
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SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Series B Note shall bind
the Holder and every subsequent Holder of that Series B Note or portion of the
Series B Note that evidences the same debt as the consenting Holder's Series B
Note, even if notation of the consent or waiver is not made on the Series B
Note. However, any such Holder or subsequent Holder may revoke the consent or
waiver as to such Holder's Series B Note or portion of the Series B 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 of the requisite percentage in principal amount of
outstanding Series B 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 Series B Notes. If an
amendment changes the terms of a Series B Note, the Trustee may require the
Holder of the Series B Note to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Series B 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 Series B Note
shall issue and the Trustee shall authenticate a new Series B Note that
reflects the changed terms. Failure to make the appropriate notation or to
issue a new Series B 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).
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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 Series B 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 Series B 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 Series B 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 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 Series B 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 Series B 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 Series B
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
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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 Series B 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 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.
<PAGE> 85
77
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 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 Series B 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.
<PAGE> 86
78
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.
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 20005
Attention: General Counsel
Facsimile: (202) 842-0006
<PAGE> 87
79
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 Series B Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
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
<PAGE> 88
80
(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 Series B Notes Disregarded. In determining
whether the Holders of the required principal amount of Series B Notes have
concurred in any direction, waiver or consent, Series B 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 Series B Notes which the Trustee knows are
so owned shall be so disregarded. Also, subject to the foregoing, only Series
B 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.
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.
<PAGE> 89
81
SECTION 11.09. Governing Law. THIS INDENTURE AND THE SERIES B
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 Series B 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 Series B 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 Series B 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 Series B 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> 90
82
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
IRIDIUM LLC
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: Vice President-Treasurer and
acting Chief Financial Officer
IRIDIUM CAPITAL CORPORATION
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: Chief Financial Officer
IRIDIUM ROAMING LLC
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: acting chief financial officer
IRIDIUM IP LLC
by /s/ ROY GRANT
-------------------------
Name: Roy Grant
Title: acting chief financial officer
STATE STREET BANK AND TRUST
COMPANY, as Trustee
by /s/ SHAWN GEORGE
-------------------------
Name: Shawn George
Title: Assistant Secretary
<PAGE> 91
EXHIBIT A
FORM OF FACE OF INITIAL SERIES B NOTE
[Global Series B 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 Series B 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 NOT 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) EXCEPT (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 903 OR RULE 904 UNDER THE SECURITIES ACT, (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 ACT (IF AVAILABLE) OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, AND, IN EACH CASE (A) THROUGH (F), IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF
- --------------------
(1) These paragraphs should only be added if the Security is issued in
global form.
<PAGE> 92
2
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), (E) OR (F) 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 (F), 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
14% SENIOR NOTE DUE 2005, SERIES B
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> 93
3
Additional provisions of this Series B Note are set forth on the
other side of this Series B 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 Series B Notes referred
to in the Indenture,
By:
-------------------------
Authorized Signatory
<PAGE> 94
4
Guaranteed pursuant to the Indenture:
IRIDIUM ROAMING LLC
By:
----------------------------------
Name:
Title:
IRIDIUM IP LLC
By:
----------------------------------
Name:
Title:
<PAGE> 95
5
FORM OF REVERSE SIDE OF INITIAL SERIES B NOTE
14% Senior Note due 2005, Series B
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 Series B 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 Series B 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 Series B 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 Series B Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender the
Series B 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 Series B Notes under an
Indenture dated as of July 16, 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 Series B 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 Series B Notes are subject to all such terms, and
holders of Series B Notes are referred to the Indenture and the TIA for a
statement of them. The Series B Notes are obligations of the Note Issuers
limited in aggregate principal amount to $500,000,000. Payment on each Series B
Note is guaranteed on a senior basis, jointly and severally, by the Guarantor
Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 96
6
5. Optional Redemption.
Except as described in the next succeeding paragraph, the Series B
Notes will not be redeemable at the option of the Note Issuers prior to July
15, 2002. On and after such date, the Series B 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:
REDEMPTION
YEAR PRICE
---- -----
2002 107.500%
2003 103.750%
2004 and thereafter 100.000%
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 Series B 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 115% 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 Series B Notes must remain
outstanding after each such redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the Series B
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 Series B Note of $1,000 in original principal amount
or less will be redeemed in part. If any Series B Note is to be redeemed in
part only, the notice of redemption relating to such Series B Note will state
the portion of the principal amount thereof to be redeemed. A new Series B
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 Series B
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 Series B 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 transfer or similar laws affecting the rights of
creditors generally.
<PAGE> 97
7
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 Series B Notes at a purchase price in cash equal to 101% of the
principal amount of the Series B Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase.
9. Denominations; Transfer; Exchange
The Series B Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Series B 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 Series B Notes selected for
redemption (except, in the case of a Series B Note to be redeemed in part, the
portion of the Series B Note not to be redeemed) or to transfer or exchange any
Series B Notes for a period of 15 days prior to a selection of Series B Notes
to be redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Series B 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 Series B 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 Series B Notes, to replace mutilated, destroyed,
lost or stolen Series B Notes and to maintain a registrar and paying agent in
respect of the Series B 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
Series B Note; nor shall any such execution, delivery or endorsement thereafter
bind any Restricted Subsidiary).
13. Amendment and Waiver.
<PAGE> 98
8
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Series B 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 Series B 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 Series B Notes in addition to or in
place of certificated Series B Notes, to add further Subsidiary Guaranties with
respect to such Series B Notes, to release Guarantor Subsidiaries when permitted
by such Indenture, to secure such Series B Notes, to add to the covenants of the
Note Issuers for the benefit of the Holders of such Series B 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 Series B 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 Series B 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 Series B 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 Series B Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Holders of Series B Notes may not enforce
the Indenture or the Series B Notes except as provided in the Indenture. Under
certain circumstances, the Holders of a majority in principal amount of the
Series B Notes then outstanding may rescind any such acceleration with respect
to the Series B 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 Series B 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 Series B Notes by accepting a Series B 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 Series B Notes shall,
subject to certain limitations, have the right to exchange Initial Series B
Notes for the Exchange Series B Notes or Private Exchange Series B Notes, which
will be registered under the Securities Act, in like principal amount and
<PAGE> 99
9
having terms identical in all material respects as the Series B 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 Series B 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 SERIES B 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 Series B 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 Series B 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 Series B 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 Series B Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
<PAGE> 100
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 SERIES B NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
ATTENTION: GENERAL COUNSEL
<PAGE> 101
11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Series B 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 Series B 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> 102
12
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
RESTRICTED SECURITIES
This certificate relates to $__________ principal amount of Series B 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 Series B Note held by
the Depository a Series B Note or Series B Notes in definitive, registered
form of authorized denominations and an aggregate principal amount equal
to its beneficial interest in such Global Series B 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 Series B Note or Series B Notes.
In connection with any transfer of any of the Series B 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 Series B Notes and the last date, if any, on which such Series B Notes
were owned by the Note Issuers or any Affiliate of the Note Issuers, the
undersigned confirms that such principal amount of Series B 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 903 or 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;
or
(6) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act of 1933.
<PAGE> 103
13
Unless one of the boxes is checked, the Issuers or the Trustee will refuse to
register any of the Series B Notes evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (4), (5) or (6) is checked, the Issuers or the Trustee may require, prior to
registering any such transfer of the Series B 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
Series B 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> 104
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SERIES B NOTE(1)
The following increases or decreases in this Global Series B Note
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal amount Signature of
in Principal in Principal of this Global authorized officer
Date of Amount of this Amount of this Series B Note following such of Trustee or
Exchange Global Series B Note Global Series B Note decrease or increase Series B Notes Custodian
- -------- -------------------- -------------------- -------------------- ------------------------
</TABLE>
- --------------------
(1) This schedule should only be added if the Security is issued in
global form.
<PAGE> 105
15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Series B 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> 106
EXHIBIT B
FORM OF FACE OF EXCHANGE SERIES B NOTE
OR PRIVATE EXCHANGE SERIES B 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
14% SENIOR NOTE DUE 2005, SERIES B
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> 107
2
Additional provisions of this Series B Note are set forth on the
other side of this Series B 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 Series B Notes referred
to in the Indenture,
By:
------------------------------------
Authorized Signatory
<PAGE> 108
3
FORM OF REVERSE SIDE OF EXCHANGE SERIES B NOTE
14% Senior Note due 2005, Series B
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 Series B 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 Series B 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 Series B 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 Series B Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender the
Series B 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 Series B Notes under an Indenture dated as
of July 16, 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 Series B 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 Series B Notes are subject to all such terms, and holders
of Series B Notes are referred to the Indenture and the TIA for a statement of
them. The Series B Notes are obligations of the Note Issuers limited in
aggregate principal amount to $500,000,000. Payment on each Series B Note is
guaranteed on a senior basis, jointly and severally, by the Guarantor
Subsidiaries pursuant to Article X of the Indenture.
<PAGE> 109
4
5. Optional Redemption.
Except as described in the next succeeding paragraph, the Series B
Notes will not be redeemable at the option of the Note Issuers prior to July
15, 2002. On and after such date, the Series B 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:
REDEMPTION
YEAR PRICE
---- -----
2002 107.500%
2003 103.750%
2004 and thereafter 100.000%
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 Series B 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 115% 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 Series B Notes must remain
outstanding after each such redemption.
6. Notice of Redemption.
In the case of any partial redemption, selection of the Series B
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 Series B Note of $1,000 in original principal amount
or less will be redeemed in part. If any Series B Note is to be redeemed in
part only, the notice of redemption relating to such Series B Note will state
the portion of the principal amount thereof to be redeemed. A new Series B
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 Series B
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 Series B 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 transfer or similar laws affecting the rights of
creditors generally.
<PAGE> 110
5
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 Series B Notes at a purchase price in cash equal to 101% of the
principal amount of the Series B Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase.
9. Denominations; Transfer; Exchange.
The Series B Notes are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Series B 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 Series B Notes selected for
redemption (except, in the case of a Series B Note to be redeemed in part, the
portion of the Series B Note not to be redeemed) or to transfer or exchange any
Series B Notes for a period of 15 days prior to a selection of Series B Notes
to be redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners.
The registered Holder of this Series B 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 Series B 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 Series B Notes, to replace mutilated, destroyed,
lost or stolen Series B Notes and to maintain a registrar and paying agent in
respect of the Series B 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
Series B Note; nor shall any such execution, delivery or endorsement thereafter
bind any Restricted Subsidiary).
13. Amendment and Waiver.
<PAGE> 111
6
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Series B 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 Series B 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 Series B Notes in addition to or in
place of certificated Series B Notes, to add further Subsidiary Guaranties with
respect to such Series B Notes, to release Guarantor Subsidiaries when permitted
by such Indenture, to secure such Series B Notes, to add to the covenants of the
Note Issuers for the benefit of the Holders of such Series B 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 Series B 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 Series B 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 Series B 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 Series B Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Holders of Series B Notes may not enforce
the Indenture or the Series B Notes except as provided in the Indenture. Under
certain circumstances, the Holders of a majority in principal amount of the
Series B Notes then outstanding may rescind any such acceleration with respect
to the Series B 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 Series B 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 Series B Notes by accepting a Series B 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 Series B Notes shall,
subject to certain limitations, have the right to exchange Initial Series B
Notes for the Exchange Series B Notes or Private Exchange Series B Notes, which
will be registered under the Securities Act, in like principal amount and
<PAGE> 112
having terms identical in all material respects as the Series B 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 Series B 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 SERIES B 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 Series B 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 Series B 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 Series B 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 Series B 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 SERIES B NOTE IN LARGER TYPE. REQUESTS MAY BE MADE TO:
IRIDIUM LLC
1575 EYE STREET, N.W.
WASHINGTON, DC 20005
ATTENTION: GENERAL COUNSEL
<PAGE> 113
8
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Series B 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 Series B 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> 114
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SERIES B NOTE(1)
The following increases or decreases in this Global Series B Note
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal amount Signature of
in Principal in Principal of this Global authorized officer
Date of Amount of this Amount of this Series B Note following such of Trustee or
Exchange Global Series B Note Global Series B Note decrease or increase Series B Notes Custodian
- -------- -------------------- -------------------- -------------------- ------------------------
</TABLE>
- --------------------
(1) This Schedule should only be added if the Security is issued in
global form.
<PAGE> 115
10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Series B 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 Series B 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> 116
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") 14%
Senior Notes due 2005, Series B (the "Series B Notes")
Ladies and Gentlemen:
This letter relates to Series B Notes represented by a temporary
global note certificate (the "Temporary Certificate"). Pursuant to Section
2.01 of the Indenture dated as of July 16, 1997 relating to the Series B Notes
(the "Indenture"), the undersigned hereby certifies that (1) the undersigned is
the beneficial owner of $[__________] principal amount of initial Series B
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 Series B
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 Series B 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> 117
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 July 16, 1997
in regard of the 14% Senior Notes due 2005, Series B (the "Series B 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 Series B Notes.
Upon transfer, the Series B 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" Series B 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
Series B Notes and invests in or purchase securities similar to the Series B
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 Series B 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
Series B Notes to offer, sell or otherwise transfer such Series B Notes prior to
the date which is two years after the later of the date of original issue and
the last date on which the Issuers or any affiliate of an Issuer was the owner
of such Series
<PAGE> 118
2
B 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) or (f) pursuant
to any other available exemption from the registration requirements of the
Securities Act and, in each case (a) through (f), 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
Series B 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 Series B 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 Series B Notes pursuant to clause (d), (e) or (f) 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> 119
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") 14%
Senior Notes due 2005, Series B (the "Series B Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of July 16, 1997
in regard of the Series B 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
Series B Notes which are held in [the form of a beneficial interest in the
Regulation S Temporary Global Series B Note (CINS No. __________) with the
Depositary in the name of the undersigned] [definitive form].
The undersigned has requested transfer of such Series B Notes to a
Person who will take delivery thereof in the form of a beneficial interest in
the Rule 144A Global Series B 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 Series B Notes are being transferred to a transferee that
the undersigned reasonably believes is purchasing the Series B Notes for
its own account or one or more accounts with respect to which the
transferee exercises sole investment discretion; and
<PAGE> 120
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> 121
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") 14%
Senior Notes due 2005, Series B (the "Series B Notes")
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of July 16, 1997
in regard of the Series B 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 Series B 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 Series B 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 903(b) or 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 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
<PAGE> 122
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 Series B Notes should be registered in the name of the new
beneficial owner as follows:
Name:
----------------------------
Address:
-------------------------
Taxpayer ID Number:
--------------
<PAGE> 123
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 July 16, 1997, providing for the issuance of an
aggregate principal amount of up to $500,000,000 of 14% Senior Notes due 2005,
Series B (the "Series B 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 is 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 Series B 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 Series B 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 Series B 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
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 Series
B Notes heretofore or hereafter authenticated and delivered shall be bound
<PAGE> 124
2
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.
<PAGE> 125
3
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
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> 126
SCHEDULE I
Support Agreement, dated as of July 15, 1992 between Motorola and
Iridium, as amended.
<PAGE> 1
EXHIBIT 10.15
WAIVER NO. 1
WAIVER NO. 1 dated as of June 25, 1997, among:
IRIDIUM LLC, a limited liability company duly organized and validly
existing under the laws of the State of Delaware (the "Company");
MOTOROLA, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware ("Motorola"); and
THE CHASE MANHATTAN BANK, as administrative agent for the Lenders
under the Credit Agreement referred to below (in such capacity, the
"Administrative Agent").
The Company and the Administrative Agent are parties hereto
are parties to the Credit Agreement (the "Credit Agreement") dated as of August
21, 1996 among the Company, the lenders party thereto (collectively, the
"Lenders"), Chase Securities Inc. and BZW, the investment banking division of
Barclays Bank PLC, as Global Arrangers, the Administrative Agent, and Barclays
Bank PLC, as Documentation Agent, providing for loans to be made by the Lenders
to the Company in an aggregate principal amount not exceeding $750,000,000.
The Lenders and the Administrative Agent wish to waive certain
provisions of the Credit Agreement, and accordingly, the parties hereto hereby
agree as follows:
Section 1. Definitions. Terms defined in the Credit
Agreement are used herein as defined therein. References in the Credit
Agreement to "this Agreement" (and indirect references such as "hereunder",
"hereby", "herein" and "hereof") shall be deemed to be references to the Credit
Agreement as amended hereby.
Section 2. Waiver. Subject to the satisfaction of the
conditions precedent specified in Section 3 below, but effective as of the date
hereof, the Administrative Agent, by its signature below, hereby irrevocably
waives on behalf of the Lenders, with respect to the issuance by the Company of
its senior unsecured notes, any restriction under Section 8.13 of the Credit
Agreement that may apply to any indenture or other instrument pursuant to which
any such senior unsecured notes shall be issued.
Section 3. Conditions Precedent. As provided in Section 2
above, the waiver to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the execution and delivery of
this Waiver No. 1 by the
Waiver No. 1
<PAGE> 2
- 2 -
Company, Motorola and the Administrative Agent (acting with the consent of
Lenders constituting the Majority Lenders).
Section 4. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Waiver No. 1 may be executed in any number of counterparts, all of which taken
together shall constitute one and the same amendatory instrument and any of the
parties hereto may execute this Waiver No. 1 by signing any such counterpart.
This Waiver No. 1 shall be governed by, and construed in accordance with, the
law of the State of New York.
[Balance of Page Left Blank Intentionally]
Waiver No. 1
<PAGE> 3
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
No. 1 to be duly executed and delivered as of the day and year first above
written.
IRIDIUM LLC
By
--------------------------
Name:
Title:
MOTOROLA, INC.
By
---------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.17
Execution Copy
AMENDED AND RESTATED
AGREEMENT REGARDING GUARANTEE
This Amended and Restated Agreement Regarding Guarantee (this
"Agreement") is dated as of July 11, 1997, and amends and restates the
Agreement Regarding Guarantee originally dated as of August 21, 1996 (the
"Original Agreement Regarding Guarantee") between Motorola, Inc., a Delaware
corporation ("Motorola"), and Iridium LLC, a Delaware limited liability company
("Iridium"). Reference is made to that certain Memorandum of Understanding
(the "MOU"), dated as of July 11, 1997, between Motorola and Iridium.
Motorola has entered into a Guarantee Agreement, dated as of
August 21, 1996 (the "Bridge Guarantee Agreement"), pursuant to which Motorola
has guaranteed the payment of up to $750,000,000 of the obligations of Iridium
under that certain Credit Agreement, dated as of August 21, 1996, between
Iridium and the Lenders named therein (the "Bridge Agreement"). The original
Agreement Regarding Guarantee defined certain rights and obligations of the
parties relating to such guarantee and possible additional guarantees by
Motorola. Capitalized terms used and not otherwise defined herein shall have
the meanings defined in the Bridge Agreement.
Iridium plans to enter into a series of amendments to the
Bridge Agreement as described in the MOU (the "Bridge Agreement Amendments") to
amend the terms thereof and to provide for additional financing thereunder.
Subject to the terms of the MOU, Motorola will consent to the
Bridge Agreement Amendments and will enter into corresponding amendments to the
Bridge Guarantee Agreement to facilitate such Bridge Agreement Amendments (the
"Guarantee Agreement Amendments," and together with the Bridge Agreement
Amendments, the "Amendments").
The parties agree as follows:
1. Reimbursement Obligation.
(a) Iridium Default. Other than as set forth under
Section 1(b) below, if any to the extent that any Lenders demand that Motorola
pay, and Motorola does pay, any Guaranteed Amount pursuant to any Guarantee,
Iridium shall, promptly upon receipt
<PAGE> 2
from Motorola of a written demand for reimbursement, reimburse Motorola for
such Guarantee Payment, plus interest accruing at a rate equal to that which
would be in effect under the Credit Agreement relating to such Guaranteed
Amount, without duplication.
(b) Motorola Default. If a Guarantee Payment is made in
respect of a Guaranteed Amount that has been accelerated or otherwise become
due as a result of a Motorola-Based Default, then (i) Motorola shall assume and
become subject to the obligations of the Lenders under the applicable Credit
Agreement vis-a-vis Iridium (including, without limitation, the obligation to
make loans in the aggregate principal amount of such Lenders' commitments under
such Credit Agreement), (ii) Motorola shall assume and become entitled to the
benefits of the rights of the Lenders under such Credit Agreement vis-a-vis
Iridium (including, without limitation, the right to receive payments in
respect of loans made under such Credit Agreement, upon acceleration or
otherwise), but not including any provisions relating to a Guarantee or any
right or remedy arising as a result of the occurrence of a Motorola-Based
Default, (iii) Iridium shall become obligated to reimburse Motorola for such
Guarantee Payment and to repay any additional amounts for which Iridium may
become indebted to Motorola pursuant to clause (ii) above on the terms and
conditions contained in such Credit Agreement as such Credit Agreement is
modified by clause (ii) above, and (iv) Iridium shall continue to be subject to
the terms and conditions of such Credit Agreement (including, without
limitation, the covenants contained therein), as such Credit Agreement is
modified by clause (ii) above, it being expressly understood that Motorola
shall in such circumstances have the right to accelerate payments under and
otherwise exercise its rights under any such Credit Agreement to the extent set
forth therein as if it were a lender thereunder to the extent that such right
to accelerate or other rights arise from some event or circumstance other than
a Motorola-Based Default or a Guarantee.
(c) Costs and Expenses. Iridium further agrees to
reimburse Motorola for all reasonable out-of-pocket costs and expenses
(including, without limitation, the fees and expenses of legal counsel) in
connection with any enforcement of Iridium's obligations under Section 1(a)
(including, without limitation, any fees and expenses incurred in connection
with any bankruptcy proceedings).
(d) Subordination. The rights of Motorola under this
Section 1 shall be subject to the terms and conditions of any applicable
subordination agreements then in effect executed by Motorola for the benefit of
Iridium creditors.
-2-
<PAGE> 3
Execution Copy
2. Compensation to Motorola.
(a) Warrant Compensation. Except as described in Section
2(e), Iridium shall compensate Motorola for incurring the Motorola Exposure by
issuing warrants (the "Warrants") to purchase Class 1 Interests in Iridium
("Shares") to Motorola. The Warrants shall (i) be in substantially the form of
the warrants issued pursuant to the Original Agreement Regarding Guarantee,
(ii) provide for a ten year term and an exercise price of $0.00013 per Class 1
Interest; (iii) become exercisable on March 1, 2001 and (iv) provide for
issuance of Shares that (A) with respect to Shares issued for warrants received
on or prior to the Commercial Activation Date, may be sold without transfer
restrictions (other than transfer restrictions imposed by the LLC Agreement,
the Interest Exchange Agreement and applicable securities law) at any time
after the fifth anniversary of the exercise of the Warrants and (B) with
respect to Shares issued for warrants received after the Commercial Activation
Date, may be sold without transfer restrictions (other than transfer
restrictions imposed by the LLC Agreement, the Interest Exchange Agreement and
applicable law) at any time after the exercise of the Warrants. In addition, in
the event that Motorola earns Warrants with respect to periods beginning after
March 1, 2001, Iridium shall compensate Motorola with Shares issued directly to
Motorola in the amounts described below in lieu of Warrants. On the 45th day
following the end of each calendar quarter during which any Motorola Exposure
was outstanding at any time, Iridium shall issue a certificate to Motorola
evidencing the Warrants or Shares earned by Motorola in respect of the total of
such Motorola Exposure outstanding in such quarter.
(b) Calculation of Warrant Compensation. Motorola shall
earn Warrants or Shares based on the amount and duration of Motorola Exposure.
The number of Warrants or Shares shall be earned according to the following
table, pro rated both (A) for the actual dollar amount of Motorola Exposure
outstanding during each relevant period and (B) for the number of days such
Motorola Exposure was outstanding during such period. The following table
indicates the maximum amount of Warrants or Shares issuable for each full $100
million of Motorola Exposure, assuming such Motorola Exposure was outstanding
during the entire relevant period.
-3-
<PAGE> 4
Execution Copy
MOTOROLA EXPOSURE NUMBER OF WARRANTS PER $100 MILLION
OF MOTOROLA EXPOSURE PER YEAR
(Prior to the Commercial Activation Date)
$ 0 -- $ 499,999,999 0/412,500(1)
500,000,000 -- 749,999,999 637,500
750,000,000 -- (or more) 825,000
(AFTER THE COMMERCIAL ACTIVATION DATE)
$ 0 -- $275,000,000 0/412,500(1)
275,000,001 -- 499,999,999 412,500
500,000,000 -- 749,999,999 637,500
750,000,000 -- 849,999,999 825,000
850,000,000 -- 949,999,999 847,500
950,000,000 -- 1,049,999,999 877,500
1,050,000,000 -- (or more) 900,000
----------
(1) See Section 2(e) below
For example, (A) if there is $750,000,000 of Motorola Exposure outstanding for
a period of one year, which year is prior to the Commercial Activation Date,
Motorola will have earned Warrants relating to 6,187,500 Shares ($750,000,000 /
100,000,000 = 7.5; 7.5* 825,000 = 6,187,500), and (B) if there is $850,000,000
of Motorola Exposure outstanding for a period of two years, one of which years
is prior to the Commercial Activation Date and one of which is after the
Commercial Activation Date, Motorola will have earned Warrants relating to
14,216,250 Shares ($850,000,000 / 100,000,000 = 8.5; 8.5 * 825,000 = 7,012,500;
8.5 * 847,500 = 7,203,750; 7,012,500+7,203,750 = 14,216,250).
(c) Limitations on Warrant Compensation. Prior to the
Commercial Activation Date, Motorola shall not be eligible to earn Warrants
relating to more than (i) 11,250,000 shares with respect to the first
$749,999,999 in Motorola Exposure and (ii) 3,750,000 shares with respect to the
additional $350,000,000 in Motorola Exposure arising out of the Guarantee
Agreement, as amended, in each case subject to antidilution adjustments in
accordance with the terms of the Warrants. Motorola shall earn Warrants on the
entire Motorola Exposure from and after the Commercial Activation Date.
(d) Warrants Issued to Date. The parties acknowledge that
Warrants for 5,475,525 Shares have been earned by Motorola as of July 10, 1997
with respect to outstanding Motorola Exposure and such Warrants apply toward
the limitations set forth in Section 2(c)(i) of this Agreement.
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(e) High Yield Equivalent Compensation. During any period
in which each of the following conditions (the "High Yield Equivalent
Conditions") exists: (i) the Motorola Exposure outstanding shall be $275,000,00
or less; (ii) no other person or party providing guarantees for the support of
Iridium's indebtedness for borrowed money is receiving equity compensation from
Iridium or IWCL in respect of such guarantees; (iii) no mandatory prepayment or
redemption or acceleration of any Senior Notes (as defined in the MOU) has
occurred (except as a result of Motorola's disposition of Class 1 Interests
causing a "change in control" (as defined in the Offering Memorandum) to occur
under the Senior Notes); and (iv) Iridium has complied with the terms of this
Agreement and the MOU, then at Iridium's option, Iridium may pay Motorola cash
and warrant compensation ("High Yield Equivalent Compensation") for the
remaining Motorola Exposure in lieu of issuing additional Warrants pursuant to
Section 2(a) above ("Warrant Compensation"), in an amount equal to (x) the
average daily Motorola Exposure outstanding during any period for which the
High Yield Equivalent Conditions exist multiplied by the difference between (A)
the average daily interest rate actually charged by the Lenders under the
Bridge Agreement (or its equivalent, if the Bridge Agreement is no longer in
effect) for such period and (B) the daily equivalent interest rate under the
Initial Senior Notes (if relevant, using a weighted average of the interest
rates on the separate tranches of Initial Senior Notes; provided that, if the
daily equivalent interest rate in (B) is greater than the average daily
interest rate in (A), such difference between (A) and (B) shall be zero) plus
(y) the average daily Motorola Exposure outstanding during such period
multiplied by the daily equivalent of the warrant compensation payable to
holders of the Initial Senior Notes with respect to such amount (calculated on
a pro rata daily basis from the date of the issuance of the Initial Senior
Notes to the Stated Maturity), in each case multiplied by (z) the number of
days the High Yield Equivalent Conditions exist. Compensation payable during
any semi-annual period during which the High Yield Equivalent Conditions exist
shall be pro-rated between High Yield Equivalent Compensation and Warrant
Compensation based on the number of days the High Yield Equivalent Conditions
existed during such semi-annual period. High Yield Equivalent Compensation
shall be paid semi-annually in arrears within 45 days after the end of each
semi-annual period.
(f) Guarantee Reduction. In connection with any permanent
reduction of the Commitments under the Bridge Agreement, as amended, Iridium
will use its reasonable efforts to cause the Lenders thereunder to amend the
Bridge Agreement Guarantee to provide for a similar reduction in Motorola's
maximum liability thereunder.
(g) Additional Member and Interests. Iridium shall
provide Motorola with the additional Banking and Finance Committee member and
the Series B, Class 2 interests as described in Section 8 of the MOU.
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3. Iridium Representations and Warranties. Iridium
represents and warrants that:
(a) the representations and warranties of Iridium set
forth in Section 7 of the Bridge Agreement were true
and correct as of the date given under the Bridge
Agreement and the representations and warranties
given under any subsequent Credit Agreement will be
true and correct on the date given;
(b) the Certificates of Designation relating to Iridium's
Series B Class 2 interests and Series C Class 2
Interests have been duly adopted by Iridium's Banking
and Financing Committee in the form attached as Annex
J to the Original Agreement Regarding Guarantee and
all other necessary corporate actions have been taken
to duly authorize the issuance to Motorola of the
Series B Class 2 Interests and Series C Class 2
Interests; and
(c) the execution, delivery and performance of this
Agreement, the Warrants, the amendments and the other
agreements and instruments contemplated hereby to
which Iridium is a party, have been duly authorized
by Iridium; this Agreement, the Warrants, such
amendments, such waiver letter and the Certificates
of Designation relating to Iridium's Series B Class 2
Interests and Series C Class 2 Interests and all
other agreements contemplated hereby to which Iridium
is a party each constitutes a valid and binding
obligation of Iridium, enforceable in accordance with
its terms; the execution and delivery by Iridium of
this Agreement, the Warrants, such amendments, such
other agreements and instruments contemplated hereby
to which Iridium is a party, the offering, sale and
issuance of Iridium's Series B Class 2 Interests and
the Warrants hereunder, the issuance of Iridium's
Class 1 interests upon exercise of Warrants and the
fulfillment of and compliance with the respective
terms hereof and thereof by Iridium, do not and shall
not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute
a default under, (iii), except as provided in the
Security Agreement, result in the creation of any
lien, security interest, charge or encumbrance upon
Iridium's or any Subsidiary's equity capital or
assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any
obligation under, (v) result in a violation of, or
(vi)
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require any authorization, consent, approval,
exemption or other action by or notice or declaration
to, or filing with, any court or administrative or
governmental body or agency pursuant to, the charter,
limited liability company agreement or bylaws of
Iridium or any Subsidiary, or any law, statute, rule
or regulation to which Iridium or any Subsidiary is
subject, or any agreement, instrument, order,
judgment or decree to which Iridium or any Subsidiary
is subject.
