<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1997
REGISTRATION NO. 333-23419
REGISTRATION NO. 333-23419-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 5
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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IRIDIUM WORLD COMMUNICATIONS LTD.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
BERMUDA 4812 52-2025291
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON HM 11, BERMUDA
(441) 295-5950
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
IRIDIUM LLC
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 4800 52-1984342
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1575 EYE STREET, N.W., WASHINGTON, D.C. 20006
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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F. THOMAS TUTTLE, ESQ.
IRIDIUM WORLD COMMUNICATIONS LTD., 1575 EYE STREET, N.W., WASHINGTON, D.C. 20006
(202) 408-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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with copies to:
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<S> <C>
JOHN P. MEAD, ESQ. TIMOTHY E. PETERSON, ESQ.
SULLIVAN & CROMWELL FRIED, FRANK, HARRIS,
125 BROAD STREET SHRIVER & JACOBSON
NEW YORK, NEW YORK 10004 ONE NEW YORK PLAZA
(212) 558-4000 NEW YORK, NEW YORK 10004
(212) 859-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Class A Common Stock, par value $.01
per share.................................... 11,500,000 $21.00 $241,500,000 $73,181.82(3)
- ------------------------------------------------------------------------------------------------------------------
Class 1 Membership Interests of Iridium
LLC(4)...................................... 11,500,000 N/A N/A N/A
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</TABLE>
(1) Includes 1,500,000 shares issuable upon exercise of options granted to the
Underwriters to cover over-allotments, if any.
(2) Estimated solely for purposes of determining the registration fee.
(3) Previously paid.
(4) The Class 1 Membership Interests of Iridium LLC will be purchased by Iridium
World Communications Ltd. with the proceeds of the sale of the Class A
Common Stock.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO SEPARATE PROSPECTUSES. THE FIRST
PROSPECTUS RELATES TO A PUBLIC OFFERING OF SHARES OF CLASS A COMMON STOCK OF
IRIDIUM WORLD COMMUNICATIONS LTD., PAR VALUE $.01 PER SHARE (THE "CLASS A COMMON
STOCK"), IN THE UNITED STATES AND CANADA (THE "U.S. OFFERING"). THE SECOND
PROSPECTUS RELATES TO A CONCURRENT OFFERING OF CLASS A COMMON STOCK OUTSIDE THE
UNITED STATES AND CANADA (THE "INTERNATIONAL OFFERING"). THE PROSPECTUSES FOR
THE U.S. OFFERING AND THE INTERNATIONAL OFFERING WILL BE IDENTICAL IN ALL
RESPECTS, OTHER THAN THE FRONT COVER PAGE, THE "UNDERWRITING" SECTION AND THE
BACK COVER PAGE RELATING TO THE INTERNATIONAL OFFERING. SUCH ALTERNATE PAGES
APPEAR IN THIS REGISTRATION STATEMENT IMMEDIATELY FOLLOWING THE COMPLETE
PROSPECTUS FOR THE U.S. OFFERING.
<PAGE> 3
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
PRELIMINARY PROSPECTUS DATED MAY 9, 1997
PROSPECTUS
10,000,000 SHARES
IRIDIUM WORLD COMMUNICATIONS LTD.
CLASS A COMMON STOCK
---------------------
Of the 10,000,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), of Iridium World Communications Ltd., a Bermuda
company (the "Company"), being offered hereby, 8,000,000 shares are being
offered in the United States and Canada by the U.S. Underwriters (the "U.S.
Offering") and 2,000,000 shares are being offered in a concurrent offering
outside the United States and Canada by the International Managers (the
"International Offering" and, together with the U.S. Offering, the "Offerings").
The public offering price and the underwriting discount per share are identical
for both Offerings. Of the 10,000,000 shares being offered in the Offerings, up
to 1,000,000 shares are being reserved for sale to eligible employees of the
Company and Iridium and persons having business relationships with Iridium. See
"Underwriting." The Company will use the proceeds of the Offerings to purchase
10,000,000 Class 1 Membership Interests (the "Class 1 Interests") in Iridium
LLC, a Delaware (U.S.A.) limited liability company ("Iridium"). Upon
consummation of the Offerings and application of the net proceeds therefrom to
purchase Class 1 Interests in Iridium, the Company will be admitted as a member
of Iridium. Pursuant to the rules promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), Iridium is a co-registrant on the
registration statement of which this Prospectus forms a part.
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $19 and $21 per share. See "Underwriting" for a discussion of
factors considered in determining the initial public offering price. The Class A
Common Stock has been approved for quotation on the Nasdaq National Market
System ("NNMS") under the symbol "IRIDF," subject to official notice of
issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
---------------------
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.
<TABLE>
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PRICE TO PROCEEDS TO
PUBLIC UNDERWRITING COMPANY(2)
DISCOUNT(1)
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<S> <C> <C> <C>
Per Share................................ $ $ $
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Total(3)................................. $ $ $
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(1) The Company and Iridium have agreed to indemnify the several Underwriters
against certain liabilities under the Securities Act. See "Underwriting."
(2) Expenses of the Offerings are estimated to be $2,000,000 and are payable by
Iridium. See "Underwriting."
(3) The Company has granted the U.S. Underwriters and the International Managers
options, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 1,200,000 and 300,000 shares of Class A Common
Stock, respectively, on the same terms as set forth above, to cover
over-allotments, if any. The Company will use the proceeds from the sale of
any shares of Class A Common Stock in respect of such over-allotment options
to purchase an equivalent number of Class 1 Interests. If all such
additional shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
---------------------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them and
subject to the approval of certain legal matters by counsel for the Underwriters
and certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will be made in New
York, New York on or about , 1997.
---------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 4
---------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF CLASS A COMMON STOCK
TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
---------------------
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.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. See the Glossary included as
Annex A hereto for the definitions of certain terms used in this Prospectus. On
February 26, 1997, the Company effected a 100 for 1 stock split (the "Stock
Split") of the Company's Class A Common Stock. 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 (the "Class 1 Interest
Subdivision"). Unless otherwise indicated all information contained in this
Prospectus reflects the Stock Split and the Class 1 Interest Subdivision and
assumes that the over-allotment options granted to the Underwriters are not
exercised. In this Prospectus, reference to "dollars" and "$" are United States
dollars.
THE COMPANY AND 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. Launch of the first five IRIDIUM
satellites occurred on May 5, 1997, and 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 $1.26 billion, and a conditional commitment to guarantee up to an
additional $350 million of borrowings. 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 World Communications Ltd., a Bermuda company (the "Company"), is
the issuer of the Class A Common Stock offered hereby. Upon consummation of the
Offerings and application of the net proceeds therefrom to purchase Class 1
Membership Interests in Iridium ("Class 1 Interests"), the Company will be
admitted as a member of Iridium and is expected to own approximately 7.2% of the
outstanding Class 1 Interests (approximately 8.2%, if the Underwriters'
over-allotment options are exercised in full). See "Dilution." The shares of
Class A Common Stock are equity securities of the Company and do not represent
interests in Iridium.
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.
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
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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 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
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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 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
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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 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. Iridium's strategic
investors have collectively invested, or committed to invest, approximately
$3.34 billion in Iridium, including equity, debt, guarantees, conditional
commitments to provide guarantees and a reserve capital call. These investments
represent more than 77% of Iridium's projected total funding needs through the
end of September 1998, the month Iridium expects to commence commercial
operations, and approximately 67% of Iridium's projected total funding needs
through December 31, 1999, the last year in which Iridium
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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) and Asia (DDI in Japan, UCOM in Thailand and Korea Mobile
Telecommunications). 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.
On May 30, 1997, South Pacific Iridium Holdings Limited ("SPI"), an
indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation,
purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant
to the terms of its purchase agreement with Iridium, SPI exercised its right to
defer payment of 60% of the total purchase price payable and is required to pay
10% of the total purchase price on or before November 15, 1997 and the remaining
50% on or before May 15, 1998. The total purchase price of such Class 1
Interests will increase to approximately $110 million in the event SPI elects in
full its right to defer payment. All information in this Prospectus with respect
to Class 1 Interests gives effect to the issuance of 7,500,000 Class 1 Interests
to SPI. In connection with its investment in Iridium, SPI was allocated the
South Pacific gateway service territory.
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. By
early May 1997, eight satellites had been produced, seven additional satellites
had been assembled and were in 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 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 with
its launch service providers and currently 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."
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
7
<PAGE> 10
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 six 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.
THE COMPANY
The Company is organized to act as a member of Iridium and to have no other
business. The Company will use the net proceeds from the Offerings to acquire
Class 1 Interests. Upon consummation of the Offerings and application of the
proceeds therefrom to purchase Class 1 Interests, the Company is expected to own
approximately 7.2% of the outstanding Class 1 Interests (approximately 8.2% if
the Underwriters' over-allotment options are exercised in full). See "Dilution"
and "Governance of the Company and Relationship with Iridium."
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.
8
<PAGE> 11
- 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, 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.
9
<PAGE> 12
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 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)
(IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDS
- ------------------------------------
<S> <C>
Class 1 Interests(2)................ $1,728
Series A Class 2 Interests(3)....... 31
14 1/2% Senior Subordinated Notes
due 2006(4)....................... 238
Guaranteed Bank Facility(5)......... 750
------
Total.......................... 2,747
Estimated Net Proceeds to Iridium
from the Offerings(6)............. 186
------
Total after Offerings.......... 2,933
Reserve Capital Call(7)............. 243
Conditional Motorola Guarantee
Commitment(8)..................... 350
Additional funding
requirements(9)................... 835
------
Total Pre-operational
Sources...................... $4,361
======
</TABLE>
<TABLE>
<CAPTION>
USES OF FUNDS
- ------------------------------------
<S> <C>
Space System Contract(10)........... $3,450
Terrestrial Network Development
Contract(11)...................... 179
Business support systems and other
expenditures(12).................. 184
Net interest and financing
costs(13)......................... 220
Net expenses and working
capital(13)(14)................... 328
------
Total Pre-operational net
uses......................... $4,361
======
</TABLE>
- ---------------
(1) Assumes that the IRIDIUM System will commence commercial operations in
September 1998. Iridium anticipates total cash needs of $5.0 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."
(2) Includes the investment of $100 million by South Pacific Iridium Holdings
Limited ("SPI"), an indirect, wholly owned subsidiary of P.T. Bakrie
Communications Corporation. On May 30, 1997, SPI purchased 7,500,000 Class
1 Interests at $13.33 per Class 1 Interest. Pursuant to the terms of its
purchase agreement with Iridium, SPI exercised its right to defer payment
of 60% of the total purchase price and is required to pay 10% of the total
purchase price on or before November 15, 1997 and the remaining 50% on or
before May 15, 1998. The aggregate purchase price of such Class 1 Interests
will increase to approximately $110 million in the event SPI elects in full
its right to defer payment. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(3) 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. 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.
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<PAGE> 13
(4) These Notes were issued with warrants to purchase 4,997,292 Class 1
Interests at a price of $.01 per Interest.
(5) As of March 31, 1997, Iridium had drawn $665 million under a $750 million
borrowing facility with a syndicate of banks (the "Guaranteed Bank
Facility"). Borrowings under the Guaranteed Bank Facility are guaranteed by
Motorola. The Guaranteed Bank Facility matures in August 1998. Iridium
expects that it will be able to extend this facility through December 31,
2000. Motorola has conditionally committed to extend its guarantee to that
date if the Guaranteed Bank Facility is so extended. In connection with its
guarantee of the Guaranteed Bank Facility Motorola received a security
interest in substantially all of Iridium's assets. Motorola's compensation
for the $750 million guarantee is in the form of warrants to acquire
additional Class 1 Interests at $.00013 per Class 1 Interest. The maximum
number of warrants to be issued as compensation for the $750 million
guarantee prior to the commencement of commercial operations would be
warrants to purchase 11,250,000 Class 1 Interests (subject to anti-dilution
adjustments). If the Guaranteed Bank Facility is extended beyond the
commencement of commercial operations, the yearly warrant compensation
proposed by Motorola would be warrants to purchase 900,000 Class 1
Interests at $.00013 per Class 1 Interest for each $100 million of
guarantee commitments, beginning at the commencement of commercial
operations (subject to anti-dilution adjustments). The Class 1 Interests
acquired upon exercise of such warrants must be held for five years from
the date of issuance of such Interests. See "Dilution."
(6) Reflects the application of the estimated net proceeds of the Offerings to
the purchase from Iridium of 10,000,000 Class 1 Interests at a price per
Class 1 Interest equal to the net price per share of Class A Common Stock
payable to the Company in the Offerings. Expenses of the Offerings,
estimated to be $2,000,000, will be borne entirely by Iridium. See "Use of
Proceeds."
(7) 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"). Iridium is
required to exercise the Reserve Capital Call under certain conditions,
including in the event of a prospective funding shortfall. See "Description
of Iridium LLC Limited Liability Company Agreement -- Capital
Contributions; Reserve Capital Call."
(8) Motorola has made a conditional commitment to guarantee up to an additional
$350 million of borrowings under the Guaranteed Bank Facility, for which
Motorola would be compensated with additional warrants to purchase Class 1
Interests at $.00013 per Class 1 Interest. The maximum number of warrants
to be issued as compensation for the additional $350 million guarantee, if
implemented, would be warrants to purchase 3,750,000 Class 1 Interests
(subject to anti-dilution adjustments) prior to commencement of commercial
operations. See "Dilution." If such additional borrowing under the
Guaranteed Bank Facility is extended beyond its August 1998 maturity date,
Motorola has proposed additional warrant compensation beginning at
commencement of commercial operations as described in note (5) above.
(9) Iridium currently expects to satisfy its additional funding requirements
through the incurrence of debt. Iridium is seeking to obtain a senior bank
facility in an amount of up to approximately $1.7 billion. In addition to
or in lieu of such bank facility, additional financing may need to be
obtained through the issuance of equity or debt securities in the public or
private markets. Iridium expects that in connection with any issuance of
debt securities in the public or private market, equity compensation in the
form of warrants to purchase shares of Class A Common Stock likely will be
required. Iridium also expects that other methods of debt financings are
likely to require guarantees or other forms of credit support and that
compensation, including equity (which may be in the form of warrants)
likely will be required for such guarantees. There are currently no
agreements with Motorola or Iridium's other investors or vendors to provide
such credit support. It is possible that some portion of Iridium's
additional funding requirements may be met through the issuance of
additional equity. Although Iridium believes that it will be able to meet
its additional funding requirements, there can be no assurance that such
financing will be available on favorable terms, on a timely basis, or at
all. Among other things, the availability of
11
<PAGE> 14
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."
(10) 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."
(11) As of March 31, 1997, Iridium had incurred $64 million of this amount. See
"Risk Factors -- Risks Associated with Principal Supply Contracts."
(12) As of March 31, 1997, Iridium had incurred $28 million of this amount. See
"Risk Factors -- Risks Associated with Principal Supply Contracts."
(13) Based on assumed interest rates and borrowing levels. Actual interest and
financing costs will depend upon applicable interest rates and the amount
and timing of actual borrowings.
(14) Comprised of operating expenses of $587 million and net of interest income
of $13 million and working capital of $246 million.
12
<PAGE> 15
THE OFFERINGS
Class A Common Stock offered by the
Company:
U.S. Offering..................... 8,000,000 shares
International Offering............ 2,000,000 shares
Total.......................... 10,000,000 shares
Class A Common Stock of the Company
to be outstanding immediately after
the Offerings..................... 10,000,000 shares(1)
Iridium Class 1 Interests to be
outstanding immediately after the
Offerings......................... 139,219,150 Interests(1)(2)
Iridium Class 1 Interests to be
owned by the Company immediately
following the Offerings........... 10,000,000 Interests(1)
Use of Proceeds..................... The estimated net proceeds of the
Offerings, including the net proceeds
from any exercise of the Underwriters'
over-allotment options, will be used by
the Company to purchase Class 1
Interests in Iridium pursuant to the
terms of the 1997 Subscription
Agreement described under "Governance
of the Company and Relationship with
Iridium -- 1997 Subscription
Agreement." Iridium will use the
proceeds from such sale of the Class 1
Interests primarily to make milestone
payments under the Space System
Contract and the Terrestrial Network
Development Contract and to a lesser
extent for other general corporate
purposes related to the
commercialization of the IRIDIUM
System. See "Use of Proceeds."
Voting Rights....................... All voting rights with respect to the
affairs of the Company, except as
otherwise required by law, are vested
in the holders of the Class A Common
Stock. See "Governance of the Company
and Relationship with Iridium" and
"Description of Capital Stock."
Nasdaq NMS Symbol................... IRIDF
- ---------------
(1) Assumes the Underwriters' over-allotment options are not exercised. If the
over-allotment options are exercised in full, there will be 11,500,000
shares of Class A Common Stock, and 140,719,150 Class 1 Interests,
outstanding immediately following the Offerings of which the Company will
own 11,500,000 Interests. Does not reflect the issuance of shares of the
Company's non-voting Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), to be issued in connection with the Company's
Global Ownership Program or the application of the proceeds therefrom to
acquire Class 1 Interests. Upon satisfaction of certain conditions, the
shares of Class B Common Stock may be exchanged for shares of Class A Common
Stock. There are no shares of Class B Common Stock outstanding. See
"Governance of the Company and Relationship with Iridium -- Global Ownership
Program" and "Description of Capital Stock."
(2) This amount does not give effect to the issuance of any Class 1 Interests
pursuant to options, warrants or convertible interests or pursuant to the
Reserve Capital Call. See "Dilution."
RISK FACTORS
See "Risk Factors" beginning on page 14 for a discussion of certain factors
that should be considered by prospective purchasers of the Class A Common Stock
offered hereby, including that Iridium is a development stage company, has not
generated any revenue from operations to date and does not expect to generate
any revenue from operations until after the IRIDIUM System commences commercial
operations (anticipated to be September 1998).
13
<PAGE> 16
RISK FACTORS
An investment in the Class A Common Stock offered hereby is speculative in
nature and involves a high degree of risk. Because the sole asset of the Company
will be its Class 1 Interests, prospective investors should carefully consider
the following risk factors related to both the Company and Iridium, in addition
to the other information contained elsewhere in this Prospectus, in evaluating
whether to make an investment in the Company prior to purchasing shares in the
Offerings.
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 Class A Common Stock. 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.
SIGNIFICANT ADDITIONAL FUNDING NEEDS
Iridium anticipates total funding requirements of approximately $4.361
billion through September 1998, the month Iridium expects to commence commercial
services, and $5.0 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. As of March 31,
1997, Iridium had equity investments of $1.659 billion with an additional $243
million available in the form of a Reserve Capital Call. Debt investments
equaled $990 million, including the $750 million credit facility with a
syndicate of banks which are guaranteed by Motorola (the "Guaranteed Bank
Facility") under which $665 million had been drawn as of March 31, 1997. In
addition, Motorola has conditionally agreed to guarantee up to an additional
$350 million of borrowings under the Guaranteed Bank Facility, bringing the
total commitments thereunder to $1.1 billion. Borrowings under the Guaranteed
Bank Facility mature in August 1998. Iridium believes it will be able to amend
the Guaranteed Bank Facility to permit these additional borrowings and to extend
its maturity. There can be no assurance that Iridium will satisfy the terms of
Motorola's conditional commitment to guarantee additional borrowings or that the
bank lenders will agree to increase the size or extend the term of the
Guaranteed Bank Facility.
Iridium expects to have sufficient cash after consummation of the Offerings
to meet its anticipated funding requirements through December 1997, assuming
exercise and full funding of the Reserve Capital Call and $1.1 billion of
borrowings under the Guaranteed Bank Facility. The remaining funds needed to
meet Iridium's projected funding requirements are expected to be raised through
additional financings. Iridium is seeking to obtain a senior bank facility in an
amount of up to approximately $1.7 billion. However, there can be no assurance
that Iridium will obtain such a financing or will be able to do so on terms and
conditions acceptable to Iridium and its members or, if such bank financing is
unavailable, that Iridium will be able to obtain financing from an alternative
source. In addition to or in lieu of the senior bank facility Iridium is seeking
to obtain, additional financing may need to be obtained through the issuance of
equity or debt securities in the public or private markets. The availability of
such financing is uncertain and is dependent, in part, on market conditions
existing at the time of any proposed financing. Iridium expects that, in
connection with any issuance of debt securities in the public or private market,
equity compensation in the form of warrants to purchase shares of Class A Common
Stock will likely be required. Iridium also expects that other methods of debt
financings are likely to require guarantees or other forms of credit support and
that compensation, including equity (which may be in the form of warrants),
likely will be required for such
14
<PAGE> 17
guarantees. There are currently no agreements with Motorola or Iridium's other
investors or vendors to provide such guarantees and there can be no assurance
that any of Iridium's investors, vendors or others will provide such guarantees
or credit support. 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.
The $243 million Reserve Capital Call is an unsecured obligation of certain
of the members of Iridium and there can be no assurance that all of the
obligated members will meet their Reserve Capital Call obligations or that they
will do so in a timely fashion.
RISK OF HIGHLY LEVERAGED CAPITAL STRUCTURE; RISK OF DEFAULT ON EXISTING
COMMITMENTS
Iridium is a development stage company with a highly leveraged capital
structure and expects to incur substantial additional indebtedness. Iridium
currently has no significant income-producing assets from which to service its
indebtedness. In connection with providing its guarantee of borrowings under the
Guaranteed Bank Facility, Motorola was granted a security interest in
substantially all of Iridium's assets and Iridium agreed not to take specified
actions without Motorola's approval. In connection therewith, Motorola also was
granted the right to appoint an additional director on the Iridium Board of
Directors (the "Iridium Board") and is being compensated in the form of warrants
to purchase Class 1 Interests. See "-- Dilution Risk" and "Dilution." If
Motorola is required to make a payment under its guarantee of the Guaranteed
Bank Facility as a result of certain events of default by Iridium, Motorola, in
most instances, will have the right to elect a majority of the Iridium Board and
each committee thereof other than the Related Party Contracts Committee.
Iridium's current and future debt service requirements could negatively
affect the value of the Class 1 Interests as a result of 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;
(iii) Iridium's greater exposure to adverse economic conditions than competing
companies that are not as highly leveraged; and (iv) the compensation required
to obtain guarantees or other credit support from Iridium members. These factors
could adversely affect Iridium's finances and dilute the interests of members,
including the Company, in Iridium. In addition, the discretion of Iridium's
management with respect to certain business matters will be limited by covenants
that will be contained in future debt instruments. There can be no assurance
that such restrictions 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
future debt agreements that may contain cross-acceleration or cross-default
provisions.
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 the Prospectus for a discussion
of various of the factors which could result in any of such forward looking
statements proving to be inaccurate.
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In addition, the information in this Prospectus under "Prospectus
Summary -- Sources and Uses of Funds by Iridium" (other than historical
information) and the statements therein and elsewhere that 1999 is the last year
in which Iridium expects negative cash flow and a net increase in year-end
borrowings and as to projected additional capital needs after the commencement
of commercial operations, are forward looking statements which may turn out to
be inaccurate for the reasons described in the preceding paragraph and are also
based upon a number of assumptions. One or more of these assumptions is likely
to be incorrect. The projected financial information assumes, among other
things, that (i) the IRIDIUM System will become commercially operational in
September 1998; (ii) the IRIDIUM System will meet all systems specifications set
forth in the Space System Contract and the Terrestrial Network Development
Contract and will have service characteristics at least as favorable as those
expected by Iridium and described in this Prospectus; (iii) there will be no
increased costs resulting from excusable delays under the Space System Contract,
the Operations and Maintenance Contract or the Terrestrial Network Development
Contract; (iv) Motorola and Kyocera will develop, manufacture and sell in
sufficient numbers portable, hand-held phones that are capable of operating in
multi-mode format and Motorola will develop alphanumeric pagers for use with the
IRIDIUM System on a timely basis in accordance with the model descriptions set
forth in this Prospectus and at the estimated prices set forth in this
Prospectus and Iridium will not incur any significant expenditures as a result
of any need to place any orders for or sell any IRIDIUM subscriber equipment;
(v) a sufficient number of gateways will be constructed and delivered not later
than September 1998 and will be fully operational at such time; (vi) the
satellite navigation and communications software and the business support
systems software will be developed and integrated into Iridium's operations on a
timely basis; (vii) Iridium will contract with a sufficient number of service
providers and roaming partners to ensure effective marketing of the 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 in the "Prospectus
Summary" and under "Business -- The IRIDIUM Market," and in addition to the
information set forth above, prospective investors are cautioned that such
statements are based exclusively upon market analysis conducted by Iridium.
Market analysis, including use of market research, by its nature does not lend
itself to mathematical certainty, since it is based upon respondents' assertions
rather than actual purchase decisions. Iridium's market analysis is based upon a
number of assumptions and it is likely that some of these assumptions will not
prove correct and unanticipated events may occur which could affect actual
markets realized. Moreover, the risks associated with market analysis are
heightened in cases such as this, where the analysis deals with a product and
service that does not yet exist and that is not directly comparable to any
product or service with which the respondents could be familiar. Consequently,
actual markets should be expected to vary from the market analysis included
herein and such variations may be material.
Iridium does not intend to publish updates or revisions of the projected
financial information or addressable market 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
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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 attain
profitability. See "Business -- Competition."
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
Vandenburg 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. 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 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.
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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 service, 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.
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
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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 service, 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 the 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."
CONSEQUENCES OF SATELLITE SERVICE LIMITATIONS ON CUSTOMER ACCEPTANCE
Iridium's ability to operate profitably 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
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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 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.
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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 must contract
with a third-party supplier to develop, manufacture and deliver the IIU that
will permit protocol translation. While Motorola has identified a third-party
supplier to manufacture and deliver the IIU, contract negotiations are in
preliminary stages and there can be no assurance that Motorola will enter a
contract with such third party or 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 service in
September 1998, with roaming agreements covering networks in approximately 150
countries in place by 2002. To date, Iridium has not entered into any roaming
agreements with terrestrial wireless service providers. Certain terrestrial
wireless service providers are offering or have announced their intention to
offer interprotocol roaming services that will compete with ICRS, and Iridium
may not be able to enter into roaming agreements with such service providers. An
inability to execute roaming agreements which provide ICRS customers terrestrial
wireless coverage in significant markets could have a material adverse effect on
Iridium. Neither Motorola nor Iridium may have sufficient intellectual property
rights to prevent other parties from developing, selling or using equipment and
systems for providing interprotocol roaming services.
SATELLITE LAUNCH RISKS
Number of Launches; Compressed Launch Schedule
In order for the IRIDIUM System to be fully operational under its current
specifications and timetable, Iridium anticipates the need to launch
successfully at least 66 low earth orbit satellites in approximately 12 to 15
months. 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
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satellite communications control facility, the second one-day delay was as a
result of a microwave link failure at the Vandenburg 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.
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.
Khrunichev is expected to provide launch services for Iridium using the Proton
launch vehicle. In November 1996, there was a failure with Khrunichev's Proton
launch vehicle in connection with the Mars 96 mission that the failure analysis
determined was attributable to faulty guidance and control commands from the
Mars 96 spacecraft. In addition, Khrunichev experienced launch failures in
February 1996 and May 1993.
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
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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 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.
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
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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.
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."
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 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
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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) and Italy (Fucino) and permit the gateways to test their links between
the IRIDIUM satellites and terrestrial services. Two of the remaining four
unlicensed gateways -- the gateways in Japan (Nagano) and India (Bombay) -- are
under construction in the expectation that they will be licensed. Iridium
expects that the gateway in Japan will be completed in August 1997 and 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 seven countries have granted conditional licenses for the
use of IRIDIUM Satellite Services in their country. These countries are the
United States, Venezuela, New Zealand, Taiwan, Thailand, 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
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
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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.
GLONASS and Radioastronomy 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.
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. 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. 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 radioastronomy 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. 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 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
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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
both of the other FCC-licensed MSS applicants -- Loral/Qualcomm Partnership,
L.P. (on behalf of Globalstar) and TRW, Inc. (on behalf of Odyssey). 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."
Competition from Interprotocol Roaming Service Providers, GSM Roaming Services,
Regional MSS Systems and Wireless Phone Rentals
Certain services are already available to provide roaming services among a
number of countries, including those that use incompatible cellular standards.
For example, GlobalRoam and Cellcard provide roaming between some North American
AMPS networks and some European and other GSM networks. The availability of such
international near-global roaming services is likely to increase. These services
will compete directly with Iridium's ICRS service and with Iridium's
satellite-based phone services for travelling 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
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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 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
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to perform many of the critical tasks in constructing the IRIDIUM System. In
addition, Iridium is currently relying on Motorola to maintain the necessary
operating licenses for the system control facilities in the United States, and
the license from the FCC to construct, launch and operate the system, and to
operate and maintain the space segment for the benefit of Iridium. Any
assignment or transfer of control of these licenses could be subject to the
prior consent of the FCC. See "Regulation of Iridium -- Licensing Status."
Motorola has developed the specifications for the gateways and subscriber
equipment. Motorola is also supplying gateway equipment and associated services
and Iridium believes that currently Motorola and Kyocera are the only companies
that are planning to develop and sell subscriber equipment. If for any reason
Motorola or any of its important subcontractors fail to perform as required
under the agreements, the ability of Iridium to implement the IRIDIUM System on
time and within estimated costs and, once implemented, to maintain and operate
the system, could be materially and adversely affected. Motorola's liability
under the agreements for damages for any breach thereof is limited. See
"Principal Contracts for the Development of the IRIDIUM System" and
"-- Conflicts of Interest with Motorola."
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
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subscriber equipment are likely to represent only a portion of each service
provider's business. In addition, while Iridium anticipates devoting significant
resources to advertising, Iridium is dependent on gateway operators and service
providers effectively cooperating in the marketing of IRIDIUM Services in their
territories. Failure of the gateway operators and service providers to
adequately fund and implement the marketing of IRIDIUM Services could have a
material adverse effect on Iridium.
A number of gateway operators have entered into non-binding memoranda of
understanding with entities that have indicated an interest in becoming IRIDIUM
Service providers in their service territories but have not yet executed
definitive agreements to any significant extent. The willingness of companies to
become service providers will be dependent upon a variety of factors including
pricing of services and compensation to service providers, local regulations and
the perceived competitiveness of the IRIDIUM System.
RISKS ASSOCIATED WITH PRINCIPAL SUPPLY CONTRACTS
Space System Contract
Iridium and Motorola 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. 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."
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
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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 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 $178.9 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.
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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 are a variety of pending and anticipated
amendments and interpretations to the principal supply contracts and other
agreements and letters with Motorola which are estimated by Motorola to
approximate an aggregate of $125 million, which amount is reflected in Iridium's
estimates of its funding requirements. Many of the service enhancements
contemplated by these amendments will not be available until after the
commencement of commercial operations. Certain of these enhancements may require
the gateway owners to sign additional agreements with Motorola. There can be no
assurance that these agreements will be executed or approved by the Iridium
Board. Further, there can be no assurance future technological, market or
regulatory developments will not necessitate further 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 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.
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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 and a holder of a
security interest in substantially all of Iridium's assets. Although Motorola
does not have any employees who serve as directors on the Company Board, 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 of the debt of Iridium and (iv) the principal
supplier to Iridium, could in certain situations exercise significant influence
over Iridium and the Company. For example, in addition to its representation on
the Iridium Board, Motorola could have control over Iridium similar to that of a
creditor through its position as a guarantor of Iridium's outstanding debt and
as the holder of a security interest in substantially all of Iridium's assets.
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 Offerings will be used primarily to make milestone payments to Motorola
under the Space System Contract and the Terrestrial Network Development
Contract. See "Principal Contracts for the Development of the IRIDIUM System"
and "Certain Relationships and Related Transactions of Iridium."
Under the Space System Contract, Motorola has agreed to license the rights
to manufacture, sell and use certain intellectual property to the extent
essential to manufacture IRIDIUM subscriber equipment to competent suppliers
that are acceptable to Motorola. Motorola maintains that it has substantial
discretion in its exercise of these rights and could limit the ability of
potential suppliers to manufacture and sell IRIDIUM subscriber equipment. See
"Principal Contracts for the Development of the IRIDIUM System -- Space System
Contract." If Motorola asserts its position and refuses to license intellectual
property to one or more potential manufacturers, the availability of subscriber
equipment and the characteristics and price thereof could be adversely affected,
which could in turn reduce the demand for IRIDIUM Services. Motorola has,
however, entered into a license agreement with Kyocera which allows Kyocera to
manufacture IRIDIUM phones and Iridium believes that if both Motorola and
Kyocera manufacture equipment, they will be able to produce a sufficient number
of IRIDIUM phones. In addition, Motorola has informed Iridium that it has not
declined to license the essential intellectual property to any third party.
Therefore, while Iridium believes that this risk has been reduced, such risk has
not been eliminated since there can be no assurance that Motorola will not
exercise its rights in the future in a manner that limits the access of other
potential manufacturers to the intellectual property essential for the
manufacture of subscriber equipment.
CONFLICTS OF INTEREST WITH GATEWAY OWNERS
The Iridium Board 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
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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 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
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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.
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.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Class A Common
Stock or Class B Common Stock, and Iridium has never made distributions on its
Class 1 Interests. The Company and Iridium do not currently anticipate paying
any such dividends or distributions until some time following the date on which
Iridium achieves a positive operating cash flow. Cash distributions by Iridium
are expected to be restricted by certain debt covenants, potentially long after
the achievement of positive operating cash flow. The Company's sole asset is its
Class 1 Interests and the Company has no independent means of generating
revenues. See "Dividend Policy" and "-- Development Stage Company; Absence of
Revenues."
Iridium is intended to be treated as a partnership for United States
federal income tax purposes. The Company will be responsible for paying the
United States federal income tax on its distributive share of the income of
Iridium that is effectively connected with the conduct of a trade or business in
the United States. See "Tax Considerations -- United States Federal Income
Taxation -- Taxation of the Company." The
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Company will have no source of funds to pay United States federal income taxes
other than distributions from Iridium. The Iridium LLC Limited Liability Company
Agreement of Iridium requires the Iridium Board, to the extent of legally
available funds, to declare and pay distributions 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. Iridium also has agreed under
the Management Services Agreement to advance funds to the Company, under certain
conditions, to enable the Company to pay any income tax liability that cannot be
satisfied by distributions to the Company on the Class 1 Interests. See
"Governance of the Company and Relationship with Iridium -- Management Services
Agreement." If for any reason Iridium were unable to comply with these
undertakings, the Company would be unable to make required tax payments to the
United States which would have a material adverse effect on the Company.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF CLASS A COMMON STOCK PRICE
Prior to the Offerings there has been no public market for the Class A
Common Stock and there can be no assurance that an active public market for the
Class A Common Stock will develop or continue after the Offerings. The initial
public offering price of the Class A Common Stock will be determined by
negotiation between the Company and the Underwriters. See "Underwriting." The
trading price of the Class A Common Stock could be subject to wide fluctuation
in response to variations in operating results, announcements of the achievement
of objectives or delays in development by Iridium or its competitors, or other
events or factors.
DILUTION RISK
Upon the purchase by the Company of Class 1 Interests with the proceeds
from the Offerings, the Company will realize a substantial dilution in pro forma
net tangible book value per Class 1 Interest. In addition, the Company will
experience dilution in the future as a result of the purchase and sale of Class
1 Interests at prices below the price paid by the Company for its Class 1
Interests. At April 30, 1997 there were outstanding warrants to purchase
4,272,000 Class 1 Interests at $.00013 per Class 1 Interest; warrants to
purchase 4,997,292 Class 1 Interests at $.01 per Class 1 Interest; options to
acquire 1,863,150 Class 1 Interests at $13.33 per Class 1 Interest issued to
executive officers and managers of Iridium under the Iridium Option Plan; Series
A Class 2 Interests that convert into 672,006 Class 1 Interests without any
additional cash investment; and a currently exercisable warrant to purchase up
to the number of Series M Convertible Class 2 Interests that would be
convertible into 2.5% of the number of outstanding Class 1 Interests on the date
of exercise, calculated on a fully diluted basis, at the equivalent of $13.33
per underlying Class 1 Interest that, when issued, will be convertible into a
like number of Class 1 Interests without the payment of additional cash
consideration. See "Dilution." In addition to the warrants described above,
under guarantee arrangements with Motorola, Iridium has a continuing obligation
to issue comparable warrants to Motorola for so long as the guarantees of
borrowings under the Guaranteed Bank Facility remain in place. The maximum
aggregate warrant compensation Motorola can receive under these arrangements is
warrants to purchase 11,250,000 Class 1 Interests (subject to anti-dilution
adjustments) at $.00013 per Class 1 Interest in respect of the $750 million
guarantee through commencement of commercial operations, warrants to purchase
3,750,000 Class 1 Interests (subject to anti-dilution adjustments) at $.00013
per Class 1 Interest in respect of the $350 million conditional guarantee
through commencement of commercial operations, if such guarantee is issued, and
warrants to purchase up to 900,000 Class 1 Interests at $.00013 per Class 1
Interest per year for each $100 million of guaranteed commitments if the
Guaranteed Bank Facility is extended beyond its scheduled August 1998 maturity
date. Through April 30, 1997, Motorola had earned warrants to purchase 4,272,000
Class 1 Interests as compensation for its guarantee. The Class 1 Interests
acquired upon exercise of such warrants must be held for five years from the
date of issuance of such Interests. Up to 18,206,550 Class 1 Interests may be
issued to existing investors in Iridium at a purchase price of $13.33 per Class
1 Interest pursuant to the Reserve Capital Call. The Iridium Board has also
authorized the issuance of warrants to purchase up to 9,165,000 Class 1
Interests at a purchase price of $.00013 per Class 1 Interest to gateway owners
who meet certain performance criteria.
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There will be no immediate dilution to the purchasers of Class A Common
Stock in the Offerings with respect to the Class A Common Stock. However,
pursuant to the Interest Exchange Agreement, the Company has agreed to exchange
shares of Class A Common Stock for Class 1 Interests at an exchange rate of one
share of Class A Common Stock for each Class 1 Interest (subject to
anti-dilution adjustments) commencing 90 days after Iridium has achieved one
full quarter of positive earnings before interest, taxes, depreciation and
amortization. No exchange shall take place unless approved by Iridium pursuant
to authorization of Directors representing at least 66 2/3% of the Iridium
Board. See "Governance of the Company and Relationship with Iridium -- Exchange
Rights of Iridium Members." Also, the Company has authorized the issuance of up
to 2,500,000 shares of Class B Common Stock in the Global Ownership Program.
These shares of Class B Common Stock will be convertible into Class A Common
Stock on a share for share basis. See "Governance of the Company and
Relationship with Iridium -- Global Ownership Program." In addition, the Company
has agreed that in the future it will issue additional shares of Class A Common
Stock at the direction of Iridium and invest the net proceeds thereof in
exchange for one Class 1 Interest for each share of Class A Common Stock so
issued (subject to anti-dilution adjustments). See "Governance of the Company
and Relationship with Iridium -- Share Issuance Agreement."
Iridium needs to raise substantial additional funds to complete the
development and implementation of the IRIDIUM System. A portion of these funds
may be raised through the Reserve Capital Call which would result in the
issuance of up to 18,206,550 Class 1 Interests at $13.33 per Class 1 Interest.
Most of the balance of Iridium's cash needs is expected to be raised through the
incurrence of debt. In order to attract debt investors, Iridium may need to
offer such investors (and to persons providing guarantees or other forms of
credit support for such debt, if any) the right to acquire Class 1 Interests (or
similar interests) at prices substantially below the price per Class 1 Interest
price to be paid by the Company. Iridium may also decide to sell additional
Class 1 Interests directly to investors and the sale price of such Interests may
be substantially less than the price per Class 1 Interest to be paid by the
Company.
SHARES ELIGIBLE FOR FUTURE SALE
Following completion of the Offerings, the only shares of Class A Common
Stock of the Company that will be outstanding will be the 10,000,000 shares
issued in the Offerings (11,500,000 shares if the Underwriters' over-allotment
options are exercised in full). However, the Company has agreed in the Interest
Exchange Agreement that it will exchange shares of Class A Common Stock for
Class 1 Interests at the rate of one share of Class A Common Stock for each
Class 1 Interest and to register with the Securities and Exchange Commission
those shares for sale. Pursuant to the Interest Exchange Agreement, the holders
of Class 1 Interests may not exchange their Interests for shares of Class A
Common Stock prior to 90 days after the first fiscal quarter in which Iridium
achieves positive earnings before interest, taxes, depreciation and
amortization. No exchanges shall take place unless approved by Iridium, pursuant
to the authorization of Directors representing at least 66 2/3% of the Iridium
Board. Based upon the number of Class 1 Interests expected to be outstanding at
the time of completion of the Offerings, 129,219,150 shares of Class A Common
Stock would be issuable upon such exchange. Including all Class 1 Interests
which will be issuable in the future based upon warrants, options and
convertible securities expected to be outstanding immediately following
completion of the Offerings, and the Reserve Capital Call, an aggregate of
181,113,530 shares of Class A Common Stock would be issuable upon such exchange.
See "Dilution."
Eligible employees of the Company and Iridium and persons having business
relationships with Iridium who are purchasing reserved shares of Class A Common
Stock in the Offerings have agreed, with certain exceptions, not to sell, offer
to sell or otherwise dispose of any shares of Class A Common Stock without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated for
a period of 180 days after the date of this Prospectus.
Following completion of the Offerings, the Company will issue shares of
Class B Common Stock in the Global Ownership Program. These shares of Class B
Common Stock will be exchangeable for Class A Common Stock on a share for share
basis after the satisfaction of certain conditions, but in no event earlier than
one year after issuance. Following such exchanges, and if registered for resale
with the Securities and Exchange Commission, the Class A Common Stock issuable
on exchange will be freely transferable if held by
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persons who are not affiliates. See "Governance of the Company and Relationship
with Iridium -- Global Ownership Program." Issuances of substantial amounts of
Class A Common Stock, or the expectation of such issuances, could adversely
affect the market price of the Class A Common Stock.
RISKS ASSOCIATED WITH INCORPORATION UNDER BERMUDA LAW
The Company is incorporated under the Companies Act 1981 of Bermuda, as
amended from time to time (the "Bermuda Act"). As a result, the rights of
holders of Class A Common Stock will be governed by Bermuda law and the
Company's Memorandum of Association and Bye-Laws. The rights of shareholders
under Bermuda law may differ from the rights of shareholders of companies
incorporated in other jurisdictions. The Company has been advised by its Bermuda
counsel, Conyers, Dill & Pearman, that uncertainty exists as to whether courts
in Bermuda will enforce judgments obtained in other jurisdictions (including the
United States) against the Company or officers or directors of the Company under
the securities laws of those jurisdictions or entertain actions in Bermuda
against the Company or its officers or directors under the securities laws of
other jurisdictions. There is no treaty in effect between the United States and
Bermuda providing for such enforcement, and there are grounds upon which Bermuda
courts may not enforce judgments of United States courts. Certain remedies
available under the United States federal securities laws would not be allowed
in Bermuda courts as contrary to that jurisdiction's public policy.
RISK OF LOSS OF MANAGEMENT RIGHTS UPON CHANGE IN CONTROL
Under the Limited Liability Company Agreement of Iridium, the Company has
certain special rights including the right to designate two members of the
Iridium Board, one of whom will act as a Vice Chairman of Iridium, and the right
to approve certain significant transactions involving Iridium. See "Governance
of the Company and Relationship with Iridium -- Participation in the Governance
of Iridium." Iridium will have the right to terminate these special rights
following a Company Change in Control (as defined), which includes circumstances
in which an entity other than Iridium becomes the beneficial owner of more than
30% of the Company's outstanding common stock or in which there is a change in a
majority of the members of the Company's Board of Directors (the "Company
Board") over a two year period that was not approved by a vote of 66 2/3% of the
members of the Company Board then still in office who were directors at the
beginning of the two year period or whose election or nomination for election
was previously so approved. As a result of these provisions, as well as the
risks described below under "-- Risks Related to the Investment Company Act of
1940," holders of Class A Common Stock may effectively be precluded from
replacing a majority of the Company Board, which initially consists of directors
selected by Iridium.
RISKS RELATED TO THE INVESTMENT COMPANY ACT OF 1940
Substantially all of the assets of the Company will consist of Class 1
Interests in Iridium. Under the United States Investment Company Act of 1940
(the "1940 Act"), the Company could be deemed to be an "investment company" if
the Class 1 Interests constitute "investment securities," as defined in the 1940
Act. If the Company were required to be registered as an investment company
under the 1940 Act, there would be a substantial risk that the Company would be
in violation of the 1940 Act because non-United States companies cannot so
register without applying for and receiving an order from the United States
Securities and Exchange Commission permitting such registration. Reincorporation
under the laws of a state in the United States would impose substantial tax
expense on the Company. The Company believes that it is not required to register
as an investment company under the 1940 Act. This decision is based upon the
Company's belief that the Class 1 Interests it will hold will not be
"securities" for purposes of the 1940 Act. This belief is based upon the
Company's role in the affairs of Iridium. There is a risk that a court could
reach a contrary conclusion. This risk would be substantially increased if there
were a Company Change in Control that resulted in the Company losing its special
management rights. See "-- Risk of Loss of Management Rights upon Change in
Control."
38
<PAGE> 41
TAX CONSEQUENCES RELATED TO PASSIVE FOREIGN INVESTMENT COMPANIES
Special U.S. tax rules apply to U.S. taxpayers who own stock in a "passive
foreign investment company" (a "PFIC"). Although the Company believes that it
will not become a PFIC, there is a risk that in the future it may become a PFIC.
Furthermore, if the Company becomes a PFIC in 1998, it will be deemed to have
been a PFIC in 1997 as well. In such an event, a U.S. shareholder would be
subject at his election either to (i) a current tax on undistributed earnings or
(ii) a tax deferral charge in certain distributions and in gains from a sale of
shares of the Class A Common Stock (taxed as ordinary income).
39
<PAGE> 42
THE COMPANY AND IRIDIUM'S STRATEGIC INVESTORS
THE COMPANY
The Company 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. The Company was formed for the purpose of acting as a member
of Iridium. The Company will use the net proceeds of the Offerings to acquire
Class 1 Interests in Iridium. Upon consummation of the Offerings and application
of the proceeds therefrom to the purchase of Class 1 Interests, the Company is
expected to own approximately 7.2% of the outstanding Class 1 Interests
(approximately 8.2%, if the Underwriters' over-allotment options are exercised
in full). The expenses of the Offerings, estimated at $2,000,000, will be borne
entirely by Iridium. The Company's only asset will be its interest in Iridium
and its only activity will be participating in the management of Iridium.
The following is a chart of Iridium's ownership structure, giving effect to
the Offerings assuming the Underwriters' over-allotment options are not
exercised.
<TABLE>
<CAPTION>
<S> <C>
Iridium Africa 2.1%
Iridium Andes-Caribe 3.1%
Iridium Brasil 2.0%
Iridium Canada 3.8%
Iridium China 3.8%
Iridium India 3.8%
Strategic Iridium Italia 4.0%
The Company Investors
Iridium Middle East 4.3%
7.2% 92.8%
Khrunichev 4.4%
Korea Mobile Telecom 3.8%
Iridium LLC Lockheed Martin 1.1%
Motorola 19.0%
Nippon Iridium 11.3%
Pacific Electric Wire
& Cable Co. 3.8%
Raytheon 0.6%
South Pacific Iridium Holdings
Limited 5.4%
Sprint 3.8%
Thai Satellite 3.8%
Vebacom Holdings, Inc. 8.9%
</TABLE>
The above chart reflects percentage ownership in outstanding Class 1
Interests. For a description of the potential for dilution of the Company's
interest in Iridium see "Dilution."
For additional information on the Company's governance arrangements and its
relationship with Iridium, see "Governance of the Company and Relationship with
Iridium."
40
<PAGE> 43
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. Iridium's strategic
investors have collectively invested, or committed to invest, approximately
$3.34 billion in Iridium, including equity, debt, guarantees, conditional
commitments to provide guarantees and the Reserve Capital Call, representing
more than 77% of Iridium's projected total funding needs through the end of
September 1998, the month Iridium expects to commence commercial operations, and
approximately 67% of Iridium's projected total funding needs through the end of
1999, the last year in which Iridium expects negative cash flow and a net
increase in year-end borrowings. See "Prospectus Summary -- Sources and Uses of
Funds by Iridium." Iridium believes that its ability to develop and
commercialize the IRIDIUM System and to compete in the highly competitive
wireless telecommunications market is greatly enhanced by the technical
expertise, regulatory experience, project management skills, distribution
capacity and market presence of its strategic investors.
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 Korea Mobile Telecommunications 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, 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.
Korea Mobile Telecommunications Corporation, 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 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."
41
<PAGE> 44
USE OF PROCEEDS
The net proceeds from the Offerings are estimated to be approximately $188
million ($216.2 million if the Underwriters' over-allotment options are
exercised in full), assuming an initial public offering price of $20 per share
(the midpoint of the estimated public offering price range set forth on the
cover of this Prospectus) and after deducting underwriting discounts. Expenses
of the Offerings, estimated at $2 million, will be borne entirely by Iridium.
The net proceeds of the Offerings will be used by the Company to purchase
10,000,000 Class 1 Interests (11,500,000 Class 1 Interests, if the Underwriters'
over-allotment options are exercised in full) pursuant to the terms of the 1997
Subscription Agreement described under "Governance of the Company and
Relationship with Iridium -- 1997 Subscription Agreement." Following application
of the net proceeds of the Offerings to the purchase of Class 1 Interests, the
Company is expected to own approximately 7.2% of the outstanding Class 1
Interests (approximately 8.2%, if the Underwriters' over-allotment options are
exercised in full). See "Dilution" and "Underwriting."
Iridium will use the net proceeds from the sale of Class 1 Interests to the
Company 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 related to commercialization of the IRIDIUM System.
See "Prospectus Summary -- Sources and Uses of Funds by Iridium."
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Class A Common
Stock or Class B Common Stock, and Iridium has never made distributions on its
Class 1 Interests. The Company and, except as described below, Iridium do not
currently anticipate paying any such dividends or distributions unless, and
until some time following the date on which, Iridium achieves positive operating
cash flow.
The Company's only assets will be its Class 1 Interests and the Company has
no independent means of generating revenues. Iridium will pay the Company's
operating expenses, which expenses are not expected to be material. To the
extent permitted by applicable law and agreements relating to indebtedness,
Iridium intends to distribute to its Class 1 Members, including the Company, net
cash, if any, received from its operations, less amounts required to repay
outstanding indebtedness, satisfy other liabilities and fund capital
expenditures and contingencies. 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 United
States federal, state and local income tax liability resulting from allocations
of Iridium's income to such Member taking into account any withholding required
under United States federal, state and local law. Cash distributions by Iridium
are expected to be restricted by certain debt covenants.
The Company intends to distribute promptly, as dividends to its
shareholders, the distributions, if any, made to it by Iridium, less any amounts
reasonably required to be retained for payment of taxes, for repayment of any
liabilities and to fund any contingencies. Any dividend declared subsequent to
the Offerings must be declared and paid equally on the outstanding Class A
Common Stock and Class B Common Stock.
42
<PAGE> 45
DILUTION
Purchasers of Class A Common Stock in the Offerings will not experience
significant dilution with respect to the Class A Common Stock of the Company
upon completion of the Offerings. However, the Company will experience immediate
dilution with respect to the Class 1 Interests when it invests the net proceeds
from the Offerings in Class 1 Interests. In addition, dilution to new investors
with respect to the Class A Common Stock will occur at any time the holders of
Class 1 Interests exchange Class 1 Interests for Class A Common Stock pursuant
to the Interest Exchange Agreement. See "Governance of the Company and
Relationship with Iridium -- Exchange Rights of Iridium Members" and "Shares
Eligible for Future Sale."
The price per Class 1 Interest to be paid by the Company for the Class 1
Interests to be purchased with the proceeds of the Offerings will exceed the
price per Class 1 Interest paid by Iridium's present Class 1 Members. The
following table illustrates the dilution in pro forma net tangible book value on
a per Class 1 Interest basis, assuming an initial public offering price of $20
per share of Class A Common Stock (the midpoint of the estimated public offering
price range set forth on the cover page of this Prospectus), the total net
proceeds to the Company from the Offerings are $188 million and those proceeds
are used to purchase 10,000,000 Class 1 Interests. Net tangible book value per
Class 1 Interest is equal to Iridium's total tangible assets less total
liabilities as of March 31, 1997, divided by the number of Class 1 Interests
outstanding at that date.
<TABLE>
<S> <C> <C>
Estimated purchase price per Class 1 Interest purchased by the Company with
the proceeds of the Offerings............................................ $18.80
Net tangible book value per Class 1 Interest at March 31, 1997............. $12.60
Pro forma increase in net tangible book value per Class 1 Interest
attributable to the sale of Class 1 Interests(1)......................... .47
------
Pro forma net tangible book value per Class 1 Interest after the
Offerings................................................................ 13.07
------
Pro forma dilution per Class 1 Interest to the Company after the
Offerings................................................................ $ 5.73
======
</TABLE>
- ---------------
(1) Includes the 7,500,000 Class 1 Interests purchased by South Pacific Iridium
Holdings Limited on May 30, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Funding Requirements."
The following table summarizes the relative investment in Iridium of the
existing holders of Class 1 Interests and the Company, as adjusted to give
effect to the sale of Class 1 Interests to the Company in connection with the
Offerings (assuming an initial public offering price of $20 per share of Class A
Common Stock (the midpoint of the estimated public offering range set forth on
the cover page of this Prospectus), the total net proceeds to the Company from
the Offerings are $188 million and those proceeds are used to purchase
10,000,000 Class 1 Interests and the Underwriters' over-allotment options are
not exercised).
<TABLE>
<CAPTION>
CLASS 1 INTEREST CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE PER
INTERESTS PERCENT PAID PERCENT CLASS 1 INTEREST
----------- ------- ------------- ------- -----------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Existing Holders of Class 1
Interests(1).................. 129,219,150 92.8% $ 1,728 90.2% $ 13.37
The Company..................... 10,000,000 7.2 188 9.8 18.80
----------- ----- ------- -----
Total................. 139,219,150 100% $ 1,916 100% $ 13.76
=========== ==== ======= ====
</TABLE>
- ---------------
(1) Includes the 7,500,000 Class 1 Interests purchased by South Pacific Iridium
Holdings Limited on May 30, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Funding Requirements."
The following table presents information with respect to the potential
issuances of Class 1 Interests pursuant to outstanding warrants and convertible
interests (assuming an initial public offering price of $20 per share of Class A
Common Stock (the midpoint of the estimated public offering range set forth on
the cover page of this Prospectus), the total net proceeds to the Company from
the Offerings are $188 million and those
43
<PAGE> 46
proceeds are used to purchase 10,000,000 Class 1 Interests and the Underwriters'
over-allotment options are not exercised).
<TABLE>
<CAPTION>
CASH CONSIDERATION
CLASS 1 INTERESTS PAID OR PAYABLE
----------------------- -------------------------
INTERESTS PERCENT PERCENT
----------- ------- PAID -------
-------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Existing Holders of Class 1 Interests........... 129,219,150 71.4% $ 1,728 74.9%
Holders of Warrants Issued in Connection with
Debt Issuances(1)............................. 16,247,292 9.0 -- --
Management Option Holders(2).................... 1,863,150 1.0 25 1.1
Holders of Series A Class 2 Interests(3)........ 1,159,985 0.6 63 2.7
Participants in the Reserve Capital Call(4)..... 18,206,550 10.1 243 10.5
Holder of Warrant to acquire Series M Class 2
Interests(5).................................. 4,417,403 2.4 59 2.6
The Company..................................... 10,000,000 5.5 188 8.2
----------- ---- ------- ----
Total................................. 181,113,530 100% $ 2,306 100%
=========== ==== ======= ====
</TABLE>
- ---------------
(1) Includes warrants to purchase 4,997,292 Class 1 Interests (at an exercise
price of $.01 per Class 1 Interest) issued in connection with the issuance
and sale of Iridium's 14 1/2% Senior Subordinated Notes due 2006 and
warrants to purchase 11,250,000 Class 1 Interests (at an exercise price of
$.00013 per Class 1 Interest) anticipated to be held by Motorola, which is
the maximum number of warrants issuable to Motorola in respect of the $750
million Guaranteed Bank Facility through commencement of commercial
operations. Motorola also would be entitled to receive warrants to purchase
up to 3,750,000 additional Class 1 Interests at a price of $.00013 per Class
1 Interest in connection with the possible $350 million increase in the
Guaranteed Bank Facility through commencement of commercial operations and
warrants to purchase up to 900,000 Class 1 Interests at a price of $.00013
per Class 1 Interest per year per $100 million of guaranteed borrowings if
the Guaranteed Bank Facility is extended beyond its scheduled August 1998
maturity. No warrants with respect to the possible increase in or extension
of the Guaranteed Bank Facility or in respect of any anti-dilution
adjustment are included in the table.
(2) Up to 2,625,000 Class 1 Interests may be issued pursuant to the Iridium
Option Plan. Options vest pro rata over a five year period. See
"Management -- Iridium Option Plan." At April 30, 1997 there were options to
purchase 1,863,150 Class 1 Interests outstanding with an exercise price of
$13.33 per Class 1 Interest.
(3) Assuming future dividends are paid in kind through February 28, 2001, there
will be 62,668 Series A Class 2 Interests outstanding at that date and each
Series A Class 2 Interest was convertible into 18.51 Class 1 Interests. The
cash consideration represents the cash payment for the Series A Class 2
Interests (including the liquidation preference of the Series A Class 2
Interests issued in satisfaction of dividend obligations).
(4) Up to 18,206,550 Class 1 Interests may be issued at a purchase price of
$13.33 per Class 1 Interest pursuant to the Reserve Capital Call. See
"Description of Iridium LLC Limited Liability Company Agreement -- Capital
Contributions; Reserve Capital Call."
(5) Motorola holds a warrant to acquire Series M Class 2 Interests in Iridium in
an amount that would be convertible into 2.5% of the fully diluted number of
Class 1 Interests outstanding at the time of exercise. The exercise price is
$1,000 per Series M Class 2 Interest. Each Series M Class 2 Interest is
currently convertible into 75 Class 1 Interests.
Iridium has also authorized the issuance of warrants to acquire up to
9,165,000 Class 1 Interests at a price of $.00013 per 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.
The Company has authorized the issuance of up to 2,500,000 shares of Class B
Common Stock as part of the Global Ownership Program. None of such shares have
been issued. See "Governance of the Company and Relationship with
Iridium -- Global Ownership Program." The table does not give effect to any of
these contingent issuances.
44
<PAGE> 47
CAPITALIZATION
THE COMPANY
The following table sets forth as of March 31, 1997: (i) the capitalization
of the Company; and (ii) the capitalization of the Company as adjusted to
reflect the issuance and sale by the Company of 10,000,000 shares of Class A
Common Stock in the Offerings at an assumed initial public offering price of $20
per share (the midpoint of the estimated public offering price range set forth
on the cover page of this Prospectus) and the receipt of the estimated net
proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' Equity:
Class A Common Stock, par value $.01 per share, 50,000,000 shares
authorized; 1,200,000 shares issued and outstanding; 10,000,000 shares
issued and outstanding as adjusted..................................... $ 12 $ 100
Class B Common Stock, par value $.01 per share, 2,500,000 shares
authorized; no shares issued and outstanding........................... -- --
Additional paid-in capital............................................... -- 187,900
Retained earnings........................................................ -- --
---- ---------
Total stockholders' equity..................................... -- 188,000
---- ---------
Total capitalization..................................................... $ 12 $ 188,000
==== =========
</TABLE>
IRIDIUM
The following table sets forth as of March 31, 1997: (i) the capitalization
of Iridium and (ii) the capitalization of Iridium as adjusted to reflect the
issuance and sale by Iridium of Class 1 Interests to the Company in exchange for
the net proceeds of the Offerings to Iridium (estimated to be $188 million) less
the expenses of the Offerings payable by Iridium (estimated to be $2,000,000)
and the 7,500,000 Class 1 Interests purchased by South Pacific Iridium Holdings
Limited on May 30, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Guaranteed Bank Facility............................................ $ 665,000 $ 665,000
Long-term debt due to Members....................................... 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
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 139,219,150 interests issued
and outstanding, as adjusted(1)................................... 1,674,869 1,974,259
Deficit accumulated during the development stage.................... (169,768) (169,768)
Adjustment for minimum pension liability............................ (733) (733)
---------- -----------
Total members' equity..................................... 1,553,636 1,839,636
---------- -----------
Total capitalization...................................... $2,458,814 $ 2,744,814
========== ===========
</TABLE>
- ---------------
(1) See "Dilution" for a discussion of additional interests issuable pursuant to
options, warrants, convertible interests and the Reserve Capital Call.
45
<PAGE> 48
SELECTED FINANCIAL DATA
THE COMPANY
The following balance sheet data as of December 31, 1996 is derived from
the Company's balance sheet which has been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The balance sheet data as of March 31,
1997 is derived from the unaudited condensed balance sheet of the Company. In
the opinion of management of the Company, such unaudited condensed balance sheet
includes all adjustments necessary for a fair presentation of financial position
as of such date. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the balance sheet of the Company and notes thereto included
herein. The Company has had no operations to date.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- -------------------------
ACTUAL ACTUAL AS ADJUSTED(1)
----------------- ------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance Sheet Data:
Cash................................................. $ -- $ 12 $ --
Investment in Iridium LLC............................ -- -- 188,000
Total assets......................................... -- 12 188,000
Stockholders' equity................................. -- 12 188,000
</TABLE>
- ---------------
(1) As adjusted to reflect the issuance and sale by the Company of the
10,000,000 shares of Class A Common Stock offered hereby at an assumed
initial public offering price of $20 per share (the midpoint of the
estimated public offering price range set forth on the cover of this
Prospectus), the receipt of the estimated net proceeds therefrom and the
purchase by the Company of 10,000,000 Class 1 Membership Interests at an
assumed aggregate purchase price of $188 million and the repurchase of the
1,200,000 shares of Class A Common Stock held by Iridium LLC for $12,000.
See "Use of Proceeds" and "Capitalization." Does not reflect the issuance of
shares of Class B Common Stock in connection with the Company's Global
Ownership Program or the application of the proceeds therefrom to acquire
Class 1 Interests. See "Governance of the Company and Relationship with
Iridium -- Global Ownership Program."
46
<PAGE> 49
IRIDIUM
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>
PERIODS PRIOR TO
INITIAL CAPITAL PERIODS FOLLOWING INITIAL
CONTRIBUTION DATE(1) CAPITAL CONTRIBUTION DATE
----------------------------- -------------------------------------------------------------
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31,
YEAR ENDED TO TO ---------------------------------------------
DEC. 31, 1992 JULY 28, 1993 DEC. 31, 1993 1994 1995 1996
------------- ------------- ------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<S> <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
Interest income................. -- -- 390 4,252 5,226 2,395
Provision for income taxes...... -- -- 173 1,525 1,684 4,589
------- ------- ------- ---------- ---------- ----------
Net loss........................ $ 8,773 $ 5,309 $ 6,924 $ 14,834 $ 23,645 $ 73,598
======= ======= ======= ========== ========== ==========
Net loss per Class 1 Interest... $ -- $ -- $ .43 $ .38 $ .27 $ .64
======= ======= ======= ========== ========== ==========
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Consolidated Statement of Loss Dat
Revenues(2)..................... $ -- $ --
Sales, general and
administrative............... 8,410 36,054
Interest income................. 1,234 126
Provision for income taxes...... 487 --
---------- ----------
Net loss........................ $ 7,663 $ 35,928
========== ==========
Net loss per Class 1 Interest... $ .07 $ .32
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
------------------------------------------------------- ---------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)
------- -------- -------- ---------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <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 $ 301,659
System under construction........ -- 275,000 646,000 1,448,000 2,376,884 2,395,597 2,395,597
Total assets..................... -- 299,886 851,809 1,505,383 2,434,081 2,483,505 2,769,505
Long-term debt (net of
discount)..................... -- -- -- -- 735,904 905,178 905,178
Total Members' equity
(deficit)..................... (9,530) 294,308 795,813 1,404,610 1,572,029 1,553,636 1,839,636
</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) As adjusted to reflect (i) the purchase by the Company of 10,000,000 Class 1
Interests with the net proceeds from the Offerings, assuming an initial
public offering price of $20 per share of Class A Common Stock (the
mid-point of the estimated public offering price range set forth on the
cover page of this Prospectus), the total net proceeds to the Company from
the Offerings are $188 million and the Underwriters' over-allotment options
are not exercised and (ii) the purchase of 7,500,000 Class 1 Interests by
South Pacific Iridium Holdings Limited. Does not reflect the issuance of
Class 1 Interests to the Company in connection with the Company's Global
Ownership Program. See "Governance of the Company and Relationship with
Iridium -- Global Ownership Program."
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<PAGE> 50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company will act as a member of Iridium and will have no other
business. The Company's sole asset will be its Class 1 Interests in Iridium and
the Company's results of operations will reflect its proportionate share of the
results of operations of Iridium on an equity accounting basis. In its annual
and quarterly reports, the Company will present separate financial statements
for the Company and Iridium.
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.
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 $178.9 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 are a variety of pending and anticipated
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 totaling approximately $125 million,
which amount is reflected in Iridium's estimates of its funding requirements.
These amendments and interpretations will 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 the current planned
schedule, Iridium's expected future cash requirements by year under the
contracts through December 31, 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Space System Contract......................................... $577 $589 --
Terrestrial Network Development Contract...................... 68 47 --
Operations and Maintenance Contract........................... -- 140 $538
</TABLE>
48
<PAGE> 51
Iridium will also require funds for working capital, business software
development, interest on anticipated borrowings, financing costs and operating
expenses until some time after the commencement of commercial operations. See
"Prospectus Summary -- Sources and Uses of Funds by Iridium." Iridium's interest
expense will increase significantly as a result of its financing plan. During
commercialization, Iridium will be required to make payments to Motorola under
the Operations and Maintenance Contract. After December 31, 1999 (the last year
in which Iridium projects negative cash flow and a net increase in year-end
outstanding borrowings), Iridium's obligations relating to the Operations and
Maintenance Contract and funds needed for working capital, capital expenditures
and debt service are anticipated to be funded through operations. Iridium
anticipates total funding requirements of approximately $4.361 billion through
September 1998, the month Iridium expects to commence commercial operations, and
$5.0 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 March 31, 1997, Iridium had equity investments of $1.659 billion with
an additional $243 million available in the form of a Reserve Capital Call. Debt
investments and commitments equaled $990 million, including the $750 million
Guaranteed Bank Facility. In addition, Motorola has conditionally agreed to
guarantee up to an additional $350 million of borrowings under the Guaranteed
Bank Facility to bring the total commitments thereunder to $1.1 billion. Iridium
is seeking to, and expects to be able to, amend the Guaranteed Bank Facility to
permit these additional borrowings. There can be no assurance that Iridium will
satisfy the terms of Motorola's conditional commitment to guarantee or that the
bank lenders will agree to increase the size of the Guaranteed Bank Facility.
The Guaranteed Bank Facility matures in August 1998. Motorola has conditionally
committed to extend its guarantee through December 31, 2000. Iridium believes
that it will be able to extend the Guaranteed Bank Facility through that date.
Motorola receives compensation in the form of warrants for its guarantees. See
"Dilution." Motorola has also been granted a security interest in Iridium's
assets.
Iridium expects to have sufficient cash after completion of the Offerings
to meet its anticipated cash requirements through December 1997, assuming
exercise and full funding of the Reserve Capital Call and $1.1 billion of
borrowings under the Guaranteed Bank Facility.
Taking into account the net proceeds of the Offerings (assumed for this
purpose to be $186 million), Iridium will have raised, or have commitments to
fund, total investments of $3.526 billion, leaving approximately an additional
$1.574 billion to be raised to meet its projected financing requirements of $5.0
billion through year-end 1999. The remaining funds needed to meet Iridium's
projected funding requirements are expected to be raised through additional
financings. Iridium is seeking to obtain a senior bank facility in an amount of
up to approximately $1.7 billion. Iridium expects that, in connection with
additional debt financings, guarantees and other credit support are likely to be
required and that compensation -- including equity (which may be in the form of
warrants) -- will likely be required for such guarantees or other credit
support. There are currently no agreements with Motorola or Iridium's other
investors or vendors to provide such guarantees or credit support. In addition
to or in lieu of the senior bank facility Iridium is seeking to obtain,
additional financing may 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 expects that, in
connection with any issuance of debt securities in the public or private market,
equity compensation in the form of warrants to purchase shares of Class A Common
Stock will likely be required. 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.
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<PAGE> 52
Additional equity financing, if pursued, may be raised either privately
from strategic or financial investors, or through additional public offerings.
See "Governance of the Company and Relationship with Iridium -- Share Issuance
Agreement."
On May 30, 1997, South Pacific Iridium Holdings Limited ("SPI"), an
indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation,
purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest. Pursuant
to the terms of its purchase agreement with Iridium, SPI exercised its right to
defer payment of 60% of the total purchase price payable and is required to pay
10% of the total purchase price on or before November 15, 1997 and the remaining
50% on or before May 15, 1998. The total purchase price of such Class 1
Interests will increase to approximately $110 million in the event SPI elects in
full its right to defer payment. All information in this Prospectus with respect
to Class 1 Interests gives effect to the issuance of 7,500,000 Class 1 Interests
to SPI. In connection with its investment in Iridium, SPI was allocated the
South Pacific gateway service territory.
Iridium expects to incur a substantial amount of secured bank debt in
satisfying a portion of its expected funding requirements. The bank lenders are
expected to require a security interest in all or substantially all of Iridium's
assets and a pledge of all of the membership interests in Iridium. In order to
facilitate the pledge of membership interests, Iridium expects to enter into a
transaction following the consummation of the Offerings 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 will pledge all of the membership
interests in the new entity to the bank lenders in connection with any secured
bank facility. The new entity is expected to be a member-managed limited
liability company with Iridium acting as the sole member.
As a result of Iridium's outstanding debt and the expected incurrence of
significant additional indebtedness required to meet its capital requirements,
Iridium will have substantial indebtedness. Iridium's ability to meet all of its
debt service obligations when due will require it to generate significant cash
flow from operations or, if necessary, make additional borrowings to refinance
its outstanding indebtedness. No assurance can be made that Iridium will be able
to generate sufficient cash flow 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; Risk
of Default on Existing Commitments."
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 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
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<PAGE> 53
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."
BUSINESS
The Company will act as a member of Iridium and will have no other
business. The business of Iridium is described below.
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
Iridium expects to commence commercial service in September 1998.
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
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<PAGE> 54
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 (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 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"
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<PAGE> 55
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. 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.
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<PAGE> 56
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.
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. 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
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<PAGE> 57
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 "-- The IRIDIUM
System -- 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.
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
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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 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 profes-
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sional 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."
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.
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Government. Currently, governments are significant users of satellite
services, and Iridium anticipates that the coverage and portability
characteristics of IRIDIUM Satellite Services and paging services will make them
attractive for a variety of governmental applications. The government
communications addressable market is expected to encompass use of MSS services
by governmental departments and agencies and international organizations for
civilian and military applications, including law enforcement, official travel
and disaster relief. In addition, governments are expected to demand MSS
services for operations in areas where inadequate terrestrial communication
capability is common, such as for border patrols, customs officials,
communication with ships at sea and embassy communications.
Rural. The rural communications market segment for MSS systems is comprised
of two main subcategories: services to users based in (i) areas with inadequate
or inconvenient access to any telephone services, typically in developing
countries, and (ii) areas in which potential demand for terrestrial wireless
service exists but such services have yet to be deployed, or, if deployed, are
of poor quality, typically in rural areas of developed countries. The variety of
available subscriber equipment is expected to permit a range of applications
that would enable IRIDIUM Satellite Services to be a precursor to a permanent
wired or terrestrial wireless service in the geographic area. IRIDIUM Satellite
Services could also be used as a long-term communications solution for those
geographic areas around the world for which no terrestrial system can be
economically justified.
DISTRIBUTION AND MARKETING
Iridium's distribution strategy reflects its role as a wholesaler of
IRIDIUM Services and is primarily designed to leverage off established retail
distribution channels by using existing distributors of wireless services as
IRIDIUM service providers and marketing IRIDIUM Services to their customers.
Iridium will implement the distribution of IRIDIUM Services through its gateway
operators, all of which have agreed to become or engage IRIDIUM service
providers within their exclusive gateway territories. IRIDIUM service providers
will generally have primary responsibility for marketing IRIDIUM Services within
their territories in accordance with marketing policies and programs established
by Iridium. They will also be responsible for customer service, billing and
collection. Iridium anticipates that gateway operators will distribute IRIDIUM
Services through their own distribution channels or through, or in conjunction
with, one or more existing wireless service providers (including ICRS roaming
partners). Iridium expects that its service providers also will include affinity
partners (e.g., airlines, hotels and car rental companies).
Iridium 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.
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PRICING
Iridium intends to implement a pricing strategy for its voice services
similar to the prevailing pricing structure for terrestrial wireless calls.
Prices for terrestrial wireless calls generally reflect two components -- a
charge based on the landline "dial-up" rate for a comparable call (primarily the
long distance charges) and a mobility premium for the convenience of wireless
service (including any roaming charges). Pricing for both IRIDIUM Satellite
Services and ICRS is expected to be based on this structure.
For international IRIDIUM Satellite Services calls, which Iridium expects
will constitute the majority of calls over the IRIDIUM satellite system, the
"dial-up" rate component will be designed to approximate the rates for
comparable landline point-to-point international long distance calls. Iridium
has analyzed and will continue to analyze published international direct dial
rates around the world as well as published international calling card rates of
many of the largest international telecommunications carriers in establishing
the "dial-up" rate component. Iridium intends to set the global mobility premium
with reference to the premium charged by other wireless services, including
cross-protocol international terrestrial wireless roaming services and competing
MSS systems.
Iridium will set the wholesale prices for its services to allow for a
suggested retail price that will approximate the "dial-up" plus mobility
premium. Iridium's wholesale price will be designed to compensate Iridium, as
the network provider, and the originating and terminating gateways, as well as
to cover the PSTN tail charges. The home gateway will mark up the wholesale
price and the service provider will establish the final retail price. Iridium
expects that for international wireless calls, Iridium's suggested retail prices
will be competitive with other global MSS systems. In addition, from a
regulatory approval perspective in markets where the monopoly telecommunications
provider and the licensing authority are the same entity, a pricing strategy
that takes into account the "dial-up" alternatives allows Iridium to respond to
concerns that Iridium will capture the local monopoly provider's long-distance
revenues by undercutting terrestrial "dial-up" rates.
For ICRS pricing, the "dial up" rate component is primarily the long
distance charge, if any, which will be passed through to the customer. The
mobility premium will be set to compensate the parties involved, primarily the
serving network for its airtime charges, the visited gateway for customer
authentication and Iridium for protocol translation services. The retail price
will include the markup of the home gateway and service provider. Iridium
believes that its ICRS suggested retail prices will be comparable to other
cross-protocol roaming services.
In addition to airtime charges, IRIDIUM subscribers will pay a monthly
subscription fee in the same manner that terrestrial wireless customers pay
monthly charges. Iridium will permit service providers that are wireless network
operators to offer IRIDIUM Services as additional features to their existing
wireless services, permitting their customers to remain customers of the
wireless network and to roam onto the IRIDIUM System. These customers will pay a
feature charge to Iridium for the roaming privilege that will be significantly
below the IRIDIUM monthly subscription fee, but they will pay an additional
roaming premium for calls made over the IRIDIUM System.
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
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to route voice, data and paging communications virtually anywhere in the world.
The gateways will link the satellite constellation with terrestrial
communications systems and will provide other call-processing services, such as
subscriber validation and billing information collection. The Iridium subscriber
equipment, which is expected to include single-mode and multi-mode, portable,
hand-held phones, aeronautical equipment, including installed phones, and
belt-worn pagers, will allow subscribers to access the IRIDIUM System or be
contacted via the IRIDIUM System virtually anywhere in the world. The
terrestrial wireless interprotocol roaming infrastructure will facilitate
roaming among the IRIDIUM System and multiple terrestrial wireless systems that
use different wireless protocols. Iridium will own the space segment and the
interprotocol roaming infrastructure, gateway owners will own and operate the
gateways, and subscribers will own the subscriber equipment.
Iridium believes that the capabilities of the IRIDIUM System will allow
Iridium to provide service features that Iridium's principal target markets,
traveling professional and corporate/industrial, will find desirable and that
will differentiate Iridium from its competitors. The number and distribution of
satellites in the IRIDIUM constellation should allow Iridium to provide
virtually global coverage, including mid-ocean and remote area access to the
IRIDIUM System. Multi-mode phones are expected to allow ICRS subscribers to
operate first with a local terrestrial cellular service (if one having a roaming
agreement in effect with Iridium is available) and then switch to the IRIDIUM
satellite system if a terrestrial service cannot be accessed. With Iridium's
global paging service, a subscriber will be able to receive a targeted page
virtually anywhere in the world with minimal customer cooperation. Iridium
believes that its expected signal strength will allow it to better serve
hand-held phones and provide a higher degree of in-building penetration for
pagers than competing MSS systems. Iridium believes that the 2,400 bps vocoder
selected by Motorola will provide voice quality that is acceptable to
terrestrial wireless customers. See "Risk Factors -- Consequences of Satellite
Service Limitations on Customer Acceptance" and "-- Consequences of IRIDIUM
Phone and Pager Characteristics on Customer Acceptance."
Space Segment
The satellite constellation of the space segment will consist of a
constellation of 66 operational satellites arranged in six orbital planes in low
earth orbit. To minimize the cost of the constellation and reduce production
time, the design of the satellites emphasizes attributes which facilitate
production in large quantities. The satellites will be placed in six distinct
planes in near-polar orbit at an altitude of approximately 780 kilometers and
will circle the Earth approximately once every 100 minutes. Each satellite will
communicate with subscriber equipment on the ground using main mission antennas,
with gateways using gateway link antennas and with other IRIDIUM satellites in
space using 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
and (iv) provide enhanced
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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. Under
the Space System Contract, Motorola has completed 31 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 16 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 early May 1997, eight satellites had been produced,
seven additional satellites had been assembled and were in 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 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
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(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 Vandenburg 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. 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 reworking of the launch schedule also creates risks because it has
compressed the time otherwise available for testing. There can be no assurance
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."
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.
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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 but one of its 14 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
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
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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, including at
least one TRC, and its version of the alphanumeric pager will have an initial
retail price of approximately $500. The Company 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 Satellite Service Limitations 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
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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."
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
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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 that the IRIDIUM System will
commence commercial operations in September 1998 as planned. See "Risk
Factors -- Potential for Delay and Cost Overruns."
<TABLE>
<S> <C>
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 bank facility established
- Kyocera begins development of Iridium phones
- Construction of gateways begins
</TABLE>
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<TABLE>
<S> <C>
1997: - First IRIDIUM satellites launched
- 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
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 both of the other two FCC licensed MSS applicants -- Loral/Qualcomm
Partnership, L.P., on behalf of Globalstar, and TRW, on behalf of Odyssey.
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, hand-held 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
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that ICO will be the most direct competitor to Iridium for the traveling
professional market. However, ICO has announced that the full constellation will
not be operational before the year 2000, which should provide Iridium with a
first-to-market advantage.
Globalstar, a 48-satellite LEO system, has been proposed by Loral/Qualcomm.
It will offer both fixed and mobile telecommunications services. The Globalstar
system will employ CDMA digital modulation technology and Globalstar has
announced an expected in-service date of 1998, with the full constellation in
place by early 1999. The Globalstar system utilizes "bent pipe" technology and
Globalstar has indicated that it will require between 100 and 210 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.
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 car-mounted 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 hand-held 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, hand-held 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 Asia-Pacific region and eventually
Africa, serving dual-mode, hand-held terminals. Elekon-Stir is a proposed
Russian LEO system consisting of seven satellites offering store and forward
mobile data services and with limited voice capabilities. Inmarsat currently
operates a world-wide GEO system that is capable of providing fixed and mobile
voice and data services to laptop-sized "Mini-M" terminals and to
briefcase-sized mobile terminals and car-mounted units. Other regional systems
that may be established could also provide services that compete with the
IRIDIUM Satellite Services. The regional GEO systems do not provide full global
coverage and, therefore, are expected to generally target persons not currently
served by landline or cellular telephone service. It is possible that one or
more regional mobile satellite services could enter into agreements to provide
intersystem roaming that could be global or nearly global in scope.
Land-based Telecommunications Systems
Iridium does not intend to compete with terrestrial cellular telephone
systems for the vast majority of personal communications services, because,
among other reasons, IRIDIUM satellite voice services will be priced
significantly higher than most terrestrial wireless services, the IRIDIUM System
will lack the operational capacity to provide local service to large numbers of
subscribers in concentrated areas and Iridium's satellite system is not expected
to afford the same voice quality, signal strength, or ability to penetrate
various environments (such as buildings) as terrestrial wireless systems.
Rather, Iridium expects its subscribers to use IRIDIUM Satellite Services in
areas or situations where local cellular systems use a standard incompatible
with that of the users' home markets or where terrestrial service is
unavailable, inconvenient, of poor quality or unreliable. As terrestrial
cellular systems expand their geographical penetration, particularly outside of
major urban and suburban areas and improve the quality of coverage in
already-served areas, potential customers for IRIDIUM Satellite Services and
other satellite-based services will be lost. Moreover, the advent of near global
terrestrial cellular roaming described below will represent a
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significant competitive threat to Iridium's satellite-based service and ICRS,
particularly with respect to travelling 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 travelling 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.
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 Prospectus. 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.
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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. 20006.
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.
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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 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. See "Prospectus
Summary -- Progress to Date." 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, 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) and Italy (Fucino) and permit the gateways to test their links
between the IRIDIUM satellites and terrestrial services. Two of the remaining
four unlicensed gateways -- the gateways in Japan (Nagano) and India
(Bombay) -- are under construction in the expectation that they will be
licensed. Iridium expects that the gateway in Japan will be completed in August
1997 and 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, seven administrations have granted conditional licenses for the
provision of IRIDIUM Satellite Services in their respective countries. The seven
countries are the United States, Venezuela, New Zealand, Taiwan, 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
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approvals for some of the countries of their territories at the anticipated
commencement of commercial operations in September 1998.
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.
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 protect it from interference from
future systems. Once the request is published, administrations that have
previously engaged in coordination with the United States regarding the IRIDIUM
System may file comments on the claim that coordination is complete. Any
comments will need to be resolved before the IRIDIUM System 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
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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
"Regulation of Iridium -- 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, is in the process of adopting 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 countries -- especially EU members -- are expected to follow these
recommendations. These draft recommendations currently give Iridium the
opportunity to obtain the spectrum it needs to operate initially in Europe,
provided it can meet certain milestones. 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
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unlikely to occur. However, there can be no assurance that Iridium will meet all
the milestones or 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 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
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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.
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
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.
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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.
See "-- Licensing Status -- Licensing Outside the United States" for a
discussion 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 Sates 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 Proton launch vehicle. Motorola has also
applied for, and expects the near-term grant of, the 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 are the only Big
LEO systems that have been 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.
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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: Mobile Communications Holdings, Inc. ("MCHI,"
also known as "Ellipsat"); Constellation Communications, Inc. ("Constellation");
and American Mobile Satellite Corporation ("AMSC"). MCHI and Constellation
recently submitted updated financial information to the FCC. 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. If these appeals are successful or
if the FCC approves of the recently submitted financial information, the FCC
could grant licenses to MCHI and Constellation. While such a result would not
have an immediate impact on the amount of spectrum assigned to the IRIDIUM
System, it could prevent Iridium from being assigned more spectrum in the 1.6
GHz MSS band in the future.
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
signalling model that treats the system as if it were a separate "country." Most
traffic moving to or from the IRIDIUM network will be considered as
international traffic. The IRIDIUM gateway serves as the link between the
IRIDIUM System and the PSTNs within the gateway territory. Consistent with this
"country" model, an IRIDIUM gateway needs to route traffic between the IRIDIUM
System and the international 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
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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.
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.
Capitalized terms used in the following summary that are defined in the
contracts have the meanings assigned to them in 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. Certain
planned additional contracts or contract amendments are currently under
negotiation with Motorola and other vendors, relating to system and service
capabilities. 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
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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 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).
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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, 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. As part of the security
interest granted to Motorola in conjunction with Motorola's $750 million
guarantee of the borrowings under the Guaranteed Bank Facility. Iridium has
agreed that it will not request such a transfer so long as the guarantee is
outstanding.
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
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$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.
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
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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 $26 million in this circumstance rather than $46
million. Moreover, the effect of damage to satellites by acts of third parties
is to be disregarded in determining the coverage and capacity factors, so that
the required performance of the Space 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 $178.9 million
under the contract in increments tied to the completion of milestones, including
milestones relating to acceptance tests of the completed gateway design. As a
result of technological developments, changes in the desired product mix and
features of the IRIDIUM Services and the addition of enhanced system
capabilities (including ICRS, "follow-me-paging" and enhanced call intercept)
there are several pending amendments to the Terrestrial Network Development
Contract, which are estimated by Motorola to approximate an aggregate of $110
million. The cost of these amendments is reflected in Iridium's estimates of its
funding requirements.
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
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that Iridium can secure damages from Andersen up to a set limit in the event of
Andersen's breach, the amount of such damages would be insufficient to
compensate Iridium for the loss of revenue should the IBSS fail to function for
a substantial period of time.
OTHER SYSTEM DEVELOPMENT CONTRACTS AND AMENDMENTS
In addition to the contracts described above, Iridium is currently in
negotiations with Motorola and other vendors or prospective vendors relating to
new contracts, or amendments to existing contracts, providing for the
development of new or enhanced system or service capabilities. In addition,
Iridium anticipates that it is likely that requirements will arise in the future
for additional contracts, or additional amendments to existing contracts, for
the development of system or service 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.
Pending Amendments
As a result of technological developments, changes in the product mix of
the IRIDIUM Services, and scheduling adjustments, there are a variety of pending
amendments to the Space System Contract, the Terrestrial Network Development
Contract, the Operations and Maintenance Contract and the IBSS Contract. These
amendments will increase the price and may change the terms of those agreements.
The changes are likely to include delivery dates for some items and features
that are beyond the date Iridium expects to commence commercial operations.
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
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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.
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
THE COMPANY
Set forth below is information concerning each director, director nominee
and executive officer of the Company, including each individual's principal
occupation and employment. The current members of the Company Board have been
elected by Iridium and will hereafter be elected at the annual general meeting
or at any special meeting of shareholders. The exclusive right to elect members
of the Company Board is vested with the holders of Class A Common Stock. The
next annual meeting of shareholders is scheduled for April 1998. Unless
otherwise indicated, each executive officer holds office until a successor is
duly elected and qualified. There are no family relationships among executive
officers or directors of the Company. See "Risk Factors -- Company Change in
Control."
The following table sets forth information concerning the executive
officers and directors of the Company as of May 9, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Edward F. Staiano....................... 60 Chairman of the Board and Chief Executive Officer
Roy Grant............................... 40 Chief Financial Officer
Wayne Morgan............................ 53 Secretary
F. Thomas Tuttle........................ 54 Assistant Secretary
Alberto Finol........................... 62 Deputy Chairman and Director
Ulf Bohla............................... 53 Director
Robert W. Kinzie........................ 63 Director
Yoshiharu Yasuda........................ 57 Director
Richard L. Lesher(1).................... 63 Director nominee
William A. Schreyer(1).................. 68 Director nominee
</TABLE>
- ---------------
(1) Messrs. Richard L. Lesher and William A. Schreyer have agreed to serve as
Directors of the Company upon consummation of the Offerings.
EDWARD F. STAIANO -- Chairman of the Board and Chief Executive Officer.
Vice Chairman and Chief Executive Officer of Iridium since January 2, 1997 and
Director of Iridium since October 1994. 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. Dr. Staiano has served as the Chief Executive Officer and
Director of the Company since March 1997 and as Chairman of the Board since May
1997.
ROY GRANT -- Chief Financial Officer. Vice President and Treasurer of
Iridium since November 1996 and acting Chief Financial Officer since April 30,
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. Mr. Grant has served
as Chief Financial Officer of the Company since April 1997.
WAYNE MORGAN -- Secretary. Mr. Morgan has been employed as a corporate
manager by Codan Services Ltd. in Bermuda since August 1996. Prior thereto, Mr.
Morgan served Johnson & Higgins (Bermuda) Limited from 1980 to 1996 in a number
of positions including Vice President and Manager of Support Services, Senior
Vice President, Client Account Management and Senior Vice President, Principal
Branch Manager. Prior to joining Johnson & Higgins, Mr. Morgan was the Deputy
Accountant General for the Government of Bermuda from 1975 to 1980. Mr. Morgan
has served as the Secretary of the Company since December 1996.
F. THOMAS TUTTLE -- Assistant Secretary. Vice President, General Counsel
and Secretary of Iridium since April 1996. Mr. Tuttle has been employed by
Iridium as Assistant Secretary since January 1994 and as
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Deputy General Counsel since November 1993. 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 Communications
Satellite Corporation ("COMSAT Corporation"). Mr. Tuttle has served as the
Assistant Secretary of the Company since December 1996.
ALBERTO FINOL -- Deputy Chairman and Director. Director of Iridium since
July 1993; member of the Iridium Board Compensation Committee, the Iridium Board
Banking and Financing Committee and the Iridium Board 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. Mr. Finol has served as Deputy Chairman and a
Director of the Company since December 1996.
ULF BOHLA -- Director. Director of Iridium since October 1994; member of
the Iridium Board Banking and Financing Committee and the Iridium Board Related
Party Contracts Committee. Mr. Bohla has been the Chief Executive Officer of
o.tel.o communications GmbH since July 1, 1994 and is currently Chairman of the
Board 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. Mr. Bohla has served as a Director of the
Company since December 1996.
ROBERT W. KINZIE -- Director. Chairman of the Iridium Board since October
1991 and Chief Executive Officer of Iridium from October 1991 to January 1,
1997. Prior to joining Iridium, Mr. Kinzie was the Director of Strategic
Planning for Intelsat from 1987 to 1991. Prior to joining Intelsat, Mr. Kinzie
worked from 1966 to 1987 in a number of positions with COMSAT Corporation
including President, Communications Services Division and President of COMSAT
General Corporation. Prior to joining COMSAT Corporation in 1966, Mr. Kinzie was
an economist with the FCC from 1962 to 1965. Mr. Kinzie has served as a Director
of the Company since December 1996.
YOSHIHARU YASUDA -- Director. Director of Iridium since January 1996;
member of the Iridium Board Banking and Financing Committee, the Iridium Board
Compensation Committee and the Iridium Board Related Party Contracts Committee.
Mr. Yasuda has been Vice President of Nippon Iridium (Bermuda) Ltd. 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 employed by
the Sanwa Research Institute. Mr. Yasuda has served as a Director of the Company
since December 1996.
RICHARD L. LESHER -- Director Nominee. Mr. Lesher has served as the
President of the Chamber of Commerce of the United States, the world's largest
business organization, since 1975. Mr. Lesher will be appointed Independent
Company Director to Iridium upon consummation of the Offerings. Mr. Lesher has
accepted his appointment to serve as a Director of the Company, effective upon
consummation of the Offerings.
WILLIAM A. SCHREYER -- Director Nominee. Mr. Schreyer is Chairman Emeritus
of Merrill Lynch & Co., Inc. and served as Chairman of the Board from April 1985
through June 1993 and as Chief Executive Officer from July 1984 through April
1992. Mr. Schreyer is currently a Director of Callaway Golf Company, Deere &
Company, True North Communications Inc., Schering-Plough Corporation and Willis
Corroon Group. Mr. Schreyer will be appointed Independent Company Director to
Iridium upon consummation of the Offerings. Mr. Schreyer has accepted his
appointment to serve as a Director of the Company, effective upon consummation
of the Offerings.
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<PAGE> 89
Executive Compensation
Currently, all executive officers of the Company (other than Mr. Morgan)
are executive officers of Iridium, are compensated by Iridium and receive no
compensation from the Company.
Director Compensation
Directors of the Company currently receive no fees for their services as
such. In connection with the appointment of Messrs. Lesher and Schreyer, each
will receive $20,000 per year plus $2,500 for each regular quarterly meeting
attended of the Company Board, or any committee meeting of the Iridium Board
held concurrently therewith, $500 for any extraordinary or telephonic meeting
attended, and reimbursement for ordinary expenses incurred in connection with
such attendance. In addition, upon appointment, Iridium will grant each of
Messrs. Lesher and Schreyer options to purchase 1,000 Class 1 Interests of
Iridium at the initial public offering price.
Indemnification; Limitation of Liability
Bermuda law permits a company to indemnify its directors and officers,
except for any act of fraud or dishonesty. The Company has provided in its
Bye-Laws that the directors and officers of the Company will be indemnified and
secured harmless to the full extent permitted by law out of the assets of the
Company from and against all actions, costs, charges, losses, damages and
expenses incurred by reason of any act done, concurred in or omitted in or about
the execution of their duties or supposed duties, other than in the case of any
fraud or dishonesty. In addition, the Company has provided in its Bye-Laws that
each shareholder of the Company agrees to waive any claim or right of action,
individually or in the right of the Company, against any director or officer of
the Company on account of any action taken by such director or officer, or the
failure of such director or officer to take any action, in the performance of
his duties with or for the Company, other than with respect to any matter
involving any fraud or dishonesty on behalf of such director or officer. The
Bye-Laws of the Company also provide for the advancement of expenses incurred by
any director or officer in defending any action, suit or proceeding prior to the
final disposition of such proceeding; provided such director or officer
undertakes to repay such amount if it shall ultimately be determined that he or
she is not entitled to indemnity by the Company.
Bermuda law also permits the Company to purchase insurance for the benefit
of its directors and officers against any liability incurred by them for the
failure to exercise the requisite care, diligence and skill in the exercise of
their powers and the discharge of their duties, or indemnifying them in respect
of any loss arising or liability incurred by them by reason of negligence,
default, breach of duty or breach of trust. The Company's directors and officers
currently are covered by an insurance policy maintained by Iridium.
At present, there is no pending material litigation or proceeding involving
a director or officer of the Company where indemnification will be required or
permitted. In addition, the Company is not aware of any threatened material
litigation or proceeding that may result in a claim for such indemnification.
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<PAGE> 90
IRIDIUM
The following table sets forth information concerning the executive
officers and directors of Iridium as of May 9, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Robert W. Kinzie(1)............ 63 Chairman of the Board
Edward F. Staiano.............. 60 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............... 45 Vice President -- Business Operations
Roy Grant...................... 40 Vice President -- Treasurer and acting Chief Financial
Officer
Dale F. Hogg................... 54 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............... 54 Vice President, General Counsel & Secretary
Robert N. Beury, Jr............ 44 Assistant Secretary and Deputy General Counsel
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 54 Director (designated by Iridium SudAmerica)
Sobrinho(2)(4)...............
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)
Ludwig Hoffman(4).............. 52 Director (designated by Vebacom Holdings, Inc.)
Kazuo Inamori(4)............... 65 Director (designated by Nippon Iridium)
S. H. Khan(4).................. 58 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 Korea Mobile
Telecommunications)
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)
Sribhumi Sukhanetr(1)(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)
Richard L. Lesher(5)........... 63 Independent Company Director nominee
William A. Schreyer(5)......... 69 Independent Company Director nominee
</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
(5) Messrs. Richard L. Lesher and William A. Schreyer have agreed to serve as
the Independent Company Directors to the Iridium Board upon consummation of
the Offerings. Mr. Lesher is expected to be appointed Vice Chairman of
Iridium and appointed to the Audit Committee, the Compensation Committee and
the Related Party Contracts Committee. Mr. Schreyer is expected to be
appointed to the Banking and Financing Committee and the Related Party
Contracts Committee.
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<PAGE> 91
Set forth below is information concerning each director, director nominee
and executive officer of Iridium, 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
EDWARD F. STAIANO -- Vice Chairman and Chief Executive Officer of Iridium
since January 2, 1997 and Director since October 1994. 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 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. 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 Communi-
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<PAGE> 92
cations 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.
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. Prior to joining
Iridium, Mr. Kinzie was the Director of Strategic Planning for Intelsat from
1987 to 1991. Prior to joining Intelsat, Mr. Kinzie worked from 1966 to 1987 in
a number of positions with COMSAT Corporation including President,
Communications Services Division and President of COMSAT General Corporation.
Prior to joining COMSAT Corporation in 1966, Mr. Kinzie was an economist with
the FCC from 1962 to 1965.
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 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
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<PAGE> 93
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
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.
LUDWIG HOFFMAN -- Director of Iridium since October 1996; member of the
Related Party Contracts Committee. Dr. Hoffmann has been the Chief Executive
Officer of VEBA Telecom GmbH since July 1996. From January 1996 to July 1996,
Dr. Hoffmann was head of the Telecommunication Division of VEBA AG. From 1992
until joining VEBA, Dr. Hoffmann was the founder and head of the network systems
division of Siemens AG. From 1990 to 1992, Dr. Hoffmann was the head of
marketing and distribution for debis Systemhaus GmbH, part of Daimler Benz AG.
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.
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
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<PAGE> 94
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 Korea Mobile
Telecommunications 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 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
Corporate Vice President of Motorola and has been with Motorola for 24 years. He
is currently the Corporate 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 Contracts
Committee. Mr. Schell has served as Senior Vice
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<PAGE> 95
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.
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. 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.
RICHARD L. LESHER -- Independent Company Director Nominee of Iridium. Mr.
Lesher will be appointed Independent Company Director, effective upon
consummation of the Offerings, and is expected to be appointed Vice Chairman of
Iridium and appointed to the Audit Committee, the Compensation Committee and the
Related Party Contracts Committee. 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.
WILLIAM A. SCHREYER -- Independent Company Director Nominee of Iridium. Mr.
Schreyer will be appointed Independent Company Director, effective upon
consummation of the Offerings, and is expected to be appointed to the Banking
and Financing Committee and the Related Party Contracts Committee. 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.
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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
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION OPTIONS/SARS PAYOUT COMPENSATION
- ------------------------------ ---- -------- -------- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Kinzie
Chairman & Former Chief
Executive Officer........... 1996 $372,194 $117,669 $1,596(b) 90,000 -- $ 7,819(c)
Jerrold D. Adams
Former President & Chief
Operating Officer........... 1996 301,772 98,010 -- 75,000 -- 4,500(d)
Paul V. Daverio
Former Chief Financial
Officer..................... 1996 234,236 46,580 -- 45,000 -- 4,500(d)
Leo Mondale
Senior Vice President --
Marketing & Strategic
Planning.................... 1996 220,561 100,000 -- 45,000 -- 4,500(d)
Mark Gercenstein
Vice President -- Business
Operations.................. 1996 201,692 62,909 -- 45,000 -- 4,500(d)
</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 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.
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<PAGE> 97
Mr. Daverio resigned from the Company 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
$13.33 per Interest. The options vest, pro rata, over a period of five years.
Vested options may be exercised at any time after a public offering. Dr.
Staiano's options will continue to vest even if his employment is terminated by
Iridium, other than for cause, so long as he is not retained or employed by a
competitor. Dr. Staiano does not receive an annual bonus or participate in
Iridium's retirement plans.
Option Grants
The following table sets forth the options granted for the fiscal year
ended December 31, 1996 for each named executive officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE
TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS/SARS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OF OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED YEAR (S/SH) DATE 5%($) 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
AT FISCAL YEAR-END AT FISCAL YEAR END
SHARE 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>
95
<PAGE> 98
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 the Company, respectively.
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
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<PAGE> 99
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, 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 April 30, 1997, options covering 1,863,150 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 the Company 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 Iridium or another entity which is a special purpose member
of Iridium. The Offerings will constitute a Public Offering under the Option
Plan.
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<PAGE> 100
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 will be amended, effective as of the date of consummation
of the Offerings, to provide 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. The Company 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 the Company 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
the Company. See "Governance of the Company 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.
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<PAGE> 101
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 Prospectus (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>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(1)
- ------------------------------------------------------ -------------------------- -------------------
<S> <C> <C>
Motorola, Inc. ....................................... 40,992,578 28.63%
1303 East Algonquin Rd.
Schaumburg, IL 60196
Nippon Iridium (Bermuda) Limited(3)................... 15,750,000 11.31
c/o NIPPON IRIDIUM CORPORATION
Ichibancho FS Building 8
Ichibancho Chiyoda-ku
Tokyo 102 Japan
Vebacom Holdings, Inc.(4)............................. 12,427,875 8.9
c/o o.tel.o communications GmbH
Am Bonneshof 35
D-40474 Dusseldorf Germany
All Directors and Executive Officers as a Group(5).... 178,414 *
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power
with respect to the Class 1 Interests. Class 1 Interests subject to options
or warrants currently exercisable or exercisable within 60 days of the date
of this Prospectus are deemed outstanding for computing the percentage
ownership of the person holding such options or warrants, but are not deemed
outstanding for computing the percentage of any other person. The percent of
class includes Class 1 Interests issued to the Company in connection with
the Offerings.
(2) The Class 1 Interests beneficially owned by Motorola include 26,533,425
Class 1 Interests held directly by Motorola and 3,520,705 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, 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 Prospectus, options covering an
aggregate of 1,376,400 Class 1 Interests had been granted to Iridium's
executive officers and directors. Such options will become exercisable
following consummation of the Offerings as and to the extent they become
vested. See "Management -- IRIDIUM Option Plan."
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<PAGE> 102
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF IRIDIUM
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. In addition, Motorola has guaranteed Iridium's borrowings
under the Guaranteed Bank Facility. In connection with providing its guarantee
of borrowings under the Guaranteed Bank Facility, Motorola was granted a
security interest in substantially all of Iridium's assets, Iridium agreed not
to take specified actions without Motorola's approval, and Motorola also was
granted the right to appoint an additional Director on the Iridium Board and is
being compensated in the form of warrants to purchase Class 1 Interests. See
"Risk Factors -- Dilution Risk" and "Dilution." If the Guaranteed Bank Facility
is increased by $350 million, Motorola will receive additional warrants to
purchase Class 1 Interests and other concessions including increased Iridium
Board representation. If the Guaranteed Bank Facility is extended beyond its
August 1998 maturity date, Motorola will receive additional warrants in respect
of guaranteed borrowings. Motorola holds a warrant to acquire 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 warrant, calculated on a fully
diluted basis, at a price of $13.33 per Interest, subject to antidilution
adjustments.
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
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<PAGE> 103
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, and are
expected to apply in the near future, to the FCC for licenses to construct,
launch and operate satellite-based systems designed to provide fixed-broadband,
fixed-data and fixed-voice transmissions.
Iridium Services Deutschland, a wholly owned subsidiary of o.tel.o
communications GmbH, the parent of Vebacom Holdings, Inc., a holder of
approximately 10% 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 13% of the Class 1 Interests, was allocated the Japan gateway
service territory. Each of o.tel.o communications GmbH 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
and Nippon Iridium Corporation will serve as service providers to their
respective gateway territory and, as such, will be entitled to payments
associated with sales of IRIDIUM Services.
Kyocera, an affiliate of Nippon Iridium Corporation, a holder of
approximately 13% 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 the Company 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."
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.
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:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OWNERSHIP(2)
CLASS 1 --------------------
INTERESTS AS PRINCIPAL GATEWAY
INVESTOR OWNED(1) ACTUAL ADJUSTED(3) SERVICE TERRITORY
- ------------------------------ ---------- ------ ----------- -------------------------------
<S> <C> <C> <C> <C>
The Company................. 10,000,000 -- 7.2 Not Applicable
Iridium Africa
Corporation.............. 3,000,000 2.3 2.1 Africa (excluding Morocco and
Egypt) and Turkey
Iridium Andes -- Caribe..... 4,350,000 3.4 3.1 South America and Caribbean(5)
Iridium Brasil Ltda. ....... 2,824,725 2.2 2.0 South America and Caribbean(5)
Iridium Canada, Inc......... 5,250,000(6) 4.1 3.8 North America(4)
Iridium China (Hong Kong)
Ltd. .................... 5,250,000 4.1 3.8 China, Mongolia, Hong Kong and
Macau
Iridium India Telecom
Limited.................. 5,250,000 4.1 3.8 Indian Subcontinent
</TABLE>
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<PAGE> 104
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OWNERSHIP(2)
CLASS 1 --------------------
INTERESTS AS PRINCIPAL GATEWAY
INVESTOR OWNED(1) ACTUAL ADJUSTED(3) SERVICE TERRITORY
- ------------------------------ ---------- ------ ----------- -------------------------------
<S> <C> <C> <C> <C>
Iridium Italia S.p.A. ...... 5,550,000 4.3 4.0 Certain countries in Europe
including Belgium, Denmark,
France, Greece, Italy,
Luxembourg, the Netherlands
and Switzerland(5)
Iridium Middle East
Corporation.............. 6,000,000 4.6 4.3 Middle East, Morocco, Egypt and
Central Asia
Khrunichev State Research
and Production Center.... 6,133,125 4.7 4.4 Russia and eight other
republics of the Commonwealth
of Independent States
Korea Mobile Telecom
Communications
Corporation.............. 5,250,000(6) 4.0 3.8 North Korea and South Korea
Motorola, Inc............... 26,533,425(6) 20.5 19.0 North America(4), Mexico(7) and
Central America, South
America and Caribbean(5)
Nippon Iridium (Bermuda)
Limited.................. 15,750,000 12.2 11.3 Japan
Pacific Electric Wire &
Cable Co., Ltd. ......... 5,250,000 4.1 3.8 Indonesia, Brunei, Papua New
Guinea, the Philippines and
Taiwan
South Pacific Iridium
Holdings Limited......... 7,500,000 5.8 5.4 Certain countries in the South
Pacific region including
Australia and New Zealand
Sprint Iridium, Inc. ....... 5,250,000 4.1 3.8 North America(4)
Thai Satellite
Telecommunications Co.,
Ltd. .................... 5,250,000 4.0 3.8 Southeast Asia
Vebacom Holdings, Inc. ..... 12,427,875 9.6 8.9 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 1.2 1.1 Not Applicable
Raytheon Company............ 900,000 0.7 0.6 Not Applicable
</TABLE>
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(1) Represents each investor's direct holdings of outstanding Class 1 Interests,
excluding Class 1 Interests issuable upon exercise of outstanding warrants
and conversion of outstanding convertible securities. The amount for the
Company assumes that the Underwriters' over-allotment options are not
exercised.
(2) The percentages do not give effect to any Class 1 Interests that the Company
may have acquired or will acquire as a result of the application of the
proceeds from the sale of shares of the Company's non-voting Class B Common
Stock, par value $.01 per share (the "Class B Common Stock") pursuant to the
Global Ownership Program. See "The Company -- Global Ownership Program."
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<PAGE> 105
(3) As adjusted to reflect the issuance and sale of 10,000,000 shares of Class A
Common Stock offered hereby at an assumed initial public offering price of
$20 per share (the midpoint of the estimated public offering price range set
forth on the cover of this Prospectus) and the application of the estimated
net proceeds therefrom to the purchase by the Company of approximately
10,000,000 Class 1 Interests. See "Use of Proceeds" and "Capitalization."
(4) The North American gateway service territory, principally consisting of the
United States and Canada, is shared by Iridium Canada, Motorola and Sprint.
(5) 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.
(6) As of April 30, 1997, Korea Mobile Telecommunications Corporation 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.
(7) It is anticipated that the Mexican gateway service territory initially will
be served by the North American gateway equipment.
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.
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."
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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.
KOREA MOBILE TELECOMMUNICATIONS CORPORATION 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.
MOTOROLA, INC. is one of the world's leading providers of wireless
communications and electronic equipment, systems, components and services for
worldwide markets. Motorola products include two-way radios, pagers, personal
communications systems, cellular telephones and systems, discrete semiconductors
and integrated circuits, defense and aerospace electronics, automotive and
industrial electronics, 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.
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<PAGE> 107
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.
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 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.
VEBACOM HOLDINGS, INC., a wholly owned subsidiary of o.tel.o communications
GmbH, 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, 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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GOVERNANCE OF THE COMPANY AND RELATIONSHIP WITH IRIDIUM
The power and authority to conduct and manage the business of the Company
is vested in the Company Board. Upon consummation of the Offerings, the Company
Board will be comprised of seven members, a majority of whom also will be
executive officers of Iridium or one of Iridium's other members. At least two
members of the Company 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 "Description of Capital Stock" and "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. The Company has waived
the limitation on liability provided by the Delaware Limited Liability Company
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 the Company'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 Company was formed to act as a special-purpose member of Iridium. The
LLC Agreement provides that the Company will have certain special membership
rights during the period (the "Company Special Rights Period") commencing on the
first date that the Company's Class 1 Interests represent five percent or more
of the total outstanding Class 1 Interests (which will occur on the consummation
of the Offerings) and ending on the date of delivery by Iridium of notice of the
termination of the Company's special rights following (i) the sale or other
disposition by the Company of Class 1 Interests, if, as a result of such sale or
other disposition, the Company'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 the Company 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 the Company's outstanding common stock (or
equivalent securities), (b) the Company 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 the
Company, in either event pursuant to a transaction in which the Company's
outstanding common stock is changed into or exchanged for cash, securities or
other property, other than any transaction (i) between the Company and either
Iridium, an affiliate of Iridium or a wholly-owned subsidiary of Iridium, or
(ii) after which the shareholders who beneficially owned the Company's common
stock immediately before such transaction beneficially own at least 50% of the
outstanding voting stock of the surviving entity and no person beneficially owns
more than 30% of the outstanding voting stock of the surviving entity, or (c)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Company Board (together with any new directors whose
election by the Company Board or whose nomination for election was approved by a
vote of 66 2/3% of the members of the Company 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 Company Board then in office.
During the Company Special Rights Period (i) the Company shall be entitled
to designate two Independent Company Directors as Directors of Iridium, (ii) one
Director of Iridium designated by the Company shall be elected Vice Chairman of
the Iridium Board and (iii) one Director of Iridium designated by the Company
shall be a member of each committee of the Iridium Board. Pursuant to the LLC
Agreement, the Company will not be entitled to appoint more than two Directors
to the Iridium Board even if its
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<PAGE> 109
ownership interest increases and it would otherwise have been entitled to
additional appointment rights. In addition to any other voting rights which the
Company may have under the LLC Agreement, under the Delaware Limited Liability
Company Act or otherwise, during the Company 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 the Company (the "Company'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 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.
EXCHANGE RIGHTS OF IRIDIUM MEMBERS
Pursuant to an Interest Exchange Agreement (the "Interest Exchange
Agreement"), the Company 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 the Company 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 the Company have the
right to defer exchanges under the Interest Exchange Agreement if doing so is in
the best interests of Iridium or the Company in light of possible or pending
financing transactions.
Under the Interest Exchange Agreement, the Company has agreed that at any
time after the Exchange Date, the Company 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 Stock in the manner
specified by those holders. The Company 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, the Company 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.
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1997 SUBSCRIPTION AGREEMENT
The Company and Iridium have entered into a 1997 Subscription Agreement
pursuant to which the Company is making the Offerings. The 1997 Subscription
Agreement provides that the Company will use the net proceeds from the Offerings
to acquire 10,000,000 (11,500,000 if the Underwriters' over-allotment options
are exercised in full) Class 1 Interests from Iridium at an aggregate purchase
price equal to the net proceeds of the Offerings. Iridium has agreed to
reimburse the Company for all costs and expenses it incurs in the Offerings.
Iridium has also agreed to indemnify the Company and each of its officers,
directors and employees against any losses, claims, damages or liabilities to
which the Company or such officer, director or employee may become subject
except to the extent that any such loss, damage or liability arises out of or is
based upon an intentional act or omission of an indemnified party which was
contrary to any written instruction or request of Iridium or which amounted to
willful misconduct on the part of the indemnified party.
SHARE ISSUANCE AGREEMENT
The Company and Iridium have entered into a Share Issuance Agreement
governing primary offerings of securities by the Company in the future. The
Share Issuance Agreement provides that all net proceeds from the sale of
securities by the Company will be invested by the Company in membership
interests in Iridium. Following the Offerings, the Company will not issue any
securities except pursuant to the Share Issuance Agreement, the Interest
Exchange Agreement and the Global Ownership Program described below. The Company
has agreed that if requested by Iridium it will use its best efforts to sell
securities of the Company in compliance with all applicable laws and will cease
to do so, if requested by Iridium.
If the Company sells Class A Common Stock pursuant to the Share Issuance
Agreement, Iridium will issue to the Company, in exchange for the net proceeds
of such offering, one Class 1 Interest for each share of Class A Common Stock
sold by the Company (subject to anti-dilution adjustments). If Iridium directs
the Company to issue securities other than Class A Common Stock, Iridium will
issue to the Company 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 the Company. Iridium has agreed to
pay all expenses incurred by the Company in connection with any issuance of
securities under the Share Issuance Agreement and to indemnify the Company and
its officers, directors and employees against certain losses, claims, damages or
liabilities. The Company also has agreed to issue Class A Common Stock pursuant
to the Share Issuance Agreement in connection with the Option Plan. Iridium will
issue to the Company one Class 1 Interest for each share of Class A Common Stock
issued by the Company in connection with the IRIDIUM Option Plan (subject to
anti-dilution adjustments).
GLOBAL OWNERSHIP PROGRAM
The Company and Iridium will commence a Global Ownership Program which is
designed to offer an equity investment opportunity in the Company 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, the
Company will sell shares of its Class B Common Stock to Telecom Administrations
designated from time to time by Iridium. The Company 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 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
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<PAGE> 111
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). The Company 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. The Company 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, the Company 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 the Company 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. The Company may require Iridium to repurchase Class 1 Interests in an
amount corresponding to any Class B Common Stock repurchased by the Company.
Iridium has agreed to pay or reimburse the Company for the payment of all
expenses incurred by the Company in connection with the Global Ownership Program
and to indemnify the Company and its officers, directors and employees against
certain losses, claims, damages or liabilities.
MANAGEMENT SERVICES AGREEMENT
The Company 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 the Company and the Company has agreed to allow Iridium to do so.
Iridium will implement or cause to be implemented all policy decisions relating
to the operations of the Company approved by the Company Board and to conduct or
cause to be conducted the ordinary and usual business and affairs of the
Company. The Company 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 the Company: 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 the Company,
including, but not limited to the Company's Special Rights Consent. Iridium also
will advance funds to the Company, under certain conditions, to enable the
Company to pay any income tax liability that cannot be satisfied by
distributions to the Company on its Class 1 Interests. See "Governance of the
Company and Relationship with Iridium" and "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 the Company, except that Iridium has the right to terminate the
agreement after the occurrence of a Company Change of Control. See
"-- Participation in the Governance of Iridium."
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DESCRIPTION OF CAPITAL STOCK
The following discussion is based upon the advice of Conyers, Dill &
Pearman, Bermuda counsel for the Company.
The Company was incorporated as an exempted company under the Companies Act
1981 of Bermuda, as amended from time to time (the "Bermuda Act"), and the
rights of its shareholders, including those persons who will become shareholders
of the Company in connection with the Offerings, are governed by Bermuda law and
the Company's Memorandum of Association and Bye-Laws. The following is a summary
of certain provisions of Bermuda law and the Company's organizational documents.
This summary is not a comprehensive description of such laws and documents and
is qualified in its entirety by appropriate reference to Bermuda law and to the
organizational documents of the Company. Reference is made to the Company's
Memorandum of Association and Bye-Laws, copies of which have been filed as
exhibits 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 the Memorandum of Association and Bye-Laws.
The authorized capital of the Company consists of 50,000,000 shares of
Class A Common Stock and 2,500,000 shares of Class B Common Stock. Prior to the
consummation of the Offerings there will be 1,200,000 shares of Class A Common
Stock outstanding, all of which are held by Iridium, and no shares of Class B
Common Stock outstanding. In connection with the Offerings, the Company will
repurchase and cancel the shares of Class A Common Stock held by Iridium at par
value ($.01 per share). Upon consummation of the Offerings the only shares of
Class A Common Stock outstanding will be the shares of Class A Common Stock
issued in the Offerings. See "Shares Eligible for Future Sale."
COMMON STOCK
Voting Rights
Under Bermuda law, questions brought before a general meeting of
shareholders are decided by a majority vote of shareholders present at the
meeting and entitled to vote (or by such majority as the Bermuda Act or the
Bye-Laws of the Company prescribe), each shareholder owning shares entitled to
vote having one vote, irrespective of the number of shares held, unless a poll
is requested. The Company's Bye-Laws provide that, subject to the provisions of
the Bermuda Act, any questions proposed for the consideration of the
shareholders will be decided by a simple majority of the votes cast, with each
shareholder that is entitled to vote and present, in person or by proxy,
entitled to one vote. If a poll is requested, each shareholder that is entitled
to vote and present in person or by proxy has one vote for each share of stock
entitled to vote on such question. A poll may only be requested under the
Company's Bye-Laws by (i) the chairman of the meeting, (ii) at least three
shareholders present in person and entitled to vote or represented by proxy,
(iii) any shareholder or shareholders, present in person or by proxy, holding
between them not less that 10% of the total voting rights of all shareholders
having the right to vote at such meeting or (iv) a shareholder or shareholders
present in person or by proxy holding voting shares in the Company on which an
aggregate sum has been paid-up equal to not less than 10% of the total sum
paid-up on all such voting shares. The holders of Class A Common Stock are
entitled to one vote per share. The holders of Class B Common Stock have no
voting rights, except as required by Bermuda law in connection with matters
involving a variation in terms of the Class B Common Stock.
Dividend Rights
Under Bermuda law, a company may pay such dividends as are declared from
time to time by its board of directors unless there are reasonable grounds for
believing that the company is or would, after the payment, be unable to pay its
liabilities as they become due or that the realizable value of its assets would
thereby be less than the aggregate of its liabilities and issued share capital
and share premium accounts. See "Dividend Policy." Each share of Class A Common
Stock and Class B Common Stock is entitled to dividends if, as and when
dividends are declared by the Company Board. Any dividend declared and payable
in cash, capital stock or other property must be paid equally on a
share-for-share basis on the Class A Common Stock and the Class B Common Stock,
except as described below. Dividends and distributions payable in shares of
Class A
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Common Stock may only be paid on Class A Common Stock, and dividends and
distributions payable in shares of Class B Common Stock may only be paid on
Class B Common Stock. If a dividend or distribution payable in shares of Class A
Common Stock is made on the Class A Common Stock, a simultaneous and equivalent
dividend or distribution in shares of Class B Common Stock must be made on the
Class B Common Stock. If a dividend or distribution payable in shares of Class B
Common Stock is made on Class B Common Stock, a simultaneous and equivalent
dividend or distribution in shares of Class A Common Stock must be made on the
Class A Common Stock.
Conversion Rights
The Class A Common Stock is not convertible. Each share of Class B Common
Stock is exchangeable into one share of Class A Common Stock on the terms set by
the Company Board. The shares of Class B Common Stock to be issued in connection
with the Company's Global Ownership Program are the only shares of Class B
Common Stock authorized. The exchange rights set by the Company Board for such
shares of Class B Common Stock are described under "Governance of the Company
and Relationship with Iridium -- Global Ownership Program."
Preemptive Rights
Neither the holders of Class A Common Stock nor the holders of Class B
Common Stock have preemptive rights to purchase any shares of the Company's
capital stock.
Transfer Restrictions
Shares of Class A Common Stock are not subject to restrictions on transfer
under the Company's Memorandum of Association and Bye-Laws. Shares of Class B
Common Stock are subject to any transfer restrictions set by the Company Board.
The shares of Class B Common Stock issued in connection with the Company's
Global Ownership Program are the only shares of Class B Common Stock authorized.
The transfer restrictions set by the Company Board on such shares of Class B
Common Stock are described under "Governance of the Company and Relationship
with Iridium -- Global Ownership Program."
Rights in Liquidation
Under Bermuda law, in the event of liquidation, dissolution or winding-up
of a company, after satisfaction in full of all claims of creditors and subject
to the preferential rights accorded to any series of preferred stock, the
proceeds of such liquidation, dissolution or winding-up are distributed pro rata
among the holders of common stock in accordance with the Company's Bye-Laws. The
holders of the Class A Common Stock and the holders of the Class B Common Stock
are entitled to participate equally on a share-for-share basis in all
distributions to holders of common stock in any liquidation, dissolution or
winding-up of the Company.
Meetings of Shareholders
Under Bermuda law, a company is required to convene at least one general
shareholders' meeting per calendar year. Bermuda law provides that a special
general meeting may be called by the board of directors of a company and must be
called upon the request of shareholders holding not less than 10% of the paid-up
capital of the company carrying the right to vote. Bermuda law also requires
that shareholders be given at least five days' advance notice of a general
meeting but the accidental omission of notice to any person does not invalidate
the proceedings at a meeting. The Bye-Laws of the Company provide that the
president or the chairman or any two directors or any director and the secretary
may convene a special general meeting of the Company whenever in their judgment
such a meeting is necessary. Under the Bye-Laws of the Company, at least ten
days' notice of the annual general meeting and at least five days' notice of any
special general meeting must be given to each shareholder entitled to vote
thereat, unless it is agreed that the meeting has been properly called by (i) in
the case of an annual general meeting, all of the shareholders entitled to
attend and vote at such meeting or (ii) in the case of a special general
meeting, shareholders holding at least 95% of the shares given the right to
attend and vote at such meeting.
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Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the Bye-laws of a company. The
Company's Bye-Laws provide that the presence of at least two persons present in
person and representing in person or by proxy in excess of 50% of the total
issued voting shares in the Company throughout the meeting shall constitute a
quorum.
Access to Books and Records and Dissemination of Information
Members of the general public have the right to inspect the public
documents of a company available at the office of the Registrar of Companies in
Bermuda. These documents include the Company's Memorandum of Association
(including its objects and powers) and any alteration to the Company's
Memorandum of Association. The shareholders have the additional right to inspect
the Bye-Laws of the Company, minutes of general meetings and the Company's
audited financial statements, which must be presented at the annual general
meeting. The register of shareholders of a company is also open to inspection by
shareholders without charge and to members of the general public on the payment
of a fee. A company is required to maintain its share register in Bermuda but
may, subject to the provisions of the Bermuda Act, establish a branch register
outside Bermuda. A company is required to keep at its registered office a
register of its directors and officers which is open for inspection for not less
than two hours in each day by members of the public without charge. Bermuda law
does not, however, provide a general right for shareholders to inspect or obtain
copies of any other corporate records.
Election or Removal of Directors
Under Bermuda law and the Company's Bye-Laws, directors are elected at the
annual general meeting or at any special general meeting called for the purpose
and shall hold office for such term as the shareholders may determine, or in the
absence of such determination, until the next annual general meeting or until
their successors are elected or appointed, unless they are earlier removed or
resign.
Under Bermuda law and the Bye-Laws of the Company, a director may be
removed at a special general meeting of shareholders specifically called for
that purpose, provided that the director was served with at least 14 days'
notice. The director has a right to be heard at the meeting. Any vacancy created
by the removal of a director at a special general meeting may be filled at such
meeting by the election of another director in his or her place or, in the
absence of any such election, by the Company Board.
Amendment of Memorandum of Association and Bye-Laws
Bermuda law provides that the Memorandum of Association of a company may be
amended by a resolution passed at a general meeting of shareholders of which due
notice has been given. An amendment to the Memorandum of Association other than
an amendment which alters or reduces a company's share capital as provided in
the Bermuda Act, also requires the approval of the Bermuda Minister of Finance,
who may grant or withhold approval at his discretion. The Bye-Laws of the
Company provide that no Bye-Law shall be rescinded, altered or amended and no
new Bye-Law shall be made unless it has been approved by a resolution of the
Company Board and by a resolution of the shareholders.
Under Bermuda law, the holders of an aggregate or not less than 20% in par
value of a company's issued share capital have the right to apply to a court of
appropriate jurisdiction in Bermuda (a "Bermuda Court") for an annulment of any
amendment of the Memorandum of Association adopted by shareholders at any
general meeting, other than an amendment which alters or reduces a company's
share capital as provided in the Bermuda Act. Where such an application is made,
the amendment becomes effective only to the extent that it is confirmed by the
Bermuda Court. An application for amendment of the Memorandum of Association
must be made within 21 days after the date on which the resolution altering the
Company's Memorandum of Association is passed and may be made on behalf of the
persons entitled to make the application by one or more of their number as they
may appoint in writing for the purpose. No such application may be made by
persons voting in favor of the amendment.
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Appraisal Rights and Shareholder Suits
Under Bermuda law, in the event of an amalgamation of two Bermuda
companies, a shareholder who is not satisfied that fair value has been paid for
his shares may apply to a Bermuda Court to appraise the fair value of his
shares. The amalgamation of a company with another company requires the
amalgamation agreement to be approved by the board of directors and by a meeting
of the holders of shares of the amalgamating company of which they are directors
and of the holders of each class of such shares. Under Bermuda law, an
amalgamation also requires the consent of the Bermuda Minister of Finance, who
may grant or withhold consent at his discretion.
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda Courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation of the company's Memorandum of Association or Bye-Laws.
Furthermore, consideration would be given by a Bermuda Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to a Bermuda Court for an order regulating the company's
conduct of affairs in the future or ordering the purchase of the shares by any
shareholder, by other shareholders or by the company.
Registrar and Transfer Agent
A register of holders of the Class A Common Stock will be maintained by
Codan Limited in Bermuda and by The Bank of New York in the United States. The
Bank of New York will act as transfer agent with respect to the Class A Common
Stock.
CERTAIN PROVISIONS OF BERMUDA LAW
The Company has been designated as a non-resident under the Exchange
Control Act of 1972 (the "Control Act") by the Bermuda Monetary Authority (the
"Authority") whose permission for the issue of shares of Class A Common Stock of
the Company has been obtained. This designation allows the Company to engage in
transactions in currencies other than the Bermuda dollar. Approvals or
permissions received from the Authority do not constitute a guarantee by the
Authority as to the performance or creditworthiness of the Company.
Prior to the Offering, this Offering Memorandum will be filed with the
Registrar of Companies in Bermuda in accordance with Bermuda law.
In granting such permission and in accepting this Prospectus for filing,
neither the Authority nor the Registrar of Companies in Bermuda accepts any
responsibility for the financial soundness of the Company or the correctness of
any of the statements made or opinions expressed in this Offering Memorandum.
The transfer of shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of shares after the completion of
the Offering to or by such persons may be effected without specific consent
under the Control Act and regulations thereunder. Issues and transfers of shares
involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Control Act.
Non-Bermuda owners of the Company's shares of Class A Common Stock are not
restricted in the exercise of the rights to hold or vote their shares. Because
the Company has been designated as a non-resident for Bermuda exchange control
purposes, the Company is permitted to engage in transactions in all currencies
other than the Bermuda dollar and there are no restrictions on its ability to
transfer funds (other than funds
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denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to
United States residents who are holders of the Company's Class A Common Stock.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an applicant
acting in a special capacity (for example as a trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such trust.
The Company will take no notice of any trust applicable to any of its
shares whether or not it had notice of such trust.
As an "exempted company," the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Company may not participate in certain business
transactions including: (i) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years); (ii) the taking of mortgages on land in
Bermuda to secure an amount in excess of $50,000 without the consent of the
Minister of Finance of Bermuda; (iii) the acquisition of securities created or
issued by, or any interest in any local company or business, other than certain
types of Bermuda government securities of another "exempted" company,
partnership or other corporation resident in Bermuda but incorporated abroad; or
(iv) the carrying on of business of any kind in Bermuda, except in furtherance
of the business of the Company carried on outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.