4. Motorola Protection Rights. Iridium will provide
Motorola with written notice at least five full business days (and no more than
ten business days) prior to giving notice to the banks under any Credit
Agreement or any proposed borrowing which is covered by a Guarantee. In
addition, for so long as any Guarantees remain outstanding (unless the High
Yield Equivalent Conditions exist), Iridium shall not without the prior written
approval of Motorola (which may be withheld in the absolute discretion of
Motorola):
(a) subject to the terms of Section 8, sell, lease or
otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of, more than 5% of
the consolidated assets of Iridium and its
Subsidiaries (computed on the basis of book value,
determined in accordance with generally accepted
accounting principles consistently applied, or fair
market value, determined by Iridium's board of
directors in its reasonable good faith judgment) in
any transaction or series of related transactions or
sell or permanently dispose of any of its or any
Subsidiary's Intellectual Property Rights (other than
commercially available software designed for
operation on a personal computer or network of
personal computers);
(b) merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person
(other than a Wholly-Owned Subsidiary);
(c) liquidate, dissolve or effect a recapitalization or
reorganization of Iridium's capital structure in any
form of transaction;
(d) effect a change in the equity capitalization of
Iridium that requires the approval of the holders of
Shares;
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(e) directly or indirectly declare or pay any dividends
or make any distributions upon any of its equity
capital other than distributions to members made
pursuant to Section 3.07(a) of the LLC Agreement with
respect to certain members' U.S. tax liabilities;
(f) directly or indirectly redeem (other than a
redemption of the Series B or C Class 2 Interests of
Iridium pursuant to the LLC Agreement), purchase or
otherwise acquire, or permit any Subsidiary to
redeem, purchase or otherwise acquire, any of
Iridium's or any Subsidiary's capital stock or other
equity securities (including, without limitation,
warrants, options and other rights to acquire such
capital stock or other equity securities) other than
pursuant to the exercise of Iridium's remedies
against any holder of Shares pursuant to the terms of
the LLC Agreement or the 1993 Stock Purchase
Agreement (as defined in the LLC Agreement);
(g) incur any indebtedness for borrowed money other than
indebtedness the amount, terms and conditions
(including without limitations, the subordination
provisions) or which have been approved in advance by
the lenders to the extent required under any Credit
Agreement; or
(h) take any action or permit any circumstances to exist
which is prohibited under the terms of any Credit
Agreement or fail to take any action required to be
taken by it under the terms of any Credit Agreement,
in each case subject to the grace period applicable
to any default created by such action or circumstance
pursuant to such Credit Agreement; provided, however,
that this clause (h) shall not apply to any action or
circumstance that would constitute a Motorola Default
(as defined in the Bridge Agreement).
5. Amendments and Modifications to Credit Agreements.
Iridium shall not enter into any amendment, waiver, supplement or modification
of any Credit Agreement (other than any of the Bridge Agreement Amendments
contemplated by the MOU) without the prior written consent of Motorola, which
consent may be granted or withheld by Motorola in its sole discretion, but
acting in good faith.
6. Use of Proceeds. Iridium will use the proceeds of
the loans made under any Credit Agreement solely (i) to make payments to
Motorola at the times and in
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the amounts required pursuant to the SSC, the TNDC or the O&M Contract, (ii) to
pay fees and expenses payable to the Lenders and agents in connection with such
Credit Agreement and (iii) for general corporate purposes so long as the amount
subject to this clause (iii) does not exceed the amounts budgeted for such
purposes in the budget plans approved by Iridium's board of directors from time
to time.
7. Copies of Information and Notices. Any and all
material information, notices and correspondence provided by or on behalf of
Iridium to any Lender (whether or not required under the applicable Credit
Agreement shall be provided at the same time to Motorola.
8. Asset Drop Down. Motorola consents and agrees that
Iridium may establish a limited liability company Subsidiary at least
ninety-nine percent of the equity of which would be owned by Iridium ("Iridium
Sub") and transfer to Iridium Sub all or substantially all of the assets of
Iridium (the "Asset Drop Down"); provided Iridium Sub shall assume in writing
certain of Iridium's obligations under this Agreement and the Security
Agreement, with Iridium remaining subject to the remainder of such obligations,
all on terms and conditions mutually agreeable to Iridium and Motorola.
9. Referral of Matters to Related Party Contracts
Committee. Iridium acknowledges and agrees that the Contract Committee (as
defined in the LLC Agreement) of Iridium's board of directors has a limited
scope of authority with respect to the relationship between Motorola and
Iridium, and that only those matters specifically required by the LLC Agreement
and matters related to the Amended Guarantee Agreement, other contracts between
Motorola and Iridium and actions or claims by Iridium against Motorola and
other Affiliate Transactions (as defined in the Offering Memorandum) will be
taken to the Contract Committee for approval.
10. Conditions to Motorola's Obligations. The obligations
of Motorola hereunder are subject to the satisfaction of the condition that the
Indemnification Agreement of even date herewith by and between Motorola and
Iridium shall have been executed and delivered by Iridium.
11. Access. Iridium shall permit Motorola to have access
to relevant meetings, documents or other materials, other than Internal
Meetings, Documents and Materials (as defined below), directly relating to the
Guarantees or any Credit Agreement. "Internal Meetings, Documents and
Materials" means meetings between or among executives or employees of IWCL or
Iridium or between or among Iridium or IWCL and their consultants, advisors
and/or counsel; documents or other materials which are prepared in connection
with such meetings; and documents or other materials which are
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circulated solely between or among executives or employees of Iridium or IWCL
or between or among Iridium or IWCL and their consultants, advisors and/or
counsel.
12. Notices under this Agreement. All notices, requests,
demands, claims, and other communications hereunder will be in writing. Any
notice, request, demand, claim or other communication hereunder shall be deemed
duly given (i) when delivered, if personally delivered, (ii) when receipt is
electronically confirmed, if faxed (with hard copy to follow via first class
mail, postage prepaid) or (iii) one day after deposit with a reputable
overnight courier, in each case addressed to the intended recipient as set
forth below:
If to Iridium:
Iridium LLC
1575 Eye Street, NW
Washington, D.C. 20005
Attention: Vice President and Chief Financial Officer and
Vice President - General Counsel
Telecopy #: (202) 842-0006
If to Motorola:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Attention: Treasurer
Telecopy #: (847) 576-4768
with a copy (which shall not constitute notice) to:
Motorola, Inc.
425 North Martingale Road
Schaumburg, Illinois 60173
Attention: Vice President - Law Department, Iridium Matters
Telecopy #: (847) 435-3328
13. Definitions. The following terms when used in this
Agreement have the following meanings:
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"Commercial Activation Date" means the date of the first "Revenue
Producing Communication Message" as defined in the SSC (excluding subscriber
trials).
"Credit Agreement" means any agreement pursuant to which Iridium
incurs indebtedness for borrowed money which is Guaranteed by Motorola,
including without limitation, the Bridge Agreement, as amended.
"Guarantee" means any guarantee by Motorola of any obligations of
Iridium under any Credit Agreement or any note, agreement or other instrument
executed in connection therewith, including without limitation, the guarantee
set forth in the Amended Guarantee Agreement with respect to the Bridge
Agreement, as amended.
"Guarantee Agreement" means any agreement which evidences any
Guarantee.
"Guarantee Payment" means any payment which is demanded of Motorola by
a Lender pursuant to any Guarantee which is actually paid by Motorola, to the
extent so paid.
"Guaranteed Amount," with respect to any period, means the maximum
amount of Iridium's obligations for which Motorola has provided a Guarantee
during such period (regardless of the actual amount of Iridium's obligations
outstanding to any Lender during such period) together, without duplication,
with any Guarantee Payments which have been made by Motorola but not repaid by
Iridium.
"Lender" means any lender under any Credit Agreement, or any agent or
other authorized representative of any Lender, including without limitation the
Global Arrangers (as defined in the Bridge Agreement, as amended).
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data,
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data bases and documentation thereof, (vi) trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial and marketing plans
and customer and supplier lists and information), (vii) other intellectual
property rights and (viii) copies and tangible embodiments thereof (in whatever
form or medium).
"IWCL" means Iridium World Communications Ltd.
"LLC Agreement" means the limited liability company Agreement of
Iridium LLC dated as of July 19, 1996 as amended as contemplated by this
Agreement.
"Motorola-Based Default" means a default under the Bridge Agreement
which is caused solely and directly by actions taken by Motorola other than:
(A) a default occurring as the result of the ownership percentage
of Motorola and its affiliates falling below the thresholds
set forth in the Bridge Agreement (as amended by the amendment
described in Section 1(c)(iii) of the MOU) unless it falls
below such thresholds as the result of Motorola or an
affiliate disposing of Iridium's voting securities;
(B) any default in existence on or prior to a date on which
Iridium provides a notice of borrowing to the Lenders if
Iridium fails to provide prior notice to Motorola of such
borrowing in the manner prescribed in Section 4 hereof.
In addition, a Motorola-Based Default means a default under the Bridge
Agreement which is caused solely and directly by actions taken by Motorola as a
result of a demand for payment under a Guarantee which has arisen as a result
of a material default by Motorola under (1) the SSC, the TNDC or the O&M
Contract, so long as Iridium has fully complied in all material respects with
its obligations under the SSC, the TNDC and the O&M Contract and Motorola's
default is the primary cause for the default under the applicable Credit
Agreement which has caused such demand for payment, or (2) under any gateway
purchase agreement between Motorola and a gateway purchaser, so long as the
default by Motorola
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thereunder was not excused or caused by any default on the part of the
purchaser thereunder.
"Motorola Exposure" means the Commitments, the Guarantee Payments (to
the extent not repaid by Iridium) and the Vendor Financing Amount.
"Offering Memorandum" means the final offering memorandum, as amended
under Section 2(a) of the MOU, related to the issuance and sale by Iridium of
the Initial Senior Notes.
"O&M Contract" means the Operations and Maintenance Contract effective
July 29, 1993 between Iridium and Motorola, as amended from time to time.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock Iridium, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Notes" has the meaning set forth in the MOU.
"SSC" means the Space System Contract effective July 29, 1993 between
Iridium and Motorola, as amended from time to time.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
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"TNDC" means the Terrestrial Network Development Contract
effective January 1, 1993 between Iridium and Motorola, as amended
from time to time.
"Vendor Financing Amount" means the total amount (including
interest and expenses) of any vendor financing, including without
limitation, vendor financing contemplated by an amendment to the TNDC
or any other payment deferrals or payments made to, or for the benefit
of, Iridium, provided to Iridium or third parties by Motorola but not
including any vendor financing or payment deferrals under the TNDC
(including Amendment No. 3) in effect on the date hereof, so long as
payment are made under the TNDC when owed.
14. Complete Agreement. This Agreement and the other
agreements and instruments referred to herein embody the complete agreement and
understanding among the parties with respect to the matters addressed herein
and supersede and preempt the Original Agreement Regarding Guarantee and any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any
way.
15. Miscellaneous. This Agreement (a) is made under and
shall be governed by the laws of the State of New York without regard to
principles of conflict of laws, (b) is intended for the benefit of the parties
hereto and is not intended to benefit any other person and no person other than
the parties hereto may rely upon the provisions hereof, (c) may be executed in
counterparts, each of which taken together shall constitute one and the same
instrument, and (d) may be amended or waived only if such amendment or waiver
is in writing and signed by the party against whom it is sought to be enforced.
16. No Third Party Beneficiaries; Limited Rights Against
Motorola. The parties hereto agree that Iridium shall have no rights (apart
from those set forth in this Agreement, the MOU or any other written agreements
between such parties) against Motorola as a result of Iridium's inability to
meet drawing or other conditions under the Secured Bank Facility.
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IN WITNESS WHEREOF, the parties have entered into this
Amended and Restated Agreement Regarding Guarantee in each case as of the date
first above written.
IRIDIUM LLC
By: /s/ EDWARD F. STAIANO
----------------------------
Name: Edward F. Staiano
Title: Chairman and Chief Executive Officer
MOTOROLA, INC.
By: /s/ S. ERHART
----------------------------
Name: Stephen Erhart
Title:
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EXHIBIT 10.18
Execution Copy
MEMORANDUM OF UNDERSTANDING
Memorandum of Understanding ("MOU"), dated as of July 11, 1997,
between Motorola, Inc., a Delaware corporation ("Motorola"), and Iridium LLC, a
Delaware limited liability company ("Iridium").
Iridium proposes to enter into a $750 million senior secured interim
credit facility (the "Secured Bridge Facility") on the terms and conditions set
forth in that certain commitment letter, dated June 16, 1997, among Iridium and
the banks and financial advisors named therein attached hereto as Exhibit A
(the "Commitment Letter"). Subject to the terms and conditions set forth in
this MOU, Motorola intends to support Iridium's efforts to obtain the Secured
Bridge Facility, as described in the Commitment Letter, subject to certain
terms and conditions of the Secured Bridge Facility directly impacting Motorola
being revised (or clarified) from those set forth in the Commitment Letter,
substantially as set forth on Exhibit B attached hereto (the "Required
Revisions").
Iridium also proposes to issue and sell (the "High Yield Offerings")
one or more tranches of senior unsecured notes ("Senior Notes"), which are pari
passu to all the obligations of Iridium to Motorola and which raise net
proceeds to Iridium of no less than $650 million, including an offering (the
"Initial High Yield Offering") of senior notes (the "Initial Senior Notes"),
scheduled to close in July 1997, on the terms and conditions described in the
Offering Memorandum, in the form attached hereto as Exhibit C, as amended
pursuant to Section 2(a) (the "Offering Memorandum").
Reference is made to that certain Guarantee Agreement, dated as of
August 21, 1996 (the "Bridge Guarantee Agreement"), pursuant to which Motorola
has guaranteed the payment of up to $750,000,000 of the obligations of Iridium
under that certain Credit Agreement, dated as of August 21, 1996, between
Iridium and the Lenders named therein (the "Bridge Agreement"), and the
Agreement Regarding Guarantee, originally dated as of August 21, 1996, between
Motorola and Iridium (the "Agreement Regarding Guarantee"). Iridium plans to
enter into a series of amendments to the Bridge Agreement as described in this
MOU (the "Bridge Agreement Amendments") and the Agreement Regarding Guarantee
to amend the terms thereof and to provide for additional financing thereunder.
Subject to the terms of this MOU and the Agreement Regarding Guarantee (as so
amended), Motorola will consent to the Bridge Agreement Amendments and will
enter into corresponding amendments to the Bridge Guarantee Agreement to
facilitate
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such Bridge Agreement Amendments (the "Guarantee Agreement Amendments," and
together with the Bridge Agreement Amendments, the "Amendments").
The purpose of this Memorandum is to set forth certain binding
agreements between Motorola and Iridium that are intended to facilitate the
Secured Bridge Facility and the High Yield Offerings.
Section 1. Guaranteed Bank Facility.
(a) Amendment No. 1. Upon the written request of Iridium
provided prior to July 15, 1997, Motorola will consent to Iridium's entering
into an amendment to the Bridge Agreement ("Amendment No. 1") pursuant to which
only the following change shall be made to the Bridge Agreement: the definition
of "Commitment Termination Date" shall be changed to a date (the "Extended
Maturity Date") which is after (but no more than six months after) the maturity
of the Initial Senior Notes.
(b) Amendment No. 2. Subject to the terms of Section 8,
upon the written request of Iridium provided prior to February 28, 1999,
Motorola will consent to Iridium's entering into an amendment to the Bridge
Agreement ("Amendment No. 2") pursuant to which only the following change shall
be made to the Bridge Agreement: the Commitments thereunder shall be increased
by $350 million for borrowings made on or prior to February 28, 1999 (the
"Commitment Increase"). If requested by Iridium, the substance of Amendment No.
2 may be provided pursuant to a separate Credit Agreement on the same terms as
the then current terms of the Bridge Agreement, amended as contemplated by
Section 1(a) and this Section 1(b).
(c) Guarantee Agreement Amendments. Subject to the terms
of Section 8, Motorola will enter into the Guarantee Agreement Amendments
pursuant to which only the changes necessary to effect the foregoing shall be
made to the Guarantee Agreement; provided, however, that Motorola shall not be
required to agree to a Guarantee Agreement Amendment corresponding to the
Commitment Increase (the "Guarantee Increase") to the extent Motorola's
liability relating to such Guarantee Increase would exceed $350 million
(inclusive of principal and interest). In addition, subject to the terms of
Section 8, Motorola will enter into any amendment to a Guarantee Agreement, and
will consent to any amendment or other modification of a Credit Agreement,
pursuant to which solely the following changes shall be made: (i) the maximum
liability of Motorola under such agreement shall be reduced, (ii) the
Commitment of the Lenders shall be reduced and (iii) Section 9(n) of the Bridge
Agreement shall be amended so that Motorola shall not be required to retain,
free and
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clear of all Liens, more than 13,266,713 Class 1 Interests (as such number may
be affected from time to time by stock splits, stock dividends,
recapitalizations, etc.).
(d) Consolidation or Separation of Amendments. The
foregoing Amendments may be consolidated or separated into one or more
Amendments to the extent that such Amendments address the substantive issues
described in Sections 1(a)-(c) within the time frames set forth therein.
Section 2. Senior Notes.
(a) Terms of the Senior Notes. Iridium and Motorola
agree that Iridium currently proposes to issue and sell the Initial Senior
Notes with the Material Terms (as defined) set forth in the attached draft of
the Offering Memorandum and additional Senior Notes on substantially similar
terms (other than with respect to interest rate) as those set forth in the
Offering Memorandum. Iridium and Motorola agree that the inclusion of certain
terms of the Initial Senior Notes (the "Material Terms") were material
conditions to its agreements hereunder and that the inclusion of terms no less
favorable to Motorola in any issuance of Senior Notes is a material condition
to its continued performance hereunder. The "Material Terms" are those
described under "Description of Notes" in the Offering Memorandum under the
captions "Change of Control" (which shall be amended to delete the phrases "or
indirectly" and "and indirect" in subsection (a) of the definition "Change in
Control"), "Certain Covenants--Limitations on Indebtedness," "--Limitation on
Restricted Payments," "--Limitation on Transactions with Affiliates,"
"--Limitations on Liens" and "Defaults" (as well as any definitions used in
such provisions), each only as they relate to (i) Motorola or (ii) Iridium's
ability to make payments to Motorola under any written agreement between
Motorola and Iridium or prepay indebtedness under any Credit Agreement.
(b) Use of Proceeds. Iridium and Motorola agree
that Iridium will not permanently reduce the Commitments under the Bridge
Agreement prior to the issuance and sale of the Initial Senior Notes. Iridium
agrees that, to the extent that the net proceeds received by it from the
issuance and sale of the Senior Notes exceed $650 million by December 31, 1997,
it will apply such excess to a prepayment of the Loans under the Bridge
Agreement and to a permanent reduction of the Commitments thereunder (subject
to the obligations to prepay Loans in multiples of $1 million under section
2.03(b) of the Bridge Agreement); provided, however, that Iridium shall not be
required to reduce the Commitments under the Bridge Agreement to an amount less
than $275 million. In the event Iridium does not realize net proceeds of at
least $650 million from the issuance and sale of Senior Notes prior to December
31, 1997, Iridium agrees to promptly request that the Lenders under the Bridge
Agreement prepare an Amendment thereto for purposes
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only of effecting the Guarantee Increase and to execute and deliver such
Amendment at such time as all other parties to such Amendment are prepared to
do so.
(c) Repurchase of Senior Notes. Iridium agrees to
repay all amounts outstanding under the Bridge Agreement and to terminate the
Commitments thereunder prior to or simultaneously with any redemption of any
Senior Notes pursuant to any optional redemption provisions thereof. In the
event that Iridium is required to purchase any Senior Notes as a result of a
"change of control" as defined in the Offering Memorandum (other than a "change
of control" triggered by a change in Motorola's ownership of Iridium), Iridium
agrees to repay the Bridge Agreement (and any other Motorola Exposure (as
defined below)) pro rata with such purchase or, if Iridium is unable or
unwilling to do so, Iridium hereby waives its right to pay Motorola high yield
compensation pursuant to Section 2(e) of the Agreement Regarding Guarantee, as
amended, until it does so.
(d) Release of Security Interests. In connection
with, and conditioned on, the execution of an underwriting, purchase or similar
agreement by Iridium with respect to the Initial Senior Notes, Motorola will
execute and deliver such documents as are necessary to release the security
interests granted to it by Iridium in connection with the Bridge Guarantee
Agreement.
(e) Iridium agrees to use its reasonable efforts to
amend the Bridge Agreement as contemplated by Section 1(c)(iii) above by
December 31, 1997.
Section 3. Subordination.
(a) Motorola hereby agrees, subject to the terms of
Section 8, to execute and deliver subordination documents that subordinate any
Subordinated Claim (as defined below) to the obligations of Iridium under the
Secured Bridge Facility. "Subordinated Claim" means any claim or right of
Motorola against Iridium or any of its assets, whether for reimbursement, by
subrogation or otherwise, as a result of any payment of any amount under the
Bridge Guarantee Agreement, as increased or extended as contemplated herein;
provided, however, that references to "Subordinated Claims" shall include only
the first $75 million of Iridium's obligations to Motorola under the Commitment
Increase.
(b) The terms of the subordination agreement shall
not be any less favorable to Motorola than the following:
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Execution Copy
"In the event that Motorola acquires any Subordinated
Claim, such Subordinated Claim, and payment with respect
thereto, shall be subordinated to the prior indefeasible
payment in full in cash of all principal, interest and
other amounts due or which may become due under the Secured
Bridge Facility. Until such payment in full and termination
or expiration of any commitment under the Secured Bridge
Facility, Motorola shall not be permitted to accept any
payment, or exercise any right or remedy, with respect to
any Subordinated Claim (except to the extent required to
retain any claims or right against Iridium). In the event
that any payment on account of a Subordinated Claim is
received by Motorola prior to such time, it will hold such
payment in trust for the benefit of the lenders under the
Secured Bridge Facility and any other creditor with respect
to an obligation to which the Subordinated Claims are
subordinated pursuant to a written agreement executed and
delivered by Motorola (together with the Lenders under the
Secured Bridge Facility, the "Senior Creditors"), and will
pay over such amount to the Senior Creditors (pro rata
based on their applicable claims) or any agent or trustee
therefor."
(c) Motorola agrees, subject to the terms of
Section 8, that it will enter into such agreements as may be reasonably
requested by Iridium, or the administrative agent, with respect to the Secured
Bank Facility or the Senior Notes, to effect solely the foregoing provisions of
this Section 3; provided, however, that such agreement may contain only very
limited representations and warranties applicable to Motorola and no covenants
except for those described in this MOU, and, to the extent not inconsistent
with the terms of this MOU, in the Commitment Letter after giving effect to the
Required Revisions.
Section 4. Agreement Regarding Guarantee. Motorola and
Iridium each agree to execute and deliver an amended Agreement Regarding
Guarantee in the form attached hereto as Annex A contemporaneously with the
execution and delivery of this MOU.
Section 5. Secured Bridge Facility. Motorola acknowledges
that Iridium will seek to enter into the Secured Bridge Facility on the terms
and conditions set forth in the Commitment Letter after giving effect to the
Required Revisions, and, subject to the terms of Section 8, Motorola will use
its reasonable efforts to support Iridium in that effort, but only to the
extent fully consistent with this MOU and the Commitment Letter (after giving
effect to the Required Revisions).
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<PAGE> 6
Execution Copy
Section 6. Vendor Financing. Reference is made to the
Terrestrial Network Development Contract, as amended, between Motorola and
Iridium (the "TNDC"), pursuant to which Iridium is required to make payments to
Motorola for certain features and functionality contained in Amendment No. 3
thereto totaling $96,437,662 (including interest to be accrued from September
30, 1998 to the dates certain payments become due under the TNDC) on September
30, 1998 and thereafter (the "FOC Payments"). Motorola hereby agrees to allow
Iridium to defer paying Motorola the amounts of any of the FOC Payments from
the dates they become due under the TNDC to the Extended Maturity Date. The
amount of the FOC Payments deferred pursuant to this MOU, including accruing or
accrued but unpaid interest to the extent such deferral or interest would
exceed the amount which would have been payable at such dates payments become
due will be deemed to be "Vendor Financing" and compensated as such (and not
pursuant to the 10% interest charge under Amendment No. 3) until paid pursuant
to the terms of the Agreement Regarding Guarantee. The FOC Payments, if
deferred to the Extended Maturity Date will be deemed to be Subordinated Claims
only with respect to Iridium's obligations under the Secured Bridge Facility,
but will rank pari passu with all other senior unsecured indebtedness of
Iridium. Iridium agrees that any funds paid to Motorola by Iridium to reduce
Vendor Financing will first be applied to deferred payments then due generally
and then to the FOC Payments.
Section 7. Certain Additional Agreements.
(a) Iridium shall not have outstanding at any time
prior to the Extended Maturity Date (i) in excess of $1.7 billion in aggregate
principal amount of indebtedness for borrowed money that is secured by the
assets of Iridium other than indebtedness owned to Motorola, (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,
without limitation, the Initial Senior 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, unless, in each case, the total
Motorola Exposure is less than $275 million, Motorola is being compensated for
such Motorola Exposure pursuant to Section 2(e) of the Agreement Regarding
Guarantee, as amended, and only if the Motorola Exposure is not subordinated to
any Senior Notes.
(b) For the duration of any period in which the
Motorola Exposure is less than $275 million, Motorola is being compensated for
such Motorola Exposure pursuant to Section 2(e) of the Agreement Regarding
Guarantee, as amended, and Motorola has not been required to make any payments
under the Bridge Agreement Guarantee, Motorola will (i) cause its Series B
Class 2 Director to resign from the Iridium Board and (ii) deliver over to an
escrow agent selected by Motorola and Iridium all of its
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Execution Copy
Series B and Series C Class 2 Interests under an agreement specifying that such
agent shall not exercise any rights represented by those interests. Iridium
intends to reregister the transfer immediately after the Motorola Exposure is
more than $275 million.
(c) Iridium will exercise its existing option to
extend the Operation & Maintenance Contract between Motorola and Iridium if,
and at the time when, it is required to do so by the terms of the Senior Notes
or the Secured Bridge Facility or the terms of any other Credit Agreement.
Section 8. Conditions. Other than the requirements set
forth in Section 1(a) and Section 2(d) above (which are subject to Iridium's
compliance with Section 4, Iridium and Motorola acknowledge that the execution
and delivery of each document contemplated hereby is subject to the following
conditions: (i) Iridium's compliance with the Amended and Restated Agreement
Regarding Guarantee and Iridium's compliance with this MOU and (ii) with
respect to any document relating to the Secured Bridge Facility, the
consistency of the terms of the Secured Bridge Facility with the terms of the
Commitment Letter after giving effect to the Required Revisions and Motorola's
reasonable satisfaction in its good faith discretion with the form and
substance of such documentation. As a condition to Motorola's execution and
delivery of Amendment No. 2, Iridium must deliver to Motorola (i) a duly
authorized and executed amendment of its Limited Liability Company Agreement
(the "LLC Agreement") which provides for: (A) the issuance to Motorola of an
aggregate number of Series B Class 2 Interests (as defined in the LLC
Agreement) sufficient to provide Motorola with at lease six members of the
Iridium Board of Directors so long as the Motorola Exposure exceeds
$750,000,000 and (B) the right of Motorola to appointment of at least two
members of the Iridium Banking and Finance Committee so long as the Motorola
Exposure exceeds $750,000,000; (ii) evidence of the authorization of such
amendment and the issuance of the Series B Class 2 Interests by the Iridium
Board and are applicable committees thereof; and (iii) a certificate evidencing
such Series B Class 2 Interests. Iridium acknowledges that Motorola's
agreements set forth in this MOU also are conditioned upon consistency of the
transactions and agreements contemplated hereby with the terms set forth, or
referenced in this MOU and those outlined in the Offering Memorandum and the
Commitment Letter after giving effect to the Required Revisions. If the terms
of the transactions or agreements contemplated hereby vis-a-vis Motorola
differ materially and adversely from such documents, or contain additional
material and adverse terms (in each case, in Motorola's discretion acting in
good faith), Iridium acknowledges that Motorola has no obligation to execute
any documents or to consent to the transactions contemplated hereby.
* * * *
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Execution Copy
IN WITNESS WHEREOF, the parties have executed this Memorandum of
Understanding as of July 11, 1997.
MOTOROLA, INC.
By: /s/ S. ERHART
----------------------------
Name: Stephen Erhart
Title:
IRIDIUM LLC
By: /s/ EDWARD F. STAIANO
----------------------------
Name: Edward F. Staiano
Title: Chairman and Chief Executive Officer
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<PAGE> 9
EXHIBIT A
[Omitted. See Exhibit 10.21 of this Registration Statement.]
EXHIBIT B
A. The last paragraph under the "Collateral-Borrower's Assets"
section of the Commitment Letter, as it pertains to Motorola's
telecommunications obligations under (i) and (ii) thereunder, shall provide
that:
1. Motorola would plan to deliver a document, in form and substance
satisfactory to Motorola, which would permit Iridium LLC to assign to
representatives of the banks for the Interim Senior Secured Credit Facility its
right, set forth in Section 18.H. of the Space System Contract, to require
Motorola to use its best reasonable efforts to promptly apply for all the FCC
authorizations needed to transfer the FCC license to construct, launch and
operate the Iridium system, after receiving a legal opinion from Motorola's
counsel that the transferee entity is qualified to hold such license.
2. Motorola would also plan to deliver a document, in form and
substance satisfactory to Motorola, under which Motorola, Inc. would pledge its
shares of stock of Motorola Satellite Communications, Inc. to the banks who are
a party to the Interim Senior Secured Credit Facility in order to secure the
debt of Iridium LLC to those banks (but in no event to secure more than $25
million of that debt).
B. The first paragraph under "Collateral--Borrower's Assets" section
of the Commitment Letter, as it pertains to Motorola's intellectual property,
shall be as follows:
1. Motorola would also plan to deliver a document, in form and
substance satisfactory to Motorola, which would allow Iridium LLC to assign any
intellectual property rights that it has under Article 14 of the Space System
Contract and Article 11 of the Operations and Maintenance Contract, subject to
the conditions and qualifications in the next sentences, among others, solely
to an entity appointed by the banks who are a party to the Interim Senior
Secured Credit Facility with Iridium LLC or to any entity to which the banks
transfer the assets of Iridium LLC in the event of foreclosure (and to no other
entity), solely for that entity to operate the IRIDIUM System and for no other
purpose. Among the terms and conditions in the actual document would be the
following: (i) such assignment would be effective solely if Motorola is no
longer the operator or manager of the Space System because of a termination of
the Space System Contract and the Operations and Maintenance Contract; and (ii)
these rights would otherwise be non-assignable by Iridium LLC or that entity.