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 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 exhibit for a complete understanding of the terms of the LLC Agreement.
Terms used herein and not otherwise defined shall have the meanings ascribed to
them in the LLC Agreement.
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 29, 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 the Company, is entitled to appoint one director to
the Iridium Board for each 5,250,000 Class 1 Interests owned. Class 1 Members,
other than the Company, 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
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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 Contracts Committee. This committee shall consist 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 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 THE COMPANY IN THE GOVERNANCE OF IRIDIUM
The LLC Agreement provides that the Company will have certain special
membership rights during the Company Special Rights Period. See "The
Company -- The Company's Participation in the Governance of Iridium." During the
Company Special Rights Period (i) the Company shall be entitled to designate two
Independent Company Directors as Directors of Iridium, (ii) one Director of
Iridium designated by the Company shall be elected Vice Chairman of the Iridium
Board and (iii) one Director of Iridium designated by the Company shall be a
member of each committee of the Iridium Board. Pursuant to the LLC Agreement,
the Company 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 the Company may have under the LLC Agreement, under the
Delaware Limited Liability Company Act or otherwise, during the Company 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 the Company: (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 and regulations 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.
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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 April 30, 1997 there were
121,719,150 Class 1 Interests and 36,305 Class 2 Interests issued and
outstanding. There are three series of Class 2 Interests outstanding.
Class 1 Interests. Upon consummation of the Offerings and application
of the net proceeds therefrom to the purchase of Class 1 Interests, there
will be 139,219,150 Class 1 Interests outstanding. 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. 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 Contracts
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
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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.
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 distributions 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 the Company) 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
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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.
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 Interest.
The Class 1 Interests acquired by the Company will not be subject to a
Reserve Capital Call.
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, the Company has waived the limitation
on liability contained in the Delaware Act, provided that the Company 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
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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 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 (the "IRS"), 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 2/3% 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 Contracts Committee. The provisions of the LLC Agreement
relating to the Related Party Contracts Committee (which reviews and
monitors the principal contracts between Iridium and certain of its
Members) may not be amended without the consent of (i) 66 2/3% of the
Directors serving on the Related Party Contracts Committee and (ii) 66 2/3%
of the non-interested Members.
Capital Contributions. Certain provisions of the LLC Agreement
relating to the circumstances in which a Reserve Capital Call is
automatically triggered may only be amended by the affirmative vote of
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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.
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, Present 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
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approval of such resolution by the affirmative vote of Class 1 Members holding
not less than 66 2/3% of the Class 1 Interests present at a meeting duly called
for such purpose; (ii) the death, retirement, resignation, bankruptcy or similar
occurrence which terminates the continued membership of any Member unless the
remaining Members exercise their right under the 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.
TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated tax
consequences of the operations of the Company and of an investment in the Class
A Common Stock under United States federal income tax laws and Bermuda laws. The
discussion does not deal with all possible tax consequences relating to the
Company's operations or to an investment in the Class A Common Stock. In
particular, the discussion does not address the tax consequences under state,
local and other (e.g., non-United States federal and non-Bermuda) tax laws.
Accordingly, each prospective investor should consult his or her tax advisor
regarding the tax consequences of an investment in the Class A Common Stock. The
discussion is based upon laws and relevant interpretations thereof in effect as
of the date of this Prospectus, all of which are subject to change.
BERMUDA LAW
In the opinion of Conyers, Dill & Pearman, Bermuda counsel to the Company,
the following discussion correctly describes certain tax consequences to the
Company with respect to the Offerings and with respect to ownership of shares of
Class A Common Stock under Bermuda law.
At the date hereof, there is no Bermuda income, corporation or profits tax,
withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by the Company or its shareholders other than
shareholders ordinarily resident in Bermuda. The Company is not subject to stamp
or other similar duty on the issue, transfer or redemption of its shares of
Class A Common Stock.
The Company has obtained an assurance from the Minister of Finance of
Bermuda under the Exempted Undertaking Tax Protection Act 1966 that, in the
event there is enacted in Bermuda any legislation imposing tax computed on
profits or income or computed on any capital assets, gain or appreciation or any
tax in the nature of estate duty or inheritance tax, such tax shall not be
applicable to the Company or to its operations, or to the shares, debentures or
other obligations of the Company until March 28, 2016 except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such shares,
debentures or other obligations of the Company or any real property or leasehold
interests in Bermuda owned by the Company. No reciprocal tax treaty affecting
the Company exists between Bermuda and the United States.
As an exempted company, the Company is liable to pay in Bermuda a
registration fee based upon its authorized share capital and the premium on its
issued shares at a rate not exceeding $25,000 per annum.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a general summary of the U.S. federal income tax
consequences of the ownership and disposition of shares of Class A Common Stock
by a "U.S. Holder," as defined below. The summary is limited to holders who hold
shares of Class A Common Stock as "capital assets" and whose "functional
currency" is the U.S. dollar and does not cover holders subject to special
rules, including insurance companies, tax-exempt organizations, financial
institutions, persons subject to the alternative minimum tax, broker-dealers, an
owner of 10% or more of the voting power or value of the shares of the Company,
or holders who hold shares of Class A Common Stock in a hedging transaction or
as part of a straddle or conversion transaction. The summary does not address
state or local taxes.
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As used herein, the term "U.S. Holder" means any holder of shares of Class
A Common Stock that is either (i) an individual who is a citizen or a resident
of the United States, (ii) a partnership or corporation organized under the laws
of the United States or any state thereof, or (iii) an estate or trust that is
subject to United States federal income taxation without regard to the source of
its income. A "Non-U.S. Holder" is any beneficial owner of shares of the Class A
Common Stock that is not a U.S. Holder. All terms used and not defined herein
have the meaning ascribed to them under the Internal Revenue Code of 1986, as
amended (the "Code").
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. The tax treatment of a holder may vary depending
upon the particular situation of the holder. Each holder should consult its own
tax advisor as to the United States, Bermuda or other tax consequences of the
ownership and disposition of shares of Class A Common Stock.
TAXATION OF THE COMPANY
Iridium is intended to be treated as a partnership for United States
federal income tax purposes. As a Class 1 Member of Iridium, the Company will be
subject to United States federal income tax on its distributive share of the
income of Iridium that is effectively connected with the conduct of a trade or
business in the United States, without regard to whether any distribution has
been received from Iridium. The Company's share of Iridium's effectively
connected income may also under certain circumstances be subject to "branch
profits tax" at a 30% rate. The Company's ability to use its distributive share
of Iridium's net operating losses may be limited under Section 382 of the Code
as a result of subsequent issuances of Company stock. However, the Company
believes that it would not be materially affected by such a limitation.
OWNERSHIP AND DISPOSITION OF SHARES
Taxation of Dividends and Stock Distributions
U.S. Holders. Distributions by the Company with respect to its Class A
Common Stock will be includible in the gross income of a U.S. Holder as ordinary
dividend income to the extent paid out of current or accumulated earnings and
profits of the Company, as determined for United States federal income tax
purposes. Dividends will not be eligible for the dividends received deduction
generally allowed to U.S. Holders who are corporations.
Any dividends paid in foreign currency will be includible in the income of
a U.S. Holder in a U.S. dollar amount calculated by reference to the prevailing
market exchange rate in effect on the date the dividends become includible in
the U.S. Holder's income. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date that the dividend becomes
includible in the U.S. Holder's income to the date that the foreign currency is
converted into U.S. dollars will be treated as ordinary income or loss.
If less than 25% of the Company's gross income for the three years
preceding the year in which a dividend is declared (or for the portion of the
three-year period during which the Company has been in existence, if shorter)
was effectively connected with the conduct of a U.S. trade or business, the
dividend generally will constitute foreign source "passive income" (or in the
case of certain holders, "financial services income") for U.S. foreign tax
credit purposes. If 25% or more of the Company's gross income for such period
was "effectively connected" income, the dividend will be United States source in
the same proportion that the Company's "effectively connected" income for such
period bears to the Company's total gross income for the period, and the
remainder will constitute foreign source "passive income" (or in the case of
certain holders, "financial services income") for U.S. foreign tax credit
purposes.
Distributions of additional shares of Class A Common Stock to U.S. Holders
with respect to shares of Class A Common Stock that are part of a pro rata
distribution to all shareholders of the Company generally will not be subject to
U.S. federal income tax.
Non-U.S. Holders. Dividends paid to a Non-U.S. Holder in respect of the
Class A Common Stock will not be subject to United States federal income tax
unless such dividends are effectively connected with the
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conduct of a trade or business within the United States by such Non-U.S. Holder
(and are attributable to a permanent establishment maintained in the United
States by such Non-U.S. Holder, if an applicable income tax treaty so requires
as a condition for such Non-U.S. Holder to be subject to United States taxation
on a net income basis in respect of income from the Class A Common Stock), in
which case the Non-U.S. Holder generally will be subject to tax in respect of
such dividends in the same manner as a U.S. Holder. Any such effectively
connected dividends received by a non-United States corporation may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
If such dividends are not subject to U.S. federal income tax as described
above, that portion of the dividends received by a Non-U.S. Holder that is
attributable to the conduct by the Company of a trade or business within the
United States will be subject to a 30% withholding tax if, for the three-year
period ending with the close of the Company's taxable year preceding the
declaration of such dividends, or for such part of that period as the Company
was in existence, 25% or more of the company's gross income was effectively
connected with the conduct of a trade or business within the United States. The
Company believes that dividends paid to Non-U.S. Holders will not be subject to
the withholding tax described above.
Taxation of Capital Gains
U.S. Holders. Except as discussed below under "Passive Foreign Investment
Company Rules," gain or loss (in an amount equal to the difference between such
U.S. Holder's adjusted tax basis in the shares of Class A Common Stock
(determined in U.S. dollars) and the U.S. dollar amount realized) will be
recognized by a U.S. Holder on the sale or other disposition of shares of Class
A Common Stock and will be subject to U.S. federal income tax as capital gain or
loss. Capital gain or loss will be treated as long-term capital gain or loss if
the U.S. Holder's holding period for the shares of Class A Common Stock is more
than one year. U.S. Holders who are individuals are currently taxed on long-term
capital gains at a maximum rate of 28%, while ordinary income may be subject to
U.S. federal income tax at a rate as high as 39.6%. Capital losses may be used
to offset long-term capital gains, and up to $3,000 of any net capital loss may
be used to offset ordinary income. U.S. Holders which are corporations are taxed
on capital gains at the same rate as ordinary income, which can be as high as
35%, and may not offset ordinary income by any net capital losses. Capital gain
recognized by a U.S. Holder on a sale or other disposition of shares of Class A
Common Stock generally will be treated as U.S. source income.
Non-U.S. Holders. A Non-U.S. Holder of shares of Class A Common Stock will
not be subject to U.S. federal income tax (including taxes imposed by
withholding) on gains realized on the sale or other disposition of shares of
Class A Common Stock, unless (i) such gain is effectively connected with the
conduct by the holder of a trade or business in the United States (and is
attributable to a permanent establishment maintained in the United States by
such Non-U.S. Holder, if an applicable income tax treaty so requires as a
condition for such Non-U.S. Holder to be subject to U.S. taxation on a net
income basis in respect of gain from the sale of the Class A Common Stock) or
(ii) in the case of gain realized by an individual holder, the holder is present
in the United States for 183 days or more during the taxable year of the sale
and certain other conditions are met. Effectively connected gains realized by a
corporate Non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Passive Foreign Investment Company Rules
Under the passive foreign investment company ("PFIC") rules, a foreign
corporation will generally be a PFIC in any taxable year of the foreign
corporation in which either at least 75 percent of its gross income is "passive
income" or at least 50 percent of its assets are "passive assets." For purposes
of the PFIC tests, passive income generally includes interest, dividends, rents
and royalties (other than rents and royalties derived in the active conduct of a
trade or business and not derived from a related person), annuities and gains
from the sale or disposition of assets that produce passive income, and passive
assets generally include assets producing or held for the production of such
income. The following discussion assumes that the Company should, under current
law, be treated for the purposes of the PFIC tests as owning its share of
Iridium's gross
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assets and as earning directly its share of Iridium gross income. The Internal
Revenue Service may, however, issue regulations that would address this issue.
The Company would be a PFIC if such regulations did not permit the Company to
treat itself as owning its share of Iridium's assets and earning directly its
share of Iridium's gross income for the purposes of the PFIC tests.
Because Iridium has substantial temporary investments in securities, it is
likely that at least 75 percent of the Company's gross income for 1997 will be
passive income for purposes of the PFIC income test. Under the PFIC rules,
however, a foreign corporation will not be considered a PFIC in the first year
in which it has gross income (the start-up year) if (i) no predecessor of such
corporation was a PFIC, (ii) it is established to the satisfaction of the
Internal Revenue Service that such corporation will not be a PFIC for either of
the first two years following the start-up year and (iii) such corporation is
not in fact a PFIC for either of the first two years following the start-up
year. Under this exception to PFIC classification, the Company does not expect
that it will be a PFIC for 1997.
Moreover, based on the manner in which Iridium currently intends to operate
its business in future years, the Company does not expect to be a PFIC for any
future year. However, since the determination of whether the shares of Class A
Common Stock constitute shares of a PFIC must be made annually based upon the
composition of the income and assets of the Company, Iridium and any corporation
in which the Company or Iridium holds a 25-percent-or-more interest, there can
be no assurance that the shares of Class A Common Stock will not be considered
shares of a PFIC for any taxable year. Furthermore, if the Company were
determined to be a PFIC in 1998, the start-up exception outlined in the previous
paragraph would be inapplicable and the Company would be considered a PFIC for
1997 as well.
Generally, if a share of Class A Common Stock were treated as stock of a
PFIC for any taxable year during which a U.S. Holder held such share, the entire
gain recognized by such U.S. Holder on a sale or other disposition of the share
would be allocated ratably over the U.S. Holder's holding period for the share.
The amounts allocated to the taxable year of the sale or other disposition and
to any year before the Company became a PFIC would be taxed as ordinary income.
The amount allocated to each other taxable year would be subject to tax at the
highest applicable ordinary income rate in effect for such taxable year, and an
interest charge would be imposed on the amount allocated to such taxable year.
All such tax and interest would be included in the U.S. Holder's U.S. federal
income tax liability for the taxable year in which the sale or other disposition
took place. Further, any distribution in respect of shares of Class A Common
Stock in excess of 125 percent of the average of the annual distributions on
shares of Class A Common Stock received by the U.S. Holder during the preceding
three years or the U.S. Holder's holding period, whichever is shorter, would be
subject to taxation as described above.
The special PFIC tax rules described above will not apply to a U.S. Holder
if (i) the U.S. Holder elects to have the Company treated as a "qualified
electing fund" (a "QEF election") for each taxable year during the U.S. Holder's
holding period in which the Company is a PFIC and (ii) the Company provides
certain information necessary to enable the U.S. Holder to make a QEF election.
The Company currently intends to provide upon the request of any U.S. Holder the
information necessary to make a QEF election.
A U.S. Holder that makes a QEF election generally will be currently taxable
on its pro rata share of the Company's ordinary earnings and net capital gain
(at ordinary and capital gain rates, respectively) for each taxable year of the
Company, regardless of whether or not distributions were received. However, a
U.S. Holder that makes a QEF election covering each taxable year of the Company
during the U.S. Holder's holding period in which the Company is a PFIC will not
be currently taxable on its pro rata share of the Company's undistributed
ordinary earnings and net capital gain in any year in which the Company is not a
PFIC.
If a U.S. Holder is taxed on its pro rata share of the Company's ordinary
earnings and net capital gain, the U.S. Holder's basis in shares of Class A
Common Stock will be increased to reflect taxed but undistributed income.
Distributions that have been taxed previously will result in a corresponding
reduction of basis in shares of Class A Common Stock and will not be taxed again
as a distribution to the U.S. Holder.
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A U.S. Holder who owns shares of Class A Common Stock during any year in
which the Company is a PFIC must file Internal Revenue Service Form 8621.
Backup Withholding
In general, information reporting requirements will apply to dividend
payments (or other taxable distributions) in respect of shares of Class A Common
Stock made within the United States to a non-corporate United States person, and
"backup withholding" at the rate of 31% will apply to such payments if the
holder or beneficial owner fails to provide an accurate taxpayer identification
number in the manner required by United States law and applicable regulations,
if there has been notification from the Internal Revenue Service of a failure by
the holder or beneficial owner to report all interest or dividends required to
be shown on its federal income tax returns or, in certain circumstances, if the
holder or beneficial owner fails to comply with applicable certification
requirements. Certain corporations and persons that are not United States
persons may be required to establish their exemption from information reporting
and backup withholding by certifying their status on Internal Revenue Service
Forms W-8 or W-9.
In general, payment of the proceeds from the sale of shares of Class A
Common Stock to or through a United States office of a broker is subject to both
United States backup withholding and information reporting unless the holder or
beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. United States information
reporting and backup withholding generally will not apply to a payment made
outside the United States of the proceeds of a sale of shares of Class A Common
Stock through an office outside the United States of a non-United States broker.
However, United States information reporting requirements (but not backup
withholding) will apply to a payment made outside the United States of the
proceeds of a sale of shares of Class A Common Stock through an office outside
the United States of a broker that is a United States person, that derives 50%
or more of its gross income for a specified three-year period from the conduct
of a trade or business in the United States, or that is a "controlled foreign
corporation" as to the United States, unless the broker has documentary evidence
in its files that the holder or beneficial owner is a non-United States person
or the holder or beneficial owner otherwise establishes an exemption.
Amounts withheld under the backup withholding rules may be credited against
a holder's tax liability, and a holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the United States Internal Revenue Service.
SHARES ELIGIBLE FOR FUTURE SALE
Following completion of the Offerings, the only shares of Class A Common
Stock of the Company that will be outstanding will be the 10,000,000 shares
issued in the Offerings (11,500,000 shares if the Underwriters' over-allotment
options are exercised in full). These shares may be freely transferred if held
by persons who are not affiliates of the Company.
Subject to certain limitations, the Company has agreed in the Interest
Exchange Agreement that it will exchange shares of Class A Common Stock for
Class 1 Interests at the rate of one share of Class A Common Stock for each
Class 1 Interest. Based upon the number of Class 1 Interests expected to be
outstanding at the time of completion of the Offerings, 129,219,150 shares of
Class A Common Stock would be issuable upon such exchange. Including all Class 1
Interests which will be issuable in the future based upon warrants, options and
convertible securities outstanding immediately following completion of the
Offerings and the Reserve Capital Call, 181,113,530 shares of Class A Common
Stock would be issuable upon such exchange. Pursuant to the Interest Exchange
Agreement, the holders of Class 1 Interests may not exchange their Interests for
shares of Class A Common Stock prior to 90 days after the first fiscal quarter
in which Iridium achieves positive earnings before interest, taxes, depreciation
and amortization (the "Exchange Date"). No exchanges shall take place unless
approved by Iridium, pursuant to authorization of directors representing at
least 66 2/3% of the Iridium Board. Thus, these Class 1 Interests are not
expected to be exchangeable for Class A Common Stock until some time in 1999, at
the earliest.
125
<PAGE> 128
Under the Interest Exchange Agreement, the Company has agreed that at any
time after the Exchange Date, the Company 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 two percent of the Fully Diluted Class A
Shares, 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 Stock in the manner
specified by those holders. If the shares of Class A Common Stock issuable upon
exchange are so registered, the shares will be freely transferable. See
"Governance of the Company and Relationship with Iridium -- Exchange Rights of
Iridium Members."
Following completion of the Offerings, the Company will issue shares of
Class B Common Stock in the Global Ownership Program. These shares of Class B
Common Stock will be exchangeable for Class A Common Stock after the
satisfaction of certain conditions, but in no event earlier than one year after
issuance. Following such exchanges, and if registered for resale with the
Securities and Exchange Commission, the Class A Common Stock issuable on
exchange will be freely transferable. See "Governance of the Company and
Relationship with Iridium -- Global Ownership Program."
The Class A Common Stock acquired upon exchange of Class 1 Interests and
upon exchange of Class B Common Stock will constitute "restricted securities"
within the meaning of Rule 144 and unless registered under the Securities Act
may only be sold if an exemption from registration is available. Pursuant to
Rule 144 under the Securities Act, a person, including an "affiliate" (as that
term is defined in Rule 144) of the issuer, may sell restricted securities if a
minimum of one year has elapsed between the later of the date of acquisition of
the restricted securities from the issuer or from an affiliate of the issuer.
Such a person will be entitled to sell, within any three-month period, a number
of shares that does not exceed the greater of (i) the average weekly trading
volume of the class of stock being sold during the four calendar weeks preceding
the filing of a notice of sale with the Securities and Exchange Commission or,
if no such notice is required, the sale date or (ii) one percent of the then
outstanding shares of the class of stock being sold. Sales pursuant to Rule 144
are also subject to certain requirements as to the manner of sale, notice filing
and availability of current public information about the Company. A person who
is deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale by such person and who has beneficially owned the
restricted securities for at least two years is entitled to sell those shares
under Rule 144 without regard to the volume limitation, manner of sale
restrictions or notice filing requirements of Rule 144. In certain
circumstances, a holder may "tack" the holding period for the restricted
securities converted into or exchanged for the restricted securities for
purposes of computing the one year and two year holding periods. A proposed
amendment to Rule 144 would, if adopted, eliminate the manner of sale
requirements under Rule 144. Shares of Class A Common Stock may also be sold
pursuant to any exemption from registration which might be available without
compliance with the requirements of Rule 144.
Eligible employees of the Company and Iridium and persons having business
relationships with Iridium who are purchasing reserved shares of Class A Common
Stock in the Offerings have agreed, with certain exceptions, not to sell, offer
to sell or otherwise dispose of any shares of Class A Common Stock without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated for
a period of 180 days after the date of this Prospectus.
Issuances of substantial amounts of Class A Common Stock, or the
expectation of such issuances, could adversely affect the market price of the
Class A Common Stock. See "Risk Factors -- Shares Eligible for Future Sale."
126
<PAGE> 129
UNDERWRITING
Subject to the terms and conditions set forth in a U.S. purchase agreement
(the "U.S. Purchase Agreement") among the Company, Iridium and each of the
Underwriters named below (the "U.S. Underwriters"), and concurrently with the
sale of 2,000,000 shares of Class A Common Stock to the International Managers
(as defined below), the Company has agreed to sell to each of the U.S.
Underwriters, and each of the U.S. Underwriters severally has agreed to purchase
from the Company, the number of shares of Class A Common Stock set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Goldman, Sachs & Co.......................................................
---------
Total........................................................... 8,000,000
=========
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. are
acting as representatives (the "U.S. Representatives") of the U.S. Underwriters.
The Company and Iridium have also entered into a purchase agreement (the
"International Purchase Agreement" and, together with the U.S. Purchase
Agreement, the "Purchase Agreements") with certain underwriters outside the
United States and Canada (collectively, the "International Managers" and,
together with the U.S. Underwriters, the "Underwriters"), for whom Merrill Lynch
International, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman
Sachs International are acting as representatives (the "International
Representatives" and, together with the U.S. Representatives, the
"Representatives"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of 8,000,000
shares of Class A Common Stock to the U.S. Underwriters pursuant to the U.S.
Purchase Agreement, the Company has agreed to sell to the International
Managers, and the International Managers have severally agreed to purchase from
the Company, an aggregate of 2,000,000 shares of Class A Common Stock. The
initial public offering price per share of Class A Common Stock and the
underwriting discount per share of Class A Common Stock are identical under the
U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such Agreement if any of the shares of Class A Common Stock
being sold pursuant to such Agreement are purchased. Under certain
circumstances, the commitments of non-defaulting U.S. Underwriters or
International Managers (as the case may be) may be increased. The purchase of
shares of Class A Common Stock by the U.S. Underwriters is conditioned upon the
purchase of shares of Class A Common Stock by the International Managers, and
vice versa.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriters are permitted to sell shares
of Class A Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any
dealer to whom they sell shares of Class A Common Stock will not, other than in
connection with the sale of certain reserved shares, as described below, offer
to sell or sell shares of Class A Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, and the International Managers
127
<PAGE> 130
and any dealer to whom they sell shares of Class A Common Stock will not offer
to sell or sell shares of Class A Common Stock to U.S. persons or to Canadian
persons or to persons they believe intend to resell to U.S. persons or Canadian
persons, except in the case of transactions pursuant to the Intersyndicate
Agreement.
The U.S. Representatives have advised the Company and Iridium that the U.S.
Underwriters propose initially to offer the shares of Class A Common Stock to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share of Class A Common Stock. The U.S. Underwriters
may allow, and such dealers may reallow, a discount not in excess of $
per share of Class A Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
At the request of the Company, the U.S. Underwriters have initially
reserved up to 1,000,000 shares of Class A Common Stock for sale at the initial
public offering price set forth on the cover page of this Prospectus to eligible
employees of the Company and Iridium and persons having business relationships
with Iridium. The number of shares of Class A Common Stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be offered
by the Underwriters to the general public on the same basis as other shares
offered hereby. Individuals purchasing reserved shares have agreed, with certain
exceptions, not to sell, offer to sell or otherwise dispose of any shares of
Class A Common Stock, without the prior written consent of Merrill Lynch, for a
period of 180 days after the date of this Prospectus. If in connection with the
sale of the reserved shares the Underwriters are prohibited by law from selling
the reserved shares of Class A Common Stock in any jurisdiction outside the
United States where the Company is permitted by law to sell Class A Common
Stock, the Company may directly sell reserved shares. Such shares would be
included in the 10,000,000 shares being sold pursuant to this Prospectus. If the
Company makes any such sales, no underwriting discount or commission will be
paid to the Underwriters with respect to such shares. The Underwriters have
agreed to reimburse Iridium for certain expenses associated with the Offerings.
The Company has agreed not to, directly or indirectly, (i) offer, pledge,
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 any shares of the Class A Common Stock or any
securities convertible into or exchangeable or exercisable for Class A Common
Stock or file any registration statement under the Securities Act, with respect
to any of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Class A Common Stock, whether any such
swap or transaction is to be settled by delivery of Class A Common Stock or
other securities, in cash or otherwise, without the prior written consent of
Merrill Lynch, for a period of 180 days after the date of this Prospectus. The
foregoing restriction does not apply to the shares of common stock of the
Company to be sold in the Offerings or under the Company's Global Ownership
Program or the Option Plan. See "Governance of the Company and Relationship with
Iridium -- Exchange Rights of Iridium Members" and "Shares Eligible for Future
Sale" for a discussion of certain limitations on the rights of holders of
Interests in Iridium to exchange such Interests for shares of Class A Common
Stock. In addition, the foregoing restriction does not apply to the issuance of
warrants to purchase shares of Class A Common Stock in connection with any
offering of debt securities of Iridium or its subsidiaries; provided that (i)
such warrants have a per share exercise price not lower than the market price of
a share of Class A Common Stock on the date such warrants are issued and (ii)
such warrants are not exercisable earlier than 180 days from the date of their
issuance.
The Company has granted an option to the U.S. Underwriters, exercisable
within 30 days after the date of this Prospectus, to purchase up to 1,200,000
additional shares of Class A Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting discount.
The U.S. Underwriters may exercise this option only to cover over-allotments, if
any, made on the sale of the Class A Common Stock offered hereby. To the extent
that the U.S. Underwriters exercise this option, each U.S. Underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
shares of Class A Common Stock proportionate to such Underwriter's initial
amount reflected in the foregoing table. The Company also has granted an option
to the International Managers, exercisable within 30 days after the
128
<PAGE> 131
date of this Prospectus, to purchase up to an aggregate of 300,000 additional
shares of Class A Common Stock to cover over-allotments, if any, on terms
similar to those granted to the U.S. Underwriters.
Until the distribution of the Class A Common Stock is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Class A Common
Stock. As an exception to these rules, the Representatives are permitted to
engage in certain transactions that stabilize the price of the Class A Common
Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Class A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Offerings, i.e., if they sell more shares of Class A Common
Stock than are set forth on the cover page of this Prospectus, the
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Class A Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Common Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company, Iridium nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Class A Common
Stock. In addition, neither the Company, Iridium nor any of the Underwriters
makes any representation that the Representatives will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock of the Company. The initial public offering price will be
determined through negotiations among the Company, Iridium and the
Representatives. Among the factors that will be considered in determining the
initial public offering price, in addition to prevailing market conditions, are
the current market valuations of publicly traded companies that the
Representatives believe to be reasonably comparable to the Company and Iridium,
certain financial information of the Company and Iridium, the history of, and
the prospects for, the Company and Iridium and the industry in which Iridium
will compete, an assessment of the Company and Iridium management, the past and
present operations of Iridium, the prospects for, and timing of, future revenues
of the Company and Iridium, the present state of Iridium's development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to the Company and Iridium. There
can be no assurance given as to the liquidity of the trading market for the
Class A Common Stock or that an active public market will develop for the Class
A Common Stock or that the Class A Common Stock will trade in the public market
subsequent to the Offerings at or above the initial public offering price. If an
active public market for the Class A Common Stock does not develop, the market
price and liquidity of the Class A Common Stock may be adversely affected.
The Class A Common Stock has been approved for quotation on the Nasdaq
National Market System under the symbol "IRIDF," subject to official notice of
issuance.
The U.S. Underwriters and the International Managers have informed the
Company that they do not intend to confirm sales of the Class A Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The Company and Iridium have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
129
<PAGE> 132
Certain of the Underwriters or their affiliates have provided from time to
time, and may provide in the future, commercial and investment banking services
to the Company and its affiliates, including Iridium and Motorola, for which
such Underwriters or their affiliates have received or will receive fees and
commissions.
VALIDITY OF THE CLASS A COMMON STOCK
The validity of the Class A Common Stock offered hereby and certain other
matters will be passed on for the Company by Conyers, Dill & Pearman, Hamilton,
Bermuda, special Bermuda Counsel to the Company. The Company and Iridium are
also being represented by Sullivan & Cromwell, New York, New York. Certain legal
matters will be passed upon for the Underwriters by Fried, Frank, Harris,
Shriver & Jacobson, a partnership including professional corporations, New York,
New York.
EXPERTS
The balance sheet of Iridium World Communications Ltd. as of December 31,
1996 and 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 from 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 reports 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.
AVAILABLE INFORMATION
The Company and Iridium have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement under the Securities Act
with respect to the Class A Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company,
Iridium and the Class A Common Stock offered hereby, reference is hereby made to
such Registration Statement and the exhibits thereto. Statements contained in
this Prospectus regarding the contents of any contract or other documents are
not necessarily complete; with respect to each such contract or document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. A copy of the
Registration Statement, including the exhibits thereto, may be inspected without
charge at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549; at its Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and its New York Regional Office, 7 World
Trade Center, New York, New York, 10048. Copies of such material may be obtained
from the public reference section of the Commission, Washington, D.C. 20549,
upon payment of the fees prescribed by the Commission. Additionally, the Company
will be subject to the public reporting requirements of the Securities Exchange
Act, as amended (the "Exchange Act"), and thus will file with the Commission
periodic reports pursuant to Section 13(d) and proxy statements pursuant to
Section 14 of the Exchange Act. These filings may also be inspected at or
obtained from the Commission. In addition, the Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission through the Electronic Data Gathering,
Analysis and Retrieval System.
The Company intends to furnish its stockholders annual reports containing
audited financial statements of the Company and Iridium and quarterly reports
containing unaudited interim financial information for the Company and Iridium
for the first three fiscal quarters of each fiscal year.
130
<PAGE> 133
ANNEX A
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
A-1
<PAGE> 134
"global roaming"........... the ability to travel worldwide, subject to certain
limitations, and receive and make telephone calls
from a handheld mobile phone
"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
A-2
<PAGE> 135
"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 Communications System 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 Class 1 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
A-3
<PAGE> 136
"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
A-4
<PAGE> 137
INDEX TO FINANCIAL STATEMENTS
<TABLE>
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IRIDIUM WORLD COMMUNICATIONS LTD.
Independent Auditors' Report.......................................................... F-2
Balance Sheet as of December 31, 1996................................................. F-3
Notes to Financial Statement.......................................................... F-4
Unaudited Condensed Balance Sheet as of March 31, 1997................................ F-5
Unaudited Condensed Statement of Cash Flows for the three months ended March 31,
1997................................................................................ F-6
Notes to Unaudited Condensed Financial Statements..................................... F-7
IRIDIUM LLC
Independent Auditors' Report.......................................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1996.......................... F-9
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-10
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-11
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-12
Notes to Consolidated Financial Statements............................................ F-13
Unaudited Condensed Consolidated Balance Sheet as of March 31, 1997................... F-26
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-27
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-28
Notes to Unaudited Condensed Consolidated Financial Statements........................ F-29
</TABLE>
F-1
<PAGE> 138
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Iridium World Communications Ltd.:
We have audited the accompanying balance sheet of Iridium World
Communications Ltd. (a development stage company) as of December 31, 1996. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Iridium World Communications Ltd.
(a development stage company) as of December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
Washington, D.C.
March 10, 1997
F-2
<PAGE> 139
IRIDIUM WORLD COMMUNICATIONS LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Total assets.......................................................................... $ --
====
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities........................................................................... $ --
Stockholder's equity:
Class A Common Stock, voting, par value $0.01; 20,000,000 shares authorized;
1,200,000 shares subscribed; none issued or outstanding.......................... 12
Class B Common Stock, non-voting, par value $0.01; 2,500,000 shares authorized; none
issued or outstanding............................................................ --
Subscription receivable............................................................. (12)
Retained earnings................................................................... --
----
Total stockholder's equity.................................................. --
----
Total liabilities and stockholder's equity.................................. $ --
====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 140
IRIDIUM WORLD COMMUNICATIONS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
1. ORGANIZATION AND BUSINESS
Iridium World Communications Ltd. (the "Company") was incorporated under
the laws of Bermuda on December 12, 1996. The Company is wholly owned by Iridium
LLC ("Iridium"), a limited liability company, which has subscribed to purchase
1,200,000 shares of $0.01 par value Class A Common Stock for an aggregate
purchase price of $12,000. The Company plans to file a registration statement
with the Securities and Exchange Commission in order to register its Class A
Common Stock for sale in an initial public offering (the "Offering"). Pursuant
to the 1997 Subscription Agreement between the Company and Iridium, the net
proceeds from the Offering will be invested in Class 1 Membership Interests of
Iridium (the "Class 1 Interests"). Upon consummation of the Offering, the
outstanding shares of Class A Common Stock subscribed to by Iridium will be
retired and the Company will become a member of Iridium.
Iridium is devoting substantially all of its present efforts to
constructing, developing and marketing the IRIDIUM communications system (the
"IRIDIUM System"). Iridium's planned principal operations, to manage the
operation of the IRIDIUM System, have not commenced and, accordingly, Iridium is
considered a development stage limited liability company. As the Company's
planned investment in Iridium will constitute its only asset, the Company is
also considered a development stage company.
Since its inception on December 12, 1996 through December 31, 1996, the
Company has not entered into any transactions or incurred any expenses.
2. COMMON STOCK
Concurrent with the Offering, the Company and Iridium intend to execute an
Interest Exchange Agreement that will allow holders of Class 1 Interests in
Iridium to exchange those interests, subject to the restrictions on transfer in
the Iridium Limited Liability Company Agreement, for shares of Class A Common
Stock in the Company at a ratio of one share of Class A Common Stock for each
Class 1 Interest, subject to anti-dilution adjustments. The Interest Exchange
Agreement will permit exchanges of Class 1 Interests commencing 90 days after
Iridium has achieved one full quarter of positive earnings before interest,
taxes, depreciation and amortization. No exchange shall take place unless
approved by Iridium pursuant to authorization of Directors representing at least
66 2/3% of the Iridium Board of Directors.
The Company and Iridium intend to commence a Global Ownership Program which
is designed to offer up to an aggregate of 2,500,000 shares of the Company's
Class B Common Stock at a purchase price of $13.33 per share to certain
governmental telecommunication administrations and related entities as part of a
comprehensive program to enhance market access, improve the competitive standing
of the IRIDIUM System and achieve appropriate regulatory approvals. At the time
of issuance, purchasers of Class B Common Stock will be required to pay only an
amount equal to the par value -- $.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 holder of Class B
Common Stock may elect to pay the purchase price in cash at any time. Class B
Common Stock is convertible to Class A Common Stock on a one-for-one basis,
subject to anti-dilution adjustments, once certain conditions are met, including
full payment for the shares. The proceeds generated from each sale of Class B
Common Stock will be used to purchase Class 1 Interests in Iridium. The payment
terms with respect to such Class 1 Interests will mirror the payment terms on
the Class B Common Stock.
The Company and Iridium also intend to execute a Share Issuance Agreement
which provides that all net proceeds from future primary offerings of securities
by the Company will be invested in Class 1 Interests in Iridium.
F-4
<PAGE> 141
IRIDIUM WORLD COMMUNICATIONS LTD.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
AS OF MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash................................................................................... $12
---
Total assets................................................................. $12
===
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities............................................................................ $--
Stockholder's equity:
Class A Common Stock, voting, par value $0.01; 20,000,000 shares authorized;
1,200,000 shares issued and outstanding........................................... 12
Class B Common Stock, non-voting, par value $0.01; 2,500,000 shares authorized; none
issued or outstanding............................................................. --
Retained earnings.................................................................... --
---
Total stockholder's equity................................................... 12
---
Total liabilities and stockholder's equity................................... $12
===
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
F-5
<PAGE> 142
IRIDIUM WORLD COMMUNICATIONS LTD.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<S> <C>
Cash Flows from Operating Activities................................................... $--
Cash Flows from Investing Activities................................................... --
Cash Flows from Financing Activities:
Proceeds from Class A Common Stock subscribed........................................ 12
---
Increase in cash....................................................................... 12
Cash, beginning of period.............................................................. --
---
Cash, end of period.................................................................... $12
===
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
F-6
<PAGE> 143
IRIDIUM WORLD COMMUNICATIONS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments necessary for a fair presentation
of the financial position of Iridium World Communications Ltd. (the "Company")
as of March 31, 1997 and its results of operations and cash flows for the three
months then ended. These condensed financial statements are unaudited and do not
include all related footnote disclosures.
Since its inception on December 12, 1996 through March 31, 1997, the
Company has not entered into any operating transactions or incurred any
expenses. 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.
The Company is a wholly owned subsidiary of Iridium LLC ("Iridium"). During
March 1997, the Company filed a registration statement with the Securities and
Exchange Commission in order to register 11,500,000 shares of its Class A Common
Stock for sale in an initial public offering (the "Offering"). Pursuant to the
1997 Subscription Agreement between the Company and Iridium, the net proceeds
from the Offering will be invested in Iridium Class 1 Membership Interests (the
"Class 1 Interests"), at which time the outstanding shares of Class A Common
Stock held by Iridium will be retired, and the Company will become a member of
Iridium.
2. 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 earnings (loss) per share data. The
Company is required to adopt the provisions of Statement 128 for the year ending
December 31, 1997. Earlier application is not permitted; however, upon adoption
the Company will be required to restate previously reported annual and interim
earnings (loss) per share data in accordance with the provisions of Statement
128. The Company does not believe that the adoption of Statement 128 will have a
material impact on the computation or manner of presentation of its earnings
(loss) per share data as presented under APB 15.
3. SUBSEQUENT EVENT
On May 9, 1997, the Company's Board of Directors adopted a resolution to
increase the authorized shares of Class A Common Stock to 50,000,000 shares.
F-7
<PAGE> 144
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-8
<PAGE> 145
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-9
<PAGE> 146
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-10
<PAGE> 147
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-11
<PAGE> 148
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-12
<PAGE> 149
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.
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.
F-13
<PAGE> 150
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-14
<PAGE> 151
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-15
<PAGE> 152
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 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
F-16
<PAGE> 153
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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>
F-17
<PAGE> 154
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-18
<PAGE> 155
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-19
<PAGE> 156
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-20
<PAGE> 157
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-21
<PAGE> 158
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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 $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>
F-22
<PAGE> 159
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-23
<PAGE> 160
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 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.
F-24
<PAGE> 161
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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-25
<PAGE> 162
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-26
<PAGE> 163
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......................... 117,505,200 120,115,575
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-27
<PAGE> 164
\
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-28
<PAGE> 165
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-29
<PAGE> 166
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.
F-30
<PAGE> 167
======================================================
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 OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, IRIDIUM OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES OF CLASS A
COMMON STOCK 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 AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY OR IRIDIUM SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 14
The Company and Iridium's Strategic
Investors.................................. 40
Use of Proceeds.............................. 42
Dividend Policy.............................. 42
Dilution..................................... 43
Capitalization............................... 45
Selected Financial Data...................... 46
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 48
Business..................................... 51
Regulation of Iridium........................ 70
Principal Contracts for the Development of
the IRIDIUM System......................... 78
Management................................... 85
Interest Ownership of Certain Beneficial
Owners and Management...................... 99
Certain Relationships and Related
Transactions of Iridium.................... 100
Iridium's Investors, Number of Class 1
Interests Owned, Percentage Ownership and
Principal Gateway Service Territories...... 101
Governance of the Company and Relationship
with Iridium............................... 106
Description of Capital Stock................. 110
Description of Iridium LLC Limited Liability
Company Agreement.......................... 114
Tax Considerations........................... 121
Shares Eligible for Future Sale.............. 125
Underwriting................................. 127
Validity of the Class A Common Stock......... 130
Experts...................................... 130
Available Information........................ 130
Glossary..................................... A-1
Index to Financial Statements................ F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
======================================================
======================================================
10,000,000 SHARES
IRIDIUM WORLD
COMMUNICATIONS LTD.
CLASS A COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
, 1997
======================================================
<PAGE> 168
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
PRELIMINARY PROSPECTUS DATED MAY 9, 1997
PROSPECTUS
10,000,000 SHARES
IRIDIUM WORLD COMMUNICATIONS LTD.
CLASS A COMMON STOCK
Of the 10,000,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), of Iridium World Communications Ltd., a Bermuda
company (the "Company"), being offered hereby, 2,000,000 shares are being
offered outside of the United States and Canada by the International Managers
(the "International Offering") and 8,000,000 shares are being offered in a
concurrent offering in the United States and Canada by the U.S. Underwriters
(the "U.S. Offering" and, together with the International Offering, the
"Offerings"). The public offering price and the underwriting discount per share
are identical for both Offerings. Of the 10,000,000 shares being offered in the
Offerings, up to 1,000,000 shares are being reserved for sale to eligible
employees of the Company and Iridium and persons having business relationships
with Iridium. See "Underwriting." The Company will use the proceeds of the
Offerings to purchase 10,000,000 Class 1 Membership Interests (the "Class 1
Interests") in Iridium LLC, a Delaware (U.S.A.) limited liability company
("Iridium"). Upon consummation of the Offerings and application of the net
proceeds therefrom to purchase Class 1 Interests in Iridium, the Company will be
admitted as a member of Iridium. Pursuant to the rules promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), Iridium is a
co-registrant on the registration statement of which this Prospectus forms a
part.
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $19 and $21 per share. See "Underwriting" for a discussion of
factors considered in determining the initial public offering price. The Class A
Common Stock has been approved for quotation on the Nasdaq National Market
System ("NNMS") under the symbol "IRIDF," subject to official notice of
issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
---------------------
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.
<TABLE>
<CAPTION>
========================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
========================================================================================================
<S> <C> <C> <C>
Per Share.......................... $ $ $
- --------------------------------------------------------------------------------------------------------
Total(3)........................... $ $ $
===================================================================================================
</TABLE>
(1) The Company and Iridium have agreed to indemnify the several Underwriters
against certain liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Expenses of the Offerings are estimated to be $2,000,000 and are payable by
Iridium. See "Underwriting."
(3) The Company has granted the International Managers and the U.S. Underwriters
options, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 300,000 and 1,200,000 shares of Class A Common
Stock, respectively, on the same terms as set forth above, solely to cover
over-allotments, if any. The Company will use the proceeds from the sale of
any shares of Class A Common Stock in respect of such over-allotment options
to purchase an equivalent number of Class 1 Interests. If all such
additional shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them and
subject to the approval of certain legal matters by counsel for the Underwriters
and certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of certificates for the shares will be made in New York,
New York on or about , 1997.
---------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN SACHS INTERNATIONAL
---------------
The date of this Prospectus is , 1997.
<PAGE> 169
UNDERWRITING
Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Company, Iridium
and each of the Underwriters named below (the "International Managers"), and
concurrently with the sale of 8,000,000 shares of Class A Common Stock to the
U.S. Underwriters (as defined below), the Company has agreed to sell to each of
the International Managers, and each of the International Managers severally has
agreed to purchase from the Company, the number of shares of Class A Common
Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch International...............................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Goldman Sachs International...............................................
---------
Total........................................................... 2,000,000
=========
</TABLE>
Merrill Lynch International, Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman Sachs International are acting as representatives (the
"International Representatives") of the International Managers.
The Company and Iridium have also entered into a purchase agreement (the
"U.S. Purchase Agreement," and, together with the International Purchase
Agreement, the "Purchase Agreements") with certain underwriters in the United
States and Canada (collectively, the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters"), for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. are acting as representatives
(the "U.S. Representatives" and, together with the International
Representatives, the "Representatives"). Subject to the terms and conditions set
forth in the U.S. Purchase Agreement, and concurrently with the sale of
2,000,000 shares of Class A Common Stock to the International Managers pursuant
to the International Purchase Agreement, the Company has agreed to sell to the
U.S. Underwriters, and the U.S. Underwriters have severally agreed to purchase
from the Company, an aggregate of 8,000,000 shares of Class A Common Stock. The
initial public offering price per share of Class A Common Stock and the
underwriting discount per share of Class A Common Stock are identical under the
International Purchase Agreement and the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such Agreement if any of the shares of Class A Common Stock
being sold pursuant to such Agreement are purchased. Under certain
circumstances, the commitments of non-defaulting International Managers or U.S.
Underwriters (as the case may be) may be increased. The purchase of shares of
Class A Common Stock by the International Managers is conditioned upon the
purchase of shares of Class A Common Stock by the U.S. Underwriters, and vice
versa.
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") providing for the
coordination of their activities. The Underwriters are permitted to sell shares
of Class A Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the International Managers and
any dealer to whom they sell shares of Class A Common Stock will not offer to
sell or sell shares of Class A Common Stock to persons who are U.S. or Canadian
persons or to persons they believe intend to resell to persons who are U.S. or
Canadian persons, and the U.S. Underwriters and any dealer to whom they sell
shares of Class A Common Stock, other than in connection with the sale of
certain reserved shares, as described below, will not, other than in connection
with the sale of certain reserved shares, as described below, offer to sell or
sell shares of Class A Common Stock to
I-1
<PAGE> 170
non-U.S. persons or to non-Canadian persons or to persons they believe intend to
resell to non-U.S. persons or non-Canadian persons, except in the case of
transactions pursuant to the Intersyndicate Agreement.
The International Representatives have advised the Company and Iridium that
the International Managers propose initially to offer the shares of Class A
Common Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share of Class A Common Stock. The
International Managers may allow, and such dealers may reallow, a discount not
in excess of $ per share of Class A Common Stock on sales to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
Each International Manager has agreed that (i) it has not offered or sold,
and, for a period of six months following consummation of the Offerings, will
not offer or sell, to persons in the United Kingdom, 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; (ii) it has complied with and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the shares of Class A Common Stock in,
from or otherwise involving the United Kingdom and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of shares of Class A Common Stock to
a person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or is a person to
whom such document may otherwise lawfully be issued or passed on.
At the request of the Company, the U.S. Underwriters have initially
reserved up to 1,000,000 shares of Class A Common Stock for sale at the initial
public offering price set forth on the cover page of this Prospectus to eligible
employees of the Company and Iridium and persons having business relationships
with Iridium. The number of shares of Class A Common Stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be offered
by the Underwriters to the general public on the same basis as other shares
offered hereby. Individuals purchasing reserved shares have agreed, with certain
exceptions, not to sell, offer to sell or otherwise dispose of any shares of
Class A Common Stock, without the prior written consent of Merrill Lynch, for a
period of 180 days after the date of this Prospectus. If in connection with the
sale of the reserved shares the Underwriters are prohibited by law from selling
the reserved shares of Class A Common Stock in any jurisdiction outside the
United States where the Company is permitted by law to sell Class A Common
Stock, the Company may directly sell reserved shares. Such shares would be
included in the 10,000,000 shares being sold pursuant to this Prospectus. If the
Company makes any such sales, no underwriting discount or commission will be
paid to the Underwriters with respect to such shares. The Underwriters have
agreed to reimburse Iridium for certain expenses associated with the Offerings.
The Company has agreed not to, directly or indirectly, (i) offer, pledge,
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 any shares of the Class A Common Stock or any
securities convertible into or exchangeable or exercisable for Class A Common
Stock or file any registration statement under the Securities Act with respect
to any of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Class A Common Stock, whether any such
swap or transaction is to be settled by delivery of Class A Common Stock or
other securities, in cash or otherwise, without the prior written consent of
Merrill Lynch, for a period of 180 days after the date of this Prospectus. The
foregoing restriction does not apply to the shares of common stock to be sold in
the Offerings or under the Company's Global Ownership Program or the Option
Plan. See "Governance of the Company and Relationship with Iridium -- Exchange
Rights of Iridium Members" and "Shares Eligible for Future Sale" for a
discussion of certain limitations on the rights of holders of Interests in
Iridium to exchange such Interests for shares of Class A Common Stock. In
addition, the foregoing restriction does not apply to the issuance of warrants
to purchase shares of Class A Common Stock in connection with any offering of
debt securities of Iridium or its
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<PAGE> 171
subsidiaries; provided that (i) such warrants have a per share exercise price
not lower than the market price of a share of Class A Common Stock on the date
such warrants are issued and (ii) such warrants are not exercisable earlier than
180 days from the date of their issuance.
The Company has granted an option to the International Managers,
exercisable within 30 days after the date of this Prospectus, to purchase up to
300,000 additional shares of Class A Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The International Mangers may exercise this option only to cover
over-allotments, if any, made on the sale of the Class A Common Stock offered
hereby. To the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional shares of Class A Common Stock proportionate to
such International Manager's initial amount reflected in the foregoing table.
The Company also has granted an option to the U.S. Underwriters, exercisable
within 30 days after the date of this Prospectus, to purchase up to an aggregate
of 1,200,000 additional shares of Class A Common Stock to cover over-allotments,
if any, on terms similar to those granted to the International Managers.
Until the distribution of the Class A Common Stock is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Class A Common
Stock. As an exception to these rules, the Representatives are permitted to
engage in certain transactions that stabilize the price of the Class A Common
Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Class A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Offerings, i.e., if they sell more shares of Class A Common
Stock than are set forth on the cover page of this Prospectus, the
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Class A Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Common Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company, Iridium nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Class A Common
Stock. In addition, neither the Company, Iridium nor any of the Underwriters
makes any representation that the Representatives will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock of the Company. The initial public offering price will be
determined through negotiations among the Company, Iridium and the
Representatives. Among the factors that will be considered in determining the
initial public offering price, in addition to prevailing market conditions, are
the current market valuations of publicly traded companies that the
Representatives believe to be reasonably comparable to the Company and Iridium,
certain financial information of the Company and Iridium, the history of, and
the prospects for, the Company and Iridium and the industry in which Iridium
will compete, an assessment of the Company and Iridium management, the past and
present operations of Iridium, the prospects for, and timing of, future revenues
of the Company and Iridium, the present state of Iridium's development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to the Company and Iridium. There
can be no assurance given as to the liquidity of the trading market for the
Class A Common Stock or that an active public market will develop for the Class
A Common Stock or that the
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<PAGE> 172
Class A Common Stock will trade in the public market subsequent to the Offerings
at or above the initial public offering price. If an active public market for
the Class A Common Stock does not develop, the market price and liquidity of the
Class A Common Stock may be adversely affected.
The Class A Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "IRIDF," subject to official notice of
issuance.
The International Managers and the U.S. Underwriters have informed the
Company that they do not intend to confirm sales of the Class A Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The Company and Iridium have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters or their affiliates have provided from time to
time, and may provide in the future, commercial and investment banking services
to the Company and its affiliates, including Iridium and Motorola, for which
such Underwriters or their affiliates have received or will receive fees and
commissions.
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<PAGE> 173
======================================================
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 OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, IRIDIUM OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES OF CLASS A
COMMON STOCK 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 AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY OR IRIDIUM SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 14
The Company and Iridium's Strategic
Investors.................................. 40
Use of Proceeds.............................. 42
Dividend Policy.............................. 42
Dilution..................................... 43
Capitalization............................... 45
Selected Financial Data...................... 46
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 48
Business..................................... 51
Regulation of Iridium........................ 70
Principal Contracts for the Development of
the IRIDIUM System......................... 78
Management................................... 85
Interest Ownership of Certain Beneficial
Owners and Management...................... 99
Certain Relationships and Related
Transactions of Iridium.................... 100
Iridium's Investors, Number of Class 1
Interests Owned, Percentage Ownership and
Principal Gateway Service Territories...... 101
Governance of the Company and Relationship
with Iridium............................... 106
Description of Capital Stock................. 110
Description of Iridium LLC Limited Liability
Company Agreement.......................... 114
Tax Considerations........................... 121
Shares Eligible for Future Sale.............. 125
Underwriting................................. 127
Validity of the Class A Common Stock......... 130
Experts...................................... 130
Available Information........................ 130
Glossary..................................... A-1
Index to Financial Statements................ F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
======================================================
======================================================
10,000,000 SHARES
IRIDIUM WORLD
COMMUNICATIONS LTD.
CLASS A COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN SACHS INTERNATIONAL
, 1997
======================================================
<PAGE> 174
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(S)
The following are the estimated expenses in connection with the
distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $ 73,182
NASD Filing Fee.......................................................... 24,650
Printing and Engraving Expenses.......................................... 200,000
Accounting Fees and Expenses............................................. 100,000
Attorneys' Fees and Expenses............................................. 900,000
Transfer Agent's and Registrar's Fees.................................... 5,000
Blue Sky Fees and Expenses (including attorneys' fees)................... 10,000
Nasdaq Listing Fees...................................................... 50,000
Miscellaneous............................................................ 637,168
----------
Total.......................................................... $2,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bermuda law permits a company to indemnify its directors and officers,
except for any act of fraud or dishonesty. The Company has provided in its
Bye-Laws that the directors and officers of the Company will be indemnified and
secured harmless to the full extent permitted by law out of the assets of the
Company from and against all actions, costs, charges, losses, damages and
expenses incurred by reason of any act done, concurred in or omitted in or about
the execution of their duties or supposed duties, other than in the case of any
fraud or dishonesty. In addition, the Company has provided in its Bye-Laws that
each shareholder of the Company agrees to waive any claim or right of action,
individually or in the right of the Company, against any director or officer of
the Company on account of any action taken by such director or officer, or the
failure of such director or officer to take any action, in the performance of
his duties with or for the Company, other than with respect to any matter
involving any fraud or dishonesty on behalf of such director or officer. The
Bye-Laws of the Company also provide for the advancement of expenses incurred by
any director or officer in defending any action, suit or proceeding prior to the
final disposition of such proceeding; provided such director or officer
undertakes to repay such amount if it shall ultimately be determined that he or
she is not entitled to indemnity by the Company.
Bermuda law also permits the Company to purchase insurance for the benefit
of its directors and officers against any liability incurred by them for the
failure to exercise the requisite care, diligence and skill in the exercise of
their powers and the discharge of their duties, or indemnifying them in respect
of any loss arising or liability incurred by them by reason of negligence,
default, breach of duty or breach of trust.
In the 1997 Share Issuance Agreement, Iridium has agreed to indemnify the
Company and each of its officers, directors and employees against any losses,
claims, damages or liabilities to which the Company or such officers, directors
or employees may become subject except to the extent that any such loss, damage
or liability arises out of or is based upon an intentional act or omission of an
indemnified party which was contrary to any written instruction or request of
Iridium or which amounted to a willful misconduct on the part of any officer,
director, employee or agent of the Company who is not also a full time employee
of Iridium.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Iridium, Inc. (predecessor company to Iridium LLC) sold shares of its
Common Stock, Preferred Stock and Units (as defined below) without registration
under the Securities Act of 1933 as follows:
(1) On July 19, 1993, Iridium, Inc. entered into a Stock Purchase
Agreement (the "1993 Stock Purchase Agreement") with China Great Wall
Industry Corporation, Iridium Africa Corporation, Iridium Canada, Inc.,
Iridium Middle East Corporation, Khrunichev Enterprise, Lockheed
Corporation, Motorola, Inc., Muidiri Investments BVI, Ltd., NIPPON IRIDIUM
Corporation, Raytheon Company,
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<PAGE> 175
Sprint Corporation, STET -- Societa Finanziaria Telefonica per Azioni, and
Thai Satellite Telecommunications Co., Ltd. (collectively, the "Initial
Investors") providing for the purchase and sale of 60,000,000 shares of
Iridium, Inc.'s Common Stock for a cash consideration of $13.33 per share
and giving Iridium, Inc. the option to require the purchasers to purchase
up to an additional 6,000,000 shares of Common Stock for a cash
consideration of $13.33 per share. The 1993 Stock Purchase Agreement also
provided certain parties, including Infrastructure Leasing & Financial
Services Limited ("IL&FS"), options to acquire up to 6,000,000 shares of
Common Stock from Iridium, Inc. at a purchase price of $13.33 per share.
The sales contemplated by the 1993 Stock Purchase Agreement were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
(2) In connection with the sale of Common Stock by Iridium, Inc.
described in (1) above, on July 29, 1993, Motorola was granted a Warrant to
purchase Series M Convertible Preferred Stock of Iridium, Inc. in an amount
equal to 2.5% of the Common Stock at the time of exercise of the Warrant at
a price of $13.33 per share plus certain adjustment factors. The Warrant
was issued in consideration of Motorola's efforts in creating and
developing the concept of the IRIDIUM System and Iridium, Inc.'s technical
and business plans. The issuance of the Warrant was exempt under Section
4(2) of the Securities Act of 1933.
(3) On August 1, 1994, IL&FS exercised its option under a 1993 Stock
Purchase Agreement to acquire 3,000,000 shares of Common Stock at a
purchase price of $13.33 per share. The exercise of this option and the
sale of such shares were exempt under Section 4(2) of the Securities Act of
1933.
(4) On August 15, 1994, Iridium, Inc. entered into a Stock Purchase
Agreement (the "1994 Stock Purchase Agreement") with China Great Wall
Industry Corporation, Iridium Canada, Inc., Khrunichev State Research and
Production Space Center, Motorola, Inc., NIPPON IRIDIUM Corporation,
Pacific Electric Wire & Cable Co., Ltd., STET -- Societa Finanziaria
Telefonica per Azioni, Sprint Corporation and Thai Satellite
Telecommunications Co., Ltd. providing for the purchase and sale of
34,762,500 shares of Common Stock at a purchase price of $13.33 per share.
The sales contemplated by the 1994 Stock Purchase Agreement were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
(5) On August 31, 1994, Iridium, Inc. entered into a Stock Purchase
Agreement with VEBA Telecom GmbH providing for the purchase and sale of up
to 6,695,850 shares of Common Stock at a purchase price of $13.33 per share
plus an interest adjustment payment and gave Iridium, Inc. an option to
require the purchaser to purchase up to an additional 956,550 shares of
Common Stock at a purchase price of $13.33 per share. The sale of shares
pursuant to this Stock Purchase Agreement was exempt under Section 4(2) of
the Securities Act of 1933.
(6) On September 15, 1994, Iridium, Inc. entered into a Stock Purchase
Agreement with IL&FS providing for the purchase and sale of 2,250,000
shares of Common Stock at a purchase price of $13.33 per share. The sale
contemplated by this Stock Purchase Agreement was exempt under Section 4(2)
of the Securities Act of 1933.
(7) On September 19, 1994, Iridium, Inc. entered into a Stock Purchase
Agreement with Iridium SudAmerica Corporation providing for the purchase
and sale of 7,500,000 shares of Common Stock at a purchase price of $13.33
per share plus an interest adjustment payment and gave Iridium, Inc. the
option to require the purchaser to purchase up to an additional 750,000
shares of Common Stock at a purchase price of $13.33 per share. The sale of
shares pursuant to this Stock Purchase Agreement was exempt under Section
4(2) of the Securities Act of 1933.
(8) On September 19, 1994, Iridium, Inc. entered into a Stock Purchase
Agreement with Korea Mobile Telecommunications Corporation providing for
the purchase and sale of 5,250,000 shares of Common Stock at a purchase
price of $13.33 per share plus an interest adjustment payment and gave
Iridium, Inc. the option to require the purchaser to purchase up to an
additional 750,000 shares of Common Stock at a purchase price of $13.33 per
share. The sale of shares pursuant to this Stock Purchase Agreement was
exempt under Section 4(2) of the Securities Act of 1933.
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<PAGE> 176
(9) On February 16, 1996, Iridium, Inc. entered into a Securities
Purchase Agreement with BCE Mobile Communications Inc., The Inamori
Foundation, Iridium Andes Caribe, Ltd., Iridium Brasil Ltda., Khrunichev
State Research and Production Space Center, Korea Mobile Telecommunications
Corporation, Motorola, Inc., Raytheon Company, Sprint Corporation,
STET -- Societa Finanziaria Telefonica per Azioni, Thai Satellite
Telecommunications Co., Ltd. and VEBA Telecom Beteiligungs GmbH providing
for the purchase and sale of: 43,325 shares of 14 1/2% Cumulative
Convertible Preferred Stock at a purchase price of $1,000 per share;
1,377,675 shares of Common Stock at a purchase price of $13.33 per share;
and 480,151 Units, each consisting of a $1,000 Principal Amount of Maturity
14 1/2% Senior Subordinated Discount Notes due 2006 and one warrant to
purchase 10.40775 shares of Common Stock, at a purchase price of $496.62
per Unit (for an aggregate price of $300,146,856). The sale of Common
Stock, Preferred Stock and Units contemplated by the Securities Purchase
Agreement was exempt under Section 4(2) of the Securities Act of 1933.
The issuance of shares of Common Stock provided for in the Stock Purchase
Agreements referred to in items (1) through (8) above took place pursuant to
capital draw schedules provided for in those agreements. The issuance of Common
Stock, Preferred Stock and Units provided for in the Securities Purchase
Agreement referred to in item (9) above took place pursuant to a capital draw
schedule provided for in such agreement. As of July 29, 1996, an aggregate of
120,836,025 shares had been issued under these Stock Purchase Agreements and the
Securities Purchase Agreement (for an aggregate cash consideration of
$1,659,343,000) and no shares remain to be issued pursuant to the capital draw
schedules.
On July 29, 1996, Iridium, Inc. was merged with and into Iridium (the
"Merger"). As a result of the Merger, all shares of Preferred Stock and Common
Stock of Iridium, Inc. were surrendered and Members were issued Interests in
Iridium. The issuance of Interests in the Merger was exempt under Section 4(2)
of the Securities Act of 1933.
On April 30, 1997, Iridium LLC issued 883,125 Class 1 Interests to
Khrunichev State Research and Production Center upon conversion of 13,390 Series
A Class 2 Interests. The issuance of Class 1 Interests in exchange for Series A
Class 2 Interests was exempt under 3(a)(9) of the Securities Act of 1933.
On May 30, 1997, South Pacific Iridium Holdings Limited ("SPI"), an
indirect, wholly owned subsidiary of P.T. Bakrie Communications Corporation,
purchased 7,500,000 Class 1 Interests at $13.33 per Class 1 Interest (for an
aggregate purchase price of $100,000,000). The total aggregate purchase price
will increase to $110,000,000 in the event SPI elects in full its right to defer
payment pursuant to the terms of its purchase agreement with Iridium LLC. The
issuance of Interests pursuant to this agreement is exempt under Section 4(2) of
the Securities Act of 1933.
ITEM 16. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------------------- --------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of U.S. Underwriting Agreement.*
1.2 -- Form of International Underwriting Agreement.*
3.1 -- Memorandum of Association of Iridium World Communications
Ltd.**
3.2 -- Bye-Laws of Iridium World Communications Ltd.*
4.1 -- Form of Class A Common Stock Certificate.**
5.1 -- Opinion of Conyers Dill & Pearman, as to the validity of the
Class A Common Stock.**
8.1 -- Opinion of Conyers Dill & Pearman, as to matters of Bermuda
tax law.**
10.1 -- Limited Liability Company Agreement of Iridium LLC, dated as
of July 29, 1996, as amended.*
10.2 -- Form of Interest Exchange Agreement, between the Company and
Iridium LLC.*
10.3 -- Form of Management Services Agreement between the Company
and Iridium LLC.*
</TABLE>
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<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- -------------------- --------------------------------------------------------------------------
<C> <S> <C>
10.4 -- Form of 1997 Subscription Agreement between the Company and
Iridium LLC.*
10.5 -- Iridium Option Plan.**
10.6 -- Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January
14, 1997.+*
10.7 -- Communications System Operations & Maintenance Contract
between Iridium LLC and Motorola, Inc. effective July 29,
1993, as amended and conformed on January 14, 1997.+**
10.8 -- Terrestrial Network Development Contract between Iridium LLC
and Motorola, Inc. effective January 1, 1993, as amended and
conformed on January 14, 1997.+**
10.9 -- Support Agreement between Iridium and Motorola.**
10.10 -- Agreement, executed as of December 16, 1996, between
Andersen Consulting, LLP and Iridium relating to the
development of business support systems.+*
10.11 -- 14 1/2% Senior Subordinated Discount Notes Due 2006 of
Iridium (contained in Exhibit 10.1).*
10.12 -- Form of Warrant issued in respect of 14 1/2% Senior
Subordinated Discount Notes (contained in Exhibit 10.1).*
10.13 -- Warrant to purchase Series M Class 2 Interests dated July
29, 1993, as amended (contained in Exhibit 10.1).*
10.14 -- Form of Gateway Authorization Agreement.**
10.15 -- Guaranteed Bank Facility.**
10.16 -- Motorola Agreement regarding Guarantee.**
10.17 -- Form of Share Issuance Agreement between the Company and
Iridium LLC.*
11.1 -- Statement re Computation of Per Share Earnings.**
23.1 -- Consent of KPMG Peat Marwick LLP.*
23.2 -- Consent of Conyers Dill & Pearman (contained in Exhibit 5.1
and Exhibit 8.1).**
24.1 -- Power of Attorney.**
27.1 -- Financial Data Schedule.**
99.1 -- Consent of Richard L. Lesher.**
99.2 -- Consent of William A. Schreyer.**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
*** To be filed by Amendment.
+ Confidential treatment requested.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreements, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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 Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnifica-
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<PAGE> 178
tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
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<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 5 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Washington, D.C., on June 5, 1997.
IRIDIUM WORLD COMMUNICATIONS LTD.
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 5 to the 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 and Chief Executive June , 1997
- --------------------------------------------- Officer
Edward F. Staiano
/s/ ROY GRANT Chief Financial Officer and June 5, 1997
- --------------------------------------------- Chief Accounting Officer
Roy Grant
* Deputy Chairman and Director June , 1997
- ---------------------------------------------
Alberto Finol
Director June , 1997
- ---------------------------------------------
Ulf Bohla
/s/ ROBERT W. KINZIE Director June 5, 1997
- ---------------------------------------------
Robert W. Kinzie
* Director June , 1997
- ---------------------------------------------
Yoshiharu Yasuda
/s/ ROY GRANT Authorized Representative in June 5, 1997
- --------------------------------------------- the United States
Roy Grant
*By: /s/ ROBERT W. KINZIE June 5, 1997
- ---------------------------------------------
Robert W. Kinzie
Attorney-in-Fact
</TABLE>
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<PAGE> 180
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 5 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Washington, D.C., on June 5, 1997.
IRIDIUM LLC
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 5 to the Registration Statement has been signed by the
following persons in the capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
/s/ ROBERT W. KINZIE Chairman June 5, 1997
- ---------------------------------------------
Robert W. Kinzie
/s/ EDWARD F. STAIANO Vice Chairman and Chief June 5, 1997
- --------------------------------------------- Executive Officer
Edward F. Staiano
/s/ ROY GRANT Vice President-Treasurer and June 5, 1997
- --------------------------------------------- acting Chief Financial
Roy Grant Officer
/s/ HASAN M. BINLADIN Director June 5, 1997
- ---------------------------------------------
Hasan M. Binladin
/s/ ULF BOHLA Director June 2, 1997
- ---------------------------------------------
Ulf Bohla
/s/ GORDON J. COMERFORD Director June 5, 1997
- ---------------------------------------------
Gordon J. Comerford
Director June , 1997
- ---------------------------------------------
Atilano de Oms Sobrinho
/s/ ROBERT A. FERCHAT Director June 1, 1997
- ---------------------------------------------
Robert A. Ferchat
/s/ ALBERTO FINOL Director June 5, 1997
- ---------------------------------------------
Alberto Finol
/s/ EDWARD GAMS Director June 5, 1997
- ---------------------------------------------
Edward Gams
/s/ LUDWIG HOFFMAN Director June 2, 1997
- ---------------------------------------------
Ludwig Hoffman
/s/ KAZUO INAMORI Director June 5, 1997
- ---------------------------------------------
Kazuo Inamori
</TABLE>
II-7
<PAGE> 181
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
- --------------------------------------------- Director June , 1997
S. H. Khan
Director June , 1997
- ---------------------------------------------
Anatoli I. Kiselev
Director June , 1997
- ---------------------------------------------
George S. Medawar
/s/ JOHN F. MITCHELL Director June 5, 1997
- ---------------------------------------------
John F. Mitchell
Director June , 1997
- ---------------------------------------------
Jung L. Mok
/s/ GIUSEPPE MORGANTI Director June 2, 1997
- ---------------------------------------------
Giuseppe Morganti
/s/ J. MICHAEL NORRIS Director June 5, 1997
- ---------------------------------------------
J. Michael Norris
/s/ YUSAI OKUYAMA Director June 5, 1997
- ---------------------------------------------
Yusai Okuyama
/s/ JOHN M. SCANLON Director June 2, 1997
- ---------------------------------------------
John M. Scanlon
/s/ THEODORE H. SCHELL Director June 5, 1997
- ---------------------------------------------
Theodore H. Schell
/s/ SRIBHUMI SUKHANETR Director June 5, 1997
- ---------------------------------------------
Sribhumi Sukhanetr
Director June , 1997
- ---------------------------------------------
Tao-Tsun Sun
/s/ YOSHIHARU YASUDA Director June 5, 1997
- ---------------------------------------------
Yoshiharu Yasuda
Director June , 1997
- ---------------------------------------------
Wang Mei Yue
</TABLE>
II-8
<PAGE> 182
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ---------- -----------------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of U.S. Underwriting Agreement.*
1.2 -- Form of International Underwriting Agreement.*
3.1 -- Memorandum of Association of Iridium World Communications Ltd.**
3.2 -- Bye-Laws of Iridium World Communications Ltd.*
4.1 -- Form of Class A Common Stock Certificate.**
5.1 -- Opinion of Conyers Dill & Pearman, as to the validity of the Class A
Common Stock.**
8.1 -- Opinion of Conyers Dill & Pearman, as to matters of Bermuda tax
law.**
10.1 -- Limited Liability Company Agreement of Iridium LLC, dated as of July
29, 1996, as amended.*
10.2 -- Form of Interest Exchange Agreement, between the Company and Iridium
LLC.*
10.3 -- Form of Management Services Agreement between the Company and Iridium
LLC.*
10.4 -- Form of 1997 Subscription Agreement between the Company and Iridium
LLC.*
10.5 -- Iridium Option Plan.**
10.6 -- Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January 14,
1997.+*
10.7 -- Communications System Operations & Maintenance Contract between
Iridium LLC and Motorola, Inc. effective July 29, 1993, as amended
and conformed on January 14, 1997.+**
10.8 -- Terrestrial Network Development Contract between Iridium LLC and
Motorola, Inc. effective January 1, 1993, as amended and conformed on
January 14, 1997.+**
10.9 -- Support Agreement between Iridium and Motorola.**
10.10 -- Agreement, executed as of December 16, 1996, between Andersen
Consulting, LLP and Iridium relating to the development of business
support systems.+*
10.11 -- 14 1/2% Senior Subordinated Discount Notes Due 2006 of Iridium
(contained in Exhibit 10.1).*
10.12 -- Form of Warrant issued in respect of 14 1/2% Senior Subordinated
Discount Notes (contained in Exhibit 10.1).*
10.13 -- Warrant to purchase Series M Class 2 Interests dated July 29, 1993,
as amended (contained in Exhibit 10.1).*
10.14 -- Form of Gateway Authorization Agreement.**
10.15 -- Guaranteed Bank Facility.**
10.16 -- Motorola Agreement regarding Guarantee.**
10.17 -- Form of Share Issuance Agreement between the Company and Iridium
LLC.*
11.1 -- Statement re Computation of Per Share Earnings.**
23.1 -- Consent of KPMG Peat Marwick LLP.*
23.2 -- Consent of Conyers Dill & Pearman (contained in Exhibit 5.1 and
Exhibit 8.1).**
24.1 -- Power of Attorney.**
27.1 -- Financial Data Schedule.**
99.1 -- Consent of Richard L. Lesher.**
99.2 -- Consent of William A. Schreyer.**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
*** To be filed by Amendment.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 1.1
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DRAFT 6/3/97
IRIDIUM WORLD COMMUNICATIONS LTD.
(a Bermuda company)
8,000,000 Shares of Class A Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: ________, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
U.S. PURCHASE AGREEMENT...........................................................................................1
SECTION 1. Representations and Warranties.............................................................4
(a) Representations and Warranties by the Company and Iridium.........................................4
(i) Compliance with Registration Requirements............................................4
(ii) Independent Accountants..............................................................5
(iii) Financial Statements.................................................................5
(iv) No Material Adverse Change in Business...............................................6
(v) Good Standing of the Company and Iridium.............................................6
(vi) No Significant Subsidiary............................................................6
(vii) Capitalization.......................................................................7
(viii) Authorization of Agreement...........................................................7
(ix) Authorization and Description of Securities..........................................7
(x) Absence of Defaults and Conflicts....................................................8
(xi) Absence of Labor Dispute.............................................................9
(xii) Absence of Proceedings...............................................................9
(xiii) Accuracy of Exhibits.................................................................9
(xiv) Possession of Intellectual Property..................................................9
(xv) Absence of Further Requirements.....................................................10
(xvi) Possession of Licenses and Permits..................................................10
(xvii) Title to Property...................................................................10
(xviii) Compliance with Cuba Act............................................................11
(xix) Investment Company Act..............................................................11
(xx) Environmental Laws..................................................................11
(xxi) Registration Rights.................................................................11
(xxii) Principal Agreements................................................................12
(xxiii) Governance Agreements...............................................................12
(xxiv) FCC License.........................................................................13
(xxv) Forward Looking Statements..........................................................13
(xxvi) Certain Descriptions................................................................13
(xxvii) Accounting Controls.................................................................13
(b) Officers' Certificates..............................................................14
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing...........................................14
(a) Initial Securities...............................................................................14
(b) Option Securities................................................................................14
(c) Payment..........................................................................................15
(d) Denominations; Registration......................................................................15
SECTION 3. Covenants of the Company..................................................................16
(a) Compliance with Securities Regulations and Commission Requests...................................16
(b) Filing of Amendments.............................................................................16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
(c) Delivery of Registration Statements..............................................................16
(d) Delivery of Prospectuses.........................................................................17
(e) Continued Compliance with Securities Laws........................................................17
(f) Blue Sky Qualifications..........................................................................17
(g) Rule 158.........................................................................................18
(h) Use of Proceeds..................................................................................18
(i) Listing..........................................................................................18
(j) Restriction on Sale of Securities................................................................18
(k) Reporting Requirements...........................................................................19
(l) Compliance with NASD Rules.......................................................................19
(m) Compliance with Rule 463.........................................................................19
(n) Exchange Agreement...............................................................................19
SECTION 4. Covenants of Iridium......................................................................19
(a) Exchange Agreement...............................................................................19
(b) Use of Proceeds..................................................................................19
SECTION 5. Payment of Expenses.......................................................................20
(a) Expenses.........................................................................................20
(b) Termination of Agreement.........................................................................20
SECTION 6. Conditions of U.S. Underwriters' Obligations..............................................21
(a) Effectiveness of Registration Statement..........................................................21
(b) Letter and Opinion of Counsel for the Company and Iridium........................................21
(c) Opinion of Bermuda Counsel for the Company.......................................................21
(d) Opinion of Regulatory Counsel for Motorola Satellite Communications, Inc.........................21
(e) Opinion of Assistant Secretary of the Company and General Counsel of Iridium.....................21
(f) Opinion of Counsel for U.S. Underwriters.........................................................22
(g) Opinion of Regulatory Counsel for the U.S. Underwriters..........................................22
(h) Officers' Certificates...........................................................................22
(i) Accountant's Comfort Letter......................................................................22
(j) Bring-down Comfort Letter........................................................................23
(k) Approval of Listing..............................................................................23
(l) No Objection.....................................................................................23
(m) Motorola Certificate.............................................................................23
(n) Purchase of Initial International Securities.....................................................23
(o) Conditions to Purchase of U.S. Option Securities.................................................23
(p) Transactions.....................................................................................24
(q) Additional Documents.............................................................................24
(r) Termination of Agreement.........................................................................24
(s) Lock-up Agreements...............................................................................25
SECTION 7. Indemnification...........................................................................26
(a) Indemnification of U.S. Underwriters.............................................................26
(b) Indemnification of Company, Iridium, Directors and Officers......................................27
(c) Actions against Parties; Notification............................................................27
(d) Settlement without Consent if Failure to Reimburse...............................................28
(e) Indemnification for Reserved Securities..........................................................28
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 8. Contribution..............................................................................29
SECTION 9. Representations, Warranties and Agreements to Survive Delivery............................30
SECTION 10. Termination of Agreement..................................................................30
(a) Termination; General.............................................................................30
(b) Liabilities......................................................................................31
SECTION 11. Default by One or More of the U.S. Underwriters...........................................31
SECTION 12. Notices...................................................................................32
SECTION 13. Parties...................................................................................32
SECTION 14 Governing Law and Time....................................................................32
SECTION 15 Effect of Headings........................................................................32
SCHEDULES
SCHEDULE A - LIST OF UNDERWRITERS.........................................................SCH A-1
SCHEDULE B - PRICING INFORMATION..........................................................SCH B-1
SCHEDULE C - PERSONS SUBJECT TO LOCK-UP.................................................SCH C - 1
EXHIBITS
EXHIBIT A-1 - FORM OF OPINION OF COMPANY'S AND
IRIDIUM'S COUNSEL......................................................A-1
EXHIBIT A-2 - FORM OF OPINION OF COMPANY'S
BERMUDA COUNSEL........................................................A-4
EXHIBIT A-3 - FORM OF OPINION OF REGULATORY COUNSEL
FOR MOTOROLA SATELLITE COMMUNICATIONS, INC.............................A-7
EXHIBIT A-4 - FORM OF OPINION OF ASSISTANT
SECRETARY AND GENERAL COUNSEL..........................................A-8
EXHIBIT B - FORM OF MOTOROLA CERTIFICATE.....................................................B-1
EXHIBIT C - FORM OF LOCK-UP AGREEMENT........................................................C-1
</TABLE>
-iii-
<PAGE> 5
Draft of June 3, 1997
IRIDIUM WORLD COMMUNICATIONS LTD.
(a Bermuda company)
8,000,000 Shares of Class A Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
________, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman, Sachs & Co.
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Each of Iridium World Communications Ltd., a Bermuda company (the
"Company"), and Iridium LLC, a Delaware limited liability company ("Iridium"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters
named in Schedule A hereto (collectively, the "U.S. Underwriters," which term
shall also include any underwriter substituted as hereinafter provided in
Section 11 hereof), for whom Merrill Lynch, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. are acting as representatives
(in such capacity, the "U.S. Representatives"), with respect to the issue and
sale by the Company and the purchase by the U.S. Underwriters, acting severally
and not jointly, of the respective numbers of shares of Class A Common Stock,
par value $.01 per share, of the Company ("Class A Common Stock") set forth in
said Schedule A, and with respect to the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 1,200,000 additional shares
of Class A Common Stock to cover over-allotments, if any. The aforesaid
8,000,000 shares of Class A Common Stock (the "Initial U.S. Securities") to
<PAGE> 6
be purchased by the U.S. Underwriters and all or any part of the 1,200,000
shares of Class A Common Stock subject to the option described in Section 2(b)
hereof (the "U.S. Option Securities") are hereinafter called, collectively, the
"U.S. Securities."
It is understood that each of the Company and Iridium is concurrently
entering into an agreement dated the date hereof (the "International Purchase
Agreement") providing for the offering by the Company of an aggregate of
2,000,000 shares of Class A Common Stock (the "Initial International
Securities") through arrangements with certain underwriters outside the United
States and Canada (the "International Managers") for which Merrill Lynch
International, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman
Sachs International are acting as lead managers (the "Lead Managers") and the
grant by the Company to the International Managers, acting severally and not
jointly, of an option to purchase all or any part of each International
Manager's pro rata portion of up to 300,000 additional shares of Class A Common
Stock solely to cover overallotments, if any (the "International Option
Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International Option
Securities are hereinafter called, collectively the "International Securities."
It is understood that the Company is not obligated to sell and the U.S.
Underwriters are not obligated to purchase, any Initial U.S. Securities unless
all of the Initial International Securities are contemporaneously purchased by
the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities."
The Underwriters are concurrently entering into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a
public offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to 1,000,000
shares of the Initial U.S. Securities to be purchased by the U.S. Underwriters
(the "Reserved Securities") shall be reserved for sale by the Underwriters to
eligible employees of the Company and Iridium and persons having business
relationships with Iridium, as part of the distribution of the Securities by
the Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. and all other applicable laws, rules and regulations. To the
extent that such Reserved Securities are not orally confirmed for purchase by
such eligible employees of the Company and Iridium and persons having business
relationships with Iridium by the end of the first business day after the date
of this Agreement, such Reserved Securities may be offered to the public as
part of the public offering contemplated hereby. Offers and sales of Reserved
Securities to eligible employees of the
-2-
<PAGE> 7
Company and Iridium and persons having business relationships with Iridium in
the Province of Quebec, Canada will be effected by the U.S. Underwriters or
their affiliates at the request of and as agent of the Company pursuant to
prospectus exemption available in Quebec.
The Company and Iridium have entered into (i) an Interest Exchange
Agreement (the "Exchange Agreement"), (ii) a 1997 Subscription Agreement (the
"1997 Subscription Agreement"), (iii) a Share Issuance Agreement (the "Share
Issuance Agreement") and (iv) a Management Services Agreement (the "Management
Services Agreement" and, collectively with the Exchange Agreement, the 1997
Subscription Agreement, the Share Issuance Agreement and the LLC Agreement (as
defined below), the "Governance Agreements"). On or prior to the Closing Time
(as defined below), (A) pursuant to an amendment to the LLC Agreement, each
Class 1 Membership Interest in Iridium (each a "Class 1 Interest") shall be
subdivided into 75 Class 1 Interests and each warrant and option to purchase
Class 1 Interests, and the conversion price of each limited liability company
interest in Iridium that is or may become convertible into or exchangeable for
Class 1 Interests, shall be adjusted accordingly, (B) Iridium shall issue and
sell to the Company and the Company shall purchase from Iridium Class 1
Interests under the 1997 Subscription Agreement with the proceeds from the
issuance and sale of the Securities as contemplated by this Agreement, the
International Purchase Agreement and the Registration Statement (as defined
below) and (C) the Company shall be admitted as a member of Iridium
(collectively, the "Transactions").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-23419) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). Two forms of prospectus are to be used in connection with the offering
and sale of the Securities: one relating to the U.S. Securities (the "Form of
U.S. Prospectus") and one relating to the International Securities (the "Form
of International Prospectus"). The Form of International Prospectus is
identical to the Form of U.S. Prospectus, except for the front cover and back
cover pages and the information under the caption "Underwriting." The
information included in any such prospectus or in any such Term Sheet, as the
case may be, that was omitted from such registration statement at the time it
became effective but that is deemed to be part of such registration statement
at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is
referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule
434 is referred to as "Rule 434 Information." Each Form of U.S. Prospectus and
Form of International Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including
-3-
<PAGE> 8
the Rule 430A Information and the Rule 434 Information, as applicable, is
herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as
the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final Form of U.S. Prospectus and the final Form of International
Prospectus in the forms first furnished to the Underwriters for use in
connection with the offering of the Securities are herein called the "U.S.
Prospectus" and the "International Prospectus," respectively, and collectively,
the "Prospectuses." If Rule 434 is relied on, the terms "U.S. Prospectus" and
"International Prospectus" shall refer to the preliminary U.S. Prospectus dated
May 9, 1997 and preliminary International Prospectus dated May 9, 1997,
respectively, each together with the applicable Term Sheet and all references
in this Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the U.S. Prospectus, the
International Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and Iridium. Each of
the Company and Iridium jointly and severally represents and warrants to each
U.S. Underwriter as of the date hereof, as of the Closing Time referred to in
Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in
Section 2(b), hereof and agrees with each U.S. Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the Company or Iridium, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any U.S.
Option Securities are purchased, at the Date of Delivery), the
Registration Statement, the Rule 462(b) Registration Statement and any
post-effective amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will 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 the Prospectuses, any preliminary
prospectuses and any supplement thereto or prospectus wrapper prepared
in connection therewith, at their respective times of issuance and at
the Closing Time, complied and will comply in all material respects
with any applicable laws or regulations of foreign jurisdictions in
which the Prospectuses and such preliminary
-4-
<PAGE> 9
prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved
Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time
the Prospectuses or any amendments or supplements thereto were issued
and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), included or will include an
untrue statement of a material fact or omitted or will 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. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became
effective.
Each preliminary prospectus and the prospectuses filed as
part of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the 1933
Act, complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
was identical in all material respects to the electronically
transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T. The
representations and warranties in this subsection (a)(i) shall not
apply to statements in or omissions from the Registration Statement or
the U.S. Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement or the U.S. Prospectus.
(ii) Independent Accountants. The accountants who
certified the financial statement and the consolidated financial
statements included in the Registration Statement are independent
public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iii) Financial Statements. The financial statement and the
consolidated financial statements included in the Registration
Statement and the Prospectuses, together with the related notes,
present fairly the financial position of the Company, 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 the Company, Iridium,
Iridium's predecessor and their respective consolidated subsidiaries
for the periods specified; said financial statement and the
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved, except, in the case
of the interim financial statements, for the absence of complete
footnote disclosure and customary year-end adjustments. The selected
financial data included in the Prospectuses 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 Registration Statement.
-5-
<PAGE> 10
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except for the matters disclosed in
the Registration Statement, (A) there has been no material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company or Iridium,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by
the Company or Iridium, other than those in the ordinary course of
business, which are material with respect to the Company or Iridium,
and (C) except for quarterly, in-kind dividends on the Series A Class
2 Interests in Iridium (the "Series A Interests") in amounts per
Series A Interest that are consistent with the terms of the Series A
Interests and the Limited Liability Company Agreement of Iridium LLC,
dated as of July 29, 1996, as amended as of the date hereof (the "LLC
Agreement"), there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock, or Iridium on any class or series of its limited liability
company interests (its "Interests").
(v) Good Standing of the Company and Iridium. The Company
has been duly incorporated and is validly existing as an exempted
company in good standing under the laws of Bermuda and has all
requisite power and authority to conduct its business as described in
the Prospectuses and to enter into and perform its obligations under
this Agreement; and the Company has been duly qualified as a foreign
company to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
Iridium has been duly formed and is an existing limited
liability company in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its
obligations under this Agreement; and Iridium has been duly qualified
as a foreign limited liability company to transact business and is in
good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(vi) No Significant Subsidiary. Neither the Company
nor Iridium has any "significant subsidiary" as such term is defined
in Rule 1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company are as set forth in the Prospectuses in
the column entitled "Actual" under the caption "Capitalization--The
Company." The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was
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issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
The authorized, issued and outstanding Interests of Iridium
are as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization--Iridium." The issued and
outstanding Interests of Iridium have been duly authorized and validly
issued and are fully paid and non-assessable (except as disclosed in
the Registration Statement under the captions "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"); none of the
outstanding Interests of Iridium was issued in violation of the
preemptive or other similar rights of any member of Iridium. Pursuant
to the LLC Agreement, and in accordance with the Delaware Limited
Liability Company Act (the "Delaware Act"), the Company has waived the
limitation on liability contained in the Delaware Act, provided that
the Company 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.
(viii) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed
and delivered by each of the Company and Iridium.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for
issuance and sale to the U.S. Underwriters pursuant to this Agreement
and the International Managers pursuant to the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to this Agreement and the International Purchase Agreement,
respectively, against payment of the consideration set forth herein
and in the International Purchase Agreement, respectively, will be
validly issued, fully paid and non-assessable; the Class A Common
Stock will conform in all material respects to the descriptions
thereof contained in the Prospectuses; upon full payment of the
consideration therefor no holder of the Securities will be subject to
personal liability by reason of being such a holder; and the issuance
of the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Company.
The Class 1 Interests to be purchased by the Company from
Iridium have been duly authorized for issuance and sale to the Company
pursuant to the 1997 Subscription Agreement and, when issued and
delivered by Iridium pursuant to the 1997 Subscription Agreement
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) fully paid and non-assessable; such Class 1 Interests will
conform in all material respects to the descriptions thereof contained
in the Prospectuses and such descriptions conform to the rights set
forth in the instruments defining the same (except as disclosed in the
Prospectuses under the caption "Description of Iridium LLC Limited
Liability Company
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<PAGE> 12
Agreement--Limitations on Liability"); except as described in the
Prospectuses under the caption "Description of Iridium LLC Limited
Liability Company Agreement--Limitations on Liability," no holder of
such Class 1 Interests will be subject to personal liability by reason
of being such a holder; and the issuance of the Class 1 Interests
pursuant to the 1997 Subscription Agreement 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, the
Company has waived the limitation on liability contained in the
Delaware Act, provided that the Company 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.
(x) Absence of Defaults and Conflicts. Neither the Company
nor Iridium is in violation of its memorandum of association,
bye-laws, certificate of formation or limited liability company
agreement or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement (including the Governance
Agreements) or instrument to which the Company or Iridium is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or Iridium is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the International Purchase Agreement
and the consummation of the transactions contemplated in this
Agreement, the International Purchase Agreement, the Governance
Agreements and in the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the sale
of the Securities as described in the Prospectuses under the caption
"Use of Proceeds") and by the Transactions and compliance by each of
the Company and Iridium with its obligations under this Agreement, the
International Purchase Agreement and the Governance Agreements have
been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or 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 Company or Iridium pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the
provisions of the memorandum of association, bye-laws, certificate of
formation or limited liability company agreement of the Company or
Iridium or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or
Iridium or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition 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 the Company or Iridium.
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<PAGE> 13
(xi) Absence of Labor Dispute. No labor dispute with
the employees of the Company or Iridium exists or, to the knowledge of
the Company or Iridium, is imminent.
(xii) Absence of Proceedings. Except for matters which are
described in the Registration Statement, 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 the Company or Iridium, threatened, against or
affecting the Company or Iridium, which is required to be disclosed in
the Registration Statement, 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 and the International Purchase Agreement or the Transactions
or the performance by, if determined adversely to the Company or
Iridium of its obligations hereunder or thereunder; all pending legal
or governmental proceedings to which the Company or Iridium is a party
or of which any of their respective property or assets is the subject
which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, would not
reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been described and filed as required.
(xiv) Possession of Intellectual Property. Except as
described in the Registration Statement or as would not have a
Material Adverse Effect, Iridium owns or possesses or reasonably
believes it can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, but excluding any required
regulatory licenses or approvals), trademarks, service marks, trade
names or other intellectual property (collectively, "Intellectual
Property"), or that it can contract on reasonable terms with third
parties who can acquire the Intellectual Property necessary to carry
on the business now operated by Iridium or described in the
Registration Statement and neither the Company 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 the Company 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.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company or
Iridium of its obligations hereunder, in connection with the offering,
issuance or sale of the Securities under this Agreement and the
International Purchase
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<PAGE> 14
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement or by the
Transactions, except (i) such as have been already obtained or as may
be required under the 1933 Act or the 1933 Act Regulations and foreign
or state securities or blue sky laws and (ii) such as have been
obtained under the laws and regulations of jurisdictions outside the
United States in which the Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. Except as
disclosed in the Registration Statement 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 the Company 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.
(xvii) Title to Property. The Company owns no real property.
Iridium has good and marketable title to all real property it owns;
and the Company 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 Registration Statement 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 the Company and Iridium, considered as one
enterprise, and under which the Company and Iridium hold properties
described in the Prospectuses, are in full force and effect, and
neither the Company nor Iridium has any notice of any material claim
of any sort that has been asserted by anyone adverse to the rights of
the Company or Iridium under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company 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.
(xviii) Compliance with Cuba Act. The Company has complied
with, and is 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 (collectively, the "Cuba Act") or is
exempt therefrom.
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<PAGE> 15
(xix) Investment Company Act. The Company 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 Prospectuses, will not be, an "investment company" or
an entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xx) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company 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 to 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 the Company or Iridium relating to Hazardous
Materials or any Environmental Laws.
(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or, except as set
forth in the Registration Statement, otherwise registered by the
Company under the 1933 Act.
(xxii) Principal Agreements. Except as disclosed in the
Registration Statement and except as would not reasonably be expected
to have a Material Adverse Effect, to the best of the Company's and
Iridium's knowledge, none of the parties to (i) the Gateway
Authorization Agreements (as defined in the Prospectuses), (ii) the
Space System Contract (as defined in the Prospectuses), (iii) the
Operations and Maintenance Contract (as defined in the Prospectuses),
(iv) the Iridium Business Support System Contract with Andersen
Consulting (the "IBSS Contract"), (v) the Terrestrial Network
Development Contract (as defined in the Prospectus), and (vi) the
Support Agreement between Iridium and Motorola (the "Support
Agreement") (collectively, the foregoing are herein called the
"Principal Agreements"), is in breach of, or in default in the
performance or observance of, any material obligation, term, covenant
or condition contained therein. Each of the Principal Agreements that
the Company has delivered to the U.S. Underwriters is a true
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<PAGE> 16
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 Company's and Iridium's 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 legally valid and
binding agreement of Iridium, enforceable against Iridium in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, 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.
(xxiii) Governance Agreements. Neither the Company nor
Iridium, nor to the best knowledge of the Company and Iridium, 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 the
Company has delivered to the U.S. Underwriters 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 the Company and Iridium has duly and validly
authorized, executed and delivered each of the Governance Agreements
and, to the best of the Company's and Iridium's 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 is a legally valid and
binding agreement of the Company and Iridium, enforceable against the
Company and Iridium in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, 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.
(xxiv) FCC License. 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, as modified, 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).
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<PAGE> 17
(xxv) Forward Looking Statements. The statements (including
the assumptions described therein) included in the Registration
Statement and the Prospectuses 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 the Company with a reasonable basis and reflect
the Company's good faith estimate of the matters described therein.
(xxvi) Certain Descriptions. The statements set forth in the
Prospectuses under the captions "Governance of the Company and
Relationship with Iridium," "Description of Capital Stock" and
"Description of Iridium LLC Limited Liability Company Agreement,"
insofar as they purport to constitute a summary of the terms of the
Class A Common Stock and the Interests, as the case may be, and to
describe the provisions of the laws and documents referred to therein,
and under the captions "Risk Factors--Risks Associated with Licensing
and Spectrum Allocation," "Risk Factors--Risks Associated with
Principal Supply Contracts," "Principal Contracts for the Development
of the Iridium System," "Certain Relationships and Related
Transactions," "Tax Considerations" and "Underwriting," insofar as
they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair in all material
respects.
(xxvii) Accounting Controls. The Company and Iridium maintain
a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles
and to maintain accountability for assets; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or Iridium delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company and Iridium to each U.S. Underwriter
as to the matters covered thereby, but no personal liability therefor shall
attach to the officer providing any such certificate.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to
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<PAGE> 18
each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter,
severally and not jointly, agrees to purchase from the Company, at the price
per share set forth in Schedule B, the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter, plus any
additional number of Initial U.S. Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the U.S.
Underwriters, severally and not jointly, to purchase up to an additional
1,200,000 shares of Class A Common Stock at the price per share set forth in
Schedule B, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial U.S. Securities but not
payable on the U.S. Option Securities. The option hereby granted will expire 30
days after the date hereof and may be exercised in whole or in part from time
to time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial U.S. Securities
upon notice by the Global Coordinator to the Company and Iridium setting forth
the number of U.S. Option Securities as to which the several U.S. Underwriters
are then exercising the option and the time and date of payment and delivery
for such U.S. Option Securities. Any such time and date of delivery for the
U.S. Option Securities (a "Date of Delivery") shall be determined by the Global
Coordinator, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
U.S. Option Securities, each of the U.S. Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of U.S. Option
Securities then being purchased which the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter bears to the
total number of Initial U.S. Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Sullivan & Cromwell, 1701 Pennsylvania Avenue, NW, Washington, DC, 20006 or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 11),
or such other time not later than ten business days after such date as shall be
agreed upon by the Global Coordinator and the Company (such time and date of
payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase
price for, and delivery of certificates for, such U.S. Option Securities shall
be made at the above-mentioned offices, or at such other place as shall be
agreed upon by the Global Coordinator and the Company, on each Date of Delivery
as specified in the notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the U.S. Representatives for
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<PAGE> 19
the respective accounts of the U.S. Underwriters of certificates for the U.S.
Securities to be purchased by them. It is understood that each U.S. Underwriter
has authorized the U.S. Representatives, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Initial U.S.
Securities and the U.S. Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the U.S.
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial U.S. Securities or the U.S. Option Securities, if any, to
be purchased by any U.S. Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such U.S. Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or
the relevant Date of Delivery, as the case may be. The certificates for the
Initial U.S. Securities and the U.S. Option Securities, if any, will be made
available for examination and packaging by the U.S. Representatives in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with
each U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectuses or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
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<PAGE> 20
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the U.S. Underwriters shall object promptly after it
receives copies thereof.
(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each
of the U.S. Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the U.S. Underwriters will be identical in all
material respects to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(d) Delivery of Prospectuses. Subject to paragraph (e), the Company
has delivered to each U.S. Underwriter, without charge, as many copies of each
preliminary prospectus as such U.S. Underwriter reasonably requested, and the
Company hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each U.S. Underwriter, without charge
during the period when the U.S. Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such
number of copies of the U.S. Prospectus (as amended or supplemented) as such
U.S. Underwriter may reasonably request. The U.S. Prospectus and any amendments
or supplements thereto furnished to the U.S. Underwriters will be identical in
all material respects to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the International Purchase Agreement and in the Prospectuses. If at
any time during the nine month period immediately following the time of issue
of the U.S. Prospectus a prospectus is required by the 1933 Act to be delivered
in connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the U.S. Underwriters or for the Company, to amend the Registration Statement
or amend or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time
to amend the Registration Statement or amend or supplement any Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectuses comply with such requirements, and the Company will furnish to the
U.S. Underwriters such number of copies of
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such amendment or supplement as the U.S. Underwriters may reasonably request.
In case any U.S. Underwriter is required to deliver a prospectus in connection
with the sale of U.S. Securities at any time nine months or more after the time
of issue of the U.S. Prospectus, upon request of the U.S. Underwriters but at
the expense of such U.S. Underwriters, the Company agrees to prepare and
deliver to such U.S. Underwriters as many copies as the U.S. Underwriters may
request of an amended or supplemented U.S. Prospectus complying with Section
10(a)(3) of the 1933 Act.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator may designate and
to maintain such qualifications in effect for a period of not less than one
year from the later of the effective date of the Registration Statement and any
Rule 462(b) Registration Statement; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation
or other governmental fees and charges in respect of doing business in any
jurisdiction in which it is not otherwise so subject. In each jurisdiction in
which the Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such jurisdiction to
continue such qualification in effect for a period of not less than one year
from the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds." The Company shall take such steps as
shall be necessary to ensure that the Company shall not become an "investment
company" within the meaning of such term under the 1940 Act and the rules and
regulations thereunder; provided that the Company is not able to control the
occurrence of a "Company Change in Control" or "Reduction in Interest," as such
terms are defined in the LLC Agreement, and the related consequences under the
1940 Act.
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities 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.
(j) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly, offer,
pledge, 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
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otherwise transfer or dispose of any share of Class A Common Stock or any
securities convertible into or exercisable or exchangeable for Class A Common
Stock or file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Class A Common Stock, whether any such
swap or transaction described in clause (i) or (ii) above is to be settled by
delivery of Class A Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to the Securities to be sold
hereunder or under the International Purchase Agreement, the Company's Global
Ownership Program or the Iridium LLC Share Option Plan, each as described in
the Prospectuses. In addition, the foregoing restriction shall not apply to the
issuance of warrants to purchase shares of Class A Common Stock in connection
with any offering of debt securities of Iridium or any of its subsidiaries;
provided, that (i) such warrants have a per share exercise price not lower than
the market price of the Class A Common Stock on the date the warrants are
issued and (ii) such warrants are not exercisable earlier than 180 days from
the date of their issuance.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the 1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.
(m) Compliance with Rule 463. The Company will file with the
Commission such reports on Form SR as may be required pursuant to Rule 463 of
the 1933 Act Regulations.
(n) Exchange Agreement. During a period of 180 days from the date
of the Prospectuses, the Company will not enter into any amendment to, or waive
the application of any provision of, the Exchange Agreement or take any action
that would have any effect similar to the foregoing, in each case if the effect
thereof is to permit exchanges of Class 1 Interests for Class A Stock during
such 180-day period.
SECTION 4. Covenants of Iridium. Iridium covenants and agrees
with each U.S. Underwriter as follows:
(a) Exchange Agreement. During a period of 180 days from the date
of the Prospectuses, Iridium will not enter into any amendment to, or waive the
application of any
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provision of, the Exchange Agreement or take any action that would have any
effect similar to the foregoing.
(b) Use of ProceedsIridium shall apply the proceeds of the sale of
its Class 1 Interests to the Company substantially as set forth in the
Prospectuses.
SECTION 5. Payment of Expenses
(a) Expenses. Iridium will pay all expenses incident to the
performance of the obligations of Iridium and the Company under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's and Iridium's
counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectuses and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. (the "NASD") of the terms
of the sale of the Securities, (x) the fees and expenses incurred in connection
with the inclusion of the Securities in the Nasdaq National Market and (xi) all
costs and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, in connection with matters related to the
Reserved Securities which are designated by Iridium for sale to employees and
others having a business relationship with Iridium. It is understood, however,
that except as provided in this Section, Section 7 and Section 8, the U.S.
Underwriters will pay all of their own costs and expenses, including the fees
and expenses of their counsel, transfer taxes on resale of any of the
securities and any advertising expenses connected with any offers they make.
(b) Termination of Agreement. If this Agreement is terminated by
the U.S. Representatives in accordance with the provisions of Section 6 or
Section 10(a)(i) hereof, Iridium shall reimburse the U.S. Underwriters for all
of their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the U.S. Underwriters.
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SECTION 6. Conditions of U.S. Underwriters' Obligations. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and Iridium
contained in Section 1 hereof or in certificates of any officer of the Company
or Iridium delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).
(b) Letter and Opinion of Counsel for the Company and Iridium. At
Closing Time, the U.S. Representatives shall have received the favorable
opinion and letter, dated as of Closing Time, of Sullivan & Cromwell, counsel
for the Company and Iridium, in form and substance satisfactory to counsel for
the U.S. Underwriters, together with signed or reproduced copies of such
letters for each of the other U.S. Underwriters to the effect set forth in
Exhibit A-1 hereto.
(c) Opinion of Bermuda Counsel for the Company. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Conyers Dill & Pearman, Bermuda counsel for the Company, in
form and substance satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit A-2 hereto.
(d) Opinion of Regulatory Counsel. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Steptoe & Johnson LLP, regulatory counsel for Motorola Satellite
Communications as FCC license holder, in form and substance satisfactory to
counsel for the U.S. Underwriters, together with signed or reproduced copies of
such letter for each of the other U.S. Underwriters to the effect set forth in
Exhibit A-3 hereto.
(e) Opinion of Assistant Secretary of the Company and General
Counsel of Iridium. At Closing Time, the U.S. Representatives shall have
received the favorable opinion, dated as of Closing Time, of F. Thomas Tuttle,
Esq., Assistant Secretary of the Company and General Counsel of Iridium, in
form and substance satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit A-4 hereto.
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<PAGE> 25
(f) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for each
of the other U.S. Underwriters with respect to the matters set forth in clauses
(i) and (iv) and certain portions of the penultimate paragraph of Exhibit A-1
hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of New
York and the federal law of the United States and the Delaware Act, upon the
opinions of counsel satisfactory to the U.S. Representatives. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and Iridium and certificates of public officials.
(g) Opinion of Regulatory Counsel for the U.S. Underwriters. At
Closing Time, the U.S. Representatives shall have received the favorable
opinion, dated as of Closing Time, of Goldberg, Godles, Wiener & Wright,
regulatory counsel for the U.S. Underwriters together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters to such effect as
the U.S. Underwriters may reasonably request.
(h) Officer's Certificates. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company or Iridium, whether or not arising in the
ordinary course of business, and the U.S. Representatives shall have received a
certificate of the President or a Vice President of each of the Company and
Iridium and of the chief financial or chief accounting officer of each of the
Company and Iridium, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties
in Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company or Iridium,
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
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.
(i) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the U.S. Representatives shall have received from KPMG Peat
Marwick LLP a letter dated such date, in form and substance satisfactory to the
U.S. Representatives, together with signed or reproduced copies of such letter
for each of the other U.S. Underwriters containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectuses.
(j) Bring-down Comfort Letter. At Closing Time, the U.S.
Representatives shall have received from KPMG Peat Marwick LLP a letter, dated
as of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (i) of this
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Section (updated to include the final Prospectuses), except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(k) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(l) No Objection. At or prior to Closing Time, the NASD shall
have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(m) Motorola Certificate At Closing Time, the U.S. Representatives
shall have received a certificate, dated as of Closing Time, of the President
or a Vice President of Motorola, Inc., in form and substance satisfactory to
counsel for the U.S. Underwriters, as to the accuracy of the statements
attributed to Motorola in the Prospectuses, and to such other matters relating
to Motorola as counsel for the U.S. Underwriters may reasonably request (a
draft of such certificate is attached as Exhibit B hereto).
(n) Purchase of Initial International Securities. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities under
this Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(o) Conditions to Purchase of U.S. Option Securities. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company and Iridium contained herein and
the statements in any certificates furnished by the Company or Iridium
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the U.S. Representatives shall have received:
(i) Officers' Certificates. A certificate, dated such Date
of Delivery, of the President or a Vice President of
each of the Company and Iridium and of the chief
financial or chief accounting officer of each of the
Company and Iridium confirming that the certificate or
certificates delivered at Closing Time pursuant to
Section 6(h) hereof remain true and correct as of such
Date of Delivery.
(ii) Opinion of Counsel for the Company and Iridium. The
favorable opinion of each of Sullivan & Cromwell,
counsel for the Company and Iridium, Conyers Dill &
Pearman, Bermuda counsel for the Company, Steptoe &
Johnson LLP, regulatory counsel for Motorola Satellite
Communications, Inc. as FCC license holder, and F.
Thomas Tuttle, Assistant Secretary of the Company and
General Counsel of Iridium, each in form and substance
satisfactory to counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S.
Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the
opinions required by Sections 6(b), 6(c), 6(d) and
6(e) hereof, respectively.
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(iii) Opinion of Counsel for U.S. Underwriters. The
favorable opinion of each of Fried, Frank, Harris,
Shriver & Jacobson, counsel for the U.S. Underwriters,
and Goldberg, Godles, Wiener & Wright, regulatory
counsel for the U.S. Underwriters, each dated such
Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinions
required by Sections 6(f) and 6(g) hereof,
respectively.
(iv) Bring-down Comfort Letter. A letter from KPMG Peat
Marwick LLP, in form and substance satisfactory to the
U.S. Representatives and dated such Date of Delivery,
substantially in the same form and substance as the
letter furnished to the U.S. Representatives pursuant
to Section 6(j) hereof, except that the "specified
date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days
prior to such Date of Delivery.
(v) Motorola Certificate. A certificate, dated such Date
of Delivery, of the president or a Vice President of
Motorola, Inc. confirming that the certificate
delivered at Closing Time pursuant to 6(m) hereof
remains true and correct as of such Date of Delivery.
(p) Transactions At or prior to Closing Time, the Transactions
shall have been duly and validly effected and all corporate proceedings and
legal matters incident to the Transactions shall be satisfactory to counsel for
the U.S. Underwriters.
(q) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained.
(r) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after Closing Time, the obligations
of the several U.S. Underwriters to purchase the relevant Option Securities,
may be terminated by the U.S. Representatives by notice to the Company at any
time at or prior to Closing Time or such Date of Delivery, as the case may be,
and such termination shall be without liability of any party to any other party
except as provided in Section 5 and except that Sections 1, 7, 8 and 9 shall
survive any such termination and remain in full force and effect.
(s) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by each of the persons specified on Schedule C hereto.
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SECTION 7. Indemnification.
(a) Indemnification of U.S. Underwriters Each of the Company and
Iridium jointly and severally agrees to indemnify and hold harmless each U.S.
Underwriter and each person, if any, who controls any U.S. Underwriter within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the supplement
or prospectus wrapper material distributed in Argentina, Brazil,
Canada, Hong Kong, Indonesia, Japan, Korea, the United Kingdom and
Venezuela in connection with the reservation and sale of the Reserved
Securities to eligible employees of the Company and Iridium and
persons having business relationships with Iridium or the omission or
alleged omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the
Prospectuses or preliminary prospectuses, not misleading; (iii)
against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission or in connection with
any violation of the nature referred to in Section 7(a)(ii)(A) hereof;
provided that (subject to Section 7(d) below) any such settlement is
effected with the written consent of the Company and Iridium; and
(iii) against any and all expense whatsoever, as incurred
(including subject to Section 7(c) hereof, the reasonable fees and
disbursements of counsel chosen by Merrill Lynch), reasonably incurred
in investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred to
in Section 7(a)(ii)(A) hereof, to the extent that any such expense is
not paid under (i), or (ii) or (iii) above;
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provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto); and
provided, further, that neither Iridium nor the Company will be liable to an
Underwriter with respect to any preliminary prospectus to the extent that
Iridium or the Company shall sustain the burden of proving that any such loss,
liability, claim, damage or expense resulted from the fact that such
Underwriter in contravention of a requirement of this Agreement or applicable
law, sold Securities to a person to whom such Underwriter failed to send or
give, at or prior to Closing Time, a copy of the U.S. Prospectus as then
amended or supplemented if the Company has previously furnished copies thereof
(sufficiently in advance of Closing Time to allow for distribution by Closing
Time) to the Underwriter and the loss, liability, claim, damage or expense of
such Underwriter resulted from an untrue statement or omission or alleged
untrue statement or omission of a material fact contained in or omitted from
the preliminary prospectus which was corrected in the U.S. Prospectus as, if
applicable, amended or supplemented prior to Closing Time.
(b) Indemnification of Company, Iridium, Directors and Officers.
Each U.S. Underwriter severally agrees to indemnify and hold harmless the
Company and Iridium, their directors, each of their officers who signed the
Registration Statement, and each person, if any, who controls the Company or
Iridium within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 7(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Company and
Iridium. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the
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indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 7 or Section 8 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) or Section 7(a)(iii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) Indemnification for Reserved Securities. In connection with
the offer and sale of the Reserved Securities, each of the Company and Iridium
jointly and severally agrees, promptly upon a request in writing, to indemnify
and hold harmless the Underwriters from and against any and all losses,
liabilities, claims, damages and expenses incurred by them as a result of (i)
the failure of eligible employees of the Company and Iridium and persons having
business relationships with Iridium to pay for and accept delivery of Reserved
Securities which, following the effectiveness of the Registration Statement,
were subject to a properly confirmed agreement to purchase and (ii) the
violation of any securities laws of foreign jurisdictions in connection with
any offer and/or sale of Reserved Securities (including, without limitation,
all regulations governing Merrill Lynch International in its capacity as
"authorized person" under the Financial Services Act in the United Kingdom).
-26-
<PAGE> 31
SECTION 8. Contribution. If the indemnification provided for in
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Iridium on the one hand and the U.S. Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) 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 Company and Iridium
on the one hand and of the U.S. Underwriters on the other hand in connection
with the statements or omissions, or in connection with any violation of the
nature referred to in Section 7(a)(ii)(A) hereof, which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and Iridium on the one
hand and the U.S. Underwriters on the other hand in connection with the
offering of the U.S. Securities pursuant to this Agreement shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the U.S. Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received
by the U.S. Underwriters, in each case as set forth on the cover of the U.S.
Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the U.S.
Securities as set forth on such cover.
The relative fault of the Company and Iridium on the one hand and the
U.S. Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company and Iridium or by the U.S. Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission or any violation of the nature
referred to in Section 7(a)(ii)(A) hereof.
The Company, Iridium and the U.S. Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the U.S. Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 8. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
8 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the
-27-
<PAGE> 32
amount of any damages which such U.S. Underwriter has otherwise been required
to pay by reason of any such 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 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company or Iridium, each officer of the
Company or Iridium who signed the Registration Statement, and each person, if
any, who controls the Company or Iridium within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The U.S. Underwriters' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the number
of Initial U.S. Securities set forth opposite their respective names in
Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or Iridium submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any U.S. Underwriter or
controlling person, or by or on behalf of the Company or Iridium, and shall
survive delivery of the Securities to the U.S. Underwriters.
SECTION 10. Termination of Agreement.
(a) Termination; General. The U.S. Representatives may terminate
this Agreement, by notice to the Company, at any time at or prior to Closing
Time (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the U.S.
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and Iridium considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
U.S. Representatives, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in any securities
of the Company has been suspended or materially limited by the Commission or
the Nasdaq National Market or Bermuda, or if trading generally on the American
Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market
has been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
-28-
<PAGE> 33
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof, and provided further that
Sections 1, 7, 8 and 9 shall survive such termination and remain in full force
and effect.
SECTION 11. Default by One or More of the U.S. Underwriters. If
one or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the U.S. Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting U.S. Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the U.S. Representatives shall not have completed such arrangements within such
24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the number of U.S. Securities to be purchased on such date,
each of the non-defaulting U.S. Underwriters shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting U.S.
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the number of U.S. Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the U.S. Underwriters to purchase
and of the Company to sell the Option Securities to be purchased and
sold on such Date of Delivery shall terminate without liability on the
part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the U.S. Underwriters to purchase and the Company to sell the
relevant U.S. Option Securities, as the case may be, either the U.S.
Representatives or the Company shall have the right to postpone Closing Time or
the relevant Date of Delivery, as the case may be, for a period not exceeding
seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "U.S. Underwriter" includes any person substituted for a U.S.
Underwriter under this Section 11.
SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
U.S. Underwriters shall be directed to the U.S. Representatives at North Tower,
World Financial Center, New York, New York 10281-1201, attention of __________;
notices to the Company shall be directed to it at Clarendon House, 2 Church
Street, Hamilton HM 11, Bermuda, attention of the Secretary (with a copy to
Iridium);
-29-
<PAGE> 34
and notices to Iridium shall be directed to it at 1575 Eye Street, N.W.,
Washington D.C. 20006, attention of General Counsel.
SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the U.S. Underwriters, the Company and Iridium
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company and Iridium and
their respective successors and the controlling persons and officers and
directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the U.S. Underwriters, the Company and Iridium and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
-30-
<PAGE> 35
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the U.S. Underwriters, the Company and Iridium in accordance
with its terms.
Very truly yours,
IRIDIUM WORLD COMMUNICATIONS
LTD.
By:
----------------------------------
Name:
Title:
IRIDIUM LLC
By:
----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
------------------------------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
-31-
<PAGE> 36
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................................
Donaldson, Lufkin & Jenrette
Securities Corporation.........................................................
Goldman, Sachs & Co.....................................................................
Total...................................................................................
</TABLE>
SCH-A-1-
<PAGE> 37
SCHEDULE B
IRIDIUM WORLD COMMUNICATIONS LTD.
8,000,000 Shares of Class A Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__________.
2. The purchase price per share for the U.S. Securities to be paid
by the several U.S. Underwriters shall be $__________, being an amount equal to
the initial public offering price set forth above less $__________ per share;
provided that the purchase price per share for any U.S. Option Securities
purchased upon the exercise of the over-allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S.
Securities but not payable on the U.S. Option Securities.
SCH-B-1-
<PAGE> 38
SCHEDULE C
List of Persons Subject to Lock-up
Robert W. Kinzie
Edward F. Staiano
Leo Mondale
SCH-B-1-
<PAGE> 39
Exhibit A-1
FORM OF OPINION OF COMPANY'S AND IRIDIUM'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 6(b)
(i) Iridium has been duly formed and is an existing limited
liability company in good standing under the laws of the State of
Delaware, with all requisite limited liability company power and
authority to own its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its
obligations under the U.S. Purchase Agreement, the International
Purchase Agreement and the 1997 Governance Agreements.
(ii) Iridium has been duly qualified as a foreign limited
liability company to transact business and is in good standing under
the laws of each jurisdiction set forth in an officer's certificate
delivered to you on the Closing Date specifying the jurisdictions in
which Iridium owns or leases properties or conducts any business (such
counsel shall have no responsibility for the matters set forth in such
officer's certificate and such counsel shall be entitled to rely in
respect of the opinion in this clause upon opinions of local counsel
and in respect of matters of fact upon certificates of officers of
Iridium).
(iii) The LLC Agreement provides for the issuance of up to
250,000,000 Class 1 Interests, 50,000 Series M Class 2 Interests and
300,000 additional Class 2 Interests, of which ______, ______ and
______ have been authorized for issuance. The outstanding limited
liability company interests of Iridium (i) are shown as outstanding
under "Actual" in the Prospectus under the caption
"Capitalization-Iridium" (ii) have been duly authorized and validly
issued and are fully paid and non-assessable.
(iv) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by
Iridium.
(v) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Company or Iridium
under the Federal laws of the United States, the laws of the State of
New York and the Limited Liability Company Act of the State of
Delaware for the issuance, sale and delivery of the Securities by the
Company to the Underwriters have been obtained or made; provided,
however, that, for purposes of this clause (v), such counsel shall
express no opinion with respect to Federal or state communications
laws.
(vi) The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement, the 1997 Subscription
Agreement and the consummation of the transactions herein and therein
contemplated (including the issuance and sale of the Securities, and
the use of the proceeds from the sale of the Securities as described
in the Prospectuses under the caption "Use Of Proceeds") do not and
will not (i) violate, conflict with or result in a breach or violation
of any of the terms or provisions of, or consitute a default under,
the Principal Agreements nor will such action result in
A-1-
<PAGE> 40
any violation of the provisions of the certificate of formation or
limited liability company agreement of Iridium or (ii) violate any
Federal law of the United States or the laws of the State of New York
or the Limited Liability Company Act of the State of Delaware, in each
case applicable to Iridium; provided, however, that, for purposes of
this paragraph (vi), such counsel shall express no opinion with
respect to Federal or state securities laws, other antifraud laws,
fraudulent transfer laws or communications laws; provided, further,
that such counsel shall express no opinion as to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights or with respect to any provision of such agreements
purporting to require indemnification of, or contribution to, the
losses, damages, claims, expenses or liability of any person.
(vii) The Company is not, and upon the issuance and sale of
the Securities as contemplated in the Purchase Agreements and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" as such term is
defined in the 1940 Act.
Such counsel shall also furnish you with a letter to the effect
that as counsel to the Company and Iridium, they reviewed the
Registration Statement and the Prospectuses, participated in
discussions with representatives of the Underwriters, the Company,
Iridium and their accountants, Motorola and the Company's Bermuda
counsel and advised the Company and Iridium as to the requirements of
the 1933 Act and the applicable rules and regulations thereunder;
between the effectiveness of the registration statement and Closing
Time, such counsel participated in further discussions with
representatives of the Underwriters, the Company, Iridium and their
accountants, and Motorola, in which the contents of certain portions
of the Prospectuses and related matters were discussed, and reviewed
certain documents filed by the Company with the Commission,
certificates of certain officers of the Company, an opinion addressed
to the Underwriters from Steptoe & Johnson and a letter from the
Company's and Iridium's independent accountants; on the basis of the
information that such counsel gained in the course of the performance
of the services referred to above, considered in the light of such
counsel's understanding of the applicable law and the experience such
counsel has gained through their practice under the 1933 Act, such
counsel will confirm to you that in such counsel's opinion, the
Registration Statement, as of its effective date, and the
Prospectuses, as of the date of the Prospectuses, appeared on their
face to be appropriately responsive in all material respects to the
requirements of the 1933 Act and the 1933 Act Regulations; further,
nothing that came to such counsel's attention in the course of such
review has caused such counsel to believe that the Registration
Statement, as of its effective date, and the Prospectuses, as of such
effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; or that the
Prospectuses, as of the date of the Prospectuses contained any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading; also, nothing
that has come to such counsel's attention in the course of the
A-2-
<PAGE> 41
procedures described in the second clause of this paragraph has caused
such counsel to believe that the Prospectuses, as of the Closing Time,
contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements therein in
the light of the circumstances under which they were made, not
misleading; in addition, such counsel shall state that such counsel
does not know of any litigation or any governmental proceeding
instituted or threatened against the Company or Iridium that would be
required to be disclosed in the Prospectuses and is not so disclosed
and that such counsel does not know of any documents that would be
required to be filed as exhibits to the Registration Statement and are
not so filed or of any documents that are required to be summarized in
the Prospectuses and are not so summarized; such counsel shall state
that the limitations inherent in the independent verification of
factual matters and the character of determinations involved in the
registration process are such, however, that such counsel does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectuses except for those made under the captions "Risk
Factors-Risks Associated with Principal Supply Contracts," "Risk
Factors - Risk of Loss of Management Rights Upon Change of Control,"
"Risk Factors - Risks Related to the Investment Company Act of 1940,"
"Risk Factors - Tax Consequences Related to Passive Foreign Investment
Companies," "Principal Contracts for the Development of the Iridium
System," "Governance of the Company and Relationship with Iridium,"
"Description of Iridium LLC Limited Liability Company Agreement" and
"Tax Considerations,", in the Prospectuses insofar as they relate to
provisions of law or documents therein described; also, such counsel
need express no opinion or belief as to (i) the financial statements
or other financial data contained in the Registration Statement or the
Prospectuses (including any financial projections) and (ii) the
description of statutes, regulations, proceedings or matters referred
to in Section 6(d) of the Purchase Agreement.
In rendering such opinion and letter, such counsel shall
state that they express no opinion as to the laws of any jurisdiction
other than the Federal laws of the United States, the laws of the
State of New York and the Limited Liability Company Act of the State
of Delaware. In rendering such opinion, such counsel may (A) rely as
to matters involving the application of the laws of Bermuda, upon the
opinion of Conyers Dill & Pearman, Bermuda counsel to the Company
(which opinion shall be dated and furnished to the U.S.
Representatives at Closing Time, shall be satisfactory in form and
substance to counsel for the U.S. Underwriters and shall expressly
state that the U.S. Underwriters may rely on such opinion as if it
were addressed to them), provided that Sullivan & Cromwell shall state
in their opinion that they believe that they and the U.S. Underwriters
are justified in relying upon such opinion, and (B) rely as to matters
of fact (but not as to legal conclusions), to the extent they deem
proper, on information obtained from public officials or certificates
of responsible officers of Iridium and the Company and other sources
believed by such counsel to be responsible and (C) assume that the
signatures on all documents examined by such counsel are genuine
(which assumption such counsel need not independently verify).
A-3-
<PAGE> 42
Exhibit A-2
FORM OF OPINION OF COMPANY'S BERMUDA
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 6(c)
(i) The Company has been duly incorporated and is validly
existing as an exempted company under the laws of Bermuda and is in
good standing (meaning that it has not failed to make any required
filing with any Bermuda governmental authority or to pay any Bermuda
government fee or tax the failure of which might make it liable to be
struck off the Register of Companies and thereby cease to exist under
the laws of Bermuda) under the laws of Bermuda.
(ii) The Company has all requisite corporate power and authority
necessary to own or hold its respective properties and conduct its
business as described in the Registration Statement and the
Prospectuses.
(iii) Based solely upon the Certified Register, the minutes,
resolutions, memorandum of association and bye-laws of the Company
which we have examined, the authorized capitalisation of the Company
as of [ ] 1997 is as set forth in the column entitled "Actual" under
"Capitalization-the Company" in the Prospectus and all shares of the
Company's issued and outstanding Common Stock requiring authorization
for issuance by the Company's Board of Directors have been duly
authorised and, to such counsel's knowledge after due inquiry, are
validly issued, fully paid and non-assessable (which term when used
herein shall mean no further sums are required to be paid by the
holders thereof in connection with the issue of such shares) and
conform as to legal matters to the description thereof contained in
the Prospectus.
(iv) The shares of Common Stock to be purchased by the U.S. and
the International Managers from the Company pursuant to the Purchase
Agreements, and the shares of Common Stock issuable upon exercise of
options granted to the U.S. Underwriters and the International
Managers to cover over-allotments, if any, have been duly authorised
for issuance and sale and upon issuance and delivery by the Company in
accordance with the terms of such Purchase Agreement against payment
in full of the consideration set forth in such Purchase Agreements
will be duly and validly issued, fully paid and non-assessable and
will not be issued in violation of the preemptive rights of any
shareholders of the Company.
(v) The Company has the necessary corporate power and authority
to enter into and perform its obligations under the Documents. The
execution and delivery of the Documents and the performance of the
obligations therein set forth and the consummation of the transactions
therein contemplated, will not result in a breach or violation of, or
constitute a default under the Memorandum of Association, or Bye-laws
or any of the other Documents, or in violation of any material order,
rule, regulation, writ,
A-4-
<PAGE> 43
injunction, or decree of any government, governmental instrumentality
or court in Bermuda the effect of any which breach, violation or
default would have a material adverse effect on the Company.
(vi) The Company has taken all corporate action required to
authorise its execution and delivery of the Documents and the
performance of its obligations under the Documents in accordance with
their respective terms. The Documents have been duly and validly
authorised and executed by or on behalf of the Company and each
constitutes the legal, valid and binding obligations of the Company
enforceable against it in accordance with its respective terms and
upon delivery will be duly and validly delivered.
(vii) To the best of our knowledge, no order, consent, approval,
licence, authorisation or validation of or exemption by any government
or public body or authority of Bermuda or any sub-division thereof is
required to authorise or is required in connection with the execution
and delivery by the Company of the Documents, the performance and
enforcement of its obligations thereunder or the conduct of its
business as described in the Prospectus except that permission of the
Bermuda Monetary Authority is required to the issue of the shares of
Common Stock and such permission has been obtained. The issuance and
sale of the shares of the Common Stock is in compliance with all
applicable requirements in Bermuda.
(vii) It is not necessary or advisable, in order to ensure their
enforceability in Bermuda, that the Documents be registered in any
register kept by, or filed with, any governmental authority or
regulatory body in Bermuda.
(viii) The Share Certificates evidencing the shares of Common
Stock are in valid and proper legal form and conform with the
requirements of Bermuda law.
(x) Based solely on a search of the Cause Book of the Supreme
Court of Bermuda conducted at 10:00 am on [ ], 1997 there are no
pending or threatened legal or governmental proceedings to which the
Company is a party which could materially adversely affect the
business, property, financial condition or operations of the Company,
or which question the validly of the shares of Common Stock, the
Documents, or of any action taken or to be taken by the Company
pursuant to the Documents; and no such proceedings are known to us to
be contemplated against the Company.
(xi) The statements in the Registration Statement under the
caption "Risk Factors-Risk Associated with Incorporation under Bermuda
law" and "Description of Capital Stocks" have been reviewed by us and
insofar as they refer to descriptions of agreements, statements of
law, descriptions of statutes, licences, rules or regulations or legal
conclusions of Bermuda, are correct in all material respects.
A-5-
<PAGE> 44
Exhibit A-3
FORM OF OPINION OF REGULATORY COUNSEL TO
MOTOROLA SATELLITE COMMUNICATIONS, INC. AS FCC
LICENSE HOLDER TO BE DELIVERED PURSUANT TO
SECTION 6(d)
(i) The information in the Prospectuses under "Risk
Factors--Risks Associated with Licensing and Spectrum Allocation" and
"Regulation of Iridium," accurately summarize in all material respects
the status of all material FCC licenses, permits, approvals and other
FCC authorizations granted to Motorola Satellite Communications, Inc.
with respect to the provision of satellite services via the IRIDIUM
System in the United States as described therein.
(ii) To the best of such counsel's knowledge, Motorola Satellite
Communications, Inc.: (a) is in substantial compliance with the
Communications Act of 1934, as amended, and the rules and regulations
of the FCC promulgated thereunder as they relate to the FCC licenses,
permits, approvals and authorizations referred to in clause (i) above,
and (b) has made all material filings, reports, applications and
submissions required thereunder as they relate to the FCC licenses,
permits, approvals and authorizations referred to in clause (i) above,
except as indicated in the Registration Statement, which filings,
reports, applications and submissions, to the best of such counsel's
knowledge, are true, complete and correct in all material respects.
(iii) No consent, approval, authorization or order of the FCC is
required to be obtained by Motorola Satellite Communications, Inc. in
connection with the authorization, issuance, sale or delivery of the
Securities by Iridium.
(iv) Nothing has come to such counsel's attention that has caused
such counsel to believe that the descriptions relating solely to the
allocation of spectrum in the United States and to the licensing of
the Iridium System in the United States contained under the captions
"Regulation of Iridium" and "Risk Factors--Risks Associated with
Licensing and Spectrum Allocation" of the Registration Statement,
contain any untrue statements of a material fact or omit to state a
material fact necessary to make such descriptions not misleading.
(v) The FCC has authorized Motorola Satellite Communications,
Inc. to construct a mobile satellite system capable of operating in
the 1616-1626.5 MHz frequency bands, consistent with the technical
specifications set forth in its application, as modified, the FCC's
rules (unless specifically waived) and the conditions set forth in the
FCC's Order and Authorization (DA 95-131), released January 31, 1995,
erratum (DA 95-372, released February 28, 1995), as affirmed by FCC
96-279, released June 27, 1996; Order and Authorization (DA 96-1789),
released October 30, 1996; provided, however,
A-6-
<PAGE> 45
that such authorizations are subject to modification, stay or
revocation through appeals or reconsideration within the FCC or the
courts.
A-7-
<PAGE> 46
Exhibit A-4
FORM OF OPINION OF ASSISTANT SECRETARY
OF THE COMPANY AND GENERAL COUNSEL OF IRIDIUM
TO BE DELIVERED PURSUANT TO
SECTION 6(e)
(i) Except as described in the Prospectuses, the Company has not
granted any outstanding options, warrants or commitments with respect
to any shares of the capital stock of the Company, whether issued or
unissued; except as described in the Prospectuses, Iridium has not
granted any warrants, rights or options with respect to the limited
liability company interests of Iridium.
(ii) The Governance Agreements have been duly authorized,
executed and delivered by Iridium.
(iii) To the best of my knowledge, Iridium is not in violation of
its Certificate of Formation or Limited Liability Company Agreement
and no default by Iridium exists in the due performance or observance
of any material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectuses or filed or incorporated by
reference as an exhibit to the Registration Statement.
(iv) The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement, the 1997 Subscription
Agreement and the consummation of the transactions herein and therein
contemplated (including the issuance and sale of the Securities, and
the use of the proceeds from the sale of the Securities as described
in the Prospectuses under the caption "Use Of Proceeds") do not and
will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Purchase
Agreements) under any contract, indenture, mortgage, deed of trust,
loan or credit agreement, any other agreement or instrument, known to
such counsel, to which the Company or Iridium is a party or by which
it or any of them may be bound, or to which any of the property or
assets of the Company or Iridium is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not have a Material Adverse Effect).
(v) Except as described in the Registration Statement, there are
no persons with registration rights or other similar rights to have
any securities registered pursuant to the Registration Statement or
otherwise registered by Iridium under the 1933 Act.
(vi) Iridium has duly and validly authorized, executed and
delivered each of the Principal Agreements to which it is a party and,
assuming due authorization,
A-8-
<PAGE> 47
execution and delivery by the other parties to the Principal
Agreements, each of the Principal Agreements is a legally valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles or with respect to any provision of such agreements
purporting to require indemnification of, or contribution to, the
losses, damages, claims, expenses or liability of any person.
(vii) Each of the Company and Iridium has duly and validly
authorized, executed and delivered each of the Governance Agreements
and, assuming due authorization, execution and delivery by the other
parties to the Governance Agreements, each of the Governance
Agreements is a legally valid and binding agreement of the Company and
Iridium, enforceable against the Company and Iridium in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(viii) Except as disclosed in the Registration Statement, to the
best of my knowledge, there is not pending or threatened any action,
suit, proceeding, inquiry or investigation, to which the Company or
Iridium is a party, or to which the property of the Company or Iridium
is subject, before or brought by any court or governmental agency or
body, domestic or foreign, 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 the
U.S. Purchase Agreement, the International Purchase Agreement or the
1997 Subscription Agreement or the performance by the Company or
Iridium of their obligations thereunder or the consummation of the
Transactions.
In rendering such opinion, such counsel shall state that such
counsel expresses no opinion as to the laws of any jurisdiction other
than the Federal laws of the United States and the Limited Liability
Company Act of the State of Delaware. In rendering such opinion, such
counsel may rely (A) as to matters involving the application of the
laws of Bermuda, upon the opinion of Conyers Dill & Pearman, Bermuda
counsel to the Company (which opinion shall be dated and furnished to
the U.S. Representatives at Closing Time, shall be satisfactory in
form and substance to counsel for the U.S. Underwriters and shall
expressly state that the U.S. Underwriters may rely on such opinion as
if it were addressed to them), and (B), as to matters of fact (but not
as to legal conclusions), to the extent he deems proper, on
information obtained from public officials or certificates of
responsible officers of Iridium and the Company and other sources
believed by such counsel to be responsible and (C) assume that the
signatures on all documents examined by such counsel (other than those
of officers or directors of Iridium or the Company) are genuine (which
assumption such counsel need not independently verify).
A-9-
<PAGE> 48
Exhibit C
____________ , 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman, Sachs & Co.
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman Sachs International
as Lead Manager(s) of the several International Managers
c/o Merrill Lynch International
20 Farringdon Road
London ECIM 3NH
England
Re: Proposed Public Offering by Iridium World Communications Ltd.
Dear Sirs:
The undersigned, a stockholder of Iridium World Communications Ltd, a
Bermuda company (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. propose to
enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the
Company providing for the public offering of shares (the "Securities") of the
Company's Class A common stock, par value $.01 per share (the "Class A Common
Stock"). In recognition of the benefit that such an offering will confer upon
the undersigned as a stockholder of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
U.S. Purchase Agreement that, during a period of 180 days from the date of the
U.S. Purchase Agreement, the undersigned will not, without the prior written
consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to
C-1-
<PAGE> 49
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of the
Company's Class A Common Stock or any securities convertible into or
exchangeable or exercisable for Class A Common Stock, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition, or file any registration
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Class A Common Stock, whether any such
swap or transaction is to be settled by delivery of Class A Common Stock or
other securities, in cash or otherwise.
Very truly yours,
Signature:
----------------------------
Print Name:
----------------------------
C-2-
<PAGE> 1
EXHIBIT 1.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DRAFT 6/3/97
IRIDIUM WORLD COMMUNICATIONS LTD.
(a Bermuda company)
2,000,000 Shares of Class A Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: __________, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
INTERNATIONAL PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 4
(a) Representations and Warranties by the Company and Iridium . . . . 4
(i) Compliance with Registration Requirements . . . . . . . 4
(ii) Independent Accountants . . . . . . . . . . . . . . . . 5
(iii) Financial Statements . . . . . . . . . . . . . . . . . 5
(iv) No Material Adverse Change in Business . . . . . . . . 6
(v) Good Standing of the Company and Iridium . . . . . . . 6
(vi) No Significant Subsidiary . . . . . . . . . . . . . . . 6
(vii) Capitalization . . . . . . . . . . . . . . . . . . . . 6
(viii) Authorization of Agreement . . . . . . . . . . . . . . 7
(ix) Authorization and Description of Securities . . . . . . 7
(x) Absence of Defaults and Conflicts . . . . . . . . . . . 8
(xi) Absence of Labor Dispute . . . . . . . . . . . . . . 9
(xii) Absence of Proceedings . . . . . . . . . . . . . . . . 9
(xiii) Accuracy of Exhibits . . . . . . . . . . . . . . . . . 9
(xiv) Possession of Intellectual Property . . . . . . . . . . 9
(xv) Absence of Further Requirements . . . . . . . . . . . . 9
(xvi) Possession Licenses and Permits . . . . . . . . . . . . 10
(xvii) Title to Property . . . . . . . . . . . . . . . . . . . 10
(xviii) Compliance with Cuba Act . . . . . . . . . . . . . . . 11
(xix) Investment Company Act . . . . . . . . . . . . . . . . 11
(xx) Environmental Laws . . . . . . . . . . . . . . . . . . 11
(xxi) Registration Rights . . . . . . . . . . . . . . . . . . 11
(xxii) Principal Agreements . . . . . . . . . . . . . . . . . 11
(xxiii) Governance Agreements . . . . . . . . . . . . . . . . . 12
(xxiv) FCC License . . . . . . . . . . . . . . . . . . . . . . 13
(xxv) Forward Looking Statements . . . . . . . . . . . . . . 13
(xxvi) Certain Descriptions . . . . . . . . . . . . . . . . . 13
(xxvii) Accounting Controls . . . . . . . . . . . . . . . . . . 13
(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. Sale and Delivery to International Managers; Closing. . . . . . . . . . 14
(a) Initial Securities . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Option Securities . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Denominations; Registration . . . . . . . . . . . . . . . . . . . 15
SECTION 3. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Compliance with Securities Regulations and Commission Requests . . 15
(b) Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Delivery of Registration Statements . . . . . . . . . . . . . . . 16
(d) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . . . . 16
(e) Continued Compliance with Securities Laws . . . . . . . . . . . . 17
(f) Blue Sky Qualifications . . . . . . . . . . . . . . . . . . . . . 17
(g) Rule 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
(j) Restriction on Sale of Securities . . . . . . . . . . . . . . . . 18
(k) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . 18
(l) Compliance with NASD Rules . . . . . . . . . . . . . . . . . . . . 19
[(m) Compliance with Rule 463 . . . . . . . . . . . . . . . . . . . . . 19
(n) Exchange Agreement . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. Covenants of Iridium . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Exchange Agreement . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6. Conditions of International Managers' Obligations . . . . . . . . . . . 20
(a) Effectiveness of Registration Statement . . . . . . . . . . . . . 20
(b) Letter and Opinion of Counsel for Company and Iridium . . . . . . 21
(c) Opinion of Bermuda Counsel for the Company . . . . . . . . . . . . 21
(d) Opinion of Regulatory Counsel for Motorola Satellite
Communications, Inc. . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Opinion of Assistant Secretary of the Company and General
Counsel of Iridium . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Opinion of Counsel for International Managers . . . . . . . . . . 21
(g) Opinion of Regulatory Counsel for the International Managers . . . 21
(h) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . 22
(i) Accountant's Comfort Letter . . . . . . . . . . . . . . . . . . . 22
(j) Bring-down Comfort Letter . . . . . . . . . . . . . . . . . . . . 22
(k) Approval of Listing . . . . . . . . . . . . . . . . . . . . . . . 22
(l) No Objection . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(m) Motorola Certificate . . . . . . . . . . . . . . . . . . . . . . . 22
(n) Purchase of Initial U.S. Securities . . . . . . . . . . . . . . . 23
(o) Conditions to Purchase of International Option Securities . . . . 23
(p) Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(q) Additional Documents . . . . . . . . . . . . . . . . . . . . . . . 24
(r) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . 24
(s) Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Indemnification of International Managers. . . . . . . . . . . . . 24
(b) Indemnification of Company, Iridium, Directors and Officers . . . 26
(c) Actions against Parties; Notification . . . . . . . . . . . . . . 26
(d) Settlement without Consent if Failure to Reimburse . . . . . . . . 27
(e) Indemnification for Reserved Securities . . . . . . . . . . . . . 27
SECTION 8. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9. Representations, Warranties and Agreements to Survive Delivery . . . . . 29
SECTION 10. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Termination; General . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11. Default by One or More of the International Managers . . . . . . . . . . 29
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
SECTION 12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 14. Governing Law And Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 15. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SCHEDULES
SCHEDULE A - LIST OF INTERNATIONAL MANAGERS . . . . . . . . . . . . . . . . . . SCH A-1
SCHEDULE B - PRICING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . SCH B-1
SCHEDULE C - PERSONS SUBJECT TO LOCK-UP . . . . . . . . . . . . . . . . . . . . SCH C-1
EXHIBITS
EXHIBIT A-1 - FORM OF OPINION OF COMPANY'S AND
IRIDIUM'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT A-2 - FORM OF OPINION OF COMPANY'S
BERMUDA COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
EXHIBIT A-3 - FORM OF OPINION OF REGULATORY COUNSEL
MOTOROLA SATELLITE COMMUNICATIONS, INC. . . . . . . . . . . . . . . A-7
EXHIBIT A-4 - FORM OF OPINION OF ASSISTANT
SECRETARY AND GENERAL COUNSEL . . . . . . . . . . . . . . . . . . . A-8
EXHIBIT B- FORM OF MOTOROLA CERTIFICATE . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C- FORM OF LOCK-UP AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
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<PAGE> 5
Draft of June 3, 1997
IRIDIUM WORLD COMMUNICATIONS LTD.
(a Bermuda company)
2,000,000 Shares of Class A Common Stock
(Par Value $.01 Per Share)
Dated: _________, 1997
MERRILL LYNCH INTERNATIONAL
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman Sachs International
as Lead Manager(s) of the several International Managers
c/o Merrill Lynch International
20 Farringdon Road
London ECIM 3NH
England
Ladies and Gentlemen:
Each of Iridium World Communications Ltd., a Bermuda company (the
"Company") and Iridium LLC, a Delaware limited liability company ("Iridium"),
confirms its agreement with Merrill Lynch International ("Merrill Lynch") and
each of the other international underwriters named in Schedule A hereto
(collectively, the "International Managers", which term shall also include any
underwriter substituted as hereinafter provided in Section 11 hereof), for whom
Merrill Lynch, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman
Sachs International are acting as representatives (in such capacity, the "Lead
Managers"), with respect to the issue and sale by the Company and the purchase
by the International Managers, acting severally and not jointly, of the
respective numbers of shares of Class A Common Stock, par value $.01 per share,
of the Company ("Class A Common Stock") set forth in said Schedule A, and with
respect to the grant by the Company to the International Managers, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of 300,000 additional shares of Class A Common Stock
to cover over-allotments, if any. The aforesaid 2,000,000 shares of Class A
Common Stock (the "Initial International Securities") to be purchased by the
International Managers and all or any part of the 300,000 shares of Class A
Common Stock subject to the option described in Section 2(b) hereof (the
"International Option Securities") are hereinafter called, collectively, the
"International Securities."
<PAGE> 6
It is understood that each of the Company and Iridium is concurrently
entering into an agreement dated the date hereof (the "U.S. Purchase
Agreement") providing for the offering by the Company of an aggregate of
8,000,000 shares of Class A Common Stock (the "Initial U.S. Securities")
through arrangements with certain underwriters in the United States and Canada
(the "U.S. Underwriters") for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co. are acting as representatives (the "U.S. Representatives") and the
grant by the Company to the U.S. Underwriters, acting severally and not
jointly, of an option to purchase all or any part of the U.S. Underwriters' pro
rata portion of up to 1,200,000 additional shares of Class A Common Stock
solely to cover overallotments, if any (the "U.S. Option Securities" and,
together with the International Option Securities, the "Option Securities").
The Initial U.S. Securities and the U.S. Option Securities are hereinafter
called the "U.S. Securities." It is understood that the Company is not
obligated to sell and the International Managers are not obligated to purchase,
any Initial International Securities unless all of the Initial U.S. Securities
are contemporaneously purchased by the U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial International Securities
and the Initial U.S. Securities are hereinafter collectively called the
"Initial Securities," and the International Securities, and the U.S. Securities
are hereinafter collectively called the "Securities."
The Underwriters are concurrently entering into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
The Company understands that the International Managers propose to
make a public offering of the International Securities as soon as the Lead
Managers deem advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters have agreed that up to 1,000,000
shares of the Initial U.S. Securities to be purchased by the U.S. Underwriters
(the "Reserved Securities") shall be reserved for sale by the Underwriters to
eligible employees of the Company and Iridium and persons having business
relationships with Iridium as part of the distribution of the Securities by the
Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. and all other applicable laws, rules and regulations. To the
extent that such Reserved Securities are not orally confirmed for purchase by
such eligible employees of the Company and Iridium and persons having business
relationships with Iridium by the end of the first business day after the date
of this Agreement, such Reserved Securities may be offered to the public as
part of the public offering contemplated hereby. Offers and sales of Reserved
Securities to eligible employees of the Company and Iridium and persons having
business relationships with Iridium in the Province of Canada will be effected
by the U.S. Underwriters or their affiliates at the request of and as agent of
the Company pursuant to prospectus exemption available in Quebec.
-2-
<PAGE> 7
The Company and Iridium have entered into (i) an Interest Exchange
Agreement (the "Exchange Agreement"), (ii) a 1997 Subscription Agreement (the
"1997 Subscription Agreement"), (iii) a Share Issuance Agreement (the "Share
Issuance Agreement") and (iv) a Management Services Agreement (the "Management
Services Agreement" and, collectively with the Exchange Agreement, the 1997
Subscription Agreement, the Share Issuance Agreement and the LLC Agreement (as
defined below), the "Governance Agreements"). On or prior to Closing Time (as
defined below), (A) pursuant to an amendment to the LLC Agreement, each Class 1
Membership Interest in Iridium (each a "Class 1 Interest") shall be subdivided
into 75 Class 1 Interests and each warrant an option to purchase Class 1
Interest, and the conversion price of each limited liability company interest
in Iridium that is or may become convertible into or exchangeable for Class 1
Interests, shall be adjusted accordingly, (B) Iridium shall issue and sell to
the Company and the Company shall purchase from Iridium Class 1 Interests under
the 1997 Subscription Agreement with the proceeds from the issuance and sale of
the Securities as contemplated by this Agreement, the International Purchase
Agreement and the Registration Statement (as defined below) and (C) the Company
shall be admitted as a member of Iridium (collectively, the "Transactions").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-23419) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). Two forms of prospectus are to be used in connection with the offering
and sale of the Securities: one relating to the International Securities (the
"Form of International Prospectus") and one relating to the U.S. Securities
(the "Form of U.S. Prospectus"). The Form of International Prospectus is
identical to the Form of U.S. Prospectus, except for the front cover and back
cover pages and the information under the caption "Underwriting". The
information included in any such prospectus or in any such Term Sheet, as the
case may be, that was omitted from such registration statement at the time it
became effective but that is deemed to be part of such registration statement
at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is
referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule
434 is referred to as "Rule 434 Information." Each Form of International
Prospectus and Form of U.S. Prospectus used before such registration statement
became effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration
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<PAGE> 8
Statement. The final Form of International Prospectus and the final Form of
U.S. Prospectus in the forms first furnished to the Underwriters for use in
connection with the offering of the Securities are herein called the
"International Prospectus" and the "U.S. Prospectus," respectively, and
collectively, the "Prospectuses." If Rule 434 is relied on, the terms
"International Prospectus" and "U.S. Prospectus" shall refer to the preliminary
International Prospectus dated May 9, 1997 and preliminary U.S. Prospectus
dated May 9, 1997, respectively, each together with the applicable Term Sheet
and all references in this Agreement to the date of such Prospectuses shall
mean the date of the applicable Term Sheet. For purposes of this Agreement,
all references to the Registration Statement, any preliminary prospectus, the
International Prospectus, the U.S. Prospectus or any Term Sheet or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and Iridium.
Each of the Company and Iridium jointly and severally represents and warrants
to each International Manager as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with each International Manager,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the Company or Iridium, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any
International Option Securities are purchased, at the Date of
Delivery), the Registration Statement, the Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will 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 the Prospectuses, any preliminary
prospectuses and any supplement thereto or prospectus wrapper prepared
in connection therewith, at their respective times of issuance and at
the Closing Time, complied and will comply in all material respects
with any applicable laws or regulations of foreign jurisdictions in
which the Prospectuses and such preliminary prospectuses, as amended
or supplemented, if applicable, are distributed in connection with the
offer and sale of Reserved Securities. Neither of the Prospectuses
nor any amendments or supplements thereto (including any prospectus
wrapper), at the time the
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<PAGE> 9
Prospectuses or any amendments or supplements thereto were issued and
at the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an
untrue statement of a material fact or omitted or will 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. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became
effective.
Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
was identical in all material respects to the electronically
transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T. The
representations and warranties in this subsection (a)(i) shall not
apply to statements in or omissions from the Registration Statement or
the U.S. Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any International
Manager through the International Manager expressly for use in the
Registration Statement or the International Prospectus.
(ii) Independent Accountants. The accountants who certified
the financial statement and the consolidated financial statements
included in the Registration Statement are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statement and the
consolidated financial statements included in the Registration
Statement and the Prospectuses, together with the related notes,
present fairly the financial position of the Company, 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 the Company, Iridium,
Iridium's predecessor and their respective consolidated subsidiaries
for the periods specified; said financial statement and the
consolidated financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved, except in the case
of the interim financial statements, for the absence of complete
footnote disclosure and customary year-end adjustments. The selected
financial data included in the Prospectuses 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 Registration Statement.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except for the matters disclosed in
the Registration Statement, (A) there has been no material
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<PAGE> 10
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company or
Iridium, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or Iridium, other than those in the
ordinary course of business, which are material with respect to the
Company or Iridium and (C) except for quarterly, in-kind dividends on
the Series A Class 2 Interests in Iridium (the "Series A Interests")
in amounts per Series A Interest that are consistent with the terms of
the Series A Interests and the Limited Liability Company Agreement of
Iridium LLC, dated as of July 29, 1996, as amended as of the date
hereof (the "LLC Agreement"), there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock, or Iridium on any class or series of its
limited liability company interests (its "Interests").
(v) Good Standing of the Company and Iridium. The Company
has been duly incorporated and is validly existing as an exempted
company in good standing under the laws of Bermuda and has all
requisite power and authority to conduct its business as described in
the Prospectuses and to enter into and perform its obligations under
this Agreement; and the Company has been duly qualified as a foreign
company to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
Iridium has been duly formed and is an existing limited
liability company in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its
obligations under this Agreement; and Iridium has been duly qualified
as a foreign limited liability company to transact business and is in
good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(vi) No Significant Subsidiary Neither the Company nor
Iridium has any "significant subsidiary" as such term is defined in
Rule 1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company are as set forth in the Prospectuses in
the column entitled "Actual" under the caption "Capitalization--The
Company." The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
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The authorized, issued and outstanding Interests of Iridium
are as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization--Iridium." The issued and
outstanding Interests of Iridium have been duly authorized and validly
issued and are fully paid and non-assessable (except as disclosed in
the Registration Statement under the captions "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"); none of the
outstanding Interests of Iridium was issued in violation of the
preemptive or other similar rights of any member of Iridium. Pursuant
to the LLC Agreement, and in accordance with the Delaware Limited
Liability Company Act (the "Delaware Act"), the Company has waived the
limitation on liability contained in the Delaware Act, provided that
the Company 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.
(viii) Authorization of Agreement. This Agreement and the
U.S. Purchase Agreement have been duly authorized, executed and
delivered by each of the Company and Iridium.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the International Managers and the U.S.
Underwriters from the Company have been duly authorized for issuance
and sale to the International Managers pursuant to this Agreement and
the U.S. Underwriters pursuant to the U.S. Purchase Agreement,
respectively, and, when issued and delivered by the Company pursuant
to this Agreement and the U.S. Purchase Agreement, respectively,
against payment of the consideration set forth herein and in the U.S.
Purchase Agreement, respectively, will be validly issued, fully paid
and non-assessable; the Class A Common Stock will conform in all
material respects to the descriptions thereof contained in the
Prospectuses; upon full payment of the consideration therefor no,
holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company.
The Class 1 Interests to be purchased by the Company from
Iridium have been duly authorized for issuance and sale to the Company
pursuant to the 1997 Subscription Agreement and, when issued and
delivered by Iridium pursuant to the 1997 Subscription Agreement
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) fully paid and non-assessable; such Class 1 Interests will
conform in all material respects to the descriptions thereof contained
in the Prospectuses and such descriptions conform to the rights set
forth in the instruments defining the same (except as disclosed in the
Prospectuses under the caption "Description of Iridium LLC Limited
Liability Company Agreement--Limitations on Liability"); except as
described in the Prospectuses under the caption "Description of
Iridium LLC Limited Liability Company Agreement--Limitations on
Liability," no holder of such Class 1 Interests will be subject to
personal liability by reason of being such a holder; and the issuance
of the Class 1 Interests
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<PAGE> 12
pursuant to the 1997 Subscription Agreement 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, the
Company has waived the limitation on liability contained in the
Delaware Act, provided that the Company 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.
(x) Absence of Defaults and Conflicts. Neither the Company
nor Iridium is in violation of its memorandum of association or
bye-laws, certificate of formation or limited liability company
agreement or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement (including the Governance
Agreements) or instrument to which the Company or Iridium is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or Iridium is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the U.S. Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
U.S. Purchase Agreement, the Governance Agreements and in the
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectuses under the caption "Use of Proceeds")
and by the Transactions and compliance by each of the Company and
Iridium with its obligations under this Agreement, the U.S. Purchase
Agreement and the Governance Agreements have been duly authorized by
all necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or 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 Company
or Iridium pursuant to, the Agreements and Instruments (except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such
action result in any violation of the provisions of the memorandum of
association, bye-laws, certificate of formation or limited liability
company agreement of the Company or Iridium or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or Iridium or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition 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 the Company
or Iridium.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the company or Iridium exists or, to the knowledge of the
Company or Iridium, is imminent.
(xii) Absence of Proceedings. Except for matters which are
described in the Registration Statement, there is no action, suit,
proceeding, inquiry or investigation
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<PAGE> 13
before or brought by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company
or Iridium, threatened, against or affecting the Company or Iridium,
which is required to be disclosed in the Registration Statement, 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 and the U.S.
Purchase Agreement or the Transactions or the performance, if
determined adversely to the Company or Iridium, of its obligations
hereunder or thereunder; all pending legal or governmental proceedings
to which the Company or Iridium is a party or of which any of their
respective property or assets is the subject which are not described
in the Registration Statement, including ordinary routine litigation
incidental to the business, would not reasonably be expected to result
in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectuses or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. Except as
described in the Registration Statement or as would not have a
Material Adverse Effect, Iridium owns or possesses or reasonably
believes it can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, but excluding any required
regulatory licenses or approvals), trademarks, service marks, trade
names or other intellectual property (collectively, "Intellectual
Property") or that it can contract on reasonable terms with third
parties who can acquire the Intellectual Property necessary to carry
on the business now operated by Iridium or described in the
Registration Statement, and neither the Company 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 the Company 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.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company or
Iridium of its obligations hereunder, in connection with the offering,
issuance or sale of the Securities under this Agreement and the U.S.
Purchase Agreement or the consummation of the transactions
contemplated by this Agreement and the U.S. Purchase Agreement or by
the Transactions except (i) such as have been already obtained or as
may be required under the 1933 Act or the 1933 Act Regulations and
foreign or state securities or blue sky laws and (ii) such as have
been obtained under the laws and regulations of jurisdictions outside
the United States in which the Reserved Securities are offered.
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<PAGE> 14
(xvi) Possession of Licenses and Permits. Except as disclosed
in the Registration Statement 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 the Company 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.
(xvii) Title to Property. The Company owns no real property.
Iridum has good and marketable title to all real property it owns; and
the Company 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 Registration Statement 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 the Company and Iridium, considered as one
enterprise, and under which the Company and Iridium hold properties
described in the Prospectuses, are in full force and effect, and
neither the Company nor Iridium has any notice of any material claim
of any sort that has been asserted by anyone adverse to the rights of
the Company or Iridium under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company 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.
(xviii) Compliance with Cuba Act. The Company has complied
with, and is 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 (collectively, the "Cuba Act") or is
exempt therefrom.
(xix) Investment Company Act. The Company 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 Prospectuses, will not be, an "investment company" or
an entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xx) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A)
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neither the Company 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
to 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 the Company or Iridium relating to
Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or, except as set
forth in the Registration Statement, otherwise registered by the
Company under the 1933 Act.
(xxii) Principal Agreements. Except as disclosed in the
Registration Statement and except as would not reasonably be expected
to have a Material Adverse Effect, to the best of the Company's and
Iridium's knowledge, none of the parties to (i) the Gateway
Authorization Agreements (as defined in the Prospectuses), (ii) the
Space System Contract (as defined in the Prospectuses), (iii) the
Operations and Maintenance Contract (as defined in the Prospectuses),
(iv) the Iridium Business Support System Contract with Andersen
Consulting (the "IBSS Contract"), (v) the Terrestrial Network
Development Contract (as defined in the Prospectus), and (vi) the
Support Agreement between Iridium and Motorola (the "Support
Agreement") (collectively, the foregoing are herein called the
"Principal Agreements"), is in breach of, or in default in the
performance or observance of, any material obligation, term, covenant
or condition contained therein. Each of the Principal Agreements that
the Company has delivered to the International Managers 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 Company's and Iridium's 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 legally valid and
binding agreement of Iridium, enforceable against Iridium in
accordance with its terms,
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<PAGE> 16
subject, as to enforcement, to bankruptcy, insolvency, 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.
(xxiii) Governance Agreements. Neither the Company nor
Iridium, nor to the best knowledge of the Company and Iridium, 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 the
Company has delivered to the International Managers 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 the Company and Iridium has duly and
validly executed and delivered each of the Governance Agreements and,
to the best of the Company's and Iridium's knowledge, the other
parties to each of the Governance Agreements have duly and validly
authorized, 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 is a legally
valid and binding agreement of the Company and Iridium, enforceable
against the Company and Iridium in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, 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.
(xxiv) FCC License. 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, as modified, the FCC's rules and the conditions set forth
in the FCC's Order 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).
(xxv) Forward Looking Statements. The statements (including
the assumptions described therein) included in the Registration
Statement and the Prospectuses 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
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<PAGE> 17
providers and roaming partners were made by the Company with a
reasonable basis and reflect the Company's good faith estimate of the
matters described therein.
(xxvi) Certain Descriptions. The statements set forth in the
Prospectuses under the captions "Governance of the Company and
Relationship with Iridium," "Description of Capital Stock" and
"Description of Iridium LLC Limited Liability Company Agreement,"
insofar as they purport to constitute a summary of the terms of the
Class A Common Stock and the Interests, as the case may be, and to
describe the provisions of the laws and documents referred to therein,
and under the captions "Risk Factors--Risks Associated with Licensing
and Spectrum Allocation," "Risk Factors--Risks Associated with
Principal Supply Contracts," "Principal Contracts for the Development
of the Iridium System," "Certain Relationships and Related
Transactions," "Tax Considerations" and "Underwriting," insofar as
they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair in all material
respects.
(xxvii) Accounting Controls. The Company and Iridium
maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(b) Officers' Certificates. Any certificate signed by any officer
of the Company or Iridium delivered to the Global Coordinator, the Lead
Manager(s) or to counsel for the International Managers shall be deemed a
representation and warranty by the Company and Iridium to each International
Manager as to the matters covered thereby but no personal liability therefor
shall attach to the officer providing any such certificate.
SECTION 2. Sale and Delivery to International Managers; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each International Manager, severally and
not jointly, and each International Manager, severally and not jointly, agrees
to purchase from the Company, at the price per share set forth in Schedule B,
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Manager, plus any additional number of Initial
International Securities which such International Manager may become obligated
to purchase pursuant to the provisions of Section 11 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
International Managers, severally and not jointly, to purchase up to an
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<PAGE> 18
additional 300,000 shares of Class A Common Stock at the price per share set
forth in Schedule B, less an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities. The option
hereby granted will expire 30 days after the date hereof and may be exercised
in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial International Securities upon notice by the Global
Coordinator to the Company and Iridium setting forth the number of
International Option Securities as to which the several International Managers
are then exercising the option and the time and date of payment and delivery
for such International Option Securities. Any such time and date of delivery
for the International Option Securities (a "Date of Delivery") shall be
determined by the Global Coordinator, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the International Option Securities, each of the International
Managers, acting severally and not jointly, will purchase that proportion of
the total number of International Option Securities then being purchased which
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Manager bears to the total number of Initial
International Securities, subject in each case to such adjustments as the
Global Coordinator in its discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Sullivan & Cromwell, 1701 Pennsylvania Avenue, NW, Washington, DC, 20006, or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 11),
or such other time not later than ten business days after such date as shall be
agreed upon by the Global Coordinator and the Company (such time and date of
payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global Coordinator and the Company, on each Date
of Delivery as specified in the notice from the Global Coordinator to the
Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the Lead Manager(s) for the respective accounts of the International
Managers of certificates for the International Securities to be purchased by
them. It is understood that each International Manager has authorized the Lead
Manager(s), for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial International Securities and the
International Option Securities, if any, which it has agreed to purchase.
Merrill Lynch, individually and not as representative of the International
Managers, may (but shall not be obligated to) make payment of the purchase
price for the Initial International Securities or the International Option
Securities, if any, to be
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purchased by any International Manager whose funds have not been received by
the Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Manager from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or
the relevant Date of Delivery, as the case may be. The certificates for the
Initial International Securities and the International Option Securities, if
any, will be made available for examination and packaging by the Lead Managers
in The City of New York not later than 10:00 A.M. (Eastern time) on the
business day prior to Closing Time or the relevant Date of Delivery, as the
case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
International Manager as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Global Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectuses or any amended Prospectuses shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectuses or for additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule
424(b) was received for filing by the Commission and, in the event that it was
not, it will promptly file such prospectus. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the International Managers shall object promptly
after it receives copies thereof.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Lead Manager(s) and counsel for the
International Managers, without charge, signed
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<PAGE> 20
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein) and signed copies of all consents and certificates of experts, and
will also deliver to the Lead Manager(s), without charge, a conformed copy of
the Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the International Managers. The copies of the
Registration Statement and each amendment thereto furnished to the
International Managers will be identical in all material respects to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. Subject to paragraph (e), the
Company has delivered to each International Manager, without charge, as many
copies of each preliminary prospectus as such International Manager reasonably
requested, and the Company hereby consents to the use of such copies for
purposes permitted by the 1933 Act. The Company will furnish to each
International Manager, without charge, during the period when the International
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the
International Prospectus (as amended or supplemented) as such International
Manager may reasonably request. The International Prospectus and any
amendments or supplements thereto furnished to the International Managers will
be identical in all material respects to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the U.S. Purchase Agreement and in the Prospectuses. If at any time
during the nine month period immediately following the time of issue of the
U.S. Prospectus a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the International Managers or for the Company, to amend the Registration
Statement or amend or supplement any Prospectus in order that the Prospectuses
will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement any
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the Company
will furnish to the International Managers such number of copies of such
amendment or supplement as the International Managers may reasonably request.
In case any U.S. Underwriter is required to deliver a prospectus in connection
with the sale of U.S. Securities at any time nine months or more after the time
of issue of the U.S. Prospectus, upon request of the U.S. Underwriters but at
the expense of such U.S. Underwriters, the Company agrees to prepare and
deliver to such U.S. Underwriters as many copies as the U.S. Underwriters may
request of an amended or supplemented U.S. Prospectus complying with Section
10(a)(3) of the 1933 Act.
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<PAGE> 21
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the International Managers, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Global Coordinator
may designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation or other governmental fees and charges in respect of doing business in
any jurisdiction in which it is not otherwise so subject. In each jurisdiction
in which the Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such jurisdiction to
continue such qualification in effect for a period of not less than one year
from the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds". The Company shall take such steps as
shall be necessary to ensure that the Company shall not become an "investment
company" within the meaning of such term under the 1940 Act and the rules and
regulations thereunder; provided that the Company is not able to control the
occurrence of a "Company Change in Control" or "Reduction in Interest," as such
terms are defined in the LLC Agreement, and the related consequences under the
1940 Act.
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities 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.
(j) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly, offer,
pledge, 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 any share of Class A Common Stock
or any securities convertible into or exercisable or exchangeable for Class A
Common Stock or file any registration statement under the 1933 Act with respect
to any of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Class A Common Stock, whether any
such swap or transaction described in clause (i) or (ii) above is to be settled
by delivery of Class A Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to the Securities to be sold
hereunder or under the U.S. Purchase Agreement, the
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<PAGE> 22
Company's Global Ownership Program or the Iridium LLC Share Option Plan, each
as described in the Prospectuses. In addition, the foregoing restriction shall
not apply to the issuance of warrants to purchase shares of Iridium Class A
Common Stock in connection with any offering of debt securities of Iridium or
any of its subsidiaries provided, that (i) such warrants have a per share
exercise price not lower than the market price of the Class A Common Stock on
the date the warrants are issued and (ii) such warrants are not exercisable
earlier than 180 days from the date of their issuance.
(k) Reporting Requirements. The Company, during the period when
the Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the rules
and regulations of the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.
(m) Compliance with Rule 463. The Company will file with the
Commission such reports on Form SR as may be required pursuant to Rule 463 of
the 1933 Act Regulations.
(n) Exchange Agreement. During a period of 180 days from the date
of the Prospectuses, the Company will not enter into any amendment to, or waive
the application of any provision of, the Exchange Agreement or take any action
that would have any effect similar to the foregoing, in each case if the effect
thereof is to permit exchanges of Class 1 Interests for Class A Stock during
such 180-day period.
SECTION 4. Covenants of Iridium. Iridium covenants and agrees
with each International Manager as follows:
(a) Exchange Agreement. During a period of 180 days from the date
of the Prospectuses, Iridium will not enter into any amendment to, or waive the
application of any provision of, the Exchange Agreement or take any action that
would have any effect similar to the foregoing.
(b) Use of Proceeds. Iridium shall apply the proceeds of the sale
of its Class 1 Interests to the Company substantially as set forth in the
Prospectuses.
SECTION 5. Payment of Expenses. (a) Expenses. Iridium will pay all
expenses incident to the performance of the obligations of Iridium and the
Company under this Agreement, including (i) the preparation, printing and
filing of the Registration Statement
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(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's and Iridium's
counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectuses and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. (the "NASD") of the terms
of the sale of the Securities, (x) the fees and expenses incurred in connection
with the inclusion of the Securities in the Nasdaq National Market and (xi) all
costs and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, in connection with matters related to the
Reserved Securities which are designated by Iridium for sale to employees and
others having a business relationship with Iridium. It is understood, however,
that except as provided in this Section, Section 7 and Section 8, the
International Managers will pay all of their own costs and expenses, including
the fees and expenses of their counsel, transfer taxes on resale of any of the
securities and any advertising expenses connected with any offers they make.
(b) Termination of Agreement. If this Agreement is terminated
by the Lead Managers in accordance with the provisions of Section 6 or Section
10(a)(i) hereof, Iridium shall reimburse the International Managers for all of
their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the International Managers.
SECTION 6. Conditions of International Managers' Obligations. The
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company and Iridium
contained in Section 1 hereof or in certificates of any officer of the Company
or Iridium delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the
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<PAGE> 24
reasonable satisfaction of counsel to the International Managers. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).
(b) Letter and Opinion of Counsel for the Company and Iridium. At
Closing Time, the Lead Managers shall have received the favorable opinion and
letter, dated as of Closing Time, of Sullivan & Cromwell, counsel for the
Company and Iridium, in form and substance satisfactory to counsel for the
International Managers, together with signed or reproduced copies of such
letters for each of the other International Managers to the effect set forth in
Exhibit A-1 hereto.
(c) Opinion of Bermuda Counsel for the Company. At Closing Time,
the Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Conyers Dill & Pearman, Bermuda counsel for the Company, in
form and substance satisfactory to counsel for the International Managers,
together with signed or reproduced copies of such letter for each of the other
International Managers to the effect set forth in Exhibit A-2 hereto.
(d) Opinion of Regulatory Counsel for Motorola. At Closing Time,
the Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Steptoe & Johnson LLP, regulatory counsel for Motorola
Satellite Communications, Inc. as FCC license holder, in form and substance
satisfactory to counsel for the International Managers, together with signed or
reproduced copies of such letter for each of the other International Managers
to the effect set forth in Exhibit A-3 hereto.
(e) Opinion of Assistant Secretary of the Company and General
Counsel of Iridium. At Closing Time, the Lead Managers shall have received the
favorable opinion, dated as of Closing Time, of F. Thomas Tuttle, Esq.,
Assistant Secretary of the Company and General Counsel of Iridium, in form and
substance satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other International
Managers to the effect set forth in Exhibit A-4 hereto.
(f) Opinion of Counsel for International Managers. At Closing
Time, the Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
International Managers, together with signed or reproduced copies of such
letter for each of the other International Managers with respect to the matters
set forth in clauses (i) and (iv) and certain portions of the penultimate
paragraph of Exhibit A-1 hereto. In giving such opinion such counsel may rely,
as to all matters governed by the laws of jurisdictions other than the law of
the State of New York and the federal law of the United States and the Delaware
Act, upon the opinions of counsel satisfactory to the Lead Managers. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and Iridium and certificates of public officials.
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<PAGE> 25
(g) Opinion of Regulatory Counsel for the International Managers.
At Closing Time, the Lead Managers shall have received the favorable opinion,
dated as of Closing Time, of Goldberg, Godles, Wiener & Wright, regulatory
counsel for the International Managers together with signed or reproduced
copies of such letter for each of the other International Managers to such
effect as the International Managers may reasonably request.
(h) Officers' Certificates. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company or Iridium, whether or not arising in the
ordinary course of business, and the Lead Managers shall have received a
certificate of the President or a Vice President of each of the Company and
Iridium and of the chief financial or chief accounting officer of each of the
Company and Iridium, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties
in Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company or Iridium,
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
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.
(i) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Lead Managers shall have received from KPMG Peat Marwick
LLP a letter dated such date, in form and substance satisfactory to the Lead
Managers, together with signed or reproduced copies of such letter for each of
the other International Managers containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.
(j) Bring-down Comfort Letter. At Closing Time, the Lead Managers
shall have received from KPMG Peat Marwick LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (i) of this Section (updated to include the
final Prospectuses), except that the specified date referred to shall be a date
not more than three business days prior to Closing Time.
(k) Approval of Listing. At Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(l) No Objection. At or prior to Closing Time, the NASD shall
have confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(m) Motorola Certificate. At Closing Time, the Lead Managers
shall have received a certificate, dated as of Closing Time, of the President
or a Vice President of Motorola, Inc., in form and substance satisfactory to
counsel for the International Managers, as to the accuracy of the statements
attributed to Motorola in the Prospectuses, and to such other matters relating
to
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Motorola as counsel for the International Managers may reasonably request (a
draft of such certificate is attached as Exhibit B hereto).
(n) Purchase of Initial U.S. Securities. Contemporaneously with
the purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased the
Initial U.S. Securities under the U.S. Purchase Agreement.
(o) Conditions to Purchase of International Option Securities. In
the event that the International Managers exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the International Option
Securities, the representations and warranties of the Company and Iridium
contained herein and the statements in any certificates furnished by the
Company or Iridium hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Lead Managers shall have
received:
(i) Officers' Certificates. A certificate, dated such Date
of Delivery, of the President or a Vice President of each of
the Company and Iridium and of the chief financial or chief
accounting officer of each of the Company and Iridium
confirming that the certificate or certificates delivered at
Closing Time pursuant to Section 6(h) hereof remain true and
correct as of such Date of Delivery.
(ii) Opinion of Counsel for the Company and Iridium. The
favorable opinion of each of Sullivan & Cromwell, counsel for
the Company and Iridium, Conyers Dill & Pearman, Bermuda
counsel for the Company, Steptoe & Johnson LLP, regulatory
counsel for Motorola Satellite Communications, Inc. as FCC
license holder, and F. Thomas Tuttle, Assistant Secretary of
the Company and General Counsel of Iridium, each in form and
substance satisfactory to counsel for the International
Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinions
required by Sections 6(b), 6(c), 6(d) and 6(e) hereof,
respectively.
(iii) Opinion of Counsel for International Managers. The
favorable opinion of each of Fried, Frank, Harris, Shriver &
Jacobson, counsel for the International Managers and Goldberg,
Godles, Wiener & Wright, regulatory counsel for the
International Managers, each dated such Date of Delivery,
relating to the International Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinions required by Sections 6(f) and 6(g)
hereof, respectively.
(iv) Bring-down Comfort Letter. A letter from KPMG Peat
Marwick LLP, in form and substance satisfactory to the Lead
Managers and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the Lead
Managers pursuant to Section 6(j) hereof, except that the
"specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.
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(v) Motorola Certificate. A certificate, dated such Date
of Delivery, of the president or a vice president of Motorola,
Inc. confirming that the certificate delivered at Closing Time
pursuant to 6(m) hereof remains true and correct as of such
Date of Delivery.
(p) Transactions. At or prior to Closing Time, the Transactions
shall have been duly and validly effected and all corporate proceedings and
legal matters incident to the Transactions shall be satisfactory to counsel for
the International Managers.
(q) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the International Managers shall have been furnished with
such documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained.
(r) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several International Managers to purchase
the relevant Option Securities may be terminated by the Lead Managers by notice
to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without liability
of any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
(s) Lock-up Agreements. At the date of this Agreement, the Lead
Managers shall have received an agreement substantially in the form of Exhibit
C hereto signed by each of the persons specified on Schedule C hereto.
SECTION 7. Indemnification.
(a) Indemnification of International Managers. Each of the
Company and Iridium agrees to indemnify and hold harmless each International
Manager and each person, if any, who controls any International Manager within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as
follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of (A) the violation
of any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the supplement
or prospectus wrapper material distributed in Argentina, Brazil,
Canada, Hong Kong, Indonesia, Japan, Korea, the United Kingdom and
Venezuela in connection with the reservation and sale of the Reserved
Securities to eligible employees of the Company and Iridium and
persons having business relationships with Iridium or the omission or
alleged omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the
Prospectuses or preliminary prospectuses, not misleading; (iii)
against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission or in connection with
any violation of the nature referred to in Section 7(a)(ii)(A) hereof;
provided that (subject to Section 7(d) below) any such settlement is
effected with the written consent of the Company and Iridium; and
(iii) against any and all expense whatsoever, as incurred
(including subject to Section 7(c) hereof the reasonable fees and
disbursements of counsel chosen by Merrill Lynch), reasonably incurred
in investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred to
in Section 7(a)(ii)(A) hereof, to the extent that any such expense is
not paid under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto) and provided, further, that neither Iridium nor the Company will be
liable to an International Manager with respect to any preliminary prospectus
to the extent that Iridium or the Company shall sustain the burden of proving
that any such loss, liability, claim, damage or expense resulted from the fact
that such International Manager in contravention of a requirement of this
Agreement or applicable law, sold Securities to a person to whom such
International Manager failed to send or give, at or prior to Closing Time, a
copy of the International Prospectus as then amended or supplemented if the
Company has previously furnished copies thereof (sufficiently in advance of
Closing Time to allow for distribution by Closing Time) to the International
Manager and the loss, liability, claim, damage or expense of such International
Manager resulted from an untrue statement or omission or alleged untrue
statement or omission of a material fact contained in or omitted from
-24-
<PAGE> 29
the preliminary prospectus which was corrected in the International Prospectus
as, if applicable, amended or supplemented prior to Closing Time.
(b) Indemnification of Company, Iridium, Directors and Officers.
Each International Manager severally agrees to indemnify and hold harmless the
Company and Iridium, their directors, each of their officers who signed the
Registration Statement, and each person, if any, who controls the Company or
Iridium within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary international prospectus or the
International Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by
such International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 7(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Company and
Iridium. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 7 or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
-25-
<PAGE> 30
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) or Section 7(a)(iii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) Indemnification for Reserved Securities. In connection with
the offer and sale of the Reserved Securities, each of the Company and Iridium
jointly and severally agrees, promptly upon a request in writing, to indemnify
and hold harmless the Underwriters from and against any and all losses,
liabilities, claims, damages and expenses incurred by them as a result of (i)
the failure of eligible employees of the Company and Iridium and persons having
business relationships with Iridium to pay for and accept delivery of Reserved
Securities following the effectiveness of the Registration Statement, were
subject to a properly confirmed agreement to purchase and (ii) the violation of
any securities laws of foreign jurisdictions in connection with any offer
and/or sale of Reserved Securities (including, without limitation, all
regulations governing Merrill Lynch in its capacity as "authorized person"
under the Financial Services Act in the United Kingdom).
SECTION 8. Contribution. If the indemnification provided for in
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Iridium on the one hand and the International Managers on the other
hand from the offering of the Securities pursuant to this Agreement or (ii) if
the allocation provided by clause (i) 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 Company and
Iridium on the one hand and of the International Managers on the other hand in
connection with the statements or omissions, or in connection with any
violation of the nature referred to in Section 7(a)(ii)(A) hereof, which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company and Iridium on the one
hand and the International Managers on the other hand in connection with the
offering of the International Securities pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from
the offering of the International Securities pursuant to this Agreement (before
deducting expenses) received by the Company and the total underwriting discount
received by the International Managers, in each case as set forth on the cover
of the International Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public offering price
of the International Securities as set forth on such cover.
-26-
<PAGE> 31
The relative fault of the Company and Iridium on the one hand and the
International Managers on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company and Iridium or by the International
Managers and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or any violation
of the nature referred to in Section 7(a)(ii)(A) hereof.
The Company, Iridium and the International Managers agree that it
would not be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the International Managers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above
in this Section 8. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 8 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 8, no International
Manager shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such International Managers has otherwise been required to
pay by reason of any such 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 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
International Managers within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company or Iridium, each
officer of the Company or Iridium who signed the Registration Statement, and
each person, if any, who controls the Company or Iridium within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The International Managers' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the number of Initial International Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or Iridium submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any International
-27-
<PAGE> 32
Manager or controlling person, or by or on behalf of the Company or Iridium,
and shall survive delivery of the Securities to the International Managers.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Lead Managers may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the International
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and Iridium considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Lead Managers, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or materially limited by the Commission or the
Nasdaq National Market or Bermuda, or if trading generally on the American
Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market
has been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof, and provided further that
Sections 1, 7, 8 and 9 shall survive such termination and remain in full force
and effect.
SECTION 11. Default by One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time or a Date
of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Lead Managers
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting International Managers, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Lead Managers shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the number of International Securities to be purchased on such date, each of
the non-defaulting International Managers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting International Managers, or
-28-
<PAGE> 33
(b) if the number of Defaulted Securities exceeds 10% of the
number of International Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing Time,
the obligation of the International Managers to purchase and of the Company to
sell the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting
International Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the International Managers to purchase and the Company to sell
the relevant International Option Securities, as the case may be, either the
Lead Managers or the Company shall have the right to postpone Closing Time or
the relevant Date of Delivery, as the case may be, for a period not exceeding
seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "International Manager" includes any person substituted for an
International Manager under this Section 11.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers at North Tower,
World Financial Center, New York, New York 10281-1201, attention of
_____________; notices to the Company shall be directed to it at Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda, attention of the Secretary
(with a copy to Iridium); and notices to Iridium shall be directed to it at
1575 Eye Street, N.W., Washington D.C. 20006, attention of General Counsel.
SECTION 13. Parties. This Agreement shall each inure to the benefit
of and be binding upon the International Managers, the Company and Iridium and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation,
other than the International Managers, the Company and Iridium and their
respective successors and the controlling persons and officers and directors
referred to in Sections 7 and 8 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
International Managers, the Company and Iridium and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of Securities from any International Manager
shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
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<PAGE> 34
STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
-30-
<PAGE> 35
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the International Managers and the Company in accordance with
its terms.
Very truly yours,
IRIDIUM WORLD COMMUNICATIONS
LTD.
By
-------------------------------------
Name:
Title:
IRIDIUM LLC
By
-------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
GOLDMAN SACHS INTERNATIONAL
By: MERRILL LYNCH INTERNATIONAL
By
------------------------------------------------------------------
Authorized Signatory
For themselves and as Lead Managers of the
other International Managers named in Schedule A hereto.
-31-
<PAGE> 36
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
----------------------------- ----------
<S> <C>
Merrill Lynch International. . . . . . . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities Corporation. . . . . . . . . . . . . . .
Goldman Sachs International. . . . . . . . . . . . . . . . . . . . . . . . . . .
-----------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
=================
</TABLE>
A-1
<PAGE> 37
SCHEDULE B
Iridium World Communications Ltd.
2,000,000 Shares of Class A Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be
$____________.
2. The purchase price per share for the International
Securities to be paid by the several International Managers shall be
$____________, being an amount equal to the initial public offering
price set forth above less $____________ per share; provided that the
purchase price per share for any International Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any
dividends or distributions declared by the Company and payable on the
Initial International Securities but not payable on the International
Option Securities.
A-2
<PAGE> 38
SCHEDULE C
List of persons and entities
subject to lock-up
Robert W. Kinzie
Edward F. Staiano
Leo Mondale
A-1
<PAGE> 39
Exhibit A-1
FORM OF OPINION OF COMPANY'S AND IRIDIUM'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 6(b)
(i) Iridium has been duly formed and is an existing limited liability
company in good standing under the laws of the State of Delaware, with all
requisite limited liability company power and authority to own its properties
and to conduct its business as described in the Prospectuses and to enter into
and perform its obligations under the U.S. Purchase Agreement, the
International Purchase Agreement and the 1997 Governance Agreements.
(ii) Iridium has been duly qualified as a foreign limited liability
company to transact business and is in good standing under the laws of each
jurisdiction set forth in an officer's certificate delivered to you on the
Closing Date specifying the jurisdictions in which Iridium owns or leases
properties or conducts any business (such counsel shall have no responsibility
for the matters set forth in such officer's certificate and such counsel shall
be entitled to rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon certificates of officers
of Iridium).
(iii) The LLC Agreement provides for the issuance of up to 250,000,000
Class 1 Interests, 50,000 Series M Class 2 Interests and 300,000 additional
Class 2 Interests, of which ______, ______ and ______ have been authorized for
issuance. The outstanding limited liability company interests of Iridium (i)
are shown as outstanding under "Actual" in the Prospectus under the caption
"Capitalization-Iridium" (ii) have been duly authorized and validly issued and
are fully paid and non-assessable.
(iv) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by Iridium.
(v) All regulatory consents, authorizations, approvals and filings
required to be obtained or made by the Company or Iridium under the Federal
laws of the United States, the laws of the State of New York and the Limited
Liability Company Act of the State of Delaware for the issuance, sale and
delivery of the Securities by the Company to the Underwriters have been
obtained or made; provided, however, that, for purposes of this clause (v),
such counsel shall express no opinion with respect to Federal or state
communications laws.
(vi) The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement, the 1997 Subscription
Agreement and the consummation of the transactions herein and therein
contemplated (including the issuance and sale of the Securities, and the use of
the proceeds from the sale of the Securities as described in the Prospectuses
under the caption "Use Of Proceeds") do not and will not (i) violate, conflict
with or result in a breach or violation of any of the terms or provisions of,
or consitute a default under, the Principal Agreements nor will such action
result in
A-1
<PAGE> 40
any violation of the provisions of the certificate of formation or limited
liability company agreement of Iridium or (ii) violate any Federal law of the
United States or the laws of the State of New York or the Limited Liability
Company Act of the State of Delaware, in each case applicable to Iridium;
provided, however, that, for purposes of this paragraph (vi), such counsel
shall express no opinion with respect to Federal or state securities laws,
other antifraud laws, fraudulent transfer laws or communications laws;
provided, further, that such counsel shall express no opinion as to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights or with
respect to any provision of such agreements purporting to require
indemnification of, or contribution to, the losses, damages, claims, expenses
or liability of any person.
(vii) The Company is not, and upon the issuance and sale of the
Securities as contemplated in the Purchase Agreements and the application of
the net proceeds therefrom as described in the Prospectuses will not be, an
"investment company" as such term is defined in the 1940 Act.
Such counsel shall also furnish you with a letter to the effect that as
counsel to the Company and Iridium, they reviewed the Registration Statement
and the Prospectuses, participated in discussions with representatives of the
Underwriters, the Company, Iridium and their accountants, Motorola and the
Company's Bermuda counsel and advised the Company and Iridium as to the
requirements of the 1933 Act and the applicable rules and regulations
thereunder; between the effectiveness of the registration statement and Closing
Time, such counsel participated in further discussions with representatives of
the Underwriters, the Company, Iridium and their accountants, and Motorola, in
which the contents of certain portions of the Prospectuses and related matters
were discussed, and reviewed certain documents filed by the Company with the
Commission, certificates of certain officers of the Company, an opinion
addressed to the Underwriters from Steptoe & Johnson and a letter from the
Company's and Iridium's independent accountants; on the basis of the
information that such counsel gained in the course of the performance of the
services referred to above, considered in the light of such counsel's
understanding of the applicable law and the experience such counsel has gained
through their practice under the 1933 Act, such counsel will confirm to you
that in such counsel's opinion, the Registration Statement, as of its effective
date, and the Prospectuses, as of the date of the Prospectuses, appeared on
their face to be appropriately responsive in all material respects to the
requirements of the 1933 Act and the 1933 Act Regulations; further, nothing
that came to such counsel's attention in the course of such review has caused
such counsel to believe that the Registration Statement, as of its effective
date, and the Prospectuses, as of such effective date, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading;
or that the Prospectuses, as of the date of the Prospectuses contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading; also, nothing that has
come to such counsel's attention in the course of the
A-2
<PAGE> 41
procedures described in the second clause of this paragraph has caused
such counsel to believe that the Prospectuses, as of the Closing Time,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein in the light of
the circumstances under which they were made, not misleading; in addition, such
counsel shall state that such counsel does not know of any litigation or any
governmental proceeding instituted or threatened against the Company or Iridium
that would be required to be disclosed in the Prospectuses and is not so
disclosed and that such counsel does not know of any documents that would be
required to be filed as exhibits to the Registration Statement and are not so
filed or of any documents that are required to be summarized in the
Prospectuses and are not so summarized; such counsel shall state that the
limitations inherent in the independent verification of factual matters and the
character of determinations involved in the registration process are such,
however, that such counsel does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectuses except for those made under the captions "Risk
Factors - Risks Associated with Principal Supply Contracts," "Risk Factors -
Risk of Loss of Management Rights Upon Change of Control," "Risk Factors -
Risks Related to the Investment Company Act of 1940," "Risk Factors - Tax
Consequences Related to Passive Foreign Investment Companies," "Principal
Contracts for the Development of the Iridium System," "Governance of the
Company and Relationship with Iridium," "Description of Iridium LLC Limited
Liability Company Agreement" and "Tax Considerations," in the Prospectuses
insofar as they relate to provisions of law or documents therein described;
also, such counsel need express no opinion or belief as to (i) the financial
statements or other financial data contained in the Registration Statement or
the Prospectuses (including any financial projections) and (ii) the description
of statutes, regulations, proceedings or matters referred to in Section 6(d) of
the Purchase Agreement.
In rendering such opinion and letter, such counsel shall state that they
express no opinion as to the laws of any jurisdiction other than the Federal
laws of the United States, the laws of the State of New York and the Limited
Liability Company Act of the State of Delaware. In rendering such opinion,
such counsel may (A) rely as to matters involving the application of the laws
of Bermuda, upon the opinion of Conyers Dill & Pearman, Bermuda counsel to the
Company (which opinion shall be dated and furnished to the U.S. Representatives
at Closing Time, shall be satisfactory in form and substance to counsel for the
U.S. Underwriters and shall expressly state that the U.S. Underwriters may rely
on such opinion as if it were addressed to them), provided that Sullivan &
Cromwell shall state in their opinion that they believe that they and the U.S.
Underwriters are justified in relying upon such opinion, and (B) rely as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on information obtained from public officials or certificates of
responsible officers of Iridium and the Company and other sources believed by
such counsel to be responsible and (C) assume that the signatures on all
documents examined by such counsel are genuine (which assumption such counsel
need not independently verify).
A-3
<PAGE> 42
Exhibit A-2
FORM OF OPINION OF COMPANY'S BERMUDA
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 6(c)
(i) The Company has been duly incorporated and is validly existing as
an exempted company under the laws of Bermuda and is in good standing (meaning
that it has not failed to make any required filing with any Bermuda
governmental authority or to pay any Bermuda government fee or tax the failure
of which might make it liable to be struck off the Register of Companies and
thereby cease to exist under the laws of Bermuda) under the laws of Bermuda.
(ii) The Company has all requisite corporate power and authority
necessary to own or hold its respective properties and conduct its business as
described in the Registration Statement and the Prospectuses.
(iii) Based solely upon the Certified Register, the minutes, resolutions,
memorandum of association and bye-laws of the Company which we have examined,
the authorized capitalisation of the Company as of [ ] 1997 is as set forth
in the column entitled "Actual" under "Capitalization-the Company" in the
Prospectus and all shares of the Company's issued and outstanding Common Stock
requiring authorization for issuance by the Company's Board of Directors have
been duly authorised and, to such counsel's knowledge after due inquiry, are
validly issued, fully paid and non-assessable (which term when used herein
shall mean no further sums are required to be paid by the holders thereof in
connection with the issue of such shares) and conform as to legal matters to
the description thereof contained in the Prospectus.
(iv) The shares of Common Stock to be purchased by the U.S. and the
International Managers from the Company pursuant to the Purchase Agreements,
and the shares of Common Stock issuable upon exercise of options granted to the
U.S. Underwriters and the International Managers to cover over-allotments, if
any, have been duly authorised for issuance and sale and upon issuance and
delivery by the Company in accordance with the terms of such Purchase Agreement
against payment in full of the consideration set forth in such Purchase
Agreements will be duly and validly issued, fully paid and non-assessable and
will not be issued in violation of the preemptive rights of any shareholders of
the Company.
(v) The Company has the necessary corporate power and authority to
enter into and perform its obligations under the Documents. The execution and
delivery of the Documents and the performance of the obligations therein set
forth and the consummation of the transactions therein contemplated, will not
result in a breach or violation of, or constitute a default under the
Memorandum of Association, or Bye-laws
A-4
<PAGE> 43
or any of the other Documents, or in violation of any material order, rule,
regulation, writ, injunction, or decree of any government, governmental
instrumentality or court in Bermuda the effect of any which breach, violation
or default would have a material adverse effect on the Company.
(vi) The Company has taken all corporate action required to authorise
its execution and delivery of the Documents and the performance of its
obligations under the Documents in accordance with their respective terms. The
Documents have been duly and validly authorised and executed by or on behalf of
the Company and each constitutes the legal, valid and binding obligations of
the Company enforceable against it in accordance with its respective terms and
upon delivery will be duly and validly delivered.
(vii) To the best of our knowledge, no order, consent, approval, licence,
authorisation or validation of or exemption by any government or public body or
authority of Bermuda or any sub-division thereof is required to authorise or is
required in connection with the execution and delivery by the Company of the
Documents, the performance and enforcement of its obligations thereunder or the
conduct of its business as described in the Prospectus except that permission
of the Bermuda Monetary Authority is required to the issue of the shares of
Common Stock and such permission has been obtained. The issuance and sale of
the shares of the Common Stock is in compliance with all applicable
requirements in Bermuda.
(vii) It is not necessary or advisable, in order to ensure their
enforceability in Bermuda, that the Documents be registered in any register
kept by, or filed with, any governmental authority or regulatory body in
Bermuda.
(viii) The Share Certificates evidencing the shares of Common Stock are in
valid and proper legal form and conform with the requirements of Bermuda law.
(x) Based solely on a search of the Cause Book of the Supreme Court of
Bermuda conducted at 10:00 am on [ ], 1997 there are no pending or
threatened legal or governmental proceedings to which the Company is a party
which could materially adversely affect the business, property, financial
condition or operations of the Company, or which question the validly of the
shares of Common Stock, the Documents, or of any action taken or to be taken by
the Company pursuant to the Documents; and no such proceedings are known to us
to be contemplated against the Company.
(xi) The statements in the Registration Statement under the caption
"Risk Factors-Risk Associated with Incorporation under Bermuda law" and
"Description of Capital Stocks" have been reviewed by us and insofar as they
refer to descriptions of agreements, statements of law, descriptions of
statutes, licences, rules or regulations or legal conclusions of Bermuda, are
correct in all material respects.
A-5
<PAGE> 44
Exhibit A-3
FORM OF OPINION OF REGULATORY COUNSEL TO
MOTOROLA SATELLITE COMMUNICATIONS, INC. AS FCC
LICENSE HOLDER TO BE DELIVERED PURSUANT TO
SECTION 6(d)
(i) The information in the Prospectuses under "Risk Factors--Risks
Associated with Licensing and Spectrum Allocation" and "Regulation of Iridium,"
accurately summarize in all material respects the status of all material FCC
licenses, permits, approvals and other FCC authorizations granted to Motorola
Satellite Communications, Inc. with respect to the provision of satellite
services via the IRIDIUM System in the United States as described therein.
(ii) To the best of such counsel's knowledge, Motorola Satellite
Communications, Inc.: (a) is in substantial compliance with the Communications
Act of 1934, as amended, and the rules and regulations of the FCC promulgated
thereunder as they relate to the FCC licenses, permits, approvals and
authorizations referred to in clause (i) above, and (b) has made all material
filings, reports, applications and submissions required thereunder as they
relate to the FCC licenses, permits, approvals and authorizations referred to
in clause (i) above, except as indicated in the Registration Statement, which
filings, reports, applications and submissions, to the best of such counsel's
knowledge, are true, complete and correct in all material respects.
(iii) No consent, approval, authorization or order of the FCC is required
to be obtained by Motorola Satellite Communications, Inc. in connection with
the authorization, issuance, sale or delivery of the Securities by Iridium.
(iv) Nothing has come to such counsel's attention that has caused such
counsel to believe that the descriptions relating solely to the allocation of
spectrum in the United States and to the licensing of the Iridium System in the
United States contained under the captions "Regulation of Iridium" and "Risk
Factors--Risks Associated with Licensing and Spectrum Allocation" of the
Registration Statement, contain any untrue statements of a material fact or
omit to state a material fact necessary to make such descriptions not
misleading.
(v) The FCC has authorized Motorola Satellite Communications, Inc. to
construct a mobile satellite system capable of operating in the 1616-1626.5 MHz
frequency bands, consistent with the technical specifications set forth in its
application, as modified, the FCC's rules (unless specifically waived) and the
conditions set forth in the FCC's Order and Authorization (DA 95-131), released
January 31, 1995, erratum (DA 95-372, released February 28, 1995), as affirmed
by FCC 96-279, released June 27, 1996; Order and Authorization (DA 96-1789),
released October 30, 1996; provided, however, that such authorizations are
subject to modification, stay or revocation through appeals or reconsideration
within the FCC or the courts.
A-6
<PAGE> 45
Exhibit A-4
FORM OF OPINION OF ASSISTANT SECRETARY
OF THE COMPANY AND GENERAL COUNSEL OF IRIDIUM
TO BE DELIVERED PURSUANT TO
SECTION 6(e)
(i) Except as described in the Prospectuses, the Company has not
granted any outstanding options, warrants or commitments with respect to any
shares of the capital stock of the Company, whether issued or unissued; except
as described in the Prospectuses, Iridium has not granted any warrants, rights
or options with respect to the limited liability company interests of Iridium.
(ii) The Governance Agreements have been duly authorized, executed and
delivered by Iridium.
(iii) To the best of my knowledge, Iridium is not in violation of its
Certificate of Formation or Limited Liability Company Agreement and no default
by Iridium exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or
the Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(iv) The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement, the 1997 Subscription
Agreement and the consummation of the transactions herein and therein
contemplated (including the issuance and sale of the Securities, and the use of
the proceeds from the sale of the Securities as described in the Prospectuses
under the caption "Use Of Proceeds") do not and will not, whether with or
without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Purchase Agreements) under any contract, indenture, mortgage,
deed of trust, loan or credit agreement, any other agreement or instrument,
known to such counsel, to which the Company or Iridium is a party or by which
it or any of them may be bound, or to which any of the property or assets of
the Company or Iridium is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect).
(v) Except as described in the Registration Statement, there are no
persons with registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered by
Iridium under the 1933 Act.
(vi) Iridium has duly and validly authorized, executed and delivered
each of the Principal Agreements to which it is a party and, assuming due
authorization,
A-7
<PAGE> 46
execution and delivery by the other parties to the Principal Agreements, each
of the Principal Agreements is a legally valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles or with respect to any provision of such agreements
purporting to require indemnification of, or contribution to, the losses,
damages, claims, expenses or liability of any person.
(vii) Each of the Company and Iridium has duly and validly authorized,
executed and delivered each of the Governance Agreements and, assuming due
authorization, execution and delivery by the other parties to the Governance
Agreements, each of the Governance Agreements is a legally valid and binding
agreement of the Company and Iridium, enforceable against the Company and
Iridium in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(viii) Except as disclosed in the Registration Statement, to the best of
my knowledge, there is not pending or threatened any action, suit, proceeding,
inquiry or investigation, to which the Company or Iridium is a party, or to
which the property of the Company or Iridium is subject, before or brought by
any court or governmental agency or body, domestic or foreign, 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 the U.S.
Purchase Agreement, the International Purchase Agreement or the 1997
Subscription Agreement or the performance by the Company or Iridium of their
obligations thereunder or the consummation of the Transactions.
In rendering such opinion, such counsel shall state that such counsel
expresses no opinion as to the laws of any jurisdiction other than the Federal
laws of the United States and the Limited Liability Company Act of the State of
Delaware. In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the laws of Bermuda, upon the opinion of Conyers
Dill & Pearman, Bermuda counsel to the Company (which opinion shall be dated
and furnished to the U.S. Representatives at Closing Time, shall be
satisfactory in form and substance to counsel for the U.S. Underwriters and
shall expressly state that the U.S. Underwriters may rely on such opinion as
if it were addressed to them), and (B), as to matters of fact (but not as to
legal conclusions), to the extent he deems proper, on information obtained from
public officials or certificates of responsible officers of Iridium and the
Company and other sources believed by such counsel to be responsible and (C)
assume that the signatures on all documents examined by such counsel (other
than those of officers or directors of Iridium or the Company) are genuine
(which assumption such counsel need not independently verify).
A-8
<PAGE> 47
Exhibit C
____________ , 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman, Sachs & Co.
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated(1)
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH INTERNATIONAL
Donaldson, Lufkin & Jenrette
Securities Corporation
Goldman Sachs International
as Lead Manager(s) of the several International Managers
c/o Merrill Lynch International
20 Farringdon Road
London ECIM 3NH
England
Re: Proposed Public Offering by Iridium World Communications Ltd.
Dear Sirs:
The undersigned, a stockholder of Iridium World Communications Ltd, a
Bermuda company (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Dondaldson,
Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. propose to
enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the
Company providing for the public offering of shares (the "Securities") of the
Company's Class A common stock, par value $.01 per share (the "Class A Common
Stock"). In recognition of the benefit that such an offering will confer upon
the undersigned as a stockholder of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
U.S. Purchase Agreement that, during a period of 180 days from the date of the
U.S. Purchase Agreement, the undersigned will not, without the prior written
consent of Merrill
C-1
<PAGE> 48
Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Company's Class A Common Stock or any securities
convertible into or exchangeable or exercisable for Class A Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Class A Common Stock,
whether any such swap or transaction is to be settled by delivery of Class A
Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature:
------------------------------
Print Name:
-----------------------------
C-2
<PAGE> 1
EXHIBIT 3.2
302894
B Y E - L A W S
of
IRIDIUM WORLD COMMUNICATIONS LTD.
<PAGE> 2
(i)
TABLE OF CONTENTS
Bye-Law
Page
<TABLE>
<S> <C> <C>
1 Interpretation 1
2 Board of Directors 3
3 Management of the Company 3
4 Power to appoint managing director or chief executive officer 3
5 Power to appoint manager 4
6 Power to authorise specific actions 4
7 Power to appoint attorney 4
8 Power to delegate to a committee 4
9 Power to appoint and dismiss employees 5
10 Power to borrow and charge property 5
11 Exercise of power to purchase shares of,
or discontinue the Company 5
12 Election of Directors 5
13 Defects in appointment of Directors 6
14 Alternate Directors 6
15 Removal of Directors 6
16 Vacancies on the Board 7
17 Notice of meetings of the Board 8
18 Quorum at meetings of the Board 8
19 Meetings of the Board 8
20 Unanimous written resolutions 9
21 Contracts and disclosure of Directors' interests 9
22 Remuneration of Directors 9
23 Officers of the Company 10
24 Appointment of Officers 10
25 Remuneration of Officers 10
26 Duties of Officers 10
27 Chairman of meetings 10
28 Register of Directors and Officers 11
29 Obligations of Board to keep minutes 11
30 Indemnification of Directors and Officers of the Company 11
31 Waiver of claim by Member 12
32 Notice of annual general meeting 12
33 Notice of special general meeting 13
34 Accidental omission of notice of general meeting 13
35 Meeting called on requisition of members 13
36 Short notice 13
37 Postponement of meetings 14
</TABLE>
<PAGE> 3
(ii)
<TABLE>
<S> <C> <C>
38 Quorum for general meeting 14
39 Adjournment of meetings 14
40 Attendance at meetings 15
41 Written resolutions 15
42 Attendance of Directors 16
43 Voting at meetings 16
44 Voting on show of hands 17
45 Decision of chairman 17
46 Demand for a poll 17
47 Seniority of joint holders voting 19
48 Instrument of proxy 19
49 Representation of corporations at meetings 19
50 Rights of shares 20
51 Power to issue shares 23
52 Variation of rights, alteration of share capital and purchase
of shares of the Company 24
53 Registered holder of shares 25
54 Death of a joint holder 26
55 Share certificates 26
56 Calls on shares 27
57 Forfeiture of Shares 27
58 Contents of Register of Members 28
59 Inspection of Register of Members 28
60 Determination of record dates 28
61 Instrument of transfer 28
62 Restriction on transfer 29
63 Transfers by joint holders 29
64 Representative of deceased Member 30
65 Registration on death or bankruptcy 30
66 Declaration of dividends by Board 31
67 Other distributions 31
68 Reserve fund 31
69 Deduction of amounts due to the Company 31
70 Issue of bonus shares 31
71 Records of account 32
72 Financial year end 32
73 Financial statements 32
74 Appointment of Auditor 33
75 Remuneration of Auditor 33
76 Vacation of office of Auditor 33
77 Access to books of the Company 33
78 Report of the Auditor 33
79 Notices to Members of the Company 34
80 Notices to joint Members 34
81 Service and delivery of notice 34
</TABLE>
<PAGE> 4
(iii)
<TABLE>
<S> <C> <C>
82 The seal 35
83 Manner in which seal is to be affixed 35
84 Winding-up/distribution by liquidator 35
85 Alteration of Bye-laws 36
</TABLE>
<PAGE> 5
INTERPRETATION
1. Interpretation
(1) In these Bye-laws the following words and
expressions shall, where not inconsistent with the context, have the following
meanings respectively:-
(a) "Act" means the Companies Act 1981 as
amended from time to time;
(b) "Alternate Director" means an alternate
Director appointed in accordance with
these Bye-laws;
(c) "Auditor" includes any individual or
partnership;
(d) "Board" means the Board of Directors
appointed or elected pursuant to these
Bye-laws and acting by resolution in
accordance with the Act and these
Bye-laws or the Directors present at a
meeting of Directors at which there is
a quorum;
(e) "Company" means the company for which
these Bye-laws are approved and
confirmed;
(f) "Director" means a director of the
Company and shall include an Alternate
Director;
(g) "Member" means the person registered
in the Register of Members as the
holder of shares in the Company and,
when two or more persons are so
registered as joint holders of shares,
means the person whose name stands
first in the Register of Members as
one of such joint holders or all of
such persons as the context so requires;
(h) "notice" means written notice as
further defined in these Bye-laws
unless otherwise specifically stated;
(i) "Officer" means any person appointed
by the Board to hold an office in the
Company;
(j) "Register of Directors and Officers"
means the Register of Directors and
Officers referred to in these Bye-laws;
(k) "Register of Members" means the
Register of Members referred to in
these Bye-laws; and
<PAGE> 6
-2-
(l) "Secretary" means the person appointed
to perform any or all the duties of
secretary of the Company and includes
any deputy or assistant secretary.
(m) "Share Equivalent Basis" means that
with respect to any action relating to
two or more classes of the Company's
shares, such action shall be taken by
reference to the number of Class 1
Membership Interests in Iridium LLC
acquired by the Company in respect of
each such class of shares (the
"Underlying LLC Interests") and on the
basis such that the effect of such
action with respect to the Underlying
LLC Interests is equal. For the
avoidance of doubt, if (i) a total
distribution of $1,000 is to be paid on
the outstanding Class A Shares and the
outstanding Class B Shares on a Share
Equivalent Basis, (ii) there are 100
Class A Shares outstanding and 10 Class
B Shares outstanding, and (iii) the
Company has acquired 15 Class 1
Membership Interests in respect of the
Class A Shares and five Class 1
Membership Interests in respect of the
Class B Shares, the distribution on the
Class A Shares would be $7.50 per share
and the distribution of the Class B
Shares would be $25.00 per share (i.e.,
the effect with respect to the Class A
Underlying LLC Interests and the Class B
Underlying LLC Interests is $50.00 per
Underlying LLC Interest).
(2) In these Bye-laws, where not inconsistent with the
context:-
(a) words denoting the plural number
include the singular number and vice
versa;
(b) words denoting the masculine gender
include the feminine gender;
(c) words importing persons include
companies, associations or bodies of
persons whether corporate or not;
(d) the word:-
(i) "may" shall be construed as
permissive;
(ii) "shall" shall be construed
as imperative; and
(e) unless otherwise provided herein words
or expressions defined in the Act shall
bear the same meaning in these Bye-laws.
<PAGE> 7
-3-
(3) Expressions referring to writing or written shall,
unless the contrary intention appears, include facsimile, printing,
lithography, photography and other modes of representing words in a visible
form.
(4) Headings used in these Bye-laws are for convenience
only and are not to be used or relied upon in the construction hereof.
BOARD OF DIRECTORS
2. Board of Directors
The business of the Company shall be managed and conducted by
the Board.
3. Management of the Company
(1) In managing the business of the Company, the Board may
exercise all such powers of the Company as are not, by statute or by these
Bye-laws, required to be exercised by the Company in general meeting subject,
nevertheless, to these Bye-laws, the provisions of any statute and to such
directions as may be prescribed by the Company in general meeting.
(2) No regulation or alteration to these Bye-laws made by
the Company in general meeting shall invalidate any prior act of the Board
which would have been valid if that regulation or alteration had not been made.
(3) The Board may procure that the Company pays all
expenses incurred in promoting and incorporating the Company.
4. Power to appoint managing director or chief executive officer
The Board may from time to time appoint one or more Directors
to the office of managing director or chief executive officer of the Company
who shall, subject to the
<PAGE> 8
-4-
control of the Board, supervise and administer all of the general business and
affairs of the Company.
5. Power to appoint manager
The Board may appoint a person to act as manager of the
Company's day to day business and may entrust to and confer upon such manager
such powers and duties as it deems appropriate for the transaction or conduct
of such business.
6. Power to authorise specific actions
The Board may from time to time and at any time authorise any
company, firm, person or body of persons to act on behalf of the Company for
any specific purpose and in connection therewith to execute any agreement,
document or instrument on behalf of the Company.
7. Power to appoint attorney
The Board may from time to time and at any time by power of
attorney appoint any company, firm, person or body of persons, whether
nominated directly or indirectly by the Board, to be an attorney of the Company
for such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Board) and for such period and
subject to such conditions as it may think fit and any such power of attorney
may contain such provisions for the protection and convenience of persons
dealing with any such attorney as the Board may think fit and may also
authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions so vested in the attorney. Such attorney may, if
so authorised under the seal of the Company, execute any deed or instrument
under such attorney's personal seal with the same effect as the affixation of
the seal of the Company.
8. Power to delegate to a committee
The Board may delegate any of its powers to a committee
appointed by the Board
<PAGE> 9
-5-
which may consist partly or entirely of non-Directors and every such committee
shall conform to such directions as the Board shall impose on them.
9. Power to appoint and dismiss employees
The Board may appoint, suspend or remove any manager,
secretary, clerk, agent or employee of the Company and may fix their
remuneration and determine their duties.
10. Power to borrow and charge property
The Board may exercise all the powers of the Company to borrow
money and to mortgage or charge its undertaking, property and uncalled capital,
or any part thereof, and may issue debentures, debenture stock and other
securities whether outright or as security for any debt, liability or
obligation of the Company or any third party.
11. Exercise of power to purchase shares of or discontinue the
Company
(1) The Board may exercise all the powers of the Company
to purchase all or any part of its own shares pursuant to Section 42A of the
Act.
(2) The Board may exercise all the powers of the Company to
discontinue the Company to a named country or jurisdiction outside Bermuda
pursuant to Section 132G of the Act.
12. Election of Directors
The Board shall consist of not less than two Directors or such
number in excess thereof as the Members may from time to time determine who
shall be elected or appointed in the first place at the statutory meeting of
the Company and thereafter, except in the case of casual vacancy, at the annual
general meeting or at any special general meeting called for the purpose and
who shall hold office for such term as the Members may determine or, in the
absence of such determination, until the next annual general meeting or until
their successors are elected or appointed or their office is otherwise vacated,
and any general
<PAGE> 10
-6-
meeting may authorise the Board to fill any vacancy in their number left
unfilled at a general meeting.
13. Defects in appointment of Directors
All acts done bona fide by any meeting of the Board or by a
committee of the Board or by any person acting as a Director shall,
notwithstanding that it be afterwards discovered that there was some defect in
the appointment of any Director or person acting as aforesaid, or that they or
any of them were disqualified, be as valid as if every such person had been
duly appointed and was qualified to be a Director.
14. Alternate Directors
(1) Any general meeting of the Company may elect a person
or persons to act as a Director in the alternative to any one or more of the
Directors of the Company or may authorise the Board to appoint such Alternate
Directors. Unless the Members otherwise resolve, any Director may appoint a
person or persons to act as a Director in the alternative to himself or herself
by notice in writing deposited with the Secretary. Any person so appointed
shall have all the rights and powers of the Director or Directors for whom such
person is appointed in the alternative provided that such person shall not be
counted more than once in determining whether or not a quorum is present.
(2) An Alternate Director shall be entitled to receive
notice of all meetings of the Board and to attend and vote at any such meeting
at which a Director for whom such Alternate Director was appointed in the
alternative is not personally present and generally to perform at such meeting
all the functions of such Director for whom such Alternate Director was
appointed.
(3) An Alternate Director shall cease to be such if the
Director for whom such Alternate Director was appointed ceases for any reason
to be a Director but may be
<PAGE> 11
-7-
re-appointed by the Board as alternate to the person appointed to fill the
vacancy in accordance with these Bye-laws.
15. Removal of Directors
(1) Subject to any provision to the contrary in these
Bye-laws, the Members entitled to vote for the election of Directors may, at
any special general meeting convened and held in accordance with these
Bye-laws, remove a Director, with or without cause, provided that the notice of
any such meeting convened for the purpose of removing a Director shall contain
a statement of the intention so to do and be served on such Director not less
than 14 days before the meeting and at such meeting such Director shall be
entitled to be heard on the motion for such Director's removal.
(2) A vacancy on the Board created by the removal of a
Director under the provisions of subparagraph (1) of this Bye-law may be filled
by the Members entitled to vote for the election of Directors at the meeting at
which such Director is removed and, in the absence of such election or
appointment, the Board may fill the vacancy.
16. Vacancies on the Board
(1) Subject to Bye-law 15, the Board shall have the power
from time to time and at any time to appoint any person as a Director to fill a
vacancy on the Board occurring as the result of the death, disability,
disqualification or resignation of any Director and to appoint an Alternate
Director to any Director so appointed.
(2) The Board may act notwithstanding any vacancy in its
number but, if and so long as its number is reduced below the number fixed by
these Bye-laws as the quorum necessary for the transaction of business at
meetings of the Board, the continuing Directors or Director may act for the
purpose of (i) summoning a general meeting of the Company or (ii) preserving
the assets of the Company.
<PAGE> 12
-8-
(3) The office of Director shall be vacated if the Director:-
(a) is removed from office pursuant to these
Bye-laws or is prohibited from being a
Director by law;
(b) is or becomes bankrupt or makes any
arrangement or composition with his
creditors generally;
(c) is or becomes of unsound mind or dies;
or
(d) resigns his or her office by notice in
writing to the Company.
17. Notice of meetings of the Board
(1) A Director may, and the Secretary on the requisition of
a Director shall, at any time summon a meeting of the Board.
(2) Notice of a meeting of the Board shall be deemed to be
duly given to a Director if it is given to such Director verbally in person or
by telephone or otherwise communicated or sent to such Director by post, cable,
telex, telecopier, facsimile or other mode of representing words in a legible
and non-transitory form at such Director's last known address or any other
address given by such Director to the Company for this purpose.
18. Quorum at meetings of the Board
The quorum necessary for the transaction of business at a
meeting of the Board shall be three Directors.
19. Meetings of the Board
(1) The Board may meet for the transaction of business,
adjourn and otherwise regulate its meetings as it sees fit.
(2) Directors may participate in any meeting of the Board
by means of such telephone, electronic or other communication facilities as
permit all persons participating
<PAGE> 13
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in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.
(3) A resolution put to the vote at a meeting of the Board
shall be carried by the affirmative votes of a majority of the votes cast and
in the case of an equality of votes the resolution shall fail.
20. Unanimous written resolutions
A resolution in writing signed by all the Directors which may
be in counterparts, shall be as valid as if it had been passed at a meeting of
the Board duly called and constituted, such resolution to be effective on the
date on which the last Director signs the resolution. For the purposes of this
Bye-law only, "Director" shall not include an Alternate Director.
21. Contracts and disclosure of Directors' interests
(1) Any Director, or any Director's firm, partner or any
company with whom any Director is associated, may act in a professional
capacity for the Company and such Director or such Director's firm, partner or
such company shall be entitled to remuneration for professional services as if
such Director were not a Director, provided that nothing herein contained shall
authorise a Director or Director's firm, partner or such company to act as
Auditor of the Company. Any Director may be or become directly or indirectly
interested in a contract or proposed contract or arrangement with the Company
or the Members for any renumeration, profit or other benefits received by him
as a director or officer or from his interest in such other contract, proposed
contract or arrangement.
(2) A Director who is directly or indirectly interested in
a contract or proposed contract or arrangement with the Company shall declare
the nature of such interest as required by the Act.
(3) Following a declaration being made pursuant to this
Bye-law, and unless disqualified by the chairman of the relevant Board meeting,
a Director may vote in respect of any contract or proposed contract or
arrangement in which such Director is interested
<PAGE> 14
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and may be counted in the quorum at such meeting.
22. Remuneration of Directors
The remuneration, (if any) of the Directors shall be
determined by the Company in general meeting and shall be deemed to accrue from
day to day. The Directors may also be paid all travel, hotel and other
expenses properly incurred by them in attending and returning from meetings of
the Board, any committee appointed by the Board, general meetings of the
Company, or in connection with the business of the Company or their duties as
Directors generally.
OFFICERS
23. Officers of the Company
The Officers of the Company shall consist of a President and a
Vice President, or a Chairman and a deputy Chairman, a Secretary and such
additional Officers as the Board may from time to time determine all of whom
shall be deemed to be Officers for the purposes of these Bye-laws.
24. Appointment of Officers
(1) The Board shall, as soon as possible after the
statutory meeting of Members and after each annual general meeting appoint a
President and Vice President or a Chairman and Deputy Chairman who shall be
Directors.
(2) The Secretary and additional Officers, if any, shall be
appointed by the Board from time to time.
25. Remuneration of Officers
The Officers shall receive such remuneration as the Board may
from time to time determine.
<PAGE> 15
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26. Duties of Officers
The Officers shall have such powers and perform such duties in
the management, business and affairs of the Company as may be delegated to them
by the Board from time to time.
27. Chairman of meetings
Unless otherwise agreed by a majority of those attending and
entitled to attend and vote thereat, the Chairman, if there be one, and, if
not, the President shall act as chairman at all meetings of the Members and of
the Board at which such person is present. In their absence the Deputy
Chairman or Vice President, if present, shall act as chairman and in the
absence of all of them a chairman shall be appointed or elected by those
present at the meeting and entitled to vote.
28. Register of Directors and Officers
The Board shall cause to be kept in one or more books at the
registered office of the Company a Register of Directors and Officers and shall
enter therein the particulars required by the Act.
MINUTES
29. Obligations of Board to keep minutes
(1) The Board shall cause minutes to be duly entered in
books provided for the purpose:-
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting
of the Board and of any committee appointed by the
Board; and
(c) of all resolutions and proceedings of general meetings
of the Members, meetings of the Board, meetings of
managers and meetings of committees appointed by the
Board.
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(2) Minutes prepared in accordance with the Act and these
Bye-laws shall be kept by the Secretary at the registered office of the
Company.
INDEMNITY
30. Indemnification of Directors and Officers of the Company
The Directors, Secretary and other Officers for the time being
of the Company and the liquidator or trustees (if any) for the time being
acting in relation to any of the affairs of the Company and every one of them,
and their heirs, executors and administrators, shall be indemnified and secured
harmless to the full extent permitted by law out of the assets of the Company
from and against all actions, costs, charges, losses, damages and expenses
which they or any of them, their heirs, executors or administrators, shall or
may incur or sustain by or by reason of any act done, concurred in or omitted
in or about the execution of their duty, or supposed duty, or in their
respective offices or trusts, and none of them shall be answerable for the
acts, receipts, neglects or defaults of the others of them or for joining in
any receipts for the sake of conformity, or for any bankers or other persons
with whom any moneys or effects belonging to the Company shall or may be lodged
or deposited for safe custody, or for insufficiency or deficiency of any
security upon which any moneys of or belonging to the Company shall be placed
out on or invested, or for any other loss, misfortune or damage which may
happen in the execution of their respective offices or trusts, or in relation
thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect
of any fraud or dishonesty which may attach to any of said persons. Expenses
incurred by any Director or Officer in defending any action, suit or
proceeding, whether civil, criminal, administrative, or investigative (whether
by a third party or by the right of the Company) (hereinafter a "proceeding")
shall be paid by the Company in advance of such proceeding's final disposition
upon receipt of an undertaking by or on behalf of the Director or Officer to
repay such amount if it shall ultimately be determined that he or she is not
entitled to indemnity by the Company. Such expenses incurred by other employees
or agents of the Company may be so paid upon such terms and conditions as the
Board deems appropriate.
31. Waiver of claim by Member
Each Member agrees to waive any claim or right of action such
Member might have, whether individually or by or in the right of the Company,
against any Director or Officer on account of any action taken by such Director
or Officer, or the failure of such Director or Officer to take any action in
the performance of his duties with or for the Company,
<PAGE> 17
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PROVIDED THAT such waiver shall not extend to any matter in respect of any
fraud or dishonesty which may attach to such Director or Officer.
MEETINGS
32. Notice of annual general meeting
The annual general meeting of the Company shall be held in
each year other than the year of incorporation at such time and place as the
President or the Chairman or any two Directors or any Director and the
Secretary or the Board shall appoint. At least 10 days notice of such meeting
shall be given to each Member entitled to vote thereat stating the date, place
and time at which the meeting is to be held, that the election of Directors
will take place thereat, and as far as practicable, the other business to be
conducted at the meeting. Notice will be given personally or by mail. Mail
notice shall be deemed given when deposited, with postage prepaid, in the
United States or Bermuda mail.
33. Notice of special general meeting
The President or the Chairman or any two Directors or any
Director and the Secretary or the Board may convene a special general meeting
of the Company whenever in their judgment such a meeting is necessary, upon not
less than five days' notice which shall state the date, time, place and the
general nature of the business to be considered at the meeting. Notice will be
given personally or by mail. Mail notice shall be deemed given when deposited,
with postage prepaid, in the United States or Bermuda mail.
34. Accidental omission of notice of general meeting
The accidental omission to give notice of a general meeting
to, or the non-receipt of notice of a general meeting by, any person entitled
to receive notice shall not invalidate the proceedings at that meeting.
35. Meeting called on requisition of Members
<PAGE> 18
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Notwithstanding anything herein, the Board shall, on the
requisition of Members holding at the date of the deposit of the requisition
not less than one-tenth of such of the paid-up share capital of the Company as
at the date of the deposit carries the right to vote at general meetings of the
Company, forthwith proceed to convene a special general meeting of the Company
and the provisions of Section 74 of the Act shall apply.
36. Short notice
A general meeting of the Company shall, notwithstanding that
it is called by shorter notice than that specified in these Bye-laws, be deemed
to have been properly called if it is so agreed by (i) all the Members entitled
to attend and vote thereat in the case of an annual general meeting; and (ii)
by a majority in number of the Members having the right to attend and vote at
the meeting, being a majority together holding not less than 95% in nominal
value of the shares giving a right to attend and vote thereat in the case of a
special general meeting. Attendance of a Member, in person or by proxy at a
meeting will constitute consent to short notice of such meeting by such Member
except when the Member attends a meeting for the sole purpose of objecting, at
the beginning the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
37. Postponement of meetings
The Secretary may postpone any general meeting called in
accordance with the provisions of these Bye-laws (other than a meeting
requisitioned under these Bye-laws) provided that notice of postponement is
given to each Member before the time for such meeting. Fresh notice of the
date, time and place for the postponed meeting shall be given to each Member
entitled to vote thereat in accordance with the provisions of these Bye-laws.
<PAGE> 19
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38. Quorum for general meeting
At any general meeting of the Company two persons present in
person and representing in person or by proxy in excess of 50% of the total
issued voting shares in the Company throughout the meeting shall form a quorum
for the transaction of business, PROVIDED that if the Company shall at any time
have only one Member, one Member present in person or by proxy shall form a
quorum for the transaction of business at any general meeting of the Company
held during such time. If within half an hour from the time appointed for the
meeting a quorum is not present, the meeting shall stand adjourned to the same
day one week later, at the same time and place or to such other day, time or
place as the Secretary may determine.
39. Adjournment of meetings
The chairman of a general meeting may, with the consent of the
Members holding not less than 51% in nominal value of the shares having a right
to attend and vote at the meeting, at any general meeting at which a quorum is
present (and shall if so directed), adjourn the meeting. Unless the meeting is
adjourned to a specific date and time and no new record date is established,
fresh notice of the date, time and place for the resumption of the adjourned
meeting shall be given to each Member entitled to vote thereat in accordance
with the provisions of these Bye-laws.
40. Attendance at meetings
Members or their duly appointed proxy may participate in any
general meeting by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously, and participation in such a
meeting shall constitute presence in person at such meeting.
41. Written resolutions
(1) Subject to subparagraph (6), anything which may be done
by resolution of the Company in general meeting or by resolution
<PAGE> 20
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of a meeting of any class of the Members of the Company, may, without a meeting
and without any previous notice being required, be done by resolution in
writing signed by, or, in the case of a Member that is a corporation whether or
not a company within the meaning of the Act, on behalf of, all the Members who
at the date of the resolution would be entitled to attend the meeting and vote
on the resolution.
(2) A resolution in writing may be signed by, or, in the
case of a Member that is a corporation whether or not a company within the
meaning of the Act, on behalf of, all the Members, or any class thereof, in as
many counterparts as may be necessary.
(3) For the purposes of this Bye-law, the date of the
resolution is the date when the resolution is signed by, or, in the case of a
Member that is a corporation whether or not a company within the meaning of the
Act, on behalf of, the last Member to sign and any reference in any Bye-law to
the date of passing of a resolution is, in relation to a resolution made in
accordance with this Bye-law, a reference to such date.
(4) A resolution in writing made in accordance with this
Bye-law is as valid as if it had been passed by the Company in general meeting
or by a meeting of the relevant class of Members, as the case may be, and any
reference in any Bye-law to a meeting at which a resolution is passed or to
Members voting in favour of a resolution shall be construed accordingly.
(5) A resolution in writing made in accordance with this
Bye-law shall constitute minutes for the purposes of Sections 81 and 82 of the
Act.
(6) This Bye-law shall not apply to:-
(a) a resolution passed pursuant to Section
89(5) of the Act; or
<PAGE> 21
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(b) a resolution passed for the purpose of
removing a Director before the
expiration of his term of office under
these Bye-laws.
42. Attendance of Directors
(1) The Directors of the Company shall be entitled to
receive notice of and to attend and be heard at any general meeting.
(2) Notice of any general meeting shall be deemed to be
duly given to a Director if it is given to such Director verbally in person or
by telephone or otherwise communicated or sent to such Director by post, cable,
telex, telecopier, facsimile or other mode of representing words in a legible
and non-transitory form at such Director's last known address or any other
address given by such Director to the Company for this purpose.
43. Voting at meetings
(1) Subject to the provisions of the Act and these
Bye-laws, any question proposed for the consideration of the Members at any
general meeting shall be decided by the affirmative votes of a majority of the
votes cast in accordance with the provisions of these Bye-laws and in the case
of an equality of votes the resolution shall fail.
(2) No Member shall be entitled to vote at any general
meeting unless such Member has paid all the calls on all shares held by such
Member.
44. Voting on show of hands
At any general meeting a resolution put to the vote of the
meeting shall, in the first instance, be voted upon by a show of hands and,
subject to any rights or restrictions for the time being lawfully attached to
any class of shares and subject to the provisions of these Bye-laws, every
Member entitled to vote who is present in person and every person holding a
valid proxy from a Member entitled to vote at such meeting shall be entitled
to one vote and shall cast such vote by raising his or her hand.
<PAGE> 22
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45. Decision of chairman
At any general meeting a declaration by the chairman of the
meeting that a question proposed for consideration has, on a show of hands,
been carried, or carried unanimously, or by a particular majority, or lost, and
an entry to that effect in a book containing the minutes of the proceedings of
the Company shall, subject to the provisions of these Bye-laws, be conclusive
evidence of that fact.
46. Demand for a poll
(1) Notwithstanding the provisions of the immediately
preceding two Bye-laws, at any general meeting of the Company, in respect of
any question proposed for the consideration of the Members (whether before or
on the declaration of the result of a show of hands as provided for in these
Bye-laws), a poll may be demanded by any of the following persons:-
(a) the chairman of such meeting; or
(b) at least three Members present in person
and entitled to vote or represented by
proxy; or
(c) any Member or Members present in person
or represented by proxy and holding
between them not less than one-tenth of
the total voting rights of all the
Members having the right to vote at
such meeting; or
(d) any Member or Members present in person
or represented by proxy holding shares
in the Company conferring the right to
vote at such meeting, being shares on
which an aggregate sum has been paid up
equal to not less than one-tenth of the
total sum paid up on all such shares
conferring such right.
(2) Where, in accordance with the provisions of
subparagraph (1) of this Bye-law, a poll is demanded, subject to any rights or
restrictions for the time being lawfully attached to any class of shares, every
person present at such meeting shall have one vote
<PAGE> 23
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for each share of stock entitled to be voted on such matter of which such
person is the holder or for which such person holds a proxy and such vote shall
be counted in the manner set out in sub-paragraph (4) of this Bye-Law or in the
case of a general meeting at which one or more Members are present by telephone
in such manner as the chairman of the meeting may direct and the result of such
poll shall be deemed to be the resolution of the meeting at which the poll was
demanded and shall replace any previous resolution upon the same matter which
has been the subject of a show of hands.
(3) A poll demanded in accordance with the provisions of
subparagraph (1) of this Bye-law, for the purpose of electing a chairman or on
a question of adjournment, shall be taken forthwith and a poll demanded on any
other question shall be taken in such manner and at such time and place as the
chairman may direct and any business other than that upon which a poll has been
demanded may be proceeded with pending the taking of the poll.
(4) Where a vote is taken by poll, each person present and
entitled to vote shall be furnished with a ballot paper on which such person
shall record his or her vote in such manner as shall be determined at the
meeting having regard to the nature of the question on which the vote is taken,
and each ballot paper shall be signed or initialled or otherwise marked so as
to identify the voter and the registered holder in the case of a proxy. At the
conclusion of the poll, the ballot papers shall be examined and counted by a
committee of not less than two Members or proxy holders appointed by the
chairman for the purpose and the result of the poll shall be declared by the
chairman.
47. Seniority of joint holders voting
In the case of joint holders the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register of Members.
<PAGE> 24
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48. Instrument of proxy
The instrument appointing a proxy shall be in writing in the
form, or as near thereto as circumstances admit, of Form "A" in the Schedule
hereto, under the hand of the appointor or of the appointor's attorney duly
authorised in writing, or if the appointor is a corporation, either under its
seal, or under the hand of a duly authorised officer or attorney. The decision
of the chairman of any general meeting as to the validity of any instrument of
proxy shall be final.
49. Representation of corporations at meetings
A corporation which is a Member may, by written instrument,
authorise such person as it thinks fit to act as its representative at any
meeting of the Members and the person so authorised shall be entitled to
exercise the same powers on behalf of the corporation which such person
represents as that corporation could exercise if it were an individual Member.
Notwithstanding the foregoing, the chairman of the meeting may accept such
assurances as he or she thinks fit as to the right of any person to attend and
vote at general meetings on behalf of a corporation which is a Member.
SHARE CAPITAL AND SHARES
50. Rights of shares
(1) The capital of the Company shall be divided into two
classes of shares, namely:
(a) Shares of Class A Common Stock, par value $0.01 per
share ("Class A Shares"); and
(b) Shares of Class B Common Stock, par value $0.01 per
share ("Class B Shares").
<PAGE> 25
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Class A Shares
(2) The holders of Class A Shares shall, subject to the
provisions of these Bye-laws:
(a) be entitled to one vote per Class A Share;
(b) be entitled to such dividends as the directors may
from time to time declare as provided below under
Dividends; and
(c) in the event of a liquidation, winding-up or
dissolution of the Company, whether voluntary or
involuntary or for a reorganisation or otherwise or
upon a distribution of capital, be entitled,
to share in the surplus assets of the Company as
provided below under Liquidation.
Class B Shares
(3) The holders of Class B Shares shall, subject to the
provisions of these Bye-laws:
(a) not be entitled to any votes in respect of such Class B
Shares except that such shares may be voted in the
case of a vote of the holders of Class B Shares as
provided in Section 52 of these Bye-laws and pursuant
to Section 47 of the Act and otherwise as required by
the Act;
(b) be entitled to such dividends as the directors may
from time to time declare as provided below under
Dividends;
(c) in the event of a liquidation, winding up or
dissolution of the Company, whether voluntary or
involuntary or for a re-organisation or otherwise or
upon a distribution of capital, be entitled, to share in
the surplus assets of the Company as provided below
under Liquidation; and
(d) subject to sub-paragraph (3)(a) above, the Class B
Shares shall be deemed to be non voting shares for all
purposes of these Bye-laws.
Conversion
(4) The Class B Shares shall be convertible into Class A
Shares on such terms and conditions as the Directors shall
determine, including by repurchase of
<PAGE> 26
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Class B Shares and the application of the proceeds towards the
purchase of Class A Shares to be issued by the Company.
Dividends
(5) Holders of Class A Shares shall be entitled to receive
equally on a Share Equivalent Basis such dividends and other
distributions in cash, stock or property of the Company as may
be declared thereon by the Board of Directors from time to
time out of assets or funds of the Company legally available
therefor; provided that the Board of Directors shall declare
no dividend, and no dividend shall be paid, with respect to
any outstanding Class A Share or Class B Share, whether paid
in cash or property, unless, simultaneously, the same dividend
(calculated on a Share Equivalent Basis) is declared and paid
with respect to each Class A Share and Class B Share, except
that in the case of any dividend in the form of capital stock
of a subsidiary of the Company, the capital stock of the
subsidiary distributed to holders of Class A Shares may differ
from the capital stock of the subsidiary distributed to
holders of the Class B Shares to the extent and only to the
extent that the Class A Shares and the Class B Shares differ
as provided herein.
Liquidation
(6) In the event of any liquidation, winding-up or
dissolution of the Company, whether voluntary or involuntary,
or for a reorganisation or otherwise or a distribution of
capital, after payment or provision for payment of the debts
and other liabilities of the Company and after payment in full
of the amounts to be paid to holders of Preferred Stock, if
any, the remaining assets and funds of the Company shall be
divided among and paid ratably (calculated on a Share
Equivalent Basis) to the holders of Class A Shares and Class B
Shares as a single class. For the purposes hereof, the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of
<PAGE> 27
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stock, securities or other consideration) of all or
substantially all the property or assets of the Company shall
be deemed a voluntary liquidation, winding-up or dissolution
of the Company (unless occurring as a result of a
reorganisation, reclassification, merger or similar
transaction involving Iridium LLC (or any successor to Iridium
LLC) if the Company becomes a member, stockholder or similar
investor in the successor entity thereto), but a consolidation
or merger of the Company with one or more other entities shall
not be deemed to be a liquidation, winding-up or dissolution,
voluntary or involuntary.
Reclassifications, Etc.
(7) The Class A Shares or the Class B Shares may be
subdivided, consolidated, reclassified or otherwise changed
without any requirement that the other class of Shares be
subdivided, consolidated, reclassified or otherwise changed.
Mergers, Consolidations, Etc.
(8) In any merger, consolidation or business combination of
the Company with or into another entity, whether or not the
Company is the surviving entity, the consideration per share
to be received by holders of either Class A Shares or Class B
Shares in such merger, consolidation or business combination
must be the same (calculated on a Share Equivalent Basis) as
that received by holders of the other class of Shares, except
that in any such transaction in which shares of capital stock
are distributed, such shares may differ as to voting and other
rights to the extent and only to the extent that such voting
and other rights of the Class A Shares and Class B Shares
differ as provided herein.
Transfer
(9) The Class B Shares shall be transferable upon such
terms and conditions as the Directors shall determine.
<PAGE> 28
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51. Power to issue shares
(1) Subject to these Bye-laws and to any resolution of the
Members to the contrary and without prejudice to any special rights previously
conferred on the holders of any existing shares or class of shares, the Board
shall have power to issue any unissued shares of the Company on such terms and
conditions as it may determine and any shares or class of shares may be issued
with such preferred, deferred or other special rights or such restrictions,
whether in regard to dividend, voting, return of capital or otherwise as the
Company may from time to time by resolution of the Members prescribe.
(2) The Board shall, in connection with the issue of any
share, have the power to pay such commission and brokerage as may be permitted
by law.
(3) The Company shall not give, whether directly or
indirectly, whether by means of loan, guarantee, provision of security or
otherwise, any financial assistance for the purpose of a purchase or
subscription made or to be made by any person of or for any shares in the
Company, but nothing in this Bye-Law shall prohibit transactions mentioned in
Sections 39A, 39B and 39C of the Act.
(4) The Company may from time to time do any one or more of
the following things:
(a) make arrangements on the issue of shares
for a difference between the Members in
the amounts and times of payments of
calls on their shares;
(b) accept from any Member the whole or a
part of the amount remaining unpaid on
any shares held by him, although no part
of that amount has been called up;
(c) pay dividends in proportion to the
amount paid up on each share where a
larger amount is paid up on some shares
than on others;
<PAGE> 29
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(d) issue shares as to which all or a portion
of the purchase price thereof is to be
paid throug the Company's withholding of
dividends which would otherwise be paid
on such shares or otherwise apply to
such purchase price all or a portion of
such dividend payments;
(e) withhold the payment of dividends on
shares as described in subparagraph
(4)(d); and
(f) issue its shares in fractional
denominations and deal with such
fractions to the same extent as its
whole shares and shares in fractional
denominations shall have in proportion to
the respective fractions represented
thereby all of the rights of whole shares
including (but without limiting the
generality of the foregoing) the right to
vote, to receive dividends and
distributions and to participate in a
winding up.
52. Variation of rights, alteration of share capital and purchase
of shares of the Company
(1) Subject to the provisions of Sections 42 and 43 of the
Act any preference shares may be issued or converted into shares that, at a
determinable date or at the option of the Company, are liable to be redeemed on
such terms and in such manner as the Company before the issue or conversion may
by resolution of the Members entitled to vote determine.
(2) If at any time the share capital is divided into
different classes of shares, the rights attached to any class (unless otherwise
provided by the terms of issue of the shares of that class) may, whether or not
the Company is being wound-up, be varied with the consent in writing of the
holders of three-fourths of the issued shares of that class or with the
sanction of a resolution passed by a majority of the votes cast at a separate
general meeting of the holders of the shares of the class in accordance with
Section 47 (7) of the Act. The rights conferred upon the holders of the shares
of any class issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class, be deemed
to be varied by the creation or issue of further shares ranking pari passu
therewith.
<PAGE> 30
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(3) The Company may from time to time by resolution of the
Members change the currency denomination of, increase, alter or reduce its
share capital in accordance with the provisions of Sections 45 and 46 of the
Act. Where, on any alteration of share capital, fractions of shares or some
other difficulty would arise, the Board may deal with or resolve the same in
such manner as it thinks fit including, without limiting the generality of the
foregoing, the issue to Members, as appropriate, of fractions of shares and/or
arranging for the sale or transfer of the fractions of shares of Members.
(4) The Company may from time to time purchase its own
shares in accordance with the provisions of Section 42A of the Act.
53. Registered holder of shares
(1) The Company shall be entitled to treat the registered
holder of any share as the absolute owner thereof and accordingly shall not be
bound to recognise any equitable or other claim to, or interest in, such share
on the part of any other person.
(2) Any dividend, interest or other moneys payable in cash
in respect of shares may be paid by cheque or draft sent through the post
directed to the Member at such Member's address in the Register of Members or,
in the case of joint holders, to such address of the holder first named in the
Register of Members, or to such person and to such address as the holder or
joint holders may in writing direct. If two or more persons are registered as
joint holders of any shares any one can give an effectual receipt for any
dividend paid in respect of such shares.
54. Death of a joint holder
Where two or more persons are registered as joint holders of a
share or shares then in the event of the death of any joint holder or holders
the remaining joint holder or holders shall be absolutely entitled to the said
share or shares and the Company shall recognise
<PAGE> 31
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no claim in respect of the estate of any joint holder except in the case of the
last survivor of such joint holders.
55. Share certificates
(1) Every Member shall be entitled to a certificate under
the seal of the Company (or a facsimile thereof) specifying the number and,
where appropriate, the class of shares held by such Member and whether the same
are fully paid up and, if not, how much has been paid thereon, or a statement
that the amount paid thereon as of a recent date may be obtained from the
Company. The Board may by resolution determine, either generally or in a
particular case, that any or all signatures on certificates may be printed
thereon or affixed by mechanical means.
(2) The Company shall be under no obligation to complete
and deliver a share certificate unless specifically called upon to do so by the
person to whom such shares have been allotted.
(3) If any such certificate shall be proved to the
satisfaction of the Board to have been worn out, lost, mislaid, stolen or
destroyed the Board may cause a new certificate to be issued and request a bond
or an indemnity for the lost, mislaid, stolen or destroyed certificate if it
sees fit.
56. Calls on shares
(1) The Board may from time to time make such calls as it
thinks fit upon the Members in respect of any monies unpaid on the shares
allotted to or held by such Members and, if a call is not paid on or before the
day appointed for payment thereof, the Member may at the discretion of the
Board be liable to pay the Company interest on the amount of such call at such
rate as the Board may determine, from the date when such call was payable up to
the actual date of payment. The joint holders of a share shall be jointly and
severally liable to pay all calls in respect thereof.
<PAGE> 32
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(2) The Board may, on the issue of shares, differentiate
between the holders as to the amount of calls to be paid and the times of
payment of such calls.
57. Forfeiture of shares
(1) If any Member fails to pay, on the day appointed for
payment thereof, any call in respect of any share allotted to or held by such
Member, the Board may, at any time thereafter during such time as the call
remains unpaid, direct the Secretary to forward to such Member a notice in the
form, or as near thereto as circumstances admit, of Form "B" in the Schedule
hereto.
(2) If the requirements of such notice are not complied
with, any such share may at any time thereafter before the payment of such call
and the interest due in respect thereof be forfeited by a resolution of the
Board to that effect, and such share shall thereupon become the property of the
Company and may be disposed of as the Board shall determine.
(3) A Member whose share or shares have been forfeited as
aforesaid shall, notwithstanding such forfeiture, be liable to pay to the
Company all calls owing on such share or shares at the time of the forfeiture
and all interest due thereon.
REGISTER OF MEMBERS
58. Contents of Register of Members
The Board shall cause to be kept in one or more books a
Register of Members and shall enter therein the particulars required by the
Act.
59. Inspection of Register of Members
<PAGE> 33
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The Register of Members shall be open to inspection at the
registered office of the Company on every business day, subject to such
reasonable restrictions as the Board may impose, so that not less than two
hours in each business day be allowed for inspection. The Register of Members
may, after notice has been given by advertisement in an appointed newspaper to
that effect, be closed for any time or times not exceeding in the whole thirty
days in each year.
60. Determination of record dates
Notwithstanding any other provision of these Bye-laws, the
Board may fix any date as the record date for:-
(a) determining the Members entitled to receive any
dividend or other distribution;
(b) determining the Members entitled to receive notice of
and to vote at any general meeting of the Company or
to consent to the taking of any action without a
meeting; and
(c) determining the Members entitled to exercise any
rights in respect of any change, conversion, or
exchange of securities or for the purpose of any other
lawful action.
TRANSFER OF SHARES
61. Instrument of transfer
(1) An instrument of transfer shall be in the form or as
near thereto as circumstances admit of Form "C" in the Schedule hereto or in
such other form as the Board may accept. Such instrument of transfer shall be
signed by or on behalf of the transferor and transferee provided that, in the
case of a fully paid share, the Board may accept the instrument signed by or on
behalf of the transferor alone. The transferor shall be deemed to remain the
holder of such share until the same has been transferred to the transferee in
the Register of Members.
<PAGE> 34
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(2) The Board may refuse to recognise any instrument of
transfer unless it is accompanied by the certificate in respect of the shares
to which it relates and by such other evidence as the Board may reasonably
require to show the right of the transferor to make the transfer.
62. Restriction on transfer
(1) The Board may in its absolute discretion and without
assigning any reason therefor refuse to register the transfer of a share. The
Board shall refuse to register a transfer unless all applicable consents,
authorisations and permissions of any governmental body or agency in Bermuda
have been obtained.
(2) If the Board refuses to register a transfer of any
share the Secretary shall, within three months after the date on which the
transfer was lodged with the Company, send to the transferor and transferee
notice of the refusal.
63. Transfers by joint holders
The joint holders of any share or shares may transfer such
share or shares to one or more of such joint holders, and the surviving holder
or holders of any share or shares previously held by them jointly with a
deceased Member may transfer any such share to the executors or administrators
of such deceased Member.
TRANSMISSION OF SHARES
64. Representative of deceased Member
<PAGE> 35
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In the case of the death of a Member, the survivor or
survivors where the deceased Member was a joint holder, and the legal personal
representatives of the deceased Member where the deceased Member was a sole
holder, shall be the only persons recognised by the Company as having any title
to the deceased Member's interest in the shares. Nothing herein contained
shall release the estate of a deceased joint holder from any liability in
respect of any share which had been jointly held by such deceased Member with
other persons. Subject to the provisions of Section 52 of the Act, for the
purpose of this Bye-law, legal personal representative means the executor or
administrator of a deceased Member or such other person as the Board may in its
absolute discretion decide as being properly authorised to deal with the shares
of a deceased Member.
65. Registration on death or bankruptcy
Any person becoming entitled to a share in consequence of the
death or bankruptcy of any Member may be registered as a Member upon such
evidence as the Board may deem sufficient or may elect to nominate some person
to be registered as a transferee of such share, and in such case the person
becoming entitled shall execute in favour of such nominee an instrument of
transfer in the form, or as near thereto as circumstances admit, of Form "D" in
the Schedule hereto. On the presentation thereof to the Board, accompanied by
such evidence as the Board may require to prove the title of the transferor,
the transferee shall be registered as a Member but the Board shall, in either
case, have the same right to decline or suspend registration as it would have
had in the case of a transfer of the share by that Member before such Member's
death or bankruptcy, as the case may be.
DIVIDENDS AND OTHER DISTRIBUTIONS
66. Declaration of dividends by the Board
The Board may, subject to these Bye-laws and in accordance
with Section 54 of the Act, declare a dividend to be paid to the Members, in
proportion to the number of shares
<PAGE> 36
-32-
held by them, and such dividend may be paid in cash or wholly or partly in
specie in which case the Board may fix the value for distribution in specie of
any assets.
67. Other distributions
The Board may declare and make such other distributions (in
cash or in specie) to the Members as may be lawfully made out of the assets of
the Company.
68. Reserve fund
The Board may from time to time before declaring a dividend
set aside, out of the surplus or profits of the Company, such sum as it thinks
proper as a reserve fund to be used to meet contingencies or for equalising
dividends or for any other special purpose.
69. Deduction of Amounts due to the Company
The Board may deduct from the dividends or distributions
payable to any Member all monies due from such Member to the Company on account
of calls or otherwise.
CAPITALISATION
70. Issue of bonus shares
(1) The Board may resolve to capitalise any part of the
amount for the time being standing to the credit of any of the Company's share
premium or other reserve accounts or to the credit of the profit and loss
account or otherwise available for distribution by applying such sum in paying
up unissued shares to be allotted as fully paid bonus shares to the Members on
a Share Equivalent Basis (and, for the avoidance of doubt, holders of Class A
Shares are only entitled to a bonus issue of Class A Shares and holders of
Class B Shares are only entitled to a bonus issue of Class B Shares.
(2) The Company may capitalise any sum standing to the
credit of a reserve account or sums otherwise available for dividend or
distribution by applying such amounts
<PAGE> 37
-33-
in paying up in full partly paid shares of those Members who would have been
entitled to such sums if they were distributed by way of dividend or
distribution.
ACCOUNTS AND FINANCIAL STATEMENTS
71. Records of account
The Board shall cause to be kept proper records of account
with respect to all transactions of the Company and in particular with respect
to:-
(a) all sums of money received and expended by the Company
and the matters in respect of which the receipt and
expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) the assets and liabilities of the Company.
Such records of account shall be kept at the registered office of the Company
or, subject to Section 83 (2) of the Act, at such other place as the Board
thinks fit and shall be available for inspection by the Directors during normal
business hours.
72. Financial year end
The financial year end of the Company may be determined by
resolution of the Board and failing such resolution shall be 31st December in
each year.
73. Financial statements
Subject to any rights to waive laying of accounts pursuant to
Section 88 of the Act, financial statements as required by the Act shall be
laid before the Members in general meeting.
<PAGE> 38
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AUDIT
74. Appointment of Auditor
Subject to Section 88 of the Act, at the annual general
meeting or at a subsequent special general meeting in each year, an independent
representative of the Members shall be appointed by them as Auditor of the
accounts of the Company. Such Auditor may be a Member but no Director, Officer
or employee of the Company shall, during his or her continuance in office, be
eligible to act as an Auditor of the Company.
75. Remuneration of Auditor
The remuneration of the Auditor shall be fixed by the Company
in general meeting or in such manner as the Members may determine.
76. Vacation of office of Auditor
If the office of Auditor becomes vacant by the resignation or
death of the Auditor, or by the Auditor becoming incapable of acting by reason
of illness or other disability at a time when the Auditor's services are
required, the Board shall, as soon as practicable, convene a special general
meeting to fill the vacancy thereby created.
77. Access to books of the Company
The Auditor shall at all reasonable times have access to all
books kept by the Company and to all accounts and vouchers relating thereto,
and the Auditor may call on the Directors or Officers of the Company for any
information in their possession relating to the books or affairs of the
Company.
78. Report of the Auditor
<PAGE> 39
-35-
(1) Subject to any rights to waive laying of accounts or
appointment of an Auditor pursuant to Section 88 of the Act, the accounts of
the Company shall be audited at least once in every year.
(2) The financial statements provided for by these
Bye-laws shall be audited by the Auditor in accordance with generally accepted
auditing standards. The Auditor shall make a written report thereon in
accordance with generally accepted auditing standards and the report of the
Auditor shall be submitted to the Members in general meeting.
(3) The generally accepted auditing standards referred to
in subparagraph (2) of this Bye-law may be those of a country or jurisdiction
other than Bermuda. If so, the financial statements and the report of the
Auditor must disclose this fact and name such country or jurisdiction.
NOTICES
79. Notices to Members of the Company
A notice may be given by the Company to any Member either by
delivering it to such Member in person or by sending it to such Member's
address in the Register of Members or to such other address given for the
purpose. For the purposes of this Bye-law, a notice may be sent by mail,
courier service, cable, telex, telecopier, facsimile or other mode of
representing words in a legible and non-transitory form.
80. Notices to joint Members
Any notice required to be given to a Member shall, with
respect to any shares held jointly by two or more persons, be given to
whichever of such persons is named first in the Register of Members and notice
so given shall be sufficient notice to all the holders of such shares.
81. Service and delivery of notice
<PAGE> 40
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Any notice shall be deemed to have been served at the time
when the same would be delivered in the ordinary course of transmission and, in
proving such service, it shall be sufficient to prove that the notice was
properly addressed and prepaid, if posted, and the time when it was posted,
delivered to the courier or to the cable company or transmitted by telex,
facsimile or other method as the case may be.
SEAL OF THE COMPANY
82. The seal
The seal of the Company shall be in such form as the Board may
from time to time determine. The Board may adopt one or more duplicate seals
for use outside Bermuda.
83. Manner in which seal is to be affixed
The seal of the Company shall not be affixed to any instrument
except attested by the signature of a Director and the Secretary or any two
Directors, or some other person appointed by the Board for the purpose,
provided that any Director, or Officer, may affix the seal of the Company
attested by such Director or Officer's signature only to any authenticated
copies of these Bye-laws, the incorporating documents of the Company, the
minutes of any meetings or any other documents required to be authenticated by
such Director or Officer.
WINDING-UP
84. Winding-up/distribution by liquidator
If the Company shall be wound up the liquidator may, with the
sanction of a resolution of the Members, divide amongst the Members in specie
or in kind the whole or any part of the assets of the Company (whether they
shall consist of property of the same kind or not) and may, for such purpose,
set such value as he or she deems fair upon any property to be divided as
aforesaid and may, subject to the provisions of these Bye-laws, determine how
such division shall be carried out as between the Members or different classes
of
<PAGE> 41
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Members. The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trusts for the benefit of the Members
as the liquidator shall think fit, but so that no Member shall be compelled to
accept any shares or other securities or assets whereon there is any liability.
ALTERATION OF BYE-LAWS
85. Alteration of Bye-laws
No Bye-law shall be rescinded, altered or amended and no new
Bye-law shall be made until the same has been approved by a resolution of the
Board and by a resolution of the Members.
*****
***
*
<PAGE> 42
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SCHEDULE - FORM A (Bye-law 48)
..............................................
P R O X Y
I/We
of
the holder(s) of share(s) in the above-named company
hereby appoint .................................................... or failing
him/her ................................................. or failing him/her
................................................. as my/our proxy to vote on
my/our behalf at the general meeting of the Company to be held on the
day of , 19 , and at any adjournment thereof.
Dated this day of , 19
*GIVEN under the seal of the Company
*Signed by the above-named
..............................................................
.............................................................
Witness
*Delete as applicable.
<PAGE> 43
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SCHEDULE - FORM B (Bye-law 57)
NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL
You have failed to pay the call of [amount of call] made on the ...... day of
........, 19.. last, in respect of the [number] share(s) [numbers in figures]
standing in your name in the Register of Members of the Company, on the ......
day of ........., 19.. last, the day appointed for payment of such call. You
are hereby notified that unless you pay such call together with interest
thereon at the rate of .......... per annum computed from the said ....... day
of ........., 19... last, on or before the ....... day of ........., 19...
next at the place of business of the Company the share(s) will be liable to be
forfeited.
Dated this ....... day of .............., 19...
[Signature of Secretary]
By order of the Board
<PAGE> 44
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SCHEDULE - FORM C (Bye-law 61)
TRANSFER OF A SHARE OR SHARES
FOR VALUE RECEIVED
........................................................................[amount]
....................................................................[transferor]
hereby sell assign and transfer unto ...............................[transferee]
of.....................................................................[address]
..............................................................[number of shares]
shares of......................................................[name of Company]
Dated ............................
............................
(Transferor)
In the presence of:
..........................
(Witness)
............................
(Transferee)
In the presence of:
..........................
(Witness)
<PAGE> 45
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SCHEDULE - FORM D (Bye-law 65)
TRANSFER BY A PERSON BECOMING ENTITLED ON
DEATH/BANKRUPTCY OF A MEMBER
I/We having become entitled in consequence of the [death/bankruptcy] of [name
of the deceased Member] to [number] share(s) standing in the register of
members of [Company] in the name of the said [name of deceased Member] instead
of being registered myself/ourselves elect to have [name of transferee] (the
"Transferee") registered as a transferee of such share(s) and I/we do hereby
accordingly transfer the said share(s) to the Transferee to hold the same unto
the Transferee his or her executors administrators and assigns subject to the
conditions on which the same were held at the time of the execution thereof;
and the Transferee does hereby agree to take the said share(s) subject to the
same conditions.
WITNESS our hands this ........ day of ..........., 19...
Signed by the above-named )
[person or persons entitled] )
in the presence of: )
Signed by the above-named )
[transferee] )
in the presence of: )
<PAGE> 1
EXHIBIT 10.1
LIMITED LIABILITY COMPANY
AGREEMENT
OF
IRIDIUM LLC
<PAGE> 2
LIMITED LIABILITY COMPANY AGREEMENT
OF
IRIDIUM LLC
LIMITED LIABILITY COMPANY AGREEMENT of IRIDIUM LLC ("LLC") dated as of
July 29, 1996 among the undersigned.
WHEREAS, the Members are forming a limited liability company pursuant
to the terms and provisions of this Agreement and in accordance with the
Delaware Limited Liability Company Act, 6 Del. C. Sections 18-101, et seq. as
amended from time to time (the "Delaware Act");
WHEREAS, On June 14, 1993, Iridium, Inc. was formed as a corporation
under the laws of the State of Delaware and commenced operations on July 29,
1993;
WHEREAS, the stockholders of Iridium, Inc. have determined that it is
advantageous and desirable, for tax and other reasons, to conduct the business
of Iridium in a limited liability company;
WHEREAS, on July 29, 1996, Iridium, Inc. was merged with and into LLC
(the "LLC Merger") pursuant to 8 Del.C. Section 264 with LLC as the surviving
entity; and
WHEREAS, certain terms shall have the meanings assigned in ARTICLE XII
hereof;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
GENERAL PROVISIONS
Section 1.01 Formation and Name
The name of LLC is Iridium LLC. The business of LLC may be conducted
under any other name deemed necessary or desirable by the Class 1 Members in
order to comply with local law.