2. Motorola would also plan to deliver a document, in form and
substance satisfactory to Motorola which would be enforceable solely by the
entity properly appointed by the banks or to which the banks transfer the
assets under B.1. that Motorola, Inc. would not assert any intellectual
property right violations against such entity in
B-1
<PAGE> 10
connection with the operation and maintenance of the IRIDIUM System, for so
long as the assignment in B.1. is effective.
C. The "Project Ownership" section of the Commitment Letter shall be
amended to read as follows:
"Except as set forth below, Motorola, Inc. and its subsidiaries may
sell, encumber or transfer all Iridium LLC securities that they directly or
indirectly hold. However, Motorola, Inc. shall not transfer, encumber or sell
13,266,713 of its Class 1 interests (as such amount may be affected from time
to time by stock splits, stock dividends, recapitalizations, etc.) at any time
prior to sixty calendar days after the Final Maturity."
"Until sixty calendar days after the Final Maturity, Motorola, Inc.
would agree not to produce for itself or others a commercial satellite-based
space system which provides direct coverage to the entire earth and which is
designed to principally provide direct voice service to and from hand-held,
fully portable subscriber units no larger than the first-generation IRIDIUM
handheld voice units. This would not prohibit Motorola, Inc., in any event,
from producing satellite-based space systems for Iridium LLC, or any successor
or related entity."
D. The "Events of Default--Motorola Defaults" section of the
Commitment Letter, and other appropriate sections of the Commitment Letter,
shall incorporate the following concepts:
The "Events of Default--Motorola Defaults" shall only be (i) a default
by Motorola under any of the material "transaction documents" (after the
passage of time/providing of notice, the application of any "excusable delay"
provisions and after the expiration of any grace periods or cure provisions in
such documents) which would be of sufficient materiality to allow the other
party to then terminate such transaction document for Motorola's default; (ii)
final judgments against Motorola for the payment of money in excess of 3% of
Motorola's consolidated total stockholders' equity (exclusive of judgment
amounts covered by insurance) not dismissed or stayed within 60 days; (iii) a
default by Motorola in the payment when due (after applicable grace periods) in
the payment of principal and interest on debt in excess of 3% of Motorola's
consolidated total stockholders' equity; (iv) a bankruptcy proceeding being
commenced against Motorola which is not dismissed within 60 days; and (v) the
only transaction document termination event applicable to Motorola (apart from
the enforceability of liens) is that Motorola shall terminate any material
"transaction document" to which it is a party. In addition, (a) the FCC
license to construct, launch and operate the IRIDIUM system would be the only
"Telecommunications Approval or other governmental approval" which Motorola
would have to obtain, renew, maintain or comply with for purposes of the
"Motorola Default" clauses; (b) no gateway equipment purchase agreements or
subscriber equipment sales agreements individually pertaining to less than $100
million of products shall be deemed
B-2
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to be "transaction documents" or material transaction documents; and (c) it
would not be an event of default if Motorola does not enter into subscriber
equipment contracts at prices less than currently expected by Motorola or if
the Iridium system has no operator because Iridium LLC has not exercised its
option extension on the terms now in the Operation and Maintenance Contract.
B-3
<PAGE> 1
EXHIBIT 10.20
IRIDIUM LLC
IRIDIUM CAPITAL CORPORATION
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
Iridium World Communications Ltd.
$500,000,000 14% Senior Notes due 2005, Series B
PURCHASE AGREEMENT
July 11, 1997
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER
AND SMITH 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 units (the "Units") each
consisting of $1,000 principal amount of 13% Senior Notes due 2005, Series A
(the "Series A Notes") and one warrant (each, a "Warrant" and, collectively,
the "Warrants"), which represents the right to purchase 5.2 shares (each, a
"Warrant Share" and, collectively, the "Warrant Shares") of Class A Common
Stock, $0.01 par value per share (the "Class A Common Stock"), of Iridium World
Communications Ltd., a Bermuda company ("IWCL") and $500,000,000 aggregate
principal amount of 14% Senior Notes due 2005, Series B (the "Series B Notes"
and, together with the Series A Notes, 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 IWCL and the Note Issuers, the "Issuers"). The Units, the Notes,
the Warrants and the Guarantees are collectively referred to herein as the
"Securities"). The Series A Notes will be issued pursuant to an Indenture to
be dated as of July 16, 1997 (the "Series A Note Indenture") among the Note
Issuers, the Guarantor Subsidiaries and State Street Bank and Trust Company, as
trustee (the "Series A Note Trustee"). The Series B Notes will be issued
pursuant to an Indenture to be dated as of July 16, 1997 (the "Series B Note
Indenture" and, together with the Series A Note Indenture, the "Indentures")
among the Note Issuers, the Guarantor Subsidiaries and State Street Bank and
Trust Company, as trustee (the "Series B Note Trustee" and, together with the
Series A Note Trustee, the "Trustees"). The Warrants are to be issued under a
warrant agreement to be dated as of July 16,
<PAGE> 2
1997 between IWCL and State Street Bank and Trust Company, as warrant agent (in
such capacity, the "Warrant Agent"). The Units will be issued under a unit
agreement dated as of July 16, 1997 (the "Unit Agreement") among the Issuers,
the Series A Note Trustee, the Warrant Agent, and State Street Bank and Trust
Company, as unit agent (in such capacity, the "Unit Agent"). The Issuers
hereby confirm their agreement with Chase Securities Inc. ("CSI") and Merrill
Lynch, Pierce, Fenner and Smith Incorporated (together with CSI, the "Initial
Purchasers") concerning the purchase of the Units and Series B Notes from the
Note Issuers by the several Initial Purchasers.
The Units and Series B 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 have prepared a preliminary offering memorandum dated June 19,
1997, as supplemented by a supplement dated June 19, 1997 (collectively, the
"Preliminary Offering Memorandum") and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning the Issuers and the Securities. Copies of the Preliminary Offering
Memorandum have been, and copies of the Offering Memorandum will be, delivered
by the Issuers to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and
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 Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offering and resale of the Units and
Series B 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 of two series of senior notes of the Note
Issuers (the "Exchange Notes") which are identical in all material respects to
the Series A Notes and Series B Notes, respectively (except that neither issue
of Exchange Notes will 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").
IWCL and Iridium have entered into (i) an interest exchange
agreement dated June 9, 1997, as amended (the "Exchange Agreement"), (ii) a
share issuance agreement dated as of June 9, 1997, as amended (the "Share
Issuance Agreement") and (iii) a management services agreement dated as of June
9, 1997, as amended (the "Management Services Agreement" and, collectively with
the Exchange Agreement, the Share Issuance Agreement and the Limited Liability
Company Agreement of Iridium, dated as of July 29, 1996, as amended (the "LLC
Agreement"), the "Governance Agreements").
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<PAGE> 3
Pursuant to the Share Issuance Agreement, IWCL will use the
net proceeds it receives from the sale of the Warrants to purchase warrants
(the "LLC Interest Warrants") from Iridium having the same tenor and terms as
the Warrants and, upon the exercise of any Warrant, IWCL will exercise a LLC
Interest Warrant and pursuant to such exercise will purchase from Iridium, and
Iridium will sell to IWCL, a number of Class 1 Membership Interests in Iridium
(the "Class 1 Interests") equal to the number of Warrant Shares issuable upon
such exercise for a purchase price equal to the exercise price of such Warrant
(subject in each case to the adjustments provided in the Share Issuance
Agreement and the LLC Interest Warrants). The Class 1 Interests to be
purchased by IWCL from Iridium pursuant to the LLC Interest Warrants are
referred to herein as the "LLC Warrant Interests".
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) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and on the
Closing Date the Offering Memorandum 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
Preliminary Offering Memorandum or 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) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, 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 Units and Series B
Notes to the Initial Purchasers and the offer, resale and delivery of
the Units and Series B Notes 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
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
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<PAGE> 4
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 or IWCL,
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) IWCL has been duly incorporated and is validly existing
as an exempted company in good standing under the laws of Bermuda, 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, singularly or in the aggregate, have a Material
Adverse Effect.
(f) 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. IWCL and Capital have no subsidiaries.
(g) Iridium and IWCL have an authorized capitalization as set
forth in the Offering Memorandum under the heading "Capitalization";
all of the outstanding shares of capital stock of IWCL and all of the
outstanding limited liability company interests of Iridium have been
duly and validly authorized and issued and are fully paid and
non-assessable (except as disclosed in the Offering Memorandum under
the caption "Description of Iridium LLC Limited Liability Company
Agreement - Limitations on Liability" and "Description of Iridium LLC
Limited Liability Company Agreement - Capital Contributions; Reserve
Capital Call" and as provided under Section 607 of the Delaware
Limited Liability Company Act (the "Delaware Act")) and were not
issued in violation of any preemptive or similar rights; and the
capital stock of IWCL and limited liability company interests of
Iridium conform in all material respects to the description thereof
contained in the Offering Memorandum. All of the limited liability
company interests of Iridium owned by IWCL are owned free and clear of
any lien, charge, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party (except as
set forth in Section 2.09 of the LLC Agreement and Section 607 of the
Delaware Act, as disclosed in the Offering Memorandum and pursuant to
the Global Ownership Program). All of the outstanding shares of
capital stock or limited
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<PAGE> 5
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.
(h) The Issuers have full right, power and authority to
execute and deliver this Agreement, the Indentures, the Registration
Rights Agreement, the Securities, the Exchange Notes, the Private
Exchange Notes (as defined in the Registration Rights Agreement), if
any, the Warrant Agreement, the Warrant Shares, the Unit Agreement,
the Share Issuance Agreement, the LLC Interest Warrants and the LLC
Warrant Interests (collectively, the "Transaction Documents") to the
extent a party thereto and to perform their obligations hereunder and
thereunder.
(i) This Agreement has been duly authorized, executed and
delivered by the Issuers.
(j) 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 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.
(k) Each 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, each 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.
(l) 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
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<PAGE> 6
and the Guarantor Subsidiaries, as the case may be, entitled to the
benefits of the applicable 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.
(m) The Warrant Agreement has been duly authorized by IWCL
and the Share Issuance Agreement has been duly authorized by IWCL and
Iridium and, when each is duly executed and delivered in accordance
with its terms by each of the parties hereto, will constitute a valid
and legally binding agreement of IWCL (in the case of the Warrant
Agreement) or of IWCL and Iridium (in the case of the Share Issuance
Agreement) as the case may be enforceable against IWCL and 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.
(n) The Warrants have been duly authorized by IWCL for
issuance, and when executed by IWCL and countersigned by the Warrant
Agent in accordance with the provisions of the Warrant Agreement, and
delivered and paid for in accordance with the terms hereof, will have
been duly executed, issued and delivered and will be entitled to the
benefits of the Warrant Agreement and will constitute valid and
binding obligations of IWCL enforceable against IWCL in accordance
with the terms of such Warrants, 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.
(o) The Warrant Shares, when authenticated and issued in
accordance with the terms and conditions contained in the Warrant
Agreement upon exercise of the Warrants and payment of the applicable
exercise price, will be duly authorized, validly issued, fully paid
and non-assessable, will not be subject to any preemptive or similar
rights, and will be free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability (other than
those, if any, imposed by Bermuda law, the Securities Act, the
securities or "Blue Sky" laws of certain jurisdictions as described in
the Offering Memorandum) or voting and upon full payment of the
consideration therefor, no holder of Warrants or Warrant Shares will
be subject to personal liability by reason of being such a holder.
The Warrant Shares have been duly reserved for issuance in accordance
with the terms of the Warrants and the Warrant Agreement.
(p) The Unit Agreement has been duly authorized by the
Issuers 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 Issuers enforceable against the
Issuers 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. The Units, when
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<PAGE> 7
duly executed, authenticated, issued and delivered as provided in the
Unit Agreement, will be duly and validly issued and outstanding and
will constitute valid and binding obligations of the Issuers entitled
to the benefits of the Unit Agreement and enforceable against the
Issuers 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.
(q) The LLC Interest Warrants and LLC Warrant Interests have
been duly authorized for issuance and sale to IWCL pursuant to the
Share Issuance Agreement (in the case of the LLC Interest Warrants) or
the LLC Interest Warrants (in the case of the LLC Warrant Interests)
and, when issued and delivered by Iridium pursuant to the Share
Issuance Agreement (in the case of the LLC Interest Warrants) or the
LLC Interest Warrants (in the case of the LLC Warrant Interests)
against payment of the consideration set forth therein, will be
validly issued, and (except as set forth in Section 2.09 of the LLC
Agreement and Section 607 of the Delaware Act) the LLC Warrant
Interests will be fully paid and non-assessable; the LLC Interest
Warrants and Class 1 Interests will conform in all material respects
to the descriptions thereof contained in the Offering Memorandum and
such descriptions conform to the rights set forth in the instruments
defining the same (except as disclosed in the Offering Memorandum
under the caption "Description of Iridium LLC Limited Liability
Company Agreement--Limitations on Liability" and "Description of
Iridium LLC Limited Liability Company Agreement - Capital
Contributions; Reserve Capital Call" and as provided under Section 607
of the Delaware Act) and will be free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party; except as described in the
Offering Memorandum under the caption "Description of Iridium LLC
Limited Liability Company Agreement--Limitations on Liability," no
holder of the LLC Interest Warrants and the LLC Warrant Interests will
be subject to personal liability by reason of being such a holder; and
the issuance of the LLC Interest Warrants pursuant to the Share
Issuance Agreement and the LLC Warrant Interests pursuant to the LLC
Interest Warrants is not subject to the preemptive or other similar
rights of any member of Iridium. Pursuant to the 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 Iridium until all of the assets and capital of Iridium
have first been exhausted in satisfaction thereof.
(r) Each of the Transaction Documents described in the
Offering Memorandum and the Governance Agreements conforms in all
material respects to the description thereof contained in the Offering
Memorandum. The Issuers make no representation or warranty as to
whether this Agreement conforms to the description thereof contained
in the Offering Memorandum.
(s) 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, the Private Exchange Notes, if any, the
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<PAGE> 8
Warrants, the Warrant Shares, the LLC Interest Warrants and the LLC
Warrant Interests, and compliance by the Issuers with the terms
thereof and the consummation of the transactions contemplated by the
Transaction Documents and the Governance Agreements 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 material indenture, mortgage, deed of trust, loan
agreement or other material agreement (including the Governance
Agreements) 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, memorandum of
association, bye-laws, 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, the Private Exchange Notes, if
any, the Warrants, the Warrant Shares, the LLC Interest Warrants and
the Class 1 Interests, 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, the Warrant Agreement and the Share Issuance
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 IWCL or Iridium.
(t) 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 IWCL, 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 IWCL, 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
8
<PAGE> 9
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.
(u) 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 governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of IWCL
or Iridium, threatened, against or affecting IWCL or Iridium, which
would be required to be disclosed in a registration statement with
respect to the Securities on Form S-1, 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, if determined adversely to IWCL or Iridium, of its
obligations hereunder or thereunder; all pending legal or governmental
proceedings to which IWCL or Iridium is a party or of which any of
their respective 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.
(v) 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, the Private Exchange Notes, if any, the Warrants, the
Warrant Shares, the LLC Interest Warrants or the LLC Warrant Interests
pursuant to the Transaction Documents, or suspends the sale of the
Securities, the Exchange Notes, the Private Exchange Notes, if any,
the Warrants, the Warrant Shares, the LLC Interest Warrants or the
Class 1 Interests, 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, the Private Exchange Notes, if any, the Warrants,
the Warrant Shares, the LLC Interest Warrants or the Class 1
Interests, or the use of the Preliminary Offering Memorandum or 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.
(w) None of the Issuers is (i) in violation of its charter,
memorandum of association, bye-laws, by-laws, certificate of formation
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 (including the Governance
Agreements) or instrument to which it is a party or by which it
9
<PAGE> 10
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.
(x) Except as disclosed in the Offering Memorandum or as
would not have a Material Adverse Effect, (i) Iridium possesses 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 Material Adverse Effect; and neither IWCL nor
Iridium has 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.
(y) 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").
(z) Iridium and IWCL maintain 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 reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) Iridium has insurance as required by Section 4.17 of the
Indentures.
(bb) 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
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<PAGE> 11
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
neither IWCL nor Iridium has 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 IWCL or 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.
(cc) IWCL owns no real property. Iridium has good and
marketable title to all real property it owns; and IWCL and Iridium
have good title to all other properties owned by them, in each case,
free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a)
are described in the Offering Memorandum or (b) would not, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect; and all of the leases and subleases material to the business
of IWCL and Iridium, considered as one enterprise, and under which
IWCL and Iridium hold properties described in the Offering Memorandum,
are in full force and effect, and neither IWCL nor Iridium has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of IWCL or Iridium under any of the
leases or subleases mentioned above, or affecting or questioning the
rights of IWCL or 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.
(dd) No labor dispute with the employees of any of the
Issuers exists or, to the knowledge of the Issuers, is imminent.
(ee) 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.
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(ff) Except as described in the Offering Memorandum and
except as would not, singly or in the aggregate, result in a Material
Adverse Effect, (A) neither IWCL nor Iridium is 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"), (B) Iridium has all permits, authorizations and approvals
required under any applicable Environmental Laws and is in compliance
with its requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
Iridium and (D) 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 IWCL or Iridium
relating to Hazardous Materials or any Environmental Laws.
(gg) 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 and (viii) the Motorola MOU
(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
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
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<PAGE> 13
losses, damages or claims of any person to the extent that such
provision may be limited by applicable laws.
(hh) Neither IWCL nor Iridium, nor to the best knowledge of
the Issuers, any other party to any of the Governance Agreements, is
in breach of, or in default in the performance or observance of, any
material obligation, term, covenant or condition contained in any of
the Governance Agreements. Each of the Governance Agreements that
Iridium has 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. Each of IWCL and Iridium has duly and validly authorized,
executed and delivered each of the Governance Agreements to which it
is a party and, to the best of the Issuers' knowledge, the other
parties to each of the Governance Agreements have duly and validly
executed and delivered each of the Governance Agreements and, assuming
due and valid authorization, execution and delivery by such other
parties, each of the Governance Agreements to which IWCL or Iridium is
a party is a valid and legally binding agreement of IWCL and Iridium,
enforceable against IWCL and Iridium as applicable 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 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 laws.
(ii) 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.
(jj) 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.
(kk) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(ll) 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
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<PAGE> 14
Purchaser, any affiliate thereof or any person acting on its behalf,
or with respect to any obligation thereof.
(mm) 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.
(nn) 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 Units or Series B 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.
(oo) 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, other than the Class A Common
Stock of IWCL. The Class 1 Interests of Iridium may be required to be
registered under the Exchange Act.
(pp) 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 Units and Series B
Notes.
(qq) 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.
(rr) 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.
(ss) 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
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<PAGE> 15
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 IWCL or Iridium, (iii) the Issuers have not entered into
any transaction, other than in the ordinary course of business which
is material with respect to IWCL or 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.
(tt) Each of Iridium and IWCL 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 number of Units and principal amount of Series B Notes set forth
opposite the name of such Initial Purchaser on Schedule 1 hereto at a purchase
price of $975.98 per Unit ($57.04 to be allocated to the purchase of the
Warrants included therein) and 95.429% of the principal amount of the Series B
Notes. The Note Issuers shall not be obligated to deliver any of the Units or
Series B Notes except upon payment for all of the Units and Series B Notes to
be purchased as provided herein.
(b) The Initial Purchasers have advised the Issuers that they
propose to offer the Units and Series B Notes 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 Units and Series B
Notes 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, 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
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<PAGE> 16
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 (h),
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. Chase
Securities Inc. 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 Units or Series B Notes 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 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 Units 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 Units and Series B
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<PAGE> 17
Notes 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 Units (including the Series A Notes and Warrants covered thereby) and
Series B Notes and payment for the Units and Series B 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 July 16, 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").
(b) On the Closing Date, payment of the purchase price for
the Units and Series B Notes 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 Units, Notes and
Warrants. 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 Units, Notes and
Warrants 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 Units (including the Series A Notes and Warrants)
and the Series B Notes 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 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
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<PAGE> 18
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
Units and Series B 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 and IWCL are 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 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
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<PAGE> 19
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 (j) 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 or equity
securities or membership interests 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, the Global Ownership Program or the
Iridium Option Plan), without the prior written consent of the Initial
Purchasers;
(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
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<PAGE> 20
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 Units and Series B
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;
(n) to apply the net proceeds from the sale of the Securities
and Warrant Shares as set forth in the Offering Memorandum under the
heading "Use of Proceeds"; and
(o) to use its best efforts to maintain the quotation of the
Class A Common Stock on the Nasdaq National Market and will file with
the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are
traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market.
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
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<PAGE> 21
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 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) Conyers Dill & Pearman shall have furnished to the
Initial Purchasers their written opinion, as counsel to IWCL,
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) 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 D hereto.
(g) F. Thomas Tuttle, Esq. shall have furnished to the
Initial Purchasers his written opinion, as Assistant Secretary of IWCL
and 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 E hereto.
(h) 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.
(i) 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
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<PAGE> 22
information as they reasonably request for the purpose of enabling
them to pass upon such matters.
(j) 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.
(k) 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.
(l) 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 IWCL or 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
(or in the case of IWCL, the Assistant Secretary) of each of IWCL and
Iridium and of the chief financial or chief accounting officer of each
of IWCL and 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.
(m) 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 F
hereto.
(n) The Initial Purchasers shall have received a counterpart
of the Registration Rights Agreement, the Warrant Agreement, the Unit
Agreement and the Share Issuance
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<PAGE> 23
Agreement which shall have been executed and delivered by a duly
authorized officer of the applicable Issuer or Issuers party thereto.
(o) Each of the Indentures shall have been duly executed and
delivered by the Note Issuers, the Guarantor Subsidiaries and the
applicable Trustee, and the Units, Notes and Warrants shall have been
duly executed and delivered by the Issuers and duly authenticated by
the Unit Agent, the applicable Trustee and the Warrant Agent.
(p) The Units, Notes and Warrants shall have been approved by
the NASD for trading in the PORTAL Market.
(q) 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.
(r) 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.
(s) 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 or IWCL, 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).
(t) 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,
the Private Exchange Notes, if any, the Warrant Shares, the LLC
Interest Warrants or the LLC Warrant Interests 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, the Private Exchange
Notes, if any, the Warrants, the LLC Interest Warrants or the LLC
Warrant Interests.
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<PAGE> 24
(u) Subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating
accorded 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 Securities.
(v) 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, the Nasdaq National Market or
Bermuda, 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.
(w) Motorola shall have released the security interests and
other liens on the assets of Iridium granted in favor of Motorola that
secure Iridium's obligations to Motorola under the Agreement Regarding
Guarantee.
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 Units and Series B
Notes if, prior to that time, any of the events described in Section 5(r), (s),
(t), (u) or (v) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing
Date, an Initial Purchaser defaults in the performance of its obligations under
this Agreement, the non-defaulting Initial Purchaser may make arrangements for
the purchase of the Units or Series B Notes which such defaulting Initial
Purchaser agreed but failed to purchase by other persons satisfactory to the
Issuers and the non-defaulting Initial Purchaser, but if no such arrangements
are made within 24 hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Initial Purchaser or the
Issuers, except that the Issuers will continue to be liable for the payment of
expenses to the extent set forth in Sections 8 and 12 and except that the
provisions of Sections 9 and 10 shall not terminate and shall remain in effect.
As used in this Agreement, the term "Initial Purchasers" includes, for all
purposes of this Agreement unless the
24
<PAGE> 25
context otherwise requires, any party not listed in Schedule 1 hereto that,
pursuant to this Section 7, purchases Securities which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Issuers or the
non-defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Units or Series B Notes of a
defaulting Initial Purchaser, either the non-defaulting Initial Purchaser 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 Units and Series B Notes. If this
Agreement is terminated pursuant to Section 7 by reason of the default of one
or both 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
and the Warrant Shares), 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 Preliminary Offering Memorandum or 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; and
provided, further, that with respect to any such
25
<PAGE> 26
untrue statement in or omission from the Preliminary Offering Memorandum, the
indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser
results from the fact that both (A) to the extent required by applicable law or
this Agreement, a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Units or
Series B Notes to such person and (B) the untrue statement in or omission from
the Preliminary Offering Memorandum was corrected in the Offering Memorandum
(unless, in either case, such failure to deliver the Offering Memorandum was a
result of non-compliance by the any of the Issuers with Section 4(b)).
(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 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 Preliminary
Offering Memorandum or 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
26
<PAGE> 27
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 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
27
<PAGE> 28
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 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
Preliminary Offering Memorandum, 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(h) and of preparing, printing
and distributing Blue
28
<PAGE> 29
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 Trustees 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:
(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);
(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); or
(c) if to IWCL, shall be delivered or sent by mail or telecopy
transmission to Clarendon House, 2 Church Street, Hamilton HM,
Bermuda, attention of the Secretary (with a copy to Iridium);
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
29
<PAGE> 30
following information in the Preliminary Offering Memorandum and 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 inside front
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, 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.
30
<PAGE> 31
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
------------------------------
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By
------------------------------
Name:
Title:
IRIDIUM WORLD COMMUNICATIONS LTD.
By
------------------------------
Name:
Title:
IRIDIUM ROAMING LLC
By
------------------------------
Name:
Title:
IRIDIUM IP LLC
By
------------------------------
Name:
Title:
31
<PAGE> 32
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
32
<PAGE> 33
SCHEDULE 1
<TABLE>
<CAPTION>
Initial Purchasers Number of Units
- ------------------ ---------------
<S> <C>
Chase Securities Inc. 200,100
Merrill Lynch, Pierce, Fenner
and Smith Incorporated 99,900
---------------
Total 300,000
</TABLE>
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Series B Notes
- ------------------ ----------------------------------
<S> <C>
Chase Securities Inc. $333,500,000
Merrill Lynch, Pierce, Fenner
and Smith Incorporated 166,500,000
---------------
Total $500,000,000
</TABLE>
33
<PAGE> 34
ANNEX A
Iridium LLC
Iridium Capital Corporation
$300,000,000 13% Senior Notes due 2005, Series A
and
$500,000,000 14% Senior Notes due 2005, Series B
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of July 16, 1997
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER
AND SMITH 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") and Merrill Lynch, Pierce, Fenner and
Smith Incorporated (together with CSI, the "Initial Purchasers"), upon the
terms and subject to the conditions set forth in a purchase agreement dated
July 11, 1997 (the "Purchase Agreement"), (i) 300,000 Units, consisting of
$300,000,000 aggregate principal amount of Series A Notes and 300,000 Warrants,
and (ii) $500,000,000 aggregate principal amount of Series B Notes. The Series
A Notes and Series B Notes are collectively referred to herein as 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
15 days following the date of original
<PAGE> 35
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
Series A Notes or the Series B Notes, as the case may be, a like aggregate
principal amount of debt securities of the Issuers that are identical in all
material respects to the Series A Notes or the Series B Notes, as the case may
be (the debt securities issued in exchange for the Series A Notes and the debt
securities issued in exchange for the Series B Notes are collectively 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 52 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 82 days after the
Issue Date (or if the 52nd day or 82nd 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
Indentures or indentures (the "Exchange Notes Indentures") each among the
Issuers, the Guarantor Subsidiaries and the applicable Trustee or such other
bank or trust company, as trustee (the "Exchange Notes Trustees"), such
indentures to be identical in all material respects to the Indentures, 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), and 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 two-thirds
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
2
<PAGE> 36
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 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 Note 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 Note 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 related 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.
3
<PAGE> 37
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;
(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 Indentures or the Exchange Notes Indentures, as the case
may be, shall provide that the Series A Notes, the related Exchange Notes and
the related Private Exchange Notes, if any, or the Series B Notes, the related
Exchange Notes or the related Private Exchange Notes, as the case may be, shall
vote and consent together on all matters as one class and that none of the
Series A Notes, the related Exchange Notes or the related Private Exchange
Notes or the Series B Notes, the related Exchange Notes or the related Private
Exchange Notes, as the case may be, 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)
4
<PAGE> 38
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.
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 as promptly as practicable (but in no event
later than the later of (i) 150 days after the Issue Date and (ii) 60 days
after so required or requested pursuant to this Section 2) with the Commission,
and thereafter use their reasonable efforts to cause to be declared effective
under
5
<PAGE> 39
the Securities Act on or prior to 60 days after such filing is made, 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 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, which are Series A 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 Series A Notes is not
filed with the Commission on or prior to 15 days after the Issue Date or a
Shelf Registration Statement covering the Series A Notes is not filed with the
Commission on or prior to the later of (x) 150 days after the Issue Date and
(y) 60 days after the date such filing is requested or required to be made
pursuant to Section 2, (ii) an Exchange Offer Registration Statement covering
the Series A
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<PAGE> 40
Notes is not declared effective within 52 days after the Issue Date (or if the
52nd day is not a business day, the first business day thereafter) or a Shelf
Registration Statement covering the Series A Notes is not declared effective
within 60 days after such filing is made (each such date, a "Series A Note
Effectiveness Target Date"), (iii) the Registered Exchange Offer covering the
Series A Notes is not consummated within 30 days after the relevant Series A
Effectiveness Target Date, or (iv) a Shelf Registration Statement or an
Exchange Offer Registration Statement covering the Series Notes, as the case
may be, is filed and declared effective within the period ending on the Series
A Note 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 Series A Notes filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Series A Note 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 15-day period immediately following the occurrence of one or more of such
Series A Note Registration Defaults, in an amount equal to $0.05 per week per
$1,000 principal amount of Transfer Restricted Notes held by such Holder until
(i) the applicable Registration Statement covering the Series A Notes is filed,
(ii) an Exchange Offer Registration Statement covering the Series A Notes is
declared effective and the Registered Exchange Offer covering the Series A
Notes is consummated, (iii) a Shelf Registration Statement covering the Series
A Notes is declared effective or (iv) the applicable Registration Statement
covering the Series A Notes again becomes effective, as the case may be. The
liquidated damages will increase by an additional $.10 per week per $1,000
principal amount of Transfer Restricted Notes, which are Series A Notes, held
by each Holder during each subsequent 30-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 Series A 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) The parties hereto agree that the Holders of Transfer
Restricted Notes, which are Series B 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
7
<PAGE> 41
Registration Statement covering the Series B Notes is not filed with the
Commission on or prior to 15 days after the Issue Date or a Shelf Registration
Statement covering the Series B Notes is not filed with the Commission on or
prior to the later of (x) 150 days after the Issue Date and (y) 60 days after
the date such filing is requested or required to be made pursuant to Section 2,
(ii) an Exchange Offer Registration Statement covering the Series B Notes is
not declared effective within 52 days after the Issue Date (or if the 52nd day
is not a business day, the first business day thereafter) or a Shelf
Registration Statement covering the Series B Notes is not declared effective
within 60 days after such filing is made (each such date, an "Series B Note
Effectiveness Target Date"), (iii) the Registered Exchange Offer covering the
Series B Notes is not consummated within 30 days after the relevant Series B
Note Effectiveness Target Date, or (iv) a Shelf Registration Statement or an
Exchange Offer Registration Statement covering the Series B Notes, as the case
may be, is filed and declared effective within the period ending on the Series
B Note 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 Series B Notes filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Series B Note 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 15-day period immediately following the occurrence of one or more of such
Series B Note Registration Defaults, in an amount equal to $0.05 per week per
$1,000 principal amount of Transfer Restricted Notes held by such Holder until
(i) the applicable Registration Statement covering the Series B Notes is filed,
(ii) an Exchange Offer Registration Statement covering the Series B Notes is
declared effective and the Registered Exchange Offer covering the Series B
Notes is consummated, (iii) a Shelf Registration Statement covering the Series
B Notes is declared effective or (iv) the applicable Registration Statement
covering the Series B Notes again becomes effective, as the case may be. The
liquidated damages will increase by an additional $.10 per week per $1,000
principal amount of Transfer Restricted Notes, which are Series B Notes, held
by each Holder during each subsequent 30-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 Series B Notes.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
(c) A Series A Note Registration Default or Series B Note
Registration Default referred to in Sections 3(a)(iv) and 3(b)(iv),
respectively, 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
8
<PAGE> 42
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.
(d) The Issuers shall notify the Trustee and the Paying
Agent under the applicable Indenture immediately upon the happening of each and
every Registration Default relating to the Notes issued thereunder. The
Issuers and the Guarantor Subsidiaries shall pay the liquidated damages due on
the Transfer Restricted Notes by depositing with the applicable 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 applicable Indenture and the
applicable 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 applicable Indenture and the applicable 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.
(e) 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
9
<PAGE> 43
the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer 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
10
<PAGE> 44
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> 45
(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 applicable 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 Indentures or the Exchange Note Indentures, 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> 46
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 of both series 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> 47
(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 of both series 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 of both series 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 of both series 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 of both series 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> 48
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
15
<PAGE> 49
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
16
<PAGE> 50
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 Units (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
17
<PAGE> 51
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 of both series, taken as a single class. 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
18
<PAGE> 52
amount of the Notes, the Exchange Notes and Private Exchange Notes of both
series 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 applicable Indenture, with a copy in like manner to Chase
Securities Inc. and Merrill Lynch, Pierce, Fenner and Smith
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.
19
<PAGE> 53
(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.
20
<PAGE> 54
Please confirm that the foregoing correctly sets forth the
agreement among the Issuers and the Initial Purchasers.
Very truly yours,
IRIDIUM LLC
By /s/ ROY GRANT
--------------------------
Name: Roy Grant
Title: Vice President - Treasurer
and acting Chief Financial
Officer
IRIDIUM CAPITAL CORPORATION
By /s/ ROY GRANT
--------------------------
Name: Roy Grant
Title: Chief Financial Officer
IRIDIUM ROAMING LLC
By /s/ ROY GRANT
--------------------------
Name: Roy Grant
Title: acting chief financial
officer
IRIDIUM IP LLC
By /s/ ROY GRANT
--------------------------
Name: Roy Grant
Title: acting chief financial
officer
Accepted:
CHASE SECURITIES INC.
By
----------------------------
Authorized Signatory
21
<PAGE> 55
MERRILL LYNCH, PIERCE, FENNER
AND SMITH INCORPORATED
By
----------------------------
Authorized Signatory
22
<PAGE> 56
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> 57
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> 58
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> 59
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> 1
EXHIBIT 10.21
EXECUTION COPY
June 16, 1997
Iridium LLC
Senior Secured Interim Credit Facility
Commitment Letter
Iridium LLC
1401 H Street, N.W.
Suite 800
Washington, D.C. 20005
Attention: Dr. Edward F. Staiano
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase"), Chase
Securities Inc. ("CSI") and BZW ("BZW"), the investment banking division of
Barclays Bank PLC ("Barclays"), that Iridium LLC, a Delaware limited liability
company (the "Borrower"), is seeking to raise senior secured bank financing for
the purpose of financing a portion of the costs of construction, installation
and completion of a global wireless, satellite-based communications system
being developed by the Borrower (the "Project"). We refer to the Engagement
Letters, each dated April 12, 1996 (collectively, the "Engagement Letter"),
pursuant to which CSI was appointed Global Financing Advisor and a Global
Arranger and BZW was appointed co-Financing Advisor and a Global Arranger. For
purposes of this letter, CSI is referred to as the "Global Financing Advisor"
and "a Global Arranger" and BZW is referred to as the "co-Financing Advisor"
and "a Global Arranger".
In that connection, you have requested that CSI acting in its
capacity as Global Financing Advisor and a Global Arranger, and BZW, acting in
its capacity as co-Financing Advisor and a Global Arranger, agree to structure,
arrange and syndicate a senior secured interim credit facility in an aggregate
principal amount of up to $750,000,000 (the "Credit Facility") and that Chase
and Barclays each commit to provide $375,000,000 of the Credit Facility, that
Chase serve as Administrative Agent for the Credit Facility and that BZW serve
as Documentation Agent for the Credit Facility.
Commitment Letter
<PAGE> 2
Iridium LLC - 2 - June 16, 1997
Each of CSI and BZW is pleased to advise you that it is
willing to act as advisor and arranger for the Credit Facility. Furthermore,
each of Chase and Barclays is pleased to advise you of its commitment to
provide $375,000,000 of the required amount of the Credit Facility upon the
terms and subject to the conditions set forth or referred to in this commitment
letter (the "Commitment Letter") and in the Summary of Indicative Terms and
Conditions attached hereto as Exhibit A (the "Term Sheet").
The Global Financing Advisor, jointly with BZW, intends to
commence syndication efforts at such time as shall be agreed with you following
the execution of this Commitment Letter, and you agree actively to assist the
Global Financing Advisor and the co-Financing Advisor in completing a
syndication satisfactory to them. The lenders for the Credit Facility
(together with Chase and Barclays, the "Lenders") will be identified by the
Global Financing Advisor in consultation with you and BZW. Such assistance
shall include (a) your using commercially reasonable efforts to ensure that the
syndication efforts benefit materially from your existing lending
relationships, (b) direct contact between senior management and advisors of the
Borrower and the proposed Lenders, (c) assistance in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication and (d) the hosting, with CSI and BZW, of one
or more meetings of prospective Lenders.
It is agreed that Chase will act as the sole and exclusive
Administrative Agent, that BZW will act as the sole and exclusive Documentation
Agent, and that CSI and BZW will act as the sole and exclusive advisors and
arrangers, for the Credit Facility, and each will, in such capacities, perform
the duties and exercise the authority customarily performed and exercised by it
in such roles. You agree that no other agents, co-agents or arrangers will be
appointed, no other titles will be awarded and no compensation (other than that
expressly contemplated by the Term Sheet, the Fee Letter and the Other Fee
Letters referred to below) will be paid in connection with the Credit Facility
unless you and we shall so agree.
The Global Financing Advisor will coordinate jointly with BZW,
and in conjunction with you, all aspects of the syndication, including
decisions as to the selection of institutions to be approached and when they
will be approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the Lenders and the
amount and distribution of fees among the Lenders. To assist the Global
Financing Advisor and the co-Financing Advisor in the syndication efforts, you
agree promptly to prepare and provide to each of them all information with
respect to the Borrower and its subsidiaries, the Project and the other
transactions contemplated hereby, including all financial information and
projections (the "Projections"), as we may reasonably request in connection
with the arrangement and syndication of the Credit Facility. You hereby
represent and covenant that (a) all information, when taken as a whole, other
than the Projections (the "Information") that has been or will be made
available to Chase, CSI, Barclays or BZW by the Borrower or any of its
representatives is or will be, when furnished, complete and correct in all
material respects and
Commitment Letter
<PAGE> 3
Iridium LLC - 3 - June 16, 1997
does not or will not, when furnished, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that
have been or will be made available to Chase, CSI, Barclays or BZW by the
Borrower or any of its representatives have been or will be prepared by the
Borrower in good faith based upon assumptions which are believed by the
Borrower to be reasonable at the time made and are disclosed to CSI and BZW
with the Projections. You understand that in arranging and syndicating the
Credit Facility we may use and rely on the Information and Projections without
independent verification thereof.
As consideration for the commitment of each of Chase and
Barclays hereunder and the agreement of each of CSI and BZW to perform the
services described herein, you agree to pay or deliver, or cause to be paid or
delivered, as the case may be, to Chase and Barclays the respective
non-refundable fees and other compensation set forth in the Term Sheet, the Fee
Letter from us to you dated the date hereof and delivered herewith (the "Fee
Letter") and the separate fee letters, each dated the date hereof, between you
and Chase and Barclays, respectively (collectively, the "Other Fee Letters").
The commitment of each of Chase and Barclays hereunder and the
agreement of each of CSI and BZW to perform the services described herein are
subject to (a) there not occurring or becoming known to us any material adverse
condition or material adverse change in or affecting the business, operations,
property, condition (financial or otherwise) or prospects of the Borrower and
its subsidiaries, taken as a whole, or the Project, (b) there not having
occurred a material disruption of or material adverse change in financial,
banking or capital market conditions that, in the judgment of either Chase or
Barclays, could materially impair the syndication of the Credit Facility, (c)
Chase's and Barclay's satisfaction that, prior to and during the syndication of
the Credit Facility, there shall be no competing issues of debt securities or
commercial bank debt or other credit facilities of the Borrower and its
subsidiaries being offered, placed or arranged (other than senior unsecured
notes of up to $1,250,000,000 in gross proceeds), (d) the negotiation,
execution and delivery on or before September 30, 1997 of definitive
documentation with respect to the Credit Facility satisfactory to the Global
Arrangers and their counsel and (e) the other conditions set forth or referred
to in the Term Sheet. The terms and conditions of the commitment of each of
Chase and Barclays hereunder and of the Credit Facility are not limited to
those set forth herein and in the Term Sheet. Those matters that are not
covered by the provisions hereof and of the Term Sheet are subject to the
approval and agreement of you, Chase, CSI, Barclays and BZW.
You agree (a) to indemnify and hold harmless Chase, CSI,
Barclays, BZW and their respective affiliates, officers, directors, employees,
advisors, and agents (each, an "indemnified person") from and against any and
all losses, claims, damages and liabilities to which any such indemnified
person may become subject arising out of or in connection with this Commitment
Letter, the Credit Facility, the use of the proceeds thereof, the Project or
any related
Commitment Letter
<PAGE> 4
Iridium LLC - 4 - June 16, 1997
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any legal or
other expenses incurred in connection with investigating or defending any of
the foregoing, provided that the foregoing indemnity will not, as to any
indemnified person, apply to losses, claims, damages, liabilities or related
expenses to the extent they are found by a final, non-appealable judgment of a
court to arise from the willful misconduct or gross negligence of such
indemnified person, and (b) to reimburse Chase, CSI, Barclays, BZW and their
respective affiliates on demand for all reasonable out-of-pocket expenses
(including due diligence expenses, syndication expenses, consultant's fees and
expenses, travel expenses, and reasonable fees, charges and disbursements of
counsel) incurred in connection with the Credit Facility and any related
documentation (including this Commitment Letter, the Term Sheet, the Fee
Letter, the Other Fee Letters and the definitive financing documentation) or
the administration, amendment, modification or waiver thereof. No indemnified
person shall be liable for any indirect or consequential damages in connection
with its activities related to the Credit Facility.
This Commitment Letter shall not be assignable by you without
the prior written consent of Chase, CSI, Barclays and BZW (and any purported
assignment without such consent shall be null and void), is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto. This Commitment Letter may not be amended or waived except by
an instrument in writing signed by you, Chase, CSI, Barclays and BZW. This
Commitment Letter may be executed in any number of counterparts, each of which
shall be an original, and all of which, when taken together, shall constitute
one agreement. Delivery of an executed signature page of this Commitment
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof. This Commitment Letter, the Engagement Letters
(and the fee letters relating thereto), the Fee Letter and the Other Fee
Letters are the only agreements that have been entered into among us with
respect to the Credit Facility and set forth the entire understanding of the
parties with respect thereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter, the Term Sheet, the Fee
Letter and the Other Fee Letters nor any of their terms or substance shall be
disclosed, directly or indirectly, to any other person except (a) to your
members, directors, officers, agents and advisors who are directly involved in
the consideration of this matter or (b) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof), provided that the foregoing restrictions
shall cease to apply (except in respect of the Fee Letter, the Other Fee
Letters and their respective terms and substance) after this Commitment Letter
has been accepted by you. If you make or permit any such disclosure in
violation of this paragraph, you shall be deemed to have accepted and agreed to
this letter, the Fee Letter and the Other Fee Letters and be obligated to us as
provided herein and therein.
Commitment Letter
<PAGE> 5
Iridium LLC - 5 - June 16, 1997
The Global Financing Advisor and co-Financing Advisor shall
have the right to review and approve all public announcements and filings made
by you or your affiliates relating to the Project or the other transactions
contemplated hereby that refer to the Credit Facility or to Chase or CSI or
Barclays or BZW, respectively, or the other lenders before they are made (such
approval not to be unreasonably withheld or delayed).
The compensation, reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter and the Other
Fee Letters shall remain in full force and effect regardless of whether
definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or the commitment of
each of Chase or Barclays hereunder.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Term Sheet, the Fee
Letter and the Other Fee Letters by returning to us executed counterparts
hereof and thereof, together with the amounts agreed upon pursuant to the Fee
Letter and the Other Fee Letters to be payable to the respective party upon the
acceptance hereof, not later than 5:00 p.m., New York City time, on June 17,
1997. The commitment of each of Chase and Barclays and the agreement of each
of CSI and BZW herein will expire at such time in the event Chase and Barclays
have not received such executed counterparts and such amounts in accordance
with the immediately preceding sentence.
Commitment Letter
<PAGE> 6
Iridium LLC - 6 - June 16, 1997
Chase, CSI, Barclays and BZW are pleased to have been given
the opportunity to assist you in connection with this important financing.
Very truly yours,
THE CHASE MANHATTAN BANK
By:
--------------------------
Name:
Title:
CHASE SECURITIES INC.
By:
--------------------------
Name:
Title:
BARCLAYS BANK PLC
By:
--------------------------
Name:
Title:
BZW, a division of
BARCLAYS BANK PLC
By:
--------------------------
Name:
Title:
Commitment Letter
<PAGE> 7
Iridium LLC - 7 - June 16, 1997
Accepted and agreed to
as of the date first
written above by:
IRIDIUM LLC
By:
-------------------------
Name:
Title:
Commitment Letter
<PAGE> 8
APPENDIX A
CONDITIONS PRECEDENT FOR AVAILABILITY UNDER THE $750,000,000
SENIOR SECURED INTERIM CREDIT FACILITY (THE "INTERIM FACILITY")
The conditions precedent to availability of funding under the Interim Facility
fall into two areas, regulatory and technical. Availability under the Interim
Facility will occur during the following three stages:
Stage 1: January 1, 1998 ($350 million)
Stage 2: April 1, 1998 ($200 million)
Stage 3: August 1, 1998 ($200 million)
If Iridium and its contractors satisfy all conditions precedent to funding for
a particular stage, amounts up to the specified amount for such stage can be
drawn down in one or more borrowings. All conditions precedent are treated on
a cumulative basis within each stage. The dates specified above are the dates
by which it is anticipated that such conditions will be satisfied.
The three stages above are tied to certain planned regulatory accomplishments
and the timing of specific milestones within various project contracts.
Examples of such contracts include the Space System Contract, the Terrestrial
Network Development Contract, and billing system, ICRS interworking unit,
control system and other contracts. The Lenders' Technical Advisor, Arthur D.
Little, Inc., has divided the technical milestones into seven categories within
each of the three stages. Specific milestones/technical tests (described as
"phase tests") are discussed below within each stage.
The following paragraphs detail the specific regulatory and technical
conditions precedent that are required to be satisfied in order to draw funds
under the Interim Facility at each stage.
<PAGE> 9
- 2 -
STAGE 1 - $350 MILLION AVAILABILITY ON OR ABOUT JANUARY 1, 1998
Regulatory Conditions Precedent:
Iridium will need to obtain regulatory approvals from those jurisdictions that
would account for at least 33% of the estimated revenues in the bank base case.
Regulatory approvals are defined as:
a. receipt of regulatory approvals that have been reviewed and deemed
valid by legal counsel or have met other satisfactory eligibility
criteria (to be determined), taking into account allowance for timely
ISU and MTD (as defined below) type approvals as required; and
b. execution of satisfactory roaming agreements and service provider
agreements (including pricing and terms), pursuant to which Iridium
may offer cellular roaming service and will have a national sales
distribution for IRIDIUM services with "qualified" service providers
(defined as PTTs, national cellular operators, and any other entity
acceptable to the Lenders).
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestones 38-39 have been successfully achieved in the Space System Contract.
There are at least 33 operational satellites in mission orbit, and the
following specific tests (details of which can be found within the Satcom test
documentation) have been successfully completed:
Phase 0 Testing: First Flight -- Basic command and
control of satellites demonstrated,
including successful testing of
secondary and feeder links
Phase B Testing: L-Band capability demonstrated,
allowing on-orbit testing of L-Band
functionality and performance, and
hand-offs between beams and channels
in a satellite
<PAGE> 10
- 3 -
Phase A/C Testing: Satellite cross-link, feeder-link
and routing are functional and
successfully tested.
Phase D/E Testing: Demonstration that the Iridium
Subscriber Unit (ISU) can establish
a voice call through the
constellation and hold a
conversation (basic telephony) with
an engineering gateway, and that the
IRIDIUM system can also support
cross-link and hand-offs between
satellites.
Attachment 1 provides a graphical presentation of the "phase tests" embodied
within this category.
Category 2 Gateway Implementation
Milestones 4-5 have been successfully achieved in the Terrestrial Network
Development Contract.
Gateway designs are verified with release 1.0 hardware and software in an
engineering gateway.
Release 1.0 hardware is installed and operating using test software in the
Iridium North America (INA) Gateway.
Category 3 Systems Control Segment
The Master Control Facility is fully operational for satellite launch and
control using version 3.5 of system control software.
Category 4 Iridium Business Support Systems (IBSS)
Version 1.0 of the IBSS (comprising IBS 1.0 and GBS 0.9), supporting basic
telephony services, has been developed and product tested.
Category 5 Iridium Interoperability Unit (IIU)
IIU 2.0 acceptance test successfully completed at Aldiscon Lab.
Category 6 Iridium Subscriber Units (ISUs) and Message
Termination Devices (MTDs)
<PAGE> 11
- 4 -
Prototype, non-miniaturized ISUs and MTDs are available for testing the IRIDIUM
network.
Category 7 Voice, Messaging and ICRS Testing and Demonstration
Program
This category encompasses demonstrations of the release 1.0 of Iridium's basic
service offerings -- voice telephony of adequate quality via satellite, as well
as Iridium Cellular Roaming Services (ICRS).
Early-stage demonstration utilizing on-orbit satellites, an engineering gateway
and prototype ISUs of satellite-based voice telephony including call set-up,
satellite cross-links, and hand-offs between satellites. No interconnection
between the engineering gateway and PSTN is required.
Early-stage, laboratory-based demonstration of messaging capability consisting
of two parts: (1) the ability of an engineering gateway to accept and process
messages up to the Message Termination Controller interface; and (2) the
ability to deliver a simulated message from an on-orbit satellite to a
prototype MTD. Neither of the above requires the use of the Message
Termination Controller.
Simulations, updated as appropriate with pertinent test results, have been
completed that demonstrate that the IRIDIUM network design provides planned
level of capacity in accordance with the Iridium Business Plan.
<PAGE> 12
- 5 -
STAGE 2 - $200 MILLION AVAILABILITY ON OR ABOUT APRIL 1, 1998
Regulatory Conditions Precedent:
Iridium will need to obtain regulatory approvals from those jurisdictions that
would account for at least 50% of the estimated revenues in the bank base case.
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestone 42 has been successfully achieved in the Space System Contract.
There are at least 44 operational satellites in mission orbit, and the
following specific test (details of which can be found within the Satcom test
documentation) has been successfully completed:
Phase F Testing: There are multiple engineering gateways
available for testing with network management
functionality available.
Category 2 Gateway Implementation
Milestone 6 has been successfully achieved in the Terrestrial Network
Development Contract.
At least three gateways are installed, functional and pass conditional
acceptance for release 1.0 service.
Category 3 Systems Control Segment
The Master Control Facility integration and tests are successfully completed
for all facility functions.
Category 4 Iridium Business Support Systems (IBSS)
Version 1.5 of the IBSS (comprising IBS 1.5 and GBS 1.0), supporting basic and
planned supplementary telephony, messaging
<PAGE> 13
- 6 -
and ICRS services, has been successfully developed and product tested.
Category 5 Iridium Interoperability Unit (IIU)
IIU is installed, functional and successfully tested.
Category 6 Iridium Subscriber Units (ISUs) and Message
Termination Devices (MTDs)
Full functionality ISUs and MTDs are available for testing (miniaturization not
required).
Category 7 Voice, Messaging and ICRS Testing and Demonstration
Program
Satellite-based voice telephony of adequate quality and messaging demonstrated
utilizing on-orbit satellites, multiple gateways, and fully functional ISUs and
MTDs (miniaturization not required).
Link margin level tests (i.e., strength of signal to the ISU/MTD from the
satellite) have been successfully completed, and the results comply with
specifications.
A successful ICRS demonstration of roaming among the IRIDIUM network, GSM and
IS-41 protocol networks, using signalling network simulators, has been
completed.
<PAGE> 14
- 7 -
STAGE 3 - $200 MILLION AVAILABILITY ON OR ABOUT AUGUST 1, 1998
Regulatory Conditions Precedent:
Iridium will need to obtain regulatory approvals from those jurisdictions that
would account for at least 66% of the estimated revenues in the bank base case.
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestones 46 and 47 have been successfully achieved in the Space System
Contract.
The constellation is ready to support commercial service (at least 65
operational satellites in mission orbit), and the following specific tests
(details of which can be found within the Satcom test documentation) have been
successfully completed:
Phase G Testing: The Iridium network successfully interfaces
with the Iridium Business System (record,
rate & bill calls).
Phase H Testing The Iridium network can send and receive
pages, as well as voice mailbox
functionality. There is upgraded network
management capability, as well as resource
management capability for the paging
function.
Category 2 Gateway Implementation
Milestones 7-9 have been successfully achieved in the Terrestrial Network
Development Contract.
At least seven gateways are deployed and commissioned by Iridium (only four
offering messaging services).
Category 3 Systems Control Segment
The Systems Control Segment, including the Backup Control Facility, is fully
operational.
<PAGE> 15
- 8 -
Category 4 Iridium Business Support Systems (IBSS)
IBSS is deployed and operational at the Master Control Facility (IBS) and the
operational gateways (GBS).
Category 5 Iridium Interoperability Unit (IIU)
IIU interconnected and tested with at least one IS-41 and one GSM cellular
network.
Category 6 Iridium Subscriber Units (ISUs) and Message
Termination Devices (MTDs)
Final manufacturable forms of the handset and pager (function and form) are
available.
Category 7 Voice, Messaging and ICRS Testing and Demonstration
Program
Satellite-based voice telephony of adequate quality, satellite-based messaging
with at least four gateways, and ICRS are fully functional.
Voice subscriber trials have commenced and are working satisfactorily.
Simulations, updated as appropriate with pertinent test results, have been
completed that demonstrate that the IRIDIUM network as completed provides
planned level of capacity in accordance with the Iridium Business Plan.
Attachment 2 is a chart that summarizes the regulatory and technical conditions
precedent for the Interim Facility.
<PAGE> 16
ATTACHMENT 2
TECHNICAL AND REGULATORY CONDITIONS PRECEDENT CHART
<TABLE>
<CAPTION>
STAGE 1 TESTS/MILESTONES STAGE 2 TESTS/MILESTONES STAGE 3 TESTS/MILESTONES
CATEGORY (FIRST $350 MILLION) (NEXT $200 MILLION) (LAST $200 MILLION)
-------- -------------------- -------------------- -------------------
<S> <C> <C> <C>
REGULATORY APPROVALS: 33% 50% 66%
TECHNICAL APPROVALS:
1. CONSTELLATION Milestones 38 and 39 completed Milestone 42 completed (per Milestones 46 and 47 completed
IMPLEMENTATION (per SSC); at least 33 SSC); at least 44 operational (per SSC); constellation ready
operational satellites in satellites in mission orbit to support commercial service
mission orbit (at least 65 operational
satellites in mission orbit)
Phase 0, B, D/E & A/C testing Phase F testing completed Phase G & H testing completed
completed
2. GATEWAY Milestones 4 and 5 (per TNDC) Milestone 6 completed (per Milestones 7, 8 and 9 (per
IMPLEMENTATION completed; gateway design TNDC); at least 3 gateways TNDC) completed; at least 7
verified with release 1.0 installed, functional and pass gateways deployed and
hardware and software in an conditional acceptance for commissioned (only 4 offering
engineering gateway; release release 1.0 service messaging services)
1.0 hardware installed and
operating using test software
in INA Gateway
3. SYSTEMS CONTROL Master Control Facility for Master Control Facility Systems Control Segment,
SEGMENT satellite launch and control integration and tests including Backup Control
using version 3.5 of system completed for all facility Facility, fully operational
control software functions
4. IRIDIUM BUSINESS IBSS version 1.0 developed and IBSS version 1.5 successfully IBSS deployed and operational
SUPPORT SYSTEMS product tested developed and product tested at Master Control Facility and
(IBSS) operational gateways
5. IRIDIUM IIU 2.0 acceptance test IIU installed, functional and IIU interconnected with at
INTEROPERABILITY successfully completed at successfully tested at INA least one IS-41 and one GSM
UNIT (IIU) Aldiscon lab Gateway cellular network
6. IRIDIUM Prototypes, non-miniaturized Full functionality subscriber Final manufacturable forms of
SUBSCRIBER UNIT available for testing IRIDIUM units available for testing subscriber units (function and
AND MESSAGE network and applying for type (miniaturization not required) form) available
TERMINATION DEVICE approvals
</TABLE>
<PAGE> 17
- 2 -
<TABLE>
<S> <C> <C> <C> <C>
7. VOICE, MESSAGING Early demonstration of voice Satellite-based voice Satellite-based voice
AND ICRS telephony in a laboratory telephony of adequate quality telephony, satellite messaging
TESTING AND setting, including call set-up, and messaging demonstrated service with at least 4
DEMONSTRATION satellite cross-links, and using on-orbit satellites, gateways, and ICRS fully
PROGRAM hand-offs between satellites. multiple gateways, and fully functional
No interconnection between the functional ISUs and MTDs
engineering gateway and PSTN is (miniaturization not required) Voice subscriber trials
required. commenced and working
satisfactorily
Early demonstration of Link margin level tests Simulations, updated as
messaging in a laboratory completed for voice telephony appropriate with pertinent
setting, consisting of two and messaging, and results test results, completed that
parts: (1) ability of an comply with specifications demonstrate that the IRIDIUM
engineering gateway to accept network as completed provides
and process messages up to the ICRS demonstration of roaming planned level of capacity in
Message Termination Controller among IRIDIUM system, IS-41 accordance with the Iridium
interface; and (2) ability to and GSM protocol networks Business Plan.
deliver a simulated message using signalling network
from an on-orbit satellite to a simulators
prototype MTD. Neither of the
above requires the use of the
Message Termination Controller.
Simulations, updated as
appropriate with pertinent test
results, completed that
demonstrate that the IRIDIUM
network design provides planned
level of capacity in accordance
with the Iridium Business Plan.
</TABLE>
<PAGE> 1
EXHIBIT 10.22
EXECUTION COPY
July 10, 1997
Iridium LLC
Senior Secured Interim Credit Facility
Amendment to Commitment Letter
Iridium LLC
1401 H Street, N.W.
Suite 800
Washington, D.C. 20005
Attention: Dr. Edward F. Staiano
Ladies and Gentlemen:
We refer to our Commitment Letter dated June 16, 1997 to you
and related Term Sheet with respect to the $750 million Senior Secured Interim
Credit Facility to be provided to Iridium LLC (the "Commitment Letter").
Terms used but not defined herein shall have the same meanings as assigned
thereto in the Commitment Letter.
This will confirm our agreement with you that the Term Sheet
is amended in the following respects:
1. The "Availability" section under Part II of the Term Sheet
is amended in certain respects and restated in its entirety to read as
follows:
"AVAILABILITY: Subject to the terms and conditions
described below under "Conditions to
Availability", drawdowns will be
permitted during the period from the
date of execution of the Credit
Agreement (assumed to be September
30, 1997) to but not including the
date 21 months after such execution
date but in any event no later than
December 31, 1998 (or June 30, 1999,
if the Borrower demonstrates (not
later than October 31, 1998) that it
has committed or available funding
(as certified by a senior financial
officer of the Borrower) to meet its
projected capital and operating
expenses under the Iridium Business
Amendment to Commitment Letter
<PAGE> 2
Iridium LLC - 2 - July 10, 1997
Plan through such extended date) (the
"COMMITMENT TERMINATION DATE"). The
drawdowns under the Credit Facility
will be tied to an agreed schedule
consistent with the achievement or
satisfaction of the technical and
other requirements specified in
Appendix A hereto."
2. The "Voting" section under Part VI of the Term Sheet is
amended by replacing the date "February 28, 1999" which appears in
clause (a)(i) thereof with the date "June 30, 1999".
Except as modified by this letter, the Commitment Letter, the
Term Sheet, the Fee Letter and the Other Fee Letters shall remain unchanged and
in full force and effect, and references therein to the "Commitment Letter",
the "Term Sheet" or words of similar import shall be deemed to refer to the
Term Sheet as modified by this letter.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof by returning to us executed
counterparts of this letter immediately.
Very truly yours,
THE CHASE MANHATTAN BANK
By:
--------------------------
Name:
Title:
CHASE SECURITIES INC.
By:
--------------------------
Name:
Title:
Amendment to Commitment Letter
<PAGE> 3
Iridium LLC - 3 - July 10, 1997
BARCLAYS BANK PLC
By:
--------------------------
Name:
Title:
BZW, a division of
BARCLAYS BANK PLC
By:
--------------------------
Name:
Title:
Accepted and agreed to
as of the date first
written above by:
IRIDIUM LLC
By:
-------------------------
Name:
Title:
Amendment to Commitment Letter
<PAGE> 1
EXHIBIT 10.23
STRICTLY CONFIDENTIAL EXECUTION COPY
--------------------------------------------------------------------
IRIDIUM LLC
$750,000,000 SENIOR SECURED INTERIM CREDIT FACILITY
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
JUNE 16, 1997
--------------------------------------------------------------------
CHASE SECURITIES INC. BZW - THE INVESTMENT BANKING
DIVISION OF BARCLAYS BANK PLC
<PAGE> 2
- 2 -
NOTICE
THIS SUMMARY OF TERMS AND CONDITIONS IS CONFIDENTIAL AMONG
IRIDIUM LLC, CHASE SECURITIES INC., THE CHASE MANHATTAN BANK,
BARCLAYS BANK PLC AND THEIR RESPECTIVE LEGAL COUNSEL AND
CONSULTANTS AND MAY NOT BE DISCLOSED TO ANY OTHER PERSON
WITHOUT THE PRIOR WRITTEN CONSENT OF IRIDIUM LLC, CHASE
SECURITIES INC. AND BARCLAYS BANK PLC.