The parties hereto agree to form LLC and enter into this Agreement,
and do hereby form LLC and enter into this Agreement, pursuant to the
provisions of the Delaware Act and for the purposes hereinafter described and
agree that the rights and liabilities of the Members shall be as provided in
the Delaware Act except as provided herein.
Section 1.02 Place of Business and Office:
Registered Agent
LLC shall maintain a registered office in the State of Delaware at The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The principal executive office
of LLC shall be 1575 Eye Street, N.W., Washington, D.C. 20005 or such other
place as the Board of Directors may determine. The name and address of LLC's
registered agent in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
Section 1.03 Purpose of LLC
LLC is organized for the purpose of acquiring, owning and managing the
low-earth orbit satellite space system to be delivered under the Space System
Contract, and any successor or replacement
1
<PAGE> 3
space system, and the management of the access to any use of such space system
by the Members and/or their Affiliates through their Gateways and/or their
Service Providers and by others and the engagement in activities necessary,
appropriate or incidental to the foregoing.
Section 1.04 Fiscal Year
The fiscal year of LLC (the "Fiscal Year") shall be fixed by
resolution of the Class 1 Members.
Section 1.05 Directors: Number, Appointment,
Removal, Qualifications, Etc.
(a) Board of Directors. There shall initially be a Board of
Directors comprised of 23 Directors, which number may be changed, subject to
the rights of the Class 2 Members, as determined from time to time by the Class
1 Members. Each Class 1 Member owning at least 5,250,000 Class 1 Interests
shall be a Director (accordingly, each such Class 1 Member shall appoint a
representative who will represent it on the Board of Directors and who shall be
the Director in respect of such Class 1 Member for purposes of this Agreement)
and in addition shall be entitled to designate one Director for each additional
5,250,000 Class 1 Interests owned by such Class 1 Member. In addition, two or
more Class 1 Members may aggregate their Class 1 Interests and appoint a
Director for each 5,250,000 Class 1 Interests owned by such Class 1 Members in
the aggregate. The persons listed in Annex A hereto as Directors are hereby
designated by the Class 1 Member(s) set forth next to such Director's name as
the initial Board of Directors of LLC. In addition, the chairman of the Board
of Directors and the vice chairman and chief executive officer elected pursuant
to Section 2.03 shall be a Director and a member of the Board of Directors.
The business address of each Director is set forth opposite his name on Annex A
hereto. Directors appointed pursuant to this Agreement shall be managers for
purposes of the Delaware Act. During the Iridium Bermuda Special Rights
Period, and notwithstanding the second and third sentences of this Section
1.05(a), Iridium Bermuda shall be entitled to designate two Directors. No
Director designated by Iridium Bermuda shall be an employee or Affiliate of
Motorola or any other Member owning more than five percent of the outstanding
Class 1 Membership Interests.
(b) Alternate Directors. The Member(s) who are or who have
appointed a Director under Section 1.05(a) may appoint an alternate Director to
act for and fulfill the obligations of such Director in the event that such
Director is unable to attend any meeting of the Board of Directors or any
committee thereof. Any such alternates are listed on Annex A hereto or if
appointed after the date hereof shall be specified in writing by such Member to
the secretary of LLC. Any appointment of an alternate Director may be changed
by the Member(s) by providing written notice of such change to the secretary of
LLC.
(c) Removal and Resignation. A Director may be removed with or
without cause by the Member who appointed such Director by providing written
notice of such removal to the secretary of LLC and to each Member. A Director
may not otherwise be removed. If, as a result of the removal, resignation or
death of any member of the Board of Directors, a vacancy occurs in the Board of
Directors, such vacancy shall be filled by the Member(s) who appointed such
Director by written notice to the secretary of LLC and to each Member of the
name of the new Director who shall fill such vacancy (such notice may be
included with notice of removal as provided by the preceding sentence).
(d) Assumption and Acceptance of Powers and Duties. Any Director
designated pursuant to this Section 1.05, and any alternate acting for such
Director, shall assume the powers, duties and obligations of a Director as
provided under this Agreement and of a director under the Delaware Act and
shall be subject to the terms hereof. Any person designated as a Director and
any alternate shall be deemed to have agreed to accept such Director's rights
and authority hereunder and to perform and discharge such Director's duties and
obligations hereunder by performing any act in the capacity of Director
hereunder (including but not limited to participating in any meeting of the
Board of Directors or executing any written consent of the Board of Directors),
and such rights, authority, duties and
2
<PAGE> 4
obligations hereunder shall continue until such Director's successor is
designated or until such Director's earlier resignation or removal in
accordance with this Agreement.
Section 1.06 Members
(a) Initial Members. The initial Members of LLC, their business
addresses and their respective Interests shall be as set forth in Annex B
hereto. The initial Members shall become Members upon the filing of the
certificate of formation of LLC and the execution of this Agreement by such
Members.
(b) Rights and Obligations. A Member shall have the rights,
powers, duties and obligations provided herein for a Member.
(c) Investment Company Restrictions. Each Member organized in the
United States covenants and agrees that it will not make a public offering of
its own securities if as a result of such offering, LLC will become an entity
controlled by an investment company registered under the Investment Company Act
of 1940.
(d) Annual Meetings. An annual meeting of the Class 1 Members
shall be held each year within 120 days after the close of the immediately
preceding fiscal year of LLC for the purpose of conducting such proper business
as may come before the meeting. The date, time and place of the annual meeting
shall be determined by the president of LLC; provided, that if the president
does not act, the Board of Directors shall determine the date, time and place
of such meeting. At such annual meetings, each Member shall provide notice to
the secretary of LLC and the other Member of the names of the Director(s) such
Member is entitled to appoint and each person so named shall serve as Director
until a substitute shall be appointed at the next annual meeting or pursuant to
Section 1.05(c).
(e) Special Meetings. Special meetings of Members may be called
for any purpose and may be held at such time and place, within or without the
State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the Board of Directors, the chairman of the Board of Directors, the vice
chairman and chief executive officer, the president or the holders of not less
than a majority of the Class 1 Interests outstanding.
(f) Place of Meetings. The Directors may designate any place,
either within or outside of the State of Delaware, as the place of meeting for
any annual meeting or for any special meeting called by the Directors. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive office of LLC.
(g) Notice. Whenever Members are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each Member entitled to vote at such meeting and to each
Director not less than 10 nor more than 60 days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the Directors, the chairman of the Board of Directors, the vice
chairman and chief executive officer, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the Member at his, her or its
address as the same appears on the records of LLC. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
(h) Members List. The officer having charge of the records
referred to in Section 2.07 shall make, at least 10 days before every meeting
of the Members, a complete list of the Members entitled to
3
<PAGE> 5
vote at such meeting arranged in alphabetical order, showing the address of
each Member and the Interest of each Member. Such list shall be open to the
examination of any Member, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any Member who is present.
(i) Quorum. The holders of a majority of the Interests entitled
to vote, present in person or represented by proxy, shall constitute a quorum
at all meetings of the Members. If a quorum is not present, the holders of a
majority of the Interests present in person or represented by proxy at the
meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place. When a specified item of business requires a vote by
a class or series (if LLC shall then have outstanding Interests of more than
one class or series) voting as a class, the holders of a majority of the
Interests of such class or series shall constitute a quorum (as to such class
or series) for the transaction of such item of business. When a quorum is once
present to commence a meeting of Members, it is not broken by the subsequent
withdrawal of any Members or their proxies.
(j) Adjourned Meetings. If at any meeting of Members there shall
be, with respect to a particular matter, less than a quorum present, the
Members present in person or by proxy and entitled to vote thereat on such
matter may without further notice, following the completion of such action, if
any, with respect to other matters as the Members present in person or by proxy
and constituting a quorum to vote thereat on such matters desire to take,
adjourn the meeting from time to time until a quorum with respect to such
matter shall be present. When a meeting is adjourned to another time and
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting LLC may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Member
entitled to vote at the meeting.
(k) Vote Required. When a quorum is present, the affirmative vote
of the majority of Interests present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
Members, unless the question is one upon which by express provisions of an
applicable law or of this Agreement a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Where a separate vote by class is required, the affirmative vote of the
majority of Interests of such class present in person or represented by proxy
at the meeting shall be the act of such class, unless the question is one upon
which by express provisions of an applicable law or of this Agreement a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
(l) Proxies. Each Member entitled to vote at a meeting of Members
or to express consent or dissent to any action in writing without a meeting may
authorize another person or persons to act for him or her by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy
may be made irrevocable regardless of whether the interest with which it is
coupled is an interest in the membership Interest itself or an interest in LLC
generally. Any proxy is suspended when the person executing the proxy is
present at a meeting of Members and elects to vote, except that when such proxy
is coupled with an interest and the fact of the interest appears on the face of
the proxy, the agent named in the proxy shall have all voting and other rights
referred to in the proxy, notwithstanding the presence of the person executing
the proxy. At each meeting of the Members, and before any voting commences,
all proxies filed at or before the meeting shall be submitted to and
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examined by the secretary or a person designated by the secretary, and no
Interests may be represented or voted under a proxy that have been found to be
invalid or irregular.
(m) Action by Written Consent. Unless otherwise provided in the
Delaware Act, any action required to be taken at any annual or special meeting
of Members, or any action which may be taken at any annual or special meeting
of such Members, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken and bearing the dates of signature of the Members who signed the
consent or consents, shall be signed by the holders of not less than the
minimum Interests that would be necessary to authorize or take such action at a
meeting at which all Interests entitled to vote thereon were present and voted
and shall be delivered to LLC by delivery to its registered office in the State
of Delaware, or LLC's principal place of business, or an officer or agent of
LLC having custody of the book or books in which proceedings of meetings of the
Members are recorded. Delivery made to LLC's registered office shall be by
hand or by certified or registered mail, return receipt requested; provided,
that no consent or consents delivered by certified or registered mail shall be
deemed delivered until such consent or consents are actually received at the
registered office. All consents properly delivered in accordance with this
section shall be deemed to be recorded when so delivered. No written consent
shall be effective to take any action referred to therein unless, within 60
days of the earliest dated consent delivered to LLC as required by this
section, written consents signed by the holders of Interests sufficient to take
such action are so recorded. Prompt notice of the taking of the action without
a meeting by less than unanimous written consent shall be given to those
Members who have not consented in writing. Any action taken pursuant to such
written consent or consents of the Members shall have the same force and effect
as if taken by the Members at a meeting thereof.
(n) Record Dates. For purposes of determining the Members entitled
to notice of or to vote at a meeting of Members or to give approvals without a
meeting as provided in Section 2.03(l), the Board of Directors may set a record
date, which shall not be less than 10 nor more than 60 days before (a) the date
of the meeting or (b) in the event that approvals are sought without a meeting,
the date by which Members are requested in writing by the Board of Directors to
give such approvals.
(o) Communications Equipment. The Members may participate in and
act at any meeting of such Members through the use of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other, and participating in the meeting pursuant to
this section shall constitute presence in person at the meeting.
Section 1.07 Liability of Members and Directors
No Member or Director shall have any liability under this Agreement or
under the Delaware Act except as provided in Section 1.08 or elsewhere herein
or as required by the Delaware Act. Except as required by the Delaware Act,
the debts, obligations and liabilities of LLC, whether arising in contract,
tort or otherwise (including without limitation those arising as member, owner
or shareholder of another company, partnership or entity), shall be solely the
debts, obligations and liabilities of LLC, and no Member or Director shall be
obligated personally for any such debt, obligation or liability of LLC solely
by reason of being a Member or acting as a Director of LLC. No Member or
Director shall be liable for any debts, obligations and liabilities, whether
arising in contract, tort or otherwise, of any other Member or Director.
Section 1.08 Certain Duties and Liabilities of
Members and Directors
(a) Duties of Members and Directors. Except as otherwise
specifically provided in this Agreement, the duties and obligations owed to LLC
and to the Members by the Directors and officers of LLC, and any such duties
that may be owed by any Member or by any Affiliates of any Member, shall be
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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 such corporation by any
similarly situated stockholder or affiliate thereof, respectively; provided,
that a Director shall not be liable as a Director if such Director would not
have had liability if LLC were a corporation subject to the Delaware General
Corporation Law as the same exists or may hereafter be amended and had in its
certificate of incoroporation the same provision as Article X of the
Certificate of Incorporation of Iridium, Inc., a Director shall not be liable
to LLC or its Members for monetary damages for a breach of fiduciary duty as a
Director and any repeal or modification of this Section 1.08(a) shall not
adversely affect any right or protection of a Director of LLC existing at the
time of such repeal or modification.
(b) Limitations on Liability of Members, Directors and Officers. To
the extent that any Member, Director or officer has duties (including fiduciary
duties) and liabilities relating thereto to LLC or to a Member, (1) any such
Member, Director or officer acting under this Agreement shall not be liable to
LLC or to any such other Member for the Member's or Director's good faith
reliance on the provisions of this Agreement, the records of LLC and such
information, opinions, reports or statements presented to LLC by any of LLC's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of LLC, and (2) the Member's, Director's or
officer's duties and liabilities are restricted by the provisions of this
Agreement to the extent that such provisions restrict the duties and
liabilities of the Members, Directors or officers otherwise existing at law or
in equity.
Section 1.09 Reliance by Third Parties
Persons dealing with LLC are entitled to rely conclusively upon the
power and authority of the Directors and officers as herein set forth. Persons
dealing with LLC are entitled to rely conclusively upon a certificate of any
secretary or assistant secretary as to the incumbency of any Director, officer
or other personnel of LLC.
Section 1.10 Organizational Expenses
LLC shall be solely responsible for the expenses of organizing LLC.
Section 1.11 Seal of LLC
The Board of Directors may adopt a seal, alter such seal at its
pleasure and authorize it to be used by causing it or a facsimile to be affixed
or impressed or reproduced in any other manner.
Section 1.12 Ratification and Authorization of Certain Actions
The actions of the officers of LLC, including the preparation of the
Merger Agreement, with respect to the formation of LLC and the LLC Merger are
hereby ratified and approved and such officers are further authorized to
execute and deliver the Merger Agreement simultaneously herewith and upon such
execution and delivery to file a corresponding Certificate of Merger in the
office of the Secretary of State of the State of Delaware.
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ARTICLE II
MANAGEMENT AND OPERATIONS OF LLC
Section 2.01 Power and Authority of Members
The Members shall manage LLC only through their designated Directors
on the Board of Directors and the Members, in their capacity as such, shall
have no authority or right to act on behalf of or bind LLC in connection with
any matter.
Section 2.02 Power and Authority of Directors
The business and affairs of LLC shall be managed by or under the
direction of the Board of Directors, except as may be otherwise provided in
this Agreement. The Board of Directors shall have the power on behalf and in
the name of LLC to carry out any and all of the objects and purposes of LLC
contemplated by Section 1.03 and to perform all acts which they may deem
necessary or advisable in connection therewith.
The Members agree that all determinations, decisions and actions made
or taken by the Board of Directors (or their designee(s)) shall be conclusive
and absolutely binding upon LLC, the Members (but only in their capacity as
such) and their respective successors, assigns and personal representatives.
Section 2.03 Directors: Meetings, Committees, and Delegation
(a) Annual and Special Meetings. An annual meeting of the Board
of Directors shall be held without other notice than this provision immediately
after, and at the same place as, the annual meeting of Members (or execution by
all Class 1 Members of a unanimous written consent in lieu thereof). At the
annual meeting of the Board of Directors, the Directors shall, by resolution
duly adopted by a majority of the Directors present and voting, elect a
chairman of the Board of Directors and shall elect a vice chairman and chief
executive officer who, in accordance with Section 2.05(g), shall also serve as
chief executive officer of LLC. During the Iridium Bermuda Special Rights
Period, the Board of Directors shall, by resolution duly adopted by a majority
of the Directors present and voting, elect one of the Directors designated by
Iridium Bermuda as a vice chairman of the Board of Directors, such vice
chairman to be responsible for such matters as shall be designated by the Board
of Directors from time to time. Regular meetings, other than the annual
meeting, of the Board of Directors shall be held without notice at such time
and at such place as shall from time to time be determined by resolution of the
Board of Directors. Special meetings of the Board of Directors may be called by
or at the request of any Director on at least 48 hours notice to each Director,
either personally, by telephone, by mail or by telegraph. One-half of the
total number of Directors shall constitute a quorum for the transaction of
business. The vote of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors, unless a previous
resolution of the Board of Directors requires a majority greater than one-half
(a "supermajority") to take such action, in which case the vote of such
supermajority shall be the act of the Board of Directors; such supermajority
requirement shall remain in effect unless amended by a vote of the
supermajority of Directors; provided, however, that at any meeting held during
any period in which Directors have been elected by holders of Series C Class 2
Interests, in their capacity as such, the vote required to approve any merger,
liquidation, sale, lease, conveyance or transfer of LLC or all or substantially
all of its assets or to approve or recommend to the Members any changes in the
capital structure or in the rights of any interests or security of LLC or to
approve the incurrence of any debt of LLC which debt would exceed $10,000,000
or any amendments to this Agreement which would have a material effect on any
of the Members, shall require the affirmative vote of 66 2/3% of all of the
directors. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat
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may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(b) Representation of Certain Members. LLC shall give each of
Raytheon Company ("Raytheon") and Lockheed Martin Corporation ("Lockheed
Martin") (in each case so long as it has complied in all material respects with
the terms of this Agreement and has not Transferred any of its Class 1
Interests other than in a Transfer referred to in clause (i) of the definition
of Exempt Transfer in the 1993 Stock Purchase Agreement) written notice of each
meeting of the Board of Directors at the same time and in the same manner as
notice is given to the Directors, and LLC shall permit a representative of each
of Raytheon and Lockheed Martin to attend as a non-participating observer all
meetings of the Board of Directors; provided, that in the case of telephonic
meetings conducted in accordance with this Agreement and applicable law, each
of Raytheon and Lockheed Martin need receive only actual notice thereof at
least 48 hours prior to any such meeting, and each of their representatives
shall be given the opportunity to listen to such telephonic meetings. Raytheon
and Lockheed Martin shall designate in writing to LLC their respective
representatives under this Section 2.03(b) (which representatives upon written
notice to LLC can be changed by the appointing party from time to time). Each
representative shall be entitled to receive all written materials and other
information (including, without limitation, copies of meeting minutes) given to
Directors in connection with such meetings at the same time such materials and
information are given to the Directors. If LLC proposes to take any action by
written consent in lieu of a meeting of the Board of Directors, LLC shall give
written notice thereof to each of the representatives of Raytheon and Lockheed
Martin prior to the effective date of such consent describing in reasonable
detail the nature and substance of such action.
(c) Committees. The Board of Directors may, by resolution passed
by a majority of all the Directors, designate one or more committees, in
addition to those provided for in this Agreement, each committee to consist of
one or more of the Directors, which to the extent provided in such resolution
or this Agreement shall have and may exercise the powers of the Board of
Directors in the management and affairs of LLC except as otherwise limited by
law; provided, that no such committee of the Board of Directors shall have the
power or authority to amend this Agreement (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of Interests adopted by the Board of Directors, fix the designations and any of
the preferences or rights of such Interests relating to distributions,
redemption, dissolution, any distribution of assets of LLC or the conversion
into, or the exchange of such Interests for, Interests of any other class or
classes or any other series of the same or any other class or classes of
Interests of LLC or fix the aggregate number of Interests comprising any series
of Interests or authorize the increase or decrease of the aggregate number of
Interests comprising any series of Interests), adopting any agreement of merger
or consolidation, recommending to the Members the sale, lease or exchange of
all or substantially all of LLC's property and assets, recommending to the
Members a dissolution of LLC or revocation of a dissolution; and, unless a
resolution of the Board of Directors or this Agreement expressly so provides,
no such committee shall have the power or authority to declare a dividend or
other distribution or to authorize the issuance of Interests. The Directors
may designate one or more Directors as alternate members of any such committee,
who may replace any absent or disqualified Director at any meeting of such
committee. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required. During the Iridium Bermuda Special Rights
Period, one Director designated by Iridium Bermuda shall be a member of each
committee of the Board of Directors.
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(d) Committee Rules. Each committee of Directors may fix its own
rules of procedure and shall hold its meetings as provided by such rules,
except as may otherwise be provided by a resolution of the Board of Directors
designating such committee. Unless otherwise provided in such a resolution,
the presence of at least a majority of the members of the committee shall be
necessary to constitute a quorum. In the event that a committee member and
that committee member's alternate, if alternates are designated by the Board of
Directors as provided in Section 2.03(c), of such committee is or are absent or
disqualified, the committee member or members present at any meeting and not
disqualified from voting, whether or not such committee member or members
constitute a quorum, may unanimously appoint another Director to act at the
meeting in place of any such absent or disqualified committee member.
(e) Audit Committee. There shall be an audit committee of the
Board of Directors and the audit committee shall consist of not fewer than two
(2) Directors as shall from time to time be appointed by resolution of the
Board of Directors. No Director who is an officer or an employee of LLC or
any subsidiary of LLC shall be eligible to serve on the audit committee. The
audit committee shall review and, as it shall deem appropriate, recommend to
the Board of Directors internal accounting and financial controls for LLC and
accounting principles and auditing practices and proce dures to be employed in
the preparation and review of financial statements of LLC. The audit
committee shall make recommendations to the Board of Directors concerning the
engagement of independent public accountants to audit the annual financial
statements of LLC and the scope of the audit to be undertaken by such
accountants.
(f) Compensation Committee. There shall be a compensation
committee of the Board of Directors and the compensation committee shall
consist of not fewer than three Directors as from time to time shall be
appointed by resolution of the Board of Directors. No Director who is an
officer or an employee of LLC or any subsidiary of LLC shall be eligible to
serve on the compensation committee. The compensation committee shall review
and, as it deems approriate, recommend to the president and the Directors
policies, practices and procedures relating to the compensation of managerial
employees and the establishment and administration of employee benefit plans.
The compensation committee shall have and exercise all authority under any
employee stock option plans of LLC as the committee therein (unless the Board
of Directors by resolution appoints any other committee to exercise such
authority), and shall advise and consult with the officers of LLC as may be
requested regarding managerial personnel policies.
(g) Related Party Contract Committee. There shall be a related
party contract committee of the Board of Directors (the "Contract Committee")
and the Contract Committee shall consist of all Directors other than any
Director who is a director, officer, employee of, or person designated as a
Director by, Motorola, Inc. ("Motorola"), Lockheed Martin or Raytheon;
provided, however, that (i) any such Director so designated by Motorola shall
be added to the Contract Committee at such time as Motorola ceases to be a
party to the Space System Contract, the O&M Contract and the Terrestrial
Network Development Contract or such contracts are terminated (other than as a
result of a breach by Motorola), (ii) any such Director so designated by
Lockheed Martin shall be added to the Contract Committee at such time as
Lockheed Martin and its Affiliates cease to be subcontractors to Motorola in
connection with the Space System Contract, the O&M Contract and the Terrestrial
Network Development Contract and (iii) any such Director so designated by
Raytheon shall be added to the Contract Committee at such time as Raytheon and
its Affiliates cease to be subcontractors to Motorola in connection with the
Space System Contract, the O&M Contract and the Terrestrial Network Development
Contract. The Contract Committee shall have the authority on behalf of LLC to
review and monitor the Space System Contract, the O&M Contract, and the
Terrestrial Network Development Contract and, as it deems appropriate, cause
LLC to enforce its rights thereunder and propose amendments, waivers and/or
modifications thereto (it being understood that the Space System Contract, the
O&M Contract, and the Terrestrial Network Development Contract can be amended
only in accordance with the terms thereof or by mutual consent of the parties
thereto). A resolution adopted by
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the Contract Committee, if within the above-described authority of the Contract
Committee, shall be deemed to be a resolution adopted by the Board of Directors
as if approved by a majority of the Directors then in office.
(h) Banking and Financing Committee. There shall be a banking and
financing committee of the Board of Directors and the banking and financing
committee shall consist of not fewer than eight (8) Directors as shall from
time to time be appointed by resolution of the Board of Directors. A quorum of
the banking and financing committee shall require the presence at any meeting
of such committee of at least five (5) members thereof. The banking and
financing committee shall (i) deal with important decisions concerning future
financings of LLC in the interim period between meetings of the Board of
Directors, (ii) consult with and advise management on future financing strategy
and direction, (iii) review debt and equity financing proposals submitted by
LLC's financial advisors and make recommendations to the Board of Directors
with respect thereto, (iv) supervise generally the financial affairs of LLC,
(v) supervise the investment of idle funds of LLC, and (vi) exercise such other
powers delegated by the Board of Directors regarding the implementation of
financing plans approved by the Board of Directors. Subject to the authority of
the Board of Directors, the banking and financing committee is authorized to
exercise all the powers and authority of the Board of Directors in all matters
related to the future financing of LLC.
(i) Communications Equipment. The Directors or any committee
thereof may participate in and act at any meeting of such Directors or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
(j) Waiver of Notice and Presumption of Assent. Any Director or
any member of a committee of the Board of Directors who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except
when such member attends for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Such member shall be conclusively presumed to
have assented to any action taken unless his or her dissent shall be entered in
the minutes of the meeting or unless his or her written dissent to such action
shall be filed with the person acting as the secretary of the meeting before
the adjournment thereof or shall be forwarded by registered mail to the
secretary of LLC immediately after the adjournment of the meeting. Such right
to dissent shall not apply to any member who voted in favor of such action.
(k) Initial Committee Members. The initial members of the audit
committee, the compensation committee, the related party contracts committee
and the banking and financing committee shall be the same Directors who served
on such committees of the Board of Directors of Iridium, Inc. as of the date of
the LLC Merger.
(l) Action by Written Consent. Unless otherwise restricted by
this Agreement or the Delaware Act, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all the Directors or members of the committee
thereof, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
(m) Tax Consequences to the Members. At the request of any
Director, the Board of Directors shall consider, as part of any determination,
decision or action, the tax consequences to the Members that result from any
proposed action by LLC.
(n) Resolutions. The resolutions of the Board of Directors of
Iridium, Inc. are hereby adopted by LLC with only such changes as are necessary
to reflect LLC as the successor to Iridium, Inc.
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Section 2.04 Compensation of the Directors
No Director shall be entitled to any compensation for services as
Director.
Section 2.05 Officers
(a) Establishment, Nomination and Election. The officers of LLC
shall be nominated by the chairman of the Board of Directors and elected by the
Directors and shall consist of a chief executive officer, a president, one or
more vice-presidents, a chief operating officer, a chief financial officer, a
secretary, a treasurer, and such other officers and assistant officers as may
be deemed necessary or desirable by the chairman of the Board of Directors.
Any number of offices may be held by the same person. In their discretion, the
Directors may choose not to fill any office for any period as they may deem
advisable, except that the offices of president and secretary shall be filled
as expeditiously as possible. The initial officers of LLC are set forth in
Annex A.
(b) Election and Term of Office. The officers of LLC shall be so
nominated and elected annually by the Board of Directors at their first meeting
held after each annual meeting of Members or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any
meeting of the Board of Directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
(c) Removal. Any officer or agent elected by the Directors may be
removed by the Directors whenever in their judgment the best interests of LLC
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
(d) Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by
the Directors for the unexpired portion of the term by the Directors then in
office.
(e) Compensation. Compensation of all officers shall be fixed by
the Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a Director of LLC.
(f) Chairman of the Board. The chairman of the Board of Directors
shall be selected according to the terms set forth in Section 2.03(a). He
shall preside at all meetings of the Board of Directors and Members. The
chairman of the Board of Directors shall also counsel the vice chairman and
cheif executive officer, when appropriate, and shall perform such other duties
as may be prescribed by the Board of Directors or provided in this Agreement.
(g) Vice Chairman and Chief Executive Officer. The vice chairman
and chief executive officer shall serve as both the chief executive officer and
a director and shall be selected as provided in Section 2.03(a). He shall in
general supervise and control all the business affairs of LLC, subject to the
powers of the Board of Directors. In the absence of the chairman of the Board
of Directors, he shall preside at meetings of the Board of Directors and
Members and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or provided in this Agreement.
(h) President. The president shall, subject to the powers of the
vice chairman and chief executive officer and the Directors, have general
charge of the business, affairs and property of LLC, and control over its
officers, agents and employees; and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The president shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of LLC,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of LLC. The president
shall have such
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other powers and perform such other duties as may be prescribed by the Board of
Directors or as may be provided in this Agreement.
(i) Chief Operating Officer. The chief operating officer of LLC,
subject to the powers of the vice chairman and chief executive officer and the
Directors, shall have general and active management of the business of LLC; and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The chief operating officer shall have such other powers and
perform such other duties as may be prescribed by the chairman of the Board of
Directors or the Board of Directors or as may be provided in this Agreement.
(j) Chief Financial Officer. The chief financial officer of LLC
shall, under the direction of the vice chairman and chief executive officer and
the President, be responsible for all financial and accounting matters and for
the direction of the offices of treasurer and controller. The chief financial
officer shall have such other powers and perform such other duties as may be
prescribed by the chairman of the Board of Directors or the Board of Directors
or as may be provided in this Agreement.
(k) Vice-presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the chairman of
the Board of Directors, shall, in the absence or disability of the president,
act with all of the powers and be subject to all the restrictions of the
president. The vice-presidents shall also perform such other duties and have
such other powers as the Board of Directors, the vice chairman and chief
executive officer, the president or this Agreement may, from time to time,
prescribe.
(l) Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the Board of Directors (other than the portion of any
such meeting during which the Compensation Committee shall be reporting to the
Board of Directors), all meetings of the committees thereof except the
Compensation Committee and all meetings of the Members and record all the
proceedings of the meetings except meetings of the Compensation Committee in a
book or books to be kept for that purpose. The record of proceedings of
meetings of the Compensation Committee and of any portion of any meeting of the
Board of Directors during which the Compensation Committee shall be reporting
to the Board of Directors (and related discussion by the Directors) included by
the secretary in such book or books of LLC shall be prepared by the chairman of
the Compensation Committee as provided in this Section 2.05(k). The chairman
of the Compensation Committee shall be responsible for recording all the
proceedings of that Committee and of any report by that committee to the
Directors (and related discussion by the Directors) and shall provide to the
secretary complete and accurate minutes of the proceedings of the Compensation
Committee and of such report to the Board of Directors and related discussion
which minutes shall be included by the secretary in the book or books of LLC
kept for the purpose of recording such proceedings. Under the president's
supervision, the secretary: shall give, or cause to be given, all notices
required to be given by this Agreement or the Delaware Act; shall have such
powers and perform such duties as the Directors, the chairman of the Board of
Directors, the vice chairman and chief operating officer, or this Agreement
may, from time to time, prescribe; and shall have custody of the seal of LLC.
The secretary, or an assistant secretary, shall have authority to affix the
seal to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
LLC and to attest the affixing by his signature. The assistant secretary, or
if there be more than one, the assistant secretaries in the order determined by
the Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
chairman of the Board of Directors, the vice chairman and chief executive
officer, or secretary may, from time to time, prescribe.
(m) Treasurer and Assistant Treasurer. The treasurer shall have
the custody of LLC's funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging
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to LLC; shall deposit all monies and other valuable effects in the name and to
the credit of LLC as may be ordered by the Board of Directors; shall cause the
funds of LLC to be disbursed when such disbursements have been duly authorized,
taking proper vouchers for such disbursements; and shall render to the
president and the Board of Directors, at its regular meeting or when the Board
of Directors so require, an account of LLC; shall have such powers and perform
such duties as the Board of Directors, the vice chairman and chief operating
officer, or this Agreement may, from time to time, prescribe. If required by
the Board of Directors, the treasurer shall give LLC a bond (which shall be
rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of the office of treasurer and for the restoration to LLC, in case
of death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in the possession
or under the control of the treasurer belonging to LLC. The assistant
treasurer, or if there shall be more than one, the assistant treasurers in the
order determined by the Board of Directors, shall in the absence or disability
of the treasurer, perform the duties and exercise the powers of the treasurer.
The assistant treasurers shall perform such other duties and have such other
powers as the Board of Directors, the vice chairman and chief executive
officer, or treasurer may, from time to time, prescribe.
(n) Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in this Agreement, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
(n) Absence or Disability of Officers. In the case of the absence
or disability of any officer of LLC and of any person hereby authorized to act
in such officer's place during such officer's absence or disability, the Board
of Directors may by resolution delegate the powers and duties of such officer
to any other officer or to any Director, or to any other person whom it may
select.
Section 2.06 Interested Directors
(a) Contracts Permitted. No contract or transaction between LLC and
one or more of its Directors or officers, or between LLC and any other limited
liability company, corporation, partnership, association, or other organization
in which one or more of its managers, directors or officers, are Directors or
officers of LLC, or have a financial interest, shall be void or voidable solely
for this reason, or solely because the Director or officer is present at or
participates in the meeting of the Board or committee which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(i) The material facts as to such Director's or officer's
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and
the Board or committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a
quorum; or
(ii) The material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the
Members entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the Members; or
(iii) The contract or transaction is fair as to LLC as of the
time it is authorized, approved or ratified by the Board of Directors,
a committee or the Members.
(b) Quorum. Interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
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Section 2.07 Books and Records
(a) Books and Records to be Kept. LLC shall keep; (i) correct and
complete books and records of account, (ii) minutes of the proceedings of
meetings of the Members, the Board of Directors and any committee thereof, and
(iii) a current list of the Directors and officers and their residence
addresses; and LLC shall also keep at its principal executive office a record
containing the names and addresses of all Members, the total Interests held by
each Member, the number thereof that are Class 1 Interests and Class 2
Interests and the dates when they respectively became the owners of record
thereof (the "Members' Interest Register"). Any of the foregoing books,
minutes or records may be in written form or in any other form capable of being
converted into written form within a reasonable time. The financial statements
of LLC shall be audited at the end of each fiscal year by an internationally
recognized firm of independent certified public accountants based in the United
States.
(b) Inspection of Books and Records. Any Member, in person or by
attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose LLC's Members' Interest Register and its other books and
records, and to make copies of extracts therefrom. A proper purpose shall mean
any purpose reasonably related to such Person's interest as a Member. In every
instance where an attorney or other agent shall be the Person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the Member. The demand under oath shall be directed to LLC
at its registered office in the State of Delaware or at its principal place of
business.
(c) Directors' Rights to Inspect. Any Director shall have the
right to examine LLC's Members' Interest Register and its other books and
records for a purpose reasonably related to his position as a Director.
(d) Members' Interest Register as Evidence. The Members' Interest
Register shall be the only evidence as to who are the Members entitled to vote
in person or by proxy at any meeting of Members.
Section 2.08 Indemnification
(a) Third Party Actions, Suits and Proceedings. Each person who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, crimi nal, administrative or
investigative (other than an action by or in the right of LLC), by reason of
the fact that he or she, or a person of whom he or she is the legal
representative, is or was a Director or officer, of LLC or is or was serving at
the request of LLC 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 (hereinafter a "proceeding"), shall be
indemnified and held harmless by LLC, against all expenses (including
attorneys' fees) judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of LLC, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of LLC, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) Actions by LLC. LLC shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of LLC to procure a judgment in its
favor by reason of the fact that such person, or a person of whom he or she is
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the legal representative, is or was a Director or officer of LLC, or is or was
serving at the request of LLC as a manager or director, officer, employee,
fiduciary or agent of another limited liability company or of a corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit 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 LLC 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 LLC unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) Procedure for Indemnification. Any indemnification of a
Director or officer of LLC under Section 2.08(a) or 2.08(b) or advance of
expenses under Section 2.08(f) shall be made promptly, and in any event within
30 days, upon the written request of the Director or officer. If a
determination by LLC, by action of its Board of Directors, that the Director or
officer is entitled to indemnification pursuant to this Section 2.08 is
required, and LLC fails to respond within 60 days to a written request for
indemnity, LLC shall be deemed to have approved the request. If LLC denies a
written request for indemnification or advancing of expenses, in whole or in
part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Section 2.08
shall be enforceable by the Director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by LLC. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to LLC)
that the claimant has not met the standards of conduct which would make it
permissible under the Delaware General Corporate Law if LLC were a corporation
for LLC to indemnify the claimant for the amount claimed, but the burden of
such defense shall be on LLC. Neither the failure of LLC (including its
Directors, independent legal counsel or Members) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the standard of
conduct set forth for a director or officer of a corporation in the Delaware
General Corporate Law, nor an actual determination by LLC (including its
Directors, independent legal counsel or Members) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the appli cable standard of
conduct.
(d) Rights Non-exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 2.08 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Agreement, agreement, vote of Members or disinterested
Directors or otherwise.
(e) Insurance. LLC may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a Director, officer, employee,
fiduciary, or agent of LLC or was serving at the request of LLC as a manager,
officer, employee or agent of another limited liability company, corpo ration,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not LLC would have the power to indemnify such person against such
liability under this Section 2.08.
(f) Expenses. Expenses incurred by any person described in
Section 2.08(a) or 2.08(b) in defending a proceeding shall be paid by LLC in
advance of such proceeding's final disposition upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
LLC. Such expenses incurred
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by other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
(g) Employees and Agents. Persons who are not covered by the
foregoing provisions of this Section 2.08 and who are or were Members,
employees or agents of LLC, or who are or were serving at the request of LLC as
employees or agents of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise, may be indemnified to
the extent authorized at any time or from time to time by the Board of
Directors.
(h) Contract Rights. The provisions of this Section 2.08 shall be
deemed to be a contract right between LLC and each Director or officer who
serves in any such capacity at any time while this Section 2.08 and the
relevant provisions of the Delaware Act or other applicable law are in effect,
and any repeal or modification of this Section 2.08 or any such law shall not
affect any rights or obligations then existing with respect to any state of
facts or proceeding then existing. The indemnification and other rights
provided for in this Section 2.08 shall inure to the benefit of the heirs,
executors and administrators of any person entitled to such indemnification.
Except as provided in Section 2.08(c) hereof, LLC shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by
such person only if such proceeding was authorized by the Directors.
(i) Merger or Consolidation; Other. For purposes of this Section
2.08, references to "LLC" shall include, in addition to the resulting company,
any constituent company (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its managers, directors,
officers, and employees or agents, so that any person who is or was a manager,
director, officer, employee or agent of such constituent company, or is or was
serving at the request of such constituent company as a director, officer,
employee or agent of another company, partnership, joint venture, trust or
other enterprise, shall stand in the same position under this Section 2.08 with
respect to the resulting or surviving company as he or she would have with
respect to such constituent company if its separate existence had continued.
For purposes of this Section 2.08, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of LLC" shall include any service as a
manager, director, officer, employee or agent of LLC which imposes duties on,
or involves services by, such manager, director, officer, employee, or agent
with respect to an employee benefit plan, its participants or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of LLC" as referred to in this Section 2.08.
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Section 2.09 Special Rights of Iridium Bermuda.
(a) Waiver of Limited Liability. Pursuant to
Section 18-303(b) of the Delaware Act, Iridium Bermuda waives,
commencing on the first day of the Iridium Bermuda Special
Rights Period, the limitation on liability contained in
Section 18-303(a) of the Delaware Act and Section 1.07 of this
Agreement; provided that Iridium Bermuda shall have no
liability to any person, including LLC, for any debt,
obligation or liability of LLC until all of the assets and
capital of LLC have first been exhausted in satisfaction
thereof.
(b) Special Approval Rights. In addition to any
other voting rights which Iridium Bermuda may have hereunder,
under the Delaware Act or otherwise, during the Iridium
Bermuda Special Rights Period, LLC shall 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
designated by Iridium Bermuda:
(i) Make any material amendments or modifications
to this Agreement;
(ii) Approve any business plan of LLC that would
result in any material change in the purpose
of LLC as set forth in Section 1.03 of this
Agreement or otherwise change LLC's business
so that it varies materially from the
business purpose contemplated by Section 1.03
of this Agreement;
(iii) Acquire, other than in the ordinary course of
business of LLC, (A) a controlling interest
or a majority of the voting stock or equity
of any corporation or other entity that would
be a
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Significant Subsidiary (as such term is
defined in Rule 405 under the United States
Securities Act of 1933, or any successor rule
thereto) 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 LLC (other than to a person
controlled by LLC);
(v) Cause the dissolution and/or liquidation of
LLC;
(vi) Take any action for the (A) commencement of a
voluntary case with respect to LLC under any
applicable bankruptcy, insolvency or similar
law now or hereafter in effect, (B) consent
to the entry of any order for relief in an
involuntary case under any such law with
respect to LLC to the extent that the giving
or withholding of such consent is within
LLC's discretion, (C) consent to the
appointment or taking possession by a
receiver, liquidator, assignee, custodian
trustee, sequestrator (or similar official)
of LLC or of any substantial part of LLC's
property or (D) making by LLC of a general
assignment for the benefit of creditors."
ARTICLE III
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
Section 3.01 Form of Contribution
The contribution with respect to a Member of LLC may, as determined by
the Board of Directors in its discretion, be in cash or other legal
consideration. The initial capital contribution of the initial Members are the
shares of Iridium, Inc. stock surrendered for Interests in LLC pursuant to the
LLC Merger and no Member shall be required to make any additional contributions
with respect thereto (except as required by law and except as set forth in
Section 4.02).
Section 3.02 Contributions by the Class 1 Members
There shall be contributed to the capital of LLC, with respect to each
Person who purchases a Class 1 Interest, an amount equal to the net purchase
price to the Company for such Class 1 Interest (such amount being such Person's
capital contribution to LLC). Class 1 Members, in their capacity as Members of
LLC, shall not be required to make any additional contributions to LLC (except
as required by law and except as set forth in Section 4.02).
The Class 1 Members shall 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 LLC at all times.
Section 3.03 Contributions with Respect to
the Class 2 Members
There shall be contributed to the capital of LLC, with respect to each
Person who purchases a Class 2 Interest, an amount equal to the net purchase
price to the Company for such Class 2 Interest (such amount being such Person's
capital contribution to LLC). Class 2 Members, in their capacity as Members of
LLC, shall not be required to make any additional contributions to LLC (except
as required by law and except as set forth in Section 4.02).
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Section 3.04 Allocation of Distributions
The distributions of LLC shall, subject to the applicable terms of
this Article, Article IV of this Agreement and the rights of the Class 2
Members, be allocated entirely to the Class 1 Members pro rata in proportion to
their percentage ownership of all outstanding Class 1 Interests.
Section 3.05 Allocation of Tax Items
(a) For U.S. federal income tax purposes, items of income and
gain, to the extent available, shall be allocated first to the Class 2 Members
in amounts that match the distributions made to the Class 2 Members pursuant to
Article IV of this Agreement. Items of income or gain not allocated to the
Class 2 Members pursuant to the immediately preceding sentence, and 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.
(b) Asset Contributions. If there is a difference between the
adjusted tax basis of any LLC asset and its fair market value as of the date of
contribution of the asset, allocations of depreciation, amortization and gain
or loss with respect to such asset, as computed for U.S. federal income tax
purposes, shall be made among the Members for U.S. federal income tax purposes
in accordance with Code Section 704(c) and the regulations thereunder. In
complying with the requirements of Code Section 704(c), LLC is authorized to
utilize any method permitted by the Treasury Regulations under Code Section
704(c) that is approved by a majority of the Directors.
(c) Allocations Solely for Tax Purposes. Allocations pursuant to
this Section 3.05 are solely for purposes of U.S. federal, state and local
taxes and shall not affect, or in any way be taken into account in computing,
any Member's share of distributions pursuant to any provision of this
Agreement.
Section 3.06 Withholding
LLC shall comply with withholding requirements under U.S. federal,
state and local law and shall remit amounts withheld to and file required forms
with applicable jurisdictions. To the extent that LLC is required to withhold
and pay over any amounts to any authority with respect to distributions or
allocations to any Member, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Member. To the fullest
extent permitted by law, in the event of any claimed over-withholding, Members
shall be limited to an action against the applicable jurisdiction. If the
amount withheld was not withheld from actual distributions, LLC may reduce
subsequent distributions by the amount of such withholding. Each Member, by
its acceptance of an Interest in LLC, shall be deemed to agree to furnish LLC
with any representations and forms as shall reasonably be requested by LLC to
assist it in determining the extent of, and in fulfilling, its withholding
obligations.
Section 3.07 Distributions
(a) Declaration. Subject to the terms of this Article III and the
Delaware Act, Class 2 Members shall receive periodic distributions
("dividends"), if any, in accordance with Article IV of this Agreement, as and
when declared by the Board of Directors, and Class 1 Members shall receive
periodic dividends, subject to Section 3.07(c) and Article IV of this Agreement
and to the provisions of the Delaware Act, as and when declared by the Board of
Directors, in their discretion. In addition to the provisions of Section
3.07(c), in determining whether to declare a dividend to Class 1 Members, the
Board of Directors shall consider the total tax liability of Class 1 Members
with respect to their Class 1 Interests, including the tax liability of Class 1
Members in countries other than the home country of each Class 1 Member.
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(b) Accounting. Each time the Board of Directors declares a
dividend, it shall determine the amount of such distribution that is from
retained earnings and the amount that constitutes a return of capital for
accounting purposes and will make a record of such determination in the minutes
of the Board meeting at which the dividend was declared.
(c) Tax. Each Non-U.S. Class 1 Member, upon receiving notice from
LLC or its allocation pursuant to Section 3.05, shall compute its U.S. federal,
state and local income tax liability resulting solely from such allocation and
shall notify LLC, within 30 days of receiving notice of its allocation of the
amount of such U.S. federal, state and local income tax liability. The Board
of Directors shall then be required, to the extent LLC has funds legally
available therefore, to promptly declare and pay a dividend (pro rata as
provided in Section 3.04) in an amount which, when added to any prior dividends
paid with respect to the profits of the same fiscal year, is sufficient to
ensure that each Non-U.S. Class 1 Member receives not less than the amount of
such U.S. federal, state and local income tax liability (the "Minimum
Dividend"); provided, that for purposes of determining the amount of the
dividend, the Board of Directors shall take into account any withholding
pursuant to Section 3.06. To the extent that LLC has insufficient funds
legally available to pay the Minimum Dividend in any year, the Minimum Dividend
that the Board of Directors shall be required to declare and pay in subsequent
years shall be increased by the amount of such shortfall. Subject to the
rights of Class 2 Interests, any amounts required to be declared and paid as
Minimum Dividends shall be declared and paid prior to the declaration and
payment of any other dividend or distribution whatsoever to Members.
For purpose of this Section 3.07 (c), a "Non-U.S. Class 1 Member" is
any Class 1 Member that is for U.S. federal income tax purposes: (i) a
nonresident alien individual or (ii) a foreign corporation, partnership or
estate or trust.
(d) Legal Funds. A Member shall not be entitled to receive any
dividend with respect to any dividend payment date (and any such dividend shall
not be considered due and payable), irrespective of whether such dividend has
been declared by the Board of Directors, until such time as LLC shall have
funds legally available for the payment of such dividend to such Member
pursuant to the terms of this Agreement and the Delaware Act, and
notwithstanding any provision of Section 18-606 of the Delaware Act to the
contrary, until such time, a Member shall not have the status of a creditor of
LLC, or the remedies available to a creditor of LLC.
(e) Record Dates. For purposes of determining the Members
entitled to receive payment of any dividend or other distribution, the Board of
Directors may set a record date, which shall not precede the date upon which
the resolution fixing the record date is adopted, and which shall be not more
than 60 days before such action. If no record date is fixed, the record date
for determining Members for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 3.08 Limitations on Distributions
Notwithstanding any provision to the contrary contained in this
Agreement, LLC shall not pay a dividend to any Member on account of any of its
Interests if such dividend would violate Section 18-607 of the Delaware Act or
other applicable law.
Section 3.09 Interests as Personal Property
Each Member hereby agrees that its Interests shall for all purposes be
personal property. A Member has no interest in specific LLC property.
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Section 3.10 Tax Matters Partner
Motorola shall be the tax matters partner (the "Tax Matters Partner")
of LLC and, as such, shall assume all the rights and duties of a Tax Matters
Partner as set forth in the Code and in the Treasury Regulations promulgated
thereunder. The Tax Matters Partner agrees to act as a liaison between LLC and
the Internal Revenue Service (the "IRS") in connection with all administrative
and judicial proceedings involving tax controversies regarding LLC.
(a) As Tax Matters Partner, Motorola agrees:
(i) to take all actions necessary to preserve the rights
of the members with respect to audits;
(ii) to notify and keep all other Members informed of all
administrative and judicial proceedings, as required by Section
6223(g) of the Code, and to furnish to each Member, a copy of each
notice or other communication which the Tax Matters Partner receives
from the IRS or sends to the IRS;
(iii) to be reasonably available to respond to inquiries
concerning any and all tax controversies;
(iv) to employ experienced tax counsel to represent LLC in
connection with any audit or investigation by the IRS, and in
connection with all subsequent administrative and judicial proceedings
arising out of such audit. The fees and expenses of such counsel
shall be an expense of LLC and shall be paid by LLC. Such counsel
shall be responsible for representing LLC; it shall be the
responsibility of the Members, at their expense, to employ tax counsel
to represent their respective interests; and
(v) to employ an international firm of certified public
accountants to prepare federal, state, local and other required
returns for LLC. At least 30 days prior to the due date of such
returns, the Tax Matters Partner (or the firm of certified public
accountants that has been retained to prepare the returns) shall
transmit copies of the Form 1065 (U.S. Partnership Return of Income)
to the Members for their review. The Tax Matters Partner shall not
sign or file the Form 1065 unless the Members have collectively
consented to its filing. If, however, a Member does not object to the
filing of the Form 1065 within 15 days after receiving the return, the
Tax Matters Partner may sign the return and LLC may file it after
making a good faith effort to incorporate in the return any comments
previously received from any Member.
(b) The Members agree that the chief financial officer, relying if
he/she deems appropriate on the advice of outside counsel or of LLC's firm of
independent certified public accountants, will make all material decisions
relating to any tax controversy. Without limiting the scope of the foregoing,
the Tax Matters Partner agrees that it shall not take any of the following
actions without the written consent of the Board of Directors:
(i) settle any significant claims by the IRS against the
LLC;
(ii) initiate judicial proceedings contesting adverse
determinations by the IRS against the LLC; and
(iii) enter into an agreement to extend the statute of
limitations.
(c) The Tax Matters Partner shall not be required to take any
action or incur any expenses for the prosecution of any administrative or
judicial remedies in its capacity as Tax Matters Partner
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unless the Members agree on a method of sharing expenses incurred in connection
with the prosection of such remedies. As long as the Tax Matters Partner is
not grossly negligent and acts in good faith pursuant to instructions it
receives from the Members, the Tax Matter Partner shall be fully protected in
acting as such and the LLC shall indemnify and hold harmless the Tax Matters
Partner from and against any and all expenses incurred by the Tax Matters
Partner in connection with any activities or undertakings taken by it in its
capacity as the Tax Matters Partner. Any Member that enters into a settlement
or closing agreement with the IRS or any comparable U.S. governmental
authorities with respect to any LLC tax item shall notify the Tax Matters
Partner of such agreement and its terms within 30 days of the execution of such
agreement. The Tax Matters Partner shall take such action as may be reasonably
necessary to constitute the other Members as "notice partners" within the
meaning of Section 6231(a)(8) of the Code.
ARTICLE IV
INTERESTS AND OTHER SECURITIES
Section 4.01 Class 1 Interests and Class 2 Interests
(a) Authorization. The Interests in LLC shall be divided into two
classes, Class 1 Interests and Class 2 Interests. Class 1 Interests shall be
represented by certificates, unless otherwise specified by resolution of the
Board of Directors pursuant to Section 4.10, evidencing any number of whole
Class 1 Interests. Class 2 Interests shall be issued in series, as described
below, with each series represented by certificates, unless otherwise specified
by resolution of the Board of Directors pursuant to Section 4.10, evidencing
any number of whole Class 2 Interests of such series. All series of Class 2
Interests are referred to herein collectively as "Class 2 Interests" and the
Class 1 Interests and Class 2 Interests are referred to herein collectively as
"Interests". The total number of Interests which LLC has the authority to
issue is 225,000,000 Class 1 Interests, 50,000 Series M Class 2 Interests and
300,000 additional Class 2 Interests. Subject to Article VII of this
Agreement, Class 2 Interests may be issued in series from time to time by the
Board of Directors, and the Board of Directors are expressly authorized by the
Members to fix by resolution or resolutions the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions
thereof, of each series of Class 2 Interests, including without limitation the
following:
(i) the distinctive serial designation of such series which
shall distinguish it from other series;
(ii) the number of Class 2 Interests included in such series,
which number may be increased or decreased from time to time unless
otherwise provided by the Board of Directors in the resolution or
resolutions providing for the issue of such series;
(iii) the dividend rate (or method of determining such rate)
payable to the holders of the Class 2 Interests of such series, any
conditions upon which such dividends shall be paid and the date or
dates upon which such dividends shall be payable;
(iv) whether dividends on the Class 2 Interests of such
series shall be cumulative and, in the case of Class 2 Interests of
any series having cumulative dividend rights, the date or dates or
method of determining the date or dates from which dividends on the
Class 2 Interests of such series shall be cumulative;
(v) the amount or amounts which shall be payable out of the
assets of LLC to the holders of the Class 2 Interests of such series
upon voluntary or involuntary liquidation,
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dissolution or winding up of LLC (including designations of priority
between and among any series of Class 2 Interests, Series M Class 2
Interests and Series A Class 2 Interests);
(vi) the price or prices at which, the period or periods
within which and the terms and conditions upon which the Class 2
Interests of such series may be redeemed, in whole or in part, at the
option of LLC or at the option of the holder or holders thereof or
upon the happening of a specified event or events;
(vii) the obligation, if any, of LLC to purchase or redeem
Class 2 Interests of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the period or periods
within which and the terms and conditions upon which the Class 2
Interests of such series shall be redeemed or purchased, in whole or
in part, pursuant to such obligation;
(viii) whether or not the Class 2 Interests of such series
shall be convertible or exchangeable, at any time or times at the
option of the holder or holders thereof or at the option of LLC or
upon the happening of a specified event or events, into Interests of
any other class or classes or any other series of the same or any
other class or classes of Interests in LLC, and the price or prices or
rate or rates of exchange or conversion and any adjustments applicable
thereto; and
(ix) the voting rights, if any, of the holders of the Class 2
Interests of such series.
(b) Certificate of Designations; Convertible Interests and
Securities. When any series of Class 2 Interests has been authorized by the
Board of Directors, the special rights, preferences and other terms of such
series of Class 2 Interests shall be as set forth in a certificate of
designations which shall be approved and adopted by a majority of the Board of
Directors and annexed to this Agreement. The annexation of a certificate of
designations to this Agreement shall not be considered an amendment of this
Agreement. When authorized as provided in Article VII, the Board of Directors
may also provide for the issuance of Class 1 Interests and Class 2 Interests
upon the exercise, conversion or exchange of rights of purchasers represented
by options, warrants, convertible debt securities or such other interests or
instruments as they may determine.
(c) Outstanding Convertible Securities. The Members hereby
acknowledge that LLC has issued (i) a warrant to Motorola (the "Motorola
Warrant"), as amended hereby in the form of Exhibit 3-B hereto, to purchase
Series M Class 2 Interests, (ii) Warrants to certain Members, in the form of
Exhibit 2- B hereto, to purchase in the aggregate 5,132,025 Class 1 Interests
(the "Third Round Warrants") and (iii) Series A Class 2 Interests, which are
convertible into Class 1 Interests; and, that (A) in connection with the
negotiation, execution and implementation of any Agreements Regarding Guarantee
with Guarantors, LLC is authorized to issue warrants to purchase up to
11,250,000 Class 1 Interests to the Guarantors, and (B) in order to provide
incentive to the gateway service territory owners to achieve commercial
activation of their gateways by the date of completion of Milestone 47 under
the Space System Contract and to achieve specified service revenues within 15
months from said date of completion of Milestone 47, LLC is authorized to issue
warrants to purchase up to 9,165,000 Class 1 Interests to the gateway territory
owners; provided, however that the banking and financing committee of the Board
of Directors shall have full authority to (x) approve the terms of the
foregoing warrants (including the inclusion of customary anti-dilution
provisions comparable to those included in the Third Round Warrants); and (y)
determine the recipients of warrants and the number of warrants to be issued to
each such recipient.
Section 4.02 Reserve Capital Call
Each Member named on Annex D hereto hereby irrevocably and
unconditionally agrees to purchase additional Class 1 Interests in an amount up
to the number of Class 1 Interests specified on
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Annex D for such Member, at a purchase price of $13.33 per Class 1 Interest, in
such manner and at such time(s) as the Board of Directors may determine if and
when the Board of Directors has determined that the purchase of such additional
Class 1 Interests is necessary for the successful operation of LLC; provided,
however, that the full capital call contemplated by this Section 4.02 shall be
mandatory (the "Mandatory Call") upon a determination by the Treasurer of LLC
that on the forty-fifth Business Day following such determination, and taking
into account funds available under the $1.1 billion bank facility guaranteed by
Motorola, LLC will not have available to it sufficient funds to meet its
contractual obligations and other funding requirements absent the Reserve
Capital Call funds, at which time the Treasurer shall deliver a notice (a
"Funding Notice") notifying each Member named on Annex D hereto that the
Reserve Capital Call is being exercised and specifying a date thirty days after
delivery of the Funding Notice for payment; provided, however, that the
Mandatory Call (A) is not effective if, at the time of occurrence of the
condition giving rise to the Mandatory Call, Motorola or another Guarantor is
in default on its milestone commitments or other material obligations under
its Guarantee, and (B) terminates immediately upon the lending of any funds to
LLC by banks, which loans are not fully Guaranteed by one or more Guarantors.
Any obligation to purchase additional Class 1 Interests under this Section
4.02 shall be on a pro rata basis, with each Member only being required to
purchase a percentage of the Class 1 Interests to be purchased under this
Section 4.02 equal to the number of Class 1 Interests set forth next to such
Members' name in Annex D hereto divided by the total number of Class 1
Interests set forth next to all of the Members names in Annex D. The number of
and purchase price for Class 1 Interests that each Member shall be obligated
to purchase pursuant to this Section 4.02 shall be appropriately adjusted for
stock splits, stock dividends and other recapitalizations having a similar
effect. In connection with a purchase of Class 1 Interests under this Section
4.02, each Member acquiring Class 1 Interests shall be deemed to have made the
acknowledgements and agreements set forth on Annex C hereto.
Section 4.03 Class 1 Interests
(a) Voting Rights. Subject to the rights of holders of Series M
Class 2 Interests, Series A Class 2 Interests and of any other Class 2
Interests, and except as otherwise provided herein and in the Delaware Act, all
voting rights of the Members shall be vested exclusively in the Class 1
Members. The Class 1 Interests shall entitle the Class 1 Members to vote in
proportion to the number of Class 1 Interests owned by each Class 1 Member upon
all matters upon which Class 1 Members have the right to vote. A Member shall
have one vote in respect of each Class 1 Interest owned by such Member.
(b) Liquidation Rights. Subject to the rights of holders of
Series M Class 2 Interests, Series A Class 2 Interests and of any other Class 2
Interests, each Class 1 Member shall be entitled to receive all distributions
to the holders of Class 1 Interests in any liquidation, dissolution or winding
up of LLC pro rata on the basis of the number of Class 1 Interests held by each
of them as a percentage of all outstanding Class 1 Interests.
(c) Dividends. To the extent permitted under the Delaware Act and
subject to the rights of holders of Series M Class 2 Interests, Series A Class
2 Interests and of any other Class 2 Interests, dividends may be paid on the
Class 1 Interests as and when declared by the Board of Directors, in their
discretion, subject to the requirements of Section 3.07 (c) of this Agreement.
In addition to the provisions of Section 3.07 (c), in determining whether to
declare a dividend on the Class 1 Interests, the Board of Directors shall
consider the total tax liability of Class 1 Members in respect of their Class 1
Interests, including the tax liability of Class 1 Members in countries other
than the home country of each Class 1 Member.
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Section 4.04 Series M Class 2 Interests
(a) Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Series M Class 2 Interests shall have no voting
rights; provided that each holder of Series M Class 2 Interests shall be
entitled to notice of all meetings of Members at the same time and in the same
manner as notice is given to the Members entitled to vote at such meeting.
(b) Liquidation Rights. Upon any liquidation, dissolution or
winding up of LLC, each holder of Series M Class 2 Interests shall be entitled
to be paid, before any distribution or payment is made upon any Junior
Interests, an amount in cash equal to the aggregate Liquidation Value (plus all
accrued and unpaid dividends) of all Series M Class 2 Interests held by such
holder, and the holders of Series M Class 2 Interests shall not be entitled to
any further payment. If upon any such liquidation, dissolution or winding up
of LLC, LLC's assets to be distributed among the holders of the Series M Class
2 Interests are insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets to be
distributed shall be distributed ratably among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Series M Class 2 Interests held by each such holder. LLC shall mail written
notice of such liquidation, dissolution or winding up, not less than 60 days
prior to the payment date stated therein, to each record holder of Series M
Class 2 Interests. Neither the consolidation or merger of LLC into or with any
other entity or entities, nor the sale or transfer by LLC of all or any part of
its assets, nor the reduction of the aggregate number of Interests in LLC,
shall be deemed to be a liquidation, dissolution or winding up of LLC within
the meaning of this Section 4.04(b).
(c) Dividends.
(i) General Obligation. When and as declared by the
Board of Directors and to the extent permitted under the Delaware Act,
LLC shall pay preferential dividends to the holders of the Series M
Class 2 Interests as provided in this Section 4.04(c)(i). Except as
otherwise provided herein, dividends on each Series M Class 2 Interest
shall accrue on a daily basis at the rate of 8% 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
Series M Class 2 Interest to and including the date on which the
Liquidation Value of such Series M Class 2 Interest (plus all accrued
and unpaid dividends thereon) is paid or the date on which such Series
M Class 2 Interest is converted into Class 1 Interests hereunder
("Series M Dividends"). Series M Dividends shall accrue whether or
not they have been declared and whether or not there are profits,
surplus or other funds of LLC legally available for the payment of
dividends. Series M Dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with
funds irrevocably set apart for payment before any dividend,
distribution or payment may be made with respect to any Junior
Interests (Series M).
In addition, as and when dividends are declared or paid on the
Class 1 Interests, whether in cash, property or additional Interests
in LLC, the holders of Series M Class 2 Interests shall be entitled to
participate with the holders of Class 1 Interests in such dividends
ratably on a per interest basis.
The date on which LLC initially issues any Series M Class 2
Interests shall be deemed to be its "date of issuance" regardless of
the number of times transfer of such Series M Class 2 Interests is
made on the records maintained by or for LLC and regardless of the
number of Certificates which may be issued to evidence such Series M
Class 2 Interests.
(ii) Series M Dividend Reference Dates. To the extent not
paid on January 1, April 1, July 1 and October 1 of each year,
beginning January 1, 1997 (the "Series M Dividend Reference Dates"),
all Series M Dividends which have accrued on each Series M Class 2
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Interest outstanding during the three-month period (or other period in
the case of the initial Series M Dividend Reference Date) ending upon
each such Series M Dividend Reference Date shall be accumulated and
shall remain accumulated dividends with respect to such Series M Class
2 Interests until paid.
(iii) Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time LLC pays less than the total
amount of Series M Dividends then accrued with respect to the Series M
Class 2 Interests, such payment shall be distributed ratably among the
holders thereof based upon the number of Series M Class 2 Interests
held by each such holder.
(d) Conversion.
(i) Conversion Procedure.
(A) At any time and from time to time, any holder of
Series M Class 2 Interests may convert all or any portion of
the Series M Class 2 Interests (including any fraction of a
Series M Class 2 Interest) held by such holder into a number
of Class 1 Interests 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.
(B) Each conversion of Series M Class 2 Interests
shall be deemed to have been effected as of the close of
business on the date on which the Certificate or Certificates
representing the Series M Class 2 Interests to be converted
have been surrendered at the principal executive office of
LLC. At such time as such conversion has been effected, the
rights of the holder of such Series M Class 2 Interests as
such holder shall cease and the Person or Persons in whose
name or names any Certificate or Certificates for Class 1
Interests are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the
Class 1 Interests represented thereby.
(C) Notwithstanding any other provision hereof, if a
conversion of Series M Class 2 Interests is to be made in
connection with a Public Offering, the conversion of any
Series M Class 2 Interests may, at the election of the holder
of such Series M Class 2 Interests, be conditioned upon the
consummation of the Public Offering in which case such
conversion shall not be deemed to be effective until the
consummation of the Public Offering.
(D) As soon as possible after a conversion has been
effected (but in any event within five business days in the
case of Section 4.04(d)(i)(D)(I) below), LLC shall deliver to
the converting holder:
(I) a Certificate or Certificates
representing the number of Class 2 Interests issuable
by reason of such conversion in such name or names
and such denomination or denominations as the
converting holder has specified;
(II) payment in an amount equal to all
accrued Series M Dividends with respect to each
Series M Class 2 Interest converted, which have not
been paid prior thereto, plus the amount payable
under Section 4.04(d)(i)(H) below with respect to
such conversion; and
(III) a Certificate representing any Series
M Class 2 Interests which were represented by the
Certificate or Certificates delivered to LLC in
connection with such conversion but which were not
converted.
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(E) If LLC is not permitted under applicable law to
pay any portion of the accrued Series M Dividends on the
Series M Class 2 Interests being converted, LLC shall pay such
dividends to the converting holder as soon thereafter as funds
of LLC are legally available for such payment. At the request
of any such converting holder, LLC shall provide such holder
with written evidence of its obligation to such holder.
(F) The issuance of Certificates for Class 1 Interests
upon conversion of Series M Class 2 Interests shall be made
without charge to the holders of such Series M Class 2
Interests for any issuance tax in respect thereof or other
cost incurred by LLC in connection with such conversion and
the related issuance of Class 1 Interests. Upon conversion of
each Series M Class 2 Interest, LLC shall take all such
actions as are necessary in order to insure that the Class 1
Interests issuable with respect to such conversion shall be
validly issued.
(G) LLC shall assist and cooperate with any holder of
Series M Class 2 Interests required to make any governmental
filings or obtain any governmental approval prior to or in
connection with any conversion of Series M Class 2 Interest
hereunder (including, without limitation, making any filings
required to be made by LLC).
(H) If any fractional interest in a Class 1 Interest
would, except for the provisions of this subsection, be
deliverable upon any conversion of the Series M Class 2
Interests of LLC, in lieu of delivering the fractional
interest therefor, shall pay an amount to the holder thereof
equal to the market price of such fractional interest as of
the date of conversion.
(I) LLC shall at all times reserve and keep available
out of its authorized but unissued Class 1 Interests, solely
for the purpose of issuance upon the conversion of the Series
M Class 2 Interests, the number of Class 1 Interests issuable
upon the conversion of all outstanding Series M Class 2
Interests. All Class 1 Interests which are so issuable shall,
when issued, be duly and validly issued and free from all
taxes, liens and charges. LLC shall take all such actions as
may be necessary to assure that all such Class 1 Interests may
be so issued without violation of any applicable law or
governmental regulation (except for official notice of
issuance which shall be immediately delivered by LLC upon each
such issuance).
(ii) Series M Conversion Price. The initial Series M
Conversion Price shall be $13.33. In order to prevent dilution of the
conversion rights granted under this subdivision, the Series M
Conversion Price shall be subject to adjustment from time to time
pursuant to this Section 4.04(d)(ii). If LLC at any time subdivides
(by any split of Interests, Interest dividend or distribution,
recapitalization or otherwise) one or more classes of its outstanding
Class 1 Interests into a greater number of Interests, the Series M
Conversion Price in effect immediately prior to such subdivision shall
be proportionately reduced, and if LLC at any time combines (by
reverse split of Interests or otherwise) one or more classes of its
outstanding Class 1 Interests into a smaller number of Interests, the
Series M Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(iii) Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of LLC's
assets to another Person or other transaction which is effected in
such a manner that holders of Class 1 Interests are entitled to
receive (either directly or upon subsequent liquidation) membership
interests, stock, securities or assets with respect to or in exchange
for Class 1 Interests is referred to herein as an "Organic Change".
Prior to the consummation of any Organic Change, LLC shall make
appropriate provisions (in form and substance satisfactory to the
holders of a majority of the Series M Class 2 Interests then
outstanding) to insure that each of the holders of Series M Class 2
Interests shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the Class 1 Interests
immediately theretofore acquirable and receivable upon the conversion
of such holder's Series M Class 2 Interests, such membership
interests, shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such holder
had converted its Series M Class 2 Interests immediately prior to such
Organic Change. In each such case, LLC shall also make appropriate
provisions (in form and substance satisfactory
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to the holders of a majority of the Series M Class 2 Interests then
outstanding) to insure that the provisions of this Section 4.04(d) and
Sections 4.04(e) and (f) shall thereafter be applicable to the Series
M Class 2 Interests (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing entity is
other than LLC, an immediate adjustment of the Series M Conversion
Price to the value for the Class 1 Interests reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of Class 1 Interests acquirable and
receivable upon conversion of Series M Class 2 Interests, if the value
so reflected is less than the Conversion Price in effect immediately
prior to such consolidation, merger or sale). LLC shall not effect
any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor Person (if other than LLC)
resulting from consolidation or merger or the corporation purchasing
such assets assumes by written instrument (in form reasonably
satisfactory to the holders of a majority of the Series M Class 2
Interests then outstanding), the obligation to deliver to each such
holder such membership interests, shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder
may be entitled to acquire.
(iv) Notices.
(A) Immediately upon any adjustment of the Series M
Conversion Price, LLC shall give written notice thereof to all
holders of Series M Class 2 Interests, setting forth in
reasonable detail and certifying the calculation of such
adjustment.
(B) LLC shall give written notice to all holders of
Series M Class 2 Interests at least 20 days prior to the date
on which LLC closes its books or takes a record (a) with
respect to any dividend or distribution upon Class 1
Interests, (b) with respect to any pro rata subscription offer
to holders of Class 1 Interests (c) for determining rights to
vote with respect to any Organic Change, dissolution or
liquidation.
(C) LLC shall also give written notice to the holders of
Series M Class 2 Interests at least 20 days prior to the date
on which any Organic Change shall take place.
(e) Liquidating Dividends. If LLC declares or pays a dividend
upon the Class 1 Interests payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for an Interest dividend payable in
Class 1 Interests (a "Liquidating Dividend"), then LLC shall pay to the holders
of Series M Class 2 Interests at the time of payment thereof the Liquidating
Dividends which would have been paid on the Class 1 Interests had such Series M
Class 2 Interests been converted immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Class 1 Interests entitled to such
dividends are to be determined.
(f) Rights. If at any time LLC grants, issues or sells any Right
to acquire Class 1 Interests pro rata to the record holders of any class of
Class 1 Interests, then each holder of Series M Class 2 Interests shall be
entitled to acquire, upon the terms applicable to such Rights, the aggregate
Rights which such holder could have acquired if such holder had held the number
of Class 1 Interests acquirable upon conversion of such holder's Series M Class
2 Interests immediately before the date on
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which a record is taken for the grant, issuance or sale of such Rights, or, if
no such record is taken, the date as of which the record holders of Class 1
Interests are to be determined for the grant, issue or sale of such Rights.
(g) Events of Noncompliance.
(i) Definition. An Event of Noncompliance shall be
deemed to have occurred if:
(A) LLC fails to pay on any Series M Dividend Reference
Date the full amount of Series M Dividends then accrued on the
Series M Class 2 Interests, whether or not such payment is
legally permissible or is prohibited by any agreement to which
LLC is subject; or
(B) LLC or any Subsidiary makes an assignment for the benefit
of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or
decree is entered adjudicating LLC or any Subsidiary bankrupt
or insolvent; or any order for relief with respect to LLC or
any Subsidiary is entered under the United States Federal
Bankruptcy Code; or LLC or any Subsidiary petitions or applies
to any tribunal for the appointment of a custodian, trustee,
receiver or liquidator of LLC or any Subsidiary or of any
substantial part of the assets of LLC or any Subsidiary, or
com mences any proceeding (other than a proceeding for the
voluntary liquidation and dissolution of a Subsidiary)
relating to LLC or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction; or any
such petition or application is filed, or any such proceeding
is commenced, against LLC or any Subsidiary and either (a) LLC
or any such Subsidiary by any act indicates its approval
thereof, consent thereto or acquiescence therein or (b) such
petition, application or proceeding is not dismissed within 60
days.
(ii) Consequences of Certain Events of Noncompliance.
(A) If an Event of Noncompliance has occurred, the
holder or holders of a majority of the Series M Class 2
Interests then outstanding may demand (by written notice
delivered to LLC) immediate redemption of all or any portion
of the Series M Class 2 Interests owned by such holder or
holders at a price per Series M Class 2 Interests equal to the
Liquidation Value thereof (plus all accrued and unpaid
dividends thereon). LLC shall redeem all Series M Class 2
Interests as to which rights under this section have been
exercised within 15 days after receipt of the initial demand
for redemption. Notwithstanding the foregoing, LLC shall not
have any obligation to redeem the Series M Class 2 Interests
so long as (i) such redemption is prohibited by the provisions
of applicable state law or (ii) such redemption is prohibited
by, or would otherwise cause a default under, indebtedness of
LLC having a principal amount of excess of $1,000,000.00.
(B) If any Event of Noncompliance has occurred, the
number of Directors of LLC shall, at the request of the
holders of a majority of the Series M Class 2 Interests then
outstanding, be increased by one (1), and the holders of
Series M Class 2 Interests shall have the special right,
voting separately as a single class (with each Series M Class
2 Interest being entitled to one vote) and to the exclusion of
all other Interests in LLC, to elect an individual to fill
such newly created Director position, to remove any individual
elected to such position and to fill any vacancies in such
position. The special right of the holders of Series M Class
2 Interests to elect Directors may be exercised at the special
meeting called pursuant to this subsection (B), at any annual
or other special meeting of Members and, to the extent and in
the manner permitted by applicable law,
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pursuant to a written consent in lieu of a meeting of Members.
Such special right shall continue until such time as there is
no longer any Event of Noncompliance in existence, at which
time such special right shall terminate subject to revesting
upon the occurrence and continuation of any Event of
Noncompliance which gives rise to such special right
hereunder.
At any time when such special right has vested in the holders
of Series M Class 2 Interests, a proper officer of LLC shall, upon the
written request of the holders of at least 10% of the Series M Class 2
Interests then outstanding, addressed to the secretary of LLC, call a
special meeting of the holders of Series M Class 2 Interests for the
purpose of electing a Director pursuant to this subsection. Such
meeting shall be held at the earliest legally permissible date at the
principal executive office of LLC, or at such other place designated
by the holders of at least 10% of the Series M Class 2 Interests then
outstanding. If such meeting has not been called by a proper officer
of LLC within 10 days after personal service of such written request
upon the secretary of LLC or within 20 days after mailing the same to
the secretary of LLC at its principal executive office, then the
holders of at least 10% of the Series M Class 2 Interests then
outstanding may designate in writing one of their number to call such
meeting at the expense of LLC, and such meeting may be called by such
Person so designated upon the notice required for annual meetings of
Members and shall be held at LLC's principal executive office, or at
such other place designated by the holders of at least 10% of the
Series M Class 2 Interests then outstanding. Any holder of Series M
Class 2 Interests so designated shall be given access to the Members'
Interests Register for the purpose of causing a meeting of Members to
be called pursuant to this section.
At any meeting or at any adjournment thereof at which the
holders of Series M Class 2 Interests have the special right to elect
Directors, the presence, in person or by proxy, of the holders of a
majority of the Series M Class 2 Interests then outstanding shall be
required to constitute a quorum for the election or removal of any
Director by the holders of the Series M Class 2 Interests exercising
such special right. The vote of a majority of such quorum shall be
required to elect or remove any such Director.
Any Director so elected by the holders of Series M Class 2
Interests shall continue to serve as a Director until the expiration
of the lesser of (a) a period of one month following the date on which
there is no longer any Event of Noncompliance in existence or (b) the
remaining period of the full term for which such Director has been
elected. After the expiration of such one-month period or when the
full term for which such Director has been elected ceases (provided
that the special right to elect Directors has terminated), as the case
may be, the number of Directors of LLC shall decrease to such number
as constituted the total number of Directors of LLC immediately prior
to the occurrence of the Event or Events of Noncompliance giving rise
to the special right to elect Directors.
(C) If any Event of Noncompliance exists, each holder of Series M
Class 2 Interests shall also have any other rights which such holder
is entitled to under any contract or agreement at any time and any
other rights which such holder may have pursuant to applicable law.
(h) Registration of Transfer. LLC shall keep at its principal
executive office the Members' Interest Register. Upon the surrender of any
Certificate representing Series M Class 2 Interests at such place, LLC shall,
at the request of the record holder of such Certificate, execute and deliver
(at the LLC's expense) a new Certificate or Certificates in exchange therefor
representing in the aggregate the number of Series M Class 2 Interests
represented by the surrendered Certificate. Each such new Certificate shall be
registered in such name and shall represent such number of Series M Class 2
Interests as is requested by the holder of the surrendered Certificate and
shall be substantially identical in form to the surrendered Certificate, and
dividends shall accrue on the Series M Class 2 Interests
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represented by such new Certificate from the date to which dividends have been
fully paid on such Series M Class 2 Interests represented by the surrendered
Certificate.
(i) Replacement. Upon receipt of evidence reasonably satisfactory
to LLC (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any Certificate
evidencing Series M Class 2 Interests, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to LLC
(provided that if the holder is a financial institution or other institutional
investor its own agreement shall be satisfactory), or, in the case of any such
mutilation upon surrender of such Certificate, LLC shall (at its expense)
execute and deliver in lieu of such Certificate a new Certificate of like kind
representing the number of Series M Class 2 Interests of such class represented
by such lost, stolen, destroyed or mutilated Certificate and dated the date of
such lost, stolen, destroyed or mutilated Certificate, and dividends shall
accrue on the Series M Class 2 Interests represented by such new Certificate
from the date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated Certificate.
(j) Amendment and Waiver. No amendment, modification or waiver
shall be binding or effective with respect to any provision of Sections (a) to
(i) hereof without the prior written consent of the holders of at least a
majority of the Series M Class 2 Interests outstanding at the time such action
is taken; provided, that no such action shall change (i) the rate at which or
the manner in which dividends on the Series M Class 2 Interests accrue or the
times at which such dividends become payable or the amount payable on
redemption of the Series M Class 2 Interests or the times at which redemption
of Series M Class 2 Interests is to occur, without the prior written consent of
the holders of at least 90% of the Series M Class 2 Interests then outstanding,
(ii) the Series M Conversion Price of the Series M Class 2 Interests or the
number of interests or class of Interests into which the Series M Class 2
Interests are convertible, without the prior written consent of the holders of
at least 90% of the Series M Class 2 Interests then outstanding, or (iii) the
percentage required to approve any change described in clauses (i) and (ii)
above, without the prior written consent of the holders of at least 90% of the
Series M Class 2 Interests then outstanding; and provided further that no
change in the terms hereof may be accomplished by merger or consolidation of
LLC with another limited liability company or entity unless LLC has obtained
the prior written consent of the holders of the applicable percentage of the
Series M Class 2 Interests then outstanding.
(k) Notices. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to LLC, at its principal executive
offices and (ii) to any holder of Series M Class 2 Interests, at such holder's
address as it appears in the records of LLC (unless otherwise indicated by any
such holder).
Section 4.05 Series A Class 2 Interests
(a) Ranking. The Series A Class 2 Interests shall rank, with
respect to dividends and distributions upon the liquidation, dissolution and
winding-up of LLC:
(i) senior to all classes or series of Junior Interests
(Series A);
(ii) on a parity with all classes of Parity Interests
(Series A); and
(iii) junior to all classes of Senior Interests (Series A).
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<PAGE> 33
(b) Dividends.
(i) Beginning on the Original Issue Date, holders of Series A
Class 2 Interests shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for
the payment of dividends, dividends on each outstanding Series A Class
2 Interest, at a rate per annum equal to 14 1/2% of the Series A
Liquidation Preference per Series A Class 2 Interest, payable with
respect to each Series A Dividend Period. All dividends shall be
cumulative and shall be payable in arrears for each Series A Dividend
Period on each Series A Dividend Payment Date. For all Series A
Dividend Periods through and including the Series A Dividend Period
ending on February 28, 2001, LLC may, at its option, pay the dividend
on the Series A Class 2 Interests in cash or in newly issued Series A
Class 2 Interests with an aggregate Series A Liquidation Preference
equal to the amount of such dividend. Commencing with the Series A
Dividend Period beginning on March 1, 2001, dividends on the Series A
Class 2 Interests will be payable only in cash.
(ii) Each dividend paid on the Series A Class 2 Interests
shall be payable to holders of record as their names shall appear in
the Members' Interest Register of LLC on the Series A Dividend Record
Date for such dividend, except that dividends in arrears for any past
Series A Dividend Payment Date may be declared and paid at any time
without reference to such regular Series A Dividend Payment Date to
holders of record on a later dividend record date determined by the
Board of Directors.
(iii) Dividends shall cease to accumulate in respect of
Series A Class 2 Interests on the day prior to the Series A Redemption
Date with respect thereto, unless LLC shall have failed to pay the
Series A Optional Redemption Price on the Series A Redemption Date
with respect to such Series A Class 2 Interests.
(iv) All dividends paid with respect to the Series A Class 2
Interests shall be paid pro rata to the holders entitled thereto based
upon the number of Series A Class 2 Interests held by each such holder
on the relevant Series A Dividend Record Date.
(v) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment by LLC on the Series
A Class 2 Interests or any Parity Interests (Series A) for any period
unless full cumulative dividends have been or contemporaneously are
declared and paid, or declared and a sum set apart sufficient for such
payment, on all Senior Interests (Series A) and on the Series A Class
2 Interests and any Parity Interests (Series A) for all dividend
periods terminating on or prior to the date of payment of such full
dividends on the Series A Class 2 Interests or such Parity Interests
(Series A). If any dividends are not paid in full, as aforesaid, upon
the Series A Class 2 Interests and any other Parity Interests (Series
A) but all dividends are paid in full, as aforesaid, upon the Senior
Interests, all dividends declared upon the Series A Class 2 Interests
and any other Parity Interests (Series A) shall be declared pro rata
so that the amount of dividends declared per interest on the Series A
Class 2 Interests and such Parity Interests (Series A) shall in all
cases bear to each other the same ratio that accrued and unpaid
dividends per Interest on the Series A Class 2 Interests and such
Parity Interests (Series A) bear to each other. Except as
contemplated herein, no interest or additional dividends, or sum of
money in lieu of interest or additional dividends, shall be payable in
respect of any dividend payment or payments on the Series A Class 2
Interests or any other Parity Interests (Series A) which may be in
arrears.
(vi) So long as any Series A Class 2 Interests are
outstanding, except with respect to (i) repurchases of Class 1
Interests or Rights to acquire Class 1 Interests issued under an
employee incentive or benefit plan of LLC or a Subsidiary of LLC, (ii)
dividends or distributions payable in additional Junior Interests
(Series A) or Rights to acquire Junior Interests (Series A)
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<PAGE> 34
and (iii) repurchases of Junior Interests (Series A) or Rights to
acquire Junior Interests (Series A) pursuant to provisions of the
agreements under which those interests or securities were issued or
under this Agreement allowing LLC to repurchase such securities at a
discount to their issue price upon a default of any Person in its
obligations thereunder, LLC shall not declare, pay or set apart for
payment any dividend on any Junior Interests, or make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any
of the Junior Interests (Series A) or any Rights to acquire Junior
Interests (Series A), and shall not permit any corporate or other
entity directly or indirectly controlled by LLC to purchase or redeem
any Junior Interests (Series A) or Rights to acquire Junior Interests
(Series A), unless prior to or concurrently with such declaration,
payment, setting apart for payment, purchase, redemption or
distribution, as the case may be, all accrued and unpaid dividends on
the Series A Class 2 Interests not paid on the dates provided for in
Section 4.05(b)(i) hereof (and, to the extent previously due but not
yet paid, any and all redemption payments on the Series A Class 2
Interests) shall have been or are concurrently being paid.
(vii) Dividends payable on Series A Class 2 Interests for any
period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in
the period for which payable. If any Series A Dividend Payment Date
occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Series A Dividend Payment Date shall be paid
on the next succeeding Business Day.
(c) Liquidation Rights.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of LLC, holders of Series A
Class 2 Interests will be entitled to receive out of the assets of LLC
available for distribution to the holders of Interests in LLC, after
satisfaction of the liquidation preference of Senior Interests (Series
A), whether such assets are capital, surplus or earnings, an amount in
cash equal to the Series A Liquidation Preference, before any payment
shall be made or any assets distributed to the holders of any of the
Junior Interests (Series A). Except as set forth in the preceding
sentence, holders of Series A Class 2 Interests shall not be entitled
to any distribution in the event of voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of LLC. If upon
any voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of LLC, the assets of LLC are not sufficient to pay in
full the liquidation payments payable to the holders of outstanding
Series A Class 2 Interests and all Parity Interests (Series A), then
the holders of all such Interests shall share equally and ratably in
any distribution of assets in proportion to the full liquidation
preferences, determined as of the date of such voluntary or
involuntary liquidation, dissolution or winding-up, to which they are
entitled.
(ii) For the purposes of this Section 4.05(c) only, neither
the sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, limited liability company interests, securities or other
consideration) of all or substantially all of the property or assets
of LLC nor the consolidation or merger of LLC with or into one or more
corporations, limited liability companies or other entities shall be
deemed to be a liquidation, dissolution or winding-up of the affairs
of LLC.
(d) Redemption.
(i) Optional Redemption.
(A) LLC may, at its option, redeem, at any time
after March 1, 2001, from any source of funds legally
available therefor, in whole or in part, in the manner
provided in Section 4.05(d)(ii) hereof, any or all of the
Series A Class 2 Interests, at the redemption prices
(expressed as a percentage of the Series A Liquidation
Preference thereof) set
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<PAGE> 35
forth below plus an amount in cash equal to all accumulated
and unpaid dividends per Series A Class 2 Interest for the
period from the Series A Dividend Payment Date immediately
prior to the Series A Redemption Date to the day prior to the
Series A Redemption Date (the "Series A Optional Redemption
Price"), if redeemed during the 12-month period beginning
March 1 of the years indicated:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 107.5%
2002 105.625
2003 103.75
2004 101.875
2005 and thereafter 100.0
</TABLE>
(B) In the event of a redemption pursuant to this
Section 4.05(d)(i) of only a portion of the then outstanding
Series A Class 2 Interests, LLC shall effect such redemption
pro rata according to the percentage of all outstanding Series
A Class 2 Interests held by each holder of such Interests.
(ii) Procedure for Redemption.
(A) Not more than sixty (60) and not less than
thirty (30) days prior to the date fixed for any redemption of
the Series A Class 2 Interests, written notice (the "Series A
Redemption Notice") shall be given by first-class mail,
postage prepaid, to each holder of record of Series A Class 2
Interests to be redeemed on the record date fixed for such
redemption at such holder's address as the same appears on the
Members' Interest Register of LLC; provided, that no failure
to give such notice nor any deficiency therein shall affect
the validity of the procedure for the redemption of any Series
A Class 2 Interests to be redeemed except as to the holder or
holders to whom LLC has failed to give such notice or except
as to the holder or holders whose notice was defective. The
Redemption Notice shall state:
(I) the Series A Optional Redemption Price;
(II) whether all or less than all the
outstanding Series A Class 2 Interests are to be
redeemed and the total number of Series A Class 2
Interests being redeemed;
(III) the number of Series A Class 2
Interests held by the holder that LLC intends to
redeem;
(IV) the date fixed for redemption (the
"Series A Redemption Date");
(V) that the holder is to surrender to LLC,
at the place or places which shall be designated in
such Series A Redemption Notice, its Certificates
representing the Series A Class 2 Interests to be
redeemed;
(VI) that dividends on the Series A Class 2
Interests to be redeemed shall cease to accrue on the
day prior to such Series A Redemption Date unless LLC
defaults in the payment of the Series A Optional
Redemption Price; and
(VII) the name of any bank or trust company
performing the duties referred to in Section
4.05(d)(ii)(E) below.
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<PAGE> 36
(B) On or before the Series A Redemption Date,
each holder of Series A Class 2 Interests to be redeemed shall
surrender the Certificate or Certificates representing such
Series A Class 2 Interests to LLC, in the manner and at the
place designated in the Series A Redemption Notice, and on the
Series A Redemption Date the full Series A Optional Redemption
Price for such Interests shall be payable in cash to the
Person whose name appears on such Certificate or Certificates
as the owner thereof, and each surrendered Certificate shall
be returned to authorized but unissued Interests. In the
event that less than all of the Interests represented by any
such Certificate are redeemed, a new Certificate shall be
issued representing the unredeemed Interests.
(C) Unless LLC defaults in the payment in full of
the Series A Optional Redemption Price, dividends on the
Series A Class 2 Interests called for redemption shall cease
to accumulate on the day prior to the Series A Redemption
Date, and the holders of such Interests shall cease to have
any further rights with respect thereto on the Series A
Redemption Date, other than the right to receive the Series A
Optional Redemption Price, without interest.
(D) If a Series A Redemption Notice shall have
been duly given, and if, on or before the Series A Redemption
Date specified therein, all funds necessary for such
redemption shall have been set aside by LLC, separate and
apart from its other funds, in trust for the pro rata benefit
of the holders of the Series A Class 2 Interests called for
redemption so as to be and continue to be available therefor,
then, notwithstanding that any Certificate for Interests so
called for redemption shall not have been surrendered for
cancellation, all Interests so called for redemption shall no
longer be deemed outstanding, and all rights with respect to
such Interests shall forthwith on such Series A Redemption
Date cease and terminate, except only the right of the holders
thereof to receive the amount payable on redemption thereof,
without interest.
(E) If a Series A Redemption Notice shall have
been duly given or if LLC shall have given to the bank or
trust company hereinafter referred to irrevocable
authorization promptly to give such notice, and if on or
before the Series A Redemption Date specified therein the
funds necessary for such redemption shall have been deposited
by LLC with such bank or trust company in trust for the pro
rata benefit of the holders of the Series A Class 2 Interests
called for redemption, then, notwithstanding that any
Certificate for Interests so called for redemption shall not
have been surrendered for cancellation, from and after the
time of such deposit, all Interests so called, or to be so
called pursuant to such irrevocable authorization, for
redemption shall no longer be deemed to be outstanding and all
rights with respect to such Interests shall forthwith cease
and terminate, except only the right of the holders thereof to
receive from such bank or trust company at any time after the
time of such deposit the funds so deposited, without interest,
and the right of the holders thereof to convert such Interests
as provided in Section 4.05(f) hereof to and including the
Business Day preceding the date fixed for redemption. The
aforesaid bank or trust company shall be organized and in good
standing under the laws of the United States of America or of
the State of New York, shall be doing business in the Borough
of Manhattan, The City of New York or in Washington D.C.,
shall have capital, surplus and undivided profits aggregating
at least $100,000,000 according to its last published
statement of condition, and shall be identified in the Series
A Redemption Notice. Any interest accrued on such funds shall
be paid to LLC from time to time. Any funds so set aside or
deposited, as the case may be, in respect of Series A Class 2
Interests that are subsequently converted shall be promptly
returned to LLC. Any funds so set aside or deposited, as the
case may be, and unclaimed at the end of three years from such
Series A Redemption Date shall, to the
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<PAGE> 37
extent permitted by law, be released or repaid to LLC, after
which repayment the holders of the Interests so called for
redemption shall look only to LLC for payment thereof.
(F) In connection with any redemption of Series
A Class 2 Interests, LLC may arrange for the purchase and
conversion of any such Interests by an agreement with one or
more investment banks or other purchasers to purchase such
Interests by paying to the holders or to the Series A
Conversion Agent in trust for such holders, on or before the
close of business on the day prior to the Series A Redemption
Date, an amount, in cash, not less than the Series A Optional
Redemption Price payable by LLC on redemption of such
Interests. Notwithstanding anything to the contrary contained
herein, the obligation of LLC to pay the Series A Optional
Redemption Price of such Series A Class 2 Interests shall be
satisfied and discharged to the extent such amount is so paid
by such purchasers. Pursuant to such an agreement, any such
Series A Class 2 Interests tendered by the holders for
redemption or not duly surrendered for conversion by such
holders shall be deemed acquired by such purchasers from such
holders and surrendered by such purchasers for conversion, all
as of immediately prior to the close of business on the day
prior to the Series A Redemption Date, subject to payment of
the Series A Optional Redemption Price as aforesaid.
(e) Voting Rights.
(i) Holders of the Series A Class 2 Interests, except as
otherwise required under Delaware law and as set forth in Sections
4.05(e)(ii) and (iii) below, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the Class
1 Members of LLC.
(ii) Without the approval of holders of at least a
majority of the Series A Class 2 Interests then outstanding, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting called for the purposes, LLC will not (A) except in
connection with the Series M Class 2 Interests, create, authorize or
issue any Senior Interests (Series A) or Rights to acquire Senior
Interests (Series A), including in connection with a merger,
consolidation or other reorganization or (B) reclassify any Junior
Interests (Series A), Parity Interests (Series A) or other outstanding
Interests of LLC into any Senior Interests (Series A) or Rights to
acquire Senior Interests (Series A).
(iii) Without the approval of holders of at least a majority
of the Series A Class 2 Interests then outstanding, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting called for the purpose, LLC will not amend, modify or
repeal this Agreement or any other specified designations, rights
preferences or powers of the Series A Class 2 Interests in a manner
adverse to holders of the Series A Class 2 Interests; provided, that
the amendment of the provisions of this Agreement so as to authorize
or create, or to increase the authorized amount of, any Junior
Interests (Series A) or any Parity Interests (Series A) shall not be
deemed to affect adversely the holders of the Series A Class 2
Interests; and provided further the authorization of the issuance from
time to time of additional Series A Class 2 Interests, which are
included in the number of Series A Class 2 Interests authorized under
this Agreement, shall not be subject to the requirements of this
Section 4.05(e)(iii).
(iv) The holders of at least a majority of the Series A
Class 2 Interests then outstanding, voting or consenting, as the case
may be, as one class, whether voting in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting
called for the purpose, may waive compliance with any provision of
this Section 4.05.
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<PAGE> 38
(v) Notwithstanding anything herein to the contrary, (A)
the creation, authorization or issuance of any Series M Class 2
Interests, Parity Interests (Series A) or Junior Interests (Series A),
or (B) the increase or decrease in the amount of authorized Interests
of any class, including any Class 2 Interests, shall not require the
consent of the holders of the Series A Class 2 Interests and shall not
be deemed to affect adversely the rights, preferences, privileges or
voting rights of holders of the Series A Class 2 Interests.
(f) Conversion.
(i) General Rights. Each Series A Class 2 Interest shall
be convertible, at any time, at the option of the holder thereof (but
if such Interest is called for redemption pursuant to Section 4.05(d),
then only to and including but (except as provided in Section
4.05(d)(ii)(E)) not after the close of business on the Business Day
preceding the date fixed for such redemption, provided that no default
by LLC in the payment of the applicable Optional Redemption Price
shall have occurred and be continuing on the date fixed for such
redemption, in which case such right of conversion shall be
reinstated), into that number of Class 1 Interests of LLC (calculated
as to each conversion to the nearest 1/100th of an Interest) obtained
by dividing the Original Series A Liquidation Preference of the Series
A Class 2 Interests surrendered for conversion by the Series A
Conversion Price (as defined below) then in effect (such date of
conversion, a "Series A Conversion Date").
The conversion price per Series A Class 2 Interest shall
initially be U.S. $54.025 (the "Series A Conversion Price").
In order to exercise the conversion privilege, a holder shall
surrender the Certificate(s) representing such Interests, accompanied
by transfer instrument(s) satisfactory to LLC and sufficient to
transfer the Series Class 2 Interests being converted to LLC free of
any adverse interest, at any of the offices or agencies maintained for
such purpose by the conversion agent designated by LLC (the "Series A
Conversion Agent") and shall give written notice to LLC that the
holder elects to convert such Interests. LLC may, at its option, act
as Series A Conversion Agent. Such notice shall also state the
name(s), together with address(es), in which the Certificate(s) for
Class 1 Interests shall be issued. As promptly as practicable after
the surrender of such Series A Class 2 Interests as aforesaid, LLC
shall issue and deliver at the office of such Series A Conversion
Agent to such holder, or on his written order, Certificate(s)
representing the number of full Class 1 Interests issuable upon the
conversion of such Interests in accordance with the provisions hereof,
and any fractional interest in respect of a Class 1 Interest arising
upon such conversion shall be settled as provided for below.
Certificates will be issued representing the balance of any remaining
Series A Class 2 Interests in any case in which fewer than all of the
Series A Class 2 Interests represented by a Certificate are converted.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which Series A Class 2
Interests shall have been surrendered and notice received by LLC as
aforesaid, and the Person(s) in whose name(s) any Certificate(s) for
Class 1 Interests shall be issuable upon such conversion shall be
deemed to have become the holder(s) of record of the Class 1 Interests
represented thereby at such time, unless the Members' Interest
Register shall be closed on the date on which Series A Class 2
Interests are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to
the close of business on the next succeeding day on which the Members'
Interest Register is open, and such person(s) shall be deemed to have
become such holder(s) of record of the Class 1 Interests at the close
of business on such later day. In either circumstance, such
conversion shall be at the Series A Conversion Price in effect on the
date upon which such Interest shall have been surrendered and such
notice received by LLC.
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<PAGE> 39
The dividend payable on a Series A Class 2 Interest on a
Series A Dividend Payment Date shall be payable to the holder of
record of such Interest at the close of business on the Series A
Dividend Record Date applicable thereto, notwithstanding the
conversion of such Interest after such Series A Dividend Record Date
and prior to the opening of business on such Series A Dividend Payment
Date or the default by LLC in the payment of the dividend due on such
Series A Dividend Payment Date. Except as provided in the next
sentence, Series A Class 2 Interests surrendered for conversion during
the period from the close of business on any Series A Dividend Record
Date to the opening of business on the Series A Dividend Payment Date
with respect to such dividend shall be accompanied by payment in
immediately available funds or other funds acceptable to LLC of an
amount equal to the dividend payable on such Series A Dividend Payment
Date on the Series A Class 2 Interests being surrendered for
conversion. The dividend with respect to a Series A Class 2 Interest
called for redemption on a Series A Redemption Date during the period
from the close of business on a Series A Dividend Record Date to the
opening of business on the Series A Dividend Payment Date shall be
payable on such Series A Dividend Payment Date to the holder of record
of such Interest on such Series A Dividend Record Date notwithstanding
the conversion of such Series A Class 2 Interest after the close of
business on such Series A Dividend Record Date and prior to the
opening of business on such Series A Dividend Payment Date, and the
holder converting such Series A Class 2 Interest need not include a
payment of such dividend amount upon surrender of such Series A Class
2 Interest for conversion. A holder of Series A Class 2 Interests
surrendered for conversion into Class 1 Interests on a Series A
Dividend Payment Date will receive the dividend payable by LLC on such
Series A Class 2 Interests on such date, and the converting holder
need not include payment of the amount of such dividend upon surrender
of Series A Class 2 Interests for conversion. Except as provided in
this section, no payment or adjustment shall be made upon any
conversion on account of any dividends accrued on Series A Class 2
Interests surrendered for conversion or on account of any dividends on
the Class 1 Interests issued upon conversion.
No fractional interest in a Class 1 Interest shall be issued
by LLC upon the conversion of any Series A Class 2 Interest(s). Any
fractional interest in a Class 1 Interest resulting from conversion of
any Series A Class 2 Interest(s) shall be paid in cash (computed to
the nearest cent) based on the Closing Price of the Class 1 Interest
on the last Business Day prior to the date on which such Series A
Class 2 Interest(s) are surrendered for conversion in the manner set
forth above. If more than one Certificate representing Series A Class
2 Interests shall be surrendered for conversion at one time by the
same holder, the number of full Interests issuable upon conversion
thereof shall be computed on the basis of the aggregate number of
Series A Class 2 Interests represented by such Certificates which are
to be converted.
(ii) Series A Conversion Price Adjustments. The
Conversion Price shall be adjusted from time to time as follows:
(A) In case LLC shall pay or make a dividend or
other distribution on any Interests of LLC in Class 1
Interests, the Conversion Price in effect at the opening of
business on the day following the date fixed for the
determination of holders of Interests entitled to receive such
dividend or other distribution shall be reduced by multiplying
such Series A Conversion Price by a fraction the numerator of
which shall be the number of Class 1 Interests outstanding at
the close of business on the date fixed for such determination
and the denominator of which shall be the sum of such number
of Interests and the total number of Interests constituting
such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination. For the
purposes of this subsection (A), the number of Class 1
Interests at any time outstanding shall not
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<PAGE> 40
include Interests held in the treasury of LLC. LLC will not
pay any dividend or make any distribution on Class 1 Interests
held in the treasury of LLC.
(B) In case LLC shall issue rights or warrants to
all holders of its Class 1 Interests entitling them to
subscribe for, purchase or acquire Class 1 Interests at a
price per Interest less than the current market price per
Interest (determined as provided in subsection (F) below) of
the Class 1 Interests on the date fixed for the determination
of holders of Interests entitled to receive such rights or
warrants, the Series A Conversion Price in effect at the
opening of business on the day following the date fixed for
such determination shall be reduced by multiplying such Series
A Conversion Price by a fraction the numerator of which shall
be the number of Class 1 Interests outstanding at the close of
business on the date fixed for such determination plus the
number of Class 1 Interests which the aggregate of the
offering price of the total number of Class 1 Interests so
offered for subscription, purchase or acquisition would
purchase at such current market price and the denominator of
which shall be the number of Class 1 Interests outstanding at
the close of business on the date fixed for such determination
plus the number of Class 1 Interests so offered for
subscription, purchase or acquisition, such reduction to
become effective immediately after the opening of business on
the day following the date fixed for such determination. For
the purposes of this subsection (B), the number of Class 1
Interests at any time outstanding shall not include Interests
held in the treasury of LLC. LLC will not issue any Rights in
respect of Class 1 Interests held in the treasury of LLC.
(C) In case the outstanding Class 1 Interests
shall be subdivided into a greater number of Class 1
Interests, the Series A Conversion Price in effect at the
opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case the outstanding Class 1
Interests shall each be combined into a smaller number of
Class 1 Interests, the Series A Conversion Price in effect at
the opening of business on the day following the day upon
which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening
of business on the day following the day upon which such
subdivision or combination becomes effective.
(D) In case LLC shall, by dividend or otherwise,
distribute to all holders of its Class 1 Interests (I)
evidences of its indebtedness and/or (II) cash or other assets
(excluding (x) any rights or warrants referred to in
subsection (B) above, (y) any dividend or distribution
referred to in subsection (A) above, and (z) cash dividends or
distributions from current or accumulated earnings, then in
each case, the Series A Conversion Price in effect at the
opening of business on the day following the date fixed for
the determination of holders of Class 1 Interests entitled to
receive such distribution shall be adjusted by multiplying
such Series A Conversion Price by a fraction of which the
numerator shall be the current market price per Class 1
Interest (determined as provided in subsection (F) below) on
such date of determination (or, if earlier, on the date on
which the Class 1 Interest goes "ex-dividend" in respect of
such distribution) less the then Fair Market Value as
determined by the Board of Directors (whose determination
shall be conclusive) of the portion of the other assets or
evidences of indebtedness so distributed (and for which an
adjustment to the Series A Conversion Price has not previously
been made pursuant to the terms of this Section 4.05(f))
applicable to one Class 1 Interest, and the denominator shall
be such current market price per Class 1 Interest, such
adjustment to become effective immediately after the opening
of business on the day following such date of determination.
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(E) The reclassification or change of Class 1
Interests into Interests including Interests other than Class
1 Interests (other than any reclassification upon a
consolidation or merger to which Section 4.05(f)(ii)(I) below
applies) shall be deemed to involve (I) a distribution of such
securities other than Class 1 Interests to all holders of
Class 1 Interests (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of holders of Class 1 Interests entitled to
receive such distribution" within the meaning of subsection
(D) above), and (II) a subdivision or combination, as the case
may be, of the number of Class 1 Interests outstanding
immediately prior to such reclassification into the number of
Class 1 Interests outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be
"the day upon which such subdivision becomes effective" or
"the day upon which such combination becomes effective," as
the case may be, and "the day upon which such subdivision or
combination becomes effective" within the meaning of
subsection (C) above).
(F) For the purpose of any computation under
subsection (B) or (D) above, the current market price per
Class 1 Interest on any day shall be deemed to be the average
of the Closing Prices of the Class 1 Interests for the 20
consecutive Business Days selected by the Board of Directors
commencing no more than 30 Business Days before and ending no
later than the day before the day in question; provided, that
in the case of clause (D), if the period between the date of
the public announcement of the dividend or distribution and
the date for the determination of holders of Class 1 Interests
entitled to receive such dividend or distribution (or, if
earlier, the date on which the Class 1 Interests go
"ex-dividend" in respect of such dividend or distribution)
shall be less than 20 Business Days, the period shall be such
lesser number of Business Days but, in any event, not less
than five Business Days.
(G) No adjustment in the Series A Conversion
Price shall be required unless such adjustment would require
an increase or decrease of at least 1% of such price;
provided, that any adjustments which by reason of this
Subsection (G) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment
and provided further that adjustments shall be required and
made in accordance with the provisions of this Section 4.05(f)
(other than this Subsection (G)) not later than such time as
may be required in order to preserve the tax free nature of a
distribution to the holders of Class 1 Interests. Anything in
this Subsection (G) to the contrary notwithstanding, LLC shall
be entitled, at its option, to make such reductions in the
Series A Conversion Price, in addition to those required by
this Section 4.05(f), as it in its discretion shall determine
to be advisable in order that any dividend of Interests,
subdivision or combination of Interests, distribution of
Interests or rights or warrants to purchase Interests or
securities, or distribution of evidences of indebtedness or
assets (other than cash dividends or distributions paid from
earnings) or other event shall be a tax free distribution for
federal income tax purposes. All calculations under this
Subsection (G) shall be made to the nearest cent.
(H) Whenever the Series A Conversion Price is
adjusted as herein provided, LLC shall promptly mail a
certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment and the manner of computing same,
which certificate shall constitute conclusive evidence, absent
manifest error, of the correctness of such adjustment. The
certificate shall be mailed to each holder at his last address
as the same appears on the Members' Interest Register of LLC
and to the Series A Conversion Agent.
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(I) In case of (X) any consolidation of LLC with,
or merger of LLC into, any other entity, (Y) any merger of
another entity into LLC (other than a merger which does not
result in any reclassification, conversion, exchange or
cancellation of outstanding Class 1 Interests) or (Z) any sale
or transfer of all or substantially all of the assets of LLC,
each holder shall have the right thereafter to convert such
Interest only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of Class 1
Interests into which such Series A Class 2 Interest might have
been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Class 1
Interests is not an entity with which LLC consolidated or into
which LLC merged or which merged into LLC or to which such
sale or transfer was made, as the case may be (a "constituent
entity"), or an Affiliate of a constituent entity and failed
to exercise its rights of election, if any, as to the kind or
amount of securities, cash or other property receivable upon
such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer
is not the same for each Class 1 Interest held immediately
prior to such consolidation, merger, sale or transfer by other
than a constituent entity or an Affiliate thereof and in
respect of which such rights of election shall not have been
exercised (a "non-electing interest"), then for the purpose of
this Section 4.05(f)(ii)(I) the kind and amount of securities,
cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing Interest shall
be deemed to be the kind and amount so receivable per Interest
by a plurality of the non-electing Interests). If necessary,
appropriate adjustment shall be made in the application of the
provisions set forth herein with respect to the rights and
Interests thereafter of the holders, to the end that the
provisions set forth herein shall thereafter correspondingly
be made applicable, as nearly as may reasonably be, in
relation to any Interests, securities or property thereafter
deliverable on the conversion of the Interests. Any such
adjustment shall be evidenced by a certificate of LLC and a
notice of such adjustment filed and mailed in the manner set
forth in subsection (H) above and containing the information
set forth in such subsection (H), and any adjustment so
certified, shall for all purposes hereof conclusively be
deemed to be an appropriate adjustment, absent manifest error.
The above provisions shall similarly apply to successive
consolidations, mergers, sales or transfers.
For purposes of this Section 4.05(f), "Class 1
Interests" includes any interests of any class of LLC which
have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of LLC and which are
not subject to redemption by LLC. However, subject to the
provisions of Section 4.05(f)(ii)(I) above, Interests issuable
on conversion of Series A Class 2 Interests shall include only
Interests of the class designated as Class 1 Interests of LLC
on the date of the initial issuance of Series A Class 2
Interests by LLC, or Interests of any class or classes
resulting from any reclassification thereof and which have no
preferences in respect of dividends or amounts payable in the
event of any voluntary or involuntary liquidation, dissolution
or winding-up of LLC and which are not subject to redemption
by LLC; provided, that if at any time there shall be more than
one such resulting class, the Interests of each such class
then so issuable shall be substantially in the proportion
which the total number of Interests of such class resulting
from all such reclassifications bears to the total number of
Interests of all such classes resulting from all such
reclassifications.
(iii) Notice of Certain Events. In case:
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(A) LLC shall take any action that would result in
an adjustment to the Series A Conversion Price; or
(B) of any consolidation, merger or share or
Interest exchange to which LLC is a party and for which
approval of any members of LLC is required, or of the sale or
transfer of all or substantially all of the assets of LLC; or
(C) of the voluntary or involuntary dissolution,
liquidation or winding-up of LLC;
then LLC shall cause to be filed with any Series A Conversion Agent
and shall cause to be mailed to each holder of Series A Class 2
Interests at its last address as the same appears on the Members'
Interest Register at least 15 days prior to the applicable record or
effective date hereinafter specified, a notice stating (I) the date on
which a record is to be taken for the purpose of such actions, or, if
the record is not to be taken, the date as of which the holders of
Class 1 Interests of record are to be determined, or (II) the date on
which such consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of
Class 1 Interests of record shall be entitled to exchange their Class
1 Interests for securities, cash or other property deliverable upon
such consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up. Neither the failure to give
such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (A) through (C)
above.
(iv) Payment of Taxes. LLC will pay any and all
documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of Class 1 Interests on conversion of
Series A Class 2 Interests pursuant hereto; provided, that LLC shall
not be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Class 1 Interests in a
name other than that of the holder of the Series A Class 2 Interests
to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue or delivery has paid to LLC
the amount of any such tax or has established, to the satisfaction of
LLC, that such tax has been paid.
(v) Interests Issuable Upon Conversion. LLC covenants
that all Class 1 Interests which may be issued upon conversions of
Series A Class 2 Interests will, upon issue, be duly and validly
issued, free of all liens and charges and not subject to any
preemptive rights. LLC covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Class 1 Interests, for the purpose of
effecting conversions of Series A Class 2 Interests, the full number
of Class 1 Interests deliverable upon the conversion of all
outstanding Series A Class 2 Interests not theretofore converted.
(g) Mutilated or Missing Series A Class 2 Interests Certificates.
If any Series A Class 2 Interest Certificate shall be mutilated, lost, stolen
or destroyed, LLC shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Series A Class 2 Interest Certificate, or in lieu
of and substitution for the Series A Class 2 Interest Certificate lost, stolen
or destroyed, a new Series A Class 2 Interest Certificate of like tenor and
representing an equivalent number of Series A Class 2 Interests, but only upon
receipt of evidence of such loss, theft or destruction of such Series A Class 2
Interest Certificate and indemnity, if requested, satisfactory to LLC.
(h) Reissuance; Preemptive Rights.
(i) Series A Class 2 Interests that have been issued and
reacquired in any manner, including Interests purchased or redeemed,
shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of authorized and unissued
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Class 2 Interests undesignated as to series and may be redesignated
and reissued as part of any series of Class 2 Interests other than the
Series A Class 2 Interests.
(ii) No Series A Class 2 Interests shall have any rights
of preemption whatsoever as to any securities of LLC, or any Rights
issued or granted with respect thereto, regardless of how such
securities or such Rights may be designated, issued or granted.
(i) Business Day. If any payment or redemption shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day and no further dividends shall accumulate after the day payment
was required.
(j) Limitations. Except as may otherwise be required by law, the
Series A Class 2 Interests shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this Agreement (as such Agreement may be amended from time to
time).
Section 4.06 Series B Class 2 Interests
(a) Issuance and Sale. The Banking and Financing committee has the
authority to issue, sell and deliver one Series B Class 2 Interest to any
Guarantor that provides between $250 million and $750 million of Guarantees and
one additional Series B Class 2 Interest to any Guarantor that provides more
than $750 million of Guarantees to the extent such issuance is provided for in
the Agreement Regarding Guarantee between LLC and such Guarantor.
(b) Voting Rights. Except as herein provided, the voting rights of
the Series B Class 2 Interests shall be limited to the right to appoint one
Director to the Board of Directors per Series B Class 2 Interest at every
annual or special meeting of Members (the Directors so elected are referred to
herein as the "Series B Directors"). Such Series B Directors shall be in
addition to, and not in the place of, any existing Directors or Director
vacancies. Any vacancies in the number of Series B Directors created by death,
resignation, removal or for any other reason (except if caused by the reduction
of the number of such Directors upon redemption of any Series B Class 2
Interests) may be filled only by the Guarantor that appointed such Director.
(c) Redemption. LLC shall redeem for $.01 per Series B Class 2
Interest any and all Series B Class 2 Interests held by a Guarantor or its
affiliates as soon as the Guarantee Agreement of such Guarantor is terminated
or expires and any previous payments thereunder by the Guarantor have been
reimbursed.
(d) Certificate of Designations and Other Terms. The banking and
financing committee is authorized to exercise all the powers and authority of
the Board of Directors with respect to the issuance of the Series B Class 2
Interests including, without limitation, (i) the authority to establish the
specific terms of the Series B Class 2 Interests, to the extent not set forth
herein, or in lieu thereof, to authorize Authorized Officers of LLC to
establish such matters, to the extent that the delegation of such authority to
Authorized Officers is not inconsistent with applicable law or this Agreement,
and (ii) without limiting the generality of the foregoing, the banking and
financing committee is expressly authorized to fix the designations and
preferences of the Series B Class 2 Interests and to authorize the attachment
hereto of certificates of designations with respect thereto.
Section 4.07 Series C Class 2 Interests
(a) Issuance and Sale. The banking and financing committee has the
authority to issue, sell and deliver one Series C Class 2 Interest (in addition
to a Series B Class 2 Interest if provided pursuant to the preceding Section
4.06) to each Guarantor for each $10 million of Guarantees provided by such
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Guarantor to the extent such issuance is provided for in the Agreement
Regarding Guarantee Class 2 Interests shall be issued (a Series C Class 2
Interest shall only be issued in respect of each full $10 million incremental
amount of Guarantees);
(b) Voting Rights. Except as herein provided, the sole and exclusive
voting rights of the Series C Class 2 Interests shall be the right to appoint
one or more Directors as follows: if, as a result of a Payment Event (as
defined below), any Guarantor is required to make a payment pursuant to the
terms of the Guarantee Agreement entered into by such Guarantor pursuant to
such Guarantor's Agreement Regarding Guarantee, such Guarantor shall have the
right to call a special meeting of the Members (pursuant to the notice
requirements provided herein) at which the holders of Series C Class 2
Interests shall be entitled to appoint a number of Directors (the "Series C
Directors") in addition to the Series B Directors and any other directors
appointed pursuant to Section 1.05(a) or otherwise by the Guarantors and their
affiliates in their capacity as members (the "Other Guarantor Directors") such
that the Series B Directors and the Series C Directors (together, the
"Guarantor Directors") together with any such Other Guarantor Directors will
constitute a majority of the Directors on the Board of Directors and the
holders of Series C Class 2 Interests shall have the right to continue to
appoint, as a class, such Series C Directors at each succeeding annual meeting
of Members, until such time as no Payment Event exists or remains unremedied
and all amounts paid by all Guarantors pursuant to their Guarantees have been
reimbursed to them (the "Time of Cure"). Holders of Series C Class 2 Interests
shall elect Series C Directors by cumulative voting with the minimum number of
Series C Class 2 Interests required to elect a Series C Director equal to the
quotient of the number of Series C Class 2 Interests outstanding divided by the
number of Series C Directors to be elected. Upon the installation of such
Series C Directors, the Board of Directors shall call a special meeting of the
Board of Directors for the purpose of appointing the members of each committee
of the Board of Directors (excepting the Related Party Contracts Committee
which shall be constituted as provided in Section 2.03(g)). In any class vote
of the Series C Class 2 Interests, each outstanding Series C Class 2 Interest
shall be entitled to one vote. The term "Payment Event" shall mean a payment
by a Guarantor in respect of debt of LLC pursuant to such Guarantor's Guarantee
Agreement; provided, however, that no Payment Event shall exist if and so long
as Motorola is in default under (i) the Space System Contract, the O&M
Contract, the Terrestrial Network Development Contract or any other Project
Document (as defined in any bank credit agreement in respect of which the
Guarantee is made), or (ii) a Gateway Equipment Purchase Agreement if such
default was not excused and was not caused by a default on the part of the
purchaser under such Gateway Equipment Purchase Agreement. At the Time of
Cure, all Series C Directors shall immediately cease to be Directors.
Vacancies in the number, if any, of Series C Directors created by death,
resignation, removal or for any other reason (except by the reduction of the
number of such Directors at the Time of Cure or upon redemption of any Series C
Class 2 Interests) may be filled only by the holders of Series C Class 2
Interests.
(c) Redemption. LLC shall redeem for $.01 per Series C Class 2
Interest any and all Series C Class 2 Interests held by a Guarantor or its
affiliates as soon as the Guarantee Agreement of such Guarantor is terminated
or expires and any previous payments thereunder by the Guarantor have been
reimbursed.
(d) Certificate of Designation and Other Terms. The banking and
financing committee is authorized to exercise all the powers and authority of
the Board of Directors with respect to the issuance of the Series C Class 2
Interests including, without limitation, (i) the authority to establish the
specific terms of the Series C Class 2 Interests, to the extent not set forth
herein, or in lieu thereof, to authorize Authorized Officers of LLC to
establish such matters, to the extent that the delegation of such authority to
Authorized Officers is not inconsistent with applicable law or this Agreement,
and (ii) without limiting the generality of the foregoing, the banking and
financing committee is expressly authorized to fix the designations and
preferences of the Series C Class 2 Interests and to authorize the attachment
hereto of certificates of designations with respect thereto.
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Section 4.08 Issuance of Interests Upon the Admission of
Additional Members
Subject to the rights of the existing Members as set forth in this
Agreement, additional Interests may be issued to an Additional Member only upon
the admission of an Additional Member pursuant to Article VII of this
Agreement.
Section 4.09 Fractional Interests
LLC may, but shall not be required to, issue fractions of an Interest.
If it does not issue fractions of an Interest, it shall (a) arrange for the
disposition of fractional Interests by those entitled thereto, (b) pay in cash
the fair value of fractions of an Interest as of the time when those entitled
to receive such fractions are determined or (c) issue scrip or warrants in
registered form (either represented by a Certificate or uncertificated) or in
bearer form (represented by a Certificate) which shall entitle the holder to
receive a full Interest upon the surrender of such scrip or warrants
aggregating a full Interest. A certificate for a fractional Interest or an
uncertificated fractional Interest shall, but scrip or warrants shall not
unless otherwise provided therein, entitle the holder to exercise voting
rights, to receive dividends thereon and to participate in any of the assets of
LLC in the event of liquidation. The Board of Directors may cause scrip or
warrants to be issued subject to the conditions that they shall become void if
not exchanged for Certificates representing the full Interests or
uncertificated full Interests before a specified date, or subject to the
conditions that the Interests for which scrip or warrants are exchangeable may
be sold by LLC and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board of Directors may
impose.
Section 4.10 Certificates for Interests
The Interests of LLC shall be represented by Certificates; provided,
that the Board of Directors may provide by resolution or resolutions that some
or all of any or all Interests of the classes or series of its Interests shall
be uncertificated. Any such resolution shall not apply to Interests
represented by a Certificate until such Certificate is surrendered to LLC.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of Interests represented by Certificates and upon request every
holder of uncertificated Interests shall be entitled to have a Certificate
signed by, or in the name of, LLC by the chairman of the Board of Directors,
the vice chairman and chief executive officer, or the president or
vice-president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of LLC representing the number of Interests
registered in Certificate form. Any or all of the signatures on the
Certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
Certificate shall have ceased to be such officer, transfer agent or registrar
before such Certificate is issued, it may be issued by LLC with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
ARTICLE V
DISSOLUTION AND WINDING-UP
Section 5.01 Dissolution
LLC shall be dissolved and its affairs wound up upon the occurrence of
the earliest of following events:
(a) December 31, 2095, subject to amendment by an affirmative
vote of 66 2/3 of the Class 1 Members.
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(b) The death, retirement, resignation, bankruptcy or dissolution
of any Member or the occurrence of any other event which terminates the
continued membership of any Member, unless, within 90 days of the later of (i)
the occurrence of such event or (ii) the receipt by LLC of any written notice
provided below in this subsection (b) (but in any event no longer than 120 days
from the occurrence of an event requiring such notice), the Board of Directors
and the remaining Members exercise their right hereunder to continue the
business of LLC in accordance with this subsection (b), and in the event of
such continuation LLC shall not be dissolved.
The continuation right provided above may be exercised upon the
consent of both (i) a majority of the Board of Directors and (ii) a "majority
in interest" (as defined in IRS Revenue Procedure 94-46, 1994-2 C.B. 688) of
the remaining Members, who shall number at least two.
The Board of Directors may determine whether such consents have been
provided in any manner they deem reasonable and need not call a meeting of
Members or communicate with all Members therefor; provided, that the Board of
Directors shall reflect such determination and the manner of determination in
the books and records of LLC.
Each Member hereby covenants that within 30 days of an event of
bankruptcy which would cause such Member to cease to be a Member under Section
18-304 of the Delaware Act or of any action taken to dissolve such Member, it
will provide written notice thereof to the Secretary of LLC and to each other
Member.
(c) The adoption of a resolution by 66 2/3% of the entire Board of
Directors that it is deemed advisable in the judgment of the Board of Directors
that LLC be dissolved followed by the affirmative vote at a meeting duly called
for such purpose of 66 2/3% of the Class 1 Interests approving the dissolution;
provided, that the resolution of the Board of Directors authorizing a proposed
dissolution may provide that notwithstanding authorization or consent to the
proposed dissolution by the Class 1 Members, the Board of Directors may abandon
such proposed dissolution without further action by the Class 1 Members.
Section 5.02 Resignation of Members
A Member may resign from LLC only by Transferring its interests
pursuant to Article VI hereof. No Member shall be able to resign or be deemed
to resign if it ceases to be a Member due to bankruptcy or for any other reason
(a "Former Member") except upon the consent of 66 2/3 of the other Members, if
LLC continues, pursuant to Section 5.01(b) or otherwise, to exist. Such Former
Member, if not permitted or deemed to resign, shall not be entitled to any of
the rights granted to a Member hereunder or under applicable law but shall be,
to the extent not otherwise provided by this Agreement or applicable law,
entitled to receive distributions and allocations of items of income, gain,
loss, deduction, expense and credit as if such Former Member continued to be a
Member hereunder.
Section 5.03 Winding-Up
(a) Upon dissolution of LLC, LLC's affairs shall be wound up by
the chairman of the Board of Directors (as liquidating trustee) or, if there is
no chairman of the Board of Directors, or vice chairman and cheif executive
officer (as liquidating trustee), or, if there no chairman of the Board of
Directors or vice chairman and chief executive officer, by the person who may
be elected by a vote of the Class 1 Members.
(b) Upon the winding-up of LLC, any amounts permitted to be
distributed to Members (other than distributions to any Member upon
resignation, interim distributions to any Member and distributions to Members
in their capacity as creditors, each of which shall be distributed prior to the
distribution provided for in this Section 5.03(b), as provided in the Delaware
Act) shall be distributed first to the Class
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2 Members, if any, to the extent of the liquidation preference of their Class 2
Interests as provided herein, and second to the Class 1 Members in proportion
to the number of Class 1 Interests held by each such Class 1 Member.
ARTICLE VI
TRANSFERS
Section 6.01 Notice to LLC and to Other Holders
Except as otherwise provided in this Agreement, a Person shall not
Transfer Class 1 Interests, Class 2 Interests, Notes or Warrants ("Restricted
Interests") except pursuant to the provisions of this Article VI; provided,
that, except as permitted by Section 6.02 of this Agreement, in no event shall
any Transfer of Restricted Interests pursuant to this Article VI be made for
any consideration other than cash payable upon consummation of such Transfer or
in installments over time. Prior to making any Transfer, the Person seeking to
make such Transfer (the "Transferring Person") shall give written notice (the
"Sale Notice") to LLC and to all other holders of Restricted Interests (each an
"Other Holder" and collectively, the "Other Holders"). The Sale Notice will
disclose in reasonable detail the identity of the prospective transferee(s),
the amount of Restricted Interests to be transferred and the terms and
conditions of the proposed Transfer. The Transferring Person will not
consummate any Transfer until 40 days after the relevant Sale Notice has been
received by LLC and the Other Members, unless the parties to the Transfer have
been finally determined pursuant to this Article VI prior to the expiration of
such 40-day period. The date of the first to occur of such events is referred
to herein as the "Authorization Date".
Section 6.02 Right to Reject Transfer; First Refusal Rights
(a) Subject to subsection (b) below, LLC may reject any Transfer
if such Transfer does not receive the approval of a majority of the Directors
by giving the Transferring Person notice to such effect (a "Rejection Notice")
within 20 days after the Sale Notice has been received by LLC and, in the event
of the timely issuance of a Rejection Notice, the Transferring Person shall not
make the Transfer described in the Sale Notice; provided, that no Transfer
shall have effect if the result of such Transfer is a termination of LLC under
Section 708 of the Code. If LLC does not issue a timely Rejection Notice, LLC
may elect to purchase all (but not less than all) of the Restricted Interests
to be transferred upon the same terms and conditions as those set forth in the
Sale Notice by delivering a written notice of such election to the Transferring
Person and the Other Holders within 20 days after the Sale Notice has been
received by LLC. If LLC has not issued a Rejection Notice and has not elected
to purchase the Restricted Interests to be transferred, the Other Holders may
elect to purchase all (but not less than all) of the Restricted Interests to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written notice of such election to the Transferring Person
within 30 days after the Sale Notice has been received by the Other Holders.
If more than one Other Holder elects to purchase the Restricted Interests, the
Restricted Interests to be sold will be allocated among such Other Holders pro
rata (which for this purpose shall be determined on the basis of the
Liquidation Value of Series M Class 2 Interests, the Series A Liquidation
Preference of Series A Class 2 Interests, the Accreted Value of Notes and the
purchase price paid to LLC in respect of Class 1 Interests, in each case held
by the Other Holders); provided, that no Other Holder shall be allowed to
purchase any Class 1 Interests pursuant to this Section 6.02 which, together
with the other Class 1 Interests owned by such Other Holder, would cause such
Other Holder (together with its Affiliates) to beneficially own and/or have the
current right to acquire more than 45% of the Class 1 Interests Deemed
Outstanding at such time or more than 45% of the Class 1 Interests actually
outstanding at such time. If neither LLC nor any of the Other Holders elects
to purchase the Restricted Interests specified in the Sale Notice, the
Transferring Person may transfer the Restricted Interests specified in the Sale
Notice at a price and on terms no more favorable to the transferee(s) thereof
than as specified in the Sale Notice during the 60-day period immediately
following the Authorization Date. Any Restricted Interests
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not transferred within such 60-day period will be subject to the provisions of
this Section 6.02 upon subsequent transfer.