INDEX
<TABLE>
<CAPTION>
PART PAGE
- ---- ----
<S> <C> <C>
I. PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . 2
III. CERTAIN PAYMENT PROVISIONS; INTEREST RATES; FEES . . . . . . 2
IV. COLLATERAL; RESERVE CAPITAL CALL OBLIGATIONS; SUBSIDIARY
GUARANTEES; INSURANCE; PROJECT ACCOUNTS . . . . . . . . . . 5
V. CERTAIN CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . 8
VI. CERTAIN DOCUMENTATION MATTERS . . . . . . . . . . . . . . . 8
ANNEXES
- -------
Annex 1 Definitions
Annex 2 Conditions Precedent
I. Conditions to the Initial Loans
II. Conditions to each Loan
</TABLE>
<PAGE> 3
EXHIBIT 10.23
STRICTLY CONFIDENTIAL
IRIDIUM LLC
$750,000,000 SENIOR SECURED INTERIM CREDIT FACILITY
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
June 16, 1997
Capitalized terms used and not defined in this
Summary shall have the respective meanings
assigned thereto in Annex 1 hereto.
I. PARTIES
BORROWER: Iridium LLC (or, if a
subsidiary of Iridium LLC
shall be established to hold
all of the assets of the
Iridium project, such
subsidiary) (the "BORROWER"
or "IRIDIUM").
GLOBAL FINANCING ADVISOR: Chase Securities Inc.
CO-FINANCING ADVISOR: BZW.
GLOBAL
ARRANGERS: Chase Securities Inc. and
BZW.
LEAD ARRANGERS: A group of leading financial
institutions, including the
Global Arrangers, selected by
the Borrower and the Global
Arrangers.
LENDERS: The banks, financial
institutions and other
entities, including Chase and
Barclays, selected in the
syndication effort for the
Credit Facility.
ADMINISTRATIVE AGENT: The Chase Manhattan Bank.
DOCUMENTATION AGENT: BZW.
<PAGE> 4
- 2 -
II. CREDIT FACILITY
TYPE AND AMOUNT: Revolving Credit Facility in
a principal amount of up to
$750,000,000 (the "CREDIT
FACILITY").
USE OF PROCEEDS: The proceeds of the Loans
shall be used solely (i) to
finance Project costs (based
upon the approved
Construction Budget) relating
to the construction,
installation, testing and
completion of the IRIDIUM
System, including but not
limited to payments to
Motorola under the Space
System Contract and interest
on the Loans, and (ii) for
payment of certain fees and
expenses payable by the
Borrower in connection with
the Credit Facility.
AVAILABILITY: Subject to the terms and
conditions described below
under "Conditions to
Availability", drawdowns will
be permitted during the
period from the date of
execution of the Credit
Agreement (assumed to be
September 30, 1997) to but
not including the date 17
months after such execution
date but in any event no
later than December 31, 1998
(or February 28, 1999, if the
Borrower demonstrates (not
later than October 31, 1998)
that it has committed or
available funding (as
certified by a senior
financial officer of the
Borrower) to meet its
projected capital and
operating expenses under the
Iridium Business Plan through
such extended date) (the
"COMMITMENT TERMINATION
DATE"). The drawdowns under
the Credit Facility will be
tied to an agreed schedule
consistent with the
achievement or satisfaction
of the technical and other
requirements specified in
Appendix A hereto.
FINAL MATURITY: The Commitment Termination
Date.
AMORTIZATION: None. The Loans will
payable in full at the Final
Maturity.
III. CERTAIN PAYMENT PROVISIONS; INTEREST RATES; FEES
OPTIONAL PREPAYMENTS AND
COMMITMENT REDUCTIONS: Loans may be prepaid and
Commitments may be
permanently reduced by the
Borrower, in whole or in
part, with prior notice and
without premium or penalty
(except for LIBOR breakage
costs, if applicable), in
<PAGE> 5
- 3 -
minimum amounts to be agreed
upon. Once so reduced, the
Commitments may not be
increased.
MANDATORY PREPAYMENTS AND
COMMITMENT REDUCTIONS: The following amounts shall
be applied to reduce the
Loans and Commitments (the
timing and prepayment
thresholds to be set forth in
the Credit Agreement):
(a) 100% of the net proceeds
received from the sale or
other disposition of the
assets of the Borrower or any
of its subsidiaries (except
for certain sales of property
in the ordinary course of
business and certain
replacements to be agreed);
(b) 100% of the net proceeds
received from the issuance of
equity or the issuance or
incurrence of debt by the
Borrower or any of its
subsidiaries, other than (i)
equity or other subordinated
debt (the terms of which
shall be satisfactory to the
Lenders) the net proceeds of
which are used to fund
approved Project costs, (ii)
unsecured debt (the terms of
which shall be satisfactory
to the Lenders) in an
aggregate amount not
exceeding $1,875,000,000
(subject to review upon
completion of the initial
high-yield debt offering) and
(iii) de minimis amounts
received from the exercise of
warrants issued in connection
with the initial high yield
debt offering and employee
stock options.
(c) 100% of all property and
casualty insurance recoveries
by the Borrower or any of its
subsidiaries (unless, with
respect to any such recovery
up to an amount to be agreed
or as otherwise agreed by the
Lenders, the Borrower applies
or commits to apply the
proceeds for the repair or
replacement of the damaged
property);
(d) 100% of all condemnation
proceeds or similar awards
received by the Borrower or
any of its subsidiaries in
connection with any
governmental taking (unless,
with respect to any such
proceeds or award up to an
amount to be agreed or as
otherwise agreed by the
Lenders, the Borrower applies
or commits to apply the
proceeds or awards for the
replacement of the condemned
or taken property); and
<PAGE> 6
- 4 -
(e) 100% of certain payments
(e.g., liquidated damages)
from the Project Parties to
the Borrower pursuant to the
Project Documents.
All such amounts shall be
applied to the permanent
reduction of the Commitments
and/or the prepayment of the
Loans.
INTEREST RATE:
INTEREST RATE OPTIONS: The Borrower may elect that
all or a portion of the Loans
bear interest at a rate per
annum equal to:
the ABR plus the relevant
Interest Margin referred to
below; or
the Eurodollar Rate plus the
relevant Interest Margin
referred to below.
As used herein:
"ABR" means the higher of (i)
the rate of interest publicly
announced by Chase as its
prime rate in effect at its
principal office in New York
City (the "PRIME RATE") and
(ii) the federal funds
effective rate from time to
time plus 0.5%.
"EURODOLLAR RATE" means the
rate (grossed-up for maximum
statutory reserve
requirements for eurocurrency
liabilities) at which
eurodollar deposits for one,
two, three or six months (as
selected by the Borrower) are
offered by Chase in the
interbank eurodollar market.
INTEREST MARGINS: ABR Margin: 150 basis
points.
Eurodollar Margin: 275 basis
points.
The above margins will be
increased by 50 basis points
on October 1, 1998 and at the
end of each subsequent
three-month period.
INTEREST PAYMENT DATES: In the case of the Loans
bearing interest based upon
the ABR Rate ("ABR LOANS"),
quarterly in arrears.
In the case of the Loans
bearing interest based upon
the Eurodollar Rate
("EURODOLLAR LOANS"), on the
last day
<PAGE> 7
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of each relevant interest
period and, in the case of
any interest period longer
than three months, on each
successive date three months
after the first day of such
interest period.
DEFAULT INTEREST: Overdue interest, fees and
other amounts shall bear
interest at 2% above the rate
applicable to ABR Loans.
COMMITMENT FEES: The Borrower shall pay a
commitment fee calculated at
the rate per annum equal to
50 basis points on the daily
average unused portion of the
Commitments from and after
the date of execution of the
Credit Agreement, payable
quarterly in arrears.
RATE AND FEE BASIS: All per annum rates shall be
calculated on the basis of a
year of 360 days (or 365/366
days, in the case of ABR
Loans the interest rate
payable on which is then
based on the Prime Rate) for
actual days elapsed.
IV. COLLATERAL; RESERVE CAPITAL CALL OBLIGATIONS; SUBSIDIARY GUARANTEES;
INSURANCE; PROJECT ACCOUNTS
COLLATERAL: Borrower's Assets: The
obligations of the Borrower
in respect of the Credit
Facility will be secured by a
first priority perfected
security interest in all of
the assets -- whether
tangible or intangible, or
personal or real property --
of the Borrower and each of
its subsidiaries, whenever
existing or arising and
wherever located, including,
without limitation, revenues,
intellectual property,
leases, fixtures, all of the
capital stock of each of the
subsidiaries of the Borrower,
rights under each of the
Project Documents to which
the Borrower is a party and
all other contract rights
(including any amounts
payable thereunder to the
Borrower, e.g. delay damages,
if any, payable by Motorola
under the Space System
Contract as currently in
effect), rights in respect of
the Reserve Capital Call
Obligations, Project accounts
(see description below) and
other permitted bank accounts
(and all monies and
investments therein),
Telecommunications Approvals
and other governmental and
third party consents and
approvals (in the case of
each Telecommunications
Approval, to the fullest
extent legally permissible),
and insurance policies and
proceeds payable thereunder,
and all other property, and
all proceeds of the
foregoing.
<PAGE> 8
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Note: Except for the gateway
facilities and certain other
on-ground property to be
identified, other than
property expected to be owned
or leased by the Borrower or
any of its subsidiaries and
except for other property as
may be mutually agreed
between Iridium and the
Global Arrangers, all
property, including but not
limited to governmental
approvals and intellectual
property, necessary for the
Project will be owned by the
Borrower or a subsidiary of
the Borrower. If any such
property (as identified by
the Borrower) cannot be
transferred to the Borrower
for any reason, the Borrower
shall have made arrangements
satisfactory to the Lenders
to ensure mutually agreeable
access to, and full
beneficial use of, such
property, and entitling the
Lenders (or their
transferee), upon enforcement
of the Borrower's rights
therein, to continue such
access and use. Motorola and
the other relevant parties
shall use all reasonable
efforts to effect the
foregoing in a timely manner.
Without limiting the
foregoing, all
Telecommunications Approvals
held or obtained by the
Borrower or any of its
subsidiaries or held or
obtained by third parties
(other than certain
Telecommunications Approvals
expected to be obtained by
the gateway investors or
their designated service
providers) to the extent
necessary for the Project
shall, to the extent
permitted by law, be
transferred to and held in a
separate subsidiary of the
Borrower the capital stock of
which shall be pledged by the
Borrower to the
Administrative Agent for the
benefit of the Lenders as
security for the Borrower's
obligations in respect of the
Credit Facility. In the
event that any such
Telecommunications Approval
cannot be transferred into
the name of the Borrower or
such subsidiary on or prior
to the initial Loans (or such
later date as may be agreed)
or otherwise are held by
third parties, then at all
times prior to effecting such
transfer (i) arrangements
satisfactory to the Lenders
shall be in place ensuring
that the Borrower shall have
full beneficial use of such
Telecommunications Approval
(and entitling the Lenders
(or their transferee), upon
enforcement of the Borrower's
rights therein, to continue
such access and use) and (ii)
Motorola or such other third
party shall have pledged the
shares of its subsidiary
holding such
Telecommunications Approval
to the Administrative Agent
as security for certain
obligations of the
<PAGE> 9
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Borrower in respect of the
Credit Facility, to the
fullest extent legally
permissible.
Borrower Capital Stock: All
of the equity interests of
the Borrower will be pledged
by the owner(s) thereof as
security for the obligations
of the Borrower in respect of
the Credit Facility and the
Reserve Capital Call
Obligations of such party (if
any).
The property subject to the
security interests and liens
in favor of the Lenders shall
be subject to no other liens
or encumbrances (other than
certain permitted liens to be
agreed).
RESERVE CAPITAL CALL OBLIGATIONS: The Iridium Members shall be
obligated to make certain
additional capital
contributions to the Borrower
on the terms set forth in the
LLC Agreement, up to an
aggregate net amount for the
Borrower of $243 million. As
contemplated under
"Collateral" above, the
Borrower will assign as
security to the Lenders all
of its rights with respect to
such obligations owing to the
Borrower, and the Iridium
Members will take all action
required under the LLC
Agreement to confirm such
assignment and agree that the
Lenders shall be entitled to
enforce such obligations and
have the right to call for
such additional capital
contributions to be made
directly to the
Administrative Agent on terms
to be agreed.
SUBSIDIARY GUARANTEE: All amounts under the Credit
Facility will be irrevocably
and unconditionally
guaranteed, jointly and
severally, by each of the
subsidiaries of the Borrower
(the "SUBSIDIARY GUARANTEE").
INSURANCE: The Administrative Agent
shall be named as loss payee
on insurance of Iridium
(other than insurance payable
to third parties), and the
Administrative Agent and the
Lenders shall be named as
additional insureds on all
liability insurance of the
Borrower and Motorola
relating to the Project.
PROJECT ACCOUNTS: One or more project accounts
will be maintained by the
Borrower and its subsidiaries
with the Administrative
Agent, through which all
Project-related funds and
revenues will flow. Funds in
the project accounts will be
applied to approved Project
costs (including but not
limited to payments under the
O&M Agreement) as
<PAGE> 10
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they fall due according to an
order of priority to be
mutually agreed between the
Borrower and the Global
Arrangers.
STATUS OF MOTOROLA GUARANTEE: In the event that Motorola
shall acquire any claim,
right or remedy against the
Borrower, by subrogation or
otherwise, as a consequence
of Motorola's payment of any
amount under the Motorola
Guarantee to the lenders
under the Guaranteed Credit
Facility, Motorola shall
agree, for the benefit of the
Lenders, that payment of any
amount in respect of such
claim against the Borrower
shall be subordinated to the
prior payment in full in cash
of principal, interest and
other amounts owing under the
Credit Facility, nor shall
Motorola be entitled to
exercise any such right or
remedy until all such amounts
under the Credit Facility
have been paid in full and
the Commitments have expired
or terminated.
V. CERTAIN CONDITIONS PRECEDENT
CONDITIONS TO AVAILABILITY: The effectiveness of the
Credit Facility and the
availability of the initial
Loans thereunder will be
subject to certain conditions
precedent to be set forth in
the Credit Agreement,
including, but not limited
to, those set forth in Part I
of Annex 2 hereto.
ON-GOING CONDITIONS: The making of each Loan
shall also be conditioned
upon (a) the accuracy of all
representations and
warranties in the Credit
Documents, (b) there being no
default or event of default
in existence at the time of,
or after giving effect to the
making of, such Loan and (c)
satisfaction of the other
conditions precedent
summarized in Part II of
Annex 2 hereto.
SATISFACTION WITH CONDITIONS: Each of the conditions
precedent under the Credit
Facility shall be determined
to the satisfaction of the
Lenders and, to the extent
documentation or other
evidence shall be required to
be delivered to satisfy any
such condition, the same
shall be either in the form
attached as exhibits to the
Credit Documents or otherwise
in form and substance
satisfactory to the Lenders
and delivered to the
Administrative Agent.
<PAGE> 11
- 9 -
VI. CERTAIN DOCUMENTATION MATTERS
The Credit Documents shall
contain representations,
warranties, covenants, events
of default and other
provisions customary for a
financing with this structure
(including, where
appropriate, materiality
qualifications) and other
terms deemed appropriate by
the Lenders, including,
without limitation:
REPRESENTATIONS AND WARRANTIES: Representations and
warranties customary or
appropriate for a financing
with this structure and will
include, but not be limited
to, the following:
1. Accuracy of financial
statements; absence of
undisclosed liabilities; and
absence of material adverse
change (to be defined).
2. Legal existence.
3. Compliance with laws and
regulations.
4. Power and authority to
carry out its business and to
execute, deliver and perform
all Transaction Documents.
5. Enforceability of the
Transaction Documents.
6. No conflict with the
Borrowers' LLC Agreement (or
other relevant organization
documents), laws and
regulations or contractual
obligations.
7. Absence of material
litigation.
8. Absence of default.
9. Title to property;
leases; and liens.
10. ERISA.
11. Intellectual property.
12. Capitalization;
subsidiaries; investments.
13. Environmental and health
and safety matters.
14. Accuracy of written
disclosure (including, as to
any "forward-looking"
statements such as
projections, budgets and the
Iridium Business Plan, that
the same are made in good
faith and based upon
reasonable assumptions at the
time made).
15. Telecommunications
Approvals and other
governmental approvals.
16. Use of proceeds.
17. Payment of taxes.
18. Validity of Security
Documents, and creation of
first priority perfected
liens thereunder in favor of
the Lenders.
19. Sufficiency of Project
Documents.
20. Insurance.
21. Immunity.
<PAGE> 12
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AFFIRMATIVE COVENANTS: Affirmative covenants
customary or appropriate for
a financing with this
structure and will include,
but not be limited to, the
following:
1. Delivery of financial and
other information, including
but not limited to:
(i) certified quarterly
financial statements
(ii) audited annual
financial statements
(iii) SEC filings
(iv) reports to
shareholders generally
(v) construction,
operating and capital
expenditures budgets, and
status reports on the Project
(vi) summary business plan
with measurable monthly
objectives
(vii) litigation and other
proceedings
(viii) notices of defaults;
and
(ix) other matters and
information (to be
specified).
2. Maintenance of legal
existence.
3. Compliance with
applicable laws and
regulations (including,
without limitation,
environmental and health and
safety laws, the Trading with
the Enemy Act, the
International Emergency
Economic Powers Act, the
Foreign Corrupt Practices
Act, etc., to the extent
applicable), Transaction
Documents and other material
contractual obligations.
4. Payment of taxes.
5. Maintenance of properties.
6. Maintenance of books and
records.
7. Inspection rights of
property of the Borrower and
its subsidiaries and, to the
extent permitted under the
terms of the Space System
Contract, the O&M Agreement
or any other agreement
between the Borrower and
Motorola, at the relevant
facilities of Motorola and
its prime subcontractors;
inspection of books and
records; and cooperation
and/or consultation with the
Lenders' consultants.
8. Maintenance of insurance
in accordance with the
insurance program of the
Borrower (see Annex 2,
Section I.1 of Part I).
9. Maintenance of and
compliance with all
Telecommunications Approvals
and other governmental
approvals.
10. Operation of the Project
in compliance with best
industry practice and all
applicable laws and
regulations.
11. Other undertakings
relating to the Project.
<PAGE> 13
- 11 -
FINANCIAL COVENANTS: Financial covenants will be as follows:
1. total debt to capitalization (to be
determined).
2. requirement to maintain at all
times committed or available funding
sources (as certified by a senior
financial officer of the Borrower)
through the then-scheduled Commitment
Termination Date to meet its projected
capital and operating expenses under
the Iridium Business Plan.
NEGATIVE COVENANTS: Negative covenants customary or
appropriate for a financing with this
structure and will include, but not be
limited to, the following (with certain
exceptions, where appropriate, to be
agreed):
1. Mergers, consolidations,
liquidations and dissolutions.
2. Sales of assets and other
dispositions.
3. Acquisitions.
4. Liens.
5. Indebtedness (including mandatorily
redeemable preferred stock or similar
instruments, guarantees and other
contingent obligations), with certain
exceptions to be agreed, including (i)
up to $1,875,000,000 in unsecured debt
(subject to review upon completion of
the initial high-yield debt offering),
and (ii) the 14-1/2% senior
subordinated notes due 2006 in an
original aggregate principal amount of
$238 million held by certain of the
Members.
6. Investments and subsidiaries.
7. Distributions and other restricted
payments.
8. Capital expenditures.
9. Modifications of the Borrower's
organizational documents, the Project
Documents and other material
agreements.
10. Scope of business and changes in
business.
11. Transactions with affiliates
(including Iridium Members).
12. Leases.
13. Restrictions on optional payments
and modifications of subordinated and
other debt instruments (including the
Guaranteed Credit Facility).
14. Use of proceeds.
15. Limitation on change in fiscal
year.
16. Utilization of the Reserve Capital
Call Obligations.
<PAGE> 14
- 12 -
EVENTS OF DEFAULT: Events of defaults customary or
appropriate for a financing with this
structure and will include, but not be
limited to, the following (subject, in
certain cases (to be determined), to
grace periods, materiality
qualifications and cure rights to be
agreed by the Lenders):
(1) Borrower Defaults.
1. Failure by the Borrower to pay
principal of or interest on any Loans
(including by mandatory prepayment) and
any other amount due under any Credit
Document.
2. Any representation or warranty of
the Borrower or any of its subsidiaries
under any Transaction Document shall
prove to be have been false or
misleading in any material respect when
made or deemed made.
3. Default by the Borrower or any of
its subsidiaries in the performance of
its obligations under any of the
Transaction Documents.
4. Cross-default to other indebtedness
of the Borrower and its subsidiaries.
5. Any bankruptcy or similar event
affecting the Borrower or any of its
subsidiaries.
6. A final judgment for the payment of
money in excess of a specified amount
(to be agreed) against the Borrower or
any of its subsidiaries and the same
shall remain unpaid and unstayed for a
specified period.
7. Any failure by the Borrower or any
of its subsidiaries or any other
relevant person to obtain, renew,
maintain or comply in all material
respects with any Telecommunications
Approval or other governmental approval
which is necessary for the conduct or
operation of the business of the
Borrower or the Project at such time;
or the revocation, cessation,
termination, withdrawal, suspension,
adverse modification or withholding of
any thereof; or the commencement of any
action for the purpose of revoking,
terminating, withdrawing, suspending,
adversely modifying or withholding any
material such Telecommunications
Approval or other governmental approval
and such proceeding is reasonably
likely to be successful and could
reasonably be expected to have a
material adverse effect.
8. Any Transaction Document to which
the Borrower or any of its subsidiaries
is a party shall terminate or cease to
be in full force and effect for any
reason, any
<PAGE> 15
- 13 -
lien created under the Security
Documents to which the Borrower or any
of its subsidiaries is a party shall
cease to be enforceable or the Borrower
or any such subsidiary shall assert the
invalidity or unenforceability of any
thereof or take any action to terminate
the same (or any similar action shall
be taken by any governmental entity).
(2) Motorola Defaults.
1. Failure by Motorola to pay any
amount due (after expiration of grace
periods and cure rights to be agreed)
under any Transaction Document to which
it is a party.
2. Any representation or warranty of
Motorola under any Transaction Document
shall prove to be have been false or
misleading in any material respect when
made or deemed made.
3. Default by Motorola in the
performance of its obligations under
any of the Transaction Documents after
expiration of grace periods and cure
rights to be agreed.
4. Cross-default to other indebtedness
of the Motorola and its domestic
subsidiaries in an amount equal to at
least 3% of Motorola's consolidated
total stockholders' equity.
5. Any bankruptcy or similar event
affecting Motorola or any of its
domestic subsidiaries.
6. A final judgment for the payment of
money (exclusive of insurance) against
Motorola or any of its domestic
subsidiaries in excess of 3% of
Motorola's consolidated total
stockholders' equity (exclusive of
insurance) and the same shall remain
unpaid and unstayed for a specified
period.
7. Any failure by Motorola to obtain,
renew, maintain or comply in all
material respects with any
Telecommunications Approval or other
governmental approval currently held
(or required to be obtained) by
Motorola which is necessary for the
conduct or operation of the business of
the Borrower or the Project at such
time; or the revocation, cessation,
termination, withdrawal, suspension,
adverse modification or withholding of
any thereof; or the commencement of any
action for the purpose of revoking,
terminating, withdrawing, suspending,
adversely modifying or withholding any
material such Telecommunications
Approval or other governmental approval
and such
<PAGE> 16
- 14 -
proceeding is reasonably likely to be
successful and could reasonably be
expected to have a material adverse
effect.
8. Any Transaction Document to which
Motorola is a party (including but not
limited to the Space System Contract
and the O&M Agreement) shall terminate
or cease to be in full force and effect
for any reason, any lien created under
the Security Documents to which
Motorola is a party shall cease to be
enforceable or Motorola shall assert
the invalidity or unenforceability of
any thereof or take any action to
terminate the same (or any similar
action shall be taken by any
governmental entity).
(3) Event of Defaults relating to
Other Project Parties.
1. Failure by any Project Party
(other than the Borrower, any of its
Subsidiaries or Motorola) (each an
"OTHER PROJECT PARTY') to pay any
amount due to the Borrower or the
Administrative Agent under any
Transaction Document to which it is a
party.
2. Any representation or warranty of
any Other Project Party under any
Transaction Document shall prove to
have been false or misleading in any
material respect when made or deemed
made.
3. Default by any Other Project Party
in the performance of any of its
obligations under any of the
Transaction Documents.
4. Any bankruptcy or similar event
affecting any Other Project Party.
5. Any failure by any Other Project
Party to obtain, renew, maintain or
comply in all material respects with
any Telecommunications Approval or
other governmental approval which is
necessary for the conduct or operation
of the business of the Borrower or the
Project at such time; or the
revocation, cessation, termination,
withdrawal, suspension, adverse
modification or withholding of any
material such Telecommunications
Approval or other governmental
approval; or the commencement of any
action for the purpose of revoking,
terminating, withdrawing, suspending,
adversely modifying or withholding any
thereof and such proceeding is
reasonably likely to be successful and
could reasonably be expected to have a
material adverse effect.
<PAGE> 17
- 15 -
6. Any material provision of any
Transaction Document to which any Other
Project Party is a party is terminated
or ceases to be in full force and
effect for any reason, any lien created
under the Security Documents to which
any Other Project Party is a party
shall cease to be enforceable or any
Other Project Party shall assert the
invalidity or unenforceability of any
thereof or take any action to terminate
or suspend the same (or any similar
action shall be taken by any
governmental entity).
Note: The terms of any Event of
Default relating to the persons (other
than the Borrower, any of its
subsidiaries and Motorola) will be
consistent with the principle that the
Credit Facility as a whole should not
depend on the credit standing,
performance or solvency of any such
person alone or on any event relating
to any such person unless the event
could reasonably be expected, in the
sole determination of the Lenders, to
have a material adverse effect on the
Borrower or the Project.
(4) Other Event of Default.
1. Abandonment of the Project;
condemnation or seizure of material
assets of the Borrower or the Project;
or suspension of the operation of the
Project for a period of time to be
determined.
2. Change of ownership and/or
control. (See "Project Ownership"
below)
3. Other events of default to be
determined.
REMEDIES: Upon the occurrence and during the
continuation of an Event of Default,
the Administrative Agent may (i)
terminate or suspend the Commitments,
(ii) demand immediate repayment of the
Loans and all other amounts owed to the
Lenders under the Credit Facility,
(iii) draw in respect of the Reserve
Capital Call Obligations and/or (iv)
exercise such other rights and remedies
as the Lenders may have at law or in
equity.
PROJECT OWNERSHIP: Motorola will hold, free and clear of
any lien or other restriction (except
for existing contractual arrangements
that have been disclosed in writing to
the Lenders), directly owned interests
in Iridium LLC of not less than
<PAGE> 18
- 16 -
15,750,000 shares. Note: Motorola
will not be required to purchase any
additional ownership interests of
Iridium LLC to offset the effects of
dilution.
In addition, Motorola will enter into,
in favor of the Lenders, a non-compete
covenant to be mutually agreed.
VOTING: Amendments and waivers with respect to
the Credit Documents shall require the
approval of the Required Lenders,
except that (a) the consent of each
Lender affected thereby shall be
required with respect to (i) extensions
of the Commitment Termination Date and
the Final Maturity (other than an
extension of the Commitment Termination
Date to February 28, 1999 as described
under "Availability" in Part II above),
(ii) reductions in the rate of interest
or any fee or extensions of any due
date thereof, (iii) increases in the
amount of any Lender's Commitment and
(iv) reductions in the amount of any
scheduled payment of principal, and (b)
the consent of 100% of the Lenders
shall be required with respect to (i)
modifications to any of the voting
percentages and (ii) releases (but not
modifications) of all or substantially
all of the collateral and/or the
Reserve Capital Call Obligations (other
than in accordance with the terms
thereof).
ASSIGNMENTS AND PARTICIPATIONS: The Lenders shall be permitted to
assign and sell participations in their
Loans and Commitments, subject, in the
case of assignments (other than to
another Lender or to an affiliate of
the assigning Lender), to the consent
of the Administrative Agent and the
Borrower (which consent, in each case,
shall not be unreasonably withheld).
In the case of partial assignments, the
minimum assignment amount shall be
$10,000,000 and, after giving effect
thereto, the assigning Lender shall
have Commitments and Loans aggregating
at least $10,000,000. Participants
shall have the same benefits as the
Lenders with respect to yield
protection and increased cost
provisions. Voting rights of
participants shall be limited to those
matters with respect to which the
affirmative vote of the Lender from
which it purchased its participation
would be required as described under
"Voting" above. A
recordation/processing fee of $3,500
will be paid to the Administrative
Agent by the assignor in connection
with each assignment.
<PAGE> 19
- 17 -
YIELD PROTECTION: The Credit Agreement shall contain
customary provisions (a) protecting the
Lenders against loss of yield resulting
from changes in reserve, tax, capital
adequacy and other requirements of law
and from the imposition of withholding
or other taxes and (b) indemnifying the
Lenders for "breakage costs" incurred
in connection with, among other things,
prepayment of a Eurodollar Loan on a
day other than the last day of an
interest period with respect thereto.
EXPENSES AND INDEMNIFICATION: The Borrower shall pay (a) all
reasonable out-of-pocket expenses of
the Global Financing Advisor, the
co-Financing Advisor, the Global
Arrangers, the other Lead Arrangers and
the Agents associated with the
syndication of the Credit Facility and
the preparation, execution, delivery
and administration of the Credit
Documents and the Project Documents and
any amendment or waiver with respect
thereto (including the reasonable fees
and disbursements and other charges of
legal counsel to the Lead Arrangers
identified or contemplated below and
the fees and expenses of the Lenders'
other consultants, including the
Lenders' Insurance Advisor, Market
Consultant and Technical Advisor and
other consultants agreed to by the
Borrower (such agreement not to be
unreasonably withheld)) and (b) all
out-of-pocket expenses of the Lenders
and the Agents in connection with the
enforcement of the Credit Documents
(including the fees and disbursements
and other charges of legal counsel).
The Borrower shall indemnify, pay and
hold harmless the Global Financing
Advisor, the co-Financing Advisor, the
Global Arrangers, the other Lead
Arrangers, the Lenders and the Agents
(and their respective directors,
officers, employees and agents) against
any loss, liability, cost or expense
incurred in respect of the financing
contemplated hereby or the use or the
proposed use of proceeds thereof
(except to the extent resulting from
the gross negligence or willful
misconduct of the indemnified party).
GOVERNING LAW: State of New York.
<PAGE> 20
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SUBMISSION TO JURISDICTION,
ETC.: All persons and entities obligated to
the Lenders in respect of the Credit
Documents will submit to the
non-exclusive jurisdiction of New York
courts. All of the parties to the
Credit Documents will, to the fullest
extent permitted by applicable law,
waive any right to a trial by jury.
WAIVER OF IMMUNITY: To the extent the Borrower or any other
Project Party party to a Credit
Document might now or later acquire
immunity from jurisdiction of any court
or from any legal process with respect
to itself or its property, each such
person irrevocably will waive immunity
with respect to its obligations under
the Credit Documents.
COUNSEL TO THE GLOBAL
ARRANGERS AND OTHER
LEAD ARRANGERS: Milbank, Tweed, Hadley & McCloy, which
will act as the sole counsel for the
Global Arrangers and the other Lead
Arrangers (other than local or special
counsel deemed necessary by the Global
Arrangers and agreed to by the Borrower
(such agreement not to be unreasonably
withheld)).
<PAGE> 21
ANNEX 1
DEFINITIONS
ADMINISTRATIVE AGENT: The Chase Manhattan Bank.
AGENTS: The Administrative Agent and the
Documentation Agent.
BARCLAYS: Barclays Bank PLC.
BORROWER: Iridium LLC.
BZW: BZW, a division of Barclays Bank PLC.
CHASE: The Chase Manhattan Bank.
COMMITMENT TERMINATION DATE: As defined in Part II above.
COMMITMENTS: The commitments of the Lenders to make
the Loans.
CONSTRUCTION BUDGET: As defined in Annex 2, Part I.D.4.
CREDIT AGREEMENT: As defined in Part V above.
CREDIT DOCUMENTS: Collectively, the Credit Agreement, the
Notes, the Security Documents and the
Subsidiary Guarantee.
CREDIT FACILITY: As defined in Part II above.
DOCUMENTATION AGENT: BZW.
FCC: U.S. Federal Communications Commission.
GATEWAYS: Terrestrial interconnection points
between the IRIDIUM satellite
constellation and public switched
telephone networks (PSTNs).
GLOBAL ARRANGERS: Chase Securities and BZW.
GUARANTEED CREDIT FACILITY: The Credit Agreement dated as of August
21, 1996, as amended, between Iridium
LLC, the lenders party thereto and the
Administrative Agent, providing for
loans of up to $750,000,000, guaranteed
by Motorola pursuant to a Guarantee
Agreement dated as of August 21, 1996,
as amended.
<PAGE> 22
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IBSS: IRIDIUM Business Support Systems.
ICRS: IRIDIUM Cellular Roaming Service.
IRIDIUM BUSINESS PLAN: The "Iridium Business Financial Plan",
Version 2.0, dated March 31, 1997.
IRIDIUM MEMBERS: The holders of all equity interests of
the Borrower, which as of the date
hereof are:
Iridium Africa Corporation
Iridium Andes Caribe
Iridium Brasil Ltda.
Iridium China (Hong Kong) Ltd.
Iridium Canada, Inc.
Iridium Italia S.p.A
Iridium India Telecom Limited
Iridium Middle East Corporation
Khrunichev State Research and
Production Space Center
Korea Mobile Telecommunications
Corporation
Lockheed Martin Corporation
Motorola
Nippon Iridium (Bermuda) Limited
Pacific Electric Wire & Cable Co., Ltd.
P.T. Bakrie Communications Corporation
Raytheon Company
Sprint Iridium, Inc.
Thai Satellite Telecommunications Co.,
Ltd.
VEBACOM Holdings, Inc.
IRIDIUM SYSTEM: The IRIDIUM Communications Systems.
LEAD ARRANGERS: A group of leading financial
institutions, including the Global
Arrangers, selected by the Borrower and
the Global Arrangers.
LENDERS: The banks, financial institutions and
other entities, including the Chase,
Barclays and the other Lead Arrangers,
selected in the syndication effort of
the Credit Facility.
LENDERS' INSURANCE ADVISOR: Sedgwick James of New Jersey, Inc.
LENDERS' MARKET CONSULTANT: Coopers & Lybrand, L.L.P.
LENDERS' TECHNICAL ADVISOR: Arthur D. Little, Inc.
<PAGE> 23
- 3 -
LOANS: The loans under the Credit Facility up to $750,000,000 in
aggregate principal amount.
MOTOROLA: Motorola, Inc., a Delaware corporation.
NOTES: As defined in Part I.A of
Annex 2 hereto.
O&M AGREEMENT: The Operations and Maintenance
Contract, effective July 29, 1993,
between Iridium, Inc. and Motorola, as
amended.
PROJECT: The IRIDIUM System, including without
limitation the IBSS and the Gateways.
PROJECT DOCUMENTS: The following contracts (as amended or
replaced) to which the Borrower is or
will be a party in connection with the
development, construction,
installation, ownership, operation and
maintenance of the Project:
1. the Space System Contract;
2. the Operations and Maintenance
Contract;
3. the Terrestrial Network
Development Contract;
4. all Gateway Authorization
Agreements;
5. all agreements regarding the
delivery and pricing of
subscriber units;
6. the Limited Liability Company
Agreement of Iridium LLC; and
7. other material agreements to
be mutually agreed between
the Borrower and the Global
Arrangers.
PROJECT PARTIES: The Borrower, the subsidiaries of the
Borrower, the Iridium Members and each
other Person party to any of the
Transaction Documents.
REQUIRED LENDERS: Lenders holding at least a simple
majority of the aggregate unused
Commitments and outstanding Loans of
all the Lenders.
RESERVE CAPITAL CALL OBLIGATIONS: The obligations of the Iridium Members
in respect of the "Reserve Capital Call
Obligations" described in Part IV
above.
<PAGE> 24
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SECURITY DOCUMENTS: As defined in Annex 2, Part I.B.
SPACE SYSTEM CONTRACT: The Space System Contract, effective as
of July 29, 1993, between Iridium, Inc.
and Motorola, as amended.
SUBSIDIARY GUARANTEE: As defined in Part IV above.
TELECOMMUNICATIONS APPROVALS: All governmental authorizations,
approvals, orders, clearances, permits,
licenses, etc. of any applicable
telecommunications authority (including
all local and national
telecommunications approvals and
licenses, including FCC licenses, and
compliance with ITU procedures and
requirements) relating to the Project
including without limitation for
spectrum allocation, Ka-band, L-band,
interconnection, type approval,
trans-border roaming and other business
operations.
TERRESTRIAL NETWORK
DEVELOPMENT CONTRACT: The Terrestrial Network Development
Contract, entered into in June 1995,
between Iridium, Inc. and Motorola, as
amended.
TRANSACTION DOCUMENTS: Each of the Credit Documents and the
Project Documents.
<PAGE> 25
ANNEX 2
CONDITIONS PRECEDENT
Set forth below is a list of the indicative principal
conditions precedent to Loan disbursements under the Credit Facility.
I. CONDITIONS PRECEDENT TO THE INITIAL LOANS
A. EXECUTION AND DELIVERY OF PRINCIPAL CREDIT DOCUMENTS
1. Credit Agreement. A Credit Agreement, duly executed and
delivered by the Borrower, the Lenders and the Administrative
Agent, providing for the Credit Facility (the "CREDIT
AGREEMENT") .
2. Notes. The promissory note(s) payable to each Lender
evidencing the Loans (the "NOTES"), if requested by any
Lender.
3. Subsidiary Guarantee. The Subsidiary Guarantee to be entered
into between each of the subsidiaries of the Borrower and the
Administrative Agent in respect of the Credit Facility.
B. EXECUTION AND DELIVERY OF SECURITY DOCUMENTS; OTHER REQUIREMENTS
RELATING TO THE COLLATERAL
1. Borrower Security Agreements. The Borrower and each of its
subsidiaries shall have entered into one or more security
agreements, pledge agreements, mortgages, deeds of trust,
leasehold mortgages or similar instruments or agreements
(collectively, the "BORROWER SECURITY AGREEMENTS"), in each
case with the Administrative Agent (or a collateral agent or
trustee designated by the Global Arrangers for that purpose),
pursuant to which the Borrower and each such Subsidiary grant
the security interests in its assets contemplated hereby, and
shall have taken such other action (including, without
limitation, the filing or recording of any instruments and the
payment of fees, assessments, taxes and/or other charges) as
the Administrative Agent shall have requested, in order to
provide the Lenders with a first priority perfected security
interest in or lien upon such assets, as contemplated hereby.
2. Pledge Agreements. The holder(s) of the equity interests of
the Borrower shall have entered into one or more pledge
agreements pursuant to which, collectively, such holder(s)
shall pledge all of the equity interests of the Borrower to
the Administrative Agent for the benefit of the Lenders
(collectively, the "PLEDGE AGREEMENTS"), as contemplated
hereby.
<PAGE> 26
- 2 -
3. Other Security Agreements. Each other Person required under
"Collateral" in Part IV above to provide a security interest
in assets of such person shall have entered into a security
agreement or similar instrument (collectively, the "OTHER
SECURITY AGREEMENTS") with the Administrative Agent creating
such security interests, and shall have taken such other
action (including, without limitation, the filing or recording
of any instruments and the payment of fees, assessments, taxes
and/or other charges) as the Administrative Agent shall have
requested, in order to provide the Lenders with a first
priority perfected security interest in or lien upon such
assets, as contemplated hereby.
4. Consent and Agreement. A consent and agreement to be entered
into between the Administrative Agent and each Project Party
party to a Project Document other than the Borrower (such as
the gateway operators) and each Iridium Member obligated under
the Reserve Capital Call Obligations (each a "CONSENT AND
AGREEMENT" and, together with the Borrower Security
Agreements, the Pledge Agreements and the Other Security
Agreements, the "SECURITY DOCUMENTS"), providing for certain
direct agreements between such party and the Lenders with
respect to various issues that are customarily addressed in
these types of agreements for a financing with this structure,
including, but not limited to: consent to the Borrower's
assignment of its rights under the respective agreements as
collateral security for the benefit of the Lenders; agreement
to the Lenders' right to enforce the Borrower's rights under
the relevant agreement; agreement to make payments of amount
payable by such Project Party to Iridium directly to one of
the project accounts maintained with the Administrative Agent,
etc. (The undertakings contemplated above may be incorporated
into a Credit Document (if any) to which the relevant Project
Party is a party or, in the case of the Iridium Members, an
amendment to the LLC Agreement, a joint resolution or other
joint undertaking.)
5. Filings, Registrations and Recordings. Evidence that all
filings, recordings, registrations, etc. with respect to the
Security Documents and payments of all filing, recordation,
registration and similar fees, and all taxes and other similar
charges in connection therewith and with the execution and
delivery of the Credit Documents shall have been made.
6. Title Insurance, Etc. In conjunction with any mortgage, deed
of trust, leasehold mortgage or similar instrument regarding
real estate, the Borrower will provide mortgagee title
insurance policies, surveys, appraisals and other
documentation reasonably requested by the Administrative Agent
in connection with the granting of a first mortgage lien in
favor of the Lenders on the subject premises.
7. Stock Certificates. If the equity interests of the Borrower
or any of its subsidiaries are evidenced by a certificate, the
Administrative Agent shall have received such certificate(s)
together with undated stock powers executed in blank, and/or
the pledgor thereof shall have taken such other action
reasonably requested by the Administrative Agent in order to
create a first priority perfected security interest in such
equity interests.
<PAGE> 27
- 3 -
8. Transfer of Property. Except as mutually agreed between
Iridium and the Global Arrangers or otherwise as contemplated
herein and only to the extent required under "Collateral" in
Part IV above, all property (including without limitation all
Telecommunications Approvals and intellectual property)
necessary for the Project shall have been transferred to the
Borrower or a subsidiary of the Borrower, or arrangements with
respect to such transfer as may be satisfactory to the
Required Lenders and the Administrative Agent.
9. Further Action. All other action or steps shall have been
taken by each party to the Security Documents reasonably
requested by the Administrative Agent in order to create a
first priority perfected security interest in the respective
property subject to the Security Documents.
C. PROJECT DOCUMENTS
1. Project Documents in Force. Each of the Project Documents
(other than any Project Document expressly contemplated to be
executed after the relevant borrowing), in each case
containing such terms and conditions as shall be consistent
with this Summary of Terms and Conditions and which shall be
in full force and effect.
2. Copies of Project Documents. The Administrative Agent shall
have received a true, complete and correct copy of each of the
Project Documents as then in effect.
D. FINANCIAL AND OTHER INFORMATION
1. Iridium's Financial Statements. Copies of the most recent
audited consolidated financial statements of the Borrower and
unaudited quarterly consolidated financial statements of the
Borrower for each quarterly period ended subsequent to the
date of such audited financial statements.
2. Certain Project Parties' Financial Statements. Upon request
of the Administrative Agent, for each party obligated in
respect of the Reserve Capital Call Obligations, copies of
audited (if available, otherwise unaudited and certified by a
senior financial officer of such party) financial statements
of such party for the two most recent fiscal years and
unaudited quarterly financial statements of such party for
each quarterly period ended subsequent to the date of such
audited financial statements.
3. Iridium Business Plan. The Iridium Business Plan as then in
effect, certified as such by a senior officer of the Borrower,
in all respects satisfactory to the Lenders, and which include
projections of revenues, operating expenses and capital
expenditures for the Project (including, without limitation,
the Gateways), together with written assumptions therefor,
covering the period of at least 1997-2004, and delivery of a
summary business plan with measurable monthly objectives.
<PAGE> 28
- 4 -
4. Construction Budget. The Project construction budget (the
"Construction Budget"), certified as such by a senior officer
of the Borrower, in all respects satisfactory to the Lenders.
5. Other Information. Such other financial or other information
as the Administrative Agent or any Lender may reasonably
request.
E. FUNDING OF CAPITAL REQUIREMENTS FOR THE PROJECT
1. Other Funding. Evidence that, prior to the initial Loans, (i)
the Borrower (x) shall have received aggregate net cash
proceeds from the issuance of equity of at least
$2,018,000,000, which may include $50,000,000 of receivables
from Bakrie (or $1,985,000,000 if over-allotment option is not
exercised by underwriters of the initial public offering), (y)
shall continue to have outstanding the 14-1/2% senior
subordinated notes due 2006 (or such notes shall have been
converted pursuant to their terms) and (z) shall have issued
or have outstanding $1,875,000,000 aggregate amount of
unsecured debt, of which not more than $350,000,000 may
represent conditional commitments of Motorola to either
provide such financing or guarantees with respect thereto (the
terms of which shall be satisfactory to the Lenders) and (ii)
such proceeds have been (or in the case of such commitments,
will be) applied by the Borrower to the payment of budgeted
Project costs (based upon the approved Construction Budget).
2. Reserve Capital Call Obligations. The provisions of the LLC
Agreement in respect of the Reserve Capital Call Obligations
shall be in full force and effect, and each of the Iridium
Members shall have entered into the agreements in favor of the
Lenders as contemplated in "Reserve Capital Call Obligations"
in Part IV above.
F. TECHNICAL REQUIREMENTS
1. Appendix A Requirements. Evidence satisfactory to the Global
Arrangers and the Lenders' Technical Advisor as to achievement
of or satisfaction with each of the technical and other
requirements specified in Appendix A hereto that are required
to be met on or prior to the making of the initial Loans.
2. Report of Lenders' Technical Advisor. A written report of the
Lenders' Technical Advisor (expected to be completed June 30,
1997), in form and substance satisfactory to the Global
Arrangers and the Lenders, as to (i) confirmation as to
adherence to the schedule for completion, (ii) functionality
of the components of project employed to date and (iii)
achievability of such completion schedule.
3. ISU's. Execution of satisfactory contracts between the
Borrower and/or other parties acceptable to the Lenders, on
the one hand, and Motorola and other parties acceptable to the
Lenders, on the other hand, which provide reasonable
assurances of the supply of subscriber units in sufficient
quantities to cover at least the projected level of
<PAGE> 29
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subscribers for the first year of commercial operation and at
a price consistent with achievement of the Iridium Business
Plan.
G. REGULATORY REQUIREMENTS
1. Disclosure of Project Approvals. The Borrower shall provide a
list in satisfactory detail of all material Telecommunications
Approvals and other governmental and third party approvals and
consents (collectively, the "PROJECT APPROVALS") required for
(1) the execution, delivery and performance of the Transaction
Documents and (2) all aspects of the Project (including
construction, launch, testing and operations) and covering,
inter alia, the Gateways, IBSS and ICRS. (This will be a
schedule to the Credit Agreement.)
2. Receipt of Project Approvals. Evidence that all Project
Approvals, which are necessary, in the opinion of the Global
Arrangers or their advisors, based on the then current stage
of development of the Project, shall have been duly obtained,
validly issued and in full force and effect, and certified
copies of each such Project Approval. With respect to any
Project Approval which is necessary for the operation of the
Project but which is not required to have been obtained as of
the relevant borrowing date or any Project Approval
theretofore granted but which is not final, the Borrower shall
represent that it has no reason to believe that the same will
not be granted to it (or the applicable person required to
obtain the same) in the ordinary course prior to the time when
it will be required or will not become final in the normal
course without unreasonable delay and without imposition of
material conditions or restrictions.
Note: Further investigation will be needed regarding any such
licenses or other consents in connection with subscriber
equipment and the operation of Gateways in local
jurisdictions, and the delays which may occur in the ordinary
course in obtaining such licenses and other consents.
3. Achievement of Minimum Regulatory Approvals. Achievement of
the minimum regulatory approvals (i.e., regulatory approvals,
execution of roaming agreements and execution of satisfactory
service provider agreements (including pricing and terms) with
"qualified" service providers (defined as PTTs and national
cellular operators)) as specified in Appendix A hereto that
are required to be obtained or in place on or prior to the
making of the initial Loans.
H. MARKETING REQUIREMENTS
1. Market Analysis. An analysis from the Lenders' Market
Consultant (expected to be completed June 30, 1997) as to (i)
the commercial market of the Project, (ii) a review of the
Iridium Business Plan and the reasonableness of the
assumptions relating thereto
<PAGE> 30
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and (iii) a review of the Iridium distribution strategy and
regulatory requirements, in form and substance satisfactory to
the Global Arrangers.
I. INSURANCE
1. Insurance Program. A description of the insurance program of
the Borrower with respect to the Project, in form and
substance satisfactory to the Global Arrangers and the
Lenders' Insurance Advisor, which program will provide
sufficient coverage for (i) all potential material losses of
the Iridium satellites in orbit for which the Borrower would
be obligated to pay under the Space System Contract and the
O&M Agreement (and, with respect to the coverage amount, in an
amount not less than the maximum amount of the Credit
Facility), (ii) the Iridium System Control Segment and (iii)
general liability in an amount of $500,000,000.
2. Evidence of Insurance.
(i) Certificates of a senior financial officer of the Borrower
and an internationally recognized insurance broker certifying
that the insurance obtained by the Borrower is in accordance
with the insurance requirements of the Credit Agreement.
(ii) Certificates of the insurers (or its authorized
representative) and a senior financial officer of the Borrower
stating that the insurance obtained by the Borrower is in full
force and effect and that all insurance premiums and deposits
then due and payable thereon have been paid or made, and
attaching true and complete copy of the insurance policies
required to be in effect or certificates of insurance with
respect thereto, such policies or certificates to be in form
and substance satisfactory to the Lenders and the Lenders'
Insurance Advisor.
3. Loss Payee/Additional Insureds Designation. Evidence that the
Administrative Agent have been named additional insured(s)
and/or loss payee(s) under certain of the Borrower's and
Motorola's insurance as required above.
4. Report of Lenders' Insurance Advisor. A written report of the
Lenders' Insurance Advisor, as to the insurance program
referred to above, in form and substance satisfactory to the
Administrative Agent and the Lenders, and stating that, in
their opinion, such insurance adequately protects the
interests of the Administrative Agent and the Lenders and is
in compliance with the insurance requirements of the Credit
Agreement.
J. MISCELLANEOUS
1. Borrower's Resolutions, Incumbency, Etc.
A certificate of a senior officer of the Borrower as to:
<PAGE> 31
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(i) board resolutions of the Borrower and its subsidiaries
authorizing the execution, delivery and performance of each of
the Transaction Documents to which the Borrower and its
subsidiaries are party and all other aspects of the
transactions contemplated thereby.
(ii) the name, incumbency and signature of each individual
authorized to execute the Transaction Documents to which the
Borrower and its subsidiaries are party and the other
documents or certificates to be delivered pursuant thereto (on
which the Administrative Agent and the Lenders may
conclusively rely until a revised certificate is similarly so
delivered).
(iii) certified copies of the organizational documents for
the Borrower and each of its subsidiaries.
2. Other Project Parties' Resolutions, Incumbency, Etc.
A certificate of a senior officer of each Project Party (other
than the Borrower and its subsidiaries) party to a Transaction
Document as to:
(i) board resolutions or other evidence of authorization of
such other Project Party authorizing the execution, delivery
and performance of each such Transaction Document and all
other aspects of the transactions contemplated thereby in
which such other Project Party is involved.
(ii) the name, incumbency and signature of each individual
authorized to execute the Transaction Documents to which such
other Project Party is a party and the other documents or
certificates to be delivered pursuant thereto (on which the
Administrative Agent and the Lenders may conclusively rely
until a revised certificate is similarly so delivered).
(iii) certified copies of the organizational documents for
each such other Project Party.
3. Borrower's Officer's Certificate. A certificate of a senior
officer of the Borrower certifying as to (i) the accuracy of
the representations and warranties made by the Borrower and
its subsidiaries in the Transaction Documents, and by each
other Project Party in the Credit Documents to which it is a
party and (ii) the absence of any default or event of default
under the Credit Agreement and the other Transaction Documents
on such date.
4. Project Party's Officer's Certificate. A certificate of a
senior officer of each Project Party (other than the Borrower)
party to a Transaction Document certifying as to (i) the
accuracy of the representations and warranties made by such
party in each such Transaction Document and (ii) the absence
of any default or event of default relating to such Project
Party under each Credit Document.
<PAGE> 32
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5. Opinions of Counsel. Legal opinions in form and substance
acceptable to the Administrative Agent and the Lenders from
counsel to each of the Borrower and each other Project Party
as the Administrative Agent or any Lender may reasonably
request and such special and local counsel as may be required
by the Administrative Agent and as are customary for similar
transactions.
6. Process Agent. Letter from one or more persons satisfactory
to the Administrative Agent accepting its appointment as
process agent in New York for each Project Party party to a
Credit Document.
7. Payment of Fees and Expenses. Receipt by the Global
Arrangers, the Lead Arrangers and the Lenders of all fees and
expenses with respect to the Credit Facility (including,
without limitation, fees and expenses of counsel and other
consultants and experts engaged by the Global Arrangers) to
the extent then due and payable.
8. Compliance with Laws. The Lenders' satisfaction that the
Borrower and its subsidiaries are in material compliance with
all applicable U.S. federal, state, local and foreign laws and
regulations (including, without limitation, all applicable
environmental laws and regulations), including that the
extensions of credit under the Credit Facility shall be in
full compliance with all legal requirements.
9. Other Documents. Receipt of such other documents,
certificates, instruments and information as the
Administrative Agent or any Lender or special counsel to the
Global Arrangers may reasonably request.
II. CONDITIONS PRECEDENT TO EACH LOAN
1. Notice of Borrowing. Receipt by the Administrative Agent of a
Notice of Borrowing for the relevant Loan.
2. Progress and Utilization Certificate. Receipt by the
Administrative Agent of a certificate or certificates (in a
form or forms to be agreed) from the Borrower certifying as
to:
(i) the progress as to the construction of the Project
(consistent with the Iridium Business Plan) and that the
Project is expected to be completed in accordance with the
agreed schedule, and demonstrating that the Borrower has, as
of each borrowing date, sufficient available or committed
funding to achieve completion of the Project in accordance
with such schedule and to provide funding of Project costs to
the then-scheduled Commitment Termination Date;
(ii) achievement of the technical and other
requirements specified in Appendix A hereto that are required
to be met on or prior to the making of such Loan; and
(iii) the use of the proceeds of the relevant borrowing,
<PAGE> 33
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accompanied by a certificate or certificates (in a form or
forms to be agreed) of the Lenders' Technical Advisor
verifying and/or concurring in certain of the foregoing (to be
mutually agreed between the Borrower and the Global
Arrangers).
3. Minimum Government Approvals. Achievement of the minimum
regulatory approvals as specified in Appendix A hereto that
are required to be obtained on or prior to the making of such
Loan.
<PAGE> 1
EXHIBIT 10.24
================================================================================
UNIT AGREEMENT
BY AND AMONG
IRIDIUM LLC
(A DELAWARE LIMITED LIABILITY COMPANY),
IRIDIUM CAPITAL CORPORATION
(A DELAWARE CORPORATION),
IRIDIUM WORLD COMMUNICATIONS LTD.
(A BERMUDA COMPANY),
IRIDIUM ROAMING LLC
(A DELAWARE LIMITED LIABILITY COMPANY),
IRIDIUM IP LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
AND
STATE STREET BANK AND TRUST COMPANY,
AS UNIT AGENT, TRUSTEE
AND WARRANT AGENT
DATED AS OF JULY 16, 1997
================================================================================
<PAGE> 2
This UNIT AGREEMENT (the "Agreement") dated as of July 16,
1997 is by and among Iridium LLC, a Delaware limited liability company
("Iridium"), Iridium Capital Corporation, a Delaware corporation ("Capital"
and, together with Iridium, the "Note Issuers"), Iridium World Communications
Ltd., a Bermuda company ("IWCL"), Iridium Roaming LLC and Iridium IP LLC
(together, the "Guarantor Subsidiaries" and together with Iridium, Capital and
IWCL, the "Issuers"), and State Street Bank and Trust Company, as Trustee,
Warrant Agent and Unit Agent.
WHEREAS, the Note Issuers propose to issue $300,000,000
aggregate principal amount of its 13% Senior Notes due 2005, Series A (the
"Notes") pursuant to an Indenture dated as of July 16, 1997 (the "Indenture")
among the Note Issuers, as joint and several obligors, the Guarantor
Subsidiaries and State Street Bank and Trust Company, as trustee (the
"Trustee"), and IWCL proposes to issue 300,000 warrants (the "Warrants"), each
of which represents the right to purchase 5.2 shares (the "Warrant Shares") of
Class A Common Stock, par value $0.01 per share (the "Class A Common Stock") of
IWCL, pursuant to a Warrant Agreement dated as of July 16, 1997 (the "Warrant
Agreement") between IWCL and State Street Bank and Trust Company, as Warrant
Agent (the "Warrant Agent"). The Warrants represent the right to purchase an
aggregate of 1,560,000 Warrant Shares. The Notes and the Warrants issued in
connection therewith will initially be represented by units (the "Units"), with
each Unit consisting of $1,000 principal amount of Notes and one Warrant. The
Note Issuers also propose to issue $500,000,000 aggregate principal amount of
its 14% Senior Notes due 2005, Series B (the "Series B Notes") pursuant to an
Indenture dated as of July 16, 1997 among the Note Issuers, as joint and
several obligors, the Guarantor Subsidiaries and State Street Bank and Trust
Company, as trustee. The Series B Notes are not subject to this Agreement.
WHEREAS, the Issuers, the Trustee and the Warrant Agent desire
to appoint State Street Bank and Trust Company to act as their agent for the
purpose of issuing certificates representing the Units and for the registration
of transfers and exchanges thereof. State Street Bank and Trust Company in
such capacity is referred to herein as the "Unit Agent."
WHEREAS, the Units will be exchangeable for the Notes and
Warrants represented thereby upon the earlier to occur of: (i) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement for the Notes and (ii) such date after January 15, 1998 as Chase
Securities Inc. may, in its discretion, deem appropriate. The date on which
the earlier of the event listed in (i) and the event listed in (ii) above
occurs is referred to as the "Separability Date."
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Unit Agent. (a) The Issuers
hereby appoint the Unit Agent to act as agent for it in accordance with the
instructions set forth hereinafter in this Agreement, and the Unit Agent hereby
accepts such appointment.
(b) The Trustee, the Note Issuers and the Guarantor
Subsidiaries hereby appoint the Unit Agent as an authenticating agent and
Registrar (as defined in the Indenture) for the Notes for so long as the Notes
are represented by the Units. In its capacity as an authenticating agent and
<PAGE> 3
Registrar, the Unit Agent shall have the rights and obligations provided for
such capacities in the Indenture.
(c) The Warrant Agent and IWCL hereby appoint the Unit
Agent as an authenticating agent and the holder of the Certificate Register (as
defined in the Warrant Agreement) (in such capacity, the "Warrants Registrar")
for so long as the Warrants are represented by the Units. In its capacity as
an authenticating agent and Warrants Registrar, the Unit Agent shall have the
rights and obligations provided for such capacities in the Warrant Agreement.
SECTION 2. Unit Certificates. (a) The Units will initially
be represented in the form of one or more global Unit certificates (the "Global
Units"), substantially in the form of Exhibit A attached hereto, as required by
the Indenture and the Warrant Agreement. The Global Units to be delivered
pursuant to this Agreement shall bear the legend set forth in Exhibit B
attached hereto. Global Units shall represent such of the outstanding Units as
shall be specified therein and each shall provide that it shall represent the
aggregate Units from time to time endorsed thereon and that the aggregate
amount of outstanding Units represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Unit to
reflect the amount of any increase or decrease in the amount of outstanding
Units represented thereby shall be made by the Unit Agent and Depositary (as
defined below) in accordance with instructions given by the holder thereof.
The Depository Trust Company shall act as the depositary (the "Depositary")
with respect to any Global Units until a successor shall be appointed by the
Issuers and the Unit Agent.
(b) The initial Units are being offered and sold by the
Issuers pursuant to the Purchase Agreement dated July 11, 1997 among the
Issuers, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Purchase Agreement"). Initial Units offered and sold to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act")) ("QIBs") in accordance with
Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase
Agreement, shall be issued on the date of first issuance of the Units (the
"Issue Date") initially in the form of one or more permanent global Units in
registered form (the "Rule 144A Global Units"), deposited with the Unit Agent,
as custodian for the Depositary, duly executed by the Issuers and countersigned
by the Unit Agent as hereinafter provided. The aggregate amount of any Rule
144A Global Units may from time to time be increased or decreased by
adjustments made on the records of the Unit Agent, as custodian for the
Depositary or its nominee, as hereinafter provided.