(b) A Transferring Person shall have the right to Transfer to any
of its Affiliates, and such Affiliate shall automatically become a substituted
Member pursuant to Section 6.07 (without approval pursuant to subsection (a) of
this Section 6.02 and without being subject to the notice provisions of Section
6.01 or to LLC's or any other Member's right to elect to purchase described in
subsection (a) of this Section 6.02, for any consideration, including cash), up
to 79% of its Restricted Interests but only to the extent that this provision
shall not result in over 79% of all Class 1 Interests or 79% of all Restricted
Interests becoming transferrable without approval; provided, further that no
Transfer shall have effect if the result is a termination of LLC under Section
708 of the Code. Upon the approval of a substitution of such Affiliate as a
Member pursuant to Section 6.07, however, a Transferring Person may Transfer to
any of its Affiliates all of its Restricted Interests upon the same terms as
provided in the preceding sentence but such Transfer will not be counted toward
the 79% of all Class 1 Interests or 79% of all Restricted Interests provided
above.
Section 6.03 No Transfers Above 45%
Each Member hereby agrees not to Transfer any Class 1 Interests to any
person if after giving effect to any such Transfer such Person (together with
its Affiliates) would beneficially own and/or have the current right to acquire
more than 45% of the Class 1 Interests Deemed Outstanding at such time or more
than 45% of the Class 1 Interests actually outstanding at such time.
Section 6.04 Obligations of Transferees and Transferors
Each Person that becomes the owner of Restricted Interests pursuant to
any Transfer shall execute an agreement in form and substance satisfactory to
LLC which shall include such Person's agreement to be bound by the provisions
of this Agreement; provided, that such Person shall not be obligated to assume
any obligations to purchase additional Restricted Interests under Section 4.02
to the extent such obligations are being retained by such Person's transferor.
No Transfer shall relieve a party hereto of its contractual obligations under
this Agreement or relieve any Indirect Owner of its contractual obligations
under its Agreement of Indirect Owner unless the relief of such obligations is
approved by the holders of at least 66 2/3% of the then outstanding Class 1
Interests, but so long as Motorola is a principal supplier to LLC, such
approval shall be effective only if such holders include Motorola.
Section 6.05 Certain Motorola Transfer Restrictions
Motorola agrees that as long as it is the principal supplier to LLC
and/or Motorola or one of its subsidiaries is the holder for the benefit of LLC
of any FCC license to construct, operate or launch the IRIDIUM system, Motorola
will not Transfer (other than pursuant to an Exempt Transfer as such term is
defined in the VEBA Stock Purchase Agreement) any of its Class 1 Interests that
were issued in respect of Common Stock of Iridium, Inc. purchased under the
1993 Stock Purchase Agreement; provided, that this restriction does not apply
to any Class 1 Interests purchased by Motorola pursuant to Section 4.02 of this
Agreement. In the event that Motorola is no longer the principal supplier to
LLC and neither Motorola nor one of its subsidiaries is the holder for the
benefit of LLC of any FCC license and Motorola desires to Transfer any such
Class 1 Interests prior to July 19, 2003, at least 30 days prior to any such
Transfer, Motorola shall deliver a written notice (the "Motorola Sale Notice")
to LLC and the other Class 1 Members (the "Other Class 1 Members"), specifying
in reasonable detail the identity of the prospective transferee(s) and the
terms and conditions of the Transfer. The Other Class 1 Members may elect to
participate in the contemplated Transfer by delivering written notice to
Motorola within 30 days after delivery of the Motorola Sale Notice. If any
Other Class 1 Members have elected to participate in such Transfer, Motorola
and such Other Class 1 Members shall be entitled to sell in the contemplated
Transfer, at the same price and on the same terms, a number of Class 1
Interests equal to the product of (i) the quotient determined by dividing the
percentage of Class 1 Interests owned by such Person by
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the aggregate percentage of Class 1 Interests owned by Motorola and all of the
Other Class 1 Members participating in such sale and (ii) the number of Class 1
Interests to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100
Class 1 Interests by Motorola, and if Motorola at such time
owns 30% of all the Class 1 Interests outstanding and if one
Other Class 1 Member elects to participate and owns 20% of all
the Class 1 Interests outstanding, Motorola would be entitled
to sell 60 Class 1 Interests (30% / 50% x 100 interests) and
the Other Class 1 Member would be entitled to sell 40 Class 1
Interests (20% / 50% x 100 interests).
Motorola shall use its reasonable best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Other Class 1 Members in
any contemplated Transfer, and Motorola shall not transfer any of its Class 1
Interests to the prospective transferee(s) if the prospective transferee(s)
declines to allow the participation of the Other Class 1 Members.
Section 6.06 Inapplicability of Article
Article VI shall not apply to a Transfer by any Person of any
ownership interest in a Member.
Section 6.07 Substituted Members
Unless otherwise provided in this Agreement, a transferee of any Class
1 Interest or Class 2 Interest shall not become a substituted Member without
the consent of a "majority in interest" (as defined in IRS Revenue Procedure
94-46, 1994-2 C.B. 688) of the non-transferring Members, which consent may be
given or withheld in the discretion of the Members, whether or not reasonable.
Unless and until a transferee becomes a Member pursuant to this Section 6.07,
the transferee shall not be entitled to any of the rights granted to a Member
hereunder or under applicable law, other than the right to receive
distributions and allocations of items of income, gain, loss, deduction,
expense, and credit as if such transferee were a Member. However, such
transferee shall be bound by any limitations and obligations contained herein
with respect to Members.
ARTICLE VII
ADMISSION OF ADDITIONAL MEMBERS
Section 7.01 Admission of Additional Members
(a) Admission of Members. With the consent of Class 1 Members
holding a majority of the Class 1 Interests, the Board of Directors may at any
time cause LLC to admit additional Members ("Additional Members").
(b) Time of Admission. An Additional Member shall be deemed
admitted as a member upon the later of:
(i) the later of (a) the written request by such Person that
the Members' Interest Register reflect such admission and (b) the
execution by such Person of this Agreement or a counterpart hereof
whereby such person agrees to be bound by the provisions of this
Agreement, and
(ii) the time such person is listed as a Member in the
Members' Interest Register of LLC and a Certificate or Certificates
evidencing such person's ownership of such Interest is issued.
(c) Required Contribution. The Board of Directors shall determine
what, if any, contribution the Additional Member need make and the number and
class of Interests to be issued to such Member. The Board
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of Directors may provide that the required contribution may be paid prior to,
at the time of, or subsequent to, the issuance of the interest to such Member
and that any subsequent contribution may be made from distributions paid or
payable in respect of such interest. If any portion of a required contribution
is payable after the issuance of the interest, the Board of Directors may
determine that any rights otherwise incident to such interest (including,
without limitation, voting, distribution, inspection and transfer rights) will
not come into effect until such required contribution has been made. At any
time that the voting rights in respect of such interest have been suspended, in
determining whether a required percentage of Class 1 Membership Interests have
approved any action, such interests shall be excluded from both the numerator
and the denominator of such percentage computation.
(d) Affiliated Purchasers. The Affiliated Purchasers are not
Members on the date hereof but are parties to the 1996 Securities Purchase
Agreement and pursuant to that agreement have acquired Notes and Warrants.
Each Member hereby consents to the admission of each of the Affiliated
Purchasers as a Member upon the acquisition by such Affiliated Purchaser of
Class 1 Interests upon the exercise of Warrants or otherwise.
(e) Motorola Eligible Transferee. Each Member hereby consents to
the admission of each Motorola Eligible Transferee as a Member upon the
acquisition by such Person of Class 1 Interests or Class 2 Interests pursuant
to the terms of this Agreement.
Section 7.02 Preemptive Rights
(a) Offer to Sell. If LLC authorizes the issuance or sale of any
Class 1 Interests (or Rights to acquire any Class 1 Interests), then LLC shall
first offer to sell to each Class 1 Member a portion of such Class 1 Interests
(or such Rights) equal to (i) the number of Class 1 Interests held by such
Class 1 Member divided by (ii) the sum of the number of Class 1 Interests
Deemed Outstanding as of the date of such offer plus the number of Class 1
Interests issuable upon exercise, conversion or exchange of all outstanding
Rights to acquire Class 1 Interests.
(b) Right to Purchase. In order to accept an offer under Section
7.02(a), each Class 1 Member must, within 15 days after receipt of written
notice from LLC describing in reasonable detail the Class 1 Interests (or
Rights) being offered, the purchase price thereof, the payment terms and such
Class 1 Member's percentage allotment, deliver a written notice to LLC
accepting such offer.
(c) Sale of Unsubscribed Interests. During the 90 days following
the expiration of such 15 day offering period, LLC shall be entitled to sell
any such Class 1 Interests (or any such Rights) which the holders of Class 1
Interests have not elected to purchase on terms and conditions no more
favorable to the purchasers thereof than those offered to such holders. Any
Class 1 Interests or securities offered or sold by LLC after such 90 day period
must be reoffered to the holders of Class 1 Interests pursuant to the terms of
this Section 7.02.
(d) Limitation on Preemptive Right. Notwithstanding the other
provisions of this Section 7.02, each Class 1 Member shall be entitled to
purchase such Class 1 Interests (or any such Rights) under this Section 7.02
only to the extent that, immediately after such purchase, neither such holder
nor any of its Affiliates beneficially owns more than 45 percent of the Class 1
Interests Deemed Outstanding at such time.
(e) Exclusion from Preemptive Rights. The provisions of this
Section 7.02 shall not apply to any issuance of Class 1 Interests (or Rights to
acquire any Class 1 Interests) (i) to employees of LLC, (ii) in connection with
the acquisition of another business (whether by purchase of stock, purchase of
assets, merger or otherwise), (iii) pursuant to the Motorola Warrant, (iv)
pursuant to conversion of the Series M Class 2 Interests, (v) pursuant to any
obligation of LLC's Members to purchase additional securities as a result of a
capital call by LLC, (vi) pursuant to the conversion of the Series A Class 2
Interests, (vii) pursuant to exercise of the Warrants, (viii) in connection
with a debt financing, (ix) as a dividend on the outstanding Class 1
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Interests, (x) pursuant to any agreement in effect on the date of this
Agreement, (xi)(A) in connection with the issuance and exercise of warrants
to purchase Class 1 Interests issued by LLC to Guarantor pursuant to Guarantee
Agreements and (B) certain gateway territory owners as incentive to complete
construction of their gateways by September 1998 and to achieve specified
revenues by January 1, 2000, (xii) to Iridium Bermuda if such issuance has
been approved by a majority of the Board of Directors excluding any directors
designated by Iridium Bermuda, or (xiii) in an amount up to 45,000,000 Class 1
Interests in private equity placements pursuant to a purchase agreement or
purchase agreements prior to an initial public offering of IWCL Common Stock.
ARTICLE VIII
GATEWAY RIGHTS AND SPECTRUM ACCESS OBLIGATIONS
Section 8.01 Gateway Rights and Service Provider Rights
(a) Gateway Allocation. Subject to the terms and conditions set
forth below, LLC hereby authorizes each Class 1 Member and its Affiliates, to
the extent permitted by applicable law (including United States law), to
provide Gateway services and to retain Service Providers (and/or act as a
Service Provider) in the Gateway Service Territory allocated to such Class 1
Member on the Gateway Service Territory Allocation Schedule attached hereto as
Annex E and to construct an unlimited number of Gateways in such Gateway
Service Territory subject to any applicable technical and operational
limitations as determined by LLC. Subject to the terms and conditions set forth
below, to the extent permitted by applicable law (including United States law),
LLC will not authorize any other Person to provide Gateway services or
construct Gateways in any Class 1 Member's Gateway Service Territory except on
a basis consistent with the allocations set forth in Annex E hereto.
(b) Class 1 Members Gateway Covenants.
(i) Each Class 1 Member who has been allocated a Gateway
Service Territory agrees to use its best efforts to obtain the
necessary authorizations (the "Gateway Authorizations") to provide
Gateway services in each of the jurisdictions included in its Gateway
Service Territory and to construct and operate such Class 1 Member's
Gateway on a timely basis consistent with the terms of such Class 1
Member's Gateway Authorization Agreement.
(ii) Each Class 1 Member who has been allocated a Gateway
Service Territory agrees to require any Service Provider it retains in
its Gateway Service Territory to use its best efforts to obtain the
necessary authorizations to act as a Service Provider to the extent
required in such Class 1 Member's Gateway Authorization Agreement.
(c) Termination of Gateway Rights and Service Provider Rights.
(i) The allocation pursuant to Section 8.01(a) of Gateway
rights and Service Provider rights to a Class 1 Member for any
particular country will cease with respect to such country (without
any compensation whatsoever being payable in connection therewith
except to the extent set forth in Section 8.01(c)(ii) below) if such
Class 1 Member has not obtained the Gateway Authorizations in such
country within the sooner of (A) 48 months (plus any period of an
"excusable delay" that may occur under Article II of the Space System
Contract prior to the expiration of such 48 months) after the Closing
Date or (B) the date on which appropriate authorizing agencies have
finally determined, after exhaustion of all available appeals being
pursued by such Class 1 Member in good faith, that such Class 1 Member
will not be granted the Gateway Authorizations in such country;
provided, that the Board of Directors may grant to a Class 1 Member an
extension of the time period for obtaining the
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Gateway Authorizations if the Board of Directors concludes that
sufficient progress in obtaining the Gateway Authorizations has been
demonstrated by such Class 1 Member.
(ii) In the event that an allocation of rights pursuant to
Section 8.01(a) ceases with respect to a Class 1 Member's Home Gateway
Country pursuant to Section 8.01(c)(i) above and such Class 1 Member
has used its best good faith efforts to obtain the Gateway
Authorizations in such country and is not in breach of this Agreement
or such Class 1 Member's Gateway Authorization Agreement, such Class 1
Member shall be entitled to compensation for the loss of such
allocation to the extent provided in this Section 8.01(c)(ii). In such
event, such Class 1 Member shall (A) promptly enter into negotiations
in good faith with any Person designated by the Board of Directors to
agree upon the nature and amount of compensation to be paid by such
Person to such Class 1 Member for such rights, (B) use its reasonable
best efforts to conclude such negotiations within six months after
LLC's notice to such Class 1 Member of the identity of such Person and
(C) in the event that such Class 1 Member and such Person are unable
to conclude such negotiations and enter into a binding agreement with
respect thereto within such six-month period, relinquish all such
rights to such Person for the compensation determined by an
Independent Appraiser.
(iii) Notwithstanding any provision in this Agreement to the
contrary, the allocation of all Gateway rights and Service Provider
rights to a Class 1 Member pursuant to Section 8.01(a) will cease if
(A) such Class 1 Member has failed to comply in any material respect
with the terms of its Gateway Authorization Agreement, provided that
notice in writing has been given to the Class 1 Member specifying such
failure to comply and that such failure to comply continues for a
period of thirty (30) days from the date of receipt of said notice or
(B) such Class 1 Member has failed to comply in any material respect
with the terms of this Agreement, provided that notice in writing has
been given to the Class 1 Member specifying such failure to comply and
that such failure to comply continues for a period of thirty (30) days
from the date of receipt of said notice.
The loss of Gateway and Service Provider rights will not diminish a Class 1
Member's other obligations hereunder, including obligations to purchase Class 1
Interests and other interests or securities pursuant to this Agreement.
(d) Assignment of Rights; Assignment of Unallocated Gateway
Service Territories. No Class 1 Member may assign its rights granted under this
Section 8.01 to any Person other than a Person that is an Affiliate of such
Class 1 Member or a Person that would be an Affiliate of such Class 1 Member
and one or more other Members if such Class 1 Member and such other Members
were together considered as one Person; provided, that nothing in this Section
8.01(d) shall prohibit two or more Class 1 Members or their Affiliates from
sharing the rights granted under this Section 8.01 through a joint venture or
otherwise.
(e) Service Provider Rights. To the extent permitted by
applicable law (including United States law) and subject to obtaining the
necessary Government authorizations to do so and to the execution of
documentation (including the Gateway Authorization Agreement) that is
acceptable to LLC and such Class 1 Member, each Class 1 Member to which a
Gateway Service Territory has been allocated hereunder will have the exclusive
right (together with all other Class 1 Members, if any, to which such Gateway
Service Territory has been allocated hereunder) to act as, and to designate
others to act as, a Service Provider in such Gateway Service Territory.
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Section 8.02 Obligations Relating to Spectrum Access
(a) If a Class 1 Member is allocated a Gateway Service Territory
hereunder and is not a Government, such Class 1 Member hereby agrees with
respect to each jurisdiction in its Gateway Service Territory and with respect
to each other jurisdiction in which it conducts any material part of its
business (i) to use its reasonable best efforts to cause the Government of such
jurisdiction and other relevant authorities in such jurisdiction to ratify and
adopt the spectrum allocation and service definitions for low earth orbiting
satellites adopted at the World Administrative Radio Conference organized by
the International Telecommunications Union and held in February 1992, (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 the
jurisdictions of such Governments and authorities.
(b) If a Class 1 Member is a Government, such Class 1 Member
hereby agrees (i) to use its reasonable best efforts to ratify and adopt the
spectrum allocation and service definitions for low earth orbiting satellites
adopted at the World Administrative Radio Conference organized by the
International Telecommunications Union and held in February 1992, (ii) to use
its reasonable best efforts to facilitate the allocation of the frequencies
necessary to operate and use the IRIDIUM system within such Government's
jurisdiction, (iii) to use its reasonable best efforts to facilitate the
coordination of the use of such frequencies with such Government's jurisdiction
and (iv) to take all of the actions specified in Section 8.02(a) above with
respect to each country in the Gateway Service Territory allocated to it
hereunder which is not within such Government's jurisdiction.
ARTICLE IX
AMENDMENT AND TERMINATION OF VARIOUS AGREEMENTS
Section 9.01 Termination of Stock Purchase Agreements
Each of the Stock Purchase Agreements is hereby terminated except that
the representations and warranties included therein shall survive as provided
in each such agreement and except that the obligations thereunder of any
investor shall not be terminated until such investor or its
successor-in-interest has executed a counterpart of this Agreement.
Section 9.02 Amendments to Outstanding Notes and Warrants
Pursuant to the LLC Merger, LLC has succeeded to all of the rights and
obligations of Iridium, Inc. including the rights and obligations of Iridium,
Inc. under the Notes and Warrants issued by Iridium, Inc. on or prior to the
date of this Agreement. Each such Note and Warrant will be deemed to be
amended as provided in Exhibits 1-A and 2-A, respectively, and LLC has issued
Notes and Warrants, as so amended, on the date hereof in replacement of each
outstanding Note and Warrant.
Section 9.03 Amendments to Gateway Authorization Agreements
Each Gateway Authorization Agreement is hereby amended to substitute
LLC for Iridium, Inc. as a party thereto and to effect such other changes as
may be necessary to refer to LLC as a limited liability company rather than a
corporation. Except as so amended each of such Gateway Authorization
Agreements shall remain in full force and effect.
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Section 9.04 Amendments to Contracts with Motorola
Each of the Space System Contract, the O&M Contract and the
Terrestrial Network Development Contract is hereby amended to substitute LLC
for Iridium, Inc. as a party thereto and to effect such other changes as may be
necessary to refer to LLC as a limited liability company rather than a
corporation. Except as so amended each of such contracts shall remain in full
force and effect.
Section 9.05 Amendments to Motorola Warrant
The Motorola Warrant shall be amended as provided in Exhibit 3-A and
LLC has issued a new Motorola Warrant, as so amended, on the date hereof in the
form of Exhibit 3-B.
ARTICLE X
MERGER AND APPRAISAL RIGHTS; SALE OF ASSETS
Section 10.01 Authority
LLC may merge or consolidate with one or more limited liability
companies, corporations, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other jurisdiction, pursuant to a written agreement of
merger or consolidation ("Merger Agreement") in accordance with this Article X.
Section 10.02 Procedure for Merger or Consolidation
Merger or consolidation of LLC pursuant to this Article X requires the
prior approval of the Board of Directors. If the Board of Directors shall
determine, in the exercise of its sole discretion, to consent to the merger or
consolidation, the Board of Directors shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of
each of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partnership or limited liability company interests, rights,
securities or obligations of the Surviving Business Entity; and (i) if any
general or limited partnership or limited liability company interests, rights,
securities or obligations of any constituent business entity are not to be
exchanged or converted solely for, or into, cash, property or general or
limited partnership or limited liability company interests, rights, securities
or obligations of the Surviving Business Entity - the cash, property or general
or limited partnership or limited liability company interests, rights,
securities or obligations of any general or limited partnership, limited
liability company, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such interests, rights, securities or
obligations of the constituent business entity are to receive in exchange for,
or upon conversion of, their interests, rights, securities or obligations and
(ii) in the case of securities represented by certificates, upon the surrender
of such certificates - which cash, property or general or limited partnership
or limited liability company interests, rights, securities or obligations of
the Surviving Business Entity or any general or limited partnership, limited
liability company,
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corporation, trust or other entity (other than the Surviving Business Entity),
or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership or limited liability company or other similar
charter or governing document) of the Surviving Business Entity to be effected
by such merger or consolidation;
(f) The effective time of the merger or consolidation, which may
be the date of the filing of the certificate of merger pursuant to Section
10.04 or a later date specified in or determinable in accordance with the
Merger Agreement (provided, that if the effective time of the merger or
consolidation is to be later than the date of the filing of the certificate of
merger or consolidation, the effective time shall be specified in the
certificate of merger or consolidation); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Board of Directors.
Section 10.03 Approval by Class 1 Members of Merger or
Consolidation
(a) General. The Board of Directors, upon its approval of the Merger
Agreement, shall direct that the Merger Agreement be submitted to a vote of the
Class 1 Members whether at a meeting or by written consent, in either case in
accordance with the requirements of Section 1.06(m). A copy or a summary of
the Merger Agreement shall be included in or enclosed with the notice of a
meeting or the written consent.
(b) Required Vote. The Merger Agreement shall be approved upon
receiving the affirmative vote or consent of Class 1 Members holding not less
than 66 2/3% of the outstanding Class 1 Interests unless the Merger Agreement
contains any provision which, if contained in an amendment to this Agreement,
the provisions of this Agreement or the Delaware Act would require the vote or
consent of a greater percentage of the Interests or of any class thereof, in
which case such greater percentage vote or consent shall be required for
approval of the Merger Agreement.
(c) Abandonment of Merger or Consolidation. After such approval
by vote or consent of the Class 1 Members, and at any time prior to the filing
of the certificate of merger or consolidation pursuant to Section 10.04, the
merger or consolidation may be abandoned pursuant to provisions therefor, if
any, set forth in the Merger Agreement. The Merger Agreement shall also
require the approval of any other class of Members if such approval is
specifically required by this Agreement or a Certificate of Designations
adopted pursuant to this Agreement.
Section 10.04 Certificate of Merger or Consolidation
Upon the required approval by the Board of Directors and the Class 1
Members of a Merger Agreement, a certificate of merger or consolidation shall
be executed and filed with the Secretary of State of the State of Delaware in
conformity with the requirements of the Delaware Act.
Section 10.05 Effect of Merger or Consolidation
(a) Effect of Merger. At the effective time of the certificate of
merger or consolidation:
(1) all of the rights, privileges and powers of each of
the business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of those
business entities and all other things and causes of action belonging
to each of those business entities shall be
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vested in the Surviving Business Entity and after the merger or
consolidation shall be the property of the Surviving Business Entity
to the extent they were property of each constituent business entity;
(2) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and is not in any way impaired because of the merger or
consolidation;
(3) all rights of creditors and all liens on or security
interest in property of any of those constituent business entities
shall be preserved unimpaired; and
(4) all debts, liabilities and duties of those
constituent business entities shall attach to the Surviving Business
Entity, and may be enforced against it to the same extent as if the
debts, liabilities and duties had been incurred or contracted by it.
(b) No Transfer of Assets or Liabilities. A merger or
consolidation effected pursuant to this Article X shall not be deemed to result
in a transfer or assignment of assets or liabilities from one entity to another
having occurred.
Section 10.06 Appraisal Rights
(a) Members Entitled. Any Member who holds Interests on the date of
the making of a demand pursuant to subsection (d) of this Section 10.06 with
respect to such Interests, who continuously holds such Interests through the
effective date of the merger or consolidation referred to below (a "Merger"),
who has otherwise complied with subsection (d) of this Section 10.06 and who
has neither voted in favor of the Merger nor consented thereto in writing
pursuant to Section 1.06(m) shall be entitled to an appraisal of the fair value
of his Interest under the circumstances described in subsections (b) and (c) of
this Section 10.06.
(b) Certain Exceptions. Appraisal rights shall be available for the
Interests in a Merger in which LLC is a constituent entity;
(i) provided, however, that no appraisal rights under this
section shall be available for Interests of any class or series which,
at the record date, if any, fixed to determine the Members entitled to
receive notice of and to vote upon the Merger or, if no such record
date is fixed, the date of the Merger, were either (x) listed on a
national securities exchange or designated as a national market system
security on a interdealer quotation system by the National Association
of Securities Dealers, Inc. or (y) held of record by more than 2,000
Members; and further provided that no appraisal rights shall be
available for any Interests of LLC if LLC is the surviving entity and
the Merger would not have required the approving vote of stockholders,
pursuant to subsection (f) and (g) of Section 251 of the Delaware
General Corporation Law if LLC were a corporation under Delaware Law;
(ii) notwithstanding paragraph (i) of this subsection,
appraisal rights under this section shall be available for the
Interests of any class or series if the holders thereof are required
by the terms of the agreement of merger to accept for such Interests
anything except:
a. Shares of stock of the corporation, or membership
interests in a nonstock entity, surviving or resulting from
such Merger, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or
membership interests in a nonstock entity, or depository
receipts in respect thereof, which shares of stock, membership
interests or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by
more than 2,000 holders;
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c. Cash in lieu of fractional Interests; or
d. Any combination of the shares of stock,
membership interests, depository receipts and cash in lieu of
fractional Interests.
(c) Perfection. Appraisal rights shall be perfected as follows: if a
proposed Merger for which appraisal rights are provided under this section is
to be submitted for approval at a meeting of Members or Directors, or is to be
approved by written consent, LLC, not less than 20 days prior to the meeting or
the effective date of the written consent, shall notify each of its Members
that appraisal rights are available for any or all of the Interests of LLC, and
shall include in such notice a copy of this Section 10.06. Each Member
electing to demand the appraisal of his Interests shall deliver to LLC, before
the taking of the vote on the Merger, a written demand for appraisal of his
Interests. Such demand will be sufficient if it reasonably informs LLC of the
identity of the Member and that the Member intends thereby to demand the
appraisal of his Interests. A vote against the Merger or the withholding of a
written consent by the Member or by a Director appointed by the Member shall
not constitute such a demand. A Member electing to take such action must do so
by a separate written demand as herein provided. Within 10 days after the
effective date of such Merger, the surviving or resulting entity in the Merger
shall notify each Member who has complied with this subsection and has not
voted in favor of or consented to the Merger of the date that the Merger has
become effective;
(d) Right to Petition Court. Within 120 days after the effective
date of the Merger, the surviving or resulting entity or any Member who has
complied with Sections 10.06(a) and (d) and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the Interests of all such Members.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the Merger, any Member shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the Merger. Within 120 days
after the effective date of the Merger, any Member who has complied with the
requirements of Sections 10.06(a) and (d), upon written request, shall be
entitled to receive from the entity surviving the Merger or resulting from the
Merger a statement setting forth the aggregate number of Interests not voted in
favor of the Merger and with respect to which demands for appraisal have been
received and the aggregate number of Members holding such Interests. Such
written statement shall be mailed to the Member within 10 days after his
written request for such a statement is received by the surviving or resulting
entity or within 10 days after expiration of the period for delivery of demands
for appraisal under Section 10.06(c), whichever is later.
(e) Service of Petition; Notice. Upon the filing of any such
petition by a Member, service of a copy thereof shall be made upon the
surviving or resulting entity, which shall within 20 days after such service
file in the office of the Register in Chancery in which the petition was filed
a duly verified list containing the names and addresses of all Members who have
demanded payment for their Interests and with whom agreements as to the value
of their Interests have not been reached by the surviving or resulting entity.
If the petition shall be filed by the surviving or resulting entity, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice to the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting entity and to the Members shown on the list at the
addresses therein stated. Such notice shall also be given by one or more
publications at least one week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(f) Court Determines Members Entitled to Appraisal. At the hearing
on such petition, the Court shall determine the Members who have complied with
this Section 10.06 and who have become entitled to appraisal rights. The Court
may require the Members who have demanded an appraisal for their Interests and
who hold Interests represented by Certificates to submit their Certificates to
the Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any Member fails to comply with such direction, the Court
may dismiss the proceedings as to such Member.
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(g) Court to Appraise Interests. After determining the Members
entitled to an appraisal, the Court shall appraise the Interests, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during
the pendency of the proceedings. Upon application by the surviving or
resulting entity or by any Member entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal prior to the
final determination of the Member entitled to an appraisal. Any Member whose
name appears on the list filed by the surviving or resulting entity pursuant to
Section 10.06(e) and who has submitted his Certificates to the Register in
Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
Section 10.06.
(h) Payment and Interest. The Court shall direct the payment of the
fair value of the Interests, together with interest, if any, by the surviving
or resulting entity to the Members entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
Member, in the case of Members of uncertificated Interests forthwith, and in
the case of Members holding Interests represented by Certificates upon the
surrender to LLC of the Certificates representing such Interests. The Court's
decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting entity be organized under the
laws of the State of Delaware or any other state.
(i) Costs. The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a Member, the Court may order all or a
portion of the expenses incurred by any Member in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the Interests entitled to an appraisal.
(j) Rights in Surviving Entity. From and after the effective date of
the Merger, no Member who has demanded his appraisal rights as provided in
Section 10.06(c) shall be entitled to the rights of a Member owing Interests;
provided, however, that if no petition for an appraisal shall be filed within
the time provided in Section 10.06(d), or if such Member shall deliver to the
surviving or resulting entity a written withdrawal of his demand for an
appraisal and an acceptance of the Merger, either within 60 days after the
effective date of the Merger as provided in Section 10.06(d) or thereafter with
the written approval of LLC, then the right of such Member to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any Member without the approval of
the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(k) Status of Unissued Shares. The shares or interests of the
surviving or resulting entity to which the Interests of such objecting Members
would have been converted had they or the Director(s) appointed by them
assented to the Merger shall have the status of authorized and unissued shares
or interests of the surviving or resulting entity.
Section 10.07 Sale of Substantially All Assets
(a) Required Vote. LLC may at any meeting of the Board of
Directors sell, lease or exchange all or substantially all of its property and
assets, including its goodwill and its corporate franchises, upon such terms
and conditions and for such consideration, which may consist in whole or in
part of money or other property, including shares of stock in, and/or other
securities of, another corporation, corporations or other entity, as the Board
of Directors deems expedient and for the best interests of LLC, when and as
authorized by a resolution adopted by the holders of 66 2/3% of the outstanding
Class 1 Interests, at a meeting duly called upon at least 20 days' notice. The
notice of the meeting shall state that such a resolution will be considered.
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(b) Abandonment of Sale. Notwithstanding authorization or consent
to a proposed sale, lease or exchange of LLC's property and assets by the Class
1 Members, the Board of Directors may abandon such proposed sale, lease or
exchange without further action by the Class 1 Members, subject to the rights,
if any, of third parties under any contract relating thereto.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Amendments to the Agreement
(a) General. This Agreement may not be changed or amended or the
observance of any provisions by LLC waived without the consent of Class 1
Members holding not less than 66 2/3% of the outstanding Class 1 Interests;
provided, that each Class 1 Member hereby consents to any change or amendment
to, or restatement of, this Agreement approved by a majority of the Board of
Directors which becomes effective on or after the date of the Class 1 Member's
cessation as a Member.
(b) Amendments Affecting Certain Voting Rights. Notwithstanding
the provisions of Section 11.01(a), the provisions of the second sentence of
Section 1.05(a), of Section 1.05(c) and of this Section 11.01(b) (and any
definitions related thereto) may not be changed or amended without the consent
of Class 1 Members holding not less than 95% of the outstanding Class 1
Interests.
(c) Amendments Affecting Contracts Committee. Notwithstanding the
provisions of Section 11.01(a), the provisions of Section 2.03(g) and of this
Section 11.01(c) (and any definitions related thereto) may not be changed or
amended without the consent of (i) at least 66- 2/3% of the Directors serving
on the Contracts Committee, and (ii) Class 1 Members holding not less than 66
2/3% of the outstanding Class 1 Interests entitled to vote on such matter
excluding (i) for so long as Motorola's representatives are not permitted to
serve on the Contracts Committee, any such Interests held by Motorola and its
Affiliates, (ii) for so long as Lockheed Martin's representatives are not
permitted to serve on the Contracts Committee, any such Interests held by
Lockheed Martin and its Affiliates and (iii) for so long as Raytheon's
representatives are not permitted to serve on the Contracts Committee, any such
Interests held by Raytheon and its Affiliates.
(d) Amendments Affecting One or More Classes. Notwithstanding the
provisions of Section 11.01(a), Section 4.04(a), Section 4.05(e) and the
provisions of any other series of Class 2 Interests relating to voting rights
and of this Section 11.01(d), the holders of the outstanding Interests of a
class shall be entitled to vote as a class upon a proposed amendment to this
Agreement, whether or not entitled to vote thereon by any other provision of
this Agreement, if the amendment would increase or decrease the aggregate
number of authorized Interests of such class, or alter or change the powers,
preferences, or special rights of the Interests of such class so as to affect
them adversely. If any proposed amendment would alter or change the powers,
preferences, or special rights of one or more series of any class so as to
affect them adversely, but shall not so affect the entire class, then only the
Interests of the series so affected by the amendment shall be considered a
separate class for purposes of this Section 11.01(d). The number of authorized
Interests in any such class or classes may be increased or decreased (but not
below the number of Interests thereof then outstanding) by the affirmative vote
of the holders of a majority of the Interests entitled to vote irrespective of
this subsection, if so provided by this Agreement or a Certificate of
Designations adopted pursuant to this Agreement.
(e) Amendments Affecting Capital Contributions and Reserve Capital
Call. Notwithstanding the provisions of Section 11.01(a), the provisions of
Sections 3.02, 3.03, 4.02 and this Section 11.01(e) (and any definitions
related thereto) may be amended only with the consent of LLC and each party
whose rights and obligations thereunder are directly affected by such
amendment(s), except that the first and second proviso
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clauses to the first sentence of Section 4.02 may only be amended by the vote
of 85% of the entire Board of Directors.
(f) Amendments Affecting Appraisal Rights. Notwithstanding the
provisions of Section 11.01(a), no amendments to the provisions of Section
10.06 or this Section 11.01(f) may be made without the unanimous consent of the
Members.
(g) Amendments Affecting Gateway Rights Obligations. Notwithstanding
the provisions of Section 11.01(a), no amendments to the provisions of Section
8.01, other than Section 8.01(d), may be made without the consent of any party
whose rights and obligations thereunder are directly affected by such
amendment(s).
(h) Amendments Affecting the Purpose of LLC. Notwithstanding the
provisions of Section 11.01(a), Section 1.03 may be amended to permit LLC to
engage in a business other than as set forth in such section only with the
unanimous consent of the Board of Directors.
(i) Amendments Affecting Indemnification. Notwithstanding the
provisions of Section 11.01(a), the provisions of Section 1.07 shall be deemed
a contract between LLC and each director or officer who serves in any such
capacity at any time while such Section 1.07 and the relevant provisions of the
Delaware Act or other applicable law are in effect, and any repeal or
modification of Section 1.07 or any change in the Delaware Act shall not affect
any rights or obligations then existing with respect to any state of facts or
proceeding then exisiting.
(j) Amendments to Annexes by Secretary. The secretary of LLC is
permitted to amend the annexes to this Agreement to reflect changes in the
information contained therein without obtaining a separate consent of the Class
1 Members.
Section 11.02 Governing Law; Severability
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE
OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. In particular, it shall be
construed to the maximum extent possible to comply with all of the terms and
conditions of the Delaware Act. If, nevertheless, it shall be determined by a
court of competent jurisdiction that any provision or wording of this Agreement
shall be invalid or unenforceable under said Act or other applicable law, such
invalidity or unenforceability shall not invalidate this entire Agreement. In
that case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of any
applicable law, and, in the event such term or provision cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions.
Section 11.03 Remedies
(a) Remedies Available. If any entity fails to pay any of the
amounts required to be paid pursuant to Section 4.02 for the purchase of
Interests, LLC shall deliver a written notice to such entity specifying the
amount owed by the entity. If such entity fails to pay all of such amount
within 30 days of the date of such written notice, such entity shall be deemed
to be in default under this Agreement and a "Defaulting Party" and LLC may, in
its sole and absolute discretion, elect to pursue one or more of the following
alternative remedies against such Defaulting Party:
(i) Revoke all of the Defaulting Party's rights under this
Agreement and, under any Gateway Authorization Agreement to which it
is a party, and redeem the Defaulting Party's Class 1 Interests for an
amount equal to $1.33 per Interest. The Interests that are redeemable
under this Section 11.03(a)(i)
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are hereinafter referred to as the "Default Interests". The
redemption contemplated hereby may be effected whether or not the
Default Interests are then redeemable according to their terms.
(ii) Set-off any cash or property otherwise distributable to
the Defaulting Party by LLC against all amounts due from the
Defaulting Party to LLC and treat such defaulted amounts as a demand
loan from LLC to the Defaulting Party bearing interest compounded
annually, from the date of default until paid in full at a fluctuating
rate determined on the date of default and quarterly thereafter equal
to (A) the three-month LIBOR rate in effect from time to time plus (B)
200 basis points.
(iii) Offer Default Interests theretofore purchased or
otherwise acquired by the Defaulting Party to the Members (other than
the Defaulting Party) pro rata (which, for this purpose shall be
determined on the basis of the Liquidation Preference of the
outstanding Series A Class 2 Interests and any Series A Class 2
Interests issued as dividends, the Liquidation Value of any
outstanding Series M Class 2 Interests, the liquidation preference of
any other outstanding Class 2 Interests, the Accreted Value of the
outstanding Notes (Warrants will be disregarded for this purpose) and
the purchase price of outstanding Class 1 Interests). The other
Members may purchase the Defaulting Party's Default Inter ests for an
amount equal to the lower of the original cost or fair market value
(as of the date of default) of the Defaulting Party's Default
Interests (other than Underlying Class 1 Interests) and the fair
market value of Underlying Class 1 Interests included in the Default
Interests.
(iv) Recover damages resulting from such default and pursue
any other right or remedy of LLC. Each party to this Agreement
acknowledges that such damages may include (A) interest and loan fees
on funds borrowed on account of such default, (B) LLC expenses
(including fees and expenses of counsel) relating to its efforts (I)
to exercise its rights and remedies upon such default, (II) to offer
and sell such Defaulting Party's Default Interests to Members or any
third party, or (III) to amend this Agreement, and (C) profits which
may be lost or liability which may be incurred by LLC if, by reason of
such default, LLC is unable to meet its contractual payment
obligations or satisfy its other commitments, including, without
limitation, its commitments under the Space System Contact, the O&M
Contract and the Terrestrial Network Development Contract.
(b) Notice of Default and Remedies. LLC shall deliver written
notice to the Members of the existence of a default which notice shall also
specify the remedy or remedies LLC is pursuing or intends to pursue as a result
of such default.
(c) Appropriateness of Remedies. Each party to this Agreement
acknowledges that the failure of any such party to perform its obligations
hereunder (including in particular the failure of such party to pay any of the
amounts required to be paid pursuant to Section 4.02) will result in
substantial damages to LLC and each of the Members. Each such party further
acknowledges the actual damages incurred in the event of any such failure would
be extremely impractical or impossible to determine and that the remedies set
forth in this Section 11.03 do not constitute a penalty; they reflect a good
faith and reasonable attempt to estimate the actual damages which would be
incurred due to any such failure.
(d) Performance Prohibited. Notwithstanding any provision in this
Agreement to the contrary, in the event that a party to this Agreement (or an
Indirect Owner) is prohibited under any law, rule, regulation, finding or order
of any Government from owning Interests in LLC or otherwise performing its
obligations hereunder (or under an Agreement of Indirect Owner) and such party
(or Indirect Owner) has used its good faith reasonable efforts to seek to own
interests in LLC and to perform its obligations hereunder in a manner that is
not so prohibited and to seek to appeal any finding or order for which an
appeal can be made, then LLC shall not exercise any of the remedies described
in this Section 11.03 until at least nine months shall have passed during which
LLC shall use its reasonable efforts to work with such party to find a Person
to purchase the Interests to be purchased under Section 4.02 and assume such
party's obligations hereunder (and, if applicable, such party's Indirect
Owner's obligations under the Agreement of Indirect Owner entered into by such
Indirect Owner). LLC, however, shall have no obligation to use such efforts and
shall have the right to
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exercise such remedies immediately if such party (or such Party's Indirect
Owner) fails to cooperate in good faith with LLC in such efforts.
Section 11.04 Jurisdiction and Service of Process; Arbitration
Any suit, action or proceeding against any party with respect to this
Agreement may be brought in a court of the United States sitting in the State
of Delaware or, if jurisdiction is lacking in such a court, in a court of
record in the State of Delaware, and each party hereby irrevocably waives, to
the fullest extent permitted by law, any objection that it may have, whether
now or in the future, to the laying of venue in, or to the jurisdiction of, any
and each of such courts for the purpose of any such suit, action, proceeding or
judgment and further waives any claim that any such suit, action, proceeding or
judgment has been brought in an inconvenient forum, and the party hereby
submits to such jurisdiction. The party hereby agrees that service of all
writs, process and summonses in any such suit, action or proceeding brought in
the State of Delaware may be made upon The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801, or such alternate process agent in
the United States designated with respect to the party in a writing delivered
to LLC (the "Process Agent") and the party hereby irrevocably appoints the
Process Agent in its name, place and stead to receive and forward such service
of any and all such writs, process and summonses and agrees that the failure of
the Process Agent to give any notice of any such service of process to such
party shall not impair or affect the validity of such service or of any
judgment based thereon. If the Process Agent is no longer able to so act for
any reason whatsoever, the party agrees to appoint a substitute process agent,
which substitute process agent shall thereafter be deemed to be the Process
Agent hereunder, and to give notice of such appointment to LLC. If the party
is a Government, it hereby irrevocably waives any and all claims of immunity in
connection with the execution, performance and enforcement of this Agreement
and others in any way related to this Agreement, including, without limitation,
with respect to service of process, submission to jurisdiction, attachment and
execution on property. In the event the foregoing provisions of this Section
11.04 are for any reason unenforceable or otherwise do not permit a party
hereto to become subject to the jurisdiction of the courts contemplated hereby,
then in the event any dispute arises in connection with the interpretation or
implementation of this Agreement which the parties are unable to resolve within
60 days, (a) any party may submit the dispute for arbitration in Stockholm,
Sweden in accordance with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce with instructions that the arbitration be
conducted in the English language; (b) the arbitration award shall be final and
binding on the parties and shall be enforced in accordance with its terms; and
(c) the arbitration fee shall be borne by the party as designated by the
arbitration award. In the course of such arbitration, this Agreement shall be
continuously performed except with respect to the part hereof which is the
subject of, or which is directly and substantially affected by, the
arbitration. In any such arbitration proceeding, any legal proceeding to
enforce any arbitration award and any other legal action between or among the
parties hereto pursuant to or relating to this Agreement or the transactions
contemplated hereby, each party expressly waives the defense of sovereign
immunity and any other defense based on the fact or allegation that it is an
agency or instrumentality of a sovereign state. Any award of the arbitrators
shall be enforceable by any court having jurisdiction over the party against
which the award has been rendered and such award shall be enforceable in
accordance with the United Nations Convention on the Reciprocal Enforcement of
Arbitral Awards (1958).
Section 11.05 Power of Attorney and Other Authorizations
Each party does hereby constitute and appoint any vice president of
LLC and the secretary of LLC as the true and lawful representative and
attorney-in-fact of such party, in the name, place and stead of such party,
with full power of substitution, to make, execute, sign and file a Certificate
of Formation, any amendment thereof and such other instruments, documents and
certificates which may from time to time be required by the laws of the United
States of America, the State of Delaware or any other state or country in which
LLC shall determine to do business or any political subdivision or agency
thereof, to effectuate, implement and continue
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the valid and subsisting existence or qualification to do business of LLC or in
connection with any tax returns, filings or related matters.
Such representative and attorney-in-fact shall not, however, have any
right, power or authority to amend or modify this Agreement when acting in such
capacities.
The power of attorney granted hereby is coupled with an interest and
shall survive and not be affected by the subsequent dissolution, incapacity or
disability of such Member.
Each Director is hereby deemed to be an authorized person within the
meaning of the Delaware Act; the execution, delivery and filing of the
Certificate of Formation of LLC by LLC is hereby authorized, approved and
ratified; and the Directors are hereby authorized to execute, deliver and file
any amendment to and restatements of the Certificate of Formation of LLC that
are required or permitted by the Delaware Act and any and all certificates or
documents required by the Delaware Act.
Section 11.06 Actions of Members
Except as otherwise stated in this Agreement or as required by law,
any act of a party hereto that may be or is required to be taken under either
this Agreement or the Delaware Act may be taken by their respective duly
authorized officers.
Section 11.07 Notices
All notices and other communications provided for in this Agreement
shall be in writing, shall be in the English language and shall be sufficiently
given if made (i) by hand delivery or by telecopier and (ii) by reputable
express courier service (charges prepaid) or by registered or certified mail
(postage prepaid and return receipt requested) (a) if to the Company, at the
following address:
Iridium LLC
1575 Eye Street, NW
Washington, D.C. 20005
U.S.A.
Attention: General Counsel
Phone: (202) 408-3800
Facsimile: (202) 408-3801
or at such other address as the Company shall have furnished in writing to any
Member and (b) if to any Member, at the address indicated on Exhibit B or at
such other address as the Member shall have furnished in writing to the
Company. All such notices and other communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited with a reputable express courier service (charges
prepaid); seven business days after being deposited in the mail, postage
prepaid, if delivered by mail; and when receipt acknowledged (by a facsimile
machine or otherwise), if telecopied.
Section 11.08 Counterparts
This Agreement may be executed in any number of counterparts and by
different parties to this Agreement in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
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ARTICLE XII
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
"Accreted Value" means, (a) as of any date of determination prior to
the date on which a Note first bears or accrues interest, the sum of (i) the
initial offering price of such Note and (ii) the portion of the excess of the
principal amount of such Note over such initial offering price which shall have
been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate of 14 1/2% per annum of the initial offering price of
such Note, compounded semi-annually on each March 1 and September 1 from the
date of issuance of such Note through the date of determination or (b) as of
any date of determination on or after the date on which such Note first bears
or accrues interest, 100% of the principal amount at maturity of such Note.
"Affiliate" means any person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
"Affiliated Purchasers" means The Inamori Foundation and VEBA Telecom
Verwaltungsgesellschaft mbH.
"Agreement" means this Limited Liability Company Agreement as it may
be amended, restated or supplemented from time to time.
"Agreement of Indirect Owner" means an Agreement of Indirect Owner
executed and delivered by an Indirect Owner in connection with a Stock Purchase
Agreement, as amended on the date of this Agreement.
"Agreement Regarding Guarantee" means any agreement entered into by
LLC and a Guarantor on or prior to October 16, 1996 providing a Guarantee of
debt incurred by LLC under a bank credit facility.
"Business Day" means a day other than a Saturday, Sunday, national or
New York State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"Certificates" means (a) with respect to an Interest, the certificate
therefor in fully registered definitive form, (b) with respect to a Note, a
note in fully registered definitive form, without coupons, in denominations of
$1,000 or any integral multiple thereof, (c) with respect to Warrants, a
warrant certificate in fully registered definitive form, and (d) with respect
to any other interests in or securities of LLC, such instruments as the Board
of Directors may authorize.
"Class 1 Interests" means Interests in LLC which represent common
limited liability company interests in LLC and are described in this Agreement.
"Class 1 Interests Deemed Outstanding" means, at any given time, the
number of Class 1 Interests actually outstanding at such time, plus the number
of Class 1 Interests for which LLC has received written commitments to
purchase, regardless of whether there are any unfulfilled conditions to any
such commitments.
"Class 1 Member" means a Member that owns one or more Class 1
Interests.
"Class 2 Interests" means Interests which are represented by Series M
Class 2 Interests, Series A Class 2 Interests or any other preferred limited
liability company interests in LLC and are described in, or issued pursuant to,
this Agreement.
"Class 2 Member" means a Series M Class 2 Interest Member, a Series A
Class 2 Member or a holder of any other Class 2 Interests of LLC.
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"Closing Price" means, for each Business Day, the last reported sale
price regular way on the principal national securities exchange on which the
Class 1 Interests are listed or admitted for trading, or, if the Class 1
Interests are not so listed or admitted for trading on a national securities
exchange, on the NASDAQ National Market System or, if the Class 1 Interests are
not quoted on the NASDAQ National Market System, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by LLC for that purpose
or, if the Class 1 Interests are not traded in the over-the-counter market, the
Fair Market Value per Class 1 Interest as determined by the Board of Directors
(whose determination shall be conclusive).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Director" means any person authorized to act as a director of LLC
pursuant to Section 1.05.
"Eligible Transferee" means a Person who was a party to a Stock
Purchase Agreement with Iridium, Inc. on February 16, 1996 or an Affiliate of
such a Person.
"Fair Market Value" means, with respect to any Interest, asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"FCC" means the United States Federal Communication Commission, or any
entity or body succeeding to the functions of the Federal Communications
Commission.
"First Round Stock Purchase Agreement" means a Stock Purchase
Agreement other than the 1994 Stock Purchase Agreement and the 1996 Securities
Purchase Agreement.
"Gateway" means a terrestrial interconnection point between the
IRIDIUM satellite constellation and a public switched telephone network.
"Gateway Authorization Agreement" means a written, executed agreement
between a Person and LLC pursuant to which such Person is authorized to operate
a Gateway for the IRIDIUM system.
"Gateway Equipment Purchase Agreement" means any one of those
agreements entered into by Motorola on the one hand and a Gateway Service
Territory Operator on the other pursuant to which Motorola agrees to provide
equipment to such Gateway Service Territory Operator.
"Gateway Service Territory" means a territory allocated to a Member on
the Gateway Service Territory Allocation Schedule attached hereto as Annex E.
"Government" means any nation or government, any state or other
political subdivision thereof, any ministry thereof, any wholly-owned Person
thereof, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Guarantee" means a guarantee of LLC's debt made pursuant to an
Agreement to Provide Guarantee.
"Guarantee Agreement" means the agreement between a Guarantor and a
lender to LLC, entered into pursuant to an Agreement to Provide Guarantee,
providing a Guarantee.
"Guarantor" means any entity providing a Guarantee.
"Home Gateway Country" means the country within a Gateway Service
Territory that constitutes a Member's principal place of business on the date
of this Agreement or as otherwise designated in writing
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(which designation shall be irrevocable) by such Member to the Board of
Directors prior to the commencement of construction of the first Gateway by
such Member pursuant to the Gateway Authorization Agreement between LLC and
such Member.
"IL&FS Stock Purchase Agreement" means the Supplemental 1994 Stock
Purchase Agreement dated as of September 15, 1994 between LLC and
Infrastructure Leasing & Financing Services.
"Independent Appraiser" means a Person mutually acceptable to the
Member which is to be compensated pursuant to Section 8.01(c)(ii) and at least
66 2/3% of the members of the Board of Directors, which has been retained to
make the compensation determinations referred to in Section 8.01(c)(ii), as
applicable. If such Member and the Board of Directors are unable to mutually
agree upon such a Person within 30 days after the obligation arises to submit
the determination of such compensation to an Independent Appraiser, each of such
Member and the Board of Directors shall select a Person of recognized
international standing with the ability to make such a determination. The two
Persons so selected shall then select a third Person of such standing who shall
act as the Independent Appraiser and such Member and LLC shall be bound by the
determination of such third Person. In the event that such two Persons are
unable to select a third Person, each of such two Persons shall select two other
Persons of such standing and one of the four Persons so selected shall be
selected by lot to become the Independent Appraiser.
"Indirect Owner" means each Person, if any, that has executed an
Agreement of Indirect Owner.
"Initial Series A Dividend Period" means the dividend period
commencing on and including the Original Issue Date and ending on and including
the day immediately preceding the next subsequent Series A Dividend Payment
Date.
"Interests" means Class 1 Interests and Class 2 Interests.
"Iridium Bermuda" means Iridium Limited, a Bermuda corporation and any
successor toall or substantially all of its assets.
"Iridium Bermuda Change of Control" means an event or series of events
not approved either by Members owning a majority of the Class 1 Member-ship
Interests or by a majority of the Board of Directors of LLC, at a time when
Iridium Bermuda owns Class 1 Membership Interests representing less than 50% of
the outstanding Class 1 Membership Interests, as a result of which (a) any
"person" or "group" (as such terms are defined in Section 12(d) and 14(d) of
the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than LLC 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
Iridium Bermuda's outstanding common stock (or equivalent securities), (b)
Iridium Bermuda consolidates with or merges into another coporation or conveys,
transfers or leases all or substantially all of its assets to any person, or
any corporation consolidates with or merges into Iridium Bermuda, in either
event pursuant to a transaction in which Iridium Bermuda's outstanding common
stock is changed into or exchanged for cash, securities or other property,
other than any transaction (i) between Iridium Bermuda and either LLC, an
affiliate of LLC or a wholly-owned subsidiary of LLC, or (ii) after which the
shareholders who beneficially owned Iridium Bermuda's common stock immediately
before such transaction beneficially own at least 50% of the outstanding voting
stock of the surviving entity and no person beneficially owns more than 30% of
the outstanding voting stock of the surviving entity, or (c) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the board of directors of Iridium Bermuda (together with any new
directors whose election by the board of directors of Iridium Bermuda or whose
nomination for election was approved by a vote of 66 2/3% of the members of the
board of directors of Iridium Bermuda then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of Iridium Bermuda then in office.
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<PAGE> 68
"Iridium Bermuda Reduction in Interest" means the sale or other
disposition by Iridium Bermuda of Class 1 Membership Interests which results in
a reduction of the ownership interest of Iridium Bermuda from five percent or
more of the total outstanding Class 1 Membership Interests to below such
percent.
"Iridium Bermuda Special Rights Period" means the period commencing on
the first date on which Iridium Bermuda's Class 1 Membership Interests
represent five percent or more of the total outstanding Class 1 Membership
Interests and ending on the date of delivery by LLC of an Iridium Bermuda
Termination Notice.
"Iridium Bermuda Special Rights Termination Event" means the
occurrence of an Iridium Bermuda Change of Control or an Iridium Bermuda
Reduction in Interest.
"Iridium Bermuda Termination Notice" means a written notice from LLC
to Iridium Bermuda following an Iridium Bermuda Special Rights Termination
Event.
"ISC Stock Purchase Agreement" means the Supplemental Offering Stock
Purchase Agreement dated as of September 19, 1994 between LLC and Iridium
SudAmerica Corporation.
"Junior Interests (Series A)" means any Interests in LLC the terms of
which do not expressly provide that such Interests rank senior to or on a
parity with Series A Class 2 Interests as to dividends and distributions upon
liquidation, dissolution and winding-up of LLC.
"Junior Interests (Series M)" means any Interests in LLC other than
the Series M Class 2 Interests.
"KMTC Stock Purchase Agreement" means the Supplemental Offering Stock
Purchase Agreement dated as of September 19, 1994 between LLC and Korean Mobile
Telecommunications Corporation.
"Liquidation Value" of any Series M Class 2 Interest as of any
particular date shall be equal to $1,000.
"LLC" means Iridium LLC, a limited liability company organized under
the laws of the State of Delaware, and when used with respect to actions,
events or circumstances occurring or existing prior to July 29, 1996 means
Iridium, Inc., a corporation organized under the laws of the State of Delaware.
"Member" means any Person that holds an Interest in the Company and is
admitted as a member of LLC pursuant to the provisions of this Agreement, in
its capacity as a member of LLC. For purposes of the Delaware Act, the Class 1
Members and the Class 2 Members shall constitute separate classes or groups of
Members.
"1993 Stock Purchase Agreement" means the Stock Purchase Agreement,
dated as of July 26, 1993, between Iridium, Inc. and China Great Wall Industry
Corporation, Iridium Africa Corporation, Iridium Canada, Inc., Iridium Middle
East Corporation, Khrunichev Enterprise, Lockheed Corporation, Motorola, Inc.,
Muidiri Investments BVI, Ltd., NIPPON IRIDIUM CORPORATION, Raytheon Company,
Sprint Corporation, Pacific Electric Wire & Cable Co., Ltd., STET -- Societa
Finanziaria Telefonica per Azioni, and Thai Satellite Telecommunications Co.,
Ltd.
"1994 Stock Purchase Agreement" means the 1994 Stock Purchase
Agreement, dated as of August 15, 1994, between Iridium, Inc. and China Great
Wall Industry Corporation, Iridium Canada, Inc., Khrunichev State Research and
Production Space Center, Motorola, Inc., NIPPON IRIDIUM CORPORATION, Pacific
Electric Wire & Cable Co., Ltd., STET -- Societa Finanziaria Telefonica per
Azioni, Sprint Corporation and Thai Satellite Telecommunications Co., Ltd.
"1996 Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of February 16, 1996, between Iridium, Inc., BCE Mobile
Communications, Inc., The Inamori Foundation, Iridium
67
<PAGE> 69
Andes-Caribe, Ltd., Iridium Brasil Ltda., Khrunichev State Research and
Production Space Center, Korea Mobile Telecommunications Corporation, Motorola,
Inc., Raytheon Company, Sprint Corporation, STET -- Societa Finanziaria
Telefonica per Azioni, Thai Satellite Telecommunications Co., Ltd. and VEBA
Telecom Beteiligungs GmbH.
"Notes" means LLC's 14 1/2% Senior Subordinated Notes due 2006 having
the terms and provisions set forth in Exhibit 1B hereto. Such term shall also
include the 14 1/2% Senior Subordinated Notes due 2006 of Iridium, Inc. which,
by virtue of Section 9.02 have been amended to become Notes of LLC having terms
identical to those specified in Exhibit 1B.
"Officer" means persons designated as such pursuant to Section 2.05.
"O&M Contract" means the Operations and Maintenance Contract between
LLC and Motorola effective July 29, 1993, as amended from time to time.
"Original Issue Date" means the date on which each particular share of
Series A Convertible Preferred Stock which was converted into a Series A Class
2 Interest pursuant to the LLC Merger was first issued by Iridium, Inc.
"Original Series A Liquidation Preference" means U.S. $1,000 per
Series A Class 2 Interest.
"Parity Interests (Series A)" means any series of Class 2 Interests
(other than Series M Class 2 Interests), the terms of which expressly provide
that it ranks on a parity with the Series A Class 2 Interests as to dividends
and distributions upon the liquidation, dissolution and winding-up of LLC.
"Person" shall mean a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
"Private Placement Memorandum" means any of LLC's Private Placement
Memoranda used in connection with an offering of securities of LLC, including
the exhibits and annexes thereto, as amended and supplemented.
"Public Offering" means any offering by LLC directly or indirectly of
its Interests to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar United States federal statute then in force.
"Quarterly Series A Dividend Period" means the quarterly period
commencing on and including a Series A Dividend Payment Date and ending on and
including the day immediately preceding the next subsequent Series A Dividend
Payment Date.
"Right" means a warrant, right, call or option or security exercisable
for or convertible into an interest or security.
"Senior Interests (Series A)" means the Series M Class 2 Interests and
any other series of Class 2 Interests the terms of which expressly provide that
it ranks senior to the Series A Class 2 Interests as to dividends and
distributions upon the liquidation, dissolution and winding-up of LLC.
"Series A Class 2 Member" means a Member which holds one or more
Series A Class 2 Interests.
"Series A Class 2 Interests" means the Interests which represent
preferred limited liability company interests in LLC and are described in this
Agreement.
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<PAGE> 70
"Series A Dividend Payment Date" means each March 1, June 1, September
1 and December 1 of each year on which dividends shall be paid or are payable,
any Series A Redemption Date and any other date on which dividends in arrears
may be paid.
"Series A Dividend Period" means the Initial Series A Dividend Period
and, thereafter, each Quarterly Series A Dividend Period.
"Series A Dividend Record Date" means, with respect to the dividend
payable on each Series A Dividend Payment Date, the close of business on the
fifteenth day immediately preceding such Series A Dividend Payment Date, or
such other record date as may be designated by the Board of Directors with
respect to the dividend payable on such Series A Dividend Payment Date;
provided, that such record date may not be more than 60 days or less than ten
days prior to such Series A Dividend Payment Date.
"Series A Liquidation Preference" means the Original Series A
Liquidation Preference, plus an amount equal to all accrued and unpaid
dividends from and after the Series A Dividend Payment Date on which such
dividends were to be paid. The Series A Liquidation Preference of a Series A
Class 2 Interests will increase by the amount of dividends that accrue on such
Interest on a Series A Dividend Payment Date and will decrease only to the
extent such dividends are actually paid, all as provided in Section 4.05(b)
hereof. Notwithstanding the foregoing, in determining the amount to be paid on
a Series A Redemption Date, Series A Liquidation Preference shall not be deemed
to include any dividends to the extent such dividends are to be paid on such
date in accordance with the requirements of this Agreement.
"Series M Class 2 Member" means a Member which holds one or more
Series M Class 2 Interests.
"Series M Class 2 Interests" means the Interests which represent
preferred limited liability company interests in LLC and are described in this
Agreement.
"Service Provider" means any provider of IRIDIUM services to end
customers.
"Space System Contract" means the Space System Contract between LLC
and Motorola effective July 29, 1993, as amended from time to time.
"Stock Purchase Agreements" means the 1993 Stock Purchase Agreement,
the 1994 Stock Purchase Agreement, the 1996 Securities Purchase Agreement, the
VEBA Stock Purchase Agreement, the IL&FS Stock Purchase Agreement, the ISC
Stock Purchase Agreement, the KMTC Stock Purchase Agreement.
"Subsidiary" means any corporation or other entity of which the shares
of outstanding capital stock or other interests possessing the voting power
(under ordinary circumstances) in electing the board of directors are, at the
time as of which any determination is being made, owned by LLC either directly
or indirectly through Subsidiaries.
"Terrestrial Network Development Contract" means the Terrestrial
Network Development Contract between LLC and Motorola, effective January 1,
1993, as amended from time to time.
"Transfer" means to sell, transfer, assign, pledge or otherwise
encumber or dispose of (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law), directly or indirectly;
provided, that a lien arising with respect to Interests in connection with a
general lien on all or substantially all of the assets of the holder of
Interests shall not constitute a Transfer.
"Transfer Agent" means the transfer agent for the Series A Class 2
Interests. LLC will initially act as Transfer Agent.
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<PAGE> 71
"Underlying Class 1 Interests" means Class 1 Interests into which, or
for which, rights to acquire Class 1 Interests may be converted or exercised.
"Unit" means the combination of a Note in a principal amount of $1,000
and one Warrant.
"VEBA Stock Purchase Agreement" means the Supplemental Offering Stock
Purchase Agreement dated as of August 31, 1994 between LLC and VEBA Telecom
GmbH.
"Warrants" means the Warrants, each entitling the holder to purchase
.13877 Class 1 Interests and having the rights and other terms and provisions
set forth in Exhibit 2b hereto. Such terms shall also include the Warrants of
Iridium, Inc. which, by virtue of Section 9.02 have been amended to become
Warrants of LLC having terms identical to those specified in Exhibit 2b.
70
<PAGE> 72
Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Additional Members" 7.01(a)
"Authorization Date" 6.01
"constituent entity" 4.05(f)
"Contract Committee" 2.03(g)
"Default Interests" 11.03(a)
"Defaulting Party" 11.03(a)
"Delaware Act" Preamble
"dividends" (a)
"Event of Noncompliance" 4.04(g)
"Fiscal Year" 1.04
"Former Member" 5.02
"Gateway Authorizations" 8.01(b)
"Loan Agreements" 4.02
"Guarantor Directors" 4.07(b)
"Iridium Brazil" 2.03(b)
"LLC Merger" Preamble
"Liquidating Dividends" 4.05(e)
"Loan Agreements" 4.02
"Lockheed Martin" 2.03(b)
"Mandatory Call" 4.02
"Members' Interest Register" 2.07(a)
"Merger Agreement" 10.01
"Minimum Dividend" (c)
"Motorola" 2.03(g)
"Motorola Sale Notice" 6.05
"Motorola Warrant" 4.01(c)
"non-electing interest" 4.05(f)
"Organic Change" 4.04(d)
"Other Class 1 Members" 6.05
"Other Guarantor Directors" 4.07(b)
</TABLE>
71
<PAGE> 73
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Other Holder" 6.01
"Payment Event" 4.07(b)
"proceeding" 2.08(a)
"Process Agent" 11.04
"Raytheon" 2.03(b)
"Rejection Notice" 6.02(a)
"Restricted Interests" 6.01
"Sale Notice" 6.01
"Series A Conversion Agent" 4.05(f)
"Series A Conversion Date" 4.05(f)
"Series A Conversion Price" 4.05(f)
"Series A Optional Redemption Price" 4.05(d)
"Series A Redemption Date" 4.05(d)
"Series A Redemption Notice" 4.05(d)
"Series B Directors" 4.06(b)
"Series C Directors" 4.07(b)
"Series M Conversion Price" 4.04(d)
"Series M Dividend Reference Date" 4.05(c)
"Series M Dividends 4.05(c)
"Surviving Business Entity" 10.02(b)
"Tax Matters Partner" 3.10
"Third Round Warrants" 4.01(c)
"Time of Cure" 4.07(b)
"Transferring Person" 6.01
</TABLE>
72
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73
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74
<PAGE> 76
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the day and year first above written.
MEMBERS
-------
BCE MOBILE COMMUNICATIONS, INC.
By: /s/Robert A. Ferchat
--------------------
Name:Robert A. Ferchat
Title: Chairman
IRIDIUM AFRICA CORPORATION
By: /s/George Medawar
-----------------
Name: George Medawar
Title: Managing Director
IRIDIUM ANDES CARIBE, LTD.
By: /s/Alberto Finol
----------------
Name: Alberto Finol
Title: Chairman
IRIDIUM BRASIL S/A
By: /s/Atilano de Oms Sobrinho
--------------------------
Name: Atilano de Oms Sobrinho
Title: President
IRIDIUM CANADA, INC.
By: /s/Robert Ferchat
-----------------
Name: Robert Ferchat
Title: Chairman
IRIDIUM CHINA (HONG KONG) LTD.
By: /s/Wang Mei Yue
---------------
Name: Wang Mei Yue
Title: Chairman & President
75
<PAGE> 77
IRIDIUM MIDDLE EAST CORPORATION
By: /s/Hasan M Binladin
-------------------
Name: Hasan M. Binladin
Title: Board Member
IRIDIUM INDIA TELECOM LIMITED
By: /s/Jaydev H. Raja
-----------------
Name: Jaydey H. Raja
Title: Managing Director
IRIDIUM SUDAMERICA CORPORATION
By: /s/Alberto Finol
----------------
Name: Alberto Finol
Title: Chairman
KHRUNICHEV STATE RESEARCH AND
PRODUCTION SPACE CENTER
By: /s/A. Kiselev
----------------
Name: A. Kiselev
Title: General Director
KOREA MOBILE TELECOMMUNICATIONS
CORPORATION
By: /s/Jung L. Mok
--------------
Name: Jung L. Mok
Title: Senior Managing Director
LOCKHEED MARTIN CORPORATION
By: /s/Lillian M. Trippett
----------------------
Name: Lillian M. Trippett
Title: Vice President & Secretary
MOTOROLA, INC.
By: /s/Edward Gams
--------------
Name: Edward Gams
Title: Vice President and Director
of Investor Relations
76
<PAGE> 78
NIPPON IRIDIUM (BERMUDA) LIMITED
By: /s/Yoshiharu Yasuda
-------------------
Name: Yoshiharu Yasuda
Title: Vice President
PACIFIC ELECTRIC WIRE & CABLE CO., LTD.
By: /s/Jack T. Sun
--------------
Name: Jack T. Sun
Title: President
RAYTHEON COMPANY
By: /s/Jack R. Kelbe
----------------
Name: Jack R. Kelbe
Title: Manager Command, Control,
Communications & Surveillance
Systems, Raytheon Electronic
Systems Division
STET - SOCIETA FINANZIARIA TELEFONICA PER
AZIONI
By: /s/Giuseppe Morganti
--------------------
Name: Giuseppe Morganti
Title: Co-Director Strategic Planning
77
<PAGE> 79
SOUTH PACIFIC IRIDIUM HOLDINGS LIMITED
By: /s/ HARDIANTO KAHARUDIN KAMARGA
-------------------------------
Name: Hardianto Kaharudin Kamarga
Title: Director
SPRINT IRIDIUM, INC.
By: /s/Theodore H. Schell
---------------------
Name: Theodore H. Schell
Title: Vice President
THAI SATELLITE TELECOMMUNICATIONS CO.,
LTD.
By: /s/Sribhumi Sukhanetr
---------------------
Name: Dr. Sribhumi Sukhanetr
Title: Chairman
By: /s/Piyabutra Vasudhara
----------------------
Name: Piyabutra Vasudhara
Title: President
VEBACOM GMBH
By: /s/Ulf Bohla
------------
Name: Ulf Bohla
Title: Chairman
By: /s/H. Wilchens
--------------
Name: H. Wilchens
Title: Chief Financial Officer
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<PAGE> 80
OTHER PARTIES
- -----------------------------------
Solely for purposes of Sections
4.03, 6.02, 6.03, 6.04, 6.05, 6.06,
7.01(d), 9.02, 9.03 and Article X
THE INAMORI FOUNDATION
By: /s/Kazuo Inamori
-----------------------------------
Name: Kazuo Inamori
Title: President
VEBA TELECOM VERWALTUNGSGESELLSCHAFT MBH
By: /s/ Huppe By: /s/ Pohlig
----------------------------------- ----------------------
Name: Huppe Name: Pohlig
Title: Managing Director Title: Managing Director
79
<PAGE> 81
OTHER PARTIES
- -------------------------------------------------------
Solely for purposes of Article VIII and Section 11.01(h)
NIPPON IRIDIUM CORPORATION
By: /s/Yoshiharu Yasuda
-----------------------------------
Name: Yoshiharu Yasuda
Title: President
80
<PAGE> 82
ANNEX A
DIRECTORS
<TABLE>
<CAPTION>
DESIGNATING MEMBER DIRECTOR(S) ALTERNATE(S)
<S> <C> <C>
Selected by Directors in Robert W. Kinzie (Chairman)
accordance with Section 2.03
Edward F. Staiano
(Vice Chairman)
Iridium Africa Corporation George S. Medawar
Iridium Canada, Inc. Robert A. Ferchat Maurice Rompre
Iridium China (Hong Kong) Wang Mei Yue
Ltd.
Iridium India Telecom Limited S.H. Kahn
Iridium Middle East Hassan Binladin Basil Al-Rahim
Corporation
Iridium SudAmerica Alberto Finol Jose Manual Lopez-Ona
Corporation Atilano de Oms Sobrinho Donald W. Murden
Khrunichev State Research and Anatoli I. Kiselev
Production Space Center
Korea Mobile Jung L. Mok
Telecommunications
Corporation
Motorola, Inc. Gordon Comerford
Edward Gams
John F. Mitchell
Jack M. Scanlon
J. Michael Norris (Class B
Shares)
Nippon Iridium (Bermuda) Kazuo Inamori
Limited Yusai Okuyama
Yoshiharu Yasuda
Pacific Electric Wire & Cable Tao-Tsun Sun
Co., Ltd.
Raytheon Company and Lockheed Jack R. Kelble
Martin Corporation
Sprint Iridium, Inc. Theodore H. Schell C. Sue Love
STET--Societa Finanziaria Giuseppe Morganti
Telefonica per Azioni
Thai Satellite Sribhumi Sukhanetr
Telecommunications
Co., Ltd.
</TABLE>
A-1
<PAGE> 83
Vebacom Holdings, Inc. Ulf Bohla
Ludwig Hoffmann
A-2
<PAGE> 84
OFFICERS
<TABLE>
<S> <C> <C>
Edward F. Staiano - Chief Executive Officer
Jerrold D. Adams - President and Chief Operating Officer
Paul V. Daverio - Vice President, Chief Financial Officer and Treasurer
F. Thomas Tuttle - Vice President, General Counsel and Secretary of the Board
Bruce Dale - Vice President, Network Operations
Dale Hogg - Vice President, Human Resources
Mark Gercenstein - Vice President, Business Operations
Leo Mondale - Vice President, Marketing & Strategic Planning
Larry G. Rands - Vice President, Engineering
Francis J.P. Latapie - Vice President, Government Affairs
Robert N. Beury, Jr. - Deputy General Counsel and
Assistant Secretary
</TABLE>
A-3
<PAGE> 85
ANNEX B
INTERESTS
<TABLE>
<CAPTION>
SERIES M SERIES A SERIES B SERIES C
CLASS 1 CONVERTIBLE CLASS 2 CLASS 2 CLASS 2
NAME AND BUSINESS ADDRESS INTERESTS CLASS 2 INTERESTS INTERESTS INTERESTS INTERESTS
------------------------- --------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Iridium Africa Corporation..................... 3,000,000 -- -- -- --
c/o Mawarid Services (UK) Ltd.
Berkeley Square House, 6th Floor
Berkeley Square
London W1X 5PN England
Iridium Andes-Caribe........................... 4,350,000 -- -- -- --
Ed. Maploca II -- Piso 4
Av. Principal de Los Cortijos de Lourdes
Caracas, Venezuela
Iridium Brasil S/A............................. 2,824,755 -- -- -- --
CX. Postal 7060
80021 - Curitiba - PR -
Brazil
Iridium Canada, Inc. .......................... 5,250,000 -- 8,988.8 -- --
c/o BCE Mobile
20 Carlson Court
Etobioke, Ontario
Canada M9W 6V4
Iridium China (Hong Kong) Ltd. 5,250,000 -- -- -- --
12/F Conic Investment Building
13 Hok Yuen Street
Hunghom, Kowloon, Hong Kong
</TABLE>
B-1
<PAGE> 86
<TABLE>
<CAPTION>
SERIES M SERIES A SERIES B SERIES C
CLASS 1 CONVERTIBLE CLASS 2 CLASS 2 CLASS 2
NAME AND BUSINESS ADDRESS INTERESTS CLASS 2 INTERESTS INTERESTS INTERESTS INTERESTS
------------------------- --------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Iridium Middle East Corporation.................. 6,000,000 -- -- -- --
c/o Carlyle International
1001 Pennsylvania Ave., N.W.
Washington, D.C. 20004
-or-
c/o Mawarid Services (UK) Ltd. .................
Berkeley Square House, 6th Floor
Berkeley Square
London W1X 5PN England
Iridium India Telecom Limited..................... 5,250,000 -- -- -- --
c/o Industrial Development Bank of India
IDBI Tower, Cuffe Parade
Bombay -- 400 005 India
Khrunichev State Research and.....................
Production Space Center 6,133,125 -- -- --
18, Novozavodskaja St.
Moscow 121309
Russian Federation
Korea Mobile Telecommunications Corporation....... 5,250,000 -- 13,230.3 -- --
6th Floor, Namsan Green Building 267
5-ga, Namdaemunno
Chung-gue, Seoul Korea
Lockheed Martin Corporation....................... 1,500,000 -- -- -- --
1111 Lockheed Way
ORGN 50-01, Bldg. 104
Sunnyvale, CA 94089
Motorola, Inc. ................................... 26,533,425 -- -- 1 75
1303 East Algonquin Rd.
Schaumburg, IL 60196
</TABLE>
B-2
<PAGE> 87
<TABLE>
<CAPTION>
SERIES M SERIES A SERIES B SERIES C
CLASS 1 CONVERTIBLE CLASS 2 CLASS 2 CLASS 2
NAME AND BUSINESS ADDRESS INTERESTS CLASS 2 INTERESTS INTERESTS INTERESTS INTERESTS
------------------------- --------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Nippon Iridium (Bermuda) Limited................... 15,750,000 -- -- -- --
c/o NIPPON IRIDIUM CORPORATION
Ichibancho FS Building 8
Ichibancho Chiyoda-ku
Tokyo 102 Japan
Pacific Electric Wire & Cable, Co., Ltd. .......... 5,250,000 -- -- -- --
4th Floor, Pacific Commercial Bldg.
285, Chung Hsiao East Road, Section 4
Taipei 106, Taiwan
Raytheon Company................................... 900,000 -- -- -- --
1001 Boston Post Road
Marlboro, MA 01752
STET--Societa Finanziaria Telefonica per Azioni.... 5,550,000 -- -- -- --
c/o Telecom Italia SpA
Via Flaminia 189
00196 Rome Italy
South Pacific Iridium Holdings Limited.............
c/o Harney Westwood & Riegels
Craigmuir Chambers, P.O. Box 71
Road Town, Tortola
British Virgin Islands
Sprint Iridium, Inc. .............................. 5,250,000 -- 13,230.3 -- --
2330 Shawnee Mission Parkway
Westwood, KS 66205
Thai Satellite Telecommunications Co., Ltd. ....... 5,250,000 -- -- -- --
c/o United Communication
Industry Co. Ltd.
20 Phahonyothin Rd.
Soi 11 Phayathai
Bangkok 10400, Thailand
VEBACOM Holdings, Inc. ............................ 12,427,875 -- -- -- --
c/o VEBACOM GmbH
Am Bonneshof 35
D-40474 Dusseldorf Germany
Totals..................................... 129,219,150 -- 35,449.4 1 75
</TABLE>
B-3
<PAGE> 88
ANNEX C
PURCHASER ACKNOWLEDGEMENTS AND AGREEMENTS
Purchaser Acknowledgments and Agreements. In
connection with the acquisition of Class 1 Interests, Class 2 Interests or
Units consisting of Notes and Warrants ("Offered Interests") under the Limited
Liability Company Agreement (the "Agreement") to which this Annex C is
attached, each purchaser (a "Purchaser", with respect to itself only,
acknowledges and agrees that:
(i) Such Purchaser (1) received and read a copy of
the Private Placement Memorandum issued in connection with the issuance of
such Offered Interests (including in particular the disclaimers set forth in
the forepart thereof and the disclosures set forth in or referred to under
the caption "RISK FACTORS" and, in the case of securities issued under
Section 4.03 of the Agreement, "Recent Developments"), (2) understands that
such Private Placement Memorandum did not contain all of the information
which may be of interest to a prospective investor and did not explain
completely the complexities of the technologies or the regulatory and
licensing considerations involved in the IRIDIUM system, (3) had an
opportunity to ask questions and receive answers concerning the IRIDIUM
system generally, the risks inherent in an investment in such Offered
Interests and the terms and conditions of the sale of such Offered Interests
and (4) had full access to such other information concerning the Company and
the IRIDIUM system as such Purchaser has requested.
(ii) Such Purchaser (1) received and read a copy of
the Space System Contract, the O&M Contract and the Terrestrial Network
Development Contract, (2) had full access to such other information
concerning the Space System Contract, the O&M Contract and the Terrestrial
Network Development Contract as such Purchaser requested, (3) understands
that LLC is bound by the provisions of the Space System Contract, the O&M
Contract and the Terrestrial Network Development Contract and hereby ratifies
LLC's execution of the Space System Contract, the O&M Contract and the
Terrestrial Network Development Contract and (4) agrees to the terms of the
Space System Contract, the O&M Contract and the Terrestrial Network
Development Contract and will not take any action in contravention of the
enforcement of, and LLC's full compliance with, the terms thereof.
(iii) Such Purchaser shall not transfer any of such
Offered Interests or Underlying Common Shares unless (1) such Transfer is
effected in accordance with the terms of the Agreement and (2)(x) such
Offered Interests and Underlying Common Shares are registered under the
United States Securities Act of 1933, as amended (the "1933 Act") and
applicable state securities laws in the United States or (y) the Transfer
does not violate any United States Federal or state securities laws or any of
the rules and regulations
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<PAGE> 89
promulgated thereunder (collectively, the "U.S. Securities Laws") and the
request for Transfer is accompanied by an opinion of counsel satisfactory to
LLC that such Transfer is in accordance with the U.S. Securities Laws.
(iv) Such Offered Interests have not been registered
under the U.S. Securities Laws. Such securities are offered and sold in
reliance upon the exemptions from registration provided in Section 4(2) of
the 1933 Act and Regulation S under the 1933 Act and applicable exemptions
under state securities laws and neither LLC nor any Person acting on its
behalf has offered or sold such Offered Interests to such Purchaser by means
of any general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.
(v) Such Purchaser must bear the economic risk of an
investment in such Offered Interests for an indefinite period of time
because:
(A) there is presently no public market for any
interests in or securities of LLC and LLC
does not anticipate that any public market
for such interests or securities will develop
in the future, and
(B) such Offered Interests have not been
registered under any U.S. Securities Laws
and, therefore, cannot be sold in a
transaction subject to the jurisdiction of
any of the U.S. Securities Laws unless such
securities are subsequently registered (which
is unlikely to occur) under applicable U.S.
Securities Laws or an exemption from
registration under such laws is available.
(vi) LLC has the right to deny a Transfer of Offered
Interests and Underlying Common Shares as provided in the Agreement. If so
provided in the Agreement, the certificates representing such Offered
Interests and Underlying Common Shares purchased and to be purchased by such
Purchaser pursuant to the Agreement will be held by LLC until such time as
the purchase price for all of such Purchaser's Offered Interests has been
fully paid.
(vii) The certificates representing such Offered
Interests and Underlying Class 1 Interests will bear such legend or legends,
consistent with the terms of the Agreement, as LLC or its legal counsel deems
necessary or desirable.
(viii) No securities commission or similar authority
has approved or recommended an investment in such Offered Interests or
guaranteed or passed upon the fairness of the terms of the offering of such
Offered Interests, the safety of such Offered Interests as an investment, the
realization of any economic return from an investment of such Offered
Interests or the accuracy or
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<PAGE> 90
adequacy of the disclosures set forth in the applicable Private Placement
Memorandum.
(ix) Such Purchaser will make any required filings
under the HSR Act and will comply with any requests for additional
information by the United States Federal Trade Commission or Department of
Justice pursuant to the HSR Act.
(x) LLC shall have the right to disclose to other
Persons the contents of the Agreement, including the identity of each Member
and its Indirect Owner(s), if any, the size of each Purchaser's commitment to
purchase Offered Interests and the scope of its Gateway Service Territory.
All capitalized terms which are not defined in this
Annex shall have the meanings ascribed thereto in the Agreement.
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<PAGE> 91
ANNEX D
RESERVE CAPITAL CALL COMMITMENTS
<TABLE>
<CAPTION>
Class 1 Member(1) Capital Call Commitment
-------------- -----------------------
<S> <C>
Iridium Africa Corporation 75,000
Iridium Canada Inc. 75,000
Iridium China (Hong Kong) Ltd. 75,000
Iridium India Telecom Limited 75,000
Iridium Middle East Corporation 150,000
Iridium SudAmerica Corporation 150,000
Khrunichev State Research and Production 75,000
Space Center
Korea Mobile Telecommunications Corporation 75,000
Lockheed Martin Corporation 37,500
Motorola, Inc. 3,337,500
Nippon Iridium (Bermuda) Limited 2,250,000
Pacific Electric Wire & Cable Co., Ltd. 75,000
Raytheon 225,000
Sprint Iridium, Inc. 75,000
STET- Societa Finanziaria Telefonica 562,500
per Azioni
Thai Satellite Telecommunications 75,000
Co., Ltd.
Vebacom Holdings, Inc. 1,693,050
</TABLE>
- -----------------
(1) Members without Capital Call obligations are not listed.
D-1
<PAGE> 92
ANNEX E
GATEWAY SERVICE TERRITORY ALLOCATION SCHEDULE
<TABLE>
<S> <C> <C>
Iridium Africa Algeria Madagascar
Angola Malawi
Benin Mali
Botswana Mauritania
Burkina Faso Mozambique
Burundi Namibia
Cameroon Niger
Cape Verde Nigeria
Central African Reunion Island
Republic Rwanda
Chad Sao Tome and
Comoro Principe
Congo Senegal
Cote d'Ivoire Seychelles
Cyprus Sierra Leone
Djibouti Somalia
Equatorial Guinea South Africa
Ethiopia Sudan
Gabon Swaziland
Gambia Tanzania
Ghana Togo
Guinea Tunisia
Guinea-Bissau Turkey
Kenya Uganda
Lesotho Zaire
Liberia Zambia
Libya Zimbabwe
Iridium Canada Canada+
St. Pierre and
Miquelon+
Bermuda+
Puerto Rico+
United States+
Iridium China (Hong Kong) Ltd. China
Hong Kong
Macau
Mongolia
</TABLE>
E-1
<PAGE> 93
<TABLE>
<S> <C> <C>
Iridium India Telecom Limited Bangladesh
Bhutan
India
Maldives
Nepal
Sri Lanka
Iridium Middle East Corporation Afghanistan Morocco
Armenia Oman
Azerbaijan Pakistan
Bahrain Qatar
Egypt Saudi Arabia
Iran Syria
Iraq Tajikistan
Jordan Turkmenistan
Kuwait United Arab
Kyrgyzstan Emirates
Lebanon Yemen
Iridium SudAmerica Corporation Anguilla Martinique
Aruba Montserrat
Antigua and Netherlands Antilles
Barbuda (Bonaire Curacao,
Argentina St. Maarten and
Bahamas St. Eustatius)
Barbados Paraguay
Bolivia Peru
Brazil Saint Kitts and
Cayman Islands Nevis
Chile Saint Lucia
Colombia Saint Martin
Cuba Saint Vincent and
Dominica the Grenadines
Dominican Suriname
Republic Trinidad and
Ecquador Tobago
French Guiana Turks and Caicos
Grenada Islands
Guadaloupe Uruguay
Guyana Venezuela
Haiti Virgin Islands
Jamaica
</TABLE>
E-2
<PAGE> 94
<TABLE>
<S> <C> <C>
Khrunichev State Research and Belorussia Lithuania
Production Space Center Estonia Moldovia
Georgia Russian Federation
Kazakhstan Uzbekistan
Latvia
Korea Mobile Telecommunications North Korea
Corporation South Korea
Motorola, Inc. Belize Mexico
Canada+ Nicaragua
Costa Rica Panama
El Salvador Puerto Rico+
Bermuda+ St. Pierre and
Guatemala Miquelon+
Honduras United States+
NIPPON IRIDIUM Japan
CORPORATION
Pacific Electric Wire & Cable Brunei
Co., Ltd. Indonesia
Papua New
Guinea
Philippines
Taiwan
South Pacific Iridium American Samoa New Caledonia
Holdings Limited Antarctica New Zealand
Australia Solomon Islands
Cook Islands Tahiti
Fiji Tonga
French Polynesia Tuvalu
Kiribati Vanuatu
Marshall Islands Western Samoa
Micronesia Wallis and Futuna
Nauru
STET- Societa Finanziaria Belgium Liechtenstein
Telefonica per Azioni Bosnia and Luxembourg
Herzegovina Macedonia
Croatia Malta
Denmark Monaco
Faroe Islands Netherlands
France San Marino
Greece Slovenia
Holy See Switzerland
Italy Yugoslavia
Sprint Iridium, Inc. Canada+
St. Pierre and
Miquelon+
Bermuda+
Puerto Rico+
United States+
</TABLE>
E-3
<PAGE> 95
<TABLE>
<S> <C> <C>
Thai Satellite Telecommunications Cambodia
Co., Ltd. Laos
Malaysia
Myanmar
Singapore
Thailand
Vietnam
VEBACOM GmbH Albania Ireland
Andorra Israel
Austria Norway
Bulgaria Poland
Czech Republic Portugal
Finland Romania
Germany Gibraltar Spain
Greenland Sweden
Hungary Slovakia
Iceland Ukraine
United Kingdom
</TABLE>
+Some or all of these jurisdictions are expected to be shared by a North
American gateway consortium consisting of Iridium Canada, Inc., Motorola, Inc.
and Sprint Corporation.
Note: The South Pacific Territory, which consists of American Samoa,
Antarctica, Australia, Cook Islands, Fiji, French Polynesia, Kiribati, Marshall
Islands, Micronesia, Nauru, New Caledonia, New Zealand, Solomon Islands,
Tahiti, Tonga, Tuvalu, Vanuatu, Western Samoa, Wallis and Futuna, has not yet
been allocated
E-4
<PAGE> 96
EXHIBIT 1-A
Amendments to Outstanding Notes
FORM OF NOTE
THIS SECURITY MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THOSE REGISTRATION
REQUIREMENTS. ACCORDINGLY, THE HOLDER OF THIS SECURITY SHALL NOT BE ENTITLED TO
TRANSFER THIS SECURITY AT ANY TIME UNLESS, AT THE TIME OF SUCH TRANSFER OR
EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT RELATING TO THIS SECURITY
HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (II) THE TRANSFER OF THIS
SECURITY IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
TRANSFER OF THIS SECURITY IS ALSO RESTRICTED BY THE TERMS OF A LIMITED
LIABILITY COMPANY AGREEMENT OF IRIDIUM LLC, DATED AS OF JULY 1, 1996, BY AND
AMONG THE PARTIES NAMED THEREIN (THE " LLC AGREEMENT"). A COPY OF THE LLC
AGREEMENT IS ON FILE AND AVAILABLE FOR INSPECTION BY THE HOLDER OF THIS SECURITY
AT THE PRINCIPAL EXECUTIVE OFFICES OF IRIDIUM LLC.
IRIDIUM LLC
14 1/2% SENIOR SUBORDINATED DISCOUNT NOTE
DUE 2006
No. _________ $ _________
Iridium LLC, A LIMITED LIABILITY COMPANY duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person hereunder), for value received, hereby promises to pay to
_________________________, or registered assigns, the principal sum of
______________________ Dollars on ______________, 2006, and to pay interest
thereon from ___________, 2001 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on March 1 and
September 1 in each year, commencing September 1, 2001, at the rate of 14 1/2%
per annum, until the principal hereof is paid or made available for payment,
provided that any principal and premium, and any such instalment of interest,
which is overdue shall bear
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<PAGE> 97
interest at the rate of 14 1/2% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are
due until they are paid or made available for payment, and such interest shall
be payable on demand.
Payment of the principal of (and premium, if any) and any such interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in either the Borough of Manhattan, the City of New York or
Washington, D.C., in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
This Security is one of a duly authorized issue of 14 1/2% Senior
Subordinated Discount Notes due 2006 of the Company (herein called the
"Security"), issued and to be issued under instruments substantially identical
hereto and limited in aggregate principal amount to $ million.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
"Accreted Value" means with respect to any Security, (i) as of any date of
determination prior to the date on which the Security first bears or accrues
interest, the sum of (a) the initial purchase price of each Security and (b)
the portion of the excess of the principal amount of each Security over such
initial purchase price which shall have been accreted thereon through such
date, such amount to be so accreted on a daily basis at the rate of 14 1/2% per
annum of the initial purchase price of such Security, compounded semi- annually
on each March 1 and September 1 from the date of issuance of such Security
through the date of determination or (ii) as of any date of determination on or
after the date on which the Security first bears or accrues interest, 100% of
the principal amount at maturity of each Security.
"Act", when used with respect to any Holder, has the meaning specified in
Section 102.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, (i) "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
securities, by contract or otherwise; (ii) the terms "controlling" and
"controlled" have meanings correlative to the foregoing; and (iii) a Person
shall be deemed to be controlled by any other Person which owns more than 15%
1-A-2
<PAGE> 98
of such Person's outstanding Common Stock or which has the right, contractually
or otherwise, to elect more than 15% of the members of such Person's board of
directors.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by
law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face
of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation shall be the date
of the last payment of rent or any other amount due under such 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 any and all shares, interests,
participation or other equivalents (however designated) of corporate stock OR
SIMILAR EQUITY INTERESTS of such Person. IN THE CASE OF THE COMPANY, CAPITAL
STOCK INCLUDES CLASS 1 MEMBERSHIP INTERESTS AND CLASS 2 MEMBERSHIP INTERESTS.
"Common Stock" of any Person means Capital Stock of such Person that does not
rank 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. IN
THE CASE OF THE COMPANY, "COMMON STOCK" MEANS THE CLASS 1 MEMBERSHIP INTERESTS.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Security, and thereafter "Company" shall mean
such successor Person.
"corporation" means a corporation, association, company, joint-stock company
or business trust.
"Debt" 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 obligations
1-A-3
<PAGE> 99
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 (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith), (v) every Capital
Lease Obligation of such Person, (vi) the maximum fixed redemption or
repurchase price of Disqualified Stock of such Person outstanding at the time
of determination, (vii) every obligation under Interest Rate Protection
Agreements or Currency Protection Agreements of such Person and (viii) every
obligation of the type referred to in clauses (i) through (vii) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The term "Debt" shall not
include any obligations of the Company or any Restricted Subsidiary under the
Space System Contract, the Operations and Maintenance Contract or the
Terrestrial Network Development Contract.
"Defeasance" has the meaning specified in Section 302.
"Defeasance and Satisfaction Payments" has the meaning specified in Section
1002.
"Designated Senior Debt" means (i) all secured Senior Debt which is Incurred
pursuant to any agreement (or series of related agreements), (ii) any other
issue of Senior Debt which is Incurred pursuant to an agreement (or series of
related agreements) providing for indebtedness, or commitments to lend, of at
least $100 million and (iii) at any time that there is no Senior Debt that
falls within either clause (i) or (ii) above, any Senior Debt, in each case
which is specifically designated in the instrument evidencing such Senior Debt
or the agreement under which such Senior Debt arises as "Designated Senior
Debt" by the Company.
"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), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final Stated Maturity of the
Securities.
"Event of Default" has the meaning specified in Section 501.
"Generally accepted accounting principles" means generally accepted
principles in the United States, which are applicable as of the date of
determination.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt or other obligation of any Person, to
create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee
or otherwise
1-A-4
<PAGE> 100
become liable in respect of such Debt or other obligation or the recording, as
required pursuant to generally accepted accounting principles or otherwise, of
any such Debt or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing).
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an instalment of interest on such Security.
"Interest Rate Protection Agreement or Currency Protection Agreement" of any
Person means any interest rate protection agreement (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
and/or other types of interest hedging agreements designed to protect such
Person against fluctuations in interest rates and which have a notional amount
no greater than the payments due with respect to the Debt being hedged thereby,
and any currency protection agreement (including foreign exchange contracts,
currency swap agreements or other currency hedging arrangements) entered into
in the ordinary course of business.
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Major Bank Financing" means an arrangement under which one or more
commercial banks or other institutional lenders extend or commit to extend
credit to the Company in an aggregate amount exceeding $1 billion.
"Maturity" means when used with respect to any Security, the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at Stated Maturity or the Redemption Date and whether by
declaration of acceleration, call for redemption or otherwise.
"Motorola" means Motorola, Inc., a Delaware corporation.
"Notice of Default" means a written notice of the kind specified in Section
501(5).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company.
"Operations and Maintenance Contract" means the IRIDIUM System Operations and
Maintenance Contract between the Company and Motorola, dated as of July 29,
1993, as amended from time to time.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company.
"Outstanding Securities" means, as of the date of determination, all
Securities theretofore authenticated and delivered, except:
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<PAGE> 101
(1) Securities theretofore cancelled;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to such Security or provision therefor has been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 302; and
(4) Securities which have been paid pursuant to Section 203
or in exchange for or in lieu of which other Securities have been
authenticated and delivered, other than any such Securities in respect of
which there shall have been presented to the Company proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of a Security which
shall be deemed to be Outstanding shall be the amount of the principal thereof
which would be due and payable as of such date upon acceleration of the
Maturity thereof to such date pursuant to Section 502 and (B) Securities owned
by the Company or any other obligor upon the Securities shall be disregarded
and deemed not to be Outstanding. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company. The Company will initially act as its own Paying Agent.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means either the Borough of Manhattan, the City of New
York or Washington, DC.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 203 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
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<PAGE> 102
"Proceeding" has the meaning specified in Section 1002.
"Public Offering" means an underwritten public offering of Common Stock
which, if offered primarily in the United States, is registered under the
Securities Act of 1933, as amended.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Security.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Security.
"Refinancing" means any renewal, extension, refinancing or refunding of Debt
or Preferred Stock; and the terms "Refinance"and "Refinanced" shall have
meanings correlative to the foregoing.
"Security" means this Security.
"Securities" means the Security and all other Securities constituting one of
the Company's 14 1/2% Senior Subordinated Discount Notes due 2005.
"Security Register" has the meaning specified in Section 202.
"Securities Payment" has the meaning specified in Section 1002.
"Senior Debt" means the principal of, premium, if any, and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, or other
amount of, or fees, costs and expenses incurred in connection with, (i) Debt
for money borrowed of the Company, whether Incurred on or prior to March 1,
1996 or thereafter incurred, other than the Securities, (ii) Debt of the
Company evidenced by bonds, debentures, notes or other similar instruments,
including Debt Incurred in connection with the acquisition of property, assets
or businesses, (iii) matured and unmatured reimbursement or other obligations
of the Company with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of the Company, (iv) obligations of
the Company under Interest Rate Protection Agreements or Currency Protection
Agreements, (v) Capital Lease Obligations of the Company, (vi) guarantees by
the Company of Debt for money borrowed and (vii) amendments, modifications and
Refinancings of any such Debt; provided, however, the following does not
constitute Senior Debt: (A) any Debt which by the terms of the instrument
creating or evidencing the same is not superior in right of payment to the
Securities, (B) any Debt which is represented by Disqualified Stock, (C) any
Debt of the Company owed to a Subsidiary, (D) any Debt which is subordinated in
right of payment in respect to any other Debt of the Company, or (E) any
obligations of the Company under the Space System Contract, the Operations and
Maintenance Contract or the Terrestrial Network Development Contract.
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<PAGE> 103
"Space System Contract" means the IRIDIUM Space System Contract between the
Company and Motorola, dated as of July 29, 1993, as amended from time to time.
"Stated Maturity", when used with respect to any Debt or any instalment of
principal thereof or interest thereon, means the date specified in such Debt as
the fixed date on which the principal of such Debt or such instalment of
principal or interest is deemed payable.
"Subordinated Debt" means Debt of the Company that is subordinated in right of
payment to Securities.
"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 thereof 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 thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Terrestrial Network Development Contract" means the Terrestrial Network
Development Contract between the Company and Motorola, entered into in June
1995, as amended from time to time.
"U.S. Government Obligation" has the meaning specified in Section 303.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added
before or after the title "vice president".
"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 with respect to the Company. With respect to the Company, Voting
Stock means the Company's Common Stock , and any OTHER class of Common Stock
having comparable voting rights on all matters other than the election of
directors
SECTION 102. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by the Securities to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such
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<PAGE> 104
instrument or instruments are delivered to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
The Company may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by the Securities to be given, made or taken by
Holders of Securities, provided that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to
in the next paragraph. With regard to any record date set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date (as defined below) by Holders of the requisite principal amount
of Outstanding Securities. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be
construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Company,
at its own expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to each Holder of
Securities.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the Company in writing, and to each
Holder of Securities, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the party hereto which set such record date shall be deemed to
have initially designated the 180th day after such record date as the
Expiration Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding the foregoing,
no Expiration Date shall be later than the 180th day after the applicable
record date.
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SECTION 103. Notice to Holders; Waiver.
Where this Security provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by
such event, at its address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders and any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given.
Where this Security 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.
Waivers of notice by Holders shall be filed with the Company, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 104. Effect of Headings.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
SECTION 105. Successors and Assigns.
All covenants and agreements in this Security by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 106. Separability Clause.
In case any provision in this Security shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 107. Benefits of Security.
Nothing in this Security, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, the holders of Senior
Debt and the Holders, any benefit or any legal or equitable right, remedy or
claim under this Security.
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SECTION 108. Governing Law.
This Security shall be governed by and construed in accordance with the law
of the State of New York without regard to principles of conflict of laws.
SECTION 109. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Security) payment of interest
or principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, or Stated Maturity, as the case may be.
SECTION 110. No Recourse Against Others.
A director, officer, employee, consultant, contractor or MEMBER as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting any of the
Securities waives and releases all such liability.
ARTICLE TWO
THE SECURITIES
SECTION 201. Denominations.
The Securities are issuable only in registered form without coupons and only
in integral multiples of $1,000.
SECTION 202. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of
Securities.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits, as the Securities surrendered upon
such registration of transfer or exchange.
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Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed, by the Holder thereof or his attorney duly authorized in
writing. The Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption and ending at the close of business on the day of such mailing, or
(B) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
SECTION 203. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Company, the Company shall
execute and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding. If
there shall be delivered to the Company (i) evidence to its satisfaction of the
destruction, loss or theft of any Security and (ii) such security or indemnity
as it may require to save it harmless, then, in the absence of notice to the
Company that such Security has been acquired by a bona fide purchaser, the
Company shall execute, in lieu of any such destroyed, lost or stolen Security,
a new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding. In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due and payable, the Company
in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone. The provisions of
this Section are exclusive and shall preclude (to the extent lawful) all other
rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 204. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company and any agent of the Company may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and any
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premium and any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
nor any agent of the Company shall be affected by notice to the contrary.
SECTION 205. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day year of
twelve 30-day months.
ARTICLE THREE
DEFEASANCE
SECTION 301. Company's Option to Effect Defeasance.
The Company may elect, at its option at any time, to have Section 302 apply
to the Securities upon compliance with the conditions set forth below in this
Article.
SECTION 302. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section applied to the
Securities, the Company shall be deemed to have been discharged from any and
all of its obligations, and the provisions of Article Ten shall cease to be
effective, with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 303 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by such Securities and to have satisfied all its other obligations
under this Security, subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of the Holder of
this Security to receive, solely from the trust fund described in Section 303
and as more fully set forth in such Section, payments in respect of the
principal of and any premium and interest on such Securities when payments are
due, (2) the Company's obligations with respect to such Securities under
Sections 202, 203, 802 and 803 and (3) this Article.
SECTION 303. Conditions to Defeasance.
The following shall be the conditions to the application of Section 302 to
the Securities:
(1) The Company shall irrevocably have deposited or
caused to be deposited in trust with a trustee (who shall agree to comply
with the provisions of this Article applicable to it) as trust funds for the
purpose of making the following payments,
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specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of the Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Holders, to pay and discharge,
and which shall be applied by such trustee to pay and discharge, the
principal of (premium, if any) and each installment of interest, if any, on
the Securities on the respective Stated Maturities, in accordance with the
terms of this Security. As used herein, "U.S. Government Obligation" means
(x) any security which is (i) a direct obligation of the United States of
America for the payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
(i) or (ii), is not callable or redeemable at the option of the issuer
thereof, and (y) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with
respect to any U.S. Government Obligation which is specified in clause (x)
above and held by such bank for the account of the holder of such depositary
receipt, or with respect to any specific payment of principal of or interest
on any U.S. Government Obligation which is so specified and held, provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by such
depositary receipt.
(2) In the event of an election to have Section 302 apply
to the Securities, the Company shall have delivered to the Holders an Opinion
of Counsel stating that (A) the Company has received from, or there has been
published by, the IRS a ruling or (B) since March 1, 1996, there has been a
change in the applicable Federal income tax law, in either case (A) or (B) to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Securities will not recognize gain or loss for Federal income
tax purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to the Securities and will be subject to Federal income
tax on the same amount, in the same manner and at the same times as would be
the case if such deposit, Defeasance and discharge were not to occur.
(3) At the time of such deposit, (A) no default in the
payment of any principal of or premium or interest on any Senior Debt shall
have occurred and be continuing, (B) no event of default with respect to any
Senior Debt shall have resulted in such Senior Debt becoming, and continuing
to be, due and payable prior to the date on which it would otherwise have
become due and payable (unless payment of such Senior Debt has been made or
duly provided for), and (C) no other event of default with respect to any
Senior Debt shall have occurred and be continuing permitting (after notice or
lapse of time or both) the holders of such Senior Debt (or a trustee on
behalf of such
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holders) to declare such Senior Debt due and payable prior to the date on
which it would otherwise have become due and payable.
(4) No event which is, or after notice or lapse of time
or both would become, an Event of Default shall have occurred and be
continuing at the time of such deposit or, with regard to any such event
specified in Sections 501(7) and (8), at any time on or prior to the 90th day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 90th day).
(5) Such Defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(6) Such Defeasance shall not result in the trust arising
from such deposit constituting an investment company within the meaning of
the Investment Company Act of 1940, as amended, unless such trust shall be
registered under such act or exempt from registration thereunder.
(7) The Company shall have delivered to the Holders an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance have been complied with.
SECTION 304. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 803, all money and
U.S. Government Obligations (including the proceeds thereof) deposited with a
trustee (solely for purposes of this Section and Section 305, such trustee is
referred to as the "Trustee") pursuant to Section 303 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance
with the provisions of the Securities, to the payment, either directly or
through any such Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Holders of such Securities, of all
sums due and to become due thereon in respect of principal and any premium and
interest, but money so held in trust need not be segregated from other funds
except to the extent required by law. Money and U.S. Government Obligations so
held in trust shall not be subject to the provisions of Article Ten.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 303 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon the Company's request any
money or U.S.
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Government Obligations held by it as provided in Section 303 with respect to
any Securities 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 the Defeasance with respect to such
Securities.
SECTION 305. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in accordance
with this Article with respect to any Securities by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations under this
Security from which the Company has been discharged or released pursuant to
Section 302 shall be revived and reinstated as though no deposit had occurred
pursuant to this Article with respect to such Securities, until such time as
the Trustee or Paying Agent is permitted to apply all money held in trust
pursuant to Section 304 with respect to such Securities in accordance with this
Article; provided, however, that if the Company makes any payment of principal
of or any premium or interest on any such Security following such reinstatement
of its obligations, the Company shall be subrogated to the rights (if any) of
the Holders of such Securities to receive such payment from the money so held
in trust.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge.
This Security shall, upon the written election by the Company, cease to be of
further effect (except as to any surviving rights of registration of transfer
or exchange of Securities herein expressly provided for), when:
(1) either (A) all Securities theretofore authenticated
and delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 203 and
(ii) Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section 803) have
been cancelled; or (B) all such Securities not theretofore cancelled (i) have
become due and payable, or (ii) will become due and payable at their Stated
Maturity within one year, or (iii) are to be called for redemption within one
year under arrangements for the giving of notice of redemption in the name,
and at the expense, of the Company, and the Company, in the case of (i), (ii)
or (iii), has irrevocably deposited or caused to be deposited with a trustee,
as trust funds in trust for the purpose of such redemption, money in an
amount sufficient to pay and discharge the entire Debt on the
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Securities not theretofore cancelled, including principal of, premium, if
any, and accrued interest, if any, on such Securities at such Maturity,
Stated Maturity or Redemption Date;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Holder of this Security
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Security have been complied with and that such satisfaction
and discharge will not result in a breach or violation of, or constitute a
default under, this Security or any other material agreement to which the
Company or any Subsidiary is a party.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article Ten or other subordination provisions
applicable to Securities or be voluntary or involuntary or be 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):
(1) failure to pay principal of (or premium, if any, on) any
Security when due, continued for two Business Days; or
(2) failure to pay any interest on any Security when due,
continued for 30 days; or
(3) failure to perform any covenant or agreement of the
Company under this Security (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with) and continuance of such default or breach for a period of 60 days
after there has been given notice to the Company by the Holders of at least
25% in aggregate principal amount of the Outstanding Securities written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(4) default under the terms of any instrument evidencing or
securing Debt for money borrowed by the Company or any Subsidiary having an
outstanding principal amount of $10 million individually or in the aggregate
which default has resulted in the
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acceleration of the payment of the principal amount of such Debt or
constitutes the failure to pay the principal amount of such Debt when due;
(5) the rendering of a final judgment or judgments (not
subject to appeal) against the Company or any Subsidiary in an amount in
excess of $10 million which remains undischarged or unstayed for a period of
60 days after the date on which the right to appeal has expired;
(6) 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 the
Company 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 court or mediator having jurisdiction;
(7) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable Federal
or state bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company or any Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Subsidiary under any applicable Federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Subsidiary or of any substantial part
of the property of the Company or any Subsidiary, or ordering the winding up
or liquidation of the affairs of the Company or any Subsidiary, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(8) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case or proceeding
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, or the
consent by it to the filing of such peti tion or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
FORMAL action by the Company or any Subsidiary in furtherance of any such
action.
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SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
501(7) or 501(8)) occurs and is continuing, then in every such case the Holders
of not less than 25% in principal amount of the Outstanding Securities may
declare the Accreted Value of all the Securities to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration such specified amount shall become immediately due and payable;
provided, however, that so long as any secured Senior Debt remains outstanding,
if any such Event of Default shall have occurred and be continuing, any such
acceleration shall not be effective until the earlier of (a) five Business Days
following a notice of acceleration given to the Company and to the holders of
the secured Senior Debt and only if upon such fifth Business Day such Event of
Default shall be continuing or (b) the acceleration of any secured Senior Debt.
If an Event of Default specified in Section 501(7) or 501(8) occurs, the
Accreted Value of all the Securities will ipso facto become immediately due and
payable without any declaration or other act on the part of any Holder.
At any time after such a declaration of acceleration has been made and before
a judgment or decree for payment of the money due has been obtained, the
Holders of a majority in principal amount of the Outstanding Securities, by
written notice to the Company, may rescind and annul such declaration and its
consequences if: (1) the Company has paid or deposited in trust a sum
sufficient to pay: (A) all overdue interest on all Securities, and (B) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate set forth in the first paragraph of this Security; and (2) all
Events of Default, other than the non-payment of the principal of Securities
which have become due solely by such declaration of acceleration, have been
cured or waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default in the
payment of the principal of (or premium, if any) or interest on any Security.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 504. Waiver of Usury, Stay or Extension Laws.
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The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of its obligations under this Security; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Holder or Holders, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 505. Limitation on Suits.
No Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to rights created under the Securities
(other than any right to institute such a proceeding to enforce the Company's
obligation to pay principal (and premium, if any) and interest on such Holder's
Securities and such Holder's rights under Sections 202 and 203), or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
the Holders of not less than 25% in principal amount of the Outstanding
Securities shall have joined in such proceedings or consented to the
institution thereof.
ARTICLE SIX
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 601. Mergers, Consolidation and Certain Sales of Assets.
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person (other than a Subsidiary) to consolidate with or merge into the
Company, (ii) directly or indirectly, transfer, sell, lease or otherwise
dispose of all or substantially all of its assets, (iii) permit any of its
Subsidiaries to enter into any transaction or transactions described in clause
(i) or (ii) above, if such transaction or transactions, in the aggregate, would
result in a sale, assignment, transfer, lease or disposal of all or
substantially all the properties and assets of the Company and its Subsidiaries
taken as a whole to any other Person or group of affiliated Persons, unless:
(1) in a transaction in which the Company does not survive or
in which the Company sells, leases or otherwise disposes of all or
substantially all of its assets, the successor entity to the Company is
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by a written agreement all of the Company's obligations under this
Security; and
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(2) immediately before and after giving effect to such
transaction and treating any Debt which becomes a direct obligation of the
Company or a Subsidiary as a result of such transaction as having been
Incurred by the Company or such Subsidiary at the time of the transaction, no
Event of Default or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default shall have occurred and
be continuing.
SECTION 602. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any transfer, sale, lease or other disposition of all or
substantially all of the assets of the Company in accordance with Section 601,
the successor Person formed by such consolidation or into which the Company is
merged or to which such transfer, sale, lease or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Security with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Security.
ARTICLE SEVEN
AMENDMENTS
SECTION 701. Amendments With Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, the Company may amend the terms of the
Securities for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Securities or of modifying
in any manner the rights of the Holders of Securities; provided, however, that
no such amendment shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon, or
reduce the amount of the principal of a Security which would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502, or change any Place of Payment where, or the coin or currency
in which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
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(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
amendment, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Security or certain defaults
hereunder and their consequences), or
(3) modify any of the provisions of this Section or Section
503 except to increase any such percentage or to provide that certain other
provisions of this Security cannot be modified or waived without the consent
of the Holder of each Outstanding Security affected thereby.
ARTICLE EIGHT
COVENANTS
SECTION 801. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay the
principal of (and premium, if any) and any interest on the Securities in
accordance with the terms of the Securities.
SECTION 802. Maintenance of Office or Agency.
The Company will maintain in either Place of Payment an office or agency
where Secu rities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities may be served.
The Company will give prompt written notice to the Holders of the location, and
any change in the location, of such office or agency.
The Company may also from time to time designate one or more other offices or
agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities for such purposes. The Company will give prompt written
notice to the Holders of any such designation or rescission and of any change
in the location of any such other office or agency.
SECTION 803. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the principal of (and premium, if any) or any interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient
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to pay the principal (and premium, if any) and any interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided.
Any money then held by the Company in trust for the payment of the principal
of (and premium, if any) or any interest on any Security and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be discharged from such trust; and the Holder
of such Security shall thereafter, as an unsecured general creditor, look only
to the Company for payment thereof, and all liability of the Company as trustee
thereof, shall thereupon cease.
SECTION 804. Existence.
Subject to Article Six, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 805. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the
income, profits or property of the Company or any Subsidiary, and (2) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
ARTICLE NINE
REDEMPTION OF SECURITIES
SECTION 901. Optional Redemption.
The Securities are subject to redemption upon not less than 30 nor more than
60 days' notice mailed to each Holder of the Securities to be redeemed at his
or her address
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appearing in the Security Register, at any time on or after March 1, 2001, as a
whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount): If redeemed during
the 12-month period beginning March 1 of the years indicated,
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2001 107.5%
2002 105.0%
2003 102.5%
2004 and thereafter 100.0%
</TABLE>
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date.
Notwithstanding the limitations on redemption in the preceding paragraph, in
the event that on or prior to March 1, 1999 the Company completes a Public
Offering of its Common Stock, up to one-third of the Outstanding Securities
will also be subject to redemption, at the option of the Company, upon not less
than 30 nor more than 60 days' notice mailed to each Holder of Securities to be
redeemed at his address appearing in the Security Register, in amounts of
$1,000 or any integral multiple thereof at a Redemption Price equal to 107.5%
of their Accreted Value. Notice of redemption will be mailed not later than 90
days after the date of consummation of the Public Offering. The aggregate
Redemption Price shall not exceed the gross proceeds to the Company in the
Public Offering.
Notwithstanding the limitations on redemption in the first paragraph of this
Section 901, in the event that the Company consummates a Major Bank Financing
on or prior to March 1, 2001, the Outstanding Securities will also be subject
to redemption in whole or in part, at the option of the Company, upon not less
than 30 nor more than 60 days' notice mailed to each Holder of Securities to be
redeemed at his address appearing in the Security Register, in amounts of
$1,000 or any integral multiple thereof at a Redemption Price equal to 107.5%
of their Accreted Value. Notice of redemption will be mailed not later than 90
days after the date of the initial extension of credit under the Major Bank
Financing.
SECTION 902. Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular Securities
to be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Company,
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from all Holders pro rata on the basis of the aggregate principal amount of all
Outstanding Securities held by such Holders.
For all purposes of this Security, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case
of any Securities redeemed or to be redeemed only in part, to the portion of
the principal amount of such Securities which has been or is to be redeemed.
SECTION 903. Notice of Redemption.
Notice of redemption shall be given by the Company by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption of any
such Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after said
date, and
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price.
SECTION 904. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate and hold in
trust) an amount of money sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) any
applicable accrued interest on, all the Securities which are to be redeemed on
that date.
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SECTION 905. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Securities
shall not bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with any applicable accrued interest to the
Redemption Date.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the first
paragraph of this Security.
SECTION 906. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company
duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the Holder of such
Security without service charge, a new Security or Securities of like tenor, as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 1001. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance hereof or thereof, likewise covenants and agrees that, to the extent
and in the manner hereinafter set forth in this Article (subject to the
provisions of Articles Three and Four), the payment of the principal of (and
premium, if any on) and any interest on the Securities, and any other
obligations of the Company in respect of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior payment in full,
in cash or cash equivalents or in any other form acceptable to the holders of
Designated Senior Debt, of all Senior Debt that the subordination is for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt,
and that each holder of Senior Debt, whether now outstanding or hereafter
created, Incurred or assumed shall be deemed to have acquired and continued to
hold, or shall have continued to hold, Senior Debt in reliance upon the
covenants and provisions contained in this Security.
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SECTION 1002. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, or (b) any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Debt will first
be entitled to receive payment in full, in cash or cash equivalents or in any
form acceptable to the holders of Designated Senior Debt, of all amounts due or
to become due thereon before the Holders of the Securities will be entitled to
receive any payment or distribution of any assets of the Company of any kind or
character, whether in cash, property or securities (including any payment or
distribution which may be payable or deliverable by reason of the payment of
any other Debt of the Company subordinated to the payment of the Securities,
such payment or distribution being hereinafter referred to as a "Junior
Subordinated Payment"), on account of the principal of, premium, if any, or
interest on such Securities and any other obligations in respect of such
Securities (including any obligation to repurchase such Securities, but
excluding any payments previously made pursuant to Article Three ("Defeasance
and Satisfaction Payments")) (all such payments, distributions, purchases and
acquisitions herein (other than payments and distributions of Permitted Junior
Interests as hereinafter defined) referred to, individually and collectively,
as a "Securities Payment").
In the event that, notwithstanding the foregoing provisions of this Section,
the Holder of any Security shall have received any Securities Payment before
all Senior Debt is paid in full or payment thereof provided for in cash or cash
equivalents or in any form acceptable to the holders of Designated Senior Debt,
then and in such event such Securities Payment shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Debt
remaining unpaid, to the extent necessary to pay all Senior Debt in full, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
For purposes of this Article only, the words "any payment or distribution of
any assets of the Company of any kind or character, whether in cash, property
or securities" shall not be deemed to include a payment or distribution of
INTERESTS or securities of the Company provided for by a plan of reorganization
or readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other ENTITY OR corporation provided for by such plan of
reorganization or readjustment which stock or securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article (such
stock or subordinated securities are referred to herein as "Permitted Junior
Interests"). The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or
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<PAGE> 123
dissolution of the Company following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Article Six shall not be deemed a
Proceeding for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets as an entirety, as the
case may be, shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions set forth in Article Six.
SECTION 1003. No Payment When Senior Debt in Default.
In the event that any Senior Payment Default (as defined below) shall have
occurred and be continuing, then no Securities Payment may be made unless and
until such Senior Payment Default shall have been cured or waived or shall have
ceased to exist or the Designated Senior Debt that is the subject of such
Senior Payment Default shall have been discharged or paid in full in cash or
cash equivalents or in any other form acceptable to the holders of such
Designated Senior Debt, after which the Company shall resume making any and all
required Securities Payments, including any missed payments. "Senior Payment
Default" means any default beyond the applicable grace period in the payment of
principal of, premium, if any, or interest, or any other obligation in respect
of Designated Senior Debt when due, whether at the Stated Maturity of any such
payment or by declaration of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined below) shall
have occurred and be continuing, then, upon the receipt by the Company of
written notice of such Senior Nonmonetary Default from a holder of Designated
Senior Debt (or a trustee, agent or other representative for such a holder duly
authorized in writing) which is the subject of such Senior Nonmonetary Default,
no Securities Payment, may be made for a period (the "Payment Blockage Period")
commencing on the date of receipt of such notice and ending on the earlier of
(i) the date on which such Senior Nonmonetary Default (and all other Senior
Nonmonetary Defaults that have occurred and of which the Company is aware) has
been cured or waived or ceases to exist and any acceleration of Designated
Senior Debt shall have been rescinded or annulled or all Designated Senior Debt
that is the subject of such Senior Nonmonetary Default has been discharged or
paid in full, in cash or cash equivalents or in any other form acceptable to
the holders of such Designated Senior Debt; (ii) the 179th day after the date
of such receipt of such notice; and (iii) the date on which such Payment
Blockage Period (and all other Senior Nonmonetary Defaults as to which notice
is given after such Payment Blockage Period is initiated) shall have been
terminated by written notice to the Company from a representative of the
holders of at least a majority of Designated Senior Debt initiating such
Payment Blockage Period, after which, in the case of clauses (i), (ii) and
(iii), the Company will promptly resume making any and all required Securities
Payments in respect of such Securities, including any missed payments;
provided, however, that no more than one Payment Blockage Period may be
commenced with respect to such Securities during any 360-day period and there
shall be a period of at least 181 days in each 360-day period when no Payment
Blockage Period is in effect; provided further, that no Senior Nonmonetary
Default which existed
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<PAGE> 124
or was continuing on the date of the commencement of a Payment Blockage Period
may be made the basis of the commencement of a subsequent Payment Blockage
Period by holders of Designated Senior Debt or their representatives, whether
or not within a period of 360 consecutive days, unless such Senior Nonmonetary
Default shall have been cured or waived for a period of not less than 90
consecutive days. "Senior Nonmonetary Default" means a default with respect to
Designated Senior Debt, other than a Senior Payment Default, which the giving
of notice or the passage of time, or both, gives the holders of the Designated
Senior Debt (or a trustee or agent on behalf of the holders thereof) the right
to declare the Debt under such Designated Senior Debt due and payable prior to
the date on which it matures or is subject to scheduled repayment.
In the event that, notwithstanding the foregoing, the Company shall make any
Securities Payment to any Holder prohibited by the foregoing provisions of this
Section, then and in such event such Securities Payment shall be paid over and
delivered forthwith to the holders of Designated Senior Debt or their
representatives or as a court of competent jurisdiction shall determine.
The provisions of this Section shall not apply to any Securities Payment with
respect to which Section 1002 would be applicable.
SECTION 1004. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Security shall prevent
the Company, at any time except during the pendency of any Proceeding referred
to in Section 1002 or under the conditions described in Section 1003, from
making Securities Payments.
SECTION 1005. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on or in
respect of Senior Debt, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Designated
Senior Debt, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Debt pursuant
to the provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordi nated to
indebtedness of the Company to substantially the same extent as the Securities
are subordinated to the Senior Debt and is entitled to like rights of
subrogation by reason of any payments or distributions made to holders of such
Senior Debt) to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt until the principal of (and premium, if any) and any interest on
the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders of the Securities would be entitled
except for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the
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<PAGE> 125
holders of Senior Debt by Holders of the Securities, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.
If any payment or distribution to which the Holder of any Security would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under the Senior Debt, then and in such case, the Holder of any
Security shall be entitled to receive from the holders of such Senior Debt at
the time outstanding any payments or distributions received by such holders of
Senior Debt in excess of the amount sufficient to pay all amounts due or to
become due on or in respect of Senior Debt in full.
SECTION 1006. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders on the one hand and the holders of
Senior Debt on the other hand. Nothing contained in this Article or elsewhere
in this Security is intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Securities,
the obligation of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior Debt, is
intended to rank equally with all other general obligations of the Company), to
pay to the Holders of the Securities the principal of (and premium, if any) and
any interest on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than the holders of Senior Debt; or (c) prevent the Holder of any
Securities from exercising all remedies otherwise permitted by applicable law
upon default under this Security, subject to the rights, if any, under this
Article of the holders of Senior Debt to receive cash, property and securities
otherwise payable or deliverable to such Holder.
SECTION 1007. Company to Effectuate Subordination.
Each Holder of this Security by his acceptance hereof authorizes and directs
the Company on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article.
SECTION 1008. No Waiver of Subordination Provisions.
No right of any present or future holder of any Designated Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms,
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<PAGE> 126
provisions and covenants of this Security, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Debt, or
otherwise amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding or
secured; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the collection of Senior Debt; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person;
provided, however, that in no event shall any such actions limit the right of
the Holders of the Securities to take any action to accelerate the maturity of
the Securities in accordance with the provisions set forth in Article Five or
to pursue any rights or remedies under this Security or under applicable laws
if the taking of such action does not otherwise violate the terms of this
Article.
SECTION 1009. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in this
Article, the Holders of the Securities shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 1010. Defeasance of this Article Ten.
The subordination provided by this Article Ten is expressly made subject to
the provisions for defeasance in Article Three hereof and, anything herein to
the contrary not withstanding, upon the effectiveness of any such defeasance or
covenant defeasance, the Securities then outstanding shall thereupon cease to
be subordinated pursuant to this Article Ten.
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IN WITNESS WHEREOF, the Company has caused this Security to be duly executed,
and its corporate seal to be hereunto affixed and attested, all as of the day
and year first above written.
IRIDIUM, INC.
By
------------------------------
Attest:
- -----------------------------------
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<PAGE> 128
- ------------------ COMPARISON OF FOOTNOTES ------------------
- -FOOTNOTE *-
Insert March 1 if this Note is purchased with an Accreted Value
Payment; otherwise the Date will be set to result in a maturity date on the
tenth anniversary of the issued date and interest from the fifth anniversary of
the issue date. Annex A sets forth appropriate insertions if purchased
without an Accreted Value Payment.
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<PAGE> 129
EXHIBIT 1-B
Form of Note
FORM OF NOTE
THIS SECURITY MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THOSE REGISTRATION
REQUIREMENTS. ACCORDINGLY, THE HOLDER OF THIS SECURITY SHALL NOT BE ENTITLED TO
TRANSFER THIS SECURITY AT ANY TIME UNLESS, AT THE TIME OF SUCH TRANSFER OR
EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT RELATING TO THIS SECURITY
HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (II) THE TRANSFER OF THIS
SECURITY IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
TRANSFER OF THIS SECURITY IS ALSO RESTRICTED BY THE TERMS OF A LIMITED
LIABILITY COMPANY AGREEMENT OF IRIDIUM LLC, DATED AS OF JULY 1, 1996, BY AND
AMONG THE PARTIES NAMED THEREIN (THE "LLC AGREEMENT"). A COPY OF THE LLC
AGREEMENT IS ON FILE AND AVAILABLE FOR INSPECTION BY THE HOLDER OF THIS
SECURITY AT THE PRINCIPAL EXECUTIVE OFFICES OF IRIDIUM LLC.
IRIDIUM LLC
14 1/2% SENIOR SUBORDINATED DISCOUNT NOTE
DUE 2006
No. _________ $ _________
Iridium LLC, a limited liability company duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person hereunder), for value received, hereby promises to pay to
_________________________, or registered assigns, the principal sum of
______________________ Dollars on _________, 2006, and to pay interest thereon
from ______________, 2001 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on March 1 and
September 1 in each year, commencing September 1, 2001, at the rate of 14 1/2%
per annum, until the principal hereof is paid or made available for payment,
provided that any principal and premium, and any such instalment of interest,
which is overdue shall bear interest at the rate of 14 1/2% per annum (to the
extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand.
Payment of the principal of (and premium, if any) and any such interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in either the Borough of Manhattan, the City of New York or
Washington, D.C., in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
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<PAGE> 130
This Security is one of a duly authorized issue of 14 1/2% Senior
Subordinated Discount Notes due 2006 of the Company (herein called the
"Security"), issued and to be issued under instruments substantially identical
hereto and limited in aggregate principal amount to $ million.