(c) Initial Units 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 Units in registered form (the "Regulation S Temporary Global
Units"). The Regulation S Temporary Global Units 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 respective initial Units and the Issue Date (the
"Regulation S Restricted Period") with respect to the offer and sale of the
initial Units (the "Regulation S Units Exchange Date"). Iridium shall promptly
notify the Unit Agent in writing of the occurrence a Regulation S Units
Exchange Date and, within a reasonable time after the Regulation S Units
Exchange Date, upon receipt by the Unit Agent and Iridium of one or more
certificates
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<PAGE> 4
substantially in the form set forth in Exhibit C, the Issuers shall execute, if
not already executed, and the Unit Agent shall authenticate and deliver, if not
already authenticated and delivered, one or more permanent global Units in
registered form, substantially in the form set forth in Exhibit A (the
"Regulation S Permanent Global Units", and together with the Regulation S
Temporary Global Units, the "Regulation S Global Units") or increase the
beneficial ownership interest therein if already executed, authenticated and
delivered, in exchange for the Regulation S Temporary Global Units of like
tenor and amount. The Regulation S Global Units and Rule 144A Global Units are
referred to herein as the "Global Units." Notwithstanding the foregoing, the
Issuers may execute, and the Unit Agent may authenticate and deliver Regulation
S Permanent Global Units in 0 (zero) amount at the time of issuance of the
Regulation S Temporary Units.
(d) Members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Unit Agreement with respect
to any Global Unit held on their behalf by the Depositary, or the Unit Agent as
its custodian, or under such Global Unit, and the Depositary may be treated by
the Issuers, the Unit Agent and any agent of the Issuers or the Unit Agent as
the absolute owner of such Global Unit for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Unit Agent or any agent of the Issuers or the Unit Agent 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 Unit.
(e) Transfers of a Global Unit shall be limited to
transfers of such Global Unit in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Unit may be transferred in accordance with the rules and procedures of
the Depositary and the provisions of Section 5. Except as otherwise provided
herein, beneficial owners may obtain Definitive Units in exchange for their
beneficial interests in a Global Unit only if (i) the Issuers notify the Unit
Agent in writing that the Depositary is no longer willing or able to act as
Depositary for such Global Unit 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 Issuers within 90 days of such
notice, (ii) the Issuers, at their option, notify the Unit Agent in writing
that they elect to cause the issuance of Definitive Units or (iii) an Event of
Default has occurred and is continuing under the Indenture and the Unit Agent
has received a request from the Depositary to effect such exchange.
(f) In connection with any transfer of a portion of the
beneficial interest in a Global Unit pursuant to subsection (e) of this Section
or Section 5 to beneficial owners who are required to hold Definitive Units,
the Unit Agent shall reflect on its books and records the date and a decrease
in the amount of such Global Unit in an amount equal to the amount of the
beneficial interest in the Global Unit to be transferred, and the Issuers shall
execute, and the Unit Agent shall authenticate and deliver, one or more
Definitive Units of like tenor and amount.
(g) In connection with the transfer of an entire Global
Unit to beneficial owners pursuant to subsection (e) of this Section, such
Global Unit shall be deemed to be surrendered to the Unit Agent for
cancellation, and the Issuers shall execute, and the Unit Agent shall
authenticate and
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<PAGE> 5
deliver, to each beneficial owner identified by the Depositary in exchange for
its beneficial interest in such Global Unit, an equal aggregate principal
amount of Definitive Units of authorized denominations.
(h) Any Definitive Unit delivered in exchange for an
interest in a Global Unit pursuant to subsection (e) or subsection (f) of this
Section shall, unless the circumstances provided in Section 5(d)(i)(x) exist or
except as otherwise provided in Section 5(h), bear the Private Placement
Legend.
(i) The registered holder of a Global Unit 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 Unit Agreement or the Units.
SECTION 3. Execution of Unit Certificates. Certificates for
Global Units and units represented in registered form as definitive Unit
certificates (the "Definitive Units") (collectively, the "Unit Certificates")
shall be signed on behalf of each of the Issuers by an Officer (as defined
below) of each of the Issuers. As used herein, "Officer" means the chairman of
the board, the chief executive officer, the chief financial officer, the
president, any vice president, the treasurer, secretary or any assistant
secretary of the applicable Issuer. Each such signature upon the Unit
Certificates may be in the form of a facsimile signature of the current or any
future Officer of each of the Issuers and may be imprinted or otherwise
reproduced on the Unit Certificates and for that purpose the Issuers may adopt
and use the facsimile signature of any person who shall have been an Officer of
each of the Issuers, notwithstanding the fact that at the time the Unit
Certificates shall be authenticated and delivered or disposed of he or she
shall have ceased to hold such office.
In case any Officer of any Issuer who shall have signed any of
the Unit Certificates shall cease to be such Officer of such Issuer before the
Unit Certificates so signed shall have been authenticated by the Unit Agent, or
disposed of by such Issuer, such Unit Certificates nevertheless may be
authenticated and delivered or disposed of as though such person had not ceased
to be such an Officer of such Issuer; and any Unit Certificate may be signed on
behalf of each of the Issuers by any person who, at the actual date of the
execution of such Unit Certificate, shall be a proper Officer of such Issuer to
sign such Unit Certificate, although at the date of the execution of this Unit
Agreement any such person was not such Officer.
Unit Certificates shall be dated the date of authentication by
the Unit Agent.
SECTION 4. Registration and Authentication. The Unit Agent,
on behalf of the Issuers, shall number and register the Unit Certificates in a
register as they are issued by the Issuers.
Unit Certificates shall be manually authenticated by the Unit
Agent and shall not be valid for any purpose unless so authenticated. The Unit
Agent shall, upon written instructions of the Issuers in the form of an
officers' certificate signed by an Officer (who must either be the principal
executive officer, principal financial officer or principal accounting officer)
(an "Officers' Certificate") specifying the number of Units to be
authenticated, the date of such Units, and such
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<PAGE> 6
other information as the Unit Agent may request, initially authenticate and
deliver not more than 300,000 Units and shall thereafter authenticate and
deliver such Units as otherwise provided in this Agreement.
The Issuers and the Unit Agent may deem and treat the
registered holder(s) of the Unit Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes, and neither any of the Issuers nor the Unit Agent
shall be affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges. (a)
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 Unit (or any predecessor of such Unit), 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 Unit issued or owned during the period set forth above, as the case may
be, and any Unit issued upon registration of transfer of, or in exchange for,
or in lieu of, such initial Unit shall be deemed a "Transfer Restricted
Security" and shall be subject to the restrictions on transfer provided in the
Private Placement Legend (as defined); provided, however, that the term
"Transfer Restricted Security" shall not include (a) any initial Unit which is
issued upon transfer of, or in exchange for, any Unit which is not a Transfer
Restricted Security or (b) any initial Unit as to which such restrictions on
transfer have been terminated in accordance with this Section 5. Any Transfer
Restricted Security shall bear the Private Placement Legend (as defined).
(b) Every Transfer Restricted Security shall be subject to
the restrictions on transfer set forth in Section 2 and this Section 5 and
shall bear the Private Placement Legend and the Holder of each Transfer
Restricted Security, by such Holder's acceptance thereof, agrees to be bound by
such restrictions on transfer.
(c) The restrictions imposed by Section 2 and this Section 5
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 Unit, on the Regulation S
Unit Exchange Date or (b) in the case of a Rule 144A Global Unit or Definitive
Unit, 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 Unit Agent in writing of the effective date of any
registration statement registering any Transfer Restricted Securities under the
Securities Act.
Any Holder of a Global Unit shall, by acceptance of such
Global Unit, agree that transfers of beneficial interests in such Global Unit
may be effected only through a book-entry
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<PAGE> 7
system maintained by the Holder of such Global Unit (as its agent), and the
ownership of a beneficial interest in the Units may be required to be reflected
in a book-entry.
(d) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of a Transfer Restricted Security to any
institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act ("IAI") which is not a QIB (excluding Non-U.S.
Persons) that is consistent with the Private Placement Legend:
(i) Unit Agent shall register the transfer of any
Unit, whether or not such Unit bears the Private Placement Legend, if
(x) the requested transfer is subsequent to a date which is two years
after the later of the Issue Date and the last date on which any of
the Issuers or an Affiliate of the Issuers was the owner of the Unit
or (y) the proposed transferee has delivered to the Unit Agent 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 Unit seeking to
transfer a Definitive Unit to another Person, upon receipt by the Unit
Agent of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Unit
Agent's procedures therefor, the Unit Agent shall reflect on its books
and records the date and a decrease in the number of Units represented
by such Rule 144A Global Unit in an amount equal to the number of
Units represented by such Rule 144A Global Unit to be transferred, and
the Issuers shall execute, and the Unit Agent shall authenticate and
deliver, one or more Definitive Units of like tenor and amount.
(iii) An IAI which is not a QIB and not a Non-U.S.
Person shall only hold Definitive Units.
(e) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a Transfer
Restricted Security to a QIB (excluding Non-U.S. Persons):
(i) If the Units to be transferred consist of (x)
Definitive Units, the Unit Agent shall register the transfer if such
transfer is being made by a proposed transferor who has provided the
Unit Agent with a certificate substantially in the form set forth in
Exhibit E hereto or (y) an interest in the Rule 144A Global Unit, the
transfer of such interest may be effected only through the book-entry
system maintained by the Depositary.
(ii) If the Units to be transferred consist of
Definitive Units, upon receipt by the Unit Agent of (x) the document,
if any, required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Unit Agent's procedures
therefor, the Unit Agent shall reflect on its books and records the
date and an increase in the number of Units represented by the Rule
144A Global Unit in an amount equal to the principal amount of the
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<PAGE> 8
Definitive Unit, to be transferred, and the Unit Agent shall cancel
the Definitive Unit so transferred.
(f) Transfers of Interests in the Regulation S Global
Unit to U.S. Persons. The following provisions shall apply with respect to any
transfer of an interest in the Regulation S Global Unit to a U.S. Person:
(i) If the beneficial interest to be transferred is
in a Regulation S Temporary Global Unit, transfers by an owner of a
beneficial interest in such Regulation S Global Unit to a transferee
who takes delivery of such interest through the Rule 144A Global Unit
will be made only upon receipt by the Unit Agent from the transferor
of a certificate substantially in the form set forth in Exhibit E
hereto to the effect that such transfer is being made to a person who
the transferor reasonably believes is a QIB within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A; and
(ii) If the beneficial interest to be transferred is
in a Regulation S Permanent Global Unit, the Unit Agent shall register
the transfer of any such Unit Certificate without requiring any
additional certification.
(g) Transfers to Non-U.S. Persons. The following
provisions shall apply with respect to any transfer of a Unit to a Non-U.S.
Person:
(i) The Unit Agent shall register any proposed
transfer to any Non-U.S. Person if the Unit Certificate to be
transferred is a Definitive Unit or an interest in a Rule 144A Global
Unit 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 Regulation S Temporary
Global Security.
(ii) (x) If the proposed transferor is an Agent
Member holding a beneficial interest in a Rule 144A Global Unit, upon
receipt by the Unit Agent of (1) the documents required by paragraph
(i) of this paragraph (d) and (2) instructions in accordance with the
Depositary's and the Unit Agent's procedures, the Unit Agent shall
reflect on its books and records the date and a decrease in the number
of Units represented by such Rule 144A Global Unit in an amount equal
to the number of Units represented by the beneficial interest in such
Rule 144A Global Units to be transferred, and (y) upon receipt by the
Unit Agent of instructions given in accordance with the Depositary's
and the Unit Agent's procedures, the Unit Agent shall reflect on its
books and records the date and an increase in the number of Units
represented by the Regulation S Global Units in an amount equal to the
number of Units represented by the Definitive Units or such Rule 144A
Global Unit, as the case may be, to be transferred, and the Unit Agent
shall cancel the Definitive Unit so transferred or decrease the number
of Units represented by such Rule 144A Global Unit, as the case may
be.
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(h) Private Placement Legend. Upon the transfer,
exchange or replacement of Unit Certificates not bearing the legend set forth
in the first three paragraphs of Exhibit A attached hereto (the "Private
Placement Legend"), the Unit Agent shall deliver Unit Certificates that do not
bear the Private Placement Legend. Upon the transfer, exchange or replacement
of Unit Certificates bearing the Private Placement Legend, the Unit Agent shall
deliver Unit Certificates that bear the Private Placement Legend unless either
(i) the Private Placement Legend is no longer required pursuant to Section 2
and Section 5 or (ii) there is delivered to the Registrar an opinion of counsel
reasonably satisfactory to the Issuers and the Unit Agent 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.
(i) Cancellation and/or Adjustment of a Global Unit. At
such time as all beneficial interests in a Global Unit have either been
exchanged for Definitive Units, redeemed, repurchased or cancelled, such Global
Unit shall be returned to the Issuer or, upon written order to the Unit Agent
in the form of an Officers' Certificate from Iridium, retained and cancelled by
the Unit Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Unit is exchanged for Definitive Units, redeemed,
repurchased or cancelled, the number of Units represented by such Global Unit
shall be reduced and an endorsement shall be made on such Global Unit by the
Unit Agent to reflect such reduction.
(j) Obligations with Respect to Transfers and Exchanges
of Definitive Units.
(i) Prior to the Separability Date, to permit registrations of
transfers and exchanges, the Issuers shall execute, at the
Unit Agent's request, and the Unit Agent shall authenticate
Unit Certificates.
(ii) All Definitive Units and Global Units issued upon any
registration, transfer or exchange of Definitive Units or
Global Units shall be the valid obligations of the Issuers,
entitled to the same benefits under this Unit Agreement as the
Definitive Units or Global Units surrendered upon the
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Unit Certificate, the Unit Agent and the Issuers may deem and
treat the person in whose name any Unit Certificate is
registered as the absolute owner of the Units represented
thereby, and neither the Unit Agent nor the Issuers shall be
affected by notice to the contrary.
SECTION 6. Separation of the Notes and the Warrants. After
the Separability Date, the Notes and the Warrants represented by the Units
shall be separately transferable. Upon presentation after the Separability
Date of any Unit Certificate for exchange for Warrants and Notes or for
registration of transfer or otherwise, (i) the Unit Agent shall notify the
Trustee and the Warrant Agent of the number of Units so presented, the
registered owner thereof, such owner's registered address, the nature of any
legends or restrictive endorsements set forth on such Unit Certificate and any
other information provided by the holder thereof in connection therewith, (ii)
the Trustee, if the requirements of the Indenture for such transaction are met,
as the case may be, shall promptly register, authenticate and deliver a new
Note equal in principal amount to the Notes represented by
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such Unit Certificate in accordance with the direction of such holder and (iii)
the Warrant Agent, if its requirements for such transactions are met, shall
promptly countersign, register and deliver a new Warrant certificate for the
number of Warrants previously represented by such Unit Certificate in
accordance with the directions of such holder. The Warrant Agent and the
Trustee will notify the Unit Agent of any additional requirements in connection
with a particular transfer or exchange.
Following the Separability Date, no Unit Certificates shall be
issued upon transfer or exchange of Unit Certificates or otherwise.
SECTION 7. Rights of Unit Holders. The registered owner of a
Unit Certificate shall have all the rights and privileges of a registered owner
of the principal amount of Notes represented thereby and the number of Warrants
represented thereby and shall be treated as the registered owner thereof for
all purposes. The Issuers agree that they shall be bound by all provisions of
the Indenture, the Notes, the Warrant Agreement and the Warrants and that the
Notes and Warrants represented by each Unit Certificate shall be deemed legal,
valid and binding obligations of the Issuers, and that upon exercise of the
Warrants, the Warrant Shares will be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 8. Unit Agent. The Unit Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by which the Issuers and the holders of Units, by their acceptance
thereof, shall be bound:
(a) The Unit Agent shall not be responsible for and makes
no representation as to the validity or adequacy of this Agreement or
the Unit Certificates and it shall not be responsible for any
statement in this Agreement or the Unit Certificates other than its
countersignature thereon.
(b) The Unit Agent shall not be responsible for any
failure of the Issuers to comply with any of the covenants in this
Agreement, the Unit Certificates, the Indenture, the Notes, the
Warrant Agreement or the Warrant Certificates (as defined in the
Warrant Agreement) to be complied with by the Issuers.
(c) The Unit Agent may consult with counsel satisfactory
to it and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(d) The Unit Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by
it in reliance upon any Unit Certificate, notice, direction, consent,
certificate, affidavit, statement, opinion or other paper or document
reasonably believed by it to be genuine and to have been presented or
signed by the proper parties.
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(e) The Note Issuers agree to pay the Unit Agent from
time to time compensation for its services and to reimburse the Unit
Agent upon request for all reasonable out-of-pocket expenses incurred
by it pursuant to this Agreement, including the reasonable
compensation and expenses of the Unit Agent's agents and counsel. The
Note Issuers shall indemnify the Unit Agent against any and all loss,
liability, damage, claim or expense (including agents' and attorneys'
fees and expenses) incurred by it without negligence or bad faith on
its part arising out of or in connection with the acceptance or
performance of its duties under this Agreement. The Unit Agent shall
notify the Note Issuers promptly of any claim for which it may seek
indemnity. The Note Issuers need not reimburse any expense or
indemnify against any loss or liability incurred by the Unit Agent
through wilful misconduct, negligence or bad faith. The Issuers'
payment obligations pursuant to this Section 8(e) shall survive the
termination of this Agreement.
(f) The Unit Agent and any stockholder, director, officer
or employee of the Unit Agent may buy, sell or deal in any of the
Units or other securities of the Issuers or their affiliates or become
pecuniarily interested in transactions in which the Issuers or their
affiliates may be interested, or contract with or lend money to any of
the Issuers or their affiliates or otherwise act as fully and freely
as though it were not the Unit Agent under this Agreement. Nothing
herein shall preclude the Unit Agent from acting in any other capacity
for the Issuers or for any other legal entity.
(g) The Unit Agent shall act hereunder solely as agent
for the Issuers, the Trustee and the Warrant Agent, and its duties
shall be determined solely by the provisions hereof. The Unit Agent
shall not be liable for anything which it may do or refrain from doing
in connection with this Agreement except for its own negligence or bad
faith or willful misconduct.
(h) The Unit Agent shall not be under any obligation to
take any action hereunder which may tend to involve it in any expense
or liability for which it does not receive indemnity if such indemnity
is reasonably requested.
(i) The Unit Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action unless the Issuers or one or more registered holders of Unit
Certificates shall furnish the Unit Agent with security and indemnity
for any costs and expenses which may be incurred acceptable to the
Unit Agent. This provision shall not affect the power of the Unit
Agent to take such action as it may consider proper, whether with or
without any such security or indemnity. All rights of action under
this Agreement or under any of the Units may be enforced by the Unit
Agent without the possession of any of the Unit Certificates or the
production thereof at any trial or other proceeding relative thereto,
and any such action, suit or proceeding instituted by the Unit Agent
shall be brought in its name as Unit Agent and any recovery of
judgment shall be for the ratable benefit of the registered holders of
the Units, as their respective rights or interests may appear.
(j) Before the Unit Agent acts or refrains from acting
with respect to any matter contemplated by this Unit Agreement, it may
require:
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(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Unit Agreement relating to the proposed
action have been complied with; and
(2) an opinion of counsel for the Issuers stating
that, in the opinion of such counsel, all such conditions
precedent have been complied with.
(k) In the absence of bad faith on its part, the Unit
Agent 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 Unit Agent and conforming to the
requirements of this Agreement. However, the Unit Agent shall examine
the certificates and opinions to determine whether or not they conform
to the requirements of this Agreement.
(l) The Unit Agent may rely and shall be fully protected
in relying upon any document believed by it to be genuine and to have
been signed or presented by the proper person. The Unit Agent need
not investigate any fact or matter stated in the document.
(m) The Unit Agent may act through agents and shall not
be responsible for the misconduct or negligence of any agent appointed
with due care.
SECTION 9. Replacement of Unit Agent. The Unit Agent may
resign by so notifying the Issuers. The holders of a majority of all the
outstanding Units may remove the Unit Agent by so notifying the Issuer and the
Unit Agent and may appoint a successor Unit Agent. The Issuers may remove the
Unit Agent if:
(1) the Unit Agent is adjudged bankrupt or
insolvent;
(2) a receiver or other public officer takes
charge of the Unit Agent or its property; or
(3) the Unit Agent becomes incapable of acting.
If the Unit Agent resigns or is removed or if a vacancy exists
in the office of the Unit Agent for any reason, the Issuers shall notify each
holder of Units of such event and shall promptly appoint a successor Unit
Agent. Notwithstanding any resignation or removal of the Unit Agent or the
cancellation of the Unit Certificates, the obligations of the Issuers under
Section 8(e) shall survive for the benefit of the retiring Unit Agent.
SECTION 10. Successor Unit Agent by Merger, Etc. If the Unit
Agent consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act shall,
if such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Unit Agent.
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SECTION 11. Notices to the Issuer and Unit Agent, Trustee and
Warrant Agent. Any notice or demand authorized by this Agreement to be given
or made to or on the Issuers, the Unit Agent, the Trustee or the Warrant Agent
shall be sufficiently given or made when and if deposited in the mail, first
class or registered, postage paid, addressed
If to the Issuers:
c/o Iridium LLC
1575 Eye Street NW
Washington D.C. 20005
Attention: General Counsel
with a copy to:
Iridium World Communications Ltd.
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Attention: Secretary
If to the Unit Agent, the Warrant Agent or the Trustee:
State Street Bank and Trust Company
Corporate Trust Department
4th Floor
2 International Place
Boston, MA 02110
Attention: Shawn George
Facsimile: 617-664-5371
The parties hereto by notice to the other parties may
designate additional or different addresses for subsequent communications or
notice.
Any notice to be mailed to a holder of Units shall be mailed
to him or her at the address that appears on the register of Units maintained
by the Unit Agent. Copies of any such communication shall also be mailed to
the Unit Agent, the Trustee and the Warrant Agent. The Unit Agent shall
furnish the Issuers, the Trustee or the Warrant Agent promptly when requested
with a list of registered holders of Units for the purpose of mailing any
notice or communication to the holders of the Notes or Warrants and at such
other times as may be reasonably requested.
SECTION 12. Supplements and Amendments. The Issuers, the
Unit Agent, the Trustee and the Warrant Agent may from time to time supplement
or amend this Agreement without the approval of any holders of Unit
Certificates in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other
12
<PAGE> 14
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Issuers, the Trustee, the Warrant Agent
and the Unit Agent may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Unit Certificates. Any
amendment or supplement to this Agreement that may have an adverse effect on
the interests of the holders of Units shall require the written consent of a
majority of the registered holders of the then outstanding Units representing
not less than a majority of the then outstanding Units.
SECTION 13. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Issuers, the Trustee, the Warrant
Agent or the Unit Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 14. Governing Law. THIS AGREEMENT AND EACH UNIT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW
RULES THEREOF.
SECTION 15. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Issuers, the Trustee, the Warrant Agent, the Unit Agent and the holders of
Units any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Issuers, the
Trustee, the Warrant Agent, the Unit Agent and the holders of Units.
SECTION 16. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
IRIDIUM LLC
By:
------------------------------
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By:
------------------------------
Name:
Title:
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
------------------------------
Name:
Title:
IRIDIUM ROAMING LLC,
as a Guarantor Subsidiary
By:
------------------------------
Name:
Title:
IRIDIUM IP LLC,
as a Guarantor Subsidiary
By:
------------------------------
Name:
14
<PAGE> 16
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By:
------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Unit Agent
By:
------------------------------
Name:
Title:
15
<PAGE> 17
EXHIBIT A
[FORM OF UNIT CERTIFICATE]
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 NOT 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), EXCEPT (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 903 OR RULE 904 UNDER THE SECURITIES
ACT, (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 ACT (IF
AVAILABLE) OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND, IN EACH CASE (A)
THROUGH (F), IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS AND SUBJECT TO THE
ISSUERS' AND THE UNIT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO
<PAGE> 18
EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES (A)
THROUGH (F), 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 UNIT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT IT IS NOT AN
AFFILIATE OF THE ISSUERS OR ACTING ON BEHALF OF THE ISSUERS AND (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1),(2),(3) OR (7) UNDER THE
SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.
IRIDIUM LLC,
(a limited liability company)
IRIDIUM CAPITAL CORPORATION,
(a Delaware corporation)
IRIDIUM WORLD COMMUNICATIONS LTD.
(a Bermuda company)
Units Consisting of 13% Senior Notes due 2005,
Series A and Warrants to
Purchase Shares of Class A Common Stock
No. CUSIP No.
----------
Iridium LLC, a Delaware limited liability company ("Iridium"),
Iridium Capital Corporation, a Delaware corporation ("Capital"), Iridium World
Communications Ltd., an exempted company under the Companies Act 1981 of
Bermuda ("IWCL"), Iridium Roaming LLC and Iridium IP LLC (together, the
"Guarantor Subsidiary" and together with Iridium, Capital and IWCL, the
"Issuers") hereby certify that [___________________________] is the owner of
[____________] Units as described above.
Each Unit consists of one $1,000 principal amount of 13%
Senior Notes due 2005, Series A of the Issuers (the "Notes") and one warrant
(the "Warrant"), initially entitling the holder thereof to purchase 5.2 shares
of Class A Common Stock, par value $0.01 per share, of
<PAGE> 19
IWCL (the "Class A Common Stock"). This Unit is issued pursuant to the Unit
Agreement (the "Unit Agreement") dated as of July 16, 1997 by and among the
Issuers, the Trustee (as defined below), State Street Bank and Trust Company as
trustee under an Indenture with respect to the 13% Senior Notes due 2005,
Series A of Iridium and Capital, the Warrant Agent (as defined below) and State
Street Bank and Trust Company, as Unit Agent (the "Unit Agent"), and is subject
to the terms and provisions contained therein, to all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The terms of the Notes are governed by an Indenture (the "Indenture") dated as
of July 16, 1997 among Iridium, Capital, the Guarantor Subsidiaries and State
Street Bank and Trust Company, as trustee (the "Trustee"), and are subject to
the terms and provisions contained therein, to all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The terms of the Warrants are governed by a Warrant Agreement dated as of July
16, 1997 (the "Warrant Agreement") between IWCL and State Street Bank and Trust
Company, as Warrant Agent (the "Warrant Agent"), and are subject to the terms
and provisions contained therein, to all of which terms and provisions the
holder of this Unit Certificate consents by acceptance hereof. The Issuers
will furnish to any Holder of this Unit Certificate upon written request and
without charge a copy of the Unit Agreement, the Indenture and the Warrant
Agreement. Requests may be made to: Iridium LLC, 1575 Eye Street N.W.,
Washington D.C. 20005, Attn.: General Counsel.
The Notes and the Warrants represented by this Unit
Certificate shall not be separately transferable until the earlier of: the
commencement of an exchange offer or the effectiveness of a shelf registration
statement for the Notes and such date after January 15, 1998 as Chase
Securities Inc. may, in its discretion, deem appropriate.
Dated:
IRIDIUM LLC
By:
------------------------------
Name:
Title:
IRIDIUM CAPITAL CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 20
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
------------------------------
Name:
Title:
IRIDIUM ROAMING LLC,
as a Guarantor Subsidiary
By:
------------------------------
Name:
Title:
IRIDIUM IP LLC,
as a Guarantor Subsidiary
By:
------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Units
referred to in the above
mentioned Unit Agreement.
STATE STREET BANK AND TRUST COMPANY,
as Unit Agent
By:
------------------------------
Authorized Signatory
<PAGE> 21
IRIDIUM LLC,
IRIDIUM CAPITAL CORPORATION,
IRIDIUM WORLD COMMUNICATIONS LTD.
Units Consisting of 13% Senior Notes due 2005,
Series A and Warrants to
Purchase Shares of Class A Common Stock
I. PROVISIONS RELATING TO THE NOTES
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. The Note
Issuers 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.
<PAGE> 22
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 July 16, 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 in this "Provisions Relating to the Notes"
section 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.
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 106.750%
2003 103.375%
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
2
<PAGE> 23
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 113.5% plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of record Holders 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 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, or (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.
3
<PAGE> 24
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 and transfer documents and the Note
Issuers may require a Holder to pay any taxes required by law or permitted by
the Indenture. The Note Issuers are not required to transfer or exchange any
Note selected for redemption or to transfer or exchange any Note for a period
of 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.
10. Persons Deemed Owners
The registered Holder of the 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).
13. Amendment and Waiver.
4
<PAGE> 25
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 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
5
<PAGE> 26
(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 to certain limitations, have the right to exchange the Notes for the
Exchange Notes or Private Exchange Series A 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
The 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 the 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
6
<PAGE> 27
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 Issuers will furnish to any holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
Iridium LLC, 1575 Eye Street NW, Washington D.C. 20005, Attention: General
Counsel.
II. PROVISIONS RELATING TO THE WARRANTS
Each Warrant evidenced by each Unit Certificate, when
exercised, will entitle the holder thereof to receive 5.2 Warrant Shares of
IWCL. In the aggregate, the Warrants will entitle the holders thereof to
purchase 1,560,000 shares of Class A Common Stock of IWCL representing, on a
fully-diluted basis, an aggregate indirect beneficial ownership of
approximately 1% of the Class 1 Interests in Iridium, as of the date of the
Offering Memorandum. The Warrants are issued pursuant to a Warrant Agreement
dated as of July 16, 1997 (the "Warrant Agreement"), duly executed and
delivered by IWCL and State Street Bank and Trust Company, as Warrant Agent
(the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument. Terms used in this
"Provisions Relating to the Warrants" section and not defined herein shall have
the respective meanings ascribed to those terms in the Warrant Agreement.
The Warrants may be exercised by surrendering to IWCL the
Warrant certificates evidencing such Warrants, if any, with the accompanying
form of election to purchase, properly completed and executed, together with
payment of the Exercise Price. Payment of the Exercise Price may be made in
the form of cash or a certified or official bank check payable to the order of
IWCL or by wire transfer of funds to an account designated by IWCL. Upon
surrender of the Warrant certificate and payment of the Exercise Price, IWCL
will cause The Bank of New York, as Transfer Agent of the Class A Common Stock,
or any successor thereto, to countersign and deliver, to or upon the written
order of such holder, certificates representing the number of whole Warrant
Shares or other securities or property to which such holder is entitled under
the Warrants and Warrant Agreement, including, without limitation, any cash
payable to adjust for fractional interests in Warrant Shares issuable upon such
exercise. If at any time prior to the Expiration Date less than all of the
Warrants evidenced by a Warrant certificate are to be exercised, a new Warrant
certificate will be issued for the remaining number of Warrants.
No fractional Warrant Shares will be issued upon exercise of
the Warrants. If any fraction of a Warrant Share would, except for the
foregoing provision, be issuable upon the
7
<PAGE> 28
exercise of any Warrants (or specified portion thereof), IWCL will pay an
amount in cash equal to the current market price per Warrant Share, as
determined on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction, computed to the nearest whole cent.
The Warrants initially will be issued as fully registered in
global form or in certain limited circumstances registered form as definitive
Warrant certificates. No service charge will be made for registration of
transfer or exchange upon surrender of any Warrant certificate at the office of
the Warrant Agent maintained for that purpose. IWCL may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration or transfer or exchange of Warrant
certificates.
In the event a bankruptcy or reorganization proceeding is
commenced by or against IWCL, a bankruptcy court may hold that unexercised
Warrants are executory contracts which may not, even if sufficient funds are
available, be entitled to receive any consideration or may receive an amount
less than they would be entitled to have received if they had exercised their
Warrants prior to the commencement of any such bankruptcy or reorganization
proceeding.