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
"Accreted Value" means with respect to any Security, (i) as of any date of
determination prior to the date on which the Security first bears or accrues
interest, the sum of (a) the initial purchase price of each Security and (b)
the portion of the excess of the principal amount of each Security over such
initial purchase price which shall have been accreted thereon through such
date, such amount to be so accreted on a daily basis at the rate of 14 1/2% per
annum of the initial purchase price of such Security, compounded semi-annually
on each March 1 and September 1 from the date of issuance of such Security
through the date of determination or (ii) as of any date of determination on or
after the date on which the Security first bears or accrues interest, 100% of
the principal amount at maturity of each Security.
"Act", when used with respect to any Holder, has the meaning specified in
Section 102.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, (i) "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
securities, by contract or otherwise; (ii) the terms "controlling" and
"controlled" have meanings correlative to the foregoing; and (iii) a Person
shall be deemed to be controlled by any other Person which owns more than 15%
of such Person's outstanding Common Stock or which has the right, contractually
or otherwise, to elect more than 15% of the members of such Person's board of
directors.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking
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institutions in that Place of Payment are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face
of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation shall be the date
of the last payment of rent or any other amount due under such 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 any and all shares, interests,
participation or other equivalents (however designated) of corporate stock or
similar equity interests of such Person. In the case of the Company, Capital
Stock includes Class 1 Membership Interests and Class 2 Membership Interests.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank 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.
In the case of the Company, "Common Stock" means the Class 1 Membership
Interests.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Security, and thereafter "Company" shall mean
such successor Person.
"corporation" means a corporation, association, company, joint-stock company
or business trust.
"Debt" 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 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 (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) the maximum fixed redemption or repurchase price of
Disqualified Stock of such Person outstanding at the time of determination,
(vii) every obligation under Interest Rate Protection Agreements or Currency
Protection Agreements of such Person and (viii) every obligation of the type
referred to in clauses (i) through (vii) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible
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or liable, directly or indirectly, as obligor, Guarantor or otherwise. The term
"Debt" shall not include any obligations of the Company or any Restricted
Subsidiary under the Space System Contract, the Operations and Maintenance
Contract or the Terrestrial Network Development Contract.
"Defeasance" has the meaning specified in Section 302.
"Defeasance and Satisfaction Payments" has the meaning specified in Section
1002.
"Designated Senior Debt" means (i) all secured Senior Debt which is Incurred
pursuant to any agreement (or series of related agreements), (ii) any other
issue of Senior Debt which is Incurred pursuant to an agreement (or series of
related agreements) providing for indebtedness, or commitments to lend, of at
least $100 million and (iii) at any time that there is no Senior Debt that
falls within either clause (i) or (ii) above, any Senior Debt, in each case
which is specifically designated in the instrument evidencing such Senior Debt
or the agreement under which such Senior Debt arises as "Designated Senior
Debt" by the Company.
"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), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final Stated Maturity of the
Securities.
"Event of Default" has the meaning specified in Section 501.
"Generally accepted accounting principles" means generally accepted
principles in the United States, which are applicable as of the date of
determination.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt 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 Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing).
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an instalment of interest on such Security.
"Interest Rate Protection Agreement or Currency Protection Agreement" of any
Person means any interest rate protection agreement (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
and/or other types of interest hedging
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agreements designed to protect such Person against fluctuations in interest
rates and which have a notional amount no greater than the payments due with
respect to the Debt being hedged thereby, and any currency protection agreement
(including foreign exchange contracts, currency swap agreements or other
currency hedging arrangements) entered into in the ordinary course of business.
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Major Bank Financing" means an arrangement under which one or more
commercial banks or other institutional lenders extend or commit to extend
credit to the Company in an aggregate amount exceeding $1 billion.
"Maturity" means when used with respect to any Security, the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at Stated Maturity or the Redemption Date and whether by
declaration of acceleration, call for redemption or otherwise.
"Motorola" means Motorola, Inc., a Delaware corporation.
"Notice of Default" means a written notice of the kind specified in Section
501(5).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company.
"Operations and Maintenance Contract" means the IRIDIUM System Operations
and Maintenance Contract between the Company and Motorola, dated as of July 29,
1993, as amended from time to time.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company.
"Outstanding Securities" means, as of the date of determination, all
Securities theretofore authenticated and delivered, except:
(1) Securities theretofore cancelled;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are to
be redeemed, notice of such redemption has been duly given pursuant to such
Security or provision therefor has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 302; and
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(4) Securities which have been paid pursuant to Section 203 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered, other than any such Securities in respect of which there
shall have been presented to the Company proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of a Security which
shall be deemed to be Outstanding shall be the amount of the principal thereof
which would be due and payable as of such date upon acceleration of the
Maturity thereof to such date pursuant to Section 502 and (B) Securities owned
by the Company or any other obligor upon the Securities shall be disregarded
and deemed not to be Outstanding. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company. The Company will initially act as its own Paying Agent.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means either the Borough of Manhattan, the City of New
York or Washington, DC.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 203 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 1002.
"Public Offering" means an underwritten public offering of Common Stock
which, if offered primarily in the United States, is registered under the
Securities Act of 1933, as amended.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Security.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Security.
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"Security" means this Security.
"Securities" means the Security and all other Securities constituting one of
the Company's 14 1/2% Senior Subordinated Discount Notes due 2005.
"Security Register" has the meaning specified in Section 202.
"Securities Payment" has the meaning specified in Section 1002.
"Senior Debt" means the principal of, premium, if any, and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, or other
amount of, or fees, costs and expenses incurred in connection with, (i) Debt
for money borrowed of the Company, whether Incurred on or prior to March 1,
1996 or thereafter incurred, other than the Securities, (ii) Debt of the
Company evidenced by bonds, debentures, notes or other similar instruments,
including Debt Incurred in connection with the acquisition of property, assets
or businesses, (iii) matured and unmatured reimbursement or other obligations
of the Company with respect to letters of credit, bankers' acceptances or
similar facilities issued for the account of the Company, (iv) obligations of
the Company under Interest Rate Protection Agreements or Currency Protection
Agreements, (v) Capital Lease Obligations of the Company, (vi) guarantees by
the Company of Debt for money borrowed and (vii) amendments, modifications and
Refinancings of any such Debt; provided, however, the following does not
constitute Senior Debt: (A) any Debt which by the terms of the instrument
creating or evidencing the same is not superior in right of payment to the
Securities, (B) any Debt which is represented by Disqualified Stock, (C) any
Debt of the Company owed to a Subsidiary, (D) any Debt which is subordinated in
right of payment in respect to any other Debt of the Company, or (E) any
obligations of the Company under the Space System Contract, the Operations and
Maintenance Contract or the Terrestrial Network Development Contract.
"Space System Contract" means the IRIDIUM Space System Contract between the
Company and Motorola, dated as of July 29, 1993, as amended from time to time.
"Stated Maturity", when used with respect to any Debt or any instalment of
principal thereof or interest thereon, means the date specified in such Debt as
the fixed date on which the principal of such Debt or such instalment of
principal or interest is deemed payable.
"Subordinated Debt" means Debt of the Company that is subordinated in right
of payment to Securities.
"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 thereof 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
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one or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs
thereof.
"Terrestrial Network Development Contract" means the Terrestrial Network
Development Contract between the Company and Motorola, entered into in June
1995, as amended from time to time.
"U.S. Government Obligation" has the meaning specified in Section 303.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added
before or after the title "vice president".
"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 with respect to the Company. With respect to the Company, Voting
Stock means the Company's Common Stock, and any other class of Common Stock
having comparable voting rights on all matters other than the election of
directors.
SECTION 102. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by the Securities to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
The Company may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by the Securities to be given, made or taken by
Holders of Securities, provided that the
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Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. With
regard to any record date set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain
Holders after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date (as
defined below) by Holders of the requisite principal amount of Outstanding
Securities. Nothing in this paragraph shall be construed to prevent the Company
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its
own expense, shall cause notice of such record date, the proposed action by
Holders and the applicable Expiration Date to be given to each Holder of
Securities.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the Company in writing, and to each
Holder of Securities, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the party hereto which set such record date shall be deemed to
have initially designated the 180th day after such record date as the
Expiration Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding the foregoing,
no Expiration Date shall be later than the 180th day after the applicable
record date.
SECTION 103. Notice to Holders; Waiver.
Where this Security provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by
such event, at its address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders and any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given.
Where this Security 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.
Waivers of notice by Holders shall be filed with the Company,
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but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
SECTION 104. Effect of Headings.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
SECTION 105. Successors and Assigns.
All covenants and agreements in this Security by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 106. Separability Clause.
In case any provision in this Security shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 107. Benefits of Security.
Nothing in this Security, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, the holders of
Senior Debt and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Security.
SECTION 108. Governing Law.
This Security shall be governed by and construed in accordance with the law
of the State of New York without regard to principles of conflict of laws.
SECTION 109. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Security) payment of interest
or principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, or Stated Maturity, as the case may be.
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SECTION 110. No Recourse Against Others.
A manager, officer, employee, consultant, contractor or member, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting any of the
Securities waives and releases all such liability.
ARTICLE TWO
THE SECURITIES
SECTION 201. Denominations.
The Securities are issuable only in registered form without coupons and only
in integral multiples of $1,000.
SECTION 202. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of
Securities.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed, by the Holder thereof or his attorney duly authorized in
writing. The Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption and ending at the close of business on the day of such mailing, or
(B) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
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SECTION 203. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Company, the Company shall
execute and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding. If
there shall be delivered to the Company (i) evidence to its satisfaction of the
destruction, loss or theft of any Security and (ii) such security or indemnity
as it may require to save it harmless, then, in the absence of notice to the
Company that such Security has been acquired by a bona fide purchaser, the
Company shall execute, in lieu of any such destroyed, lost or stolen Security,
a new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding. In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due and payable, the Company
in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone. The provisions of
this Section are exclusive and shall preclude (to the extent lawful) all other
rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 204. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company and any agent of the Company may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and any interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, nor any agent of the Company shall be
affected by notice to the contrary.
SECTION 205. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day year of
twelve 30-day months.
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ARTICLE THREE
DEFEASANCE
SECTION 301. Company's Option to Effect Defeasance.
The Company may elect, at its option at any time, to have Section 302 apply
to the Securities upon compliance with the conditions set forth below in this
Article.
SECTION 302. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section applied to
the Securities, the Company shall be deemed to have been discharged from any
and all of its obligations, and the provisions of Article Ten shall cease to be
effective, with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 303 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by such Securities and to have satisfied all its other obligations
under this Security, subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of the Holder of
this Security to receive, solely from the trust fund described in Section 303
and as more fully set forth in such Section, payments in respect of the
principal of and any premium and interest on such Securities when payments are
due, (2) the Company's obligations with respect to such Securities under
Sections 202, 203, 802 and 803 and (3) this Article.
SECTION 303. Conditions to Defeasance.
The following shall be the conditions to the application of Section 302 to
the Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited in trust with a trustee (who shall agree to comply with the
provisions of this Article applicable to it) as trust funds for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Securities, (A) money
in an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants expressed in a written certification thereof
delivered to the Holders, to pay and discharge, and which shall be applied
by such trustee to pay and discharge, the principal of (premium, if any) and
each installment of interest, if any, on the Securities on the respective
Stated Maturities, in accordance with the terms of this Security. As used
herein, "U.S. Government Obligation" means (x) any security which is (i) a
direct
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obligation of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not callable
or redeemable at the option of the issuer thereof, and (y) any depositary
receipt issued by a bank (as defined in Section 3(a)(2) of the Securities
Act of 1933, as amended) as custodian with respect to any U.S. Government
Obligation which is specified in clause (x) above and held by such bank for
the account of the holder of such depositary receipt, or with respect to any
specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, provided that (except as required
by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal or interest evidenced by such depositary
receipt.
(2) In the event of an election to have Section 302 apply to the
Securities, the Company shall have delivered to the Holders an Opinion of
Counsel stating that (A) the Company has received from, or there has been
published by, the IRS a ruling or (B) since March 1, 1996, there has been a
change in the applicable Federal income tax law, in either case (A) or (B)
to the effect that, and based thereon such opinion shall confirm that, the
Holders of the Securities will not recognize gain or loss for Federal income
tax purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to the Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times as
would be the case if such deposit, Defeasance and discharge were not to
occur.
(3) At the time of such deposit, (A) no default in the payment of any
principal of or premium or interest on any Senior Debt shall have occurred
and be continuing, (B) no event of default with respect to any Senior Debt
shall have resulted in such Senior Debt becoming, and continuing to be, due
and payable prior to the date on which it would otherwise have become due
and payable (unless payment of such Senior Debt has been made or duly
provided for), and (C) no other event of default with respect to any Senior
Debt shall have occurred and be continuing permitting (after notice or lapse
of time or both) the holders of such Senior Debt (or a trustee on behalf of
such holders) to declare such Senior Debt due and payable prior to the date
on which it would otherwise have become due and payable.
(4) No event which is, or after notice or lapse of time or both would
become, an Event of Default shall have occurred and be continuing at the
time of such deposit or, with regard to any such event specified in Sections
501(7) and (8), at any time on or prior to the 90th day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until after such 90th day).
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(5) Such Defeasance shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which the
Company is a party or by which it is bound.
(6) Such Defeasance shall not result in the trust arising from such
deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such act or exempt from registration thereunder.
(7) The Company shall have delivered to the Holders an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance have been complied with.
SECTION 304. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 803, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
a trustee (solely for purposes of this Section and Section 305, such trustee is
referred to as the "Trustee") pursuant to Section 303 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance
with the provisions of the Securities, to the payment, either directly or
through any such Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Holders of such Securities, of all
sums due and to become due thereon in respect of principal and any premium and
interest, but money so held in trust need not be segregated from other funds
except to the extent required by law. Money and U.S. Government Obligations so
held in trust shall not be subject to the provisions of Article Ten.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 303 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon the Company's request any
money or U.S. Government Obligations held by it as provided in Section 303 with
respect to any Securities 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 the Defeasance with respect to such
Securities.
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SECTION 305. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Security from which the Company has been discharged or released pursuant to
Section 302 shall be revived and reinstated as though no deposit had occurred
pursuant to this Article with respect to such Securities, until such time as
the Trustee or Paying Agent is permitted to apply all money held in trust
pursuant to Section 304 with respect to such Securities in accordance with this
Article; provided, however, that if the Company makes any payment of principal
of or any premium or interest on any such Security following such reinstatement
of its obligations, the Company shall be subrogated to the rights (if any) of
the Holders of such Securities to receive such payment from the money so held
in trust.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge.
This Security shall, upon the written election by the Company, cease to be
of further effect (except as to any surviving rights of registration of
transfer or exchange of Securities herein expressly provided for), when:
(1) either (A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 203 and (ii)
Securities for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 803) have been
cancelled; or (B) all such Securities not theretofore cancelled (i) have
become due and payable, or (ii) will become due and payable at their Stated
Maturity within one year, or (iii) are to be called for redemption within
one year under arrangements for the giving of notice of redemption in the
name, and at the expense, of the Company, and the Company, in the case of
(i), (ii) or (iii), has irrevocably deposited or caused to be deposited with
a trustee, as trust funds in trust for the purpose of such redemption, money
in an amount sufficient to pay and discharge the entire Debt on the
Securities not theretofore cancelled, including principal of, premium, if
any, and accrued interest, if any, on such Securities at such Maturity,
Stated Maturity or Redemption Date;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Holder of this Security an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Security have been complied with and that such
satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, this Security or any other material agreement to
which the Company or any Subsidiary is a party.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article Ten or other subordination provisions
applicable to Securities or be voluntary or involuntary or be 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):
(1) failure to pay principal of (or premium, if any, on) any Security
when due, continued for two Business Days; or
(2) failure to pay any interest on any Security when due, continued for
30 days; or
(3) failure to perform any covenant or agreement of the Company under
this Security (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with) and continuance of such default or breach for a period of 60 days
after there has been given notice to the Company by the Holders of at least
25% in aggregate principal amount of the Outstanding Securities written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(4) default under the terms of any instrument evidencing or securing Debt
for money borrowed by the Company or any Subsidiary having an outstanding
principal amount of $10 million individually or in the aggregate which
default has resulted in the acceleration of the payment of the principal
amount of such Debt or constitutes the failure to pay the principal amount
of such Debt when due;
(5) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any Subsidiary in an amount in excess of $10
million which remains undischarged or unstayed for a period of 60 days after
the date on which the right to appeal has expired;
(6) 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 the Company 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 court or
mediator having jurisdiction;
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(7) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a decree
or order adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable Federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial part of the
property of the Company or any Subsidiary, or ordering the winding up or
liquidation of the affairs of the Company or any Subsidiary, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(8) the commencement by the Company or any Subsidiary of a voluntary
case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it
to the entry of a decree or order for relief in respect of the Company or
any Subsidiary in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case or proceeding
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, or the
consent by it to the filing of such peti tion or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or
of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the
taking of formal action by the Company or any Subsidiary in furtherance of
any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
501(7) or 501(8)) occurs and is continuing, then in every such case the Holders
of not less than 25% in principal amount of the Outstanding Securities may
declare the Accreted Value of all the Securities to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration such specified amount shall become immediately due and payable;
provided, however, that so long as any secured Senior Debt remains outstanding,
if any such Event of Default shall have occurred and be continuing, any such
acceleration shall not be effective until the earlier of (a) five Business Days
following a notice of acceleration given to the Company and to the holders of
the secured Senior Debt and only if upon such fifth Business Day such Event of
Default shall be continuing or (b) the acceleration of any secured Senior Debt.
If an Event of Default specified in Section 501(7) or 501(8) occurs, the
Accreted Value of all the Securities will ipso facto become
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immediately due and payable without any declaration or other act on the part of
any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained, the
Holders of a majority in principal amount of the Outstanding Securities, by
written notice to the Company, may rescind and annul such declaration and its
consequences if: (1) the Company has paid or deposited in trust a sum
sufficient to pay: (A) all overdue interest on all Securities, and (B) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate set forth in the first paragraph of this Security; and (2) all
Events of Default, other than the non-payment of the principal of Securities
which have become due solely by such declaration of acceleration, have been
cured or waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default in the
payment of the principal of (or premium, if any) or interest on any Security.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 504. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of its obligations under this Security; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Holder or Holders, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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SECTION 505. Limitation on Suits.
No Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to rights created under the Securities
(other than any right to institute such a proceeding to enforce the Company's
obligation to pay principal (and premium, if any) and interest on such Holder's
Securities and such Holder's rights under Sections 202 and 203), or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
the Holders of not less than 25% in principal amount of the Outstanding
Securities shall have joined in such proceedings or consented to the
institution thereof.
ARTICLE SIX
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 601. Mergers, Consolidation and Certain Sales of Assets.
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person (other than a Subsidiary) to consolidate with or merge into the
Company, (ii) directly or indirectly, transfer, sell, lease or otherwise
dispose of all or substantially all of its assets, (iii) permit any of its
Subsidiaries to enter into any transaction or transactions described in clause
(i) or (ii) above, if such transaction or transactions, in the aggregate, would
result in a sale, assignment, transfer, lease or disposal of all or
substantially all the properties and assets of the Company and its Subsidiaries
taken as a whole to any other Person or group of affiliated Persons, unless:
(1) in a transaction in which the Company does not survive or in which
the Company sells, leases or otherwise disposes of all or substantially all
of its assets, the successor entity to the Company is organized and validly
existing under the laws of the United States of America, any State thereof
or the District of Columbia and shall expressly assume, by a written
agreement all of the Company's obligations under this Security; and
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes a direct obligation of the Company or a
Subsidiary as a result of such transaction as having been Incurred by the
Company or such Subsidiary at the time of the transaction, no Event of
Default or event that with the passing of time or the giving of notice, or
both, would constitute an Event of Default shall have occurred and be
continuing.
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SECTION 602. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any transfer, sale, lease or other disposition of all or
substantially all of the assets of the Company in accordance with Section 601,
the successor Person formed by such consolidation or into which the Company is
merged or to which such transfer, sale, lease or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Security with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Security.
ARTICLE SEVEN
AMENDMENTS
SECTION 701. Amendments With Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, the Company may amend the terms of the
Securities for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Securities or of modifying
in any manner the rights of the Holders of Securities; provided, however, that
no such amendment shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment of
interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable thereon, or reduce the
amount of the principal of a Security which would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502,
or change any Place of Payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such amendment,
or the consent of whose Holders is required for any waiver (of compliance
with certain provisions of this Security or certain defaults hereunder and
their consequences), or
(3) modify any of the provisions of this Section or Section 503 except
to increase any such percentage or to provide that certain other provisions
of this Security cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
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ARTICLE EIGHT
COVENANTS
SECTION 801. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay the
principal of (and premium, if any) and any interest on the Securities in
accordance with the terms of the Securities.
SECTION 802. Maintenance of Office or Agency.
The Company will maintain in either Place of Payment an office or agency
where Secu rities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities may be served.
The Company will give prompt written notice to the Holders of the location, and
any change in the location, of such office or agency.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities for such purposes. The Company will give prompt written
notice to the Holders of any such designation or rescission and of any change
in the location of any such other office or agency.
SECTION 803. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the principal of (and premium, if any) or any interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) and any interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided.
Any money then held by the Company in trust for the payment of the principal
of (and premium, if any) or any interest on any Security and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be discharged from such trust; and the Holder
of such Security shall thereafter, as an unsecured general creditor, look only
to the Company for payment thereof, and all liability of the Company as trustee
thereof, shall thereupon cease.
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SECTION 804. Existence.
Subject to Article Six, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 805. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the
income, profits or property of the Company or any Subsidiary, and (2) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
ARTICLE NINE
REDEMPTION OF SECURITIES
SECTION 901. Optional Redemption.
The Securities are subject to redemption upon not less than 30 nor more than
60 days' notice mailed to each Holder of the Securities to be redeemed at his
or her address appearing in the Security Register, at any time on or after
March 1, 2001, as a whole or in part, at the election of the Company, at the
following Redemption Prices (expressed as percentages of the principal amount):
If redeemed during the 12-month period beginning March 1 of the years
indicated,
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<TABLE>
<CAPTION>
Redemption
Year Price
---- -------------
<S> <C>
2001 107.5%
2002 105.0%
2003 102.5%
2004 and thereafter 100.0%
</TABLE>
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date.
Notwithstanding the limitations on redemption in the preceding paragraph, in
the event that on or prior to March 1, 1999 the Company completes a Public
Offering of its Common Stock, up to one-third of the Outstanding Securities
will also be subject to redemption, at the option of the Company, upon not less
than 30 nor more than 60 days' notice mailed to each Holder of Securities to be
redeemed at his address appearing in the Security Register, in amounts of
$1,000 or any integral multiple thereof at a Redemption Price equal to 107.5%
of their Accreted Value. Notice of redemption will be mailed not later than 90
days after the date of consummation of the Public Offering. The aggregate
Redemption Price shall not exceed the gross proceeds to the Company in the
Public Offering.
Notwithstanding the limitations on redemption in the first paragraph of this
Section 901, in the event that the Company consummates a Major Bank Financing
on or prior to March 1, 2001, the Outstanding Securities will also be subject
to redemption in whole or in part, at the option of the Company, upon not less
than 30 nor more than 60 days' notice mailed to each Holder of Securities to be
redeemed at his address appearing in the Security Register, in amounts of
$1,000 or any integral multiple thereof at a Redemption Price equal to 107.5%
of their Accreted Value. Notice of redemption will be mailed not later than 90
days after the date of the initial extension of credit under the Major Bank
Financing.
SECTION 902. Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Company, from all Holders pro rata on the basis of the
aggregate principal amount of all Outstanding Securities held by such Holders.
For all purposes of this Security, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
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SECTION 903. Notice of Redemption.
Notice of redemption shall be given by the Company by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where each such Security is to be surrendered
for payment of the Redemption Price.
SECTION 904. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate and hold in
trust) an amount of money sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) any
applicable accrued interest on, all the Securities which are to be redeemed on
that date.
SECTION 905. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Securities
shall not bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with any applicable accrued interest to the
Redemption Date.
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If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the first
paragraph of this Security.
SECTION 906. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company
duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the Holder of such
Security without service charge, a new Security or Securities of like tenor, as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TEN
SUBORDINATION OF SECURITIES
SECTION 1001. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance hereof or thereof, likewise covenants and agrees that, to the extent
and in the manner hereinafter set forth in this Article (subject to the
provisions of Articles Three and Four), the payment of the principal of (and
premium, if any on) and any interest on the Securities, and any other
obligations of the Company in respect of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior payment in full,
in cash or cash equivalents or in any other form acceptable to the holders of
Designated Senior Debt, of all Senior Debt that the subordination is for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt,
and that each holder of Senior Debt, whether now outstanding or hereafter
created, Incurred or assumed shall be deemed to have acquired and continued to
hold, or shall have continued to hold, Senior Debt in reliance upon the
covenants and provisions contained in this Security.
SECTION 1002. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, or (b) any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event,
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if any, herein sometimes referred to as a "Proceeding") the holders of Senior
Debt will first be entitled to receive payment in full, in cash or cash
equivalents or in any form acceptable to the holders of Designated Senior Debt,
of all amounts due or to become due thereon before the Holders of the
Securities will be entitled to receive any payment or distribution of any
assets of the Company of any kind or character, whether in cash, property or
securities (including any payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of the Company
subordinated to the payment of the Securities, such payment or distribution
being hereinafter referred to as a "Junior Subordinated Payment"), on account
of the principal of, premium, if any, or interest on such Securities and any
other obligations in respect of such Securities (including any obligation to
repurchase such Securities, but excluding any payments previously made pursuant
to Article Three ("Defeasance and Satisfaction Payments")) (all such payments,
distributions, purchases and acquisitions herein (other than payments and
distributions of Permitted Junior Interests as hereinafter defined) referred
to, individually and collectively, as a "Securities Payment").
In the event that, notwithstanding the foregoing provisions of this Section,
the Holder of any Security shall have received any Securities Payment before
all Senior Debt is paid in full or payment thereof provided for in cash or cash
equivalents or in any form acceptable to the holders of Designated Senior Debt,
then and in such event such Securities Payment shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Debt
remaining unpaid, to the extent necessary to pay all Senior Debt in full, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
For purposes of this Article only, the words "any payment or distribution of
any assets of the Company of any kind or character, whether in cash, property
or securities" shall not be deemed to include a payment or distribution of
interests or securities of the Company provided for by a plan of reorganization
or readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other entity or corporation provided for by such plan of
reorganization or readjustment which stock or securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article (such
stock or subordinated securities are referred to herein as "Permitted Junior
Interests"). The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth in Article Six shall not be deemed a Proceeding for the
purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with
the conditions set forth in Article Six.
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SECTION 1003. No Payment When Senior Debt in Default.
In the event that any Senior Payment Default (as defined below) shall have
occurred and be continuing, then no Securities Payment may be made unless and
until such Senior Payment Default shall have been cured or waived or shall have
ceased to exist or the Designated Senior Debt that is the subject of such
Senior Payment Default shall have been discharged or paid in full in cash or
cash equivalents or in any other form acceptable to the holders of such
Designated Senior Debt, after which the Company shall resume making any and all
required Securities Payments, including any missed payments. "Senior Payment
Default" means any default beyond the applicable grace period in the payment of
principal of, premium, if any, or interest, or any other obligation in respect
of Designated Senior Debt when due, whether at the Stated Maturity of any such
payment or by declaration of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined below) shall
have occurred and be continuing, then, upon the receipt by the Company of
written notice of such Senior Nonmonetary Default from a holder of Designated
Senior Debt (or a trustee, agent or other representative for such a holder duly
authorized in writing) which is the subject of such Senior Nonmonetary Default,
no Securities Payment, may be made for a period (the "Payment Blockage Period")
commencing on the date of receipt of such notice and ending on the earlier of
(i) the date on which such Senior Nonmonetary Default (and all other Senior
Nonmonetary Defaults that have occurred and of which the Company is aware) has
been cured or waived or ceases to exist and any acceleration of Designated
Senior Debt shall have been rescinded or annulled or all Designated Senior Debt
that is the subject of such Senior Nonmonetary Default has been discharged or
paid in full, in cash or cash equivalents or in any other form acceptable to
the holders of such Designated Senior Debt; (ii) the 179th day after the date
of such receipt of such notice; and (iii) the date on which such Payment
Blockage Period (and all other Senior Nonmonetary Defaults as to which notice
is given after such Payment Blockage Period is initiated) shall have been
terminated by written notice to the Company from a representative of the
holders of at least a majority of Designated Senior Debt initiating such
Payment Blockage Period, after which, in the case of clauses (i), (ii) and
(iii), the Company will promptly resume making any and all required Securities
Payments in respect of such Securities, including any missed payments;
provided, however, that no more than one Payment Blockage Period may be
commenced with respect to such Securities during any 360-day period and there
shall be a period of at least 181 days in each 360-day period when no Payment
Blockage Period is in effect; provided further, that no Senior Nonmonetary
Default which existed or was continuing on the date of the commencement of a
Payment Blockage Period may be made the basis of the commencement of a
subsequent Payment Blockage Period by holders of Designated Senior Debt or
their representatives, whether or not within a period of 360 consecutive days,
unless such Senior Nonmonetary Default shall have been cured or waived for a
period of not less than 90 consecutive days. "Senior Nonmonetary Default" means
a default with respect to Designated Senior Debt, other than a Senior Payment
Default, which the giving of notice or the passage of time, or both, gives the
holders of the Designated Senior Debt (or a trustee or agent on behalf of the
holders
1-B-29
<PAGE> 158
thereof) the right to declare the Debt under such Designated Senior Debt due
and payable prior to the date on which it matures or is subject to scheduled
repayment.
In the event that, notwithstanding the foregoing, the Company shall make any
Securities Payment to any Holder prohibited by the foregoing provisions of this
Section, then and in such event such Securities Payment shall be paid over and
delivered forthwith to the holders of Designated Senior Debt or their
representatives or as a court of competent jurisdiction shall determine.
The provisions of this Section shall not apply to any Securities Payment
with respect to which Section 1002 would be applicable.
SECTION 1004. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Security shall
prevent the Company, at any time except during the pendency of any Proceeding
referred to in Section 1002 or under the conditions described in Section 1003,
from making Securities Payments.
SECTION 1005. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on or in
respect of Senior Debt, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Designated
Senior Debt, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Debt pursuant
to the provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordi nated to
indebtedness of the Company to substantially the same extent as the Securities
are subordinated to the Senior Debt and is entitled to like rights of
subrogation by reason of any payments or distributions made to holders of such
Senior Debt) to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt until the principal of (and premium, if any) and any interest on
the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders of the Securities would be entitled
except for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Debt by Holders of the
Securities, shall, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Debt.
If any payment or distribution to which the Holder of any Security would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under the Senior Debt, then and in such case, the Holder of any
Security shall be entitled to receive from
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<PAGE> 159
the holders of such Senior Debt at the time outstanding any payments or
distributions received by such holders of Senior Debt in excess of the amount
sufficient to pay all amounts due or to become due on or in respect of Senior
Debt in full.
SECTION 1006. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders on the one hand and the holders
of Senior Debt on the other hand. Nothing contained in this Article or
elsewhere in this Security is intended to or shall (a) impair, as among the
Company, its creditors other than holders of Senior Debt and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional
(and which, subject to the rights under this Article of the holders of Senior
Debt, is intended to rank equally with all other general obligations of the
Company), to pay to the Holders of the Securities the principal of (and
premium, if any) and any interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Securities and
creditors of the Company other than the holders of Senior Debt; or (c) prevent
the Holder of any Securities from exercising all remedies otherwise permitted
by applicable law upon default under this Security, subject to the rights, if
any, under this Article of the holders of Senior Debt to receive cash, property
and securities otherwise payable or deliverable to such Holder.
SECTION 1007. Company to Effectuate Subordination.
Each Holder of this Security by his acceptance hereof authorizes and directs
the Company on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article.
SECTION 1008. No Waiver of Subordination Provisions.
No right of any present or future holder of any Designated Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Security, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do
any one or more of the following: (i) change the manner, place or terms of
payment
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<PAGE> 160
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding or secured; (ii)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Debt; (iii) release any Person liable in any
manner for the collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person; provided,
however, that in no event shall any such actions limit the right of the Holders
of the Securities to take any action to accelerate the maturity of the
Securities in accordance with the provisions set forth in Article Five or to
pursue any rights or remedies under this Security or under applicable laws if
the taking of such action does not otherwise violate the terms of this Article.
SECTION 1009. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Holders of the Securities shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 1010. Defeasance of this Article Ten.
The subordination provided by this Article Ten is expressly made subject to
the provisions for defeasance in Article Three hereof and, anything herein to
the contrary not withstanding, upon the effectiveness of any such defeasance or
covenant defeasance, the Securities then outstanding shall thereupon cease to
be subordinated pursuant to this Article Ten.
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<PAGE> 161
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed, and its corporate seal to be hereunto affixed and attested, all as of
the day and year first above written.
IRIDIUM, INC.
By
----------------------------------
Attest:
- ------------------------------------
1-B-33
<PAGE> 162
EXHIBIT 2-A
Amendments to Outstanding Warrants
FORM OF WARRANT
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE CLASS 1
MEMBERSHIP INTERESTS OF IRIDIUM LLC (THE "COMPANY") FOR WHICH THE WARRANTS
REPRESENTED BY THIS WARRANT CERTIFICATE ARE EXERCISABLE (THE "WARRANT SHARES")
MAY BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM THOSE REGISTRATION REQUIREMENTS.
ACCORDINGLY, THE HOLDER OF THIS WARRANT CERTIFICATE SHALL NOT BE ENTITLED TO
TRANSFER OR EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF
SUCH TRANSFER OR EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT RELATING
TO THE WARRANTS OR THE WARRANT SHARES, AS THE CASE MAY BE, HAS BEEN FILED WITH,
AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT
HAS BEEN ISSUED BY THE SEC OR (II) THE TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR THE ISSUANCE OF THE WARRANT SHARES IS PERMITTED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
TRANSFER OF THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND THE
WARRANT SHARES IS ALSO RESTRICTED BY THE TERMS OF A LIMITED LIABILITY COMPANY
AGREEMENT, DATED AS OF JULY 1, 1996 BY AND AMONG THE PARTIES NAMED THEREIN
(THE "LLC AGREEMENT"). A COPY OF THE LLC AGREEMENT IS ON FILE AND AVAILABLE
FOR INSPECTION BY THE HOLDER OF THIS WARRANT CERTIFICATE AT THE COMPANY'S
PRINCIPAL EXECUTIVE OFFICES.
No. __________ Warrants
WARRANT TO PURCHASE CLASS 1 MEMBERSHIP INTERESTS
of
IRIDIUM LLC
This Warrant Certificate certifies that __________, or registered permitted
assigns, is the registered holder of _____ warrants expiring March 1, 2006 to
purchase an aggregate of ________ Class 1 Membership Interests in the Company
(the "Common Interests"), of Iridium LLC, a delaware limited liability company
(the "Company"). The Warrants evidenced hereby are part of a duly authorized
issue of Warrants of the Company (the "Warrants") all evidenced by Warrant
Certificates substantially similar to this Warrant Certificate. Each Warrant
entitles the holder upon exercise to purchase from the Company at any time on
or after March 1, 2001 and prior to 5:00 p.m. New York City time on March 1,
2006, .13877 Common Interests (each a "Warrant Share") upon surrender of this
Warrant Certificate to the Warrant Agent, subject to the conditions set forth
herein. The number of Warrant Shares purchasable upon exercise thereof are
subject to adjustment upon the occurrence of certain events set forth herein.
Exercise of a Warrant by a person other than the registered holder named above
is subject to the approval of such person for admission as a Member of the
company by the Members of the Company who may grant or withhold such consent in
their absolute discretion.
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<PAGE> 163
SECTION 1. EXERCISE OF THE WARRANTS. Warrants may be exercised at any time
on or after March 1, 2001 and prior to 5:00 p.m. New York City time on March 1,
2006 (the "Expiration Date"). The holder of Warrants evidenced by this Warrant
Certificate may exercise such Warrants by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment to the Company of the Exercise
Price for each Warrant then exercised. Exercise of this Warrant by a person
other than the registered holder named in the preamble of this warrant is
subject to the approval of such person for admission as a member of the company
by the members of the company who may grant or withhold such consent in their
absolute discretion. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, the Company shall issue to the holder hereof or his
permitted assignee a new Warrant Certificate evidencing the number of Warrants
not exercised. No cash dividend shall be paid to a holder of Warrants Shares
issuable upon the exercise of Warrants unless such holder was, as of the record
date for the declaration of such dividend, the record holder of such Warrant
Shares.
No Warrant may be exercised after the Expiration Date, and to the extent not
exercised by such time, such Warrants shall become void. The Company shall give
notice of expiration not less than 90 nor more than 120 days prior to the
Expiration Date to the registered holders of the then outstanding Warrants;
provided, however, that if the Company fails to give such notice, the Warrants
shall still terminate and become void on the Expiration Date.
SECTION 3. REGISTRATION OF TRANSFER AND EXCHANGE. The Company and its
agents may deem and treat the registered holder(s) of this Warrant Certificate
as the absolute owner(s) hereof (notwithstanding any notation of ownership or
other writing hereon made by anyone), for all purposes, and neither the Company
nor its agents shall be affected by any notice to the contrary.
References herein to "Warrant holder(s)" or "holders of the Warrant
Certificates" means in each case registered holders of Warrant Certificates.
Subject to the restrictions on transfer referred to in the Legend on page 1
of this Warrant Certificate, Warrant Certificates, when surrendered at the
office maintained by the Company for such purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be presented for exchange or registration of transfer without
payment of any service charge (except for stamp or any other governmental tax
or charge that may be imposed in connection with any such transfer or
exchange), for another Warrant Certificate or Warrant Certificates representing
a like tenor executed by the Company in the aggregate a like number of
Warrants.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in any form satisfactory to the
Company, duly executed by the Warrant holder or his attorney duly authorized in
writing (with, in the case of transfer and if requested by the Company, such
signature guaranteed by an eligible guarantor institution).
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Certificate, as the Warrant Certificates surrendered for such registration of
transfer
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<PAGE> 164
or exchange, except for the limitation on right of exercise set forth in the
third sentence of Section 1.
SECTION 4. RETIREMENT OF WARRANTS. The Company may purchase Warrants. Any
Warrants purchased by the Company may be retired by cancellation of such
Warrants and appropriate notation thereof in the Company's register.
SECTION 5. PAYMENT OF TAXES. The Company will pay all taxes and other
governmental charges attributable to the initial issuance of Common Interests
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any such taxes or charges which may be payable in respect of
any transfer involved in the issue of any Warrant Certificates or any
certificates for Common Interests in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such taxes or charges or shall have
established to the satisfaction of the Company that such taxes or charges have
been paid.
SECTION 6. MUTILATED OR MISSING WARRANT CERTIFICATES. In case this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company may in
its discretion issue, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction for such Warrant Certificate and indemnity and security therefor,
if requested, also satisfactory to the Company. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company may prescribe.
SECTION 7. RESERVATIONS OF WARRANT SHARES. The Company (i) shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Class 1 Membership Interests, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon
exercise of Warrants, the maximum number of Common Interests which would then
be deliverable upon the exercise of all outstanding Warrants if all such
outstanding Warrants were then exercisable and (ii) shall not take any action
which results in any adjustment of the Exercise Rate if the total number of
Warrant Shares would exceed the total number of Common Interests then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise.
The transfer agent for the Common Interests (which may be the Company if it
is acting as transfer agent) (the "Transfer Agent") and every subsequent
transfer agent for any interests of the Company issuable upon the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized interests as shall
be required for such purpose.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price and issuance, be
duly and validly issued,
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<PAGE> 165
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 8. ADJUSTMENT OF WARRANT SHARES ISSUABLE. The Warrants
represented by this Warrant Certificate will initially be exercisable by the
holder thereof to purchase 10.40775 Common Interests at $.01 per interest. The
number of Warrant Shares that may be purchased upon the exercise of each
Warrant (the "Exercise Rate") will be subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 8. For purposes of
this Section 8, "Common Interests" means the Common Interests and any other
interests in the Company for which the Warrants may be exercised and where, as
a result of this definition, the term refers to more than one class of
interests, the adjustment provisions of this Section 8 shall be equitably
adjusted to achieve as nearly as practicable the intended result as evidenced
by the text of such adjustment provisions.
(a) Adjustments for Change in Common Interests.
If at any time after March 1, 1996 the Company:
(1) pays a dividend or makes a distribution on its Common Interests in
Common Interests;
(2) subdivides its outstanding Common Interests into a greater number of
Common Interests;
(3) combines its outstanding Common Interests into a smaller number of
common Interests;
(4) pays a dividend or makes a distribution on its Common interests
other than Common Interests; or
(5) issues by reclassification of its Common Interests any of its other
interests;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of, or interests in, the
Company which such holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment and upon exercise of a Warrant the holder may receive
two or more classes of interests in the Company, the Company shall determine
the allocation of the adjusted Exercise Price between the classes.
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<PAGE> 166
Notwithstanding any other provision hereof, the Exercise Price with respect to
the issuance of any Warrant Share shall not be less than $.01 per share. After
such allocation, the exercise privilege and the Exercise Rate with respect to
each class of interests shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Interests in this Section 8.
Such adjustment shall be made successively whenever any event listed above
occurs.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all holders of
its Common Interests entitling them for a period expiring within 60 days after
the record date mentioned below to purchase Common Interests or securities
convertible into, or exchangeable or exercisable for, Common Interests at a
price per interest less than the Current Market Value (as defined in subsection
(d)) per interest as of the Time of Determination (as defined in subsection
(d)), the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O+N
--------------
N x P
O -----
+ M
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
O = the number of Common Interests outstanding on the record date.
N = the number of additional Common Interests offered.
P = the offering price per additional Common Interests.
M = the Current Market Value per interest (as defined in Subsection (d)).
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the rights, warrants or
options to which this subsection (b) applies. To the extent that Common
Interests are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would
otherwise be in effect had the adjustment made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of Common
Interests actually delivered. In the event that such rights or warrants are not
so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of holders
entitled to receive such rights or warrants had not been so fixed.
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<PAGE> 167
No adjustment shall be made under this subsection (b) if the application of
the formula stated above in this subsection (b) would result in a value of E'
that is lower than the value of E.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Interests any of its
assets, debt securities or any rights, options or warrants to purchase debt
securities, assets or other interests in or securities of the Company
(including securities or cash, but excluding (1) distributions of Common
Interests or interests referred to in subsection (a) and distributions of
rights, warrants or options referred to in subsection (b) and (2) cash
dividends or other cash distributions that are paid out of current or
accumulated earnings), the Exercise Rate shall be adjusted in accordance with
the formula:
E' = E x M
---
M-F
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
M = the Current Market Value per Common Interest on the record date for
the determination of holders entitled to receive the distribution.
F = the fair market value (as determined by the Board of Directors whose
determination shall be conclusive) of the assets, securities,
interests, rights or warrants applicable to one Common Interest as of
the Time of Determination for the determination of holders entitled to
receive the distribution.
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of holders entitled to receive the distribution.
The Company shall give the Warrant holders at least 10 days notice of a
record date for any dividend payment or other distribution on the Common
Interests.
(d) Current Market Value; Time of Determination.
"Current Market Value" per Common Interest or any other Interest or security
at any date means, on any date of determination the average of the Closing
Prices of the Common Interests (or such interest or security) for the 20
consecutive Business Days selected by the Board of Directors commencing no
more than 30 Business Days before and ending no later than the day before the
day in question; provided that, in the case of clause (c), if the period
between the date of the public announcement of the dividend or distribution and
the date for the determination of holders of Common Interests (or such interest
or security) entitled to
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<PAGE> 168
receive such dividend or distribution (or, if earlier, the date on which the
Common Interests (or such interest or security) go "ex-dividend" in respect of
such dividend or distribution) shall be less than 20 Business Days, the period
shall be such lesser number of Business Days but, in any event, not less than
five Business Days.
"Closing Price" means, for each Business Day, the last reported sale price
regular way on the principal national securities exchange on which the Common
Interests (or such other Interest OR security) are listed or admitted for
trading, or, if the Common Interests (or such other interest or security) are
not so listed or admitted for trading on a national securities exchange, on the
NASDAQ National Market System or, if the Common Interests (or such other
interest or security) are not quoted on the NASDAQ National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose or, if the Common Interests (or such other
interest or security) are not traded in the over-the-counter market, the Fair
Market Value per Common Interest (or such other Interest or security) as
determined by the Board of Directors whose determination shall be conclusive.
"Time of Determination") means the time and date of the earlier of (i) the
determination of holders entitled to receive rights, warrants, or options or a
distribution, in each case, to which subsection (b) or (c) applies and (ii) the
time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or distribution on such
national or regional exchange or market on which the Common Interests are then
listed or quoted.
(e) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Rate need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Rate; provided,
however, that any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section 8 shall be made to the nearest cent or
to the nearest 1/100th of a interest, as the case may be.
(f) When No Adjustment Required.
To the extent the Warrants become convertible into cash pursuant to
subsection (j), no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(g) Notice of Adjustment.
Whenever the Exercise Rate is adjusted, the Company shall provide the
notices required by Section 11 hereof.
(h) Voluntary Increase or Reduction.
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The Company from time to time may increase the Exercise Rate by any amount
for any period of time if the period is at least 20 days and if the increase or
decrease, as the case may be, is irrevocable during the period.
Whenever the Exercise Rate is increased the Company shall mail to registered
Warrant holders a notice of the increase or decrease, as the case may be. The
Company shall mail the notice at least 15 days before the date the increased
Exercise Rate, takes effect. The Notice shall state the increased Exercise
Rate, and the period it will be in effect.
An increase in the Exercise Rate, does not change or adjust the Exercise
Rate, as the case may be, otherwise in effect, or as used for calculations, for
purposes of subsections (a), (b), and (c) of this Section 8.
(i) Notice of Certain Transactions.
If: (1) the Company takes any action that would require an adjustment in the
Exercise Rate pursuant to subsections (a), (b) or (c) of this Section 8 or (2)
the Company takes any action that would require a Supplemental Agreement
pursuant to subsection (j) of this Section 11, the Company shall mail to
registered Warrant holders a notice stating the proposed record date for a
dividend or distribution or the expected effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 20 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(j) Consolidation, Merger or Reorganization of the Company.
If the Company consolidates or mergers with or into, or transfers or leases
all or substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind
and amount of securities, interests, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction and assuming such holder, as a holder of
Common Interests of the Company, failed to exercise its rights of election, if
any, as to the kind or amount of securities, interests, cash and other assets
receivable upon such consolidation, merger, transfer or lease (provided that if
the kind or amount of securities, interests, cash and other assets receivable
upon such consolidation, merger, sale, transfer or lease is not the same for
each Common Interest of the Company held immediately prior to such
consolidation, merger, transfer or lease by other than a constituent person or
an affiliate thereof and in respect of which such rights of election shall have
not been exercised ("non-electing interest"), then for the purpose of this
Section 8 the kind and amount of securities, cash and other assets receivable
upon such consolidation, merger, sale or transfer by each non-electing
interest shall be deemed to be the kind and amount so receivable per interest
by a plurality of the non-electing interests). Concurrently with the
consummation of such transaction, the entity formed by or surviving any such
consolidation or merger if other than the Company, or the person to which such
sale or conveyance shall have been made, shall enter into a Supplemental
Agreement (as defined in Section 13 so providing and further providing for
adjustments in the future which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 8.
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If the issuer of securities deliverable upon exercise of Warrants under the
Supplemental Agreement is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the Supplemental Agreement.
Notwithstanding the first paragraph of this subsection (j), in the case of
any merger, reverse stock split, or other transaction in which the publicly
held Common Interests, if any, shall be converted into the right to receive a
consideration consisting solely of cash, (A) the Warrants shall terminate and
(B) each holder of a Warrant, without having to take any other action than the
surrendering of such Warrant to the Company, shall receive an amount equal to
the amount (if any) by which the price per interest payable to, or which would
be received by, any public holder of Common Interests in connection with such
transaction exceeds the Exercise Price effective at that time.
If this subsection (j) applies, subsections (a), (b) and (c) of this Section
8 shall not apply.
(k) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other interests in the Company, if any, issuable upon such exercise over
and above the Warrant Shares and other interests in the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate and (ii) paying
to such holder any amount in cash in lieu of a fractional interest pursuant to
Section 10 hereof; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(l) Form of Warrants.
Irrespective of any adjustments in the Exercise Rate or kind of interests or
other assets purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
price and number and kind of interests or other assets as are stated in the
Warrant Certificates as initially issued.
SECTION 9. NO DILUTION OR IMPAIRMENT. If any event shall occur as to which
the provisions of Section 8 are not strictly applicable but the failure to make
any adjustment would adversely affect the purchase rights represented by the
Warrants in a way that is contrary to the manifest and essential intent and
principles of Section 8, then, in each such case, the Company shall appoint an
investment banking firm of recognized national standing, or any other financial
expert that does not (or whose directors, officers, employees, affiliates or
stockholders do not) have a direct or material indirect financial interest in
the Company, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the manifest and essential intent
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and principles established in Section 8, necessary to preserve, without
dilution, the purchase rights, represented by the Warrant. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the Warrant
Agent and the Warrant holders and shall make the adjustment described therein.
SECTION 10. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Common Interests on the exercise of Warrants, although it may
do so in its sole discretion. If more than one Warrant shall be presented for
exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Common Interests purchasable
on exercise of the Warrants so presented. If any fraction of a Common Interest
would, except for the provisions of this Section 10, be issuable upon the
exercise of any such Warrants (or specified portion thereof), the Company shall
pay to the Warrant holder an amount in cash equal to the Current Market Value
per Common Interest, 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.
SECTION 11. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS. Upon
any adjustment of the Exercise Rate pursuant to Section 8, the Company shall
promptly thereafter cause to be given to each of the registered holders of the
Warrant certificates at his or her address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 11.
In case:
(a) the Company shall authorize the issuance to all holders of Common
Interests of rights, options or warrants to subscribe for or purchase Common
Interests or of any other subscription rights or warrants and other than
issuances in exchange for equivalent consideration; or
(b) the Company shall authorize the distribution to all holders of
Common Interests of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in Common Interests or distributions
referred to in subsection (a) or Section 8 hereof) and other than
distributions in exchange for equivalent consideration; or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any holders of shares of or interests in the Company
is required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any reclassification or
change of Common Interests issuable upon exercise of the Warrants (other
than as a result of a subdivision or combination), or a tender offer or
exchange offer by the Company for Common Interests; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
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(e) the Company proposes to take any action (other than actions of the
character described in Section 8(a)) which would require an adjustment of
the Exercise Rate pursuant to Section 8;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at the address appearing on the Warrant register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of Common Interests to be entitled to receive any such rights, options,
warrants or distributions are to be determined, or (ii) the initial or record
expiration date set forth in any tender offer or exchange offer for Common
Interests, or (iii) the date on which any such consolidation, merger,
conveyance, transfer, reclassification, dissolution, liquidation, or winding up
is expected to become effective or consummated, and the date as of which it is
expected that holders of record of Common Interests shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such consolidation, merger, conveyance, transfer, reclassification,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 11 or any defect therein shall not affect the legality or
validity of any issuance, right, option, warrant, distribution, tender offer,
exchange offer, consolidation, merger, conveyance, transfer, reclassification,
dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the holder hereof the right to vote or to consent or to receive
notice of meetings of members or the election of directors of the Company or
any other matter, or any other rights of members of the Company, including any
right to receive dividends. In addition, the holders of Warrant Certificates
shall have no preemptive rights and shall not be entitled to share in the
assets of the Company in the event of the liquidation, dissolution or winding
up of the Company's affairs in respect of Common Interests issuable upon
exercise hereof.
SECTION 12. NOTICES TO THE COMPANY. Any notice or demand authorized by
this Warrant Certificate to be given or made by the holder of any Warrant
Certificate to the Company shall be sufficiently given or made when deposited
in the mail, first class or registered, postage prepaid, addressed, as follows:
Iridium, Inc.
1401 H Street NW - 8th floor
Washington, DC 20005
Attention: General Counsel
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: John P. Mead
;or to such other addressee or at such other address or location as may be
notified by the Company to the holders of Warrant Certificates from time to
time.
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SECTION 13. SUPPLEMENTS AND AMENDMENTS. The Company by entering into a
supplemental agreement (a "Supplemental Agreement") signed by the Company may
amend the terms of this Warrant Certificate; provided that any amendment which
would adversely affect the interests of the holders of Warrants must be
approved by holders of a majority of the then outstanding Warrants. A copy of
any Supplemental Agreement shall be mailed by the Company to each Warrant
holder within 30 days of its effective date. The consent of each Warrant holder
affected shall be required for any amendment pursuant to which the Exercise
Rate would be decreased (other than in connection with a waiver of any
provisions of Section 8 or 10 hereof).
SECTION 14. GOVERNING LAW. This Warrant Certificate and the Warrants shall
be governed and construed in accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, Iridium LLC has caused this Warrant Certificate to be
signed by a duly authorized officer of the Company and has caused its seal to
be affixed hereunto or imprinted hereon.
Dated: IRIDIUM LLC
By:
-------------------------
Name:
Title:
Attested by: (seal)
- -------------------------
Name: F. Thomas Tuttle
Title: General Counsel
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Form of Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to receive __________ Class 1 Membership Interests
("Common Shares") and hereby tenders payment for such Common Interests to the
order of Iridium LLC in the amount of $_____ in accordance with the terms
hereof.
The undersigned requests that a certificate for such Common Interests be
registered in the name of __________________, whose address is
_____________________________________ and that such shares be delivered to
_____________________________________________ whose address is
__________________________________________.
If said number of Common Interests is less than all of the Common Interests
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such Common Interests be registered in
the name of _________________________, whose address is
____________________________, and that such Warrant Certificate be delivered to
__________________________, whose address is _______________________
_______________.
_________________________(1) (Signature)
Date: ________________
Signature Guaranteed by:
_______________________
Name:
Title: (1)
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and, at the option of the Company,
must be guaranteed by an "eligible guarantor institution" which meets the
requirements of the Company (which requirements may include membership or
participation in STAMP or such other "signature guaranty program" as may
be determined by the Company in addition to, or in substitution for,
STAMP).
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EXHIBIT 2-B
Form of Warrant
FORM OF WARRANT
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE CLASS 1
MEMBERSHIP INTERESTS OF IRIDIUM LLC (THE "COMPANY") FOR WHICH THE WARRANTS
REPRESENTED BY THIS WARRANT CERTIFICATE ARE EXERCISABLE (THE "WARRANT SHARES")
MAY BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM THOSE REGISTRATION REQUIREMENTS.
ACCORDINGLY, THE HOLDER OF THIS WARRANT CERTIFICATE SHALL NOT BE ENTITLED TO
TRANSFER OR EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF
SUCH TRANSFER OR EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT RELATING
TO THE WARRANTS OR THE WARRANT SHARES, AS THE CASE MAY BE, HAS BEEN FILED WITH,
AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT
HAS BEEN ISSUED BY THE SEC OR (II) THE TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE OR THE ISSUANCE OF THE WARRANT SHARES IS PERMITTED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
TRANSFER OF THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND THE
WARRANT SHARES IS ALSO RESTRICTED BY THE TERMS OF A LIMITED LIABILITY COMPANY
AGREEMENT, DATED AS OF JULY 1, 1996 BY AND AMONG THE PARTIES NAMED THEREIN (THE
"LLC AGREEMENT"). A COPY OF THE LLC AGREEMENT IS ON FILE AND AVAILABLE FOR
INSPECTION BY THE HOLDER OF THIS WARRANT CERTIFICATE AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES.
No. __________ Warrants
WARRANT TO PURCHASE CLASS 1 MEMBERSHIP INTERESTS
of
IRIDIUM LLC
This Warrant Certificate certifies that __________, or registered permitted
assigns, is the registered holder of _____ warrants expiring March 1, 2006 to
purchase an aggregate of ____________ Class 1 Membership Interests in the
Company (the "Common Shares"), of Iridium LLC, a Delaware limited liability
company (the "Company"). The Warrants evidenced hereby are part of a duly
authorized issue of Warrants of the Company (the "Warrants") all evidenced by
Warrant Certificates substantially similar to this Warrant Certificate. Each
Warrant entitles the holder upon exercise to purchase from the Company at any
time on or after March 1, 2001 and prior to 5:00 p.m. New York City time on
March 1, 2006, .13877 Common Interests (each a "Warrant Share") upon surrender
of this Warrant Certificate to the Warrant Agent, subject to the conditions set
forth herein. The number of Warrant Shares purchasable upon exercise thereof
are subject to adjustment upon the occurrence of certain events set forth
herein. Exercise of a Warrant by a person other than the registered holder
named above is subject to the approval of such person for admission as a Member
of the Company by the Members of the Company who may grant or withhold such
consent in their absolute discretion.
SECTION 1. EXERCISE OF THE WARRANTS. Warrants may be exercised at any time on
or after March 1, 2001 and prior to 5:00 p.m. New York City time on March 1,
2006 (the "Expiration Date"). The holder of Warrants evidenced by this Warrant
Certificate may exercise such Warrants by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment to the Company of the Exercise
Price fo each Warrant
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<PAGE> 177
then exercised. Exercise of this Warrant by a person other than the registered
holder named in the preamble of this Warrant is subject to the approval of such
person for admission as a Member of the Company by the Members of the Company
who may grant or withhold such consent in their absolute discretion. In the
event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, the Company shall issue to the holder hereof or his permitted assignee
a new Warrant Certificate evidencing the number of Warrants not exercised. No
cash dividend shall be paid to a holder of Warrants Shares issuable upon the
exercise of Warrants unless such holder was, as of the record date for the
declaration of such dividend, the record holder of such Warrant Shares.
No Warrant may be exercised after the Expiration Date, and to the extent not
exercised by such time, such Warrants shall become void. The Company shall give
notice of expiration not less than 90 nor more than 120 days prior to the
Expiration Date to the registered holders of the then outstanding Warrants;
provided, however, that if the Company fails to give such notice, the Warrants
shall still terminate and become void on the Expiration Date.
SECTION 3. REGISTRATION OF TRANSFER AND EXCHANGE. The Company and its
agents may deem and treat the registered holder(s) of this Warrant Certificate
as the absolute owner(s) hereof (notwithstanding any notation of ownership or
other writing hereon made by anyone), for all purposes, and neither the Company
nor its agents shall be affected by any notice to the contrary.
References herein to "Warrant holder(s)" or "holders of the Warrant
Certificates" means in each case registered holders of Warrant Certificates.
Subject to the restrictions on transfer referred to in the Legend on page 1
of this Warrant Certificate, Warrant Certificates, when surrendered at the
office maintained by the Company for such purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be presented for exchange or registration of transfer without
payment of any service charge (except for stamp or any other governmental tax
or charge that may be imposed in connection with any such transfer or
exchange), for another Warrant Certificate or Warrant Certificates representing
a like tenor executed by the Company in the aggregate a like number of
Warrants.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in any form satisfactory to the
Company, duly executed by the Warrant holder or his attorney duly authorized in
writing (with, in the case of transfer and if requested by the Company, such
signature guaranteed by an eligible guarantor institution).
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Certificate, as the Warrant Certificates surrendered for such registration of
transfer or exchange, except for the limitation on right of exercise set forth
in the third sentence of Section 1.
SECTION 4. RETIREMENT OF WARRANTS. The Company may purchase Warrants. Any
Warrants purchased by the Company may be retired by cancellation of such
Warrants and appropriate notation thereof in the Company's register.
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SECTION 5. PAYMENT OF TAXES. The Company will pay all taxes and other
governmental charges attributable to the initial issuance of Common Interests
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any such taxes or charges which may be payable in respect of
any transfer involved in the issue of any Warrant Certificates or any
certificates for Common Interests in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such taxes or charges or shall have
established to the satisfaction of the Company that such taxes or charges have
been paid.
SECTION 6. MUTILATED OR MISSING WARRANT CERTIFICATES. In case this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Company may in
its discretion issue, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction for such Warrant Certificate and indemnity and security therefor,
if requested, also satisfactory to the Company. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company may prescribe.
SECTION 7. RESERVATIONS OF WARRANT SHARES. The Company (i) shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Class 1 Membership Interests, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon
exercise of Warrants, the maximum number of Common Interests which would then
be deliverable upon the exercise of all outstanding Warrants if all such
outstanding Warrants were then exercisable and (ii) shall not take any action
which results in any adjustment of the Exercise Rate if the total number of
Warrant Shares would exceed the total number of Common Interests then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise.
The transfer agent for the Common Interests (which may be the Company if it
is acting as transfer agent) (the "Transfer Agent") and every subsequent
transfer agent for any interests of the Company issuable upon the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized interests as shall
be required for such purpose.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price and issuance, be
duly and validly issued, free of preemptive rights and free from all taxes,
liens, charges and security interests with respect to the issue thereof.
SECTION 8. ADJUSTMENT OF WARRANT SHARES ISSUABLE. The Warrants
represented by this Warrant Certificate will initially be exercisable by the
holder thereof to purchase .13877 Common Interests at $.01 per interest. The
number of Warrant Shares that may be purchased upon the exercise of each
Warrant (the "Exercise Rate") will be subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 8. For purposes of
this Section 8, "Common Interests" means the Common Interests and any other
interests in the Company for which the Warrants
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<PAGE> 179
may be exercised and where, as a result of this definition, the term refers to
more than one class of interests, the adjustment provisions of this Section 8
shall be equitably adjusted to achieve as nearly as practicable the intended
result as evidenced by the text of such adjustment provisions.
(a) Adjustments for Change in Common Interests.
If at any time after March 1, 1996 the Company:
(1) pays a dividend or makes a distribution on its Common Interests in
Common Interests;
(2) subdivides its outstanding Common Interests into a greater number of
Common Interests;
(3) combines its outstanding Common Interests into a smaller number of
Common Interests;
(4) pays a dividend or makes a distribution on its Common Interests in
interests other than Common Interests; or
(5) issues by reclassification of its Common Interests any of its other
interests;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of, or interests in, the
Company which such holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment and upon exercise of a Warrant the holder may receive
two or more classes of interests in the Company, the Company shall determine
the allocation of the adjusted Exercise Price between the classes.
Notwithstanding any other provision hereof, the Exercise Price with respect to
the issuance of any Warrant Share shall not be less than $.01 per share. After
such allocation, the exercise privilege and the Exercise Rate with respect to
each class of interests shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Interests in this Section 8.
Such adjustment shall be made successively whenever any event listed above
occurs.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all holders of
its Common Interests entitling them for a period expiring within 60 days after
the record date mentioned below to purchase Common Interests or securities
convertible into, or exchangeable or exercisable for, Common Interests at a
price per interest less than the Current Market Value (as defined in subsection
(d)) per interest as of the Time of Determination (as defined in subsection
(d)), the Exercise Rate shall be adjusted in accordance with the formula:
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E' = E x O+N
-------
N x P
O --------
+ M
where:
E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
O = the number of Common Interests outstanding on the record date.
N = the number of additional Common Interests offered.
P = the offering price per additional Common Interests.
M = the Current Market Value per interest (as defined in Subsection (d)).
The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the rights, warrants or
options to which this subsection (b) applies. To the extent that Common
Interests are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would
otherwise be in effect had the adjustment made upon the issuance of such rights
or warrants been made on the basis of delivery of only the number of Common
Interests actually delivered. In the event that such rights or warrants are not
so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of holders
entitled to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this subsection (b) if the application of
the formula stated above in this subsection (b) would result in a value of E'
that is lower than the value of E.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Interests any of its
assets, debt securities or any rights, options or warrants to purchase debt
securities, assets or other interests in or securities of the Company
(including securities or cash, but excluding (1) distributions of Class 1
Membership Interests or interests referred to in subsection (a) and
distributions of rights, warrants or options referred to in subsection (b) and
(2) cash dividends or other cash distributions that are paid out of current or
accumulated earnings), the Exercise Rate shall be adjusted in accordance with
the formula:
E' = E x M
-----
M-F
where:
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E' = the adjusted Exercise Rate.
E = the current Exercise Rate.
M = the Current Market Value per Common Interest on the record date for
the determination of holders entitled to receive the distribution.
F = the fair market value (as determined by the Board of Directors whose
determination shall be conclusive) of the assets, securities,
interests, rights or warrants applicable to one Common Interest as of
the Time of Determination for the determination of holders entitled to
receive the distribution.
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of holders entitled to receive the distribution.
The Company shall give the Warrant holders at least 10 days notice of a
record date for any dividend payment or other distribution on the Common
Interests.
(d) Current Market Value; Time of Determination.
"Current Market Value" per Common Interest or any other interest or security
at any date means, on any date of determination the average of the Closing
Prices of the Common Interests (or such interest or security) for the 20
consecutive Business Days selected by the Board of Directors commencing no more
than 30 Business Days before and ending no later than the day before the day in
question; provided that, in the case of clause (c), if the period between the
date of the public announcement of the dividend or distribution and the date
for the determination of holders of Common Interests (or such interest or
security) entitled to receive such dividend or distribution (or, if earlier,
the date on which the Common Interests (or such interest or security) go
"ex-dividend" in respect of such dividend or distribution) shall be less than
20 Business Days, the period shall be such lesser number of Business Days but,
in any event, not less than five Business Days.
"Closing Price" means, for each Business Day, the last reported sale price
regular way on the principal national securities exchange on which the Common
Interests (or such other interest or security) are listed or admitted for
trading, or, if the Common Interests (or such other interest or security) are
not so listed or admitted for trading on a national securities exchange, on the
NASDAQ National Market System or, if the Common Interests (or such other
interest or security) are not quoted on the NASDAQ National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose or, if the Common Interests (or such other
interest or security) are not traded in the over-the-counter market, the Fair
Market Value per Common Interest (or such other interest or security) as
determined by the Board of Directors whose determination shall be conclusive.
"Time of Determination") means the time and date of the earlier of (i) the
determination of holders entitled to receive rights, warrants, or options or a
distribution, in each case, to which subsection (b) or
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(c) applies and (ii) the time ("Ex-Dividend Time") immediately prior to the
commencement of "ex-dividend" trading for such rights, warrants or distribution
on such national or regional exchange or market on which the Common Interests
are then listed or quoted.
(e) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Rate need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Rate; provided,
however, that any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section 8 shall be made to the nearest cent or
to the nearest 1/100th of a interest, as the case may be.
(f) When No Adjustment Required.
To the extent the Warrants become convertible into cash pursuant to
subsection (j), no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
(g) Notice of Adjustment.
Whenever the Exercise Rate is adjusted, the Company shall provide the
notices required by Section 11 hereof.
(h) Voluntary Increase or Reduction.
The Company from time to time may increase the Exercise Rate by any amount
for any period of time if the period is at least 20 days and if the increase or
decrease, as the case may be, is irrevocable during the period.
Whenever the Exercise Rate is increased the Company shall mail to registered
Warrant holders a notice of the increase or decrease, as the case may be. The
Company shall mail the notice at least 15 days before the date the increased
Exercise Rate, takes effect. The Notice shall state the increased Exercise
Rate, and the period it will be in effect.
An increase in the Exercise Rate, does not change or adjust the Exercise
Rate, as the case may be, otherwise in effect, or as used for calculations, for
purposes of subsections (a), (b), and (c) of this Section 8.
(i) Notice of Certain Transactions.
If: (1) the Company takes any action that would require an adjustment in the
Exercise Rate pursuant to subsections (a), (b) or (c) of this Section 8 or (2)
the Company takes any action that would require a Supplemental Agreement
pursuant to subsection (j) of this Section 11, the Company shall mail to
registered Warrant holders a notice stating the proposed record date for a
dividend or distribution or the expected effective date of a subdivision,
combination, reclassification, consolidation, merger,
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transfer, lease, liquidation or dissolution. The Company shall mail the notice
at least 20 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(j) Consolidation, Merger or Reorganization of the Company.
If the Company consolidates or mergers with or into, or transfers or leases
all or substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind
and amount of securities, interests, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction and assuming such holder, as a holder of
Common Interests of the Company, failed to exercise its rights of election, if
any, as to the kind or amount of securities, interests, cash and other assets
receivable upon such consolidation, merger, transfer or lease (provided that if
the kind or amount of securities, interests, cash and other assets receivable
upon such consolidation, merger, sale, transfer or lease is not the same for
each Common Interest of the Company held immediately prior to such
consolidation, merger, transfer or lease by other than a constituent person or
an affiliate thereof and in respect of which such rights of election shall have
not been exercised ("non-electing interest"), then for the purpose of this
Section 8 the kind and amount of securities, cash and other assets receivable
upon such consolidation, merger, sale or transfer by each non-electing interest
shall be deemed to be the kind and amount so receivable per interest by a
plurality of the non-electing interests). Concurrently with the consummation of
such transaction, the entity formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or
conveyance shall have been made, shall enter into a Supplemental Agreement (as
defined in Section 13 so providing and further providing for adjustments in the
future which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 8.
If the issuer of securities deliverable upon exercise of Warrants under the
Supplemental Agreement is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the Supplemental Agreement.
Notwithstanding the first paragraph of this subsection (j), in the case of
any merger, reverse stock split, or other transaction in which the publicly
held Common Interests, if any, shall be converted into the right to receive a
consideration consisting solely of cash, (A) the Warrants shall terminate and
(B) each holder of a Warrant, without having to take any other action than the
surrendering of such Warrant to the Company, shall receive an amount equal to
the amount (if any) by which the price per interest payable to, or which would
be received by, any public holder of Common Interests in connection with such
transaction exceeds the Exercise Price effective at that time.
If this subsection (j) applies, subsections (a), (b) and (c) of this Section
8 shall not apply.
(k) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an adjustment in the
Exercise Rate be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other interests in the Company, if any, issuable upon such exercise over
and above the
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Warrant Shares and other interests in the Company, if any, issuable upon such
exercise on the basis of the Exercise Rate and (ii) paying to such holder any
amount in cash in lieu of a fractional interest pursuant to Section 10 hereof;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence of
the event requiring such adjustment.
(l) Form of Warrants.
Irrespective of any adjustments in the Exercise Rate or kind of interests or
other assets purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
price and number and kind of interests or other assets as are stated in the
Warrant Certificates as initially issued.
SECTION 9. NO DILUTION OR IMPAIRMENT. If any event shall occur as to which
the provisions of Section 8 are not strictly applicable but the failure to make
any adjustment would adversely affect the purchase rights represented by the
Warrants in a way that is contrary to the manifest and essential intent and
principles of Section 8, then, in each such case, the Company shall appoint an
investment banking firm of recognized national standing, or any other financial
expert that does not (or whose directors, officers, employees, affiliates or
stockholders do not) have a direct or material indirect financial interest in
the Company, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its managers,
officers, employees, affiliates or stockholders are) a promoter, manager or
officer of the Company, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the manifest and essential intent and
principles established in Section 8, necessary to preserve, without dilution,
the purchase rights, represented by the Warrant. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the Warrant Agent and the
Warrant holders and shall make the adjustment described therein.
SECTION 10. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Common Interests on the exercise of Warrants, although it may
do so in its sole discretion. If more than one Warrant shall be presented for
exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Common Interests purchasable
on exercise of the Warrants so presented. If any fraction of a Common Interest
would, except for the provisions of this Section 10, be issuable upon the
exercise of any such Warrants (or specified portion thereof), the Company shall
pay to the Warrant holder an amount in cash equal to the Current Market Value
per Common Interest, 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.
SECTION 11. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS. Upon
any adjustment of the Exercise Rate pursuant to Section 8, the Company shall
promptly thereafter cause to be given to each of the registered holders of the
Warrant certificates at his or her address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 11.
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In case:
(a) the Company shall authorize the issuance to all holders of Common
Interests of rights, options or warrants to subscribe for or purchase Common
Interests or of any other subscription rights or warrants and other than
issuances in exchange for equivalent consideration; or
(b) the Company shall authorize the distribution to all holders of
Common Interests of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in Common Interests or distributions
referred to in subsection (a) or Section 8 hereof) and other than
distributions in exchange for equivalent consideration; or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any holders of shares of or interests in the Company
is required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any reclassification or
change of Common Interests issuable upon exercise of the Warrants (other
than as a result of a subdivision or combination), or a tender offer or
exchange offer by the Company for Common Interests; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company proposes to take any action (other than actions of the
character described in Section 8(a)) which would require an adjustment of
the Exercise Rate pursuant to Section 8;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at the address appearing on the Warrant register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of Common Interests to be entitled to receive any such rights, options,
warrants or distributions are to be determined, or (ii) the initial or record
expiration date set forth in any tender offer or exchange offer for Common
Interests, or (iii) the date on which any such consolidation, merger,
conveyance, transfer, reclassification, dissolution, liquidation, or winding up
is expected to become effective or consummated, and the date as of which it is
expected that holders of record of Common Interests shall be entitled to
exchange such interests for securities or other property, if any, deliverable
upon such consolidation, merger, conveyance, transfer, reclassification,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 11 or any defect therein shall not affect the legality or
validity of any issuance, right, option, warrant, distribution, tender offer,
exchange offer, consolidation, merger, conveyance, transfer, reclassification,
dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the holder hereof the right to vote or to consent or to receive
notice of meetings of Members or the election of directors of the Company or
any other matter, or any other rights of Members of the Company, including any
right to receive dividends. In addition, the holders of Warrant Certificates
shall have no preemptive rights and shall not be entitled to share in the
assets of the Company in the event of the liquidation,
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dissolution or winding up of the Company's affairs in respect of Common
Interests issuable upon exercise hereof.
SECTION 12. NOTICES TO THE COMPANY. Any notice or demand authorized by
this Warrant Certificate to be given or made by the holder of any Warrant
Certificate to the Company shall be sufficiently given or made when deposited
in the mail, first class or registered, postage prepaid, addressed, as follows:
Iridium, Inc.
1401 H Street NW - 8th floor
Washington, DC 20005
Attention: F. Thomas Tuttle, Esq.
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: John P. Mead
;or to such other addressee or at such other address or location as may be
notified by the Company to the holders of Warrant Certificates from time to
time.
SECTION 13. SUPPLEMENTS AND AMENDMENTS. The Company by entering into a
supplemental agreement (a "Supplemental Agreement") signed by the Company may
amend the terms of this Warrant Certificate; provided that any amendment which
would adversely affect the interests of the holders of Warrants must be
approved by holders of a majority of the then outstanding Warrants. A copy of
any Supplemental Agreement shall be mailed by the Company to each Warrant
holder within 30 days of its effective date. The consent of each Warrant holder
affected shall be required for any amendment pursuant to which the Exercise
Rate would be decreased (other than in connection with a waiver of any
provisions of Section 8 or 10 hereof).
SECTION 14. GOVERNING LAW. This Warrant Certificate and the Warrants shall
be governed and construed in accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, Iridium LLC has caused this Warrant Certificate to be
signed by a duly authorized officer of the Company and has caused its seal to
be affixed hereunto or imprinted hereon.
Dated: IRIDIUM LLC
By:
---------------------------
Name:
Title:
Attested by: (seal)
- --------------------------
Name: F. Thomas Tuttle
Title: General Counsel
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Form of Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to receive __________ Class 1 Membership Interests
("Common Shares") and hereby tenders payment for such Common Shares to the
order of Iridium LLC in the amount of $_____ in accordance with the terms
hereof.
The undersigned requests that a certificate for such Common Shares be
registered in the name of __________________, whose address is
_____________________________________ and that such Common Shares be delivered
to _____________________________________________ whose address is
__________________________________________.
If said number of Common Shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such Common Shares be registered in the
name of _________________________, whose address is
____________________________, and that such Warrant Certificate be delivered to
__________________________, whose address is _______________________
_______________.
(1)
----------------------
(Signature)
Date:
-------------------------
Signature Guaranteed by:
---------------------------
Name:
Title: (1)
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and, at the option of the Company,
must be guaranteed by an "eligible guarantor institution" which meets the
requirements of the Company (which requirements may include membership or
participation in STAMP or such other "signature guaranty program" as may
be determined by the Company in addition to, or in substitution for,
STAMP).
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EXHIBIT 3-A
Amendments to Motorola Warrant
MOTOROLA WARRANT
Date of Issuance: July 29, 1993 Certificate No. W-1
For value received, Iridium LLC, a Delaware limited liability company
(the "Company"), hereby grants to Motorola, Inc., a Delaware corporation
("Motorola") the right to purchase from the Company membership interests
denominated as Series M Class 2 Interests ("Series M Class 2 Interests")
representing 2.5% of the Class 1 Interests Deemed Outstanding at the Exercise
Time (as hereinafter defined) at a price per interest of $1,000 (as adjusted
from time to time in accordance herewith, the "Exercise Price"). Certain
capitalized terms used herein are defined in Section 5 hereof. The amount and
kind of interests and securities purchasable pursuant to the rights granted
hereunder and the purchase price for such Interests and securities are subject
to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. Motorola may exercise, in whole but
not in part, the purchase rights represented by this Warrant at any time and
from time to time during the period commencing on the third anniversary of the
Closing Date through and including July 29, 2006 (the "Exercise Period"). The
Company shall give Motorola written notice of the expiration of the Exercise
Period at least 60 days but not more than 90 days prior to the expiration of
the Exercise Period.
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised
when the Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
paragraph 1C below, executed by Motorola;
(b) this Warrant; and
(c) a check payable to the Company in an amount equal to
the product of the Exercise Price multiplied by the number of Series M
Class 2 Interests being purchased upon such exercise (the "Aggregate
Exercise Price").
(ii) Certificates for Series M Class 2 Interests purchased
upon exercise of this Warrant shall be delivered by the Company to Motorola
within five business days after the date of the Exercise Time.
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(iii) The Series M Class 2 Interests issuable upon the
exercise of this Warrant shall be deemed to have been issued to Motorola at the
Exercise Time, and Motorola shall be deemed for all purposes to have become the
record holder of such Series M Class 2 Interests at the Exercise Time.
(iv) The issuance of certificates for Series M Class 2
Interests upon exercise of this Warrant shall be made without charge to
Motorola for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Series M
Class 2 Interests. Each Series M Class 2 Interest issuable upon exercise of
this Warrant shall, upon payment of the Exercise Price therefor, be fully paid
and nonassessable and free from all liens and charges with respect to the
issuance thereof.
(v) The Company shall not close its books against the
transfer of this Warrant or of any Series M Class 2 Interest issued or issuable
upon the exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
(vi) The Company shall assist and cooperate with Motorola in
making any governmental filings or obtaining any governmental approvals prior
to or in connection with any exercise of this Warrant (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of this Warrant is to be made in connection with a public offering or
sale of the Company, the exercise of this Warrant may, at the election of
Motorola, be conditioned upon the consummation of the public offering or sale
of the Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued Series M Class 2 Interests solely
for the purpose of issuance upon the exercise of this Warrant, such number of
Series M Class 2 Interests issuable upon the exercise of this Warrant. All
Series M Class 2 Interests which are so issuable shall, when issued, be duly
and validly issued and free from all taxes, liens and charges. The Company
shall take all such actions as may be necessary to assure that all such Series
M Class 2 Interests may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which Series M Class 2 Interests may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each such
issuance).
1C. Exercise Agreement. Upon any exercise of this
Warrant, the Exercise Agreement shall be substantially in the form set forth in
Exhibit 1 hereto. Such Exercise Agreement shall be dated the actual date of
execution thereof.
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Section 2. Adjustment of Exercise Price. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2.
2A. Subdivision or Combination of Series M Class 2
Interests. If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
Series M Class 2 Interests into a greater number of interests, the Exercise
Price in effect immediately prior to such subdivision shall be proportionately
reduced. If the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding Series M Class 2 Interests
into a smaller number of interests, the Exercise Price in effect immediately
prior to such combination shall be proportionately increased.
2B. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Series M Class 2 Interests are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Series M Class 2 Interests are referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the Company
shall make appropriate provision (in form and substance satisfactory to
Motorola) to insure that Motorola shall thereafter have the right to acquire
and receive in lieu of or addition to (as the case may be) the Series M Class 2
Interests immediately theretofore acquirable and receivable upon the exercise
of this Warrant, such interests, interests of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Series M Class 2 Interests immediately theretofore acquirable and receivable
upon exercise of this Warrant had such Organic Change not taken place. In any
such case, the Company shall make appropriate provision (in form and substance
satisfactory to Motorola) with respect to Motorola's rights and interests to
insure that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to this Warrant. The Company shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to Motorola) the obligation to
deliver to each such holder such interests, interests of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
2C. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided for
by such provisions, then the Company's board of directors shall make an
appropriate adjustment in the Exercise Price so as to protect the rights of
Motorola as the holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price as otherwise determined pursuant to this Section 2.
2D. Notices.
(i) Immediately upon any adjustment of the Exercise
Price, the Company shall give written notice thereof to Motorola, setting forth
in reasonable detail and certifying the calculation of such adjustment.
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(ii) The Company shall give written notice to Motorola at
least 20 days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Series M
Class 2 Interests or the Class 1 Interests, (B) with respect to any pro rata
subscription offer to holders of Series M Class 2 Interests or Class 1
Interests or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to Motorola
at least 20 days prior to the date on which any Organic Change, dissolution or
liquidation shall take place.
Section 3. Liquidating Dividends. If the Company declares or
pays a dividend or distribution upon the Series M Class 2 Interests or Class 1
Interests payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend or distribution payable in
Class 1 Interests (a "Liquidating Dividend"), then the Company shall pay to
Motorola at the time of payment thereof the Liquidating Dividend which would
have been paid to Motorola on the Series M Class 2 Interests or Class 1
Interests, as the case may be, had this Warrant been fully exercised
immediately prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the record holders of
Series M Class 2 Interests or Class 1 Interests, as the case may be, entitled
to such dividends or distributions are to be determined.
Section 4. Purchase Rights. If at any time the Company
grants, issues or sells any options, convertible securities or rights to
purchase interests, stock, warrants, securities or other property pro rata to
the record holders of any class of Interests (the "Purchase Rights"), then
Motorola shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which Motorola could have
acquired if Motorola had held the number of Series M Class 2 Interests
acquirable upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Series M Class 2 Interests are to be determined for the grant, issue or sale
of such Purchase Rights.
Section 5. Definitions. The following terms have meanings
set forth below:
"Closing Date" means July 29, 1993.
"Class 1 Interests" means, collectively, the membership
interests in the Company denominated as Class 1 Interests, and any other class
of membership interests in the Company hereafter authorized which is not
limited to a fixed sum or percentage in respect to the rights of holders
thereof to participate in dividends or distributions or in the distribution of
assets upon any liquidation, dissolution or winding up of the
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Company. The Series A, Series B, Series C and Series M Class 2 Interests are
not Class 1 Interests.
"Class 1 Interests Deemed Outstanding" means, at any given
time, the number of Class 1 Interests actually outstanding at such time, plus
the number of Class 1 Interests for which the Company has received commitments
to purchase, regardless of whether there are any unfulfilled conditions
precedent to such commitments, plus the number of Class 1 Interests issuable
upon exercise of any rights or options to subscribe for or to purchase Class 1
Interests or any interests, stock or other securities convertible into or
exchangeable for Class 1 Interests regardless of whether such rights or options
are actually exercisable at such time, plus the number of Class 1 Interests
issuable upon conversion or exchange of any interests or securities
convertible into or exchangeable for Class 1 Interests regardless of whether
such interests or securities are actually convertible or exchangeable at such
time, but excluding any Class 1 Interests issuable upon exercise of this
Warrant.
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Series M Class 2 Interests Interests" means the membership
interests in the Company denominated as Series M Class 2 Interests.
Section 6. No Voting Rights; Limitations of Liability. This
Warrant shall not entitle Motorola to any voting rights or other rights as a
member in the Company. No provision hereof, in the absence of affirmative
action by Motorola to purchase Series M Class 2 Interests, and no enumeration
herein of the rights or privileges of Motorola shall give rise to any liability
of Motorola for the Exercise Price of Series M Class 2 Interests acquirable by
exercise hereof or as a member in the Company.
Section 7. Warrant Not Transferable. This Warrant is not
transferable, in whole or in part.
Section 8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of Motorola shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of a Motorola indemnity agreement reasonably
satisfactory to the Company, or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 9. Notices. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and shall
be delivered personally, sent by reputable express courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and shall be deemed to have been given when so delivered, sent
or deposited in the
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U.S. Mail (i) to the Company, at its principal executive offices and (ii) to
Motorola, at such holder's address as it appears in the records of the Company
(unless otherwise indicated by Motorola).
Section 10. Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of Motorola.
Section 11. Descriptive Headings; Governing Law. The
descriptive headings of the several Sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
The construction, validity and interpretation of this Warrant shall be governed
by the internal law, and not the conflicts law, of the State of Delaware.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its seal and to be
dated the Date of Issuance hereof.
IRIDIUM LLC
By:
------------------------
Its:
------------------------
[SEAL]
Attest:
- ---------------------------
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EXHIBIT 1
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-1), hereby agrees to subscribe for the
purchase of all of the Series M Class 2 Interests covered by such Warrant and
makes payment herewith in full therefor at the price per interest provided by
such Warrant.
MOTOROLA, INC.
By:
------------------------------
Its:
-----------------------------
EXHIBIT 1
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EXHIBIT 3-B
Form of Motorola Warrant
MOTOROLA WARRANT
Date of Issuance: July 29, 1993 Certificate No. W-1
For value received, Iridium LLC, a Delaware limited liability
company (the "Company"), hereby grants to Motorola, Inc., a Delaware
corporation ("Motorola") the right to purchase from the Company membership
interests denominated as Series M Class 2 Interests ("Series M Class 2
Interests") representing 2.5% of the Class 1 Interests Deemed Outstanding at
the Exercise Time (as hereinafter defined) at a price per interest of $1,000
(as adjusted from time to time in accordance herewith, the "Exercise Price").
Certain capitalized terms used herein are defined in Section 5 hereof. The
amount and kind of interests and securities purchasable pursuant to the rights
granted hereunder and the purchase price for such interests and securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. Motorola may exercise, in whole but
not in part, the purchase rights represented by this Warrant at any time and
from time to time during the period commencing on the third anniversary of the
Closing Date through and including July 29, 2006 (the "Exercise Period"). The
Company shall give Motorola written notice of the expiration of the Exercise
Period at least 60 days but not more than 90 days prior to the expiration of
the Exercise Period.
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised
when the Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
paragraph 1C below, executed by Motorola;
(b) this Warrant; and
(c) a check payable to the Company in an amount equal to
the product of the Exercise Price multiplied by the number of Series M
Class 2 Interests being purchased upon such exercise (the "Aggregate
Exercise Price").
(ii) Certificates for Series M Class 2 Interests purchased
upon exercise of this Warrant shall be delivered by the Company to Motorola
within five business days after the date of the Exercise Time.
3-B-1
<PAGE> 197
(iii) The Series M Class 2 Interests issuable upon the
exercise of this Warrant shall be deemed to have been issued to Motorola at the
Exercise Time, and Motorola shall be deemed for all purposes to have become the
record holder of such Series M Class 2 Interests at the Exercise Time.
(iv) The issuance of certificates for Series M Class 2
Interests upon exercise of this Warrant shall be made without charge to
Motorola for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Series M
Class 2 Interests. Each Series M Class 2 Interest issuable upon exercise of
this Warrant shall, upon payment of the Exercise Price therefor, be fully paid
and nonassessable and free from all liens and charges with respect to the
issuance thereof.
(v) The Company shall not close its books against the
transfer of this Warrant or of any Series M Class 2 Interest issued or issuable
upon the exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
(vi) The Company shall assist and cooperate with Motorola in
making any governmental filings or obtaining any governmental approvals prior
to or in connection with any exercise of this Warrant (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of this Warrant is to be made in connection with a public offering or
sale of the Company, the exercise of this Warrant may, at the election of
Motorola, be conditioned upon the consummation of the public offering or sale
of the Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued Series M Class 2 Interests solely
for the purpose of issuance upon the exercise of this Warrant, such number of
Series M Class 2 Interests issuable upon the exercise of this Warrant. All
Series M Class 2 Interests which are so issuable shall, when issued, be duly
and validly issued and free from all taxes, liens and charges. The Company
shall take all such actions as may be necessary to assure that all such Series
M Class 2 Interests may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which Series M Class 2 Interests may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each such
issuance).
1C. Exercise Agreement. Upon any exercise of this
Warrant, the Exercise Agreement shall be substantially in the form set forth in
Exhibit 1 hereto. Such Exercise Agreement shall be dated the actual date of
execution thereof.
Section 2. Adjustment of Exercise Price. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2.
2A. Subdivision or Combination of Series M Class 2
Interests. If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more
3-B-2
<PAGE> 198
classes of its outstanding Series M Class 2 Interests into a greater number of
interests, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced. If the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding Series
M Class 2 Interests into a smaller number of interests, the Exercise Price in
effect immediately prior to such combination shall be proportionately
increased.
2B. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Series M Class 2 Interests are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Series M Class 2 Interests are referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the Company
shall make appropriate provision (in form and substance satisfactory to
Motorola) to insure that Motorola shall thereafter have the right to acquire
and receive in lieu of or addition to (as the case may be) the Series M Class 2
Interests immediately theretofore acquirable and receivable upon the exercise
of this Warrant, such interests, interests of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Series M Class 2 Interests immediately theretofore acquirable and receivable
upon exercise of this Warrant had such Organic Change not taken place. In any
such case, the Company shall make appropriate provision (in form and substance
satisfactory to Motorola) with respect to Motorola's rights and interests to
insure that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to this Warrant. The Company shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from such
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to Motorola) the obligation to
deliver to each such holder such interests, interests of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
2C. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided for
by such provisions, then the Company's board of directors shall make an
appropriate adjustment in the Exercise Price so as to protect the rights of
Motorola as the holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price as otherwise determined pursuant to this Section 2.
2D. Notices.
(i) Immediately upon any adjustment of the Exercise
Price, the Company shall give written notice thereof to Motorola, setting forth
in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to Motorola at
least 20 days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Series M
Class 2 Interests or the Class 1 Interests, (B) with respect to any pro rata
subscription offer to holders of Series M Class 2 Interests or Class 1
Interests or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
3-B-3
<PAGE> 199
(iii) The Company shall also give written notice to Motorola
at least 20 days prior to the date on which any Organic Change, dissolution or
liquidation shall take place.
Section 3. Liquidating Dividends. If the Company declares or
pays a dividend or distribution upon the Series M Class 2 Interests or Class 1
Interests payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend or distribution payable in
Class 1 Interests (a "Liquidating Dividend"), then the Company shall pay to
Motorola at the time of payment thereof the Liquidating Dividend which would
have been paid to Motorola on the Series M Class 2 Interests or Class 1
Interests, as the case may be, had this Warrant been fully exercised
immediately prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the record holders of
Series M Class 2 Interests or Class 1 Interests, as the case may be, entitled
to such dividends or distributions are to be determined.
Section 4. Purchase Rights. If at any time the Company
grants, issues or sells any options, convertible securities or rights to
purchase interests, stock, warrants, securities or other property pro rata to
the record holders of any class of Interests (the "Purchase Rights"), then
Motorola shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which Motorola could have
acquired if Motorola had held the number of Series M Class 2 Interests
acquirable upon complete exercise of this Warrant immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Series M Class 2 are to be determined for the grant, issue or sale of such
Purchase Rights.
Section 5. Definitions. The following terms have meanings
set forth below:
"Closing Date" means July 29, 1993.
"Class 1 Interests" means, collectively, the membership
interests in the Company denominated as Class 1 Interests, and any other class
of membership interests in the Company hereafter authorized which is not
limited to a fixed sum or percentage in respect to the rights of holders
thereof to participate in dividends or distributions or in the distribution of
assets upon any liquidation, dissolution or winding up of the Company. The
Series M, Series A, Series B, Series C and Series M Class 2 Interests are not
Clas 1 Interests.
"Class 1 Interests Deemed Outstanding" means, at any given
time, the number of Class 1 Interests actually outstanding at such time, plus
the number of Class 1 Interests for which the Company has received commitments
to purchase, regardless of whether there are any unfulfilled conditions
precedent to such commitments, plus the number of Class 1 Interests issuable
upon exercise of any rights or options to subscribe for or to purchase Class 1
Interests or any interests, stock or other securities convertible into or
exchangeable for Class 1 Interests regardless of whether such rights or options
are actually exercisable at such time, plus the number of Class 1 Interests
issuable upon conversion or exchange of any interests or securities convertible
into or exchangeable for Class 1 Interests regardless of whether such interests
or securities are actually convertible or exchangeable at such time, but
excluding any Class 1 Interests issuable upon exercise of this Warrant.
3-B-4
<PAGE> 200
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Series M Class 2 Interests" means the membership interests in
the Company denominated as Series M Class 2 Interests.
Section 6. No Voting Rights; Limitations of Liability. This
Warrant shall not entitle Motorola to any voting rights or other rights as a
member in the Company. No provision hereof, in the absence of affirmative
action by Motorola to purchase Series M Class 2 Interests, and no enumeration
herein of the rights or privileges of Motorola shall give rise to any liability
of Motorola for the Exercise Price of Series M Class 2 Interests acquirable by
exercise hereof or as a member in the Company.
Section 7. Warrant Not Transferable. This Warrant is not
transferable, in whole or in part.
Section 8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of Motorola shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of a Motorola indemnity agreement reasonably
satisfactory to the Company, or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 9. Notices. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and shall
be delivered personally, sent by reputable express courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and shall be deemed to have been given when so delivered, sent
or deposited in the U.S. Mail (i) to the Company, at its principal executive
offices and (ii) to Motorola, at such holder's address as it appears in the
records of the Company (unless otherwise indicated by Motorola).
Section 10. Amendment and Waiver. Except as otherwise
provided herein, the provisions of the Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of Motorola.
Section 11. Descriptive Headings; Governing Law. The
descriptive headings of the several Sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
The construction, validity and interpretation of this Warrant shall be governed
by the internal law, and not the conflicts law, of the State of Delaware.
* * * * *
3-B-5
<PAGE> 201
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its seal and to be
dated the Date of Issuance hereof.
IRIDIUM LLC
By:
------------------------
Its:
-----------------------
[SEAL]
Attest:
- --------------------------
3-B-6
<PAGE> 202
EXHIBIT 1
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-1), hereby agrees to subscribe for the
purchase of all of the Series M Class 2 Interests covered by such Warrant and
makes payment herewith in full therefor at the price per interest provided by
such Warrant.
MOTOROLA, INC.
By:
------------------------
Its:
-----------------------
3-B-7
<PAGE> 203
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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ARTICLE I
<S> <C> <C>
GENERAL PROVISIONS
Section 1.01 Formation and Name .................................................... 1
Section 1.02 Place of Business and Office:
Registered Agent ...................................................... 2
Section 1.03 Purpose of LLC ........................................................ 2
Section 1.04 Fiscal Year ........................................................... 2
Section 1.05 Directors: Number, Appointment, ......................................
Removal, Qualifications, Etc. ......................................... 2
Section 1.06 Members .............................................................. 3
Section 1.07 Liability of Members and Directors ................................... 7
Section 1.08 Certain Duties and Liabilities of
Members and Directors ................................................. 8
Section 1.09 Reliance by Third Parties ............................................. 9
Section 1.10 Organizational Expenses ............................................... 9
Section 1.11 Seal of LLC ........................................................... 9
Section 1.12 Ratification and Authorization
of Certain Actions .................................................... 9
ARTICLE II
MANAGEMENT AND OPERATIONS OF LLC
Section 2.01 Power and Authority of Members ........................................ 9
Section 2.02 Power and Authority of Directors....................................... 9
Section 2.03 Directors: Meetings, Committees, and Delegation....................... 10
Section 2.04 Compensation of the Directors ......................................... 15
Section 2.05 Officers .............................................................. 15
Section 2.06 Interested Directors .................................................. 19
Section 2.07 Books and Records ..................................................... 20
Section 2.08 Indemnification ....................................................... 20
ARTICLE III
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
Section 3.01 Form of Contribution .................................................. 24
Section 3.02 Contributions by the Class 1 Members ................................. 24
Section 3.03 Contributions with Respect to
the Class 2 Members ................................................... 25
Section 3.04 Allocation of Distributions ........................................... 25
Section 3.05 Allocation of Tax Items ............................................... 25
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.06 Withholding ........................................................... 26
Section 3.07 Distributions ........................................................ 26
Section 3.08 Limitations on Distributions .......................................... 27
Section 3.09 Interests as Personal Property ........................................ 28
Section 3.10 Tax Matters Partner ................................................... 28
ARTICLE IV
INTERESTS AND OTHER SECURITIES
Section 4.01 Class 1 Interests and Class 2
Interests ............................................................. 30
Section 4.02 Reserve Capital Call .................................................. 32
Section 4.03 Class 1 Interests ..................................................... 33
Section 4.04 Series M Class 2 Interests ............................................ 34
Section 4.05 Series A Class 2 Interests ............................................ 44
Section 4.06 Series B Class 2 Interests ............................................ 62
Section 4.07 Series C Class 2 Interests ............................................ 63
Section 4.08 Issuance of Interests Upon the
Admission of Additional Members ....................................... 65
Section 4.09 Fractional Interests .................................................. 65
Section 4.10 Certificates for Interests ............................................ 65
ARTICLE V
DISSOLUTION AND WINDING-UP
Section 5.01 Dissolution ........................................................... 66
Section 5.02 Resignation of Members ................................................ 67
Section 5.03 Winding-Up ........................................................... 67
ARTICLE VI
TRANSFERS
Section 6.01 Notice to LLC and to Other Holders .................................... 68
Section 6.02 Right to Reject Transfer; First Refusal Rights ........................ 68
Section 6.03 No Transfers Above 45% ............................................... 70
Section 6.04 Obligations of Transferees and
Transferors ........................................................... 70
Section 6.05 Certain Motorola Transfer Restrictions ................................ 70
Section 6.06 Inapplicability of Article ............................................ 71
Section 6.07 Substituted Members ................................................... 71
</TABLE>
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<TABLE>
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ARTICLE VII
ADMISSION OF ADDITIONAL MEMBERS
Section 7.01 Admission of Additional Members ....................................... 72
Section 7.02 Preemptive Rights .................................................... 72
ARTICLE VIII
GATEWAY RIGHTS AND SPECTRUM ACCESS OBLIGATIONS
Section 8.01 Gateway Rights and Service Provider
Rights ................................................................ 74
Section 8.02 Obligations Relating to Spectrum
Access ............................................................... 76
ARTICLE IX
AMENDMENT AND TERMINATION OF VARIOUS AGREEMENTS
Section 9.01 Termination of Stock Purchase
Agreements ............................................................ 77
Section 9.02 Amendments to Outstanding Notes and Warrants .......................... 77
Section 9.03 Amendments to Gateway Authorization ...................................
Agreements ............................................................ 77
Section 9.04 Amendments to Contracts with Motorola ................................. 77
Section 9.05 Amendments to Motorola Warrant ....................................... 78
ARTICLE X
MERGER AND APPRAISAL RIGHTS; SALE OF ASSETS
Section 10.01 Authority.............................................................. 78
Section 10.02 Procedure for Merger or Consolidation ................................. 78
Section 10.03 Approval by Class 1 Members of ........................................
Merger or Consolidation ............................................... 79
Section 10.04 Certificate of Merger or Consolidation ................................ 80
Section 10.05 Effect of Merger or Consolidation ..................................... 80
Section 10.06 Appraisal Rights ...................................................... 81
Section 10.07 Sale of Substantially All Assets ..................................... 85
</TABLE>
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<TABLE>
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Amendments to the Agreement ........................................... 85
Section 11.02 Governing Law; Severability ........................................... 87
Section 11.03 Remedies .............................................................. 88
Section 11.04 Jurisdiction and Service of Process;
Arbitration ........................................................... 90
Section 11.05 Power of Attorney and
Other Authorizations ................................................. 91
Section 11.06 Actions of Members .................................................... 91
Section 11.07 Notices ............................................................... 92
Section 11.08 Counterparts .......................................................... 92
ARTICLE XII
CERTAIN DEFINITIONS
ANNEX A DIRECTORS ............................................................. A-1
ANNEX B INTERESTS ............................................................. B-1
ANNEX C PURCHASER ACKNOWLEDGEMENTS AND AGREEMENTS ............................. C-1
ANNEX D RESERVE CAPITAL CALL COMMITMENTS ...................................... D-1
ANNEX E GATEWAY SERVICE TERRITORY ALLOCATION
SCHEDULE .............................................................. E-1
EXHIBIT 1-A Amendments to Outstanding Notes ....................................... 1-A-1
EXHIBIT 1-B Form of Note .......................................................... 1-B-1
EXHIBIT 2-A Amendments to Outstanding Warrants .................................... 2-A-1
EXHIBIT 2-B Form of Warrant ....................................................... 2-B-1
EXHIBIT 3-A Amendments to Motorola Warrant ........................................ 3-A-1
EXHIBIT 3-B Form of Motorola Warrant .............................................. 3-B-1
</TABLE>
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<PAGE> 1
EXHIBIT 10.2
Draft of June 1, 1997
INTEREST EXCHANGE AGREEMENT
Dated as of June [ ], 1997
by and between
IRIDIUM WORLD COMMUNICATIONS LTD.
and
IRIDIUM LLC
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
EXCHANGE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.01 General Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.02 Notice Required for Exercise
of Exchange Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.03 Iridium Board Authorization
Required for Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.04 Exchange; Allocation of Iridium
Board Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.05 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.06 Distributions with Respect to
Class 1 Membership Interests . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.07 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.08 Sale by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.09 Company Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.10 Special Deferral Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
EXCHANGE DATE AND EXCHANGE RATE ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.01 Exchange Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.02 Exchange Rate Adjustments - Company
Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.03 Exchange Rate Adjustments - Iridium
Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.04 Exchange Rate Adjustments - General . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V
</TABLE>
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TABLE OF CONTENTS (CONT'D)
<TABLE>
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<S> <C>
PROCEDURE FOR REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.01 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.02 Registration of Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.03 Deferral Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.05 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
RULE 144 INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII
EQUAL TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.01 Indemnification by Iridium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.02 Indemnification by Registering Holders . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.03 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.04 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.01 Representations and Warranties
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.02 Representations, Warranties and
Agreements of the Holders and
the Registering Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X
EFFECTIVENESS OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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TABLE OF CONTENTS (CONT'D)
<TABLE>
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ARTICLE XI
ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.01 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 12.03 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.04 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12.05 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.06 Amendments to the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.07 Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . 35
Annexes
- -------
Annex A Letter of Representations
Annex B Form of Restricted Securities Certificate
Annex C Notice of Exchange Authorization
Annex D Registration Notice
</TABLE>
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INTEREST EXCHANGE AGREEMENT
This INTEREST EXCHANGE AGREEMENT, dated as of JUNE [ ], 1997,
is made by and between IRIDIUM WORLD COMMUNICATIONS LTD. (the "Company"), a
company incorporated under the laws of Bermuda and IRIDIUM LLC ("Iridium"), a
limited liability company organized under the laws of the State of Delaware.
The parties hereto agree as follows:
I. Definitions and Other Provisions of General
Applicability.
Section 1.01. Definitions. As used in this Agreement,
the following terms have the following respective meanings:
"Agreement" means this Interest Exchange Agreement.
"Business Day" means a day other than a Saturday, Sunday,
national or New York State holiday or other day on which commercial banks in
New York City are authorized or required by law to close.
"Class A Common Stock" means Class A Common Stock, par value
$.01 per share, of the Company.
"Class B Common Stock" means Class B Common Stock, par value
$.01 per share, of the Company.
"Class A Holder" means a person that is the holder of record
of Class A Common Stock received by that person upon the exchange of Class 1
Membership Interests pursuant to this Agreement.
"Class 1 Membership Interests" means Class 1 Membership
Interests of Iridium.
"Closing" shall have the meaning assigned thereto in Section
2.05.
"Closing Price" means, for each Trading Day, the last reported
sale price regular way or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices regular way, in
either case on the principal national securities exchange on which the Class A
Common Stock is listed or admitted to trading,
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or, if the Class A Common Stock is not so listed or admitted to trading on a
national securities exchange, on the NASDAQ National Market System or, if the
Class A Common Stock is not quoted on the NASDAQ National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by Iridium for that purpose or, if the Class A Common Stock is not traded in
the over-the-counter market, the fair market value per share of the Class A
Common Stock as determined by the Iridium Board (whose determination shall be
conclusive).
"Commission" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Common Stock" means the Class A Common Stock, the Class B
Common Stock and any stock of any class of the Company which has no preference
in respect of dividends or amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which is
not subject to redemption by the Company. However, shares issuable on exchange
of Class 1 Membership Interests, and subject to the rights of Holders granted
in Article IV, shall include only shares of the class designated as Class A
Common Stock of the Company on the date hereof, or shares of any class or
classes resulting from any reclassification thereof and which have no
preferences in respect of dividends or amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which are not subject to redemption by the Company; provided that, if at
any time there shall be more than one such resulting class, the shares of each
such class then so issuable and registerable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Company Board" means the Board of Directors of the Company.
"Company Certificate" shall have the meaning set forth in
Section 5.03.
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"Deemed Outstanding 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 this Agreement in exchange for Class 1 Membership
Interests at the then applicable Exchange Rate, assuming for this purpose that
the Class 1 Membership Interests are then exchangeable.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Act Documents" shall have the meaning assigned
thereto in Section 5.01(a)(vii).
"Exchange Date" shall have the meaning assigned thereto in
Article III.
"Exchange Notice" shall have the meaning assigned thereto in
Section 2.02.
"Exchange Rate" shall have the meaning assigned thereto in
Section 2.01.
"Exchange Window Period" means the period commencing on the
date of commencement by Iridium of a Notice Distribution and ending on the
thirtieth day following such date.
"Exchanging Holder" shall have the meaning assigned thereto in
Section 2.02.
"Final Required Transfer Date" shall have the meaning assigned
thereto in Section 2.03.
"Gateway Authorization Agreement" shall have the meaning
assigned thereto in Article XII of the LLC Agreement.
"Holder" means any person that is the record owner of Class 1
Membership Interests.
"Indemnified Person" means, with respect to indemnification by
Iridium, the Company and each of its directors and officers, each Registering
Holder, such Holder's directors and officers, and each other person (including
each underwriter) who participated in the offering of Registerable Securities
and each other
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person, if any, who controls the Company or such Registering Holder or such
participant within the meaning of the Securities Act, and with respect to
indemnification by a Registering Holder, the Company, Iridium, each of their
officers and directors and each person, if any, who controls any of them within
the meaning of the Securities Act.
"Iridium" shall have the meaning set forth in the preamble and
shall also include Iridium's successors.
"Iridium Board" means the Board of Directors of Iridium.
"Iridium Director" means any person authorized to act as
director of Iridium pursuant to the LLC Agreement.
"LLC Agreement" means the Limited Liability Company Agreement
of Iridium LLC.
"managing underwriter or underwriters" means the person or
persons selected by Holders in an offering pursuant to Section 5.01 to manage
an underwritten offering of Class A Common Stock.
"Notice Distribution" shall have the meaning assigned thereto
in Section 2.02.
"Noticed Interests" shall have the meaning assigned thereto in
Section 2.03.
"Other Holder" shall have the meaning assigned thereto in
Section 6.01 of the LLC Agreement.
"person" means a natural person, partnership (whether general
or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative capacity.
"Process Agent" shall have the meaning assigned thereto in
Section 12.07.
"Registering Holders" shall have the meaning assigned thereto
in Section 5.01(a)(i).
"Registerable Securities" means Class A Common Stock acquired
by a Class A Holder upon exchange of Class 1 Membership Interests pursuant to
this Agreement which have not previously been registered for sale pursuant to
this
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Agreement; provided, that, if U.S. nationally recognized securities counsel to
the Company delivers to the Company a written legal opinion to the effect that
any particular securities may be disposed of by the Holder thereof in the
manner proposed by such Holder without registration under the Securities Act,
such securities shall not be Registerable Securities.
"Registration Notice" shall have the meaning assigned thereto
in Article IV.
"Registration Request" shall have the meaning assigned thereto
in Article IV.
"Rule 144" shall have the meaning assigned thereto in Article
VI.
"Sale Notice" shall have the meaning assigned thereto in
Section 6.01 of the LLC Agreement.
"Securities Act" means the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" means a registration pursuant to a Shelf
Registration statement.
"Shelf Registration statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 5.01 hereof
which covers Class A Common Stock on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the Commission
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Suspension Notice" shall have the meaning assigned thereto in
Section 5.01(c).
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday, other than any day on which securities are not traded on the
applicable exchange or in the applicable market.
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"underwriter" means any underwriter of an underwritten
offering of Common Stock pursuant to Section 5.01.
Section 1.02. Interpretation. The following provisions shall
govern the interpretation of this Agreement:
(a) The singular form of any word used herein, including the
terms defined in Section 1.01, include the plural, and vice versa, unless the
context otherwise requires. The use herein of a pronoun of any gender shall
include correlative words of the other gender.
(b) Unless otherwise expressly indicated, all references
herein to "Articles", "Sections" and other subdivisions hereof are to the
corresponding Articles, Sections or subdivisions of this Agreement; and the
words "herein", "hereof", "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
(c) The headings or titles of the several Articles and
Sections hereof, and any table of contents appended to copies hereof, shall be
solely for convenience of reference and shall not affect the meaning,
construction or effect of this Agreement.
(d) Each reference herein to any agreement, instrument or
other document shall mean such agreement, instrument or document as from time
to time amended, modified or supplemented in accordance with the terms hereof
and thereof. The term "including" shall be construed to mean "including but
not limited to".
II. Exchange Rights.
Section 2.01. General Rights. Subject to the restrictions
on transfer contained in the LLC Agreement the deferral rights of Iridium and
the Company under Section 2.10 and the authorization of the Iridium Board
pursuant to Section 2.03, each Class 1 Membership Interest shall be
exchangeable, at any time on or after the Exchange Date, at the option of the
Holder thereof for one fully paid and non-assessable share of Class A Common
Stock, subject to adjustment as provided in Article III. The number of shares
of Class A Common Stock to be delivered by the Company pursuant to this Article
II in exchange for one Class 1 Membership Interest is hereinafter referred to
as the "Exchange Rate".
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Section 2.02. Notice Required for Exercise of Exchange
Right. In order to exercise the conditional right of exchange, a Holder shall
provide written notice (an "Exchange Notice") to the Company and Iridium of
its intent to (a) exercise its rights under this Article II and setting forth
the number of Class 1 Membership Interests to be exchanged by such Holder, (b)
exercise or not exercise its right pursuant to Articles IV and V hereof to have
registered pursuant thereto the Class A Common Stock received for Class 1
Membership Interests and (c) engage or not engage in any distribution of the
Class A Common Stock. A Holder's obligation to provide an Exchange Notice
shall be in addition to any other notices such Holder is required to provide,
under the LLC Agreement or otherwise, including any Sale Notice required under
Section 6.01 of the LLC Agreement. Promptly following receipt of such Exchange
Notice, Iridium shall send to the other Holders a copy of such notice (the
"Notice Distribution"). Such other Holders shall each then have the right
during the Exchange Window Period to elect their conditional right of exchange
by furnishing to the Company and Iridium an Exchange Notice prior to the
expiration of the Exchange Window Period that contains the same information
required by Section 2.02 (a)-(c) above. (Each Holder furnishing an Exchange
Notice during the Exchange Window Period is referred to herein as an
"Exchanging Holder".) The receipt of additional Exchange Notices during the
Exchange Window Period shall not require another Notice Distribution by
Iridium. No Exchange Notice may be given by any member of Iridium (and, if
given by any member of Iridium shall not be effective) during the six month
period following the expiration of the Exchange Window Period. No Holder may
furnish any notice under this Section 2.02 or otherwise participate in any
exchange hereunder unless such Holder and its affiliates are in full compliance
with the LLC Agreement and any Gateway Authorization Agreement to which it or
any of its affiliates is a party.
Section 2.03. Iridium Board Authorization Required for
Exchange. (a) At the next annual or regular meeting of the Iridium Board
following the date (the "Final Required Transfer Date") that is [THIRTY] days
after the date of expiration of the Exchange Window Period, the Iridium Board
shall determine whether to authorize the exchange of the Class 1 Interests
requested to be exchanged pursuant to the Exchange Notices received during such
Exchange Window Period which have not been transferred to
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Iridium or Other Holders pursuant to the LLC Agreement (the "Noticed
Interests"); provided that the Iridium Board may determine whether to authorize
the exchange of the Noticed Interests at any special meeting of the Iridium
Board held after the Final Required Transfer Date and prior to the next annual
or regular meeting following the Final Required Transfer Date. Authorization
of the exchange of the Noticed Interests pursuant to this Section 2.03(a) shall
require the affirmative vote of Iridium Directors representing at least 66 2/3%
of the Iridium Directors on the Iridium Board.
(b) In the event the Iridium Board does not authorize the
exchange of the Noticed Interests pursuant to Section 2.03(a), the Iridium
Board may, in its sole discretion, authorize the exchange of a number of Class
1 Interests less than the number of Noticed Interests; provided that such
authorization of the exchange of a lesser number of Class 1 Interests than the
number of Noticed Interests shall require the affirmative vote of Iridium
Directors representing at least 66 2/3% of the Iridium Directors on the Iridium
Board.
(c) If the Iridium Board grants its authorization, notice
in substantially the form of Annex C shall be given to each Exchanging Holder
and each such Exchanging Holder shall have 10 Business Days from the date of
receipt thereof to countersign and return such notice. Any Exchanging Holder
that fails to so countersign and return its notice shall lose its exchange
rights with respect to that Exchange Window Period.
Section 2.04. Exchange; Allocation of Iridium Board
Authorization. At the Closing described in Section 2.05, which shall take
place following receipt by Iridium of a duly authorized and countersigned
Notice of Exchange Authorization in substantially the form of Annex C, the
Company shall issue and deliver to such Exchanging Holder shares of Class A
Common Stock in an amount equal to the Exchange Rate multiplied by the
appropriate number of Noticed Interests; provided, however, that if by
operation of Section 2.03 the number of Noticed Interests exceeds the number
Class 1 Interests authorized for exchange by the Iridium Board, the right to
exchange Class 1 Membership Interests shall be pro rated among the Exchanging
Holders, based on the number of Class 1 Membership Interests proposed to be
exchanged in each Exchanging Holders' Exchange Notice to the Company and
Iridium.
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Section 2.05. Closing. The closing of the transactions
contemplated by this Article II shall take place at such specific time and
place as shall be mutually agreed upon by the Company, Iridium and the
Exchanging Holder involved (the "Closing"). At the Closing, the Exchanging
Holder shall relinquish to the Company certificates representing such Class 1
Membership Interests as are to be exchanged accompanied by such instruments of
transfer as shall reasonably be required by the Company and Iridium, and the
Company shall deliver to such Exchanging Holders shares of Class A Common Stock
in an amount determined pursuant to Section 2.04, registered in the name of
such Exchanging Holders. The Company shall present to Iridium such Class 1
Membership Interests for transfer and Iridium shall deliver replacement
certificates representing the number of Class 1 Membership Interests
transferred to the Company in the name of the Company or its designee and
Iridium shall make corresponding notations in its books and records. In
addition, each Exchanging Holder shall deliver to the Company and Iridium a
letter of representation substantially in the form of Annex A attached hereto
and such other certificates and documents as may reasonably be requested by the
Company or Iridium (including, without limitation, evidence of receipt of all
required approvals and consents and compliance with all applicable securities
and tax laws).
No fractional interest in a share of Class A Common Stock
shall be issued by the Company upon the exchange of Class 1 Membership
Interests. Any fractional interest in a share of Class A Common Stock
resulting from the exchange of any Class 1 Membership Interests shall be paid
by Iridium in cash (computed to the nearest cent) based on the Closing Price of
the Class A Common Stock on the last Trading Day prior to the date on which
such Class 1 Membership Interests are surrendered for exchange in the manner
set forth above.
The Exchanging Holder will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Class A Common Stock on exchange of Class 1 Membership Interests
pursuant hereto; and the Company may withhold delivery until such charge is
paid or offset against the number of shares to be delivered.
Section 2.06. Distributions With Respect to Class 1
Membership Interests. Any payment or distribution (for purposes of this
Section 2.06, a "distribution") received by an Exchanging Holder with respect
to Class 1
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Membership Interests exchanged pursuant to this Article II by such Exchanging
Holder allocable to any period after the Closing shall be forwarded immediately
by the Exchanging Holder to the Company. Iridium is hereby instructed to and
agrees to pay or cause to be paid such portions of any distribution owed to the
Company directly to the Company on behalf of such Exchanging Holder and
thereafter shall be discharged of any obligation to such Exchanging Holder with
respect to such portion of such distribution.
Section 2.07. Restricted Securities. Any Class A Common
Stock issued by the Company to any Holder prior to the effectiveness of a
registration statement filed with the Commission pursuant to Article IV below
shall be "restricted securities" and any Holder receiving such "restricted
securities" by execution and delivery of an Exchange Notice shall be deemed to
have agreed that at the time of issuance of such securities such Holder shall
execute and deliver a certificate in the form of Annex B attached hereto. The
certificates evidencing such "restricted securities" shall bear a restrictive
legend to the effect that the shares of Class A Common Stock represented
thereby have not been registered under the Securities Act, and may not be sold
except pursuant to an effective registration statement under the Securities Act
or pursuant to an applicable exemption from the registration requirements
thereof.
Section 2.08. Sale by Holder. Each Holder, by execution and
delivery of an Exchange Notice, shall be deemed to have agreed that it will
not, directly or indirectly, transfer, sell, assign, pledge, hypothecate,
encumber or otherwise dispose of, to any person, in one or a series of
transactions, any Class A Common Stock received pursuant to this Agreement,
except pursuant to an effective registration statement or an applicable
exemption from the registration requirements of the Securities Act.
Section 2.09. Company Covenants. The Company covenants that
(a) all shares of Class A Common Stock which may be issued upon exchange of
Class 1 Membership Interests will, upon issue, be duly and validly issued,
fully paid and non-assessable (no further sums will be required to be paid by
the holders of the shares in connection with the issue of
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such shares), free of all liens and charges and not subject to any preemptive
rights and (b) it will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued shares
of Class A Common Stock, for the purpose of effecting exchange of Class 1
Membership Interests, the full number of shares of Class A Common Stock
deliverable upon the exchange of all outstanding Class 1 Membership Interests
not theretofore converted.
Section 2.10. Special Deferral Rights. At any time prior to
the Closing either Iridium or the Company shall have the right to defer an
exchange hereunder for a period of up to 120 days if Iridium or the Company, as
the case may be, determines that such a deferral is in the best interests of
Iridium or the Company, as the case may be, in light of possible or pending
financing transactions. Such a deferral shall be effected by the furnishing by
Iridium or the Company to the Exchanging Holders of a written notice of an
executive officer of Iridium or the Company, as the case may be, stating that
(a) the exchange is being deferred, (b) the number of days, up to 120, of such
deferral and (c) that such deferral is being implemented pursuant to this
Section 2.10. This right may not be utilized by either Iridium or the Company
more than once in any twelve month period.
III. Exchange Date and Exchange Rate Adjustments.
Section 3.01. Exchange Date. The rights of Holders pursuant
to Article II shall not be exercisable by any Holder until the 90th day (the
"Exchange Date") after the first fiscal quarter in which Iridium has achieved
positive earnings before interest, taxes, depreciation and amortization, as
determined in accordance with U.S. generally accepted accounting principles.
Section 3.02. Exchange Rate Adjustments -- Company Actions.
The Exchange Rate shall be adjusted from time to time as follows:
(a) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock
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of the Company in Class A Common Stock or any other class of Common Stock, the
Exchange Rate in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by multiplying such Exchange
Rate by a fraction the numerator of which shall be the sum of the number of
shares of Class A Common Stock (Common Stock in the case of a dividend in
another class of Common Stock) outstanding at the close of business on the date
fixed for such determination and the total number of shares constituting such
dividend or other distribution and the denominator of which shall be such
number of shares of Class A Common Stock (Common Stock in the case of a
dividend in another class of Common Stock) outstanding at the close of business
on the date fixed for such determination, such increase to become effective
immediately after the opening of business on the day following the date fixed
for such determination. For the purposes of this subsection (a), the number of
shares of Class A Common Stock or Common Stock at any time outstanding shall
not include shares held in the treasury of the Company.
(b) In case the Company shall issue rights or warrants to
all holders of any class of Capital Stock of the Company entitling them to
subscribe for, purchase or acquire shares of Class A Common Stock or any other
class of Common Stock at a price per share less than the current market price
per share (determined as provided in subsection (f) below) of the Class A
Common Stock (or Common Stock in the case of rights or warrants to acquire
another class of Common Stock) on the date fixed for the determination of
stockholders entitled to receive such rights or warrants, the Exchange Rate in
effect at the opening of business on the day following the date fixed for such
determination shall be increased by multiplying such Exchange Rate by a
fraction the numerator of which shall be the number of shares of
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Class A Common Stock (or Common Stock in the case of rights or warrants to
acquire another class of Common Stock) outstanding at the close of business on
the date fixed for such determination plus the number of shares of Class A
Common Stock (or Common Stock in the case of rights or warrants to acquire
another class of Common Stock) so offered for subscription, purchase or
acquisition, and the denominator of which shall be the number of shares of
Class A Common Stock (or Common Stock in the case of rights or warrants to
acquire another class of Common Stock) outstanding at the close of business on
the date fixed for such determination plus the number of shares of Class A
Common Stock (or Common Stock in the case of rights or warrants to acquire
another class of Common Stock) which the aggregate of the offering price of the
total number of shares of Class A Common Stock (or Common Stock in the case of
rights or warrants to acquire another class of Common Stock) so offered for
subscription, purchase or acquisition would purchase at such current market
price, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this subsection (b), the number of shares of Class A Common Stock
(or Common Stock in the case of rights or warrants to acquire another class of
Common Stock) at any time outstanding shall not include shares held in the
treasury of the Company. The Company agrees not to pay any dividend or make
any distribution on shares of Common Stock held in its treasury.
(c) In case the outstanding shares of Class A Common
Stock shall be subdivided into a greater number of shares of Class A Common
Stock, the Exchange Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately increased, and, conversely, in case the outstanding shares of
Class A Common Stock shall each be combined into a smaller number of shares of
Class A Common Stock, the Exchange Rate in effect at the opening of business on
the day following the day upon which such combination becomes effective shall
be proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Class A Common Stock or any other class of
Common Stock evidences of its indebtedness or assets (including securities but
excluding (i) any rights or warrants referred to in subsection (b) above, (ii)
any dividend or distribution referred to in subsection (a) above, and (iii) any
dividend or distribution paid in cash out of current or accumulated earnings),
then in each case, the
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Exchange Rate in effect at the opening of business on the day following the
date fixed for the determination of holders of Class A Common Stock or other
class of Common Stock entitled to receive such distribution shall be adjusted
by multiplying such Exchange Rate by a fraction of which the denominator shall
be the current market price per share (determined as provided in subsection (f)
below) of the Class A Common Stock (or Common Stock in the case of a dividend
or distribution on Common Stock) on such date of determination (or, if earlier,
on the date on which the Class A Common Stock (or Common Stock in the case of a
dividend or distribution on Common Stock) goes "ex-dividend" in respect of such
distribution) less the then fair market value as determined by the Company
Board (whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed (and for which an adjustment to the
Exchange Rate has not previously been made pursuant to the terms of this
Section 3.02) applicable to one share of Class A Common Stock (or Common Stock
in the case of a dividend or distribution on Common Stock), and the numerator
shall be such current market price per share of the Class A Common Stock (or
Common Stock in the case of a dividend or distribution on Common Stock), such
adjustment to become effective immediately after the opening of business on the
day following such date of determination.
(e) The reclassification or change of Class A Common
Stock or any other class of Common Stock into securities including securities
other than Class A Common Stock (or Common Stock in the case of a
reclassification or change of Common Stock) (other than any reclassification
upon a consolidation or merger to which subsection (i) below applies) shall be
deemed to involve (i) a distribution of such securities other than Class A
Common Stock (or Common Stock in the case of a reclassification or change of
Common Stock) to all holders of Class A Common Stock (or Common Stock in the
case of a reclassification or change of Common Stock) (and the effective date
of such reclassification shall be deemed to be "the date fixed for the
determination of holders of Class A Common Stock (or Common Stock) entitled to
receive such distribution" within the meaning of subsection (d) above), and, in
the case of Class A Common Stock, (ii) a subdivision or combination, as the
case may be, of the number of shares of Class A Common
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Stock outstanding immediately prior to such reclassification into the number of
shares of Class A Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
subsection (c) above).
(f) For the purpose of any computation under subsection
(b) or (d) above, the current market price per share of Class A Common Stock or
Common Stock on any day shall be deemed to be the average of the Closing Prices
of the Class A Common Stock (or Common Stock in the case of Common Stock) for
the 20 consecutive Trading Days selected by the Company Board commencing no
more than 30 Trading Days before and ending no later than the second Trading
Day before the day in question; provided, that, in the case of subsection (d),
if the period between the date of the public announcement of the dividend or
distribution and the date for the determination of holders of Class A Common
Stock or other class of Common Stock entitled to receive such dividend or
distribution (or, if earlier, the date on which the Class A Common Stock or
other class of Common Stock goes "ex-dividend" in respect of such dividend or
distribution) shall be less than 20 Trading Days, the period shall be such
lesser number of Trading Days but, in any event, not less than five Trading
Days.
(g) No adjustment in the Exchange Rate in respect of this
Section 3.02 shall be required unless such adjustment would require an increase
or decrease of at least 1% in such rate; provided, however, that any
adjustments which by reason of this clause (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and provided, further, that adjustments shall be required and made in
accordance with the provisions of this Section 3.02 (other than this clause
(g)) not later than such time as may be required in order to preserve the tax
free nature of a distribution to the holders of shares of Class A Common Stock
or other class of Common Stock. Anything in this clause (g) to the contrary
notwithstanding, the Company shall be entitled, at its option, to make such
increases in the Exchange Rate, in addition to those required by this Section
3.02, as it in its discretion shall determine to be advisable in
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order that any stock dividend, subdivision or combination of shares,
distribution of capital stock or rights or warrants to purchase stock or
securities, or distribution of evidences of indebtedness or assets (other than
cash dividends or distributions paid from current or accumulated earnings) or
other event shall be a tax free distribution to holders for United States
federal income tax purposes. All calculations under this clause (g) shall be
made to the nearest cent.
(h) Whenever the Exchange Rate is adjusted as provided in
this Section 3.02, the Company shall provide written notice of such adjustment
to Iridium, which notice shall include the Exchange Rate after such adjustment
and shall set forth a brief statement of the facts requiring such adjustment
and the manner of computing the same.
(i) In case of any consolidation of the Company with, or
merger of the Company into, any other entity, any merger of another entity into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Class A Common
Stock) or any sale or transfer of all or substantially all of the assets of the
Company, Iridium shall have the right thereafter to exchange Class 1 Membership
only into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by a holder of the number of
shares of Class A Common Stock or Common Stock into which such Class 1
Interests might have been exchanged immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Class A Common Stock or
Common Stock is not the entity with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be (a "constituent person"), or an
affiliate of a constituent person and failed to exercise its rights of
election, if any, as to the kind or amount of securities, cash or other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each
share of Class A Common Stock or Common Stock held immediately prior to such
consolidation, merger, sale or transfer by others than a constituent entity or
an affiliate thereof and in respect of which such rights of election shall not
have been exercised ("non-electing share"), then for the purpose of this
subsection (i)
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the kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares. If necessary, appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of Iridium, so that the provisions set forth herein shall
thereafter be applicable, as nearly as may reasonably be practicable, to any
shares of stock or other securities or property thereafter deliverable on the
exchange of the Class 1 Interests. Any adjustment under this subsection (i)
shall be evidenced by written notice of such adjustment in the manner set forth
in subsection (h). The above provisions shall similarly apply to successive
consolidations, mergers, sales or transfers.
In case (x) the Company shall take any action that would
result in an adjustment to the Exchange Rate; or (y) of any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or (z) of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company; then the
Company shall provide to Iridium, at least 15 days prior to the applicable
record or effective date hereinafter specified, a notice stating (i) the date
on which a record is to be taken for the purpose of such actions, or, if the
record is not to be taken, the date as of which the holders of Common Stock or
Class A Common Stock, as the case may be, of record are to be determined, or
(ii) the date on which such consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as of
which it is expected that holders of Class A Common Stock or Common Stock of
record shall be entitled to exchange their shares of Class A Common Stock or
Common Stock for securities, cash or other property deliverable upon such
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (x) through (z)
above.
Section 3.03. Exchange Rate Adjustments -- Iridium Actions.
The Exchange Rate shall be adjusted from time to time as follows:
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(a) In case Iridium shall pay or make a dividend or other
distribution on any class of Iridium Interests in Class 1 Interests, the
Exchange Rate in effect at the opening of business on the day following the
date fixed for the determination of Iridium members entitled to receive such
dividend or other distribution shall be decreased by multiplying such Exchange
Rate by a fraction the denominator of which shall be the sum of the number of
Class 1 Interests outstanding at the close of business on the date fixed for
such determination and the total number of Class 1 Interests constituting such
dividend or other distribution and the numerator of which shall be such number
of Class 1 Interests outstanding at the close of business on the date fixed for
such determination, such decrease to become effective immediately after the
opening of business on the day following the date fixed for such determination.
For the purposes of this subsection (a), the number of Class 1 Interests at any
time outstanding shall not include interests held in the treasury of Iridium.
(b) In case Iridium shall issue rights or warrants to all
holders of any class of Iridium Interests entitling them to subscribe for,
purchase or acquire Class 1 Interests at a price per Class 1 Interest less than
the current market price per share (determined as provided in subsection (f)
below) of Class A Common Stock multiplied by the Exchange Rate on the date
fixed for the determination of Iridium Interest holders entitled to receive
such rights or warrants, the Exchange Rate in effect at the opening of business
on the day following the date fixed for such determination shall be decreased
by multiplying such Exchange Rate by a fraction the denominator of which shall
be the number of Class 1 Interests outstanding at the close of business on the
date fixed for such determination plus the number of Class 1 Interests so
offered for subscription, purchase or acquisition, and the numerator of which
shall be the number of Class 1 Interests outstanding at the close of business
on the date fixed for such determination plus the number of Class 1 Interests
which the aggregate of the offering price of the total number of Class 1
Interests so offered for subscription, purchase or acquisition would purchase
at a price per Class 1 Interest equal to the market
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price per Share of Class A Common Stock multiplied by the Exchange Rate in
effect at the opening of business on the day following the date fixed for the
determination of Iridium Interest holders entitled to receive such rights or
warrants, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this subsection (b), the number of Class 1 Interests at any time
outstanding shall not include shares held in the treasury of Iridium. Iridium
agrees not to pay any dividend or make any distribution on Iridium Interests
held in its treasury.
(c) In case the outstanding Class 1 Interests shall be
subdivided into a greater number of Class 1 Interests, the Exchange Rate in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately decreased, and,
conversely, in case the outstanding Class 1 Interests shall each be combined
into a smaller number of Class 1 Interests, the Exchange Rate in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(d) In case Iridium shall, by dividend or otherwise,
distribute to all holders of its Class 1 Interests evidence of its indebtedness
or assets (including securities but excluding (i) any rights or warrants
referred to in subsection (b) above, (ii) any dividend or distribution referred
to in subsection (a) above, and (iii) any dividend or distribution paid in cash
out of current or accumulated earnings), then in each case, the Exchange Rate
in effect at the opening of business on the day following the date fixed for
the determination of holders of Class 1 Interests entitled to receive such
distribution shall be adjusted by multiplying such Exchange Rate by a fraction
of which the numerator shall be the current market price per share (determined
as provided in subsection (f) below) of the Class A Common Stock on such date
of determination
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multiplied by the Exchange Rate (or, if earlier, on the date on which the Class
1 Interests go "ex-dividend" in respect of such distribution) less the then
fair market value as determined by the Iridium Board (whose determination shall
be conclusive) of the portion of the assets or evidences of indebtedness so
distributed (and for which an adjustment to the Exchange Rate has not
previously been made pursuant to the terms of this Section 3.03) applicable to
one Class 1 Interest, and the denominator shall be such current market price
per share of the Class A Common Stock multiplied by the Exchange Rate, such
adjustment to become effective immediately after the opening of business on the
day following such date of determination.
(e) The reclassification or change of Class 1 Interests
into interests or securities including Iridium Interests other than Class 1
Interests shall be deemed to involve (i) a distribution of such interests or
securities other than Class 1 Interests to all holders of Class 1 Interests
(and the effective date of such reclassification shall be deemed to be "the
date fixed for the determination of holders of Class 1 Interests entitled to
receive such distribution" within the meaning of subsection (d) above), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Class 1 Interests outstanding immediately prior to such reclassification
into the number of Class 1 Interests outstanding immediately thereafter (and
the effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
subdivision becomes effective," as the case may be, and "the day upon which
such subdivision or combination become effective" within the meaning of
subsection (c) above).
(f) For the purpose of any computation under subsection
(b) or (d) above, the current market price per share of Class A Common Stock on
any day shall be deemed to be the average of the Closing Prices of the Class A
Common Stock for the 20 consecutive Trading Days selected by the Company Board
commencing no more than 30 Trading Days before and ending no later than the
second Trading Day before the day in question (adjusted as necessary in the
discretion of
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the Iridium Board to reflect any dividends or other distributions on the Class
A Common Stock).
(g) No adjustment in the Exchange Rate in respect of this
Section 3.03 shall be required unless such adjustment would require an increase
or decrease of at least 1% in such rate; provided, however, that any
adjustments which by reason of this clause (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and provided, further, that adjustments shall be required and made in
accordance with the provisions of this Section 3.03 (other than this clause
(g)) not later than such time as may be required in order to preserve the tax
free nature of a distribution to the holders of Iridium Interests. Anything in
this clause (g) to the contrary notwithstanding, Iridium shall be entitled, at
its option, to make such decreases in the Exchange Rate, in addition to those
required by this Section 3.03, as it in its discretion shall determine to be
advisable in order that any interest dividend, subdivision or combination of
interests, distribution of interests or rights or warrants to purchase
interests, or distribution of evidences of indebtedness or assets (other than
cash dividends or distributions paid from current or accumulated earnings) or
other event shall be a tax free distribution to holders for United States
federal income tax purposes. All calculations under this clause (g) shall be
made to the nearest cent.
(h) Whenever the Exchange Rate is adjusted as provided in
this Section 3.03, the Iridium shall provide written notice of such adjustment
to the Company, which notice shall include the Exchange Rate after such
adjustment and shall set forth a brief statement of the facts requiring such
adjustment and the manner of computing the same.
Section 3.04. Exchange Rate Adjustments -- General. Anything
in this Article III to the contrary notwithstanding, it is the intent of the
parties that the Exchange Rate be adjusted to reflect events affecting the
capital structure of Iridium and the Company, including those events described
in this Article III, as necessary or appropriate to place the parties to this
Agreement in the
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same relative position which they would have been had such events not occurred,
and the parties hereby agree that Exchange Rate in effect at any time shall
reflect such intent.
IV. Registration Rights.
At any time from and after the Exchange Date, the Company
shall, after a written request (a "Registration Request") from Holders or Class
A Holders requesting registration under the Securities Act of an aggregate
number of Registerable Securities representing not less than 2% of the Deemed
Outstanding Class A Shares, promptly notify all Holders and Class A Holders in
writing of the receipt of such request and each such Holder or Class A Holder
may elect (by written notice (a "Registration Notice") to the Company within 14
days after receipt by such Holder or Class A Holder of the aforementioned
notice from Iridium or the Company, as the case may be), to join in the
Registration Request and to have the Registerable Securities specified in its
notice included in such registration pursuant to this Article. The
Registration Notice to the Company must be in substantially the form of Annex D
hereto and must be executed by the Holder or Class A Holder. Thereupon the
Company will (a) file as soon as reasonably practicable a registration
statement providing for the sale by the Holders and Class A Holders of the
Registerable Securities specified in the Registration Requests, (b) use its
reasonable best efforts to have such registration statement declared effective
and remain continuously effective for a period of not less than six months or,
if earlier, until the date on which all Registerable Securities
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covered by such registration have been disposed by Holders and Class A Holders
either pursuant to the registration statement or otherwise. In addition, if
requested by Iridium, the Company will include in such registration statement
any other Registerable Securities specified by Iridium or, if another
registration is not in process under this Article IV, the Company will (x) file
as soon as reasonably practicable a registration statement providing for the
sale by Holders or Class A Holders of the specified Registerable Securities,
(y) use its best reasonable efforts to have such registration statement
declared effective and remain continuously effective for a period of not less
than [SIX] months or, if earlier, until the date on which all Registerable
Securities covered by such registration statement have been disposed of by
Holders or Class A Holders either pursuant to the registration statement or
otherwise. Such [SIX] month period shall be extended by (aa) the period that
any Suspension Notice is in effect under Section 5.01(c), (bb) the period of
any deferral under Section 5.03 during such period and (cc) if the registration
covers Class A Common Stock to be issued upon exchange of Class 1 Membership
Interests which cannot be exchanged because of a deferral of exchanges pursuant
to Section 2.10, by the period of any such deferral. The Company further
agrees that if permitted by the rules and regulations of the Commission, the
registration contemplated by this Article IV shall be a Shelf Registration.
V. Procedure for Registration.
Section 5.01. Registration Statement. (a) In connection with
the obligations of the Company under Article IV, the Company shall:
(i) prepare and file with the Commission, a registration
statement with respect to the Class A Common Stock on any form which
may be utilized by the Company and which shall permit the disposition
of Class A Common Stock in accordance with the intended method or
methods thereof, as specified in writing to the Company by Holders and
Class A Holders whose Registerable Securities are covered by such
registration statement ("Registering Holders") and use its reasonable
best efforts to cause such registration statement to become effective
as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to maintain the
effectiveness of such registration statement for the period required
by Article IV and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of the Class A Common
Stock covered by such registration statement;
(iii) for a reasonable period prior to the filing of such
registration statement, and throughout the period required by Article
IV upon reasonable notice, make available for inspection by a
representative of
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the Registering Holders, any underwriter participating in any
distribution pursuant to the registration statement, and any attorney
or accountant designated by the Registering Holders, at a reasonable
time and in a reasonable manner, financial and other information and
books and records of the Company and Iridium, and cause the officers,
directors and employees of the Company and Iridium to respond to such
inquiries and supply information reasonably requested by any such
representative, underwriter, attorney or accountant in the course of
conducting a reasonable investigation within the meaning of Section 11
of the Securities Act; provided, however, that such representatives,
attorneys or accountants shall be acceptable to the Company and
Iridium in their respective judgments reasonably exercised and shall
agree to enter into written confidentiality agreements acceptable to
the Company and Iridium regarding any records, information or
documents that are designated by the Company or Iridium as
confidential unless such records, information or documents are
available to the public or disclosure of such records, information or
documents is required by court or administrative order after the
exhaustion of appeals therefrom and to use such information obtained
pursuant to this provision only in connection with the transaction for
which such information was obtained, and not for any other purpose;
(iv) promptly notify the Registering Holders, and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (A) when such registration statement or supplement
or post-effective amendment has been declared or becomes effective,
(B) of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (C) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Class A Common Stock for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose,
or (D) of the happening of any event during the period such
registration statement is effective which makes any statement made in
such registration statement or the related prospectus untrue in any
material respect or which requires the making of any changes in such
registration statement or prospectus in order to make the statements
therein not misleading;
(v) upon the occurrence of any event contemplated by
Section 5.01(a)(iv)(D) hereof, use its
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reasonable best efforts to prepare a supplement or post-effective
amendment to such registration statement or the related prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of the Class A Common Stock, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(vi) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto at the
earliest practicable date;
(vii) provide copies of any prospectus, any amendment to the
registration statement or amendment or supplement to any prospectus or
any document which is to be incorporated by reference into such
registration statement or any prospectus after initial filing of such
registration statement, a reasonable time prior to the filing of any
such prospectus, amendment, supplement or document, to the Registering
Holders and underwriters, if any, and make the representatives of the
Company and Iridium available on a reasonable basis if reasonably
requested by the Registering Holders; provided that the requirements
of this paragraph shall not apply to the Company's Annual Report on
Form 10-K, its Quarterly Reports on Form 10-Q, its current reports on
Form 8-K or any other documents filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act (the "Exchange Act Documents");
and further provided that the Company shall promptly notify
Registering Holders of the filing of any Exchange Act Documents except
for such Exchange Act Documents specifically related to the offering
of other securities and not to the Registerable Securities;
(viii) furnish to each Registering Holder and to each
underwriter and selling agent, if any, at the expense of the
Registering Holders as many copies of the prospectus, including each
preliminary prospectus, and any amendment or supplement thereto and
such other documents as such Registering Holder or managing
underwriter may reasonably request, in order to facilitate the public
sale or other disposition of the Class A Common Stock;
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(ix) use its reasonable best efforts to (A) register or
qualify the Class A Common Stock to be included in such registration
statement under such securities laws or blue sky laws of such
jurisdictions as any Registering Holders and each placement or sales
agent, if any, therefor and each underwriter, if any, thereof shall
reasonably request in writing on a timely basis, (B) take any and all
other actions as may be reasonably necessary or advisable to enable
each such holder, agent, if any, and each underwriter, if any, to
consummate the disposition in such jurisdictions of Class A Common
Stock; provided that neither the Company nor Iridium shall be required
for any such purpose to (w) qualify as a foreign corporation or
foreign limited liability company in any jurisdiction wherein it would
not otherwise be required to qualify but for the requirements of this
paragraph 5.01(a)(ix), (x) file a general consent to service of
process in any such jurisdiction, (y) subject itself to taxation in
any jurisdiction where it is not already subject to taxation or (z)
make any changes to its Memorandum of Association or Bye-Laws or the
LLC Agreement, as the case may be, or any agreement between it and its
shareholders or members, as the case may be;
(x) use its reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, in the U.S. or Bermuda which may be required to effect
the registration or the offering or sale in connection therewith or to
enable the Exchanging Holder(s) to offer, or to consummate the
disposition of, their Class A Common Stock;
(xi) furnish to each Registering Holder, without charge,
at least one conformed copy of such registration statement and any
post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
(xii) cooperate with the Registering Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Class A Common Stock to be
sold, which shall not bear any restrictive legends; and, in the case
of an underwritten offering, enable such Class A Common Stock to be in
such denominations and registered in such names as the managing
underwriters may request at least two Business Days prior to any sale
of the Class A Common Stock; and
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(xiii) enter into and deliver all such customary agreements
(including underwriting or purchase agreements), documents and take
such other actions (including causing the delivery of opinions of
counsel and "comfort" letters of independent certified public
accountants) as are reasonably requested of the Company or Iridium to
expedite or facilitate the disposition of the Class A Common Stock.
(b) Iridium hereby agrees to provide the Company with all
assistance reasonably necessary for the Company to comply with its obligations
under Section 5.01(a).
(c) Each Registering Holder, by execution and delivery of
a Registration Notice, shall be deemed to have agreed that, upon receipt of any
(i) notice from the Company of the happening of any event of the kind described
in Section 5.01(a)(iv)(B), (C) or (D), (ii) notice from the Company that it is
in possession of material information that has not been disclosed to the public
and the Company reasonably deems it to be advisable not to disclose such
information in a registration statement or prospectus or (iii) notice from the
Company that it is in the process of a registered offering of securities and
the Company reasonably deems it to be advisable to have Registering Holders
temporarily discontinue disposition of Class A Common Stock pursuant to the
registration statement (in each case, such notice being hereinafter referred to
as a "Suspension Notice"), such Registering Holder will forthwith discontinue
disposition of Class A Common Stock pursuant to any registration statement and
shall not be entitled to the benefits provided under Article VIII hereof with
respect to any sales made by it in contravention of this subsection, until such
Registering Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5.01(a)(v) or a notice in accordance with
Section 5.01(a)(vi) hereof that any order suspending the effectiveness of the
registration statement has been withdrawn, or, in the case of (ii) or (iii)
above, until further notice from the Company that disposition of Registerable
Securities may resume. Any Suspension Notice must be based upon a good faith
determination of the Company Board that such Suspension Notice is necessary.
In the case of a Suspension Notice, if so directed by the Company, each
Registering Holder by execution and delivery of a Registration Notice, shall be
deemed to have agreed to deliver to the Company (at the expense of Iridium) all
copies in its possession, other than permanent file copies then in such
Registering Holder's possession, of the
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prospectus covering such Class A Common Stock which is current at the time of
receipt of such notice. If the Company shall give any such notice to suspend
the disposition of Class A Common Stock pursuant to any registration statement,
the Company shall extend the period during which such registration statement
shall be maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such notice to
and including the date when the Registering Holders shall have received copies
of the supplemented or amended prospectus necessary to resume such dispositions
or received notice that any order suspending dispositions of the Class A Common
Stock has been withdrawn.
(d) By execution and delivery of a Registration Notice,
each Registering Holder shall be deemed to have agreed that the Company may
require such Registering Holder to (i) furnish in writing to the Company such
information regarding such Registering Holder and such Registering Holder's
intended method of distribution of its Class A Common Stock as the Company may
from time to time reasonably request in writing, but only to the extent that
such information is required in order to comply with the Securities Act and
(ii) enter into and deliver all such customary agreements (including
underwriting or purchase agreements) and documents (including legal opinions)
as are reasonably requested of such Registering Holder to expedite or
facilitate the disposition of its Class A Common Stock. Each such Registering
Holder, by execution and delivery of a Registration Notice, shall be deemed to
have agreed to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such Registering Holder to the
Company 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 Registering Holder or such
Registering Holder's intended method of distribution of its Class A Common
Stock or omits to state any material fact regarding such Registering Holder or
such Registering Holder's intended method of distribution of its Class A Common
Stock required to be stated therein or necessary to make the statements therein
not misleading in
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light of the circumstances then existing, and promptly to furnish to the
Company 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 Registering Holder or the distribution of its
Class A Common Stock, 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
Registering Holder, by execution and delivery of a Registration Notice, shall
be deemed to have agreed to comply with the provisions of the Securities Act
and the Exchange Act applicable to such Registering Holder with respect to the
disposition by such Registering Holder of Class A Common Stock covered by such
registration statement in accordance with the intended methods of disposition
by such Registering Holder set forth in such registration statement.
Section 5.02. Registration of Additional Shares. The
registration statement filed pursuant to this Article V, may, in addition to
the shares of Class A Common Stock subject to registration rights set forth in
Article IV above, include other securities for sale for the Company's own
account or for the account of any other person.
Section 5.03. Deferral Period. Notwithstanding the
foregoing, if the Company shall furnish to the Registering Holders a
certificate (the "Company Certificate") signed by the Chief Executive Officer
of the Company stating that, in the good faith judgment of the Company Board,
acting reasonably and in the best interest of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed or for the Registering Holders to sell Class A Common
Stock acquired pursuant to this Agreement under any such effective registration
statement and it is therefore necessary to defer the filing of the registration
statement or suspend the ability of the Registering Holders to sell Class A
Common Stock acquired pursuant to this Agreement under an effective
registration statement, each Registering Holder, by execution and delivery of a
Registration Notice, hereby agrees that the filing of the registration
statement shall be deferred, or the ability of such Registered Holder to sell
Class A Common Stock acquired pursuant to this Agreement under an effective
registration statement shall be suspended, for a period of not more than an
aggregate of 120 days from the date of the Company Certificate; provided
however, that the Company may not utilize this right more than one time in any
twelve-month period and the 120-day period shall be reduced by any period of
time in the prior six months covered by a Suspension Notice as to such
Registering Holders under Section 5.01(c). Upon any delivery of a Company
Certificate pursuant to this Section 5.03, each Registering Holder, by
execution and delivery of a Registration Notice, shall be deemed to have agreed
that it shall not dispose of its Class A Common Stock covered by the
registration statement during the above-stated 120-day period other than
pursuant to the
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limitations applicable to "restricted securities" within the meaning of Rule
144 under the Securities Act and that any sale by such Registering Holder or
its designee of such Class A Common Stock during this period shall be made only
to a person who has agreed to comply with the provisions of this Section 5.03
for the balance of the 120-day period.
Section 5.04. Expenses. By execution and delivery of a
Registration Notice, each Registering Holder shall be deemed to have agreed
that (i) all registration expenses incurred in connection with any
registration, qualification or compliance pursuant to this Article V, including
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company and of the Company's accountants,
blue sky fees and expenses and the expenses of any special audits incident to
or required by any such registration, shall be borne by such Registering Holder
pro rata on the basis of the number of shares of Class A Common Stock of such
Registering Holder included in such registration and (ii) such Registering
Holder shall pay its own selling expenses. Selling expenses shall mean all
costs and commissions applicable to the sale of the Class A Common Stock and
all fees and disbursements of counsel and other professionals. To the extent
that the Company registers for primary offering additional securities pursuant
to Section 5.02, Iridium shall bear the Company's pro rata share of the above
referenced registration expenses and the Company's own selling expenses.
Section 5.05. Listing. The Company shall use its reasonable
best efforts to list all Class A Common Stock covered by a registration
statement filed pursuant to this Article V on each securities exchange or
automated quotation system on which any of the Class A Common Stock is then
listed unless the Company and Iridium agree not to have the Company do so.
VI. Rule 144 Information.
With a view to making available to the Holders and Class A
Holders the benefits of Rule 144 under the Securities Act ("Rule 144") and any
other rule or regulation of the Commission that may at any time permit a Class
A Holder to sell restricted securities or securities subject to Rule 145 under
the Securities Act of the Company to the public without registration, the
Company agrees to: (i) make and keep public information available, as required
by Rule 144; (ii) use its reasonable best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company
under the Securities Act
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and the Exchange Act; and (iii) furnish to any Class A Holder forthwith upon
request (A) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(B) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (C) such other
information as may be reasonably requested in availing any Class A Holder of
any rule or regulation of the Commission which permits the selling of any Class
A Common Stock without registration.
VII. Equal Treatment.
Nothing contained in this Agreement shall prohibit the Company
from offering, following the Exchange Date, to purchase Class 1 Membership
Interests held by a Holder for cash or any other consideration, or to exchange
additional shares of its Class A Common Stock for Class 1 Membership Interests,
all on such terms and conditions as the Company and such Holder may agree.
VIII. Indemnification.
Section 8.01. Indemnification by Iridium. Iridium will
indemnify and hold harmless each Indemnified Person against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may
become subject, under the Securities Act or otherwise, that directly or
indirectly arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
registration statement or the prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, prepared pursuant to the
transactions contemplated by this Agreement, and will reimburse such
Indemnified Person for any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that Iridium
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (i) in the case of
indemnification of the Company or its officers and directors, an intentional
act or omission of the Company of any such officers, directors or any employee
of the Company which was contrary to any written instruction or request of
Iridium or which amounted to willful misconduct on the part of such officer,
director, employee or agent of the Company
31--
<PAGE> 36
who is not also an employee of Iridium, and (ii) in the case of a party other
than the Company or its officers and directors, an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus, the registration statement or the prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Indemnified Person expressly for use therein.
Section 8.02. Indemnification by Registering Holders. Each
Registering Holder, by execution and delivery of a Registration Notice, shall
be deemed to have agreed that it will indemnify and hold harmless each
Indemnified Person against any losses, claims, damages or liabilities to which
such Indemnified Person may become subject, under the Securities Act or
otherwise, that directly or indirectly arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the registration statement or the prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
preliminary prospectus, the registration statement or the prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Registering Holder expressly for
use therein; and will reimburse each Indemnified Person for any legal or other
expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such action or claim as such expenses are
incurred.
Section 8.03. Proceedings. Promptly after receipt by an
Indemnified Person of notice of the commencement of any action, suit or
proceeding as to which a claim in respect thereof is to be made under this
Article VIII the Indemnified Person shall notify the party against whom the
Indemnified Person intends to assert a claim for indemnification (an
"Indemnifying Person") in writing of the commencement thereof, but the omission
so to notify the Indemnifying Person shall not relieve the Indemnifying Person
from any liability which it may have to any Indemnified Person otherwise than
under this Article. In case any such action shall be brought against any
Indemnified Person and it shall notify the Indemnifying Person of the
commencement thereof, the Indemnifying Person
32--
<PAGE> 37
shall be entitled to participate therein and, to the extent that it shall wish,
to assume the defense thereof, with counsel reasonably satisfactory to such
Indemnified Person (which shall not, except with the consent of the Indemnified
Person, be counsel to the Indemnifying Person), and, after notice from the
Indemnifying Person to such Indemnified Person of its election so to assume the
defense thereof, the Indemnifying Person shall not be liable to such
Indemnified Person under such section for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such Indemnified
Person, in connection with the defense thereof other than reasonable costs of
investigation. The Indemnifying Person shall not, without the written consent
of the Indemnified Person, effect the settlement or compromise of, or consent
to the entry of any judgment with respect to, any pending or threatened action
or claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Person is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of such Indemnified Person from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of such Indemnified Person. No Indemnified Person shall effect
the settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution has been or may be sought hereunder without the
prior written consent of the Indemnifying Person. By execution and delivery of
a Registration Notice, each Registering Holder shall be deemed to have agreed
to the provisions of this Section 8.03.
Section 8.04. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in this Article VIII is for any reason held to be unenforceable by
an Indemnified Person although applicable in accordance with its terms, the
Indemnified Person on the one hand and the Indemnifying Person on the other
hand shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Indemnified Person; provided, however, that 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. As between the Indemnifying Person and
33--
<PAGE> 38
each Indemnified Person, such parties shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect (a)
the relative benefits received by the Indemnifying Person on the one hand and
the Indemnified Person on the other hand, from the offering of the Class A
Common Stock included in such offering, and (b) the relative fault of the
Indemnifying Person on the one hand and the Indemnified Person on the other,
with respect to the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. It is agreed that it would not be
just and equitable if contribution pursuant to this Article VIII were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the relevant equitable considerations. For purposes
of this Article VIII, each person, if any, who controls a party covered by the
indemnity provisions of this Article VIII within the meaning of Section 15 of
the Securities Act shall have the same rights to contribution as such party.
By execution and delivery of a Registration Notice, each Registering Holder
shall be deemed to have agreed to the foregoing contribution provisions.
IX. Representations and Warranties.
Section 9.01. Representations and Warranties of the Company.
Each of the Company and Iridium represents and warrants to each of the Holders
as follows:
(a) The execution, delivery and performance of this
Agreement by the Company or Iridium, as the case may be, have been duly
authorized by all requisite corporate or limited liability company action and
will not violate any provisions of law, any order of any court or other agency
of government, its organizational documents or any provision of any indenture,
agreement or other instrument to which it or any of its properties or assets is
bound, conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Company or Iridium, as the case may be.
(b) This Agreement has been duly executed and delivered
by the Company or Iridium, as the case may be, and constitutes the legal, valid
and binding obligation of the
34--
<PAGE> 39
Company or Iridium, as the case may be, enforceable in accordance with its
terms.
Section 9.02. Representations, Warranties and Agreements of
the Holders and the Registering Holders. Each of the Holders by execution and
delivery of an Exchange Notice, and each Registering Holder by execution and
delivery of a Registration Notice, shall be deemed to represent, warrant to and
agree with each of the Company and Iridium as follows:
(a) The performance of this Agreement by such Holder or
Registering Holder have been duly authorized by all requisite corporate,
partnership or similar action and will not violate any provisions of law
(assuming compliance by the Company and Iridium with all applicable federal or
state securities laws), any order of any court or other agency of government,
the organizational documents of the Holder or Registering Holder or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of such Holder or Registering Holder.
(b) This Agreement constitutes the legal, valid and
binding obligation of the Holder or Registering Holder, enforceable in
accordance with its terms.
X. Effectiveness of Agreement.
This Agreement shall become effective only upon the first date
on which the Company purchases Class 1 Membership Interests from Iridium.
XI. Assignability.
Each of the Holders by execution and delivery of an Exchange
Notice, and each Registering Holder by execution and delivery of a Registration
Notice, shall be deemed to have agreed that, without the prior written consent
of Iridium, the interest exchange and registration rights of a Holder or Class
A Holder set forth in this Agreement shall not be assignable, in whole or in
part, to any transferee of such Holder's Class 1 Membership Interests, or such
Class A Holder's restricted securities.
35--
<PAGE> 40
XII. Miscellaneous.
Section 12.01. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties; provided that this Agreement may not be
assigned by any party hereto other than in compliance with the terms hereof.
Section 12.02. Notices. All notices and other communications
provided for in this Agreement shall be in writing, shall be in the English
language and shall be sufficiently given if made (i) by hand delivery or by
telecopier and (ii) by reputable express courier service (charges prepaid) or
by registered or certified mail (postage prepaid and return receipt requested)
(a) if to the Company, at the following address:
Iridium World Communications Ltd.
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Attention: The Secretary
Phone: (441) 295-1422
Facsimile: (441) 292-4720
or if to Iridium, at the following address:
Iridium, LLC
1575 Eye Street, N.W.
Washington, D.C. 20005
U.S.A.
Attention: General Counsel
Phone: (202) 326-5600
Facsimile: (202) 326-5712
or at such other address as the Company or Iridium shall have furnished in
writing one to the other (notice of any change from the Company to Iridium
being binding upon any Holder), (b) if to any Holder, at the address maintained
by Iridium on its books and records for such purpose (which Iridium agrees to
make available to the Company at its request) and (c) if to a Class A Holder,
at the address maintained by the Company on its books and records for such
purpose. All such notices and other communications shall be deemed to have
been duly given and delivered: when delivered by hand, if personally delivered;
when receipt acknowledged,
36--
<PAGE> 41
if delivered by telecopier; five Business Days after being deposited with a
reputable express courier service (charges prepaid); and seven Business Days
after being deposited in the mail, postage prepaid, if delivered by United
States or Bermuda mail (registered or certified mail, return receipt
requested). Each of the Holders by execution and delivery of an Exchange
Notice, and each Registering Holder by execution and delivery of a Registration
Notice, shall be deemed to have agreed to the foregoing notice provisions.
Section 12.03. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.
Section 12.04. Entire Agreement. This Agreement constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior understanding among such parties.
Section 12.05. Governing Law; Severability. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE DOMESTIC
LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. If it shall be determined by a
court of competent jurisdiction that any provision or wording of this Agreement
shall be invalid or unenforceable under applicable law, such invalidity or
unenforceability shall not invalidate this entire Agreement. In that case,
this Agreement shall be construed so as to limit any term or provision so as to
make it enforceable or valid within the requirements of any applicable law,
and, in the event such term or provision cannot be so limited, this Agreement
shall be construed to omit such invalid or unenforceable provisions.
Section 12.06. Amendments to the Agreement. This Agreement
may not be changed or amended or the observance of any provisions waived
without the written consent of each of the Company and Iridium. No consent to
any such amendment by the Holders or the Class A Holders shall be required.
Section 12.07. Jurisdiction and Service of Process. Any
suit, action or proceeding against any party with respect to this Agreement and
any Holder or Registering Holder may be brought in a court of the United States
sitting in the State of Delaware or, if jurisdiction is
37--
<PAGE> 42
lacking in such a court, in a court of record in the State of Delaware, and
each party hereto, each Holder by execution and delivery of an Exchange Notice,
and each Registering Holder by execution and delivery of a Registration Notice,
(i) irrevocably waives, to the fullest extent permitted by law, any objection
that it may have, whether now or in the future, to the laying of venue in, or
to the jurisdiction of, any and each of such courts for the purpose of any such
suit, action, proceeding or judgment and further waives any claim that any such
suit, action, proceeding or judgment has been brought in an inconvenient forum,
and submits to such jurisdiction, (ii) agrees that service of all writs,
process and summonses in any such suit, action or proceeding brought in the
State of Delaware may be made upon The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, or such alternate process agent in the
United States designated with respect to the party, Holder or Registering
Holder in a writing delivered to Iridium and the Company (the "Process Agent"),
(iii) irrevocably appoints the Process Agent in its name, place and stead to
receive and forward such service of any and all such writs, process and
summonses, (iv) agrees that the failure of the Process Agent to give any notice
of any such service of process to such party, Holder or Registering Holder
shall not impair or affect the validity of such service or of any judgment
based thereon, (v) agrees to appoint a substitute process agent, if the Process
Agent is no longer able to so act for any reason whatsoever, which substitute
process agent shall thereafter be deemed to be the Process Agent hereunder and
to give notice of such appointment to Iridium and the Company and (vi) if the
party is a government, irrevocably waives any and all claims of immunity in
connection with the execution, performance and enforcement of this Agreement
and others in any way related to this Agreement, including, without limitation,
with respect to service of process, submission to jurisdiction, attachment and
execution on property.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
IRIDIUM WORLD COMMUNICATIONS LTD
By:
-----------------------------
Name:
Title:
IRIDIUM LLC
By:
-----------------------------
Name:
Title:
38--
<PAGE> 43
ANNEX A
LETTER OF REPRESENTATIONS
Iridium World Communications Ltd.
Iridium LLC
1575 Eye Street
Washington, DC 20006
Ladies and Gentleman:
The undersigned, an "Exchanging Holder" under the Interest
Exchange Agreement (the "Exchange Agreement"), dated as of June __, 1997, by
and between Iridium LLC ("Iridium") and Iridium World Communications Ltd.
("IWCL"), hereby acknowledges, represents, warrants, and agrees, on behalf of
itself and its assigns, that in connection with the undersigned's exchange of
Class 1 Membership Interests in Iridium for shares of Class A Common Stock of
IWCL (its "Exchange") pursuant to the Exchange Agreement:
(i) Pursuant to the terms of the Exchange Agreement, the
undersigned has duly and validly executed a Notice of Exchange
Authorization agreeing to be bound by certain provisions of the
Exchange Agreement. Each of the Exchange and the undersigned's
execution, delivery and performance under the Notice of Exchange
Authorization complies with all laws applicable to the undersigned or
to which it is subject and does not violate, breach or conflict with
any agreement to which it is a party or by which it is bound. The
Notice of Exchange Authorization is and will be valid, binding and
enforceable against the undersigned in accordance with its terms.
(ii) The undersigned has obtained all consents or
approvals required by governmental entities that are necessary in
connection with the Exchange and its execution, delivery and
performance under the Notice of Exchange Authorization.
(iii) Each of the Exchange and the undersigned's execution,
delivery and performance under the Notice of Exchange Authorization
does not violate any laws which pertain to the offer or sale of
securities generally in any jurisdiction to which the undersigned may
be subject or in any jurisdiction which may claim a right
<PAGE> 44
to regulate such offer to, or purchase by, the undersigned (it being
expressly understood that the undersigned is not giving a
representation or warranty as to whether IWCL or Iridium has complied
with the federal or state laws of the United States which pertain to
the offer or sale of securities).
(iv) Neither IWCL nor Iridium has rendered any investment
advice to the undersigned in connection with the Exchange. The
undersigned has had access to such financial and other information
concerning IWCL and Iridium as it has deemed necessary in connection
with its decision to effect the Exchange. In electing to effect the
Exchange the undersigned has relied only on the advice of its own
advisors.
(v) The certificates representing the shares of Class A
Common Stock of IWCL to be received by the undersigned in connection
with the Exchange will bear such legend or legends, consistent with
the terms of the Exchange Agreement, as IWCL, Iridium or their
respective legal counsel deems necessary or desirable.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF DELAWARE WOULD BE REQUIRED THEREBY
Date:
Very truly yours,
----------------------------
[Exchanging Holder]
By:
Title:
<PAGE> 45
ANNEX B
RESTRICTED SECURITIES CERTIFICATE
The undersigned, an "Exchanging Holder" under the Interest
Exchange Agreement (the "Exchange Agreement"), dated as of June __, 1997,
between Iridium LLC ("Iridium") and Iridium World Communications Ltd. ("IWCL"),
hereby acknowledges, represents, warrants, and agrees, on behalf of itself and
its assigns, that:
(i) Any shares of Class A Common Stock of IWCL issued to
the undersigned upon exchange of Class 1 Membership Interests in
Iridium pursuant to the Exchange Agreement prior to the effectiveness
of a registration statement filed with the U.S. Securities and
Exchange Commission pursuant to Article IV of the Exchange Agreement
in respect of such shares (a) have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (b) have
been issued in reliance on exemptions from such registration provided
in Section 4(2) of the Securities Act and Regulation S under the
Securities Act and applicable exemptions under the state securities
laws, and (c) shall be "Restricted Securities".
(ii) It shall not sell, transfer, assign, pledge or
otherwise encumber or dispose of, directly or indirectly
(collectively, "Transfer") any Restricted Securities prior to the date
which is two years after the later of (a) the date of original issue
to the undersigned or (b) the last date on which the undersigned was
an affiliate of Iridium or IWCL, unless (1) for so long as the
Restricted Securities are eligible for resale pursuant to Rule 144A
under the Securities Act, the Transfer is made to a person the
undersigned reasonably believes is a "qualified institutional buyer"
(a such term is defined in Rule 144A, a "QIB") that is purchasing for
its own account or the account of a QIB to whom notice is given that
the Transfer is being made in reliance on Rule 144A,(2) the Transfer
is made outside the United States to a
<PAGE> 46
person who is not a "U.S. Person" in a transaction meeting the
requirements of Rule 904 under the Securities Act, (3) the Transfer
does not violate any United States federal or state securities laws or
any of the rules and regulations promulgated thereunder (collectively,
the "U.S. Securities Laws") or the securities laws of any other
jurisdiction and, prior to effecting such Transfer, the undersigned
provides an opinion of counsel satisfactory to each of IWCL and
Iridium that such Transfer is in accordance with the U.S. Securities
Laws or (4) the Transfer is effected in accordance with the terms of
the Exchange Agreement.
(iii) It is not acquiring the Restricted Securities with a
view to, or for the offer or sale in connection with, any distribution
in violation of the Securities Act.
(iv) It shall provide to any person purchasing any
Restricted Securities from it a notice advising such purchaser that
Transfers of the Restricted Securities are restricted as set forth
herein and in the Exchange Agreement.
(v) IWCL, Iridium and others will rely upon the
undersigned's confirmations, acknowledgments and agreements set for
herein and in the undersigned's Notice of Exchange Authorization, and
the undersigned will notify IWCL and Iridium promptly in writing if
any of its representations or warranties herein or therein ceases to
be accurate and complete.
THIS CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE WOULD BE REQUIRED
THEREBY
Date:
----------------------------
[Exchanging Holder]
By:
Title:
<PAGE> 47
ANNEX C
NOTICE OF EXCHANGE AUTHORIZATION
The Board of Directors of Iridium LLC ("Iridium") has
authorized an exchange of Class 1 Interests into shares of Class A Common Stock
of Iridium World Communications Ltd. ("IWCL") pursuant to the Interest Exchange
Agreement, dated as of June __, 1997, between Iridium and IWCL (the "Interest
Exchange Agreement"). A copy of the Interest Exchange Agreement is attached to
this Notice. By executing a copy of this Notice, the undersigned agrees, on
behalf of itself and its assigns, to be bound by (i) the provisions of the
Interest Exchange Agreement applicable to "Holders" and "Class A Holders" and,
(ii) if the undersigned or its successors or assigns elect to participate in
any registration of Class A Common Stock under the Interest Exchange Agreement,
the provisions of the Interest Exchange Agreement applicable to a "Registering
Holder".
IRIDIUM LLC
By:
- ------------------------- -----------------------
Date Secretary
Agreed to and accepted:
- -------------------------
[Exchanging Holder]
By:
Title:
<PAGE> 48
ANNEX D
REGISTRATION NOTICE
The undersigned holder of Class 1 Membership Interests of
Iridium LLC or shares of Class A Common Stock of Iridium World Communications
Ltd. ("IWCL") hereby notifies IWCL pursuant to the Interest Exchange Agreement,
dated as of June __, 1997, between Iridium LLC ("Iridium") and IWCL (the
"Interest Exchange Agreement") that it wishes to have registered with the
Securities and Exchange Commission the specified number of shares of Class A
Common Stock which are either currently owned by the undersigned or issuable
upon exchange of Class 1 Membership Interests currently owned by the
undersigned and as to which the undersigned has delivered an Exchange Notice to
Iridium. A copy of the Interest Exchange Agreement is attached to this Notice.
By executing a copy of this Registration Notice, the undersigned agrees, on
behalf of itself and its assigns, to be bound by the provisions of the Interest
Exchange Agreement applicable to "Registering Holders" or to "Holders" or
"Class A Holders" that have requested registration of "Registerable Securities"
under the Interest Exchange Agreement.
- ---------------------
[Exchanging/Registered Holder]
By:
Title:
Number of Securities to be Registered:
_________________ shares of Class A Common Stock, of which
_____________ are issuable upon exchange of Class 1 Membership
Interests.
<PAGE> 1
EXHIBIT 10.3
Draft of May 23, 1997
MANAGEMENT SERVICES AGREEMENT
Dated as of June __, 1997
by and between
IRIDIUM WORLD COMMUNICATIONS LTD.
and
IRIDIUM LLC
<PAGE> 2
Draft of May 23,1997
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT is dated as of June __,
1997 and is made by and between IRIDIUM LLC, a Delaware limited liability
company ("Iridium" or the "Manager"), and IRIDIUM WORLD COMMUNICATIONS LTD., a
Bermuda company (the "Company"). Iridium and the Company are sometimes
referred to herein collectively as the "Parties" and each individually as a
"Party".
WHEREAS, Iridium was organized pursuant to a Limited Liability
Company Agreement dated as of July 29, 1996, as amended (the "LLC Agreement");
WHEREAS, Iridium is commercializing the IRIDIUM System, a
wireless communications system designed to provide global wireless telephone
service;
WHEREAS, the Company has been established to serve as the
entity through which Iridium will seek to obtain access to the equity capital
markets and through which special financial transactions will be conducted; and
WHEREAS, the Parties hereto desire to enter into this
Management Services Agreement ("Management Agreement") pursuant to which
Iridium shall supervise and manage the day-to-day operations of the Company on
the terms set forth herein;
NOW THEREFORE in consideration of the mutual covenants and
agreements hereinafter set forth, the Parties hereto agree as follows:
ARTICLE 1
GENERAL DUTIES OF MANAGER
1.1 General Duties of Manager. (a) From and after the date
hereof until the earlier of the date (the "Termination Date") i) on which the
parties mutually agree that this Management Agreement shall terminate or ii)
specified by Iridium in a Termination Notice (as defined below) pursuant to
Section 1.1(b), the Manager shall, subject to the direction and oversight of
the Board of Directors of the Company (the "Company Board") and subject to the
Manager observing and complying with the Memorandum of Association and Bye-Laws
of the Company, supervise and manage the day-to-day operations of the Company.
The Manager shall implement or cause to be implemented all policy decisions
relating to the operations of the Company approved by the Company Board and
shall conduct or cause to be conducted the ordinary and usual business and
affairs of the Company in accordance with and as limited by this
<PAGE> 3
Management Agreement. The Manager shall have the authority on behalf of the
Company to take all actions and make all decisions (including and in addition
to those described in Sections 1.2 through 1.14) other than as provided in
Article 3.
(b) Iridium shall have the right within 120 days after
the occurrence of an Iridium Bermuda Change of Control (as defined in the LLC
Agreement), to terminate this Management Agreement by giving written notice to
the Company (the "Termination Notice") stating the date on which the
termination of this Management Agreement shall become effective.
1.2 Treasury. The Manager shall administer all of the
Company's treasury functions including collection and disbursement of funds and
management of receivables and payables. The Company's funds shall not be
commingled with the Manager's funds.
1.3 Legal; Indemnification. (a) The Manager shall administer
all of the Company's legal affairs including any litigation by, against or
involving the Company.
(b) Iridium shall indemnify and hold harmless the Company
and each of its officers, directors and employees (each an "indemnified party")
against any losses, claims, damages or liabilities to which such indemnified
party may become subject, under the United States Securities Act of 1933, as
amended (the "Securities Act") or otherwise, that directly or indirectly, arise
out of or are related to, the Company's participation in the management and
business of Iridium, including but not limited to capital raising activities
conducted at the request of Iridium, and will reimburse such indemnified party
for any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim, as such
losses, damages, liabilities or expenses are incurred; provided, however, that
Iridium shall not be liable in any such case to any indemnified party to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an intentional act or omission of the indemnified party which was contrary
to any written instruction or request of Iridium or which amounted to willful
misconduct on the part of the indemnified party.
(c) Proceedings. Promptly after receipt by an
indemnified party of notice of the commencement of any action, suit or
proceeding as to which a claim in respect thereof is to be made against Iridium
under Section 1.3(b), the indemnified party shall notify Iridium in writing of
the commencement thereof, but the omission so to notify Iridium shall not
relieve Iridium from any liability which it may have to any indemnified party
otherwise than under such section. In case any such action shall be brought
against any indemnified party and it shall notify Iridium of the commencement
thereof, Iridium shall be entitled to participate therein and, to the extent
that it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to Iridium), and, after notice
from Iridium to such indemnified party of its election so to assume the
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defense thereof, Iridium shall not be liable to such indemnified party under
such section for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. Iridium
shall not, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party. No
indemnified party shall effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution has been or may be
sought hereunder without the prior written consent of Iridium.
(d) Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in this Section 1.3 is for any reason held to be unenforceable
although applicable in accordance with its terms, Iridium shall contribute to
the losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by any indemnified party in
such proportion as shall be appropriate to reflect (i) the relative benefits
received, directly or indirectly, by Iridium on the one hand and the
indemnified party on the other hand, with respect to the Company's
participation in the management and business of Iridium, including but not
limited to capital raising activities conducted at the request of Iridium, and
(ii) the relative fault of Iridium on the one hand and the indemnified party on
the other, with respect to the acts or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. Iridium and the Company agree
that it would not be just and equitable if contribution pursuant to this
Section 1.3 were to be determined by pro rata allocation or by any other method
of allocation which does not take into account the relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from Iridium if Iridium was not guilty of such fraudulent
misrepresentation.
(e) To the extent that (i) the Company is required to pay or
reimburse any director, secretary or other officer of the Company, or any of
their heirs, executors or administrators (each, a "Company Indemnified Party"),
pursuant to the indemnification provided by Bye-Law 30 of the Company's
Bye-Laws (the "Company Indemnity") and (ii) such Company Indemnified Party is
not otherwise entitled to indemnification by, or contribution from, Iridium
pursuant to this Section 3.1 or the LLC Agreement, the Manager shall, on behalf
of the Company, promptly pay the amount due to such Company Indemnified Party
pursuant to the Company Indemnity. In addition, to the extent that (i)
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the Company is required to conditionally advance funds to cover expenses
incurred by any Company Indemnified Party pursuant to the provisions of Bye-Law
30 of the Company's Bye-Laws and (ii) such Company Indemnified Party is not
otherwise entitled to the advancement of such funds pursuant to the LLC
Agreement, the Manager shall, on behalf of the Company, promptly advance funds
to the Company Indemnified Party to cover such expenses upon receipt of an
undertaking by or on behalf of the Company Indemnified Party to repay such
advanced funds to the Manager if it shall ultimately be determined that such
Company Indemnified Party is not entitled to the Company Indemnity.
The indemnity and contribution obligations in this Section 1.3
are solely obligations of Iridium and no recourse may be had thereunder against
any member, director, officer, employee or agent of Iridium.
1.4 Accounting System. The Manager shall maintain a system
of accounting established and administered in accordance with generally
accepted accounting principles consistently applied and a set of audit
procedures that are consistent with generally accepted auditing standards.
1.5 Books and Records of the Company. The Manager shall
maintain the books of account and other records of the Company including
without limitation all tax returns, financial statements, contracts and
licenses of the Company at all times at the Manager's principal executive
offices or at such other place or places approved by the Company Board. The
Manager shall maintain the books of account of the Company on an accrual basis
in accordance with generally accepted accounting principles consistently
applied. The Manager agrees that, to the extent required under Bermuda law or
the Company's Memorandum of Association or Bye-Laws, each stockholder of the
Company (a "Stockholder") shall have the right at all reasonable times during
normal business hours to examine the books of account of the Company. Such
right may be exercised through any agent or employee of a Stockholder
designated by it or by an independent public accountant designated by such
Stockholder.
1.6 Tax Returns and Elections; Payment of Tax Liabilities.
The Manager shall cause the Company's certified public accountants (the
"Accountants") to prepare the tax returns of the Company, and the Manager shall
use all reasonable efforts to cause the Accountants to prepare such tax returns
as soon as reasonably practicable after the end of each fiscal year of the
Company. The Manager shall use all reasonable efforts to cause such tax
returns to be filed on a timely basis and shall, promptly after the receipt
thereof from such Accountants, deposit such copies with the Company's permanent
records. The Manager shall make all elections required or permitted to be made
by the Company under applicable law, consistent with any instructions issued by
the Company Board. In the event that the Company is required to pay any tax or
similar governmental charge and the Company does not have sufficient funds
available to pay such tax or charge, the Manager
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shall pay to the appropriate authority the amount of such tax or governmental
charge (the "Tax Advance") on behalf of the Company upon receipt of an
undertaking by the Company to promptly repay the Manager for the Tax Advance
(in whole or in installments) immediately upon the availability of funds for
such purpose; provided that, in any fiscal year, the Manager shall not be
required to provide aggregate Tax Advances for the payment of U.S. federal,
state and local income tax liabilities of the Company in an amount greater than
the amount of the Minimum Dividend (as defined in the LLC Agreement) for such
fiscal year (without adjustment for any shortfall in Minimum Dividend payments
for previous years).
1.7 Administration of Borrowing Documentation. The Manager
shall administer the Company's obligations and responsibilities under any loan
documents and related security and other documents relating to borrowings of
the Company, including without limitation submitting certificates required of
the Company thereunder and administering the Company's compliance with all loan
covenants and obligations under such loan documents.
1.8 Insurance. The Manager shall implement the Company's
insurance program, including procuring and maintaining any and all insurance
required to be maintained by the Company pursuant to any agreement to which the
Company is a party. The Manager also shall be responsible for administering
all claims and making all collections on behalf of the Company under insurance
policies covering the Company. The Manager shall be named as an additional
insured or a named insured, as appropriate, under each of the insurance
policies which include the Company as a named or additional insured.
1.9 Licenses and Permits. The Manager shall cause the
Company to obtain, and the Manager shall monitor and maintain compliance with,
all permits, licenses and governmental approvals necessary or desirable for the
conduct of the Company's business. Where permits must be obtained, modified or
renewed by the Company, the Manager shall prepare any application, filing or
notice relating thereto, shall cause such materials to be submitted to, and
shall represent the Company in contacts with, the appropriate governmental
agency, and shall perform all ministerial or administrative acts necessary for
timely issuance and the continued effectiveness thereof.
1.10 Investor Relations. The Manager shall be responsible
for all matters relating to the relations between the Company and its
Stockholders and other investors, including but not limited to, promptly
providing the notice of an annual general meeting, or a special general
meeting, of the Company as required by the Company's Bye-Laws, upon receipt of
written notice from the Company Board of the scheduling of such meetings. The
Manager shall appoint, and oversee the performance of, the registrar and
transfer agent or agents for the Company's common stock.
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1.11 Public Relations. The Manager shall be responsible for
all public and community relations matters of the Company.
1.12 Securities Law and Other Filings. The Manager shall be
responsible for making all filings required (a) under any applicable securities
laws, including without limitation the Securities Act and the Securities
Exchange Act of 1934, as amended, and (b) by any securities exchange or market
on which any of the Company's securities are listed or traded.
1.13 Other. The Manager shall as promptly as practicable
after obtaining knowledge thereof inform the Company Board of any event, action
or condition that the Manager believes is reasonably likely to have a material
effect on the operations or financial condition of the Company. In addition,
the Manager shall provide any other assistance or services reasonably requested
by the Company in connection with the management of the Company.
1.14 Personnel; Payment of Outside Directors' Fees and
Expenses. (a) The Manager shall provide and make available as necessary all
professional, supervisory, managerial, administrative and other personnel as
are necessary to perform its obligations hereunder, which personnel may be
employees of the Manager and/or its affiliates. Such personnel shall be
qualified and experienced in the duties to which they are assigned.
(b) The Manager shall pay the directors of the Company who
also serve as directors of Iridium pursuant to Section 1.05(a) of the LLC
Agreement an annual fee in the amount authorized by the Board of Directors of
Iridium from time to time and shall reimburse such directors for any expenses
incurred by such directors in attending any meetings of the Company Board or
any committee thereof, or any meetings of the Board of Directors of Iridium or
any committee thereof.
1.15 Standards for Performance of Services. (a) The Manager
shall perform its obligations hereunder in a prudent and efficient manner.
(b) The Manager shall use all reasonable efforts to perform
its obligations hereunder in accordance with all applicable laws, regulations,
codes, permits, licenses and standards.
1.16 The Company Board's Right to Deliver Instructions. The
Company, by action of the Company Board, may from time to time deliver to the
Manager written instructions with respect to matters arising under this
Management Agreement and the Manager shall follow such instructions, provided
that such instructions are consistent with the terms and conditions of this
Management Agreement.
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1.17 Manager's Right to Request Instructions. At any time,
the Manager may, if it reasonably deems it necessary or appropriate, request
written instructions from the Company Board within a reasonable period prior to
the necessity for taking action with respect to any matter contemplated by this
Management Agreement, and may defer action thereon pending receipt of such
written instructions. Actions taken by the Manager, its officers, employees
and representatives in accordance with the written instructions of the Company
Board, or failure to act by such persons pending the receipt of such written
instructions, shall be deemed to be proper conduct within the scope of the
Manager's authority under this Management Agreement.
ARTICLE 2
REPORTS
2.1 Financial Statements; Periodic Reports. (a) The Manager
shall have prepared and shall furnish to the Company Board as soon as
practicable, but in any event within 90 days after the end of each fiscal year
of the Company, an audited consolidated balance sheet as at the end of such
fiscal year and audited statements of income and results of operations and cash
flows for such fiscal year (including notes thereto), setting forth in each
case (in comparative form) corresponding figures for the preceding fiscal year.
Such financial statements shall be accompanied by the report thereon of the
Accountants to the effect that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior years (except as otherwise specified in such report).
The Manager shall use all reasonable efforts to conduct the business of the
Company so that such report of the Accountants will not contain any
qualifications as to the scope of the audit or with respect to the Company's
compliance with generally accepted accounting principles consistently applied,
except for changes in methods of accounting in which such Accountants concur.
(b) The Manager shall prepare and furnish to the Company Board
as soon as practicable, and in any event within 45 days after the end of each
fiscal quarter, a report of the Company consisting of an unaudited consolidated
balance sheet as at the end of such quarter and an unaudited statement of
operations, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal quarter. All such reports shall be certified
by the Manager to be correct and complete, to fairly present in all material
respects the consolidated financial condition of the Company at the date shown
and the results of its operations for the period then ended and to have been
prepared in accordance with generally accepted accounting principles
consistently applied except for year end adjustments. The reports for each
calendar quarter shall include a narrative discussion prepared by the Manager
describing the business and operations of the Company during the preceding
quarter.
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ARTICLE 3
LIMITATIONS ON AUTHORITY
3.1 Interested Transactions. The Manager shall have no
authority to give any notice, to consent to the taking of any action under, or
otherwise to act on behalf of the Company with respect to, any matter under the
LLC Agreement, unless the Manager has received written instructions from the
Company Board or authorization from the Company Board to act on behalf of the
Company as to any specific matter or classes of matters.
3.2 Section 2.09(b) Actions. Notwithstanding any other
provision of this Management Agreement, the Manager shall have no authority to
consent or approve on behalf of the Company any of the actions set forth in
Section 2.09(b) of the LLC Agreement.
3.3 Reserved Actions. The Manager shall have no authority to
take any actions on behalf of the Company which actions may only be taken by
the Company under Bermuda law or the Company's Memorandum of Association or
Bye-Laws.
ARTICLE 4
FEES AND CHARGES
The Manager shall perform the services to be performed
hereunder free of any charge to the Company and all of the costs and expenses
associated with the performance of all services hereunder shall be paid or
reimbursed by the Manager including, without limitation, the funds required to
be paid or advanced pursuant to Section 1.3, the fees and expenses of the
Accountants, the funds required to be advanced pursuant to Section 1.6 (subject
to the Company's repayment obligation), the costs of the insurance referred to
in Section 1.8, the fees and costs of the filings referred to in Section 1.12
and the directors' fees and expenses referred to in Section 1.14.
ARTICLE 5
MISCELLANEOUS
5.1 Term. This Agreement shall terminate on the Termination
Date (as defined in Section 1.1). No termination shall affect any rights of
the Company against the Manager in respect of any breach by the Manager of any
provision of this Management Agreement or any rights of the Manager hereunder.
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5.2 Assignment. Neither the Company nor the Manager may
assign, transfer, convey or delegate in any manner, any of their respective
duties and obligations under this Management Agreement without the prior
written consent of the other Party hereto; provided that, the Manager shall
have no authority to provide such consent on behalf of the Company.
5.3 Non-Recourse. Each representation, warranty, undertaking
and agreement made in this Management Agreement on the part of either Party
hereto was not made or intended to be made as a personal or individual
representation, undertaking or agreement on the part of any past, present, or
future general or limited partner of either Party or any such Party's
incorporator, stockholder, director, officer, employee or agent or of any such
person's incorporators, stockholders, directors, officers, employees, agents or
partners, and no personal or individual liability or responsibility is assumed
by, nor shall any recourse at any time be asserted or enforced against, any
past, present, or future general or limited partner of either Party or any such
partner's incorporator, stockholder, director, officer, employee or agent or
against any such person's incorporators, stockholders, directors, officers,
employees, agents or partners, all of which recourse (whether in common law, in
equity, by statute or otherwise) is hereby forever waived and released. It is
intended by the Parties hereto that the Manager shall be solely responsible for
its performance of its obligations under this Management Agreement and the
Company expressly waives any obligation it may have now or in the future
against any individual officer, employee or agent of the Manager who performs
or omits to perform any actions hereunder on behalf of the Manager.
5.4 Major Decisions. The Manager shall not be obligated
to perform its duties or obligations hereunder to the extent but only to the
extent the performance of such duties or obligations is subject to the
authorization of the Company Board pursuant to Article 3 of this Management
Services Agreement and such authorization has not been obtained.
5.5 Independent Contractor. The Manager shall be an
independent contractor with respect to the performance of its obligations
hereunder. In no event shall the relationship between the Company and the
Manager be construed as a partnership or joint venture for any purpose.
Neither the Manager nor its employees or other agents employed by the Manager
in connection with the performance of its obligations hereunder shall be deemed
to be agents of the Company, except to the extent of the agency created
hereunder pursuant to the authority granted to the Manager under Article 1.
5.6 Counterparts. This Management Agreement may be executed
in several counterparts and all such counterparts shall constitute one
Agreement, binding on the Parties hereto, notwithstanding that all of the
parties are not signatory to the original or the same counterpart.
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5.7 Binding on Successors. This Management Agreement shall
be binding upon and shall inure to the benefit of the successors and permitted
assigns of the Parties.
5.8 Severability. In the event any one or more of the
provisions contained in this Management Agreement should be rendered invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby. The Parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid, legal and enforceable provisions, the economic effect of which come as
close as possible to that of such invalid, illegal or unenforceable provisions.
5.9 Notices. All notices under this Management Agreement
shall be in writing and shall be given to the person entitled thereto, by
personal service, or by certified or registered mail, return receipt requested,
posted to the address for that person set forth below or at any other address
that he specifies in writing. Any such notice shall be deemed given on the
date delivered, when so given by personal service, or on the fourth day after
the date mailed, when so given by certified or registered mail.
The Company: c/o Iridium LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
cc: General Counsel
The Manager: Iridium LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
cc: General Counsel
5.10 Captions. Article and section titles or captions
contained in this Management Agreement are inserted only as a matter of
convenience and for reference. The titles and captions in no way define,
limit, extend or describe the scope of this Management Agreement nor the intent
of any provision hereof.
5.11 Choice of Law. This Management Agreement shall be
construed under the laws of the State of New York as if this Management
Agreement were executed in and to be performed entirely within the State of New
York.
5.12 Jurisdiction and Service of Process. Any suit, action
or proceeding against any party with respect to this Management Agreement may
be brought in a court of the United States sitting in the State of Delaware or,
if jurisdiction is lacking in such a
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court, in a court of record in the State of Delaware, and each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection that
it may have, whether now or in the future, to the laying of venue in, or to the
jurisdiction of, any and each of such courts for the purpose of any such suit,
action, proceeding or judgment and further waives any claim that any such suit,
action, proceeding or judgment has been brought in an inconvenient forum, and
the party hereby submits to such jurisdiction. Each party hereto hereby agrees
that service of all writs, process and summonses in any such suit, action or
proceeding brought in the State of Delaware may be made upon The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, or such
alternate process agent in the United States designated with respect to the
party in a writing delivered to the other party (the "Process Agent") and each
of the parties hereto hereby irrevocably appoints the Process Agent in its
name, place and stead to receive and forward such service of any and all such
writs, process and summonses and agrees that the failure of the Process Agent
to give any notice of any such service of process to such party shall not
impair or affect the validity of such service or of any judgment based thereon.
If the Process Agent is no longer able to so act for any reason whatsoever, the
party agrees to appoint a substitute process agent, which substitute process
agent shall thereafter be deemed to be the Process Agent hereunder, and to give
notice of such appointment to the other party.
5.13 Authority. Each individual executing this Management
Agreement on behalf of an entity represents and warrants that he or she has
full authority to execute this Management Agreement on behalf of such entity
and the execution of this Management Agreement and entry into this transaction
by the undersigned has been duly authorized by such entity.
5.14 Entire Agreement. This Management Agreement constitutes
the entire agreement between the Parties with respect to the subject matter
herein contained and supersedes all agreements, representations, warranties,
statements, provisions, and undertakings, whether oral or written, with respect
to the subject matter hereof.
5.15 Amendments. This Management Agreement may be amended or
modified only with the written consent of both Parties; provided that, the
Manager shall have no authority to provide such consent on behalf of the
Company.
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IN WITNESS WHEREOF, the Parties hereto have executed this
Management Agreement as of the date first above written.
IRIDIUM LLC
By:
-----------------------------
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
-----------------------------
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EXHIBIT 10.4
Draft of May 23, 1997
1997 SUBSCRIPTION AGREEMENT
Dated as of June [ ], 1997
by and between
IRIDIUM WORLD COMMUNICATIONS LTD.
and
IRIDIUM LLC
<PAGE> 2
This 1997 SUBSCRIPTION AGREEMENT (this "Agreement") is dated as of
June [ ], 1997 and is by and between IRIDIUM WORLD COMMUNICATIONS LTD., a
company incorporated under the laws of Bermuda (the "Company"), and IRIDIUM LLC
("Iridium"), a limited liability company organized under the laws of the State
of Delaware.
WHEREAS, the Company intends to consummate an underwritten initial
public offering (the "Offering") of 10,000,000 shares of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") (11,500,000 shares
if the Underwriters' over-allotment options are exercised in full) and to use
the proceeds of the Offering to purchase an equivalent number of Class 1
Membership Interests ("Class 1 Interests") in Iridium as described in the
registration statement on Form S-1 (File No. 333-23419) filed with the U.S.
Securities and Exchange Commission, as amended (the "Registration Statement").
WHEREAS, upon consummation of the Offering, Iridium intends to issue
and sell to the Company 10,000,000 Class 1 Interests (11,500,000 Class 1
Interests if the Underwriters' over-allotment options are exercised in full) at
a purchase price per Class 1 Interest equal to the per share public offering
price of the Class A Common Stock less the per share underwriting discount.
WHEREAS, Iridium owns all 1,200,000 currently outstanding shares of
Class A Common Stock (the "Outstanding Shares") and in connection with, and as
a condition to, the sale of the Class 1 Interests, Iridium intends to surrender
the Outstanding Shares to the Company and the Company intends to retire and
cancel the Outstanding Shares upon such surrender by Iridium.
NOW, THEREFORE, the parties hereto, intending to be bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Reference to Registration Statement. Capitalized terms
used but not defined herein shall have the meanings assigned to such terms in
the Registration Statement.
Section 1.2. Certain Definitions. As used in this Agreement the
following terms have the following respective meanings:
"Agreement" means this 1997 Subscription Agreement.
"Class A Common Stock" means the Class A Common Stock, par value $.01
per share, of the Company.
"Class 1 Interests" means the Class 1 Membership Interests of Iridium
LLC.
"Firm Interests" has the meaning assigned to the term in Section 2.1
of this Agreement.
"Firm Shares" means the shares of Class A Common Stock purchased by
the Underwriters pursuant to the Purchase Agreements without giving effect to
the exercise of over-allotment options.
"Iridium Bermuda" means the Company as such term is used in the LLC
Agreement referenced herein.
<PAGE> 3
"LLC Agreement" means the Limited Liability Company Agreement of
Iridium LLC dated as of July 29, 1996, as amended.
"Offering" means the initial public offering by the Company of its
Class A Common Stock as described in the Registration Statement.
"Option Interests" has the meaning assigned to the term in Section 2.2
of this Agreement.
"Option Shares" means the shares of Class A Common Stock purchased by
the Underwriters pursuant to the over-allotment options granted in the Purchase
Agreements.
"Registration Statement" means the Company's registration statement on
Form S-1 (File No. 333-23419) filed with the U.S. Securities and Exchange
Commission, as amended.
ARTICLE II
PURCHASE OF CLASS 1 INTERESTS
BY THE COMPANY
Section 2.1. Firm Interests. Subject to the terms and conditions set
forth herein, Iridium agrees to create, issue and sell 10,000,000 Class 1
Interests to the Company (the "Firm Interests") and the Company agrees to
purchase the Firm Interests at a price per Firm Interest equal to the per share
price paid to the Company by the Underwriters for the 10,000,000 Firm Shares of
Class A Common Stock purchased by the Underwriters pursuant to the Purchase
Agreements.
Section 2.2. Over-Allotment Interests. Subject to terms and
conditions set forth herein, Iridium agrees to create, issue and sell up to
1,500,000 Class 1 Interests to the Company (the "Option Interests") and the
Company agrees to purchase an aggregate number of Option Interests that is
equal to the number of Option Shares of Class A Common Stock purchased by the
Underwriters pursuant to the Purchase Agreements at a price per Option Interest
equal to the price paid by the Underwriters for the Option Shares of Class A
Common Stock purchased by the Underwriters pursuant to the Purchase Agreements.
ARTICLE III
DELIVERY AND PAYMENT FOR INTERESTS
Section 3.1. Delivery of and Payment for Firm Interests. Delivery of
certificates for the Firm Interests shall be made at the time and location of
the delivery of the Firm Shares under the Purchase Agreements against payment
of the purchase price therefor in immediately available funds.
Section 3.2. Delivery of and Payment for Option Interests. Delivery
of certificates for the Option Interests shall be made at the time and location
of the delivery of the Option Shares under the Purchase Agreements against
payment of the purchase price therefor in immediately available funds.
Section 3.3. Delivery and Cancellation of Outstanding Shares.
Iridium hereby agrees that in addition to its other obligations under this
Agreement, upon payment by the Company of the purchase price for the Firm
Shares pursuant to Section 3.1 above, Iridium shall surrender the Outstanding
Shares to the Company and shall relinquish any rights in or claims on the
Outstanding Shares. The
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<PAGE> 4
Company hereby agrees that upon delivery of the Outstanding Shares by Iridium,
the Company shall retire and cancel such Outstanding Shares.
ARTICLE IV
ADMISSION OF THE COMPANY TO IRIDIUM LLC
Section 4.1. Admission of the Company. The Company wishes to be
admitted as a Class 1 Member in Iridium and agrees to be bound by all of the
applicable provisions of the LLC Agreement. Prior to the first issuance of any
Class 1 Interests hereunder, the Company will execute and deliver a counterpart
of the LLC Agreement in substantially the form set forth in Annex A hereto.
This Agreement constitutes the Company's written request that Iridium's
Members' Interest Register be amended to reflect the Company's admission as a
Member and Iridium agrees that its Members' Interest Register will be so
amended, and the Company will be admitted as a Member in Iridium, on the date
of the issuance of the Firm Interests hereunder.
Section 4.2. Rights of the Company. The Class 1 Interests issued to
the Company hereunder shall be entitled to all of the rights of Class 1
Interests under the LLC Agreement, including the rights of "Iridium Bermuda"
described thereunder.
ARTICLE V
EXPENSES OF THE OFFERING
Iridium shall promptly pay, or reimburse the Company for the payment
of, all expenses incurred by the Company in connection with the Offering and
the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS OF THE PARTIES' OBLIGATIONS
Section 6.1. Firm Interests. The respective obligations of the
parties with respect to the Firm Interests are subject to the performance by
the Underwriters of their obligations to purchase the 10,000,000 Firm Shares
under the Purchase Agreements.
Section 6.2. Option Interests. The respective obligations of the
parties with respect to the Option Interests, if any, are subject to the
performance by the Underwriters of their obligations, if any, to purchase
Option Shares under the Purchase Agreements.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1 Representations and Warranties of Iridium. Iridium hereby
represents and warrants that it has duly and validly executed and delivered
this Agreement and that the Firm Interests and the Option Interests, if any,
when issued against payment therefore by the Company pursuant to Article III,
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will be duly and validly authorized and issued and fully-paid and
non-assessable, subject to the Company's waiver of limited liability pursuant
to Section 2.09 of the LLC Agreement.
Section 7.2 Representations and Warranties of the Company. The
Company hereby represents and warrants that it has duly and validly executed
and delivered this Agreement and will duly and validly execute the LLC
Agreement pursuant to Article IV.
ARTICLE VIII
INDEMNIFICATION AND CONTRIBUTION
Section 8.1. Indemnification by Iridium. Iridium will indemnify and
hold harmless the Company and each of its officers, directors and employees
(each an "indemnified party") against any losses, claims, damages or
liabilities to which such indemnified party may become subject, under the
Securities Act or otherwise, that directly or indirectly, arise out of or are
related to, the transactions contemplated by this Agreement, and will reimburse
such indemnified party for any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim, as such losses, damages, liabilities or expenses are incurred;
provided, however, that Iridium shall not be liable in any such case to any
indemnified party to the extent that any such loss, claim, damage or liability
arises out of or is based upon an intentional act or omission of the
indemnified party which was contrary to any written instruction or request of
Iridium or which amounted to willful misconduct on the part of the indemnified
party.
Section 8.2. Proceedings. Promptly after receipt by an indemnified
party of notice of the commencement of any action, suit or proceeding as to
which a claim in respect thereof is to be made against Iridium under Section
8.1, the indemnified party shall notify Iridium in writing of the commencement
thereof, but the omission so to notify Iridium shall not relieve Iridium from
any liability which it may have to any indemnified party otherwise than under
such section. In case any such action shall be brought against any indemnified
party and it shall notify Iridium of the commencement thereof, Iridium shall be
entitled to participate therein and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (which shall not, except with the consent of the indemnified
party, be counsel to Iridium), and, after notice from Iridium to such
indemnified party of its election so to assume the defense thereof, Iridium
shall not be liable to such indemnified party under such section for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation. Iridium shall not, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party. No indemnified party shall effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution has been or may be sought hereunder without the
prior written consent of Iridium.
Section 8.3. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 8.1 is for any reason held to be unenforceable although
applicable in accordance with its terms, Iridium shall contribute to the
losses, liabilities, claims, damages and expenses of the type contemplated by
such indemnity agreement incurred by any indemnified party in such proportion
as shall be appropriate to reflect (i) the relative benefits
-4-
<PAGE> 6
received, directly or indirectly, by Iridium on the one hand and the
indemnified party on the other hand, from (a) the sale of the Firm Shares and
the Option Shares, if any, and (b) the sale of the Firm Interests and the
Option Interests, if any, and (ii) the relative fault of Iridium on the one
hand and the indemnified party on the other, with respect to the acts or
omissions which resulted in such loss, liability, claim, damage or expense, or
action in respect thereof, as well as any other relevant equitable
considerations. Iridium and the Company agree that it would not be just and
equitable if contribution pursuant to this Section 8.3 were to be determined by
pro rata allocation or by any other method of allocation which does not take
into account the relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from Iridium if Iridium was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution obligations in this Article VIII are
solely obligations of Iridium and no recourse may be had thereunder against any
member, director, officer, employee or agent of Iridium.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Governing Law; Severability. This Agreement is governed
by, and shall be construed and enforced in accordance with, the laws of the
State of New York without regard to principles of conflicts of laws. If it
shall be determined by a court of competent jurisdiction that any provision or
wording of this Agreement shall be invalid or unenforceable under applicable
law, such invalidity or unenforceability shall not invalidate this entire
Agreement. In that case, this Agreement shall be construed so as to limit any
term or provision so as to make it enforceable or valid within the requirements
of any applicable law, and, in the event such term or provision cannot be so
limited, this Agreement shall be construed to omit such invalid or
unenforceable provisions.
Section 9.2. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.3. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior understandings among such parties with respect to such
subject matter.
Section 9.4. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of each
of the parties; provided that this Agreement may not be assigned by the Company
without the written consent of Iridium.
Section 9.5. Notices. All notices and other communications provided
for in this Agreement shall be in writing, shall be in the English language and
shall be sufficiently given if made (i) by hand delivery, (ii) by telecopier,
or (iii) by reputable express courier service (charges prepaid), if to the
Company, at the following address:
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<PAGE> 7
Iridium World Communications Ltd.
c/o Iridium, LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
U.S.A.
Attention: General Counsel
Phone: (202) 408-3800
Telecopier: (202) 408-3801
or if to Iridium, at the following address:
Iridium, LLC
1575 Eye Street, N.W.
Washington, D.C. 20006
U.S.A.
Attention: General Counsel
Phone: (202) 408-3800
Telecopier: (202) 408-3801
or at such other address as the Company or Iridium shall have furnished in
writing one to the other. Such notice shall be deemed to have been given when
actually received.
Section 9.6. Jurisdiction and Service of Process. Any suit,
action or proceeding against any party with respect to this Agreement may be
brought in a court of the United States sitting in the State of Delaware or, if
jurisdiction is lacking in such a court, in a court of record in the State of
Delaware, and each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may have, whether now or in the future,
to the laying of venue in, or to the jurisdiction of, any and each of such
courts for the purpose of any such suit, action, proceeding or judgment and
further waives any claim that any such suit, action, proceeding or judgment has
been brought in an inconvenient forum, and the party hereby submits to such
jurisdiction. Each party hereto hereby agrees that service of all writs,
process and summonses in any such suit, action or proceeding brought in the
State of Delaware may be made upon The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, or such alternate process agent in the
United States designated with respect to the party in a writing delivered to
the other party (the "Process Agent") and each of the parties hereto hereby
irrevocably appoints the Process Agent in its name, place and stead to receive
and forward such service of any and all such writs, process and summonses and
agrees that the failure of the Process Agent to give any notice of any such
service of process to such party shall not impair or affect the validity of
such service or of any judgment based thereon. If the Process Agent is no
longer able to so act for any reason whatsoever, the party agrees to appoint a
substitute process agent, which substitute process agent shall thereafter be
deemed to be the Process Agent hereunder, and to give notice of such
appointment to the other party.
Section 9.7. Amendments to the Agreement. This Agreement may
not be changed or amended or the observance of any provisions waived without
the written consent of each of the Company and Iridium.
-6-
<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto signed their names in
the space provided below.
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
-------------------------------
Name:
Title:
IRIDIUM LLC
By:
-------------------------------
Name:
Title:
-7-
<PAGE> 9
ANNEX A
TO 1997 SUBSCRIPTION AGREEMENT
FORM OF COUNTERPART TO LLC AGREEMENT
The undersigned agrees to be bound by the Limited Liability Company
Agreement of Iridium LLC, dated as of July 29, 1996, as amended, to which this
signature page is attached.
IN WITNESS WHEREOF, the undersigned has hereunto set its hand as of
this day of June, 1997.
MEMBER
------
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.6
IRIDIUM(R)
SPACE SYSTEM
CONTRACT
Between
IRIDIUM LLC
and
MOTOROLA
CONTRACT EFFECTIVE DATE: JULY 29, 1993
(CONFORMED 01/14/97 TO INCLUDE AMENDMENTS 1, 2, 3, 4, 5 AND 6
REQUESTS FOR CHANGE RFC-001, RFC-002 AND RFC-004)
- ---------------
IRIDIUM IS A REGISTERED TRADEMARK AND SERVICE MARK OF IRIDIUM LLC.
<PAGE> 2
IRIDIUM Space System Contract
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TITLE PAGE
- ----- ----
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. DESCRIPTION OF WORK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3. MILESTONE PERFORMANCE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4. PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5. PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6. GATEWAY DELIVERY COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 7. OPERATION OF SYSTEM CONTROL SEGMENT FACILITIES . . . . . . . . . . . . . . . . 10
ARTICLE 8. ACCEPTANCE CRITERIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 9. TITLE TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 10. CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 11. EXCUSABLE DELAYS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 12. BUYER'S ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 13. PROGRESS MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 14. INTELLECTUAL PROPERTY RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 15. PATENT INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 16. WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 17. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 18. PERMITS AND LICENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 19. CROSS WAIVER OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 20. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 21. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 22. EXPORT REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 23. DEFAULT BY SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 24. DEFAULT BY BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 25. TERMINATION FOR CONVENIENCE. . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 26. LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 27. DISCLOSURE AND USE OF INFORMATION BY THE PARTIES. . . . . . . . . . . . . . . 28
ARTICLE 28. PUBLIC RELEASE OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 29. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 30. RELATIONSHIP WITH OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 31. SALES OF OTHER SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 32. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 33. AUTHORIZED REPRESENTATIVES. . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 34. EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 35. ORDER OF PRECEDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 36. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 37. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 38. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
Page i
<PAGE> 3
IRIDIUM Space System Contract
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TITLE PAGE
- ----- ----
<S> <C> <C>
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBIT B. STATEMENT OF WORK
EXHIBIT C. ACCEPTANCE PLAN
</TABLE>
Page ii
<PAGE> 4
IRIDIUM Space System Contract
IRIDIUM SPACE SYSTEM CONTRACT
THIS CONTRACT is hereby made between Motorola, Inc. (hereinafter called
"Seller") a corporation organized under the laws of the State of Delaware,
U.S.A., and Iridium LLC (hereinafter called "Buyer"), a Delaware limited
liability company. The Effective Date of this Contract is the date specified
in ARTICLE 38, EFFECTIVE DATE.
RECITALS
A. On June 26, 1990, Motorola formally announced that it intended to
develop a global communication system that would allow communication
via portable radio telephones -- whether on land, at sea or in the
air. The new system, known as IRIDIUM, has at the heart of its
operation, a Constellation of nominally sixty-six (66) satellites in
low-earth orbit working together as a digitally-switched
communications network in space. The system is intended to handle
both voice and data. One or more ground-based spacecraft control
facilities will maintain the satellite Constellation and overall
operation of the system.
B. A key component of the IRIDIUM Communications System will be a network
of "gateway" surface facilities in various countries that will link
the satellites with the public-switched telephone network. These
gateways will also store customer billing information and will keep
track of each user's location.
C. Other key components to the system are the Subscriber Units (ISUs) and
Mobile Exchange Units (MXUs).
D. On June 14, 1991 Motorola incorporated Iridium, Inc. to become, among
other things, the owner of the Space System portion of the IRIDIUM
Communications System.
E. This Contract is intended to function as the mechanism whereby
Motorola will sell to Iridium LLC the Space System portion of the
IRIDIUM Communications System.
F. Separate agreements between Motorola and other appropriate parties
will provide for the production and sale of the Gateways, Subscriber
Units, MXUs, and other components of the IRIDIUM Communications
System. Motorola intends to develop or have others develop these
components by the time the system is operational. A separate
agreement between Iridium LLC and Motorola, Inc. shall provide for the
operation and maintenance of the Space System upon completion of this
Contract.
Page 1
<PAGE> 5
IRIDIUM Space System Contract
ARTICLE 1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
following meanings:
A. Constellation or Space Segment: That part of the complete IRIDIUM
Communications System consisting solely of the space vehicles (also
referred to as spacecrafts or satellites) in low-earth orbit and
providing a 98.5% global coverage as specified in TABLE 3.7.1 of the
Statement of Work. It does not include the System Control Segment,
Gateways, ISUs, MXUs or other components necessary for complete
utilization of the IRIDIUM Communications System.
B. Gateway: The Gateways encompass the ground-based facilities
constructed in accordance with the Gateway Interface Specification
supporting the subscriber billing/information functions in addition to
call processing operations and the connection of the IRIDIUM
subscriber communications through the Public Switched Telephone
Network (PSTN).
C. Gateway Interface Specification: The functional specification
prepared by Seller that defines the radio frequency interface, logical
and physical protocols, and functionality necessary for Gateway
interoperability with the Space System. It does not include the Voice
Encoding Algorithm necessary for complete interoperability with the
IRIDIUM Communications System.
D. Initial Operating Period: The Initial Operating Period shall commence
immediately after arrival of the first space vehicle at its designated
orbital position, and conclude when Seller demonstrates to Buyer
completion of the Space System, (i.e. completion of Milestone 47).
E. IRIDIUM Communications System (or simply "IRIDIUM"): The complete
integrated satellite-based digitally-switched communication system.
This term refers collectively to the Space Segment, System Control
Segment, Gateways and Subscriber Unit Segment.
F. Mobile Exchange Units (MXUs): The equipment designed to interconnect
multiple voice or data channels to the IRIDIUM Communications System
using the subscriber unit radio frequency interface to the Space
System.
G. Mobile Exchange Unit (MXU) Interface Specification: The functional
specification prepared by Seller that defines the radio frequency
interface, logical and physical protocols necessary for Mobile
Exchange Unit (MXU) interoperability with the Space System. It does
not include the Voice Encoding Algorithm necessary for complete
interoperability with the IRIDIUM Communications System.
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<PAGE> 6
IRIDIUM Space System Contract
H. Paging Unit Interface Specification: The functional specification
prepared by Seller that defines the radio frequency interface, logical
and physical protocols and paging unit functionality necessary for
paging unit interoperability with the Space System.
I. Revenue Producing Communication Message: As used within this
Contract, this phrase means: A message transmitted other than by
Seller through the Space System or any portion thereof entitling Buyer
to revenue.
J. Satellite Communication Link Interface Specification: The functional
specification prepared by Seller that defines the radio frequency
interface, logical and physical protocols and satellite functionality
necessary for satellite-to-satellite and satellite-to-system control
segment interoperability.
K. Satellite Subscriber Unit (Voice) Interface Specification: The
functional specification prepared by Seller that defines the radio
frequency interface, logical, and physical protocols necessary for
subscriber unit (voice, data, facsimile) interoperability with the
Space System. It does not include the Voice Encoding Algorithm
necessary for complete interoperability with the IRIDIUM Communication
System.
L. Space System Operations Plan: Documentation prepared by Seller which
details the operation of the Space System and the actions required to
retain its performance characteristics at the levels provided in the
Statement of Work. It also describes the operations of the entire
IRIDIUM Communications System.
M. Space System: This term refers to the integrated combination of the
Space Segment and System Control Segment.
N. Space Vehicles: The terms space vehicle, satellite, or spacecraft all
have the same meaning throughout this Contract and refer to the
individual or multiple satellites of the Constellation.
O. Subscriber Unit Segment: The Subscriber Unit Segment refers
collectively to the individual equipment units to be used by
subscribers and capable of initiating and receiving communications
through the IRIDIUM Communications System. These may include for
example hand-held portable units, aircraft units, marine units,
portable office units, and pay phone units. As used herein, this term
also includes paging units.
P. System Control Segment (SCS): This term refers to the various
ground-based sites, equipment, and facilities to manage and control
the individual space vehicles of the Constellation, and the
communication links of the IRIDIUM Communications System in accordance
with the performance levels specified in the Statement of Work,
Exhibit B. The System Control Segment is composed of a Master Control
Facility (MCF), and Backup Control Facility (BCF), and associated
Telemetry, Tracking and Command Facilities (TTAC's).
Page 3
<PAGE> 7
IRIDIUM Space System Contract
Q. Voice Encoding Algorithm: As this term is used in this Contract it
refers to the algorithm used to encode and decode analog voice to and
from compressed digital speech.
ARTICLE 2. DESCRIPTION OF WORK.
A. Seller shall design, develop, produce, and deliver in accordance with
the provisions of this Contract, (including all Exhibits) the
integrated Space System of the IRIDIUM Communication System consisting
of the Constellation and the System Control Segment. Seller shall
also deliver the Satellite Subscriber Unit (Voice) Interface
Specification and the Space System Operations Plan. The Satellite
Subscriber Unit (Voice) Interface Specification will be made available
by Seller and Buyer to the public after Milestone Number 37 is
completed.
B. Seller shall deliver the Gateway Interface Specification. Seller
agrees to develop and sell Gateways to third parties and to license to
responsible and competent suppliers acceptable to Seller, the rights
to use the information in the Gateway Interface Specification and the
Voice Encoding Algorithm to the extent essential to manufacture and
sell IRIDIUM Gateways, all pursuant to reasonable terms and conditions
mutually acceptable to Seller and such third parties. Seller also
agrees to license to responsible and competent suppliers named by
Buyer, the right to use the information in the Gateway Interface
Specification and Voice Encoding Algorithm to the extent essential to
manufacture and sell IRIDIUM Gateways solely for the next generation
IRIDIUM Communication System, pursuant to reasonable terms and
conditions mutually acceptable to Seller and such suppliers.
C. Seller shall deliver, the Paging Unit Interface Specification. Seller
agrees to develop and sell paging units to third parties and to
license to responsible and competent suppliers acceptable to Seller
the rights to use the information in the Paging Unit Interface
Specification to the extent essential to manufacture and sell IRIDIUM
Paging Units, all pursuant to reasonable terms and conditions mutually
acceptable to Seller and such third parties.
D. Seller shall deliver, the Mobile Exchange Unit (MXU) Interface
Specification. Seller agrees to develop and sell MXUs to third
parties and to license to responsible and competent suppliers
acceptable to Seller the rights to use the information in the MXU
Interface Specification and the Voice Encoding Algorithm to the extent
essential to manufacture and sell IRIDIUM MXU's, all pursuant to
reasonable terms and conditions mutually acceptable to Seller and such
third parties.
E. Seller agrees to develop and sell Subscriber Units (Voice) to third
parties and to license the rights to manufacture, sell and use the
Voice Encoding Algorithm to responsible and competent suppliers
acceptable to Seller to the extent essential to manufacture and sell
IRIDIUM Subscriber Units (Voice) all pursuant to reasonable terms and
conditions mutually acceptable to Seller and such suppliers.
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<PAGE> 8
IRIDIUM Space System Contract
F. Seller shall deliver the Satellite Communications Link Interface
Specification.
G. Buyer understands that the Interface Specifications for the Gateways,
Paging Unit, Mobile Exchange Unit and the Satellite Communications
Link are Seller's proprietary information to be used only as permitted
under ARTICLE 27, DISCLOSURE AND USE OF INFORMATION BY THE PARTIES,
and may not be disclosed without Seller's permission except to those
third parties licensed by Seller pursuant to this ARTICLE 2, or, upon
completion of this Contract, to those third parties selected by Buyer
for the purposes of obtaining a proposal for the delivery of IRIDIUM
Space System equipment or services to Buyer after the five year period
of the O&M Contract expires, provided, Buyer also permits Motorola the
opportunity to submit a proposal for such equipment or services.
ARTICLE 3. MILESTONE PERFORMANCE SCHEDULE.
A. Seller shall perform all work and deliver the Constellation, System
Control Segment, Space System Operations Plan, and the Satellite
Subscriber Unit (Voice) Interface Specification pursuant to the
milestone schedule in Exhibit A hereto.
B. Seller shall complete the Gateway, Paging Unit, MXU, and Satellite
Communication Link Interface Specifications under Paragraphs B, C, D
and F of ARTICLE 2, DESCRIPTION OF WORK, and make them available to
Buyer at Seller's Chandler, Arizona facility on or before the
scheduled completion date of the final milestone specified in Exhibit
A hereto.
C. The milestone schedule in Exhibit A is subject to adjustment as
provided in ARTICLE 11, EXCUSABLE DELAYS.
ARTICLE 4. PRICE.
A. For performance of this Contract, Buyer shall pay Seller the
$275,000,000 down payment and the applicable fixed milestone prices
(the "$ Amount Due" column) specified in Exhibit A subject to
adjustments in accordance with the provisions of this Contract. The
prices are stated in United States Dollars and cumulatively total
$3,450,000,000. See also ARTICLE 17, TAXES.
B. In the event Seller fails to either (1) complete Milestone 47, or be
deemed to have done so under ARTICLE 8, ACCEPTANCE CRITERIA, on or
before the final scheduled completion date of Milestone 47, or, (2)
satisfy or be deemed to have satisfied the Gateway Delivery Commitment
as provided by ARTICLE 6, GATEWAY DELIVERY COMMITMENT, on or before
the final scheduled completion date of Milestone 47, the final
milestone price of this contract totaling $150 million is subject to
reduction as provided below:
(i) For each day of the first ninety (90) days following the
final scheduled completion date of Milestone 47 that either
(1) Milestone 47 is not completed, or
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<PAGE> 9
IRIDIUM Space System Contract
is not deemed to have been completed under ARTICLE 8,
ACCEPTANCE CRITERIA, or, (2) the Gateway Delivery Commitment
as provided by ARTICLE 6, GATEWAY DELIVERY COMMITMENT, is not
satisfied or is not deemed to have been satisfied, the price
of Milestone 47 shall be reduced by $388,889 (for a potential
total price reduction of $35 million). To the extent,
however, that Seller has completed Milestone 47 but has only
partially satisfied the Gateway Delivery Commitment by the
final scheduled completion date of Milestone 47, the price
reduction associated with the Gateway Delivery Commitment
shall be prorated to daily amounts equal to the percentage of
the Gateway Delivery Commitment actually satisfied on a daily
basis compared to the total Gateway Delivery Commitment.
For example: If the Gateway Delivery Commitment is
equal to ten (10) Gateways, based upon actual
contracts signed in 1995; the final scheduled
completion date of Milestone 47 ends up as October
1, 1998; Milestone 47 is actually completed on
October 1, 1998; five (5) Gateways are delivered and
tested by October 1, 1998; three (3) additional
Gateways are delivered and tested on November 1,
1998; the two (2) other Gateways are delivered and
tested on February 1, 1999; and, if all of the
delays in the deliveries of the final five Gateways
after October 1, 1998 are attributed solely (i) to
Motorola's failure to exercise commercially
reasonable efforts under Paragraph C of Article 6,
or, (ii) to Motorola's inexcusable failure to timely
deliver and install those Gateways, then in such a
case, the price reduction allowable under this
paragraph would equal $10,616,669.70 ($388,889 x
5/10 = 194444.5; $194444.5 x 31 days = $6,027,779.5;
$388,889 x 2/10 = $77,777.8; $77,777.8 x 59 days =
$4,588,890.2; $6,027,779.5 + $4,588,890.2 =
$10,616,669.7).
(ii) For each complete thirty (30) days period beginning on the
ninety-first (91st) day following the final scheduled
completion date of Milestone 47 that Milestone 47 is not
completed, or is not deemed to have done so under ARTICLE 8,
ACCEPTANCE CRITERIA, the price of Milestone 47 shall be
reduced by $12,777,777 (for a potential total price reduction
of $115 million).
EXAMPLE: If the final scheduled completion date of
Milestone 47 ends up as October 1, 1998 but the
milestone is not completed until January 15, 1999
and none of the Gateways subject to the Gateway
Delivery Commitment are delivered and tested until
March 15, 1999, the $150 million price of Milestone
47 shall be reduced by $35 million to $115 million.
(Note: No price reduction beyond $35 million nor
any other remedy shall apply to Seller's failure to
satisfy the Gateway Delivery Commitment on or before
the final scheduled completion date of Milestone
47.)
BUYER AGREES THAT THE FOREGOING PRICE REDUCTIONS SHALL BE ITS
EXCLUSIVE REMEDY FOR DELAYS BY SELLER IN COMPLETING MILESTONE 47 OR
IN SATISFYING THE GATEWAY DELIVERY COMMITMENT EXCEPT THAT A DELAY IN
COMPLETING MILESTONE 47 IN EXCESS OF TWELVE (12)
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IRIDIUM Space System Contract
MONTHS BEYOND ITS SCHEDULED COMPLETION DATE, AS MAY BE ADJUSTED UNDER
THIS CONTRACT, SHALL PERMIT BUYER TO DECLARE SELLER IN DEFAULT UNDER
ARTICLE 23, DEFAULT BY SELLER, HEREIN.
ARTICLE 5. PAYMENT.
A. The down payment referred to in ARTICLE 4, PRICE, shall be paid by
Buyer to Seller in three increments in the amounts and on or before
the date specified by Exhibit A and without the necessity of any
invoice being submitted by Seller. The milestone prices referred to
in ARTICLE 4, PRICE, shall be paid by Buyer to Seller upon completion
of each milestone by Seller as provided in the Statement of Work,
Exhibit B. The milestone prices specified in Exhibit A shall in each
case be paid by Buyer to Seller within thirty (30) calendar days
following completion of each milestone and receipt of Seller's
invoice for these payments. Seller's invoice shall be accompanied by
a certification by Seller that such milestone has been completed in
accordance with this Contract. Payment to Seller shall be made by
cable/wire transfer to a banking institution as Seller designates or
by such other means as Seller may designate from time to time.
Notwithstanding the foregoing, Buyer may withhold the amount of
$5,000,000 from Buyer's payment of Milestone 47 under the Space
System Contract, and such amount shall become due and payable the
earlier of: (i) thirty (30) days after Buyer's receipt of an invoice
and certification that the activation of Release 3 functionality into
the IRIDIUM Communications System for commercial services has been
completed, which is scheduled for April 1999; or (ii) June 1, 1999.
B. In the event Seller completes a specific milestone prior to the
scheduled completion date in Exhibit A (as such dates may be adjusted
pursuant to the terms of this Contract), Buyer shall not be obligated
to make the payment associated with such milestone until thirty days
after such scheduled completion date.
C. In the event Seller fails to complete any milestone on or before the
scheduled completion date shown in Exhibit A (as such dates may be
adjusted pursuant to the terms of this Contract), Buyer shall be
relieved of its obligation to pay the applicable amount specified for
such milestone until such time as Seller completes or is deemed to
have completed such milestone. THIS SHALL CONSTITUTE BUYER'S
EXCLUSIVE RIGHT AND REMEDY FOR SELLER'S FAILURE TO COMPLETE ANY OR
ALL SUCH MILESTONES IN ACCORDANCE WITH THE SCHEDULE SHOWN IN EXHIBIT
A (AS SUCH DATES MAY BE ADJUSTED PURSUANT TO THE TERMS OF THIS
CONTRACT); PROVIDED, HOWEVER, THAT IF COMPLETION OF THE FINAL
MILESTONE IS DELAYED, BUYER SHALL HAVE THE ADDITIONAL RIGHTS AND
REMEDIES PROVIDED BY PARAGRAPH B OF ARTICLE 4, PRICE. SELLER'S
FAILURE TO TIMELY COMPLETE ANY MILESTONE SHALL NOT RELIEVE BUYER FROM
ITS OBLIGATION TO PAY FOR OTHER MILESTONES AS THEY ARE COMPLETED;
PROVIDED, HOWEVER, THAT UNTIL MILESTONE NUMBER 22 IS COMPLETED, BUYER
SHALL NOT BE OBLIGATED
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IRIDIUM Space System Contract
TO PAY FOR MILESTONES COMPLETED MORE THAN SIX (6) MONTHS AFTER THE
SCHEDULED COMPLETION DATE OF MILESTONE NUMBER 22.
D. In the event Seller does not satisfy the Gateway Delivery Commitment
obligation on or before the final scheduled completion date of
Milestone 47, Buyer agrees to promptly pay to the Seller upon
completion of Milestone 47 the amount due for the completion of
Milestone 47 which amount and the method and timing of its payment
shall be calculated in accordance with the provisions of this
contract (including Paragraph B of Article 4, and Paragraph A of this
Article 5 and Paragraph C of Article 8). Upon the earlier of
satisfaction of the Gateway Delivery Commitment, or 90 days after the
scheduled completion of Milestone 47, Buyer shall promptly pay to
Seller all of the balance of the price for Milestone 47 not
previously paid to Motorola less only amounts determined by applying
the reduction specified in Paragraph B(i) of ARTICLE 4, PRICE.
For example, under the same assumptions used in the example
following Paragraph B(i) of Article 4, Motorola would be
entitled to receive $132,500,000 on Oct. 1, 1998 and
$6,883,330.30 on December 29, 1999.
E. Buyer shall have the right to challenge the assertion of Seller that
any milestone has been completed in accordance with the Milestone
Acceptance Criteria by providing Seller with written notice to such
effect within 20 days following receipt of Seller's invoice. Such
notice shall summarize the reasons for such challenge and Seller
shall respond thereto in writing or orally within 5 days of receipt
of such challenge. Failure to resolve any dispute between Seller and
Buyer with respect to any such challenge shall be resolved in
accordance with ARTICLE 36, APPLICABLE LAW. Nothing herein shall be
construed to limit Buyer's rights under ARTICLE 23, DEFAULT BY
SELLER, nor Seller's rights under ARTICLE 24, DEFAULT BY BUYER.
ARTICLE 6. GATEWAY DELIVERY COMMITMENT
A. Subject to the provisions herein, Seller hereby agrees that no later
than September 23, 1998, it will have delivered, installed and
achieved Final Acceptance or Conditional Acceptance of thirteen
Gateway Equipment systems with Release 1, 2 and 3 services and
functional capabilities pursuant to the terms of Gateway Equipment
Purchase Agreements expected to be signed by Motorola and Gateway
Equipment purchasers and containing reasonable terms and conditions
mutually acceptable to Seller and such Gateway Equipment purchasers
and containing reasonable terms and conditions mutually acceptable to
Seller and such Gateway Equipment purchasers. The foregoing
agreement is referred to as the Gateway Delivery Commitment. This
Gateway Delivery Commitment is provided solely for the purpose
provided in Paragraph B of ARTICLE 4, PRICE. It may not be used for
any other purpose and Motorola shall not have any liability to any
third party for damages incurred by any such third party in the event
Motorola fails to satisfy such Gateway Delivery Commitment for any
reason whatsoever.
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IRIDIUM Space System Contract
B. The Gateway Delivery Commitment will be deemed to have been satisfied
for purposes of this Contract and specifically Paragraph B of ARTICLE
4, PRICE, on the date when the earliest of the following conditions
occurs:
1. when thirteen (13) Gateway Equipment systems have been
delivered, installed and achieved Final Acceptance for
Release 1, 2 and 3 services and functional capabilities.
2. when Conditional Acceptance occurs for thirteen (13) Gateway
Equipment systems pursuant to the terms of the Gateway
Equipment Purchase Agreements between Seller and Gateway
Equipment purchasers.
3. when the first Revenue Producing Communication Message is
transmitted through the Space System or any component
thereof.
C. The Gateway Delivery Commitment for thirteen (13) Gateway Equipment
systems is expressly conditioned upon:
1. at least ten (10) complete Gateway Equipment Purchase
Agreements being signed by both Motorola and ten (10) Gateway
Equipment purchasers on or before September 30, 1995 for the
delivery and installation of M030 or larger Gateway Equipment
systems with seven (7) of them scheduled to be installed no
later than April 30, 1998 and three (3) of them scheduled to
be installed no later than June 30, 1998; and,
2. at least three (3) more complete Gateway Equipment Purchase
Agreements being signed by both Motorola and three (3) more
Gateway Equipment purchasers on or before December 30, 1995
for the delivery and installation of M030 or larger Gateway
Equipment systems with all three of them scheduled to be
installed no later than September 30, 1998; and,
3. All thirteen Gateway Equipment systems must also each be
contracted for delivery to one of the following Gateway
Countries: Brazil, Cyprus or Canary Islands (Spain), China
(PRC), Germany, India, Indonesia, Italy, Japan, South Korea,
Russia, Taiwan (ROC), Thailand and the United States.
Motorola agrees to exert commercially reasonable efforts to negotiate
and conclude Gateway Purchase Agreements with Gateway purchasers by
the dates specified above. However, in the event Motorola exerted
its commercially reasonable efforts, but less than the ten (10) and
three (3) Gateway Equipment Purchase Agreements referred to above are
signed by both Motorola and Gateway Purchasers by the dates specified
above, the Gateway Delivery Commitment shall be reduced from the
thirteen (13), down by the number of such agreements which were not
so signed by Motorola and Gateway Equipment purchasers.
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IRIDIUM Space System Contract
Example: If seven Gateway Equipment Purchase Agreements are signed
by September 30, 1995 and an additional four are signed by December
30, 1995, the Gateway Delivery Commitment shall be reduced to ten
(10) Gateway Equipment systems assuming Seller exerted its
commercially reasonable efforts to conclude thirteen Gateway
Equipment Purchase agreements by the dates specified in C.1. and 2.,
above.
D. In the event the scheduled delivery date of any of the Gateway
Equipment systems covered by any of the thirteen Gateway Equipment
Purchase Agreements referred to in this ARTICLE 6, GATEWAY DELIVERY
COMMITMENT is changed to a date later than the applicable delivery
date specified in subparagraph C.1 or 2 herein for any reason other
than the default by Motorola, or its failure to exert its
commercially reasonable efforts, all such Gateway Equipment systems
shall be deemed to have been delivered, installed and successfully
tested through Release 1, 2 and 3 services and functional
capabilities and Conditional Acceptance for purposes of Paragraph B 1
and 2 above on the date that Milestone 47 is completed or is deemed
to have been completed.
E. In the event any of the thirteen Gateway Equipment Purchase
Agreements referred to in this ARTICLE 6, GATEWAY DELIVERY COMMITMENT
is terminated for any reason other than the default by Motorola, all
Gateway Equipment systems covered by such terminated Agreement(s)
shall be deemed to have been delivered, installed, and successfully
tested through Release 1, 2 and 3 services and functional
capabilities and Conditional Acceptance for purposes of Paragraphs B
1 and 2 above on the date that Milestone 47 is completed or is deemed
to have been completed.
F. Release 1, 2 and 3 for purposes of this Contract refer to those
specific services and functional capabilities which are defined in
the Terrestrial Network Development Contract (TNDC) between Seller
and Buyer.
ARTICLE 7. OPERATION OF SYSTEM CONTROL SEGMENT FACILITIES.
A. Notwithstanding the transfer to the Buyer of title and risk of loss
to each space vehicle of the Space Segment and each facility of the
System Control Segment, Seller shall be responsible for the
management and control of the Space System during the Initial
Operating Period. Both parties hereto recognize that Seller's
obligation to deliver the Space System necessarily requires that
Buyer permit Seller to maintain control and be permitted unrestricted
access to all of the Facilities of the System Control Segment during
the Initial Operating Period. The specific operations activities to
be performed by Seller are more fully described in the Statement of
Work, Exhibit B hereto. After the Initial Operating Period,
performance of such operations activities by Seller shall be pursuant
to the Operations and Maintenance Contract (see ARTICLE 30,
RELATIONSHIP WITH OTHER AGREEMENTS).
B. Buyer agrees that its failure to procure the insurance required by
ARTICLE 21, INSURANCE, or any other act or failure to act by Buyer
that delays or prevents
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IRIDIUM Space System Contract
Seller's access to and/or operation of such System Control
Facility(ies) shall entitle Seller to a prompt equitable adjustment
to the schedule and price of this Contract. In the event such delay
associated with Buyer's acts or failures to act cumulatively result
in a delay or series of delays in excess of six (6) months, Seller
may elect at its option to treat such situation as a default by Buyer
thereby permitting Seller to terminate this Contract pursuant to
ARTICLE 24, DEFAULT BY BUYER, herein.
ARTICLE 8. ACCEPTANCE CRITERIA.
A. Subject to Paragraph C below, acceptance of the Constellation and
System Control Segment described in ARTICLE 2, DESCRIPTION OF WORK,
shall be in accordance with the Acceptance Plan, Exhibit C hereto.
B. Subject to Paragraph C below, acceptance of the Satellite Subscriber
Unit (Voice) Interface Specification and Space System Operations Plan
described in ARTICLE 2, DESCRIPTION OF WORK, shall occur upon
delivery of each such document by Seller to Buyer at Seller's
Chandler, Arizona facility. Buyer shall promptly accept the items in
writing or shall notify the Seller in writing of those particulars in
which the items delivered do not meet the requirements of this
Contract. Buyer shall be deemed to have accepted such items thirty
(30) days after delivery by Seller unless Buyer provides before such
time written notice otherwise to Seller. In the event Buyer provides
Seller with written notice setting forth the particulars in which the
items delivered do not meet the requirements of this Contract, upon
establishment by Seller and completion of a reasonable corrective
action plan acceptable to Buyer, the item involved shall be deemed to
have been delivered and finally accepted.
C. Notwithstanding Seller's inability to demonstrate compliance with the
criteria of the Statement of Work specified by Section 4 of the
Acceptance Plan, if Buyer chooses to use or permit others to use the
Space System after the scheduled completion date of Milestone Number
47, the date of the first Revenue Producing Communication Message
transmitted through the Space System or any component thereof shall
be deemed the date of completion and acceptance by Buyer of all items
required to be delivered by Seller under this Contract. The final
milestone price shall be adjusted by reducing it first to account for
any schedule delay as provided by Paragraph B of ARTICLE 4, PRICE.
The remaining balance, if any, shall be promptly paid to Seller after
adjustment to account for the deficiencies of the Space System using
Table 8.1.
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IRIDIUM Space System Contract
Table 8.1
- --------------------------------------------------------------------------------
Downward adjustment to remaining balance of final milestone price shall be
based upon a calculated quarterly Average Actual Service Provided percentage
(AASP) value of less than 98% in either or both of the coverage or capacity
factors:
<TABLE>
<CAPTION>
Calculated AASP Calculated AASP Percent
Coverage Factor Capacity Factor Reduction
- --------------- --------------- ---------
<S> <C> <C>
97% Minimum 70% Minimum 1%
96% Minimum 70% Minimum 2%
95% Minimum 70% Minimum 3%
94% Minimum 60% Minimum 8%
93% Minimum 60% Minimum 13%
92% Minimum 60% Minimum 18%
91% Minimum 50% Minimum 28%
90% Minimum 50% Minimum 38%
89% Minimum 50% Minimum 48%
88% Minimum 40% Minimum 58%
87% Minimum 40% Minimum 68%
86% Minimum 40% Minimum 78%
85% Minimum 30% minimum 88%
84% Minimum 30% Minimum 98%
83% Minimum 30% Minimum 100%
and below and below
- --------------------------------------------------------------------------------
</TABLE>
For example if the AASP coverage factor is calculated to be 93.1% and the AASP
capacity factor is calculated to be 58.1%, the remaining balance of the final
milestone price after accounting for the schedule delay, if any, shall be
reduced by 28%.
ARTICLE 9. TITLE TRANSFER.
Unless otherwise stated herein, the following shall apply:
A. Title and risk of loss or damage to each individual space vehicle of
the Constellation shall pass to Buyer upon the arrival of each space
vehicle at its designated orbital location in the Constellation.
B. Title and risk of loss or damage to each facility of the System
Control Segment shall pass to Buyer upon the earlier of (1) when
Seller demonstrates to Buyer successful completion of each SCS
Facility's Acceptance Plan as specified in Exhibit C hereto or (2)
completion of Milestones 40 and 41 respectively.
C. Title to the Space System Operations Plan described in ARTICLE 2,
STATEMENT OF WORK, shall pass to Buyer upon delivery of such item from
Seller to Buyer at Seller's Arizona facility or other facility
designated by Seller upon completion of Milestone Number 15.
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IRIDIUM Space System Contract
D. Title to the Gateway, Paging Unit, Mobile Exchange Unit and Satellite
Communication Link Interface Specifications shall remain with Seller
and shall not be transferred to Buyer under this Contract.
E. To the extent successful and timely completion of any milestone of
this Contract is affected by the loss of or damage to any item(s) due
to the acts of third parties (including space debris) after title and
risk of loss has transferred to Buyer as provided above, Buyer shall
afford Seller an equitable adjustment to the price and schedule of
this Contract to account for the time and costs associated with
Seller's correction, repair or replacement of such item(s). The
prices and payment provisions for the replacement of space vehicles of
the Constellation that are lost or damaged by the acts of third
parties (including space debris) shall be the same as specified in the
Operation and Maintenance Contract referred to in ARTICLE 30,
RELATIONSHIP WITH OTHER AGREEMENTS.
F. Subject to the license granted to Buyer under Article 14, title to the
Satellite Subscriber Unit (Voice) Interface Specification shall remain
with Seller. However, both parties may release such document to third
parties.
ARTICLE 10. CHANGES.
Changes to this Contract may be made only by mutual agreement of the parties
hereto. Such changes shall be evidenced by a written agreement executed by
authorized representatives of both parties. No change shall be binding on
either party unless and until such written document is fully executed by both
parties.
ARTICLE 11. EXCUSABLE DELAYS.
A. Without limiting any other provision specifying what constitutes an
excusable delay under this Contract, any event which causes a failure
or delay to perform hereunder, and in every case is beyond the
reasonable control and without the fault or negligence of Seller and
its subcontractors hereunder shall constitute an excusable delay, if
notice thereof is given to Buyer within thirty (30) days after such
event shall have occurred. Such excusable delay events include but
are not limited to acts of God or of the public enemy; acts of
governments in their sovereign or contractual capacity, including
government priorities, allocations, regulations or orders affecting
materials, facilities, or completed spacecraft; fires; floods;
snowstorms; earthquakes; epidemics; quarantine restrictions; strikes;
labor difficulties; wars and freight embargoes. Delays in launches of
Spacecraft caused by the actions or inactions of Seller's launch
service subcontractors directly pursuant to their subcontracts with
Seller shall not constitute excusable delays hereunder. All other
delays in launches of Spacecraft arising for whatever reason not
caused by Seller shall constitute excusable delays hereunder. Such
excusable delays include but are not limited to delays in the
launch(es) of Seller's spacecraft due to delays of any other
launch(es) (i.e. not for this Contract) preceding any of Seller's
scheduled launch(es) whether or
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IRIDIUM Space System Contract
not caused by the actions or inactions of Seller's launch service
subcontractors relating to such preceding launches.
B. In the event of any such excusable delay, the performance schedule
shall be extended equitably and the price shall be adjusted to account
for any additional costs incurred by Seller as a result of such delay.
Seller has the burden to prove an event constitutes an excusable
delay. Seller shall provide Buyer with evidence supporting Seller's
claim of excusable delay and shall exert its best efforts to mitigate
such additional costs or schedule impact to the extent reasonable.
ARTICLE 12. BUYER'S ACCESS.
For the purpose of observing the status and quality of Seller's performance of
work, Seller shall afford a limited number of Buyer's employees, or, designees
as approved by Seller, subject to ARTICLE 22, EXPORT REGULATIONS, access to
Contract activities including design reviews, systems and subsystems testing,
program management reviews, test reviews and failure reviews at the Seller's
and its first-tier subcontractor's facilities on a non-interference basis.
Seller's approval of designees requested by Buyer shall not be unreasonably
withheld; provided, however, that such approval may be withheld if Seller or
its first-tier Subcontractor(s) have reasonable concerns as to the protection
of their proprietary information or potential injury to their competitive
market position(s).
ARTICLE 13. PROGRESS MEETINGS.
A. Meetings and Presentations. During the performance of this Contract,
Seller shall conduct Quarterly Summary Executive Reviews at which
Seller shall provide a review of the milestones completed subsequent
to the preceding quarterly review, status of the upcoming milestone
and such other matters as may be mutually agreed upon by the parties.
The parties may mutually agree to conduct additional interim meetings
or reviews from time to time such as a monthly Program Manager's
Review with a mutually acceptable agenda. Buyer shall determine its
appropriate management personnel to attend such meetings. Seller
shall be represented by its General Manager or a designee thereof and
such other personnel as are specifically required to support the
particular presentation. All periodic meetings shall be held at
Seller's facility.
B. Distribution of Reports. Copies of viewgraphs or other documents
utilized during these meetings shall be furnished or be made available
to Buyer. All materials, reports, and documentation furnished
pursuant to this Article shall remain the property of Seller and shall
be subject to the limitations set forth in ARTICLE 27, DISCLOSURE AND
USE OF INFORMATION BY THE PARTIES.
ARTICLE 14. INTELLECTUAL PROPERTY RIGHTS.
A. Except for computer programs and related documentation which are
covered by Paragraph C below, unless this Contract is terminated
pursuant to ARTICLE 24,
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IRIDIUM Space System Contract
DEFAULT BY BUYER, or ARTICLE 25, TERMINATION FOR CONVENIENCE, Buyer
shall have an unlimited right to use, duplicate, and disclose the
information contained in the Satellite Subscriber Unit (Voice)
Interface Specification and Space System Operations Plan furnished
pursuant to ARTICLE 2, DESCRIPTION OF WORK, of this Contract; however,
if any written material furnished as part of said documentation is
copyrighted, Buyer shall have an unlimited right to make copies of
such copyrighted material and to use such copies for any Buyer purpose
without payment of additional compensation to Seller only to the
extent that Seller has the authority to grant such right. In the
event Seller does not have such right, Seller will use its best
reasonable efforts to obtain such rights for Buyer. In the event that
the obtaining of such rights involve the payment of a fee, Buyer shall
reimburse Seller for said fee.
B. Except for the data listed in Paragraph A above, and the license
described in Paragraph E below, all data, including without
limitation, manufacturing processes technology, and any other
information relating to terrestrial cellular networks or components,
that are or may be delivered or disclosed by Seller to Buyer shall be
subject to ARTICLE 27, DISCLOSURE AND USE OF INFORMATION BY THE
PARTIES and Buyer acquires no rights, title or interest in such
intellectual property or other intellectual property associated with
the design of the Space System except as is provided under this
ARTICLE 14E or otherwise may be negotiated in other license agreements
between Seller and Buyer pursuant to reasonable terms and conditions
mutually acceptable to Seller and Buyer.
C. To the extent computer software and documentation delivered under the
Contract is proprietary to either Seller or its licensor, such items
shall be provided as proprietary information under ARTICLE 27,
DISCLOSURE AND USE OF INFORMATION BY THE PARTIES. Notwithstanding any
other provisions of this Contract, the ownership and title to
copyrights in computer programs and related documentation that may be
delivered to Buyer by Seller in accordance with the Contract shall
remain in Seller or Seller's licensor.
1. To the extent that Seller has the right to do so, Seller shall
grant to Buyer, with respect to software and related
documentation delivered in written or magnetic or optical form
under the Contract as part of the System Control Segment
facilities, a paid-up, non-exclusive, non-transferable license
with respect to such software and documentation, to:
a. use or have used on Buyer's behalf solely for the
operation and maintenance of Buyer's IRIDIUM Space System
supplied by Seller and direct replacements thereto
whether manufactured by Seller or not; and
b. make one or more back-up copies for retention in a secure
area in case a working copy is destroyed or damaged, the
number of back-up copies to be consistent with generally
accepted and prudent data processing archive procedures,
not to exceed six (6) such copies.
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IRIDIUM Space System Contract
2. Buyer has no right to copy or have copied or modify software that is
(a) not supplied in written form or on optical or magnetic media, or
(b) not supplied as a part of the System Control Segment equipment, or
(c) embedded as firmware in any equipment delivered by Seller.
3. Buyer's license set forth in paragraph C.1.a. shall become effective
on completion of the Operations and Maintenance (O & M) Contract by
Seller. Buyer's license under Paragraph C.1.b. shall become effective
upon completion of this Space System Contract.
D. Seller agrees to promptly assign to Buyer all Seller's right, title and
interest in the word "IRIDIUM(R)" as a tradename, trademark and service
mark in all forms used by Seller. Seller will execute such documents as
requested by Buyer to effect such assignment. Buyer shall thereafter
assume responsibility for registration and perfection of such tradename and
trademarks and assignments, and Seller will cooperate with buyer to that
end. Seller may thereafter use such marks on Seller's goods and services
only with Buyer's written permission.
E. In order to permit Buyer to engage in competitive bidding for future
additions to or replacement of the Space System and its parts after its
delivery by the Seller, and for future operation and maintenance of the
Space System beyond completion of the initial Operations and Maintenance
(O & M) Contract by Seller, Seller and Buyer agree as follows:
1. Subject to the other provisions of this ARTICLE 14, Seller agrees to
grant Buyer a non-exclusive right and license to use, make and
have-made equipment comprising the Space System of the IRIDIUM
Communications System and its subsequent evolutions, under the then
current versions of the Satellite Communications Link, Gateway, MXU,
and Paging Unit Interface Specifications and Seller's patents
essential to utilize these Interface Specifications in the Space
System and subsequent evolutions thereof. Such license shall be
irrevocable except for events of default by Buyer under this Space
System Contract or the O & M Contract. Such license shall become
effective upon completion of this Space System Contract for purposes
of obtaining quotations from other vendors and for purposes of
obtaining delivery of such equipment upon completion of the O & M
Contract.
2. Subject to the other provisions of this ARTICLE 14, Seller agrees to
grant Buyer a non-exclusive right and license to have-used services
for operating the Space System of the IRIDIUM Communications System
and its subsequent evolutions, under the then current versions of the
Satellite Communications Link, Gateway, MXU, and Paging Unit Interface
Specifications and Seller's patents essential to utilize these
Interface Specifications in the Space System and subsequent evolutions
thereof. Such license shall be irrevocable except for events of
default by Buyer under this
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IRIDIUM Space System Contract
Space System Contract or the O & M Contract. Such license shall
become effective for purposes of obtaining quotations from other
service vendors one year prior to completion of the O & M Contract,
and for purposes of obtaining delivery of such services upon
completion of the O & M Contract.
3. Buyer is free to exercise the make or have-made and use or have used
rights granted in paragraphs E.1 and E.2 above and select its own
vendors therefore, provided that:
a. Buyer also permits Seller the opportunity to submit a proposal
for such equipment or services on at least an equal footing
with all other prospective vendors for the same equipment or
services.
b. In the event that a vendor chosen by Buyer has intellectual
property rights that would prevent Seller from effectively
competing for the sale of IRIDIUM equipment and services, if
Seller requests, Buyer agrees to require such vendor, as a
condition of the acceptability of its proposal, to extend a
license to Seller on reasonable terms and conditions under
vendor's intellectual property essential to such effective
competition by Seller, to enable Seller to make, have made,
use, have used, sell, lease or otherwise provide any IRIDIUM
equipment and services, to users thereof, including ground and
space.
c. Buyer shall pay Seller a royalty of six (6) percent of the
final price paid by Buyer for replacements to or evolutions of
the Space System or its individual components, excluding the
reasonable cost of launch services if any included in such
price, and less the reasonable value of any licenses obtained
by Buyer for Seller under this Section E.4.3.
d. Buyer agrees not to engage vendors for Space System equipment
or services under this ARTICLE 14 whose governments have not
licensed or allowed operation of the IRIDIUM System in their
own countries or have not granted frequency allocations
required for such operation.
4. The Parties intend and will exert their best reasonable efforts to
enter into a mutually acceptable license agreement consistent with the
terms described herein prior to completion of this Space System
Contract.
ARTICLE 15. PATENT INDEMNITY.
A. Subject to the limitations contained or referred to herein, Seller will
defend at its own expense, any claim, suit or proceeding brought against
Buyer on account of the Space System or any part thereof supplied by Seller
to Buyer under this Contract, FOR INFRINGEMENT OF ANY VALID AND ENFORCEABLE
PATENT IN ANY COUNTRY OF THE WORLD WHERE AN IRIDIUM SERVICE PROVIDER HAS
BEEN AUTHORIZED TO PROVIDE IRIDIUM SERVICES by an Authorized Gateway
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IRIDIUM Space System Contract
Operator, and, to the extent required, licenses by the government of
such country to provide IRIDIUM services. In responding to such
claim, suit or proceeding Seller shall have the option of settling or
resolving such claim, suit, or proceeding by any one or more of the
following:
1. procuring for Buyer the right under such patent to use,
lease, or sell, as appropriate, the Space System or
infringing part thereof; or,
2. replacing the Space System or infringing part thereof; or,
3. modifying the Space System or part thereof so as not to
infringe; or,
4. paying any settlement or any final judgment entered by a
court of competent jurisdiction against Buyer on such
infringement defended by Seller.
B. Buyer agrees that Seller shall be relieved of the foregoing
obligations unless Buyer notifies Seller promptly in writing of any
such claim, suit or proceeding, and at Seller's expense, cooperates
with and gives Seller complete information and assistance to
mitigate, settle and/or defend any such claim, suit or proceeding.
In the event that the actual liability of Seller as a consequence of
a claim, suit or proceeding or a combination of claims, suits or
proceedings in a particular country exceeds ten percent (10%) of the
actual income derived by Buyer from operation of the IRIDIUM
Communication System in such country, then Buyer shall cooperate with
Seller to mitigate Seller's liability, including either terminating
service in such country or releasing Seller from any obligation for
liability for patent infringement in such country in excess of the
aforesaid percentage of Buyer's income in such country.
C. Seller shall have no liability for any infringement arising from:
1. the combination of the Space System or any part thereof with
any other product or service not furnished by Seller; or
2. the modification of the Space System or any part thereof
unless such modification was made by Seller; or
3. a patent of a country not included in Section A of this
Article 15.
D. Subject to all the provisions of this Article 15, PATENT INDEMNITY,
Seller's entire liability hereunder, including liability for
attorney's fees, costs, adverse judgements and other compliance with
the provisions hereof, shall be limited to the amount Buyer paid
Seller for the particular items found to infringe. Furthermore,
Seller's entire liability under this Article 15 shall be subject to
the overall limitation of liability under Article 26, LIMITATION OF
LIABILITY.
E. Seller shall not be liable for any costs or expense incurred pursuant
to this Article without Seller's written authorizations. SELLER
SHALL IN NO EVENT BE LIABLE FOR LOSS OF USE OR FOR INCIDENTAL,
SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT OR
IN TORT OR UNDER ANY OTHER CAUSE OF ACTION. THE FOREGOING STATES THE
ENTIRE WARRANTY BY SELLER AND THE EXCLUSIVE REMEDY OF BUYER, WITH
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IRIDIUM Space System Contract
RESPECT TO ANY ALLEGED PATENT INFRINGEMENT BY THE SPACE SYSTEM OR ANY
PART THEREOF OR ANY OTHER PRODUCT DELIVERED BY SELLER TO BUYER UNDER
THIS CONTRACT.
F. Buyer shall indemnify, defend and hold Seller harmless against any
expense, judgement, or loss for infringement of any patents,
copyrights or trademarks which results from Seller's compliance with
Buyer's designs, specifications, or instructions.
G. Except as specifically provided by ARTICLE 14, INTELLECTUAL PROPERTY
RIGHTS, and any other written agreements between the parties, no
sale, or lease hereunder shall convey any license by implication,
estoppel, or otherwise to Buyer, under any proprietary rights,
copyrights, or patents rights of Seller.
ARTICLE 16. WARRANTY.
A. Seller warrants that immediately upon completion of this Contract but
not thereafter, the Space System shall comply with the requirements
specified in the Acceptance Plan, Exhibit C. This warranty, however,
terminates in the event Buyer uses or permits others to use the Space
System or any component thereof prior to completion of this Contract.
B. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER STATUTORY,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ALL OF WHICH ARE
EXPRESSLY EXCLUDED. SELLER SHALL HAVE NO OTHER LIABILITY, WHETHER IN
CONTRACT, TORT, NEGLIGENCE, OR OTHERWISE, INCLUDING WITHOUT
LIMITATION, ANY LIABILITY FOR SPECIAL, INCIDENTAL, INDIRECT, OR
CONSEQUENTIAL DAMAGES, OR FOR BUYER'S COST OF EFFECTING COVER, OR FOR
FAILURE OR NONPERFORMANCE OF PROPERTY OR FOR LOST PROFIT OR REVENUE.
ARTICLE 17. TAXES.
A. The price of this Contract referred to in ARTICLE 4, PRICE, includes
all transportation and related charges and all applicable taxes,
duties and similar liabilities whatsoever for delivery of all items
to a destination in the continental United States, except any tax on
the sale to Buyer of any item delivered hereunder. Buyer will
reimburse Seller for any such sales, use tax or duty drawback claim
Seller is required by law to pay.
B. If requested by the other party, the Seller and Buyer will cooperate
with each other in contesting and/or protesting those taxes which
either party reasonably deems inappropriate. In return for such
cooperation, the Seller and Buyer agree to indemnify each other
against and hold each other harmless from any such tax that the other
party is responsible to pay under Paragraph A above, and from any
costs,
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IRIDIUM Space System Contract
expenses, penalties or fees (including reasonable attorney's fees)
which either party incurs in cooperating with the other.
ARTICLE 18. PERMITS AND LICENSES.
A. Seller or one of its wholly-owned subsidiaries shall apply for and
use its reasonable best efforts to obtain all permits, licenses and
approvals required by the United States Federal Communications
Commission (FCC) or by any applicable U.S. law or regulation, as well
as all necessary orbital locations and radio frequency spectrum, to
construct, launch and operate the Space Segment and to construct and
operate the System Control Segment. Specifically, Seller or one of
its wholly-owned subsidiaries shall apply to and use its reasonable
best efforts to obtain from the FCC a construction permit(s) to build
the Space Segment and at least one of the System Control Segment
facilities within the United States. In the event such permit to
construct all of the spacecraft and System Control Segment facilities
is not issued by the FCC or other authorized Government entity
acceptable to Buyer (whether U.S. or foreign) to Seller or its
wholly-owned subsidiary on or before December 1, 1994, such situation
shall be treated as an excusable delay under ARTICLE 11, EXCUSABLE
DELAYS, and the price only of this Contract shall be adjusted
accordingly for costs incurred by Seller after December 1, 1994 as a
result of failure to obtain such permit. In the event such permit to
construct all of the spacecraft and System Control Segment Facilities
is not issued by the FCC or other authorized Government entity
acceptable to Buyer (whether U.S. or foreign) to Seller or its
wholly-owned subsidiary on or before January 1, 1995, such situation
shall be treated as an excusable delay under ARTICLE 11, EXCUSABLE
DELAYS, and the price and schedule of this Contract shall be adjusted
accordingly for costs incurred by Seller after December 1, 1994 and
for schedule delays incurred by Seller after January 1, 1995 as a
result of failure to obtain such permit. Seller or one of its
wholly-owned subsidiaries also shall apply for and use its reasonable
best efforts to obtain from the FCC a license(s) to launch and
operate the Space System within the United States and between the
United States and international points. If such license to launch
and operate is not issued to Seller or its wholly-owned subsidiary by
February 1, 1996, such situation shall be treated as an excusable
delay under ARTICLE 11, EXCUSABLE DELAYS, and the price and schedule
of this Contract shall be adjusted accordingly. Seller shall exert
its best reasonable efforts to mitigate the impact of any such
excusable delays by attempting to obtain a waiver, alternate license
(i.e., an experimental license) or undertaking other actions as
determined appropriate in Seller's discretion.