The holders of the Warrants have no right to vote on matters
submitted to the stockholders of IWCL and have no right to receive cash
dividends. The holders of the Warrants have no preemptive rights and are not
entitled to share in the assets of IWCL in the event of the liquidation,
dissolution or winding up of IWCL's affairs.
The Warrants and the Warrant Shares are entitled to the
benefits of two shelf registration statements relating to the Warrants and the
shares of Class A Common Stock issuable upon exercise thereof. A warrant shelf
registration statement, covering the resale of the Warrants, and a common shelf
registration statement, covering the issuance of the Warrant Shares, must be
declared effective under the Securities Act within 365 days after the Issue
Date.
8
<PAGE> 29
ASSIGNMENT FORM
I or we assign and transfer the Units represented by this Unit Certificate to
- ---------------------------------------------------------------
- ---------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ---------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ,
---------------------------------------
agent to transfer this Unit Certificate on the books of the Unit Agent and
Company. The agent may substitute another to act for him.
Dated:
---------------------
Signed:
----------------------------
(Sign exactly as name
appears on the first page
of this Unit Certificate)
Signature Guarantee:
---------------------------------------------
Participant in a recognized Signature [Guarantee Medallion
Program] (or other signature guarantor program reasonably
acceptable to the Unit Agent)
<PAGE> 30
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have the Notes represented hereby
purchased by the Note Issuers pursuant to Section 4.06 or Section 4.08 of the
Indenture, check the appropriate box:
Section 4.06 [ ] Section 4.08 [ ]
If you want to elect to have only part of the Notes
represented hereby purchased by the Note Issuers pursuant to Section 4.06 or
Section 4.08 of the Indenture, state the amount:
$
----------------------
Date:
------------------
Your Signature:
------------------------
(Sign exactly as your name appears on the first page of this
Unit Certificate)
Signature Guarantee:
---------------------------------------------
<PAGE> 31
FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be
executed only upon exercise of Warrants)
IRIDIUM WORLD COMMUNICATIONS LTD.
[No exercise of Warrants may be made prior to a shelf registration statement
relating to the Class A Common Stock underlying the Warrants being declared
effective.]
The undersigned hereby irrevocably elects to exercise [____] Warrants at an
exercise price per share (subject to adjustment) of $[ ] to acquire [____]
shares of Class A Common Stock, par value $0.01 per share, of Iridium World
Communications Ltd. on the terms and conditions specified within the Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to Iridium World
Communications Ltd. and directs that the shares of Class A Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date:
(Signature of Owner)
- -------------------------------------
(Street Address)
- -------------------------------------
-------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
<PAGE> 32
[Signature must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan
associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities
and Exchange Commission Rule 17Ad-5]
- -----
1. The signature must correspond with the name as written upon
the face of the Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever,
and must be guaranteed.
2
<PAGE> 33
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
---------------------------------------------
Street Address:
-----------------------------------
City, State and Zip Code:
-------------------------
Any unexercised Warrants represented by the Warrant Certificate to be issued
to:
Please insert social security or identifying number:
Name:
---------------------------------------------
Street Address:
-----------------------------------
City, State and Zip Code:
-------------------------
3
<PAGE> 34
SCHEDULE OF INCREASES AND DECREASES IN THE NUMBER
OF UNITS REPRESENTED BY GLOBAL UNIT(1)
<TABLE>
<CAPTION>
Number of
Units Repres-
ented by
Decrease in Increase in this Global
Number of Number of Unit Signature of
Units Repre- Units Repre- following authorized
Date of sented by this sented by this such decrease officer of
Exchange Global Unit Global Unit or increase Unit Agent
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(1) This is to be included only if the Unit Certificate is
in global form.
4
<PAGE> 35
EXHIBIT B
FORM OF LEGEND FOR GLOBAL UNIT
Any Global Unit authenticated and delivered hereunder shall
bear a legend in substantially the following form:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS
OR THEIR AGENT 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 UNIT 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
WARRANT AGREEMENT REFERRED TO HEREIN.
<PAGE> 36
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
UPON TERMINATION OF RESTRICTED PERIOD
[__], 1997
Iridium LLC
Iridium World Communications Ltd.
State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Plaza
Boston, MA 02110
Re: Iridium LLC Units (the "Units")
Ladies and Gentlemen:
This letter relates to Units represented by a temporary global
unit certificate (the "Temporary Certificate"). Pursuant to Section 2 of the
Unit Agreement dated as of July 16, 1997 relating to the Units (the "Unit
Agreement"), the undersigned hereby certifies that (1) the undersigned is the
beneficial owner of [_____] Units represented by the Temporary Certificate and
(2) the undersigned is a non-U.S. person (as defined in the Unit Agreement)
outside the United States to whom the initial units 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
initial Units represented by the Temporary Certificate into a permanent global
certificate, all in the manner provided by the Unit Agreement.
<PAGE> 37
You and Iridium LLC 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:
-------------------------------
Name:
Title:
2
<PAGE> 38
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
Iridium LLC
Iridium World Communications Ltd.
State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Re: Iridium LLC ("Iridium") Units
Ladies and Gentlemen:
Reference is hereby made to the Unit Agreement, dated as of
July 16, 1997 (the "Unit Agreement") among Iridium LLC, Iridium Capital
Corporation, Iridium World Communications Ltd., Iridium Roaming LLC, Iridium IP
LLC and State Street Bank and Trust Company, as Unit Agent.
This certificate is delivered to request a transfer of Units
(the "Units").
Upon transfer, the Units would be registered in the name of
the new beneficial owner as follows:
Name:
------------------------------
Address:
---------------------------
Taxpayer ID Number:
----------------
The undersigned represents and warrants to Iridium World
Communications Ltd., Iridium LLC, Iridium Capital Corporation and each
subsidiary of Iridium which has guaranteed its 13% Senior Notes due 2005,
Series A or its 14% Senior Notes due 2005, Series B (together the "Iridium
Parties") that (terms used herein that are defined in Rule 144A ("Rule 144A"),
Regulation D ("Regulation D") or Regulation S ("Regulation S") under the
Securities Act are used herein as defined therein):
<PAGE> 39
1. We are 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")) and have purchased the Units in a transaction
exempt from the registration requirements of the Securities Act. We have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risk of our investment in the Units and invest in or
purchase securities similar to the Units in the normal cause of our business.
We and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
2. We understand that the Units have not been registered
under the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing Units to offer, sell or
otherwise transfer such Units prior to the date which is two years after the
later of the date of original issue and the last date on which any Iridium
Party or any affiliate of any Iridium Party was the owner of such Units (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) an
Iridium Party, (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 we reasonably
believe 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, (e) to an institutional "accredited investor" within the
meaning Rule 501(a)(1), (2), (3) or (7) under the Securities Act in a
transaction exempt from the registration requirements of the Securities Act (if
available), (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, and, in each case (a) through (f), 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 Units is proposed to be made pursuant to the clause (e)
above prior to the Resale Restrictions Termination Date, we shall deliver a
letter from the transferee substantially in the form of this letter to the
Iridium Parties and the Unit Agent, which shall provide, among other things,
that the transferee is an institutional "accredited investor" within the
meaning of Rule 5.01(a)(1), (2), (3) or (7) under the Securities Act and that
it is acquiring such Units for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that each Iridium
Party and the Unit Agent reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the Units pursuant
to clauses (d), (e) or (f) above to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Iridium
Parties and the Unit Agent.
TRANSFEREE:
--------------------
BY:
----------------------------
2
<PAGE> 40
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR
TRANSFER TO RULE 144A GLOBAL UNIT
BEARING A SECURITIES ACT LEGEND
Iridium LLC
Iridium World Communications Ltd.
State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Re: Iridium LLC Units (the "Units")
Ladies and Gentlemen:
Reference is hereby made to the Unit Agreement, dated as of
July 16, 1997 (the "Unit Agreement") among Iridium LLC, Iridium Capital
Corporation, Iridium World Communications Ltd., Iridium Roaming LLC, Iridium IP
LLC and State Street Bank and Trust Company, as Unit Agent. Capitalized terms
used but not defined herein will have the meanings given to them in the Unit
Agreement.
This letter relates to Units which are held in [the form of a
beneficial interest in the Regulation S Temporary Global Unit (CINS No.
__________) with the Depositary in the name of the undersigned] [definitive
form].
The undersigned has requested transfer of such Units to a
Person who will take delivery thereof in the form of a beneficial interest in
the Rule 144A Global Unit (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 Unit
Agreement and the Unit Certificates 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
<PAGE> 41
2
1. the Units are being transferred to a transferee that
the undersigned reasonably believes is purchasing the Units for its
own account or one or more accounts with respect to which the
transferee exercises sole investment discretion; and
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:
-----------------------
2
<PAGE> 42
EXHIBIT F
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
Iridium LLC
Iridium World Communications Ltd.
State Street Bank and Trust Company
Corporate Services Division
4th Floor
2 International Place
Boston, MA 02110
Re: Iridium LLC Units (the "Units")
Ladies and Gentlemen:
Reference is hereby made to the Unit Agreement, dated as of
July 16, 1997 (the "Unit Agreement") among Iridium LLC, Iridium Capital
Corporation, Iridium World Communications Ltd., Iridium Roaming LLC, Iridium IP
LLC and State Street Bank and Trust Company, as Unit Agent.
In connection with our proposed sale of units (the "Units"),
the undersigned confirms that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended, and,
accordingly, the undersigned represents that:
(1) the offer of the Units was not made to a U.S. Person;
(2) either (a) at the time of the buy order was
originated, the transferee was outside the United States or the
undersigned and any person acting on our behalf reasonably believed
that the transferee was outside in 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 our behalf knows that the transaction has been
pre-arranged 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 the requirements
of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and
1
<PAGE> 43
2
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities Act of
1933, as amended.
In addition, if the sale is made during the restricted period applicable to the
Units and the provisions of Rule 903(c)(2) or Rule 904(c)(1) of Regulation S
are applicable thereto, the undersigned confirms that such sale has been made
in accordance with the applicable provisions of Rule 903(c)(3) or Rule
904(c)(1), as the case may be.
You 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.
[NAME OF TRANSFEROR]
By:
----------------------------
Name:
Title:
Address:
Date:
--------------------------
Upon transfer, the Units should be registered in the name of the new beneficial
owner as follows:
Name:
--------------------------------------------------
Address:
-----------------------------------------------
Taxpayer ID Number:
------------------------------------
2
<PAGE> 1
EXHIBIT 10.27
IRIDIUM LLC
SELECTED SENIOR OFFICERS' SUPPLEMENTARY RETIREMENT PLAN
SECTION 1 - INTRODUCTION
1.1 Purpose. The Selected Senior Officers Supplementary
Retirement Plan is established by the Company to provide non-qualified deferred
compensation to specified executive officers of the Company whose participation
has been approved by the Board of Directors. Unless specifically named as a
Participant in the SSOSRP by resolution of the Board of Directors, no officer
or employee of the Company shall have any rights to benefits hereunder.
1.2 Effective Date. The effective date of the Plan is January 1,
1995.
SECTION 2 - DEFINITIONS
2.1 Definitions. Except where the context otherwise requires, a
capitalized term which is not defined herein shall have the same meaning as
such term is assigned in Section 2 of the Base Plan.
(a) "Base Plan" means the Iridium LLC Pension Plan, as from time
to time amended.
(b) "Board of Directors" means the Board of Directors of Iridium
LLC.
(c) "Company" means Iridium LLC, a Delaware limited liability
company, or any successor thereto. Prior to July 29, 1996,
Iridium LLC was known as Iridium, Inc.
(d) "Earnings" shall have the same meaning as in the Base Plan,
with the following exception:
For calendar years beginning after December 31, 1988, the Code
imposes various dollar limitations on annual compensation
which may be taken into account for any calendar or Plan Year
in determining benefits. These limitations are disregarded
under this definition of Earnings.
- 1 -
<PAGE> 2
(e) "Final Average Earnings" means the average of the
Participant's Earnings in any four years (including years in
which the Participant did not work a complete year) within the
last ten calendar years of his Vesting Service preceding the
earlier of the termination of his status as a Participant or
his termination of employment as an Employee, providing the
highest yearly average. If a Participant has not been
employed for four calendar years, his Final Average Earnings
shall be taken for the period of his employment.
(f) "Incentive Bonus" means the amount paid to a Participant
during a calendar year under the Iridium Short Term Incentive
Plan.
(g) "Participant" means an Employee of the Company designated by
the Board of Directors as a participant in the Plan, in the
sole and absolute discretion of the Board of Directors.
(h) "Salary" means the rate of compensation being paid to a
Participant for the calendar year in which the earlier of the
termination of his status as a Participant or his termination
of employment as an Employee occurs.
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology herein shall also include the feminine and
neuter, and the definition of any term herein in the singular may also include
the plural.
SECTION 3 - RETIREMENT
3.1 Normal Retirement. If a Participant terminates employment as
an Employee after (a) attainment of age 65, or (b) attainment of age 60 and the
completion of two years of Benefit Service, the Participant shall be entitled
to commence receiving Normal Retirement Benefits, calculated as set forth in
Section 4; provided, however, that the Participant must attain age 65 or age
60, whichever is applicable, while a Participant in order to be eligible for
benefits hereunder.
3.2 Early Retirement. If a Participant terminates employment as
an Employee after (a) attainment of age 57 while a Participant and the
completion of five years of Benefit Service, or (b) attainment of age 55 while
a Participant and the completion of five years of Benefit Service, the
Participant shall be entitled to an Early Retirement Benefit under the Plan,
calculated as set forth in Section 4. Payment of an Early Retirement Benefit
to a Participant shall commence no earlier than the first day of the month
following the later of his termination of employment as an Employee or
attainment of age 57; provided, however, that a benefit which commences prior
to the Participant's attainment of age 60 shall be actuarially reduced to
reflect such early
- 2 -
<PAGE> 3
commencement. A Participant entitled to an Early Retirement Benefit hereunder
may elect to receive the unreduced benefit calculated under Section 4 by
deferring receipt of the benefit until attainment of age 60. Notwithstanding
the foregoing, commencement of benefits under this provision prior to age 60 is
conditioned upon the Participant entering into an anti-compete agreement
satisfactory to the Company. Except as specifically provided in Section 3.1,
3.3 or 3.4, no benefit shall be paid under the Plan with respect to a
Participant whose employment with the Company terminates prior to the time he
meets the requirements set forth above.
3.3 Disability Retirement. If a Participant becomes eligible for
benefits under the Company's Long-Term Disability Policy, he will be deemed to
have satisfied the requirements for early retirement under Section 3.2, if he
is not otherwise eligible for normal retirement under Section 3.1. Payment of
benefits will occur as provided in Section 4.6. A disabled Participant who
recovers from disability prior to attaining age 55, and who does not return to
employment with the Company, will forfeit all rights to subsequent benefits
under the SSOSRP.
3.4 Change of Control. If the Board of Directors determines that
a change in control of the Company will occur upon certain stated events,
Participants shall become 100% vested in their benefits in this SSOSRP upon the
occurrence of such events. In these circumstances, a Participant may elect to
receive the benefits provided for in Section 4 upon the attainment of age 55,
actuarially reduced as described in Section 3.2 to provide for early
commencement, if applicable, without the consent of the Company or of the
Compensation Committee or completion of the anti-compete agreement, as
described therein.
SECTION 4 - BENEFITS
4.1 Limitation on Benefits. In no event may the sum of the
benefits payable from this Plan and from the Base Plan with respect to any
Participant for any period exceed 70% of the Participant's Salary for such
period.
4.2 Benefit Formulas. Subject to the limitation in Section 4.1,
the benefit provided under this SSOSRP, payable in the form of a single life
annuity commencing at the later of age 60 or the Participant's attained age,
will be the greater of (a) or (b), minus (c), where these are:
(a) An amount equal to 40% of monthly Salary multiplied by the
"Incentive Bonus factor." The "Incentive Bonus factor" equals
the sum of 1 plus a percentage equal to the average of the
five highest ratios of Incentive Bonus to Salary paid during
the eight full calendar years preceding the year in which the
Participant's status as an Employee ceases.
- 3 -
<PAGE> 4
(b) An amount equal to the Participant's monthly accrued benefit
determined under the Base Plan, but based on the Participant's
Final Average Earnings as defined in this SSOSRP, and
expressed in the form of a single life annuity commencing at
the later of age 60 or the Participant's attained age.
(c) An amount equal to the Participant's monthly accrued benefit
determined under the Base Plan, expressed in the form of a
single life annuity commencing at the later of age 60 or the
Participant's attained age.
Amounts determined under Section 4.2(a) or (b) shall be determined without
regard to any limitation contained in Section 5.9 of the Base Plan. If the
Participant is less than age 65, the benefits otherwise determined under
Section 4.2(b) or (c) shall be reduced 1/180 per month for each complete
calendar month (not to exceed 60) by which the Participant's age at retirement
(determined to the nearest month) precedes the month coincident with or next
following the Participant's 65th birthday.
4.3 Normal Form of Payment. Benefits under the Plan shall be
payable as a single life annuity for the life of the Participant if the
Participant is not married at retirement and as a Qualified Joint and Survivor
Annuity if the Participant is married.
4.4 Optional Forms of Payment. In lieu of the benefits specified
in Section 4.3, a Participant may elect one of the following options:
(a) a life annuity,
(b) a Ten-Year Certain and Life Annuity,
(c) a Qualified Joint and Survivor Annuity providing a surviving
spouse benefit equal to 75% or 100% of the benefit payable to
the Participant, or
(d) a lump sum.
An unmarried Participant may not elect a Qualified Joint and Survivor
Annuity or any benefit providing lifetime payments to a non-spouse beneficiary.
A married Participant electing other than a Qualified Joint and Survivor
Annuity providing a surviving spouse's pension equal to 50% of the benefit
payable to the Participant must comply with the rules for a Qualified Election
contained in the Base Plan.
For adjusting benefits under the Ten-Year Certain and Life option or
the Qualified Joint and Survivor Annuity option, the factors specified for that
purpose in Appendix A of the Base Plan shall be used. Upon election of a
benefit option, an individual annuity from a qualified reserve life insurance
company shall be purchased
- 4 -
<PAGE> 5
and distributed to the Participant to provide the benefits under the option
elected. The amount of a lump sum shall be equal to what would be the
Company's purchase price for the amount of benefit determined under this
Section 4 payable as a life annuity for the Participant commencing at age 60 or
current age if later.
4.5 Early Retirement Benefits. A Participant eligible for Early
Retirement Benefits under Section 3.2 who enters into an anti-compete agreement
satisfactory to the Company and desires to commence retirement benefits prior
to age 60 shall be eligible to receive an actuarially reduced Early Retirement
Benefit. Upon election of the optional form of benefit and subject to the
adjustment factors specified for such options in Appendix A of the Base Plan,
an annuity shall be purchased for the Participant as described in Section 4.4.
Such annuity contract shall permit commencement of benefits on or after the
Participant's early retirement age (but not earlier than age 57) in accordance
with the actuarial factors specified in the annuity contract. The amount of
benefit payable at an early retirement age shall be determined solely by the
terms of the annuity purchased. A Participant wishing to receive a lump sum at
an early retirement age (but not earlier than age 57) shall receive an amount
equal to the purchase price at the requested payment date of a deferred life
annuity equal to the benefit otherwise payable to the Participant commencing at
age 60.
4.6 Disability Retirement Benefits. A Participant eligible for
disability retirement as described in Section 3.3 shall be eligible to receive
from the SSOSRP a monthly benefit equal to the monthly benefit determined under
Section 4.2, reduced by the monthly disability benefit paid under the Company's
Long-Term Disability Plan. The benefit deemed paid from the Long-Term
Disability Plan is considered to include the "other income benefits" described
in the Long-Term Disability Policy. This benefit shall cease at the earlier of
the date the Participant ceases to receive disability benefits from the
Company's Long Term Disability Plan or the date the Participant elects to
retire as described above. A disabled Participant is deemed to have terminated
employment in the year of disability for purposes of Section 4.2(a).
SECTION 5 - DEATH BENEFITS
5.1 Pre-Retirement Death Benefits for Married Participant. The
death benefit payable to the Spouse of a married Participant who dies after
becoming eligible for a retirement benefit under Section 3 above but prior to
the commencement of benefits from the SSOSRP shall be equal to the greater of
(a) 50% of the amount determined under Section 4.2(a) less the actual Qualified
Pre-Retirement Survivor Annuity payable from the Base Plan or (b) the Qualified
Pre-Retirement Survivor Annuity amount determined under Section 4.2(b) which
would be payable as of the date of the Participant's death less the actual
Qualified Pre-Retirement Survivor Annuity payable from the Base Plan.
- 5 -
<PAGE> 6
5.2 Settlement of Pre-Retirement Death Benefits for Married
Participant. The surviving Spouse of a married Participant who is entitled to
a benefit under Section 5.1 shall receive the benefit either as (a) an annuity
purchased from a legal reserve life insurance company providing the benefit
determined under Section 5.1 for the Spouse's lifetime, or (b) the lump sum
equal to the premium which would be paid to purchase the annuity described in
Section 5.2(a).
5.3 Other Death Benefits. The death benefits, if any, of a
Participant who has commenced to receive benefits from the SSOSRP shall be
determined solely by the elections made at retirement with respect to the
annuity purchased for the Participant. Election of a lump sum constitutes a
full settlement of all rights under the SSOSRP and no further benefits are
provided. No death benefits are provided with respect to a Participant who is
not eligible for a retirement benefit under Section 3 upon his date of death or
who, if so eligible, has no Spouse.
SECTION 6 - TAX EQUALIZATION PAYMENTS
6.1 Federal and State Tax Equalization Payments. If the payment
of a lump sum or distribution of an annuity to or for the benefit of a
Participant hereunder gives rise to Federal or state income taxes with respect
to such benefit, the Company shall pay to the Participant (or his beneficiary,
if applicable), or to the applicable taxing authority, an appropriately
allocated amount equal to the difference between:
(a) The Adjusted Taxable Distribution which is equal to
(i) the amount of the lump sum distribution or annuity
purchase price divided by
(ii) 100% minus
(A) the Selected Marginal Federal Tax Rate, and
(B) 100% minus the Selected Marginal Federal Tax
Rate multiplied by the Selected Marginal
State Tax Rate
(b) The amount of the lump sum distribution or annuity purchase.
6.2 Definitions. The Selected Marginal Federal Tax Rate shall be
equal to 39.6% in 1995 and the Selected Marginal State Tax Rate shall be the
highest marginal tax rate specified in the jurisdiction where the Participant
is domiciled including county piggy-back taxes where appropriate. The Marginal
Federal Tax Rate specified above and the Selected Marginal State Tax Rates
shall be adjusted to reflect changes in either the Federal or State income tax
rates.
- 6 -
<PAGE> 7
SECTION 7 - ADMINISTRATION
7.1 Compensation Committee. The Plan shall be administered by the
Compensation Committee of the Board of Directors.
7.2 Powers and Duties of the Compensation Committee. The
Compensation Committee shall carry out the duties assigned to it under the Plan
and shall administer the Plan in accordance with its terms. The Compensation
Committee shall have the responsibility and authority to administer the Plan in
its sole and complete discretion, including the right to construe and interpret
the Plan, to decide all questions of fact, and to determine the eligibility of
any person to participate in the Plan, the entitlement of any individual to
benefits, and the amount and time of payment of any such benefits under the
Plan. The decisions or determinations of the Compensation Committee relating
to the construction or interpretation of any provision of the Plan, the
eligibility of any person to participate in the Plan, the entitlement of any
individual to benefits and the amount and time of payment of any such benefits
under the Plan, or any other matter relating to the Plan, including findings of
fact with respect to the foregoing, shall be final and binding on all persons
whomsoever. The Compensation Committee shall also have the power to allocate
and delegate responsibilities.
7.3 Meetings of the Compensation Committee. The Compensation
Committee shall act by a majority of its members at the time in office, and
such action may be taken either by a vote at a meeting or in writing without a
meeting. The Compensation Committee may authorize any person or persons, who
may but need not be a member or members of the Compensation Committee, to
execute any document or documents on behalf of the Compensation Committee.
7.4 Adoption of Rules by the Compensation Committee. The
Compensation Committee may adopt such rules as it deems necessary, desirable or
appropriate. All rules and decisions of the Compensation Committee shall be
uniformly and consistently applied to all participants in similar
circumstances. When making a determination or calculation, the Compensation
Committee shall be entitled to rely upon information furnished by a participant
or beneficiary, the Company, and legal counsel of the Company.
7.5 Reports and Records. The Compensation Committee shall keep a
record of all its proceedings and acts and shall keep all such books or
accounts, records, and other data as may be necessary for the proper
administration of the Plan. The Compensation Committee shall file or cause to
be filed all such annual reports, financial and other statements as may be
required by any Federal or state statute, agency or authority within the time
prescribed by the law or regulations for filing said documents. The
Compensation Committee shall furnish such reports, statements and other
documents to participants and beneficiaries of the Plan as may be required by
any
- 7 -
<PAGE> 8
Federal or state statute or regulation, within the time prescribed for
furnishing such documents.
7.6 Inspection of Records of the Compensation Committee. The
Compensation Committee's records and books of account shall be open to
inspection at all reasonable times by the Company or any person designated from
time to time by the Company.
7.7 Indemnification. The Company shall indemnify each member of
the Compensation Committee, and the directors, officers and employees of the
Company involved in the operation and administration of the Plan against any
and all claims, losses, damages, expenses and liabilities arising from any
action or failure to act, except when the same is determined by the Board of
Directors to be due to gross negligence or willful misconduct of such member.
7.8 Claims Procedure. The Compensation Committee shall make all
determinations as to the right of any person to a benefit. The Compensation
Committee shall follow the claims procedure set forth in the Base Plan.
SECTION 8 - AMENDMENT AND TERMINATION
8.1 Right to Amend or Terminate by Company. The Company reserves
the right to alter, amend, modify, revoke, or terminate the Plan. In the event
of termination or an amendment reducing benefits under the Plan, the vested
retirement benefits then accrued to each participant affected by such
termination or amendment shall not be reduced.
SECTION 9 - FUNDING
9.1 Funding. This Plan is an unfunded supplemental retirement
plan as defined in sections 201(2), 301(3), and 401(a)(1) of ERISA. Benefits
payable under the Plan to or on account of a Participant shall be paid directly
by the Company. The Company shall not be required to segregate any assets to be
applied for the payment of benefits under the Plan, and no person entitled to
benefits under the Plan shall have any right to any assets of the Company. All
assets under this Plan shall remain part of the general assets of the Company
and subject to the claims of the Company's general creditors until distributed
to the Participant or Beneficiary as cash or an annuity.
- 8 -
<PAGE> 9
SECTION 10 - MISCELLANEOUS
10.1 No Enlargement of Employee Rights. Nothing contained in the
Plan shall be deemed to give any Employee the right to be retained in the
employment of the Company or to interfere with the right of the Company to
discharge or retire any Employee at any time.
10.2 Notice of Address. Each person entitled to benefit under the
Plan must file with the Compensation Committee, in writing, his post office
address and each change of post office address. Any communication, statement
or notice addressed to such a person at his latest post office address as filed
with the Compensation Committee will be binding upon such person for all
purposes of the Plan, and neither the Compensation Committee nor the Company
shall be obliged to search for or ascertain the whereabouts of any such person.
10.3 Data. All persons entitled to benefits under the Plan must
furnish to the Compensation Committee such documents, evidence, or information
as the Compensation Committee considers necessary or desirable for the purpose
of administering the Plan.
10.4 Overpayments. If the Compensation Committee determines that
the Plan has made overpayments to or on behalf of a participant, the
Compensation Committee shall adjust subsequent benefit payments thereafter due
on an actuarial basis to correct for such overpayments; provided, however, that
this provision shall not limit the ability of the Compensation Committee to
initiate other action to recover such overpayments.
10.5 Non-Alienation. Except to the extent permitted with respect
to benefits under the Base Plan, an Employee, former Employee or beneficiary
may not pledge, hypothecate, anticipate or in any way create a lien upon any
amounts payable under this Plan, and no benefits payable hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts
or by operation of law.
10.6 Governing Law. This document shall be interpreted in
accordance with the laws of the State of Delaware.
10.7 Withholding; Payroll Taxes. To the extent required by the
laws in effect at the time payments are made, the Company may withhold from
payments made hereunder any taxes it believes required to be withheld for
federal, state or local governmental purposes.
- 9 -
<PAGE> 1
EXHIBIT 11
Iridium LLC
Exhibit 11 Supporting Calculations
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net Loss 14,834,000 23,645,000 73,598,000 7,663,000 35,928,000
Pref. Dividend Requirement - - 3,652,000 - 2,291,000
---------- ---------- ---------- --------- -----------
Net Loss for Class 1 Interests 14,834,000 23,645,000 77,250,000 7,663,000 38,219,000
---------- ---------- ---------- --------- -----------
Average # of Class 1 Interests O/S 520,537 1,175,505 1,601,541 1,566,736 1,611,147
Fully Diluted Adjustments:
Subscribed but not issued 609,787 412,273 5,779 29,104 -
Assumed Ex. of Options/Warrants 6,979 12,258 65,839 20,279 131,178
Assumed Conversion Series A/2 - - 10,693 - 11,594
---------- ---------- ---------- --------- -----------
AVG. O/S, full dilution 1,137,303 1,600,036 1,683,852 1,616,119 1,753,919
NEW LOSS PER CLASS 1 INTEREST
Primary 28.50 20.11 48.23 4.89 23.72
Fully Diluted 13.04 14.78 45.88 4.74 21.79
</TABLE>
<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, THREE MONTHS ENDED
YEAR ENDED 1993 TO ------------------------------ MARCH 31,
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 .... - - - - 28,127 799 18,712
Portion of rent expense
representative of
Interest(1) ........... - - 54 264 342 398 100 304
---------- ------------ ----------- -------- --------- --------- -------- -------
Total fixed charges ... $ - - 54 264 342 28,525 899 19,016
========== ============
Earnings:
Loss before income
taxes ................. $ (8,773) (5,309) (6,751) (13,309) (21,961) (69,009) (7,176) (35,928)
Fixed charges, less
capitalized interest .. $ - - 54 264 342 398 100 304
Earnings (loss) adjusted
for fixed charges ..... $ (8,773) (5,309) (6,697) (13,045) (21,619) (68,611) (7,076) (35,624)
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 7,875 54,640
</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 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.
KPMG Peat Marwick LLP
Washington, D.C.
July 18, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements for the quarter ended March
31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 15,659
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,035
<PP&E> 2,398,654
<DEPRECIATION> 2,536
<TOTAL-ASSETS> 2,483,505
<CURRENT-LIABILITIES> 18,831
<BONDS> 905,178
0
49,268
<COMMON> 1,674,869
<OTHER-SE> (169,768)
<TOTAL-LIABILITY-AND-EQUITY> 2,483,505
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 36,054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (35,928)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,928)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