B. Seller shall use its reasonable best efforts to coordinate within the
United States and on a worldwide basis the effective use by the Space
System of the necessary frequency spectrum and orbital locations.
C. Seller shall use it reasonable best efforts to defend and maintain
all of the aforementioned approvals, permits, and licenses for the
Space System and System Control Segment in accordance with their
respective terms and conditions, and to
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IRIDIUM Space System Contract
operate the Space System and System Control Segment in accordance
with all applicable laws and government regulations. In the event a
wholly-owned subsidiary of Seller is issued the FCC Operating License
contemplated in Paragraph A above, Seller agrees to maintain its
complete ownership of such wholly-owned subsidiary until such time as
such FCC license is transferred to Seller, a third party approved by
Buyer and the FCC, or to Buyer pursuant to Paragraph H below.
D. Seller shall pay for its costs of applying for, obtaining and
renewing the aforementioned approvals, licenses and permits. Buyer
agrees to reimburse Seller for all of its other expenses associated
with the aforementioned approvals, licenses, permits, and allocations,
including but not limited to Seller's costs of defending against
challenges by third parties, and for coordinating within the United
States and on a worldwide basis the effective use by the Space System
of the necessary frequency spectrum.
E. Seller agrees to keep Buyer fully informed on a timely basis of
material events relating to the operational and performance status of
the Space System, and any communications relating the aforementioned
approvals, licenses, permits and allocations. Specifically, Seller
shall use its reasonable best efforts to furnish to Buyer the
following promptly after their receipt by or issuance from Seller:
All communication to or from any regulatory authority, national,
foreign or international, which relate to or affect the Space System
or any approvals, licenses, permits or allocations associated
therewith.
F. Buyer agrees not to take any action or enter into any agreement or
arrangement with a third party that conflicts with Seller's rights
and obligations under this Contract, or to act or fail to act in any
manner which would interfere with Seller's aforementioned
responsibilities.
G. Notwithstanding any other provision in this Contract, Seller shall at
all times retain full responsibility for, and all control of the
Space System and all components thereof, including but not limited to
the System Control Segment and any other facilities or stations
licensed by the FCC.
Furthermore, nothing contained herein shall be interpreted as
requiring Seller to apply for or obtain the blanket mobile licenses
to operate subscriber units not the authorizations necessary to
operate gateways in the United States or any other country. Although
Seller or one of its subsidiaries may apply to become a gateway
operator or service provider for the United States, such action and
the obtaining of necessary FCC licenses to provide such service,
shall be accommodated via separate agreements with Buyer as
appropriate.
H. Seller agrees that, upon request of Buyer, if the written opinion of
Seller's legal counsel concludes that Buyer is lawfully qualified to
hold the approvals, permits and licenses to construct, launch and
operate the Space System obtained by Seller
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IRIDIUM Space System Contract
pursuant to Paragraph A above, Seller will use its best reasonable
efforts to promptly apply for and obtain appropriate authorization
from the FCC to transfer such approvals, permits and licenses,
including any pending applications therefore, at no cost to Buyer
except for the costs that may result from FCC implementation of an
auction approach to issuing such permits, licenses, or approvals.
Neither the appliction to transfer nor the issuance of any license to
Buyer pursuant thereto shall affect the rights and obligations of the
parties hereto except the obligations of Seller as provided by
Paragraphs A, B, and C above, which shall also completely transfer to
Buyer upon transfer of such approvals, permits and licenses to Buyer.
In the event the FCC adopts an auction approach to issuing any of the
permits, licenses or approvals contemplated by this Article, Seller
and Buyer agree to negotiate in good faith a mutually acceptable
arrangement with respect to such auctions.
ARTICLE 19. CROSS WAIVER OF LIABILITY.
A. In the event the U.S. Commercial Space Launch Act of 1984, as
amended, is applicable to the launch of spacecraft of the
Constellation, to the extent required thereunder and by any launch
service provider licensed thereunder, both parties agree to make no
claims against the other, the contractors and subcontractors of the
other at any tier (including suppliers of any kind), the officers,
directors, agents, servants, and employees of the other, or any of
them, with respect to injury to or death of either party's employees
involved in, or damaged to either party's property in connection with
all licensed activities relating to launches of space vehicles of the
Constellation, except as provided by ARTICLE 20, INDEMNIFICATION.
Both parties further agree to cause all of their respective
contractors and subcontractors at any tier (including suppliers of
any kind) to make no such claims.
B. Both parties hereby waive and shall cause their contractors and
subcontractors at any tier (including suppliers of any kind) to waive
any cause of action in tort against the U.S. government, its agents,
employees, contractors, and subcontractors to the extent required by
the U.S. government, and agree to furnish appropriate waivers and
releases as may be required to implement this Article in connection
with the use of U.S. government launch facilities, equipment, or
required launch support services.
C. In the event Seller conducts any launch of space vehicles not subject
to the U.S. Commercial Space Launch Act both parties agree to accede
to any waiver of claims as may be required pursuant to applicable law
or as required by any launch service provider. Seller agrees to keep
Buyer informed as to the status of negotiations with such launch
service providers with respect to any such waiver of claims
provisions that are proposed by launch service providers not subject
to the U.S. Commercial Space Launch Act. Seller further agrees to
use its best reasonable efforts to negotiate such waiver of claims
provisions so that they are not any broader than the waivers required
by the U.S. Commercial Space Launch Act.
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IRIDIUM Space System Contract
ARTICLE 20. INDEMNIFICATION.
A. Buyer shall indemnify and hold harmless Seller, its directors,
officers, agents, subsidiaries, servants, and employees from any
liabilities, losses and damages including costs, expenses and damages
incurred by Seller in connection with any and all claims by third
parties caused by or arising out of the development, operation or use
of any part of the Space System after passage of title thereto to
Buyer in accordance with ARTICLE 9, TITLE TRANSFER, except any such
third party liabilities, losses and damages that are caused by the
gross negligence or willful misconduct of Seller. The foregoing
indemnification shall only apply to the extent such liabilities,
losses and damages exceed the amounts paid by Seller's launch service
providers, any governmental indemnification, and the insurance
obtained by Buyer as provider by ARTICLE 21, INSURANCE.
B. Seller shall not be liable to Buyer, customers of Buyer or their
customers for any damages resulting from any loss, destruction,
degradation or failure of the Space System or its subsystems to
operate satisfactorily. Buyer agrees to enter into suitable
agreements with its customers to effect the foregoing limitation of
Seller's liability and agrees to indemnify and hold harmless Seller,
its directors, officers, agents, subsidiaries, servants, contractors
and employees against the unenforceability of any such limitation or
Owner's customer's failure to secure such limitation of liability
provisions in agreements with their customers.
C. Each party shall indemnify the other for and hold it harmless from
any liability, loss or damage suffered by the other party resulting
from the failure of such party to comply with its obligations under
this Contract to waive or to cause its contractors and subcontractors
at any tier (including suppliers of any kind) to make no claims under
this Contract.
ARTICLE 21. INSURANCE.
A. Seller shall procure and maintain during performance of this Contract
Worker's Compensation Insurance covering all employees of Seller
performing any work hereunder in statutory amounts; provided,
however, that Seller may maintain self-insurance program in lieu of
Worker's Compensation Insurance if authorized and qualified to do so
pursuant to statutory authority.
B. Buyer shall procure and maintain during performance of this Contract,
at its sole cost and expense, comprehensive general liability
insurance in an amount no less than $500,000,000 (U.S.) covering
Buyer's indemnification obligations under ARTICLE 20,
INDEMNIFICATION, on such terms and conditions and with such insurers
acceptable to Seller, and, which insurance shall name Seller, its
contractors and subcontractors as additional insureds. Buyer shall
furnish Seller with a waiver of its insurance carrier's rights of
subrogation, and, with respect to the insurance obligations under
this Article, such insurance shall also provide that the insurers
shall give thirty (30) days notice to Seller prior to the effective
date of cancellation or
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IRIDIUM Space System Contract
termination of such insurance. To the extent insurance is provided
for Seller's benefit by its launch service provider (s), in
connection with any third party liability arising from provision of
the launch services, Seller agrees to use its best efforts to add
Buyer as an additional insured to such insurance, and in such event,
the insurance provided herein will be secondary coverage to the
extent such insurance from Seller's launch service providers (s) and
any indemnification provided by the U.S. Government, any other
Government, and any launch service provider covers the same third
party liability risks.
ARTICLE 22. EXPORT REGULATIONS.
Neither party shall export, directly or indirectly, any information or
technical data disclosed under this Contract to any individual or country which
the U.S. government at the time of export requires an export license or other
government approval without first obtaining such license or approval. The
parties recognize that Buyer may be comprised of individuals or entities for
which Buyer must ensure no disclosure of technical data unless and until Buyer
obtains appropriate export licenses from the U.S. Government.
ARTICLE 23. DEFAULT BY SELLER.
A. Buyer may, by written notice of default sent by registered letter to
Seller, terminate this Contract for cause upon the occurrence of any
of the following circumstances:
1. if Seller fails to make delivery and complete this Contract
within twelve (12) months of the scheduled completion date of
the final milestone (as may be adjusted under this Contract);
or,
2. if Seller fails to complete Milestone Number 22 within twelve
(12) months of its scheduled completion date (as may be
adjusted under this Contract); or,
3. if Seller fails to perform any of the other material
provisions of this Contract or fails to timely complete one
or more of the milestones so as to prevent completion of the
Final Milestone of this Contract within twelve (12) months of
the scheduled date (as may be adjusted under this Contract)
in accordance with its terms as established by clear and
convincing evidence, and in either of these two circumstances
does not act to commence correction of such failure within a
period of thirty (30) days (or such longer period as Buyer
may authorize in writing) after receipt of notice from Buyer
specifying such failure.
B. If this Contract is terminated as provided in this Article, Seller
shall:
1. at Buyer's expense, deliver to Buyer all hardware, drawings
and other technical data associated with the Space System
developed as part of the performance of the completed
milestones of the Contract along with appropriate
intellectual property licenses to the intellectual property
embodied in such hardware, drawings and other technical data
to use, make and have made such items to the extent it is
permitted to do so by third parties. The licenses to be
granted shall exclude intellectual property rights associated
with all manufacturing
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IRIDIUM Space System Contract
process technology, ISU's, MXU's, Gateways and any
terrestrial cellular networks and components; and
2. at Buyer's expense, protect and preserve property in the
possession of Seller in which Buyer has an interest; and,
3. be paid the Contract price for all completed milestones; and,
4. subject to ARTICLE 26, LIMITATION OF LIABILITY, pay to Buyer
all reasonable costs to have this Contract completed by
another responsible contractor, to the extent such costs
exceed the total amount which Buyer would have had to pay
Seller for this Contract had Seller completed the Contract as
required; provided, however, that Buyer enters into a
Contract with a responsible contractor to complete the
terminated effort within one (1) year of notification of
termination for default.
5. if Seller has not transferred the approvals, permits, and
licenses as provided in Paragraph H of ARTICLE 18, PERMITS
AND LICENSES, the Seller will continue to operate the System
Control Segment Facilities, if completed, (but, not to
replace space vehicles in the Constellation or upgrade the
hardware or software of the System Control Segment) to permit
Buyer time to obtain a successor operator for a period not to
exceed thirty (30) days at no cost to Buyer. Buyer and
Seller may agree to extend this thirty day period at a price
and on such terms as are mutually acceptable to the parties.
C. NOTWITHSTANDING ANY PROVISION IN THIS CONTRACT TO THE CONTRARY THE
REMEDIES SET FORTH IN THIS ARTICLE SHALL BE THE SOLE RECOURSE TO
WHICH BUYER IS ENTITLED IN THE EVENT OF SELLER'S DEFAULT (I.E.
BREACH), AND SELLER SHALL HAVE NO LIABILITY FOR SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS OR LOST
REVENUES.
D. If, after the Buyer gives Seller notice of default it is determined
for any reason that the Seller was not in default under the
provisions of this Article, or that the delay was excusable under the
provisions of ARTICLE 11, EXCUSABLE DELAYS, the rights and
obligations of the parties shall be the same as if Buyer defaulted in
the performance of its obligations under this Contract as provided by
ARTICLE 24, DEFAULT BY BUYER.
ARTICLE 24. DEFAULT BY BUYER.
A. Seller may, by written notice of default sent by registered letter to
Buyer, terminate this Contract for cause upon the occurrence of any
of the following circumstances:
1. if Buyer fails to make timely payments as required by Exhibit
A and Article 5 herein and does not make any such required
payment within five (5) days after notice from Seller; or,
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IRIDIUM Space System Contract
2. if Buyer fails to perform any other obligation which it is
required to perform pursuant to this Contract and Buyer does
not act to commence correction of such failure within (30)
days after notice of such failure is received from Seller.
B. If this Contract is terminated pursuant to this Article, Buyer shall:
1. pay to Seller, the full amounts of anticipated and reasonable
profits Seller could have earned had it been permitted to
complete this Contract; and,
2. assign to Seller all licenses of Buyer to use frequency
allocations in any country to the fullest extent permitted by
law; and,
3. return to Seller all documentation and technical data
previously delivered to Buyer by Seller; and,
4. pay to Seller the portion of the prices for all partially
completed milestones based upon actual work performed by
Seller towards completion of such milestones; and,
5. pay to Seller all of Seller's cost of stopping the work under
the Contract including its costs or terminating subcontracts
and purchase commitments; and,
6. immediately pay to Seller all payments for milestones
completed on or before the date of such default by Buyer as
provided by Exhibit A.
C. THE REMEDIES SET FORTH IN THIS ARTICLE SHALL BE THE SOLE RECOURSE TO
WHICH SELLER IS ENTITLED IN THE EVENT OF BUYER'S DEFAULT, AND EXCEPT
AS PROVIDED ABOVE, BUYER SHALL HAVE NO LIABILITY FOR SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS OR
LOST REVENUES.
ARTICLE 25. TERMINATION FOR CONVENIENCE.
A. Except as specifically provided by this Article, this Contract may
not be terminated by either party for its own convenience and without
cause. Terminations for Cause shall be governed by ARTICLE 23,
DEFAULT BY SELLER and ARTICLE 24, DEFAULT BY BUYER above.
B. Buyer may terminate this Contract at any time without reason or cause
by providing written notice of such termination to Seller. In the
event Buyer issues such a termination notification to Seller, this
Contract shall terminate effective upon receipt of such notice by
Seller. Upon such termination, the parties shall have the follow
rights and responsibilities and shall undertake to discharge them in
a prompt manner:
1. Seller's Rights and Responsibilities:
a. Seller shall be entitled to received, from Buyer:
full payment for all milestones completed on or
prior to the effective date of such termination;
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IRIDIUM Space System Contract
the portion of the prices for all partially
completed milestones based upon the actual work
performed toward completion of such milestones
through the effective date of such termination;
Seller's costs of stopping all work under this
Contract including its costs of terminating all
subcontracts and purchase commitments; and, a fair
and reasonable profit based upon the foregoing
items. Buyer shall pay Seller such amounts within
thirty (30) days after receipt of Seller's invoice
therefor.
b. Seller shall be relieved of all other obligations
contained in this Contract except for its obligation
to not use or disclose Buyer's proprietary
information except in accordance with ARTICLE 27,
DISCLOSURE AND USE OF INFORMATION BY PARTIES.
2. Buyer's Rights and Responsibilities:
a. Buyer shall pay Seller: the full payment for all
milestones completed on or prior to the effective
date of such termination; the portion of the prices
for all partially completed milestones based upon
the actual work performed toward completion of such
milestones through the effective date of such
termination; Seller's costs of stopping all work
under this Contract including its costs or
terminating all subcontracts and purchase
commitments; and, a fair and reasonable profit based
upon the foregoing items. Buyer shall pay seller
such amounts within thirty (30) days after receipt
of Seller's invoice (s) therefor.
b. Buyer shall be relieved of all other obligations
contained in this Contract except for its obligation
to not disclose or use the Seller's proprietary
information except in accordance with ARTICLE 27,
DISCLOSURE AND USE OF INFORMATION BY PARTIES.
ARTICLE 26. LIMITATION OF LIABILITY.
A. IN NO EVENT SHALL SELLER BE LIABLE, WHETHER IN CONTRACT, TORT OR
OTHERWISE, FOR SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFIT OR REVENUES.
B. FURTHERMORE, IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL SELLER BE
LIABLE TO BUYER IN AN AMOUNT IN EXCESS OF $100,000,000 (U.S.) FOR ANY
AND ALL COSTS, DAMAGES, CLAIMS OR LOSSES WHATSOEVER ARISING OUT OF OR
RELATED TO THIS CONTRACT OR ANY OTHER CONTRACT REFERRED TO IN ARTICLE
30 HEREOF OR EXECUTED BETWEEN BUYER AND SELLER IN CONNECTION WITH THE
IRIDIUM COMMUNICATIONS SYSTEM, OR ANY PROVISION HEREUNDER OR
THEREUNDER WHETHER PURSUED AS A BREACH (I.E. DEFAULT) OF THE CONTRACT
OR AS A TORT OR OTHER CAUSE OF ACTION AND WHETHER ACCRUING BEFORE OR
AFTER COMPLETION OF ALL THE WORK REQUIRED TO BE PERFORMED UNDER THIS
CONTRACT.
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IRIDIUM Space System Contract
ARTICLE 27. DISCLOSURE AND USE OF INFORMATION BY THE PARTIES.
A. "Proprietary Information" is defined as information which the
disclosing party at the time of disclosure identifies in writing as
Proprietary Information by means of a proprietary legend, marking,
stamp or other positive written notice identifying the information to
be proprietary. In order for information disclosed orally or
visually by a party to this Contract to be Proprietary Information
protected hereunder, the disclosing party shall identify the
information as proprietary at the time of the disclosure and, within
thirty (30) days after such oral or visual disclosure, reduce the
subject matter of the disclosure to writing, properly stamped with
the proprietary legend, marking, stamp or other positive written
notice and submit it to the receiving party.
B. Except as may be specifically provided otherwise in this Contract,
Proprietary Information of Seller disclosed hereunder to Buyer may
only be used by Buyer for monitoring the progress of the performance
of this Contract by Seller.
C. Except as may be specifically provided otherwise in this Contract,
Proprietary Information of Buyer disclosed hereunder to Seller may
only be used by Seller in performance of the work specified in this
Contract.
D. It is agreed that for a period of ten (10) years following the
receipt of Proprietary Information, the receiving party will use such
information only for the purpose(s) provided in Paragraphs B and C
above as applicable and shall take reasonable efforts to preserve in
confidence such Proprietary Information and prevent disclosure
thereof to third parties. Each of the parties agree that it will use
the same reasonable efforts to protect the other's Proprietary
Information as are used to protect its own but will at least use
reasonable care. Disclosures of such information shall be restricted
to those individuals directly participating in the efforts provided
in Paragraphs B and C above who have a need to know such information,
and, who have been made aware of and consent to abide by the
restrictions contained herein concerning the use of such information.
E. The obligation to protect Proprietary Information, and the liability
for unauthorized disclosure or use of Proprietary Information, shall
not apply with respect to such information which is now available or
becomes available to the public without breach of this Contract;
information lawfully received without restrictions from other
sources; information known to the receiving party prior to disclosure
not subject to a separate non-disclosure obligation; information
published or disclosed by the disclosing party to others, without
restriction; information developed by the receiving party independent
of and without use of the information disclosed by the disclosing
party; or, information for which further use of disclosure by the
recipient is authorized in writing by the disclosing party; or
information required to be disclosed to any persons involved in
insuring risks hereunder.
ARTICLE 28. PUBLIC RELEASE OF INFORMATION.
Except as otherwise provided by ARTICLE 27, DISCLOSURE AND USE OF INFORMATION
BY THE PARTIES, during the term of this Contract, either party, its
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IRIDIUM Space System Contract
affiliates, subcontractors, employees, agents and consultants may release items
of publicity of any kind, including, without limitation, news releases,
articles, brochures, advertisements, prepared speeches, external company
reports or other information releases, related to the work performed hereunder,
including the denial or confirmation thereof. Each party shall provide a copy
of such publicity items to the other and shall endeavor to provide such copies
prior to their actual release to the public. Notwithstanding the foregoing,
however, neither party may disclose the specific terms and conditions of this
Contract without the prior approval of the other party except for such
disclosures required by law or as a part of the Private Placement Memorandum
issuance.
ARTICLE 29. ASSIGNMENT.
Neither party shall assign or delegate this Contract or any of its rights,
duties, or obligations thereunder to any other person without the prior express
written approval of the other party except that Buyer agrees that Seller may
assign this Contract to any subsidiary or successor corporation of Seller.
Nothing contained in this Article shall restrict Seller from subcontracting
work or procuring parts/materials or services in the ordinary course of
performance of this Contract; nor shall it restrict Buyer from assigning any
right, title or interest it may have in any items delivered by Seller
hereunder, solely to secure financing for the IRIDIUM Communications System.
ARTICLE 30. RELATIONSHIP WITH OTHER AGREEMENTS.
The following agreements executed simultaneously on or after this Contract
relate to the effort described herein. The rights and responsibilities of the
parties within each of these related agreements is set forth within each such
separate and independent agreement.
A. OPERATIONS AND MAINTENANCE CONTRACT: The Operations and Maintenance
Contract (O&M Contract) covers the operation and maintenance of the
entire IRIDIUM Space System and the network management associated
with the gateways. The five (5) year period contemplated by the O&M
Contract begins immediately upon completion of this IRIDIUM Space
System Contract. Generally the work required includes the
replacement of individual spacecraft of the Constellation as
necessary to maintain the performance and reliability levels
specified for the Space System. This Contract, however, does not
include the development, sale, operation or maintenance of the
gateways themselves.
B. ENGINEERING ASSISTANCE AGREEMENT: This contract is intended to
provide engineering assistance and other services by Seller to Buyer
in excess of the effort included in the scope of the O&M Agreement
and this Space System Contract. Such services could include the
system engineering design assistance in evaluating the utility of an
enhanced design for the second or replacement Space System.
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IRIDIUM Space System Contract
ARTICLE 31. SALE OF OTHER SYSTEMS
Subject to Buyer's complete and timely performance of all of its obligations
hereunder, Seller agrees not to produce for itself or others a similar
satellite-based space system of a global communication system for commercial
use without Buyer's prior written approval. This obligation shall cease as of
July 31, 2003 or the termination date of this contract, whichever is earlier.
This obligation, however, shall not be construed to prohibit Seller from
designing, developing, or selling a similar space-based non-global commercial
system, a non-commercial communications system, a commercial non-communication
system, nor a space-based communication system to the United States or other
governmental body in any country for military or defense communication
purposes, nor individual spacecraft for any purpose.
ARTICLE 32. NOTICES.
All correspondence, including notices, reports and documentation deliverables,
to be provided to Buyer or Seller under this Contract shall be sent to Buyer or
Seller as follows:
<TABLE>
<S> <C> <C> <C>
Buyer: Iridium LLC Seller: Motorola, Inc.
Address: 1401 H Street N.W. Address: 2501 S. Price Rd.
Suite 800 Chandler, AZ 85248
Washington, DC 20005
Attn: Robert R. Call Attn: Walter R. Rhodes
Director, Commercial Director, Contractual
Relations Alliances
Satellite Communications
M/D/G1214
Phone: (202) 362-5648 Phone: (602) 732-2634
FAX: (202) 842-0006 FAX: (602) 732-2542
</TABLE>
ARTICLE 33. AUTHORIZED REPRESENTATIVES.
The only representatives of Buyer and Seller authorized to make changes to this
Contract and to sign contractual documents are:
Buyer: Seller:
Edward F. Staiano Durrell L. Hillis
F. Thomas Tuttle Bary Bertiger
Mark Borota
Either party may change its aforementioned representatives at any time by
providing written notice to the other party.
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IRIDIUM Space System Contract
ARTICLE 34. EXHIBITS.
The following Exhibits are attached hereto and hereby incorporated as part of
this Contract by reference as if fully set forth within this Contract:
Exhibit A - Milestone Performance and Payment Schedules
Exhibit B - Statement of Work
Exhibit C - Acceptance Plan
ARTICLE 35. ORDER OF PRECEDENCE.
In the event of any inconsistency among or between the parts of this Contract,
such inconsistency shall be resolved by giving precedence in the order of the
parts as set forth below:
1. Contract Articles
2. Milestone Performance and Payment Schedules (Exhibit A)
3. Acceptance Plan (Exhibit C)
4. Statement of Work (Exhibit B)
5. Other contracts or documents referred to in any of the preceding
parts of this Contract.
ARTICLE 36. APPLICABLE LAW.
This Contract and any dispute arising under or in connection with this
Contract, including any action in tort, shall be construed in accordance with
and governed by the laws of the State of Arizona except for its choice of laws
rules. Venue for any dispute not resolved by the parties shall be in Arizona
except for its choice of laws rules.
Seller and Buyer will attempt to settle any claim or controversy arising out of
it through consultation and negotiation in good faith and a spirit of mutual
cooperation. If those attempts fail, then the dispute will be mediated by a
mutually-acceptable mediator to be chosen by Seller and Buyer within forty-five
(45) days after written notice by one of us demanding mediation. Neither party
may unreasonably withhold consent to the selection of a mediator, and Seller
and Buyer will share the costs of the mediation equally. By mutual agreement,
however, the parties may postpone mediation until they have each completed some
specified but limited discovery about the dispute. The parties may also agree
to replace mediation with some other form of alternative dispute resolution
(ADR), such as neutral fact-finding or a minitrial.
Any dispute which is not resolved by the parties through negotiation, mediation
or other form of ADR within six (6) months of the date of the initial demand
for it by either party, may then be submitted to the courts within Arizona for
resolution. The use of any ADR procedures will not be construed under the
doctrines of laches, waiver or estoppel to affect
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IRIDIUM Space System Contract
adversely the rights of either party. And nothing in this section will prevent
either party from resorting to judicial proceedings if (a) good faith efforts
to resolve the dispute under these procedures have been unsuccessful or (b)
interim relief from a court is necessary to prevent serious and irreparable
injury to one party or to others.
ARTICLE 37. ENTIRE AGREEMENT.
This Contract constitutes the entire agreement between the parties and
supersedes all prior understandings, commitments, and representations with
respect to the subject matter including the IRIDIUM Space System Contract
signed by the parties on September 11, 1991 which is now null and void. This
Contract may not be amended or modified except as provided by ARTICLE 10,
CHANGES; nor may it be terminated except as provied by ARTICLE 23 OR 24; and
none of its provisions may be waived, except by a writing signed by an
authorized representative of the party against which the waiver is sought to be
enforced. The paragraph headings herein shall not be considered in
interpreting the text of this Contract. In the event any part of this Contract
is declared legally invalid or unenforceable by an authorized judicial body,
such part of this Contract shall be ineffective to the extent of such
invalidity or unenforceability and shall not affect the remaining provisions of
this Contract unless such declaration affects ARTICLE 20, INDEMNIFICATION, or
ARTICLE 26, LIMITATION OF LIABILITY. In such case, this Contract shall be
declared terminated as of the date of such judicial decision and the parties
shall have only the following rights and responsibilities:
1. Seller's Rights and Responsibilities:
a. Seller shall be entitled to have received all payments for
completed milestones due in accordance with Exhibit A, as of
the termination date; and,
b. Seller shall be relieved of all other obligations contained
in this Contract except for its obligation to not use or
disclose Seller's proprietary information except in
accordance with ARTICLE 27, DISCLOSURE AND USE OF INFORMATION
BY PARTIES.
2. Buyer's Rights and Responsibilities:
a. Buyer shall pay Seller all payments for completed milestones
in accordance with the Payment Schedule as of the termination
date, but shall be relieved of any further payment
obligations under this Contract after the termination date;
and,
b. Buyer shall be relieved of all other obligations contained in
this Contract except for its obligation to not use or diclose
Seller's proprietary information except in accordance with
ARTICLE 27, DISCLOSURE AND USE OF INFORMATION BY PARTIES.
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IRIDIUM Space System Contract
ARTICLE 38. EFFECTIVE DATE.
The term Effective Date of this Contract (EDC), as used in this Contract shall
mean the 29th day of July, 1993.
IN WITNESS WHEREOF, the parties hereto have executed this Contract consisting
of this and the preceding 32 pages and the Exhibits referenced therein.
MOTOROLA, INC. IRIDIUM LLC
- -------------- -----------
By: /s/ BARRY BERTIGER By: /s/ JERROLD D. ADAMS
------------------------------- ------------------------------
Name: Barry Bertiger Name: Jerrold D. Adams
----------------------------- ----------------------------
Corporate Vice President President and Chief
Title: and General Manager Title: Operating Officer
---------------------------- ---------------------------
Date: Date:
----------------------------- -----------------------------
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IRIDIUM Space System Contract
EXHIBIT A
<TABLE>
<CAPTION>
Milestone Scheduled $ Amount Due
Number Description* Completion Date** (U.S. Dollars)
- -------- ------------ ----------------- ------------------
<S> <C> <C> <C>
N/A Down Payment (1st increment) 07/29/93 $ 75,000,000
--------------
N/A Down Payment (2nd increment) 09/29/93 $ 100,000,000
--------------
N/A Down Payment (3rd increment) 11/29/93 $ 100,000,000
--------------
1 Main Mission Antenna PDR (5.1) 01/29/94 $ 20,000,000
--------------
2 Communications Module PDR (5.2) 02/28/94 $ 20,000,000
--------------
3 Space Vehicle Manufacturing Plan 03/29/94 $ 20,000,000
(5.3) --------------
4 Earth Terminal SCS PDR (5.4) 04/29/94 $ 20,000,000
--------------
5 Earth Terminal Controller SCS PDR (5.5) 05/29/94 $ 20,000,000
--------------
6 System Control Segment PDR (5.6) 07/29/94 $ 21,000,000
--------------
7 Earth Terminal SCS CDR (5.7) 08/29/94 $ 50,000,000
--------------
8 Earth Terminal Controller SCS CDR (5.8) 09/29/94 $ 50,000,000
--------------
9 Communications Module CDR (5.9) 10/29/94 $ 50,000,000
--------------
10 System Control Segment CDR (5.10) 11/29/94 $ 50,000,000
--------------
11 Main Mission Antenna CDR (5.11) 12/29/94 $ 50,000,000
--------------
12 Space System CDR (5.12) 01/29/95 $ 65,000,000
--------------
13 SCC Construction Complete (5.13) 02/28/95 $ 70,000,000
--------------
14 Space Vehicle Test Plan (5.14) 03/29/95 $ 80,000,000
--------------
15 Space System Ops Plan (5.15) 04/29/95 $ 80,000,000
--------------
16 Main Mission Antenna Qual Model Test 05/29/95 $ 87,000,000
(5.16) --------------
17 Space Vehicle Bus Qual Test Complete 07/29/95 $ 80,000,000
(5.17) --------------
</TABLE>
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IRIDIUM Space System Contract
<TABLE>
<CAPTION>
Milestone Scheduled $ Amount Due
Number Description* Completion Date** (U.S. Dollars)
- -------- ------------ ----------------- ------------------
<S> <C> <C> <C>
18 Space Vehicle Qual Model Assembly Complete 08/29/95 $ 80,000,000
(5.18) --------------
19 Space System DT&E Test Readiness Review 10/29/95 $ 80,000,000
(5.19) --------------
20 Space Vehicle Supplier PRR (5.20) 11/29/95 $ 90,000,000
--------------
21 SCC Ready For OT&E Test (5.21) 12/29/95 $ 90,000,000
--------------
22 Space Vehicle Qual Test (5.22) 01/29/96 $ 90,000,000
--------------
23 TTAC West Construction Complete (5.23) 02/29/96 $ 90,000,000
--------------
24 Space System Multiple SV DT&E Test Report 05/29/96 $ 106,000,000
(5.24) --------------
25 SCC and TTAC Integration & Test (OTE) 07/29/96 $ 100,000,000
Complete (5.25) --------------
26 SCC and TTAC Ready To Support First Launch 09/29/96 $ 100,000,000
(5.26) --------------
27 Preliminary Satellite Subscriber Unit 10/29/95 $ 0
Interface Specification (5.27) --------------
28 Space System OT&E Test Readiness Review 11/29/96 $ 100,000,000
(5.28) --------------
29 ATP Procedures (5.29) 12/29/96 $ 100,000,000
--------------
30 Initial Launch (5.30) 01/29/97 $ 100,000,000
--------------
31 Initial Launch Test Data Report (5.31) 03/29/97 $ 100,000,000
--------------
32 Step I of Table 3.7.1 (5.32) 04/29/97 $ 75,000,000
--------------
33 Final Test Report (Launch #1) (5.33) 05/29/97 $ 82,000,000
--------------
34 Step II of Table 3.7.1 (5.34) 07/29/97 $ 75,000,000
--------------
35 Step III of Table 3.7.1 (5.35) 08/29/97 $ 70,000,000
--------------
</TABLE>
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IRIDIUM Space System Contract
<TABLE>
<CAPTION>
Milestone Scheduled $ Amount Due
Number Description* Completion Date** (U.S. Dollars)
- -------- ------------ ----------------- ------------------
<S> <C> <C> <C>
36 MCF Construction Complete (5.36) 09/29/97 $ 50,000,000
--------------
37 Satellite Subscriber Unit Interface 10/29/96 $ 150,000,000
Specification (5.37) --------------
38 Space Node Test Report (5.38) 11/29/97 $ 25,000,000
--------------
39 Step IV of Table 3.7.1 (5.39) 12/29/97 $ 75,000,000
--------------
40 BCF Integration & Test Complete (5.40) 01/29/98 $ 25,000,000
--------------
41 MCF Integration & Test Complete (5.41) 02/28/98 $ 25,000,000
--------------
42 Step V of Table 3.7.1 (5.42) 03/29/98 $ 75,000,000
--------------
43 BCF Fully Operational (5.43) 05/29/98 $ 44,000,000
--------------
44 Step VI of Table 3.7.1 (5.44) 06/29/98 $ 75,000,000
--------------
45 SCS Fully Operational (5.45) 07/29/98 $ 45,000,000
--------------
46 Step VII of Table 3.7.1 (5.46) 08/29/98 $ 75,000,000
--------------
47 Completion of Test Plan (FOC) (5.47) 09/23/98 $ 150,000,000
--------------
</TABLE>
* Except as specified otherwise, the paragraph referenced in parenthesis beside
the description of each milestone refers to the applicable provision of the
Statement of Work, Exhibit B.
** The dates shown in the column titled "Scheduled Completion Date" are those
dates as of the Effective Date of this Contract and are subject to adjustment
as provided by ARTICLE 11, EXCUSABLE DELAYS, of the Contract.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
1.0 SCOPE
This Statement of Work (SOW) describes the specific effort associated with
the Space System Contract. This effort includes only the following items:
1) Design, Development, Production, Construction, and all work necessary
to Deliver the Space System as described in the Milestones specified
in Section 5 of this SOW. The specifications for the Design of the
Constellation are provided in Section 3 of this SOW. The
specifications for the Design of the System Control Segment are
provided in Section 4 of this SOW.
2) Development and Delivery of the Space Systems Operations Plan that
will define the plan for the operation and control of the IRIDIUM
Communications System.
3) Design, Development, and Delivery of the Satellite Subscriber Unit
(Voice) Interface Specification; and design, development, and
availability of the Mobile Exchange Unit (MXU) Interface
Specification, Gateway Interface Specification, and Paging Unit
Interface Specification.
4) Operation of the Space System in accordance with the Space System
Operations Plan. Concurrently, seller will begin collecting data for
and reporting Average Actual Service Provided as described in
Statement of Work Exhibit B, Section 6 commencing 90 days prior to
anticipated Full Operational Capability (FOC) or at a mutually agreed
upon date.
To the extent the Space System Contract specifications require the Space
System to have the capability of a specific performance characteristic
unless the specifications provide a specific magnitude of capability, the
Seller's determination of the magnitude of the Space System's capability of
such performance characteristic shall be conclusive and final.
To facilitate the reader's understanding of the requirements presented in
this document, explanatory notes are provided where appropriate. These
notes are not requirements, but are intended to provide additional
information and/or background rationale. Such data is presented in an
italic type font.
2.0 GENERAL
The IRIDIUM Space System is a constellation of satellites and its
associated control elements primarily intended to provide commercial,
mobile voice and subscriber data service via IRIDIUM Subscriber Units to
subscribers throughout the world. It is composed of a Space Segment and a
System Control Segment (SCS). The Space System provides IRIDIUM services
in conjunction with a Gateway Segment and a Subscriber Unit Segment which
are specified elsewhere.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
The Space System provides a worldwide communications service for voice and
subscriber data between any two IRIDIUM Subscriber Units (ISUs) as well as
between any IRIDIUM Subscriber Unit and a local PTT (Postal, Telegraph and
Telephone) customer.
This worldwide personal communications service is designed to support
portable, low power subscriber units through the use of a constellation of
small satellites in low earth polar orbits. The satellites are networked
together to form a system which provides continuous line-of-sight (LOS)
communications between the IRIDIUM System and any point within
approximately 30 km of the earth's surface.
The Space System is composed of the Constellation of satellites, the system
control facilities, and the communications links which interconnect these
elements. Additionally, Gateways operated by private owners play a vital
role in the provision of communications services to subscribers.
To support service between ISUs and local PTT customers the Gateways
provide the interface with the Public Switched Telephone Networks (PSTN) of
the host countries PTTs. Each ISU is recorded in a home location register
which maintains its last known location and registration/service records
used for subscriber validation prior to placement of a call. This Gateway
interfaces with the ISU's billing service. The Gateway also contains a
visitor location register which maintains a record of all ISUs currently in
its service area regardless of where they are registered. Subject to
possible government restrictions, an ISU may be carried and used to
communicate anywhere in the world.
IRIDIUM Space Vehicles will be launched by Expendable Launch Vehicles
(ELV). During launch operations, status of both the Launch Vehicle and the
Space Vehicle(s) are monitored by the launch control facility. The Launch
Vehicle will place the Space Vehicle in a parking orbit, in which the SV
deploys its solar panels and antennas.
Following the Space Vehicle's separation from the Launch Vehicle, control
of the Space Vehicle will be handed over to the SCS. After computing the
transfer maneuvers required to move the Space Vehicle from the actual
parking orbit attained to its mission orbit, the SCS will generate and
transmit the commands which will implement the maneuvers.
The SCS monitors and controls all elements of the Space System. It
receives and processes health and status telemetry data from all IRIDIUM
Space Vehicles, status data from each Gateway, and call loading data for
each node and link in the Network.
The SCS has a communications link with the launch control facility to
obtain the data necessary to initially acquire the SV. The SCS monitors
the Space Vehicle as it leaves its parking orbit and acquires its mission
orbit. Until the Space Vehicle is fully operational, communications with
the Space Vehicle will utilize a secondary communications subsystem rather
than the primary feeder links. Once the Space Vehicle has completed the
deployment sequence, the feeder links between it and the Gateways and other
Space Vehicles may be established.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
Prior to turning the Space Vehicle over for the IRIDIUM Mission Operations,
a full set of on orbit tests are run to validate operational readiness.
These tests exercise all systems required for successful operation of the
Space Vehicle and all functions used in Mission Operations. The SCS will
provide the command functions required for maintaining control of the
IRIDIUM Constellation.
When a Space Vehicle is no longer able to support mission operations,
either because it has reached the end of its expendables or because of
equipment degradation/failure, it will be commanded to de-boost by the SCS
and the Constellation reconstituted with a replacement Space Vehicle. In
the case where all normal communications have failed, the SV secondary
communications subsystem will be used to safely de-boost the Space Vehicle
using a stored command sequence which is initiated by the SCS.
The command and control of the Space System is driven by two operations
planning functions: on-line routine traffic loading projections to identify
potential problems and off-line predictions of "what-if" responses to
perturbations. The on-line planning routinely projects performance forward
in time, notifying operators when potential problems are foreseen. The
off-line planning tools are used by network operators to choose the best
times to perform required reconfigurations and design automatic system
responses to unanticipated failures. The SCS will also have analysis tools
which allow operators to design and execute reconfiguration commands to
mitigate or eliminate anticipated future problems and to analyze the impact
of expanded capacity and/or increased capability.
An ISU-to-ISU call is used as an example to describe the process of placing
an IRIDIUM call. In this example, ISU 1 (which is already registered)
calls ISU 2 and both units are initially in the STANDBY Mode, i.e., they
have both reported their current location to the System and are ready to
send or receive a call. ISU 1 is at its registered location, "Home", on a
private island in the Caribbean while ISU 2 is a portable unit currently
away from its London "Home" on a ranch in the Andean foothills of
Argentina. Although locations have been assumed for purposes of this
example, both units could be located anywhere on the earth's surface either
in or out of their Home areas and there would be no difference in the
scenario described.
To initiate the call, Subscriber 1 enters ISU 2's IRIDIUM phone number via
the ISU's key pad and presses "send" to access the network. ISU 1 then
automatically uploads its own phone and registration numbers as well as the
number being called. The Space Vehicle sends the information received from
ISU 1 to its home Gateway. This Gateway is the controlling Gateway for the
call. The Gateway determines that the called party is an ISU and uses its
visitor location register to validate ISU registration. In contacting the
England Gateway, it determines that ISU 2's registration is valid and that
its last known location is in Argentina. Since both units' registrations
were successfully validated, call placement continues. ISU 2's last known
location is relayed via the network to the controlling Gateway which
determines the initial destination. A ring alert is sent to ISU 2. When
ISU 2 is answered, an acknowledgement signal is sent through the network,
the channel is totally engaged and the conversation occurs, i.e., the call
enters a "steady state" mode. When the call is disconnected, the caller,
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
destination, and start and stop times of the call are relayed (call image)
by the controlling Gateway to both home location registers and output by
their respective Gateways to the appropriate billing entity. The call is
also included in the billing summary sent by the Servicing Gateway to the
SCS.
If the called ISU is not near its last known location, that is, it does not
respond to the ring-alert at its last known location, a limited area
ring-alert is performed. If there is still no response, a message is
transmitted to the calling party informing them that the called party has
not responded.
The procedure is basically the same if a PTT customer is at one end of the
call instead of an ISU, but involves the Gateway servicing that PTT.
Because the IRIDIUM antenna beams projected onto the earth by the Space
Vehicles in the IRIDIUM Constellation move rapidly relative to the
subscribers, calls may be handed off from antenna beam-to-antenna beam and
from SV-to-SV during a call. Handoff is transparent to the subscribers at
both ends of the call and may be performed several times during a normal
call.
2.2 FUNCTIONAL DESCRIPTION
The Space System consists of the Constellation, or Space Segment and its
associated control element, the System Control Segment. There are also
Gateway and Subscriber segments being developed to support the Space
System. Each segment is briefly described in the following sections.
2.2.1 SPACE SEGMENT
The IRIDIUM Space Segment is defined to be multiple units of a
satellite design which will populate the IRIDIUM Constellation. Each
Space Vehicle is a network node orbiting the earth in a circular
polar orbit. Each SV is a three-axis stabilized satellite which
integrates the structure and subsystems required to perform IRIDIUM
space-based communications routing and control functions, maintain
Space Vehicle operations and provide communications service for the
ISUs.
Each Space Vehicle includes a nadir pointing subscriber-link main
mission antenna subsystem, feeder-link Gateway/SCS and crosslink
antenna subsystems, a secondary, omni-directional, communications
subsystem and associated communications electronics. The main
mission antenna (MMA) communicates directly with the ISUs. The
Gateway/SCS and crosslink antennas of each Space Vehicle provide the
capability to communicate with Gateway/SCS facilities within its
field of view and neighboring Space Vehicles, respectively.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
2.2.2 GATEWAY SEGMENT
Each gateway is defined to be a node in the network. The
Gateway Segment is defined to be the collection of gateway nodes. A
gateway communicates with ISUs, other gateways and the SCS via the
Constellation and is the System's interface to the local PSTN.
Secondarily, it communicates with the SCS via existing commercial
communications links.
The gateway determines the initial routing cues for all calls
originating in the local PTTs that it services and by ISUs, home or
visiting, which it is currently servicing. Each gateway maintains
call detail records and registration information for all ISUs
assigned to it, i.e., for all ISUs contained in its home location
register. For each call involving one of its assigned ISUs, it
either directly verifies ISU registration or sends registration
information to the Gateway controlling the call, and it records all
pertinent call detail data. It supplies this data to the appropriate
billing office and summary data to the SCS.
Each gateway has a minimum of two antennas; one operates with the
Space Vehicle with which it is currently communicating, while the
other establishes the link to the next Space Vehicle with which it
will communicate.
2.2.3 SYSTEM CONTROL SEGMENT
The System Control Segment is defined to consist of a Master Control
Facility, a Backup Control Facility, and Telemetry, Tracking and
Command (TTAC) sites. The SCS monitors, manages and controls all
elements of the Space System. The primary linkage between the SCS,
the Constellation, and gateways is via the feeder link network. A
secondary linkage to each gateway exists via existing commercial
communication links. The SCS tests all network links and
reconfigures the network as necessary. The SCS components will be
placed in geographic locations determined appropriate by Motorola. As
of the effective date of this contract, Motorola plans to locate the
MCF in the United States and the BCF in Italy subject to all
necessary governmental authorizations and acceptable contract
negotiation results. During initial deployment of the Constellation
and until necessary components of the SCS become operational, the
functions of the MCF will be performed by the SATCOM Control Center
(SCC).
The SCS receives each SV's telemetry and provides the commands
required for maintaining control of the Constellation. The SCS
monitors and manages each gateway's health and status, receives
reports from the gateways, and provides data to the gateways to
support operations. The SCS also monitors and manages the health and
status of its own subsystems.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
2.2.4 SUBSCRIBER SEGMENT
The Subscriber Segment consists of several types/configurations of
subscriber equipment, any one of which, with proper registration and
status, is all that is needed by an individual subscriber to utilize
the communications service. Each ISU controls unit operation,
transmits/receives single channel subscriber-link data, converts the
data to/from voice, receives subscriber-link signals from potential
handoff antenna beam(s), chooses the best handoff options and
determines its own location.
2.3 GLOSSARY OF TERMS
AVAILABILITY The percentage of time a customer has access to IRIDIUM
communications services.
ANALYSIS Verification by technical or mathematical evaluation using
mathematical representations (i.e., mathematical models, algorithms,
equations), charts, graphs, circuit diagrams, and representative data or
evaluation of previously qualified equipment as determined appropriate by
Seller.
ANTENNA BEAM PATTERN An antenna beam cluster is defined as the pattern an
individual antenna beam projects on the earth's surface.
ANTENNA BEAM CLUSTER An antenna beam cluster is defined as the number of
antenna beams that can be created by a single SV antenna panel.
AZIMUTH Arc of the horizon around an axis on a line from the center of
the earth through the observer, measured clockwise from 0 to 360 degrees
with 0 degrees referenced to true north.
BCF Backup Control Facility. See System Control Segment.
BER Bit Error Rate. The fraction of a sequence of message bits that are in
error.
BLOCKING The inability of the telecommunication system to establish a
connection due to the unavailability of a traffic channel.
CALL IMAGE The information that the Servicing Space Vehicle provides to
the Servicing Gateway that allows the Gateway to prepare a Call Detail
Record.
CALL SETUP The time from the completion of subscriber dialing (following
registration) to ringing of the distant party for ISU to ISU calls, or
delivery of the ringing message to the PSTN for ISU to PSTN calls.
CHANNEL 1) A unique combination of frequency, time and space in which a
unique message may be transmitted.
2) The propagating medium or electromagnetic path connecting the
transmitter and receiver.
CONSTELLATION See ARTICLE 1, DEFINITIONS, of Contract terms and
conditions.
COVERAGE The percentage of the earth's surface geometrically visible from
the constellation as a function of time. See paragraph 3.1.1 herein.
CROSSLINK A radio link between two space vehicles (intersatellite link).
These links are in K-Band on the IRIDIUM System.
CROSSPLANE The crosslink between two co-rotating planes of space
vehicles.
DTOA Differential Time of Arrival.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
DEMONSTRATION Verification as determined appropriate by Seller through
operations, movement, and/or adjustment of the item to show its Go/No-Go
functionality. Compliance with qualitative standards for performance and
functionality will be shown.
EIRP Effective Isotropic Radiated Power. The product of the power
supplied to the antenna and the antenna gain in a given direction relative
to an isotropic antenna. Also known as "absolute" or "true" antenna gain.
EPHEMERIS A set of numbers describing a satellite's orbit which permit
the prediction of the position and velocity of the satellite at any point
in time.
ERLANG The international dimensionless unit of traffic intensity. One
Erlang is the intensity in a traffic path continuously occupied, or in one
or more paths carrying an aggregate traffic of 1 call-hour per hour, 1
call-minute per minute, etc.
EQUIVALENT VOICE CHANNEL The channel capacity required to transport 2400
bps vocoder data.
FEEDER LINK A K-Band radio link between an earth station (gateway or SCS)
and a Space Vehicle, or between Space Vehicles, used to relay MD, MCD, SCD,
and NOD. Subscribers (Users) are not nodes of feeder links.
FRAME A protocol data unit to facilitate simple, reliable, and robust
synchronization procedures for the transport of system data through
communications channels. Frames are delimited by placing sync markers
between their boundaries.
GATEWAY See ARTICLE 1, DEFINITIONS, of Contract terms and conditions.
GATEWAY INTERFACE SPECIFICATION See ARTICLE 1, DEFINITIONS, of Contract
terms and conditions.
GATEWAY LINK A radio (feeder) link between a Gateway Earth Terminal and a
Space Vehicle. These links are in K-Band on the IRIDIUM System.
INPLANE The crosslink between two adjacent co-planar space vehicles.
INSPECTION Verification by visual examination of the item, review of
descriptive documentation, and comparison of the appropriate
characteristics with a predetermined standard to determine conformance to
requirements without the use of special laboratory equipment or procedures
to the extent determined adequate by Seller.
ISU IRIDIUM Subscriber Unit. A generic term referring to any subscriber
unit configuration contained in the (IRIDIUM) Subscriber Segment.
IRIDIUM COMMUNICATIONS SYSTEM See ARTICLE 1, DEFINITIONS, of Contract
terms and conditions.
LINK The propagating medium or electromagnetic path connecting the
transmitter and receiver.
LOS Line of Sight.
MCD Mission Control Data.
MCF Master Control Facility. See System Control Segment.
MD Mission Data.
MISSION CONTROL DATA (MCD) All data needed to establish and control
IRIDIUM subscriber-links. Examples of the types of data included in this
category are the IRIDIUM pilot control signal that ISUs use to locate and
synchronize with a servicing SV, ring-alerts to call-up ISUs, the data
required for ISU validation and SV/ISU rf-power control information.
MISSION DATA (MD) All voice & message data transmitted and/or received by
an IRIDIUM Subscriber Unit (ISU).
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
MISSION OPERATIONS The operation of the IRIDIUM System to provide the
IRIDIUM Communications Service.
MISSION ORBIT The orbit of each Space Vehicle from which it supports the
provision of the IRIDIUM Communications Service.
MOBILE EXCHANGE UNIT (MXU) See ARTICLE 1, DEFINITIONS, of Contract terms
and conditions.
NADIR The direction from a Space Vehicle to the earth on an imaginary
line passing through the center of the earth (opposite of zenith).
NETWORK A complex of interconnections between at least two
nodes/terminals. The interconnections may be in any form which allows the
transmission of information (wire, radio link, etc).
NOD Network Operations Data. All data needed to manage and control the
IRIDIUM Network. Examples of the types of data included in this category
are SV/GW rf-power control, SV/GW link assignments, cell-shutdown schedules
and wild-card assignments.
NODE A terminal of any branch of a network, or a terminal common to two
or more branches of a network. In the IRIDIUM subscriber message network,
the nodes are the Subscriber Unit, the Space Vehicle(s) and the Gateway(s).
PACKET A group of binary digits, including data and control elements,
which is switched and transmitted as a composite whole. The data, control
elements and error control information are arranged in a specific format.
PTT Postal, Telegraph and Telephone (Authority). The corporate or
government entity which contracts with IRIDIUM for service.
RA Radio Astronomy.
REGISTRATION Registration involves the subscriber equipment identifying
itself to the System and being validated by the System.
RING-ALERT The process of a SV interrogating an ISU to alert the
subscriber via a ringer.
SAFE MODE The mode a Space Vehicle enters when either it determines that
a prescribed set of conditions are met, e.g., it loses all of its
crosslinks or has not had any communications from the SCS for a specified
time period, or it is commanded to enter the mode. When in the Safe Mode,
the SV powers down all but essential equipment. Typically, the SV will
buffer specified telemetry data, provide a continuous low data rate
telemetry transmission over the secondary link in the default key and check
for commands addressed to it on its omni receiver and respond to those
commands in a prescribed manner.
SCC SATCOM Control Center. The deployment of the constellation will be
under the control of Motorola's SATCOM Control Center. The SCC will
monitor, manage and control all elements of the Space System until the SCS
is ready to assume control.
SCD System Control Data. All data required to monitor and control the
IRIDIUM Constellation and the Gateways. This includes all TTAC data
between the Space Vehicles and the SCS, and all statusing and commanding of
the Gateways by the SCS.
SCS System Control Segment.
SEGMENT A conglomerate of subsystems which together performs a major
function of the system. The officially named Segments of the IRIDIUM
System are Space, Gateway, Subscriber, and System Control.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
SERVICE AREA 1) Area associated with a station for a given service and a
specified frequency under specified technical conditions where radio
communications may be established with existing or projected stations and
within which the protection afforded by the frequency assignment or
allotment plan or by any other agreement must be respected. CCIR
definition.
SERVICE AREA 2) The area on the earth's surface defined by multiple pairs
of latitude and longitude which, when encompassing an SV's nadir, define
which servicing Gateway (GW) will perform the initial call setup tasks,
that is to which GW the SV should route call setup requests. Based on the
results of geolocation of the ISU, the remainder of the call setup process
responsibility may be transferred to another GW. An initial assignment of
service areas will be implemented by the SCS with consultation from Iridium
LLC. As new GWs are added to (or deleted from) the system, the service
area assignments will be reviewed and adjusted as necessary and with
consultation from Iridium LLC. Service area assignments will be controlled
by the SCS. IRIDIUM definition.
SERVICING GATEWAY The Gateway which determines the initial routing of a
call through the Network. For ISU originated calls, the Servicing Gateway
is the Gateway designated to perform the call setup function for the
originating ISU's Servicing SV at the time the call is placed. For PTT
customer originated calls, the Servicing Gateway is the Gateway which
interfaces with the originator's PTT.
SERVICING SPACE VEHICLE The Space Vehicle at a given point in time in
whose cell a calling or called ISU is located.
SIGNALING Methods of formatting information and modulating a carrier for
transmission/communication.
SPACE SEGMENT See ARTICLE 1, DEFINITIONS, of Contract terms and
conditions.
SPACE SYSTEM See ARTICLE 1, DEFINITIONS, of Contract terms and
conditions.
SPACE SYSTEMS OPERATIONS PLAN See ARTICLE 1, DEFINITIONS, of Contract
terms and conditions.
STATE VECTOR In general, a vector that describes the condition of a
system. For an IRIDIUM Space Vehicle, it is the position and velocity at a
specified point in time, (x,y,z,xdot,ydot,zdot,t). The position and
velocity are specified in earth centered coordinates and time is given as
the year, month, day, hour, minute and second.
SUBSCRIBER LINK A radio link between a Subscriber Unit (the User) and its
servicing Space Vehicle (satellite). These links are in L-Band on the
IRIDIUM System.
SATELLITE SUBSCRIBER UNIT INTERFACE SPECIFICATION See ARTICLE 1,
DEFINITIONS, of Contract terms and conditions.
SUBSCRIBER UNIT SEGMENT See ARTICLE 1, DEFINITIONS, of Contract terms and
conditions.
SV Space Vehicle (or satellite) See ARTICLE 1, DEFINITIONS, of Contract
terms and conditions.
SYSTEM CONTROL SEGMENT See ARTICLE 1, DEFINITIONS, of Contract terms and
conditions.
TTAC Telemetry, Tracking, and Command Facility. See System Control
Segment.
TEST Verification through systematic exercising of the item with
sufficient instrumentation to show operational performance to the extent
determined appropriate by Seller. Collection, analysis and evaluation of
test data will show compliance with specified quantitative criteria.
VOCODED VOICE The digital data that is transmitted through the System and
then reconstructed into a replica of the original speech.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
VOICE CHANNEL is defined as a single channelized or packetized
communication resource that may be used to support transport of *
milliseconds of 2400 Bit/Second of vocoded voice data, or the equivalent
amount of signaling, bearer or network overhead traffic. The terms Voice
Channel, equivalent Voice Channel and Traffic Channel are used
interchangeably."
*Each facility consists of an Earth Terminal Controller (ETC) and up to
four Earth Terminals (ET's).
3.0 CONSTELLATION REQUIREMENTS
3.1. CONSTELLATION CONFIGURATION
1. PROVIDE CONTINUOUS COVERAGE The Space System shall be designed to
be capable of providing continuous coverage from any location on the
surface of the earth or in the air within the simultaneous limits
stipulated below:
Max. Altitude for Subscriber Equipment: *
Min. Evaluation angle at Earth's surface: * Degrees
2. ANTENNA BEAMS
The Space System shall project antenna beams on the earth's surface
in a geometric pattern consistent with the coverage requirements
herein.
3. NUMBER OF INDEPENDENT LINKS PER SV
SV's shall be designed to have the capability of operating up to *
* independent SV GW/SCS feeder links per SV at maximum capacity.
4. CONSTELLATION-SCS MINIMUM ELEVATION ANGLES
The minimum elevation angle (referenced to the horizon and measured
from the SCS to the SV), for all SV-SCS communication links above
which all requirements shall be satisfied, *
degrees.
5. SIMULTANEOUS OPERATION OF FEEDER LINKS
The Constellation-GW/SCS feeder links shall be capable of operating
simultaneously with the SV-SV crosslinks.
6. CROSSLINK COMMUNICATIONS
Each SV shall be capable of simultaneous communications with SVs
immediately ahead (fore) and behind (aft) in the same plane and with
one SV in each adjacent co-rotating plane.
7. CROSSPLANE CROSSLINK OPERATIONAL LIMITATIONS
Crossplane crosslinks between pairs of SVs shall be capable of
operating when the nadir points of the SVs at each end of the link
are * degrees latitude.
The intention of this requirement is to specify when the crosslinks
must operate and therefore that they need not operate at higher
latitudes due to frame timing limitations.
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
3.2 COMMUNICATIONS REQUIREMENTS
1. CONSTELLATION-ISU RF LINK FOR MD AND MCD
The Space System shall provide RF links between the Space Segment and
the Subscriber Segment for the transmission of MD and MCD
2. CONSTELLATION SUBSCRIBER UPLINK FREQUENCY
The subscriber to Constellation uplink shall have the capability to
operate in the band from 1616.0 MHz to 1626.5 MHz.
3. CONSTELLATION SUBSCRIBER DOWNLINK FREQUENCY
The Constellation to subscriber downlinks shall have the capability
to operate in the band from 1616.0 MHz to 1626.5 MHz.
4. VOICE/DATA TRAFFIC CHANNEL BURST POWER FLUX DENSITY
The minimum burst power flux density of a voice/data traffic channel
that the full constellation shall be capable of producing at any
point on the surface of the earth shall be
*
This requirement shall be satisfied at any location having a clear
unobstructed view of the satellite.
*
4A. DOWNLINK VOICE/DATA TRAFFIC CHANNEL MAXIMUM BER
At a received signal level * lower than the maximum level
specified in paragraph 4 above, an ISU designed to satisfy IRIDIUM
specifications provided by contractor shall be capable of operating
at a BER less than *
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5. VOICE/DATA/ACQUISITION CHANNEL UPLINK C/N(o)
The receiver carrier-power-to-noise-spectral-density (C/N(o)) ratio
at any satellite vehicle on any voice, data or acquisition subscriber
channel under conditions defined below shall be greater than *
using a ground transmitter having a minimum EIRP of at least *
This requirement shall be met for more than * of the time averaged
over 24 hours using the full satellite Constellation. It shall apply
only to transmissions from locations having an elevation angle
greater than * degrees with a clear unobstructed view of the
satellite and within an interference free channel.
5A. UPLINK VOICE/DATA TRAFFIC CHANNEL MAXIMUM BER
With a test ISU designed to satisfy IRIDIUM specifications provided
by Seller transmitting at a signal level * lower than that
specified in paragraph 5 above, the BER measured at the output of any
SV receiver shall be lower than *
6. PAGING CHANNEL BURST POWER FLUX DENSITY
The minimum burst power flux density of a paging channel shall be
greater than * for more than * of the time and greater than *
for greater than * of the time. This requirement shall be
satisfied at any location having a clear unobstructed view of the
satellite at any point on the surface of the earth.
6A. PAGING CHANNEL MAXIMUM BER
At a received signal level 26dB lower than the maximum level
specified in paragraph 6 above, an ISU/pager designed to satisfy the
IRIDIUM network paging specifications shall be capable of operating
at a BER of less than
*
7. RING ALERT CHANNEL BURST POWER FLUX DENSITY
The minimum burst power flux density of a ring alert channel shall be
greater than * for more than * of the time and greater than
* for greater than * of the time. This requirement shall be
satisfied at any location having a clear unobstructed view of the
satellite at any point on the surface of the earth.
7A. RING ALERT CHANNEL MAXIMUM BER
At a received signal level * lower than the maximum level
specified in paragraph 7 above, an ISU designed to satisfy the
IRIDIUM network specification shall be capable or operating at a BER
of less than
*
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
8. SUBSCRIBER LINK POWER CONTROL
The Constellation-ISU subscriber traffic channel links (not including
any channels reserved for acquisition or operating in an acquisition
mode) shall be power controlled to enable the Space System to control
link power over a nominal * range.
9. GEOLOCATION TIMELINESS/ACCURACY
The Space System shall have the capability to support geolocation of
stationary subscriber equipment within the following limits:
Location Error: *
Location Determination Time: *
Confidence: *
10. SV-SV Link Frequency
The SV to SV links shall have the capability to operate in the band
from 23,180 MHz to 23,380 MHz.
11. CONSTELLATION-GW RF LINK
The Space System shall provide RF links between the Space Segment and
the Gateway segment for the transmission of MD, MCD, SCD, and NOD.
12. CONSTELLATION-SCS RF LINKS
The Space System shall provide both primary and secondary RF links
between the Space Segment and the System Control Segment for the
transmission of SCD and NOD.
13. PROVIDE SECONDARY COMM SYSTEM
The SV secondary antenna shall be designed so that the SV, during any
mission phase following deployment from the launch vehicle can
receive signals from and send signals to the SCS. This capability
shall allow the SCS to command and monitor SVs that are operating
with or without active altitude control, from any single or
combination of overlapping TTAC or LEOP tracking facilities. This
capability shall provide opportunities for contacts with the SV of
sufficient frequency and duration to permit the SCS to meet
requirements to protect the health and safety of each SV and of the
Constellation.
14. UPLINK FREQUENCY
The Gateway to Constellation and SCS to Constellation uplinks shall
have the capability to operate in the band from 29,100 to 29,300
MHz.
15. DOWNLINK FREQUENCY
The Constellation to Gateway and Constellation to SCS downlinks shall
have the capability to operate in the bank from 19,400 to 19,600 MHz.
16. FEEDER LINK POWER CONTROL
The CONSTELLATION-SCS (primary communications link only) feeder link
shall be power controlled to insure that the power available at the
receiving location is * above the minimum necessary.
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
3.3 CAPACITY
1. PAGING CAPACITY
Paging messages shall be packaged in Paging Message Frames, each
of which shall be capable of containing
*
where the frequency of such delivery does not exceed
* in any one antenna beam pattern.
2. VOICE SUBSCRIBER CAPACITY PER BEAM PATTERN
The Space System shall provide a maximum of * concurrent
L-Band full duplex traffic channels in a single beam pattern.
3. PEAK CAPACITY PER ANTENNA BEAM CLUSTER
Each Space Vehicle antenna beam cluster shall be capable of
supporting up to
*
4. PEAK SUBSCRIBER LINK CAPACITY PER SPACE VEHICLE
Each Space Vehicle shall be capable of supporting up to *
full duplex traffic channels
*
5. AVERAGE SUBSCRIBER LINK TRAFFIC LOAD PER SPACE VEHICLE PER ORBIT
Each Space Vehicle shall be capable of supporting an average of
* full duplex traffic channels
*
6. CONSTELLATION-GATEWAY CAPACITY
Each Constellation-Gateway link shall be capable of supporting up
to * full duplex traffic channels.
3.4 CONSTELLATION CONTROL
1. UNAUTHORIZED COMMAND ATTEMPTS
The Space System shall have the capability to detect and report
unauthorized attempts to command and control Space System assets,
or to gain access to protect space system data.
2. MONITOR MISSION CRITICAL PARAMETERS
Mission critical parameters shall be monitored. Mission critical
parameters are those to be defined by the seller as critical to
network or Constellation operations.
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
3. FAULT RESPONSES
The Space System shall have the capability to respond to specific
fault conditions with predetermined and/or SCS specified actions.
Specific fault conditions are those to be defined by the seller.
4. RECONFIGURATION DUE TO NODE/LINK FAILURE
The Space System shall provide the capability to reroute traffic
through the space network within * upon detection of a
single failure within the Constellation.
5. CONDUCT PM WITHOUT DEGRADING PERFORMANCE
The Space System shall have the capability to perform preventive
maintenance without degrading the quality of service.
Preventive maintenance includes readiness checks which will run on
system equipment, test equipment calibration, and periodic
maintenance on ground-based equipment with moving parts (e.g.,
line printers and disks).
6. PROCESS COMMANDS BY TYPE
The Constellation shall have the capability to process:
1) Individual Real-Time Commands
2) Stacked Sequenced Commands
3) Commands for execution at a specified time.
7. SV COMMAND AUTHENTICATION
Each SV shall have the capability to authenticate any command with
the potential to damage the SV or disrupt Mission Operations prior
to execution.
8. UPLINK AND LOAD SOFTWARE UPON COMMAND
The Constellation shall provide the capability to accept commands
from the SCS to uplink and load software modules into processors.
9. ROUTE TELEMETRY TO THE SCS
Each SV shall be capable of routing telemetry to the SCS.
10. RESPOND TO SCS COMMANDS FOR SPECIFIC DATA
Each SV shall respond to SCS commands for transmission of specific
telemetry formats as defined by seller.
This includes the capability to download memory and database
information, and to verify the loading of uplinked software
modules. It also includes the transmission of low, normal and
expanded data rate modes, and changes in the sampling rates and
sampling points of telemetered information.
11. REPORT FAILED COMMAND ATTEMPTS TO SCS
The Constellation shall have the capability to detect and report
all failed authentication attempts, including the associated
command field, to the SCS.
- -----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
12. RECEIVE COMMANDS FROM SCS.
Each SV shall support reception of SCS commands, via the primary
link, secondary link, and cross links.
13. MESSAGE ROUTING
The Constellation shall support control and routing of MD, MCD,
NOD, and SCD through the appropriate subscriber links and feeder
links.
14. SV DE-BOOST
Each SV shall have the capability of de-boosting to a perigee of
less than * km at any time up to * years after orbit
insertion with a probability of success of * percent.
15. SAFE MODE
Each SV shall have the capability to enter a predetermined
operating mode when the SV is unable to execute stored SCS
commands.
3.5 CONSTELLATION OPERATIONS
1. GEOGRAPHIC BASED SERVICE RESTRICTIONS
The Space System shall have the capability to selectively restrict
service based on predetermined geographic parameters.
2. PROCESS CHANNEL REQUEST
For each requested channel and * the Space
System shall either assign a unique channel or send a "service not
available" indication to the subscriber equipment.
This time interval is measured for the time that the subscriber
equipment initiates an acquisition sequence until the subscriber
equipment receives the channel assignment or message including
propagation times to and from the SV.
3. HANDOFF BETWEEN ANTENNA BEAMS
The Space System shall have the capability to perform all
handoffs, within an antenna beam pattern (frequency reuse pattern
change), antenna beam pattern to antenna beam pattern within a SV,
SV to SV, SV-GW and SV-SCS.
4. CONSTELLATION CONTRIBUTION TO REGISTRATION ACTIVITY
The Constellation shall contribute no more than * to the
subscriber registration activity.
5. CONSTELLATION DELAY FOR CALL SETUP
The contribution of the Constellation to the Call Setup time
between two subscriber units or between a subscriber unit and a
PTT customer shall not exceed *
6. TOTAL SV DELAY FOR VOICE COMMUNICATIONS
The Constellation, excluding L-Band framing, shall contribute to
no more than * one way delay to any voice
communications link without failures *
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
7. PROVIDE * LEVELS OF PRECEDENCE
The Constellation shall provide the capability to support user
acquisition on a priority basis with at least * levels
of precedence.
8. CALL IMAGE DATA TO SCS
Within a period of * after connection disconnect,
the Constellation shall provide the SCS with the Connection image
information it has gathered, and the Servicing Gateway with the
Call Status Code.
3.6 ENVIRONMENTAL REQUIREMENTS
1. AVOID INTERFERENCE WITH OTHER SYSTEMS
The Constellation shall have the capability to adjust transmitter
power levels and channel frequency usage as directed by the SCS to
avoid interference with other systems operating in the same
spectrum.
2. ORBITAL DEBRIS
The Space System shall have the capability to exercise all
reasonable methods to minimize orbital debris.
3.7 COVERAGE REQUIREMENTS
1. EARLY CONSTELLATION COVERAGE
The coverage of any subset of the fully populated Constellation
shall be defined as including those areas on earth at which the
elevation angle to any satellite within the Constellation is at
least * degrees. The Constellation shall provide limited
coverage as it is being formed. The coverage of the Constellation
shall be dependent upon latitude. The Constellation coverage
schedule is reflected in the following table. All coverage rates
provided in the table are averaged over 5 day periods.
TABLE 3.7.1
CONSTELLATION EARTH COVERAGE STEPS
STEPS
Latitude I II III IV V VI VII
*
The coverage percentages shown in the above table represent minimum coverage
requirements for the IRIDIUM constellation. The percentages are based on the
surface area of a constant radius sphere.
*
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
4.0 SYSTEM CONTROL SEGMENT REQUIREMENTS
4.1 MONITOR AND CONTROL REQUIREMENTS
1. MAINTAIN CONSTELLATION FAULT RESPONSE CRITERIA
The SCS shall have the capability to establish and maintain fault
condition criteria and associated command responses for the
Constellation.
2. REQUEST DIAGNOSTICS
The SCS shall have the capability to request the Constellation to
execute diagnostic procedures for fault detection and isolation.
3. PROCESS TELEMETRY
The SCS shall have the capability to receive and process
Constellation telemetry.
4. GENERATE CONSTELLATION COMMANDS
The SCS shall have the capability to format and transmit commands
to the Constellation.
5. AUTHENTICATION COMMAND COUNT
The SCS shall have the capability to maintain a count of each
successful authentication of a critical command for each SV.
6. GENERATE SINGLE OR STACKED COMMANDS
The SCS shall have the capability to generate a set of one or more
commands to be executed either upon receipt or at a designated
time not already assigned to another command.
7. COMMAND DESIGNATION
The SCS shall be capable of redesignating commands as critical or
non-critical.
8. GENERATE EPHEMERIS FOR SYSTEM OPS
Using an SCS-produced full state vector or element set, the SCS
shall be capable of generating the ephemeris of any SV.
9. ORBIT DETERMINATION
The SCS shall be capable of estimating orbital parameters on the
basis of time tagged azimuth, elevation measurements, and DTOAs.
10. KNOWLEDGE BOX
The SCS shall have the capability to maintain knowledge of the
Constellation ephemeris.
11. PLAN MANEUVERS AND GENERATE COMMANDS
The SCS shall have the capability to plan the station keeping
maneuvers and generate commands for each Space Vehicle as required
to maintain its mission orbit.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
12. CONTROL BOX
The SCS shall have the capability to maintain the Constellation
positions to within:
Crosstrack: *
Intrack: *
Radially: *
*
13. SPARED SV CLOCK ACCURACY
The SCS shall have the capability to maintain the clock of each SV
in sparing orbit to within *
14. GENERATE DTOA VALUES
The SCS shall be capable of generating differential
time-of-arrival (DTOA) values.
*
15. COMMANDS TO MAINTAIN SPARING ORBIT
The SCS shall have the capability to plan the station keeping
maneuvers and generate commands for each SV as required to
maintain its sparing orbit.
16. MANAGE CONSTELLATION POWER
The SCS shall have the capability to manage the power of the
Constellation, both individually and collectively.
17. PREDICT CONSTELLATION THERMAL CONDITIONS
The SCS shall have the capability to manage the thermal conditions
of the Constellation based on expected illumination
geometry/history and equipment status/utilization.
18. COMMAND SV TO ORBIT
The SCS shall have the capability to plan and command the orbit
maneuvers required for each Space Vehicle to establish its orbit.
19. PERFORM ON ORBIT TESTING
The SCS shall have the capability to perform on-orbit testing of
each Space Vehicle as required to verify that the Space Vehicle is
ready to commence Mission Operations.
20. LOCATE SV IN ANOMALOUS OR UNKNOWN ORBITS
The SCS shall have the capability to search for and locate any SV
within *
21. MANAGE LAUNCH PLANS & SCHEDULES
The SCS shall have the capability to manage launch plans and
schedules.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
22. DETECT NODE/LINK FAILURES
The SCS shall have the capability to detect node and link failures
in the Space System within * of their
occurrence.
23. ESTABLISH ALT ROUTES
The SCS shall have the capability to establish network routing
instructions based on the health and status of the Constellation,
GWs, and SCS.
24. SET MAX NUMBER OF CROSSLINKS TRAVERSED
The SCS shall have the capability to specify to the Constellation
in the Network the maximum number of crosslinks a packet may
traverse before the packet is discarded, up to a maximum of
*
25. CONTROL ANTENNA BEAM ACTIVATION
The SCS shall have the capability to determine, plan, and
distribute antenna beam activation and deactivation instructions.
26. CONTROL OF OPERATIONAL ELEMENTS
The SCS shall have the capability to remove from service or
restore to service any operational network node (Constellation or
Gateway), or any operational network communications link.
27. RECONFIGURATION DUE TO MULTIPLE FAILURES
The SCS shall have the capability to reconfigure the network
within * upon detection of MULTIPLE node or
link failure.
28. MANAGE PSTN PHONE NUMBER TO GW MAP
The SCS shall have the capability to manage the Gateway-to-PSTN
phone number mappings.
29. MANAGE PHONE NUMBER TO GW MAP
The SCS shall have the capability to manage subscriber equipment
phone number-to-Gateway mappings.
30. ASSIGN CALL SETUP RESPONSIBILITIES
The SCS shall have the capability to assign GW call setup service
areas.
31. REASSIGN CALL SETUP SERVICE AREAS
The SCS shall have the capability to reassign GW call setup
service areas within * of detection for single gateway
failures.
32. MULTIPLE GW FAILURES
The SCS shall have the capability to reassign GW call setup
service areas within * of detection for multiple
gateway failures.
33. UPDATE PHONE NUMBER MAP
The SCS shall have the capability to update phone number-to-PSTN
mapping within * of detection for single gateway failures.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
34. MAP UPDATE FOR MULTIPLE FAILURES
The SCS shall have the capability to update phone number-to-PSTN
mapping within * of detection for multiple
gateway failures.
35. SCHEDULE FEEDER LINKS
The SCS shall have the capability to schedule and allocate SCS/GW
feeder links and disseminate the schedule to affected nodes.
36. MANAGE SV DATA
As a minimum, the SCS shall have the capacity and capability to
manage telemetry, command, and both current and historical
configuration data for the Constellation of space vehicles which
are performing network functions, as well as * SVs which are
on-orbit spares, * SVs in parking orbit or in transition to
either operational or storage orbits and * SVs which have been
decommissioned but have yet to re-enter the atmosphere.
37. PROVIDE CAPABILITY TO TEST ALL LINKS
The SCS shall have the capability to test all links.
38. MASTER SERVICE DENIAL LIST
The SCS shall have the capability to manage the Master Subscriber
Equipment Service Denial List.
39. MANAGE SERVICE RESTRICTIONS
The SCS shall have the capability to selectively restrict service
based on geographic parameters.
40. MAINTAIN GW FAULT RESPONSE CRITERIA
The SCS shall have the capability to establish and maintain for
each Gateway, fault condition criteria and associated command
responses.
41. REQUEST GW DIAGNOSTICS
The SCS shall have the capability to direct/request each Gateway
to execute diagnostic procedures for fault detection and
isolation.
42. MONITOR SCS CRITICAL PARAMETERS
The SCS shall have the capability to monitor SCS mission critical
parameters.
43. EXECUTE FAULT RESPONSES
The SCS shall have the capability to respond to specific fault
conditions with predetermined actions.
44. AVOID INTERFERENCE WITH OTHER SYSTEMS
The SCS shall have the capability to direct the GWs, SVs and SCS
transmitter equipment to adjust transmitter powers and use
frequencies which will avoid interference with other systems as
required to conform to all applicable operating licenses.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
45. GRACEFUL DEGRADATION
The SCS shall be capable of planning for and providing sufficient
SCD and NOD to each node in the Network to allow the Network to
continue to function for up to *
without further SCD and NOD inputs from the SCS.
46. MANAGE SOFTWARE/HARDWARE CONFIGURATION
The SCS shall have the capability to manage the configuration of
SV, SCS, and GW software and hardware.
47. SV-SCS CHANNEL CAPACITY
The SCS shall be capable of supporting up to * (routine
and memory dump SCD/NOD) on each SV-SCS primary link.
*
48. MONITOR RECEIVED DATA AND GENERATE ALARMS
The SCS shall have the capability to monitor SCS-received data and
generate alarms when out-of-tolerance (OOT) conditions or fault
messages are detected.
49. SYSTEM MASTER CLOCK
The SCS shall have the capability to maintain the System Master
Clock.
50. MISSION CONSTELLATION CLOCK ACCURACY
The SCS shall have the capability to maintain Constellation clocks
to within *
51. SV-SCS PRIMARY DOWNLINK SCD BER
The SCS shall be designed to operate with the SV such that the
primary downlink feeder link end-to-end bit error rate (BER) will
be no greater than *
52. SV-SCS SECONDARY DOWNLINK SCD BER
The SCS shall be designed to operate with the SV such that the
secondary downlink feeder link end-to-end bit error rate (BER)
will be no greater than *
53. UNAUTHORIZED COMMAND ATTEMPTS
The SCS shall have the capability to detect and report attempts to
command and control, or gain access to protected system data.
54. MINIMIZE ORBITAL DEBRIS
The SCS shall have the capability to exercise all reasonable
methods to minimize orbital debris.
55. PHYSICAL AND COMPUTER SECURITY
The SCS shall have the capability to implement physical and
computer security procedures to ensure the security of Space
System resources.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
4.2 INTERFACES
1. PROVIDE SV KNOWLEDGE BOX UPDATES
The SCS shall be capable of providing all pertinent orbit updates,
to each SV and each GW, at least as often as every *
2. GW-SCS CALL DETAIL RECORD TRANSMISSION FREQUENCY
The SCS shall be capable of receiving abbreviated call detail
records from each GW at least *
3. EXCHANGE SCD WITH GATEWAYS
The SCS shall have the capability to plan, format and transmit
system control data to Gateways and receive system control data
from Gateways.
4. EXCHANGE NOD WITH GATEWAYS
The SCS shall have the capability to plan, format, and transmit
network operations data to Gateways and receive network operations
data from Gateways.
5. SATELLITE EPHEMERIS DATA FOR RADIO ASTRONOMY
The SCS shall be capable of supplying satellite ephemeris data for
all IRIDIUM satellites to registered Radio Astronomy
organizations.
6. RADIO ASTRONOMY SCHEDULING INTERFACE
The SCS shall be capable of receiving, recording, and
acknowledging the schedules for Radio Astronomy (RA) observations
in the 1610.6 to 1613.8 MHz RA band of registered RA organizations
for registered RA sites.
7. SV-SCS LINK CAPACITY
The SCS shall be capable of communicating with any SV using a
single SV-SCS link.
8. TRANSPARENCY OF HANDOFFS
SV-SCS feeder link handoff shall be accomplished without
interruption of monitor and control operations.
9. SV-SCS PRIMARY RF LINK
The SCS shall provide a primary RF link for line-of-sight
communications with a Space Vehicle's primary communications link
for the transmission of SCD and NOD.
10. SV-SCS SECONDARY RF LINK
The SCS shall provide a secondary RF link for line-of-sight
communications with a Space Vehicle's secondary communications
link for the transmission of SCD.
11. ADJUST EIRP
The SCS shall have the capability to adjust the EIRP on each
SCS-SV uplink.
12. MEASURE/REPORT RECEIVED POWER
The SCS shall be capable of measuring and reporting the received
power on each SV-SCS downlink.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
13. SCS-GW FEEDER LINK
The SCS shall be capable of communications with each Gateway via
the feeder link network.
14. SCS-GW SECURE COMMERCIAL COMM LINK
The SCS shall be capable of secure communications with each
Gateway via commercial communication links.
15. SCS-SPACE LAUNCH OPERATIONS INTERFACE
The SCS shall have the capability to support a communications
interface between the SCS and the Space Segment launch activity.
16. SCS UPLINK FREQUENCY
The SCS shall have the capability to operate SCS-SV uplinks in the
band form 29,100 to 29,300 MHz.
17. SCS DOWNLINK FREQUENCY
The SCS shall have the capability to operate SV-SCS downlinks in
the band from 19,400 to 19,600 MHz.
18. PROVIDE TIME OFFSETS
The SCS shall be capable of providing IRIDIUM System Time offsets
from other time standards to the Gateways.
4.3 MAINTAINABILITY REQUIREMENTS
1. CONDUCT PM WITHOUT DEGRADING PERFORMANCE
The SCS shall have the capability to perform preventative
maintenance without degrading operational capability.
The SCS shall have the capability of performing preventive
maintenance without degrading the quality of service.
2. DIAGNOSTICS WITHOUT SERVICE DEGRADATION
The SCS shall have the capability of performing diagnostic
procedures without degrading the quality of service.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.0 MILESTONES
5.0.1 Buyer shall have the right to challenge the assertion of
Seller that any milestone has been completed in accordance with the
Milestone Acceptance Criteria pursuant to Paragraph E, Article 5,
PAYMENT.
5.1 MILESTONE 1 MAIN MISSION ANTENNA (MMA) PRELIMINARY DESIGN REVIEW
(PDR)
5.1.1 MILESTONE DESCRIPTION
An approximately two day long MMA PDR shall be conducted by the MMA
seller at the seller's facilities to review the development of the
MMA. Design and construction plans shall be available for review.
MMA requirement compliance shall be presented. Design development
data shall be provided to verify critical design decisions.
5.1.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.2 MILESTONE 2 COMMUNICATIONS MODULE (CM) PRELIMINARY DESIGN REVIEW
(PDR)
5.2.1 MILESTONE DESCRIPTION
An approximately two day long CM PDR shall be conducted by the CM
seller at the seller's facilities to review the development of the CM.
Design and construction plans shall be available for review. CM
requirement compliance shall be presented. Design development data
shall be provided to verify critical design decisions.
5.2.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.3 MILESTONE 3 SPACE VEHICLE MANUFACTURING PLAN
5.3.1 MILESTONE DESCRIPTION
This milestone encompasses the initial release of the manufacturing
plan which is a top level document defining the Space Vehicle final
assembly processes and facilities; and labor, equipment and schedule
requirements associated with those processes. The assembly activities
will begin with a fully assembled and tested Communication Module (CM)
Main Mission Antenna, bus assembly and solar arrays. Conclusion of
these assembly and test activities will result in a complete Space
Vehicle ready for shipment and launch. Being an "Initial Release",
however, it may have many provisions which will not be completed,
but, that will be completed no later than the completion of the entire
Space System.
5.3.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed completed when Motorola internally
issues the initial release of the Space Vehicle Manufacturing Plan.
5.4 MILESTONE 4 SCS EARTH TERMINAL PRELIMINARY DESIGN REVIEW (PDR)
5.4.1 MILESTONE DESCRIPTION
The Seller shall conduct a Preliminary Design Review at the Seller's
facility. It shall be used to determine that: "hardware, software,
functional, performance, interface and design requirements are
complete and consistent with the Earth Terminal section of the IRIDIUM
System Control Segment Specification and applicable documents and that
there is an achievable plan to design, produce and test the Earth
Terminal, including all lower level assemblies and interfaces.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.4.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review this milestone shall
be deemed completed.
5.5 MILESTONE 5 SCS EARTH TERMINAL CONTROLLER PRELIMINARY DESIGN
REVIEW (PDR)
5.5.1 MILESTONE DESCRIPTION
The Seller shall conduct a Preliminary Design Review at the Seller's
facility. It shall be used to determine that: hardware, software,
functional, performance, interface and design requirements are
complete and consistent with the Earth Terminal Controller section of
the IRIDIUM System Control Segment Specification and applicable
documents and that there is an achievable plan to design, produce and
test the Earth Terminal Controller, including all lower level
assemblies and interfaces.
5.5.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review this milestone shall
be deemed completed.
5.6 MILESTONE 6 SYSTEM CONTROL SEGMENT PRELIMINARY DESIGN REVIEW
(PDR)
5.6.1 MILESTONE DESCRIPTION
The Seller shall conduct a Preliminary Design Review at the Seller's
facility. It shall be used to determine that: hardware, software,
functional, performance, interface and design requirements are
complete and consistent with the IRIDIUM System Control Segment
Specification and applicable documents and that there is an achievable
plan to design, produce and test the System Control Segment, including
all lower level assemblies and interfaces.
5.6.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review the milestone shall be
deemed completed.
5.7 MILESTONE 7 SCS EARTH TERMINAL CRITICAL DESIGN REVIEW (CDR)
5.7.1 MILESTONE DESCRIPTION
An approximately two day long Critical Design Review (CDR) shall be
conducted at the Seller's facilities to review the development of the
SCS Earth Terminal design. Relevant design and construction plans
shall be presented. Segment requirement compliance shall be
presented. Design development data to verify critical design
decisions shall be presented.
5.7.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review this milestone shall
be deemed completed.
5.8 MILESTONE 8 SCS EARTH TERMINAL CONTROLLER CRITICAL DESIGN REVIEW
(CDR)
5.8.1 MILESTONE DESCRIPTION
An approximately two day long Critical Design Review (CDR) shall be
conducted at the Seller's facilities to review the development of the
SCS Earth Terminal Controller design. Relevant design and
construction plans shall be presented. Segment requirement compliance
shall be presented. Design development data to verify critical design
decisions shall be presented.
5.8.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review, the milestone shall
be deemed completed.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.9 MILESTONE 9 COMMUNICATIONS MODULE (CM) CRITICAL DESIGN REVIEW
(CDR)
5.9.1 MILESTONE DESCRIPTION
An approximately two day long CM CDR shall be conducted by the CM
seller at the seller's facilities to review the development of the CM.
Design and construction details shall be available for review. CM
requirement compliance shall be presented. Design test data shall be
provided to verify critical design decisions.
5.9.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting form the review this milestone
shall be deemed completed.
5.10 MILESTONE 10 SYSTEM CONTROL SEGMENT CRITICAL DESIGN REVIEW (CDR)
5.10.1 MILESTONE DESCRIPTION
An approximately two day long Critical Design Review (CDR) shall be
conducted at the Seller's facilities to review the development of the
System Control Segment design. Relevant design and construction plans
shall be presented. System requirement compliance shall be presented.
Design development data to verify critical design decisions shall be
presented.
5.10.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review this milestone shall
be deemed completed.
5.11 MILESTONE 11 MAIN MISSION ANTENNA (MMA) CRITICAL DESIGN REVIEW (CDR)
5.11.1 MILESTONE DESCRIPTION
An approximately two day long MMA CDR shall be conducted by the MMA
seller at the seller's facilities to review the development of the
MMA. Design and construction Details shall be available for review.
MMA requirement compliance shall be presented. Design test data shall
be provided to verify critical design parameters.
5.11.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting form the review this milestone
shall be deemed completed.
5.12 MILESTONE 12 SPACE SYSTEM CRITICAL DESIGN REVIEW (CDR)
5.12.1 MILESTONE DESCRIPTION
An approximately two day long Space System Critical Design Review
(CDR) shall be conducted by the seller at the seller's facilities to
review the development of the Space System design. Relevant design
and construction plans shall be presented. Space System requirement
compliance shall be presented. Design development data to verify
critical design decisions shall be presented.
5.12.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting form the review this milestone
shall be deemed completed.
5.13 MILESTONE 13 SATCOM CONTROL CENTER (SCC) CONSTRUCTION COMPLETE.
5.13.1 MILESTONE DESCRIPTION
When all the necessary building facilities and subsystems (heating,
ventilation, air conditioning, power and security) are operating such
that the SATCOM Control Center is ready to support the integration and
test of control and communications equipment as required to operate
the Space System, a formal review with the Buyer shall be held
on-site.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.13.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.14 MILESTONE 14 SPACE VEHICLE TEST PLAN
5.14.1 MILESTONE DESCRIPTION
This milestone encompasses the initial release of the Space Vehicle
Test Plan. Being an initial release, however, it may have many
provisions which are not yet then completed (i.e. TBD), but, will
ultimately be completed no later than completion of the entire Space
System. The primary objective of this plan is to define the test
program to be implemented by Motorola's Assembly, Integration and Test
(AIT) organizations. The AIT program will consist of three distinct
phases:
a. Qualification Vehicle program
b. Initial Production program
c. Production program
This test plan provides the top level document from which the test
processes will be implemented. It includes the test program from the
beginning of the test program (i.e., Qualification Test Vehicle (QTV)
test program) through the test program for the production space
vehicles that make up the IRIDIUM constellation. Organizational
responsibilities, documentation requirements, as well as the general
support equipment and facilities used are identified by this test
plan. Additional testing of breadboards, engineering models,
structural test vehicles, etc. are not included as a part of this
plan.
5.14.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed completed when Motorola internally
issues the initial release of the Space Vehicle Test Plan.
5.15 MILESTONE 15 SPACE SYSTEM OPERATIONS PLAN
5.15.1 MILESTONE DESCRIPTION
The primary objective of this plan is to describe the intended
operations of the constellation within the IRIDIUM Communications
System as reflected in the System Operations Concept, the System
Specification, and the segment Specifications. Details on staffing
and processes shall be included in the document. The document shall
detail the Network and Constellation Operations.
5.15.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed completed when Motorola internally
releases the Network Operations Plan.
5.16 MILESTONE 16 MAIN MISSION ANTENNA QUALIFICATION MODEL TEST
5.16.1 MILESTONE DESCRIPTION
The MMA Qualification Model is a prototype of the MMA built to
production oriented requirements and processes. The MMA Qualification
Model shall be tested to qualify the MMA design and production
processes for space use.
5.16.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is complete when the testing required by the MMA
integrated test plan has been performed and any specific action items
established.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.17 MILESTONE 17 SPACE VEHICLE BUS QUALIFICATION TEST COMPLETE
5.17.1 MILESTONE DESCRIPTION
The BM shall be tested to qualify the Bus Module Design and production
processes for space use.
5.17.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is complete when the test sequence required by the
suppliers integrated test plan has been performed, and any specific
action items established.
5.18 MILESTONE 18 SPACE VEHICLE QUALIFICATION MODEL ASSEMBLY COMPLETE
5.18.1 MILESTONE DESCRIPTION
After completion of the subsystem qualifications, the Bus
Qualification, CM, and MMA Models shall be assembled for testing as an
integrated SV.
5.18.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is complete when the SV Qualification Model is ready
for start of testing in accordance with the Space Vehicle Test Plan.
5.19 MILESTONE 19 SPACE SYSTEM DT&E TEST READINESS REVIEW
5.19.1 MILESTONE DESCRIPTION
An approximately one day long System DT&E Test Readiness Review will
be conducted by SATCOM System Engineering at the Seller's facilities.
This review is held to demonstrate that the documentation, test
equipment and personnel are currently on hand so that formal DT&E can
commence in accordance the System DT&E Test Plan.
5.19.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.20 MILESTONE 20 SPACE VEHICLE SUPPLIER PRODUCTION READINESS REVIEWS
(PRR'S)
5.20.1 MILESTONE DESCRIPTION
An approximately two day long PRR shall be conducted at Motorola or
its Supplier's Facilities to review the qualification data and design
details of the manufacturing process of the Bus Module, Communications
Module, and Main Mission Antenna. The reviews shall establish the
extent to which Motorola and its suppliers are ready for full scale
production of these modules.
5.20.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review the milestone shall
be deemed completed.
5.21 MILESTONE 21 SATCOM CONTROL CENTER (SCC) READY FOR OT&E TEST
5.21.1 MILESTONE DESCRIPTION
Upon the completion of the integration of all the hardware and
software necessary for operations by the SATCOM Control Center as part
of the SCC OT&E testing, a one day readiness review will be conducted.
Seller shall present the results of the review to the Buyer.
5.21.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.22 MILESTONE 22 SPACE VEHICLE QUALIFICATION TEST/SPACE SYSTEM
COMPLIANCE MATRIX UPDATE
5.22.1 MILESTONE DESCRIPTION
The SV Qualification model shall be tested as required in the SV Test
Plan developed by Seller to demonstrate integrated compatibility of
the Bus Module, Communications Module and MMA and SV integration
processes.
The Space System compliance matrix presented at the Space System
Critical Design Review (Milestone 12) shall be updated based on lower
level test data available since Milestone 12.
.
5.22.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed complete when Seller: (1) completes the
Space Vehicle Qualification Testing, and establishes specific action
items; and (2) provides to the Buyer the results of the Seller's Space
System compliance review update showing Seller's determination of the
current status of compliance of the Space System with the key system
parameters of the Statement of Work as specified in Table 5.1 of this
exhibit. Compliance conclusions shall be based on a combination of
demonstration, testing, or analyses as determined appropriate in
Seller's sole discretion.
5.23 MILESTONE 23 TTAC WEST CONSTRUCTION COMPLETE
5.23.1 MILESTONE DESCRIPTION
When all the necessary building facilities subsystems (heating,
ventilation, air conditioning, power and security) are operating such
that the TTAC West facility is ready to support the integration and
test of control and communications equipment as required to operate
the IRIDIUM Communications System, a formal review with the general
contractor shall be held on-site.
5.23.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.24 MILESTONE 24 SPACE SYSTEM MULTIPLE SV DT&E TEST REPORT
5.24.1 MILESTONE DESCRIPTION
The objective of this milestone is to provide the test report on the
Space System DT&E testing conducted in accordance with the DT&E Test
Plan. This report shall contain collected and summarized data and all
conclusions resulting from the various test configurations as
identified in the DT&E Test Plan. Each test will be clearly
identified with supporting test procedures, identified test equipment,
appropriate drawings, and results attained.
5.24.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be considered complete when the Seller internally
releases the test report.
5.25 MILESTONE 25 SCC AND TTAC INTEGRATION & TEST (OT&E) COMPLETE
5.25.1 MILESTONE DESCRIPTION
Upon the completion of the integration and testing of all the hardware
and software of the SCC required to support the very first launch, an
approximately one day long Pre-Operations Readiness Review shall be
conducted at the Seller's facilities to review the ability of the
SATCOM Control Center and at least one of the TTAC's to support manned
operations.
5.25.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's the completion of the review and the establishment by
Seller of specific action items resulting from the review, the
milestone shall be deemed completed.
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.26 MILESTONE 26 SCC AND TTAC READY TO SUPPORT FIRST LAUNCH
5.26.1 MILESTONE DESCRIPTION
Upon the completion of the SCC operator Launch Readiness Training, an
approximately one day long Launch Readiness Review shall be conducted
at the Seller's facilities to review the operational status of the
available TTAC's and the SCC. Compliance with Motorola's internal
performance-related specification to support the very first launch
shall be presented. Operator certification compliance shall also be
presented.
5.26.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and establishment by Seller of
specific action items resulting from the review, this milestone shall
be deemed completed.
5.27 MILESTONE 27 PRELIMINARY SATELLITE SUBSCRIBER UNIT INTERFACE
SPECIFICATION
5.27.1 MILESTONE DESCRIPTION
This milestone encompasses the initial issuance of the preliminary
satellite subscriber unit <voice> interface specification.
Note: This specification will not have been validated by Seller, and
therefore, may be used for planning purposes only. Seller makes no
promises or guarantees either expressed or implied as to the accuracy
of the information included therein.
5.27.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed complete when Seller internally issues
the initial release of the satellite subscriber unit [voice] interface
specification and delivers it to Buyer.
5.28 MILESTONE 28 SPACE SYSTEM OPERATIONAL TESTING AND EVALUATION
(OT&E) TEST READINESS REVIEW
5.28.1 MILESTONE DESCRIPTION
An approximately one day long Space System OT&E Test Readiness Review
will be conducted at the Seller's facilities. This review is held to
demonstrate that planning, documentation, test equipment and personnel
are currently on hand so on-orbit Space System testing can commence at
the conclusion of initial launch. OT&E will include on-orbit test and
evaluations conducted at the inter-segment level using network
software/protocol, documentation, and personnel.
5.28.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.29 MILESTONE 29 ATP PROCEDURES
5.29.1 MILESTONE DESCRIPTION
The Space System Acceptance Test Plan (ATP) procedures describe the
tests, test methods and test limits in accordance with the Acceptance
Plan (Exhibit C).
5.29.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when the ATP procedures are internally
issued by Seller.
5.30 MILESTONE 30 INITIAL LAUNCH
5.30.1 MILESTONE DESCRIPTION
The launch of the first Space Vehicle(s)
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IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.30.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed upon intentional ignition of the Launch
Vehicle carrying the first Space Vehicle(s) intended for deployment as
part of the constellation.
5.31 MILESTONE 31 INITIAL LAUNCH TEST DATA REPORT
5.31.1 MILESTONE DESCRIPTION
The objective of this milestone is to provide an initial assessment of
the health and status of each of the first space vehicle(s) arriving
at a parking orbit following launch. This report will contain data
such as; SV telemetry runs, SV BIT data, and BER test data on the
primary and secondary SV-SCS links.
5.31.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed complete when the test report is
internally issued within Motorola.
5.32 MILESTONE 32 STEP I OF TABLE 3.7.1
5.32.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by six satellites
arranged in a cluster across three planes (two satellites per plane).
5.32.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step I of Table
3.7.1.
5.33 MILESTONE 33 FINAL TEST REPORT (INITIAL LAUNCH)
5.33.1 MILESTONE DESCRIPTION
The objective of this milestone is to provide the final test report on
the first Space Vehicle(s) arriving at a parking orbit following
launch. This report shall contain collected and summarized data and
all conclusions resulting from System level tests for the various test
configurations as identified in the OT&E Test Plan. Each test will be
clearly identified with supporting test procedures, identified test
equipment, appropriate drawings, and results attained.
5.33.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed complete when the test report is
internally issued within Motorola.
5.34 MILESTONE 34 STEP II OF TABLE 3.7.1
5.34.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by one plane of
satellites with no credit for the cluster satellites in plane two and
plane three.
5.34.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step II of Table
3.7.1.
5.35 MILESTONE 35 STEP III OF TABLE 3.7.1
5.35.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by two planes of
satellites with no credit for the cluster satellites in the third
plane.
5.35.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step III of Table
3.7.1.
Page 32
<PAGE> 72
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.36 MILESTONE 36 MCF CONSTRUCTION COMPLETE
5.36.1 MILESTONE DESCRIPTION
When all the necessary building facilities subsystems (heating,
ventilation, air conditioning, power and security) are operating such
that the MCF facility is ready to support the integration and test of
control and communications equipment as required to operate the
IRIDIUM Communications System, a formal review with the general
contractor shall be held on-site.
5.36.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific actions items resulting from the review this milestone
shall be deemed completed.
5.37 MILESTONE 37 SATELLITE SUBSCRIBER UNIT (VOICE) INTERFACE
SPECIFICATION COMPLETE
5.37.1 MILESTONE DESCRIPTION
This milestone encompasses the issuance of the Satellite Subscriber
Unit (Voice) Interface Specification.
5.37.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be deemed complete when Seller delivers to buyer
the Satellite Subscriber Unit (Voice) Interface Specification and it
is accepted by Buyer as provided by ARTICLE 8, Acceptance Criteria of
this contract.
5.38 MILESTONE 38 SPACE NODE TEST REPORT
5.38.1 MILESTONE DESCRIPTION
The objective of this milestone is to provide the final test report on
the space node. This report shall contain collected and summarized
data and all conclusions resulting from System level tests for the
various test configurations as identified in the OT&E Test Plan. Each
test will be clearly identified with supporting test procedures,
identified test equipment, appropriate drawings, and results attained.
Subjective conclusions included or referenced in each test will be
clearly identified.
5.38.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be considered complete when the test report is
internally issued within Motorola and is made available to the Buyer.
5.39 MILESTONE 38 STEP IV OF TABLE 3.7.1
5.39.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by three planes of
satellites with one satellite "out" in an outer plane.
5.39.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step IV of Table
3.7.1.
5.40 MILESTONE 40 BCF INTEGRATION & TEST COMPLETE
5.40.1 MILESTONE DESCRIPTION
Upon the completion of the integration and testing of all hardware and
software of the BCF required to control the IRIDIUM Communications
System, an approximately one day long Pre-Operations Readiness Review
shall be conducted at the Seller's facilties to review the ability of
the System Control Segment BCF to support manned operation of a fully
operational Constellation. Compliance with Motorola's internal
performance-related specification shall be presented.
Page 33
<PAGE> 73
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.40.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review, the milestone
shall be deemed completed.
5.41 MILESTONE 41 MCF INTEGRATION & TEST COMPLETE
5.41.1 MILESTONE DESCRIPTION
Upon the completion of the integration and testing of all the hardware
and software of the MCF required to control the IRIDIUM Communications
System, an approximately one day long Pre-Operations Readiness Review
shall be conducted at the Seller's facilities to review the ability of
the System Control Segment MCF to support manned operations of a fully
operational Constellation. Compliance with Motorola's internal
performance-related specification shall be presented.
5.41.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review and the establishment by Seller
of specific action items resulting from the review this milestone
shall be deemed completed.
5.42 MILESTONE 42 STEP V OF TABLE 3.7.1
5.42.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by four planes of
satellites with one satellite out in an outer plane.
5.42.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step V of Table
3.7.1.
5.43 MILESTONE 43 BCF FULLY OPERATIONAL
5.43.1 MILESTONE DESCRIPTION
An approximately one day long Operations Readiness Review shall be
conducted at the Seller's facilities to review the operational status
of the System Control Segment's Backup Control Facility. System
requirement compliance to support the operation of the IRIDIUM
Communications System shall be presented. Operator certification
compliance shall also be presented.
5.43.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review, establishment by Seller of
specific action items, and seller's determination that sufficient
operational capability exists, milestone shall be deemed completed.
5.44 MILESTONE 44 STEP VI OF TABLE 3.7.1
5.44.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by five planes of
satellites with one satellite out in an outer plane.
5.44.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step VI of Table
3.7.1.
Page 34
<PAGE> 74
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
5.45 MILESTONE 45 SCS FULLY OPERATIONAL
5.45.1 MILESTONE DESCRIPTION
Upon the completion of the pre-operational phase of the Master Control
Facility and the remaining TTAC facility, an approximately one day
long Operations Readiness Review shall be conducted at the Seller's
facilities to review the operational status of the System Control
Segment. System requirement compliance to support the operation of
the IRIDIUM Communications System shall be presented. Operator
certification compliance shall also be presented.
5.45.2 MILESTONE ACCEPTANCE CRITERIA
Upon Seller's completion of the review, establishment by Seller of
specific action items, and seller's determination that sufficient
operational capability exists, the milestone shall be deemed
completed.
5.46 MILESTONE 46 STEP VII OF TABLE 3.7.1
5.46.1 MILESTONE DESCRIPTION
This milestone represents the coverage provided by six planes of
satellites with one satellite out in an inner plane.
5.46.2 MILESTONE ACCEPTANCE CRITERIA
This milestone is completed when Seller achieves the Space System
coverage levels for this milestone as referred to in Step VII of Table
3.7.1.
5.47 MILESTONE 47 COMPLETION OF TEST PLAN (FOC)
5.47.1 MILESTONE DESCRIPTION
This milestone encompasses the completion of the final incremental
testing of the Space System in accordance with the Acceptance Plan,
Exhibit C.
5.47.2 MILESTONE ACCEPTANCE CRITERIA
This milestone shall be considered complete upon the earlier of
Buyer's Acceptance of the Space System as provided by Paragraph C of
Article 8, Acceptance Criteria, or, Seller's successful completion of
the Final Acceptance Program as defined in Section 4 of the Acceptance
Plan (Exhibit C) evidencing compliance of the Space System with the
specific criteria of this Statement of Work listed in Table 2.2-1 of
the Acceptance Plan.
Page 35
<PAGE> 75
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
6.0 AVERAGE ACTUAL SERVICE PROVIDED
The Seller is responsible for demonstrating the operation of the
IRIDIUM Space System commencing 90 days prior to anticipated FOC or at
a mutually agreed upon date. This demonstration shall consist of
determining the Average Actual Service Provided (AASP) by the Space
System which includes operating the System Control Segment (SCS)
facilities in accordance with the Space System Operations Plan. The
AASP meansurements shall be made by special test equipment provided by
the Seller. The special test equipment shall provide the necessary
signal formats and calibrated RF signal measurement capability.
6.1 The AASP provides two separate measures of the network performance
provided to a hypothetical subscriber randomly located anywhere on the
earth's surface assuming the * coverage specified in Step VII
of Table 3.7.1 has been achieved. Inasmuch as the 90 day period for
computing the AASP for purposes of this Contract will likely begin
prior to Step VII of Table 3.7.1 being achieved, for purposes of
computing the average AASP over the 90 day period, until Step VII of
Table 3.7.1 is achieved any satellites not yet launched into their
final designated orbital location in the constellation shall be
treated as having been so launched and as being full operational with
respect to computing the AASP factors. The AASP data and related
calculations include separate calculations of factors related to the
coverage provided to the subscriber by the Space System L-Band
equipment as well as factors related to the Space System's capability
to meet the capacity requirements of this contract. Contractor's
interpretation of such data and measurements shall be conclusive for
purposes of the computation of the AASP percentage under this Contract
absent manifest error, gross negligence or fraud. The AASP
percentages shall be computed on a quarterly basis using the following
formulae:
X = (A-B)/A
Y = (A-C)/A
X = Coverage factor during the evaluation period.
Y = Capacity factor during the evaluation period.
A = The total number of seconds in the period. This will be
determined by multiplying 60 seconds per minute times 60 minutes per
hour times 24 hours per day (86,400 seconds) times number of days in
the period.
B = a factor that is intended to determine the capability of the Space
System to provide a L-Band link to a user within specified tolerances
for the period of performance. B is calculated as described in
Paragraph 6.2.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 36
<PAGE> 76
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
C = a factor that is intended to determine the capability of the Space
System to meet the specified system capacities based on the equipment
downtimes of the individual space vehicle crosslinks, the space
vehicle gateway/SCS links, and the space vehicle channel capacity. C
is calculated as described in Paragraph 6.4.
6.2 CALCULATION OF "B" FACTOR:
Procedure:
1) From telemetry, built-in-test results, or periodic monitoring
determine the individual space vehicle antenna beams with suspected
degraded performance and the time that the degraded performance was
initially detected. Each antenna beam cluster shall be monitored for
degradation a minimum of once per day.
2) Verify and quantify the extent of degradation of each antenna beam
identified in step 1) using a calibrated test set. The downlink
degradation shall be measured in terms of Power Flux Density (PFD)
while uplink is measured in terms of Bit Error Rate (BER) for the
nominal subscriber link per Table 6.2.1. The BER calculation shall be
made on a frame by frame basis and averaged over an antenna beam
pattern and power level. BER and PFD data will be recorded by
satellite and individual beam pattern to enable AASP calculations.
The percent degradation used in the AASP calculation for each antenna
beam shall be as shown in Table 6.2.1.
TABLE 6.2.1
DEGRADATION LEVELS FOR USE IN CALCULATING "B"
DOWNLINK DEGRADATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERFORMANCE LEVEL PFDdbW/sq meter PERCENT DEGRADATION
- --------------------------------------------------------------------------------
<S> <C> <C>
* *
*
- --------------------------------------------------------------------------------
*
</TABLE>
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 37
<PAGE> 77
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
UPLINK DEGRADATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERFORMANCE LEVEL EIRP DBW PERCENT DEGRADATION
- --------------------------------------------------------------------------------
<S> <C> <C>
* *
*
- --------------------------------------------------------------------------------
</TABLE>
*
3) The degradation percentage for each individual antenna beam is
determined by averaging the uplink and downlink degradation
percentages.
4) Using an astro-dynamics orbital model calculate the number of
seconds that a hypothetical user at * degrees latitude is
covered by each degraded antenna beam. The individual antenna beam
coverage patterns to be used in this calculation shall be defined in
the model defined by Seller and presented at the Space System Critical
Design Review. The resulting coverage seconds for each degraded
antenna beam shall be determined by a weighted average of the
resulting data points. The weighted average shall be calculated using
the equation shown below.
*
(Note: If the system operator has adjacent beams available to
partially cover the degraded coverage area and reconfigures the system
accordingly this will reduce the degrade coverage seconds beginning at
the time the reconfiguration takes place.)
5) Each of the coverage seconds for each antenna beam in the
constellation are then summed together weighted by the percentage
degradations calculated in step 3) to determine the total degraded
coverage seconds to be used in the calculation of the coverage factor
(X). The degraded coverage seconds calculated in this step are equal
to "B".
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 38
<PAGE> 78
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
6.3 MINIMUM COVERAGE FACTOR
The system shall meet a minimum coverage factor (X) of * as
calculated in accordance with paragraphs 6.0 - 6.6 of the Statement of
Work, during the 90 days prior to the scheduled FOC date.
6.4 CALCULATION OF "C" FACTOR:
1) Channel Capacity Degradation: Using a model defined by Seller and
presented at the Space System Critical Design Review calculate the
capability of each of the antenna beams on each space vehicle in the
operational constellation to support the Capacity per Beam Traffic
Channel Pattern specified in SOW Paragraph 3.3-2. (The Space System
shall provide a maximum of * concurrent L-Band full duplex traffic
channels in a single beam pattern.) This calculation shall be
performed upon the detection of any failures that affect the
capability to support the specified capacity. The failures that
affect individual space vehicle antenna beam capacity include
switching failures, modem failures, processor failures, etc. A
complete listing of the applicable failures, method of detection, and
model description will be provided at the Space Segment Critical
design review. Calculate the percentage degradation to be used in the
capacity factor (Y) calculations for each antenna beam based on the
calculated traffic channel subscriber capacity per beam as shown in
Table 6.3-1.
TABLE 6.3-1
TRAFFIC CHANNEL CAPACITY PER BEAM DEGRADATION PERCENTAGES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VOICE SUBSCRIBER CAPACITY DEGRADATION PERCENTAGE USED
PER BEAM IN AASP CALCULATION
- --------------------------------------------------------------------------------
<S> <C>
* *
- --------------------------------------------------------------------------------
</TABLE>
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 39
<PAGE> 79
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
2) Using an astro-dynamics orbital model calculate the number of
seconds that a hypothetical user at * degrees
latitude is covered by each antenna beam with degraded capacity.
The individual antenna beam coverage patterns to be used in this
calculation shall be defined in the model defined by Seller and
presented at the Space System Critical Design Review. The resulting
coverage seconds for each degraded antenna beam shall be determined
by a weighted average of the resulting data points. The weighted
average shall be calculated using the equation shown below.
*
(Note: If the system operator has adjacent beams available to
partially cover the degraded coverage area and reconfigures the system
accordingly this will reduce the degraded coverage seconds beginning
at the time the reconfiguration takes place.)
3) Each of the coverage seconds for each antenna beam in the
constellation are then summed together weighted by the percentage
degradations calculated in step 1) to determine the total degraded
coverage to be used in the calculation of the capacity factor (Y).
The degraded coverage seconds for each antenna beam cannot exceed 100%
of the total coverage seconds for that beam. For example if the beam
has totally failed the coverage as calculated in Paragraph 6.2, no
additional degradation is taken for beam capacity for that beam.
4) Crosslink Degradation: Identify critical failures in the space
vehicle crosslink subsystems and the time duration of the critical
failure. (Note: a critical failure is one that causes the associated
crosslink to become non-operational) Calculate the percentage
degradation for each space vehicle based on the percentages shown in
Table 6.3-2.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 40
<PAGE> 80
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
TABLE 6.3-2
CROSSLINK DEGRADATION PERCENTAGES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
NO. OF IN-PLANE NO. OF CROSS-PLANE PERCENT
SV PLANE CROSSLINK FAILURES CROSSLINK FAILURES DEGRADATION
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
* * * *
- ----------------------------------------------------------------------------------------
</TABLE>
5) Space Vehicle to SCS/Gateway Link Degradation: Identify critical failures
in the space vehicle gateway subsystems and the time duration of the critical
failure. (Note: a critical failure is one that causes the associated
Gateway/SCS link to become non-operational) Calculate the percentage
degradation for each space vehicle based on the percentages shown in Table
6.3-3.
TABLE 6.3-3
SV GATEWAY ANTENNA DEGRADATION PERCENTAGES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
NO. OF SV GATEWAY PERCENT DEGRADATION
ANTENNA FAILURES
- -----------------------------------------------------------------------
<S> <C>
* *
- -----------------------------------------------------------------------
</TABLE>
6) Total SV K-Band Link Degradation: For each space vehicle the percent total
degradation for crosslinks and Gateway/SCS failures will then be calculated by
summing the individual degradations determined in steps 4) and 5). If the sum
exceeds 100%, it will be deemed to be 100%.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 41
<PAGE> 81
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
7) Using an astro-dynamics orbital model calculate the number of seconds that
a hypothetical user at * degrees latitude is covered by each
space vehicle with failed K-Band links. The individual space vehicle
coverage patterns to be used in this calculation shall be defined in the model
presented by Seller at the Space System Critical Design Review. The resulting
coverage seconds for each degraded space vehicle shall be determined by a
weighted average of the resulting data points. The weighted average shall be
calculated using the equation shown below.
*
(Note: If the system operator has adjacent beams available to partially cover
the degraded coverage area and reconfigures the system accordingly this will
reduce the degraded coverage seconds beginning at the time the reconfiguration
takes place.)
8) Each of the coverage seconds for each degraded space vehicle are then
summed together weighted by the percentage degradations calculated in step 6)
to determined the total degraded coverage seconds for K-Band link failures to e
used in the calculation of the capacity factor (Y).
9) The total degraded coverage seconds is the sum of the degraded coverage
seconds calculated in steps 3) and 8). The degraded coverage seconds
calculated in this step are equal to "C".
6.5 MINIMUM CAPACITY FACTOR
The system shall meet a minimum Capacity Factor (Y) of * as
calculated in accordance with paragraphs 6.0 - 6.6 of the Statement of
Work, during the * prior to the scheduled FOC date.
6.6 The following examples illustrate the application of the formulas in
this section to five (5) hypothetical factual situations.
6.6.1 Example 1 (AASP Coverage Factor Example)
*
6.6.2 Example 2 (AASP Coverage Factor Example)
*
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 42
<PAGE> 82
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
*
6.6.3 Example 3 (AASP Coverage Factor Example)
*
6.6.4 Example (AASP Capacity Factor Example)
*
6.6.5 Example (AASP Coverage and Capacity Factors Example)
*
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 43
<PAGE> 83
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
*
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 44
<PAGE> 84
IRIDIUM Space System Contract
EXHIBIT B
Statement of Work
*
7.0 DOCUMENTATION CONTROL
The seller shall develop a documentation control system to
maintain control of all final design documents to allow the
orderly development of the IRIDIUM Communications System.
Documents contained within the seller's document control system
shall be available for review by the buyer upon reasonable notice
and on a non-interference basis.
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 45
<PAGE> 85
IRIDIUM Space System Contract
EXHIBIT C
ACCEPTANCE PLAN
1.0 INTRODUCTION
This exhibit details the final Acceptance Test program that is
intended to be the basis for the IRIDIUM(R) Space System acceptance.
The final acceptance test program consists of a test and analysis
program that includes simulations, analyses, and developmental test
activities. The final acceptance test program will make use of an
orbit self-test diagnostics and Space Segment and System Control
Segment lower level test results to confirm operation of all elements
of the Space System. See Exhibit B, Statement of Work, for the
glossary of terms used in this document. Seller's interpretation of
the testing, analyses, inspection and demonstrations conducted by
Seller shall be conclusive for purposes of determining compliance with
the specified provisions of the Statement of Work absent manifest
error, gross negligence or fraud.
2.0 ACCEPTANCE PROGRAM OVERVIEW
2.1 Test Philosophy
Final acceptance testing of the Space System will take place
incrementally. Testing will begin when the Backup Control
Facility, two associated TTAC Facilities and a partial
constellation are available. Acceptance testing will be performed
and analysis completed to verify that the System Control
Facilities and space vehicles operate as designed and as
previously documented by other testing. As new Space Vehicles are
inserted in the Constellation they will be tested to verify their
performance before entering an operational state in the
constellation. All acceptance testing will be performed utilizing
operational Space System hardware and software and gateway and
subscriber unit simulators.
The acceptance of the Master Control Facility and the remaining
TTAC Facility shall be accomplished by employing the Master
Control Facility and the remaining TTAC Facility during the
incremental acceptance of one of the Space Vehicles.
During the quarter preceding FOC the data required to support the
calculation of the Average Actual Service Provided (AASP) will be
accumulated for presentation as part of the IRIDIUM Space System
Acceptance report at FOC.
2.2 Verification Matrix
A verification matrix listing each SOW requirement and the method
of verification is included as Table 2.2-1.
The methods of verification include:
A - Analysis
T - Test
D - Demonstration
I - Inspection
A definition of each method of verification is included in the
glossary of terms, section 2.2 of the SOW.
Page 1
<PAGE> 86
IRIDIUM Space System Contract
EXHIBIT C
ACCEPTANCE PLAN
Table 2.2.1 Acceptance Plan Verification Matrix
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SOW TEST
PARA. VERIF. PLAN
NO. REQUIREMENT TITLE METHOD PARA. COMMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------
3.0 CONSTELLATION REQUIREMENTS
--------------------------------------------------------
3.1 CONSTELLATION CONFIGURATION
- -----------------------------------------------------------------------------------------------------------
3.1-1 PROVIDE CONTINUOUS COVERAGE A 5.16.3
- -----------------------------------------------------------------------------------------------------------
3.1-2 ANTENNA BEAMS A 5.16.2 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.1-3 NUMBER OF INDEPENDENT LINKS PER SV A 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.1-4 CONSTELLATION-SCS MINIMUM ELEVATION ANGLES D 5.10 One time only
- -----------------------------------------------------------------------------------------------------------
3.1-5 SIMULTANEOUS OPERATION OF FEEDER LINKS D 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.1-6 CROSSLINK COMMUNICATIONS D 5.9
- -----------------------------------------------------------------------------------------------------------
3.1-7 CROSSPLANE CROSSLINK OPERATIONAL LIMITATIONS D 5.9
--------------------------------------------------------
3.2 COMMUNICATIONS REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------
3.2-1 CONSTELLATION-ISU RF LINK FOR MD AND MCD D 5.12.1
- -----------------------------------------------------------------------------------------------------------
3.2-2 CONSTELLATION SUBSCRIBER UPLINK FREQUENCY D 5.12.1
- -----------------------------------------------------------------------------------------------------------
3.2-3 CONSTELLATION SUBSCRIBER DOWNLINK FREQUENCY D 5.12.1
- -----------------------------------------------------------------------------------------------------------
3.2-4 VOICE/DATA TRAFFIC CHANNEL BURST POWER FLUX A 5.5
DENSITY
- -----------------------------------------------------------------------------------------------------------
3.2.4A DOWNLINK VOICE/DATA TRAFFIC CHANNEL MAXIMUM D 5.5
BER
- -----------------------------------------------------------------------------------------------------------
3.2-5 VOICE/DATA/ACQUISITION CHANNEL UPLINK C/N A 5.5
- -----------------------------------------------------------------------------------------------------------
3.2.5A UPLINK VOICE/DATA TRAFFIC CHANNEL MAXIMUM BER D 5.5
- -----------------------------------------------------------------------------------------------------------
3.2-6 PAGING CHANNEL BURST POWER FLUX DENSITY A 5.5
- -----------------------------------------------------------------------------------------------------------
3.2.6A PAGING CHANNEL MAXIMUM BER D 5.5
- -----------------------------------------------------------------------------------------------------------
3.2-7 RING ALERT CHANNEL BURST POWER FLUX DENSITY A 5.5
- -----------------------------------------------------------------------------------------------------------
3.2.7A RING ALERT CHANNEL MAXIMUM BER D 5.5
- -----------------------------------------------------------------------------------------------------------
3.2-8 SUBSCRIBER LINK POWER CONTROL D 5.5
- -----------------------------------------------------------------------------------------------------------
3.2-9 GEOLOCATION TIMELINESS/ACCURACY A 5.11
- -----------------------------------------------------------------------------------------------------------
3.2-10 SV-SV LINK FREQUENCY D 5.12.2
- -----------------------------------------------------------------------------------------------------------
3.2-11 CONSTELLATION-GW RF LINK D 5.12.2
- -----------------------------------------------------------------------------------------------------------
3.2-12 CONSTELLATION-SCS RF LINKS D 5.12.2
- -----------------------------------------------------------------------------------------------------------
3.2-13 PROVIDE SECONDARY COMM SYSTEM D 5. 2
- -----------------------------------------------------------------------------------------------------------
3.2-14 UPLINK FREQUENCY D 5.12.2
- -----------------------------------------------------------------------------------------------------------
3.2-15 DOWNLINK FREQUENCY D 5.12.2
- -----------------------------------------------------------------------------------------------------------
3.2-16 FEEDER LINK POWER CONTROL D 5.12.2
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
3.3 CAPACITY
- -----------------------------------------------------------------------------------------------------------
3.3-1 PAGING CAPACITY A 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.3-2 VOICE SUBSCRIBER CAPACITY PER BEAM PATTERN A 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.3-3 PEAK CAPACITY PER ANTENNA BEAM CLUSTER A 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.3-4 PEAK SUBSCRIBER LINK CAPACITY PER SV A 5.16.1 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
3.3-5 AVERAGE SUBSCRIBER LINK TRAFFIC LOAD PER SV A 5.16.1 Based on SV Data
PER ORBIT
- -----------------------------------------------------------------------------------------------------------
3.3-6 CONSTELLATION-GATEWAY CAPACITY D 5.10
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
3.4 CONSTELLATION CONTROL
- -----------------------------------------------------------------------------------------------------------
3.4-1 UNAUTHORIZED COMMAND ATTEMPTS D 5.13
- -----------------------------------------------------------------------------------------------------------
3.4-2 MONITOR MISSION CRITICAL PARAMETERS D 5.2
- -----------------------------------------------------------------------------------------------------------
3.4-3 FAULT RESPONSES D 5.2
- -----------------------------------------------------------------------------------------------------------
3.4-4 RECONFIGURATION DUE TO NODE/LINK FAILURE D 5.13
- -----------------------------------------------------------------------------------------------------------
3.4-5 CONDUCT PM WITHOUT DEGRADING PERFORMANCE A
- -----------------------------------------------------------------------------------------------------------
3.4-6 PROCESS COMMANDS BY TYPE D 5.2
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
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EXHIBIT C
ACCEPTANCE PLAN
Table 2.2.1 Acceptance Plan Verification Matrix
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SOW TEST
PARA. VERIF. PLAN
NO. REQUIREMENT TITLE METHOD PARA. COMMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
3.4-7 SV COMMAND AUTHENTICATION D 5.13
- -----------------------------------------------------------------------------------------------------------
3.4-8 UPLINK AND LOAD SOFTWARE UPON COMMAND D 5.13
- -----------------------------------------------------------------------------------------------------------
3.4-9 ROUTE TELEMETRY TO THE SCS D 5.1
- -----------------------------------------------------------------------------------------------------------
3.4-10 RESPOND TO SCS COMMANDS FOR SPECIFIC DATA D 5.2
- -----------------------------------------------------------------------------------------------------------
3.4-11 REPORT FAILED COMMAND ATTEMPTS TO SCS D 5.2
- -----------------------------------------------------------------------------------------------------------
3.4-12 RECEIVE COMMANDS FROM SCS D 5.2
- -----------------------------------------------------------------------------------------------------------
3.4-13 MESSAGE ROUTING D Demo during other
testing
- -----------------------------------------------------------------------------------------------------------
3.4-14 SV DE-BOOST A 5.3
- -----------------------------------------------------------------------------------------------------------
3.4-15 SAFE MODE D 5.2
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
3.5 CONSTELLATION OPERATIONS
- -----------------------------------------------------------------------------------------------------------
3.5-1 GEOGRAPHIC BASED SERVICE RESTRICTIONS D 5.11
- -----------------------------------------------------------------------------------------------------------
3.5-2 PROCESS CHANNEL REQUEST D 5.16.1
- -----------------------------------------------------------------------------------------------------------
3.5-3 HANDOFF BETWEEN ANTENNA BEAMS D 5.8
- -----------------------------------------------------------------------------------------------------------
3.5-4 CONSTELLATION CONTRIBUTION TO REGISTRATION T 5.7
ACTIVITY
- -----------------------------------------------------------------------------------------------------------
3.5-5 CONSTELLATION DELAY FOR CALL SETUP A 5.7
- -----------------------------------------------------------------------------------------------------------
3.5-6 TOTAL SV DELAY FOR VOICE COMMUNICATIONS A 5.6
- -----------------------------------------------------------------------------------------------------------
3.5-7 PROVIDE EIGHT LEVELS OF PRECEDENCE D 5.7
- -----------------------------------------------------------------------------------------------------------
3.5-8 CALL IMAGE DATA TO GW D 5.8
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
3.6 ENVIRONMENTAL REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------
3.6-1 AVOID INTERFERENCE WITH OTHER SYSTEMS A
- -----------------------------------------------------------------------------------------------------------
3.6-2 ORBITAL DEBRIS A
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
3.7 COVERAGE REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------
3.7-1 EARLY CONSTELLATION COVERAGE A 5.16.3 Based on SV Data
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
4.0 SCS REQUIREMENTS
--------------------------------------------------------
4.1 MONITOR AND CONTROL REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------
4.1-1 MAINTAIN CONSTELLATION FAULT RESPONSE CRITERIA D 5.1
- -----------------------------------------------------------------------------------------------------------
4.1-2 REQUEST DIAGNOSTICS D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-3 PROCESS TELEMETRY D 5.1
- -----------------------------------------------------------------------------------------------------------
4.1-4 GENERATE CONSTELLATION COMMANDS D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-5 AUTHENTICATION COMMAND COUNT D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-6 GENERATE SINGLE OR STACKED COMMANDS D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-7 COMMAND DESIGNATION D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-8 GENERATE EPHEMERIS FOR SYSTEM OPS D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-9 ORBIT DETERMINATION D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-10 KNOWLEDGE BOX D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-11 PLAN MANUEVERS AND GENERATE COMMANDS D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-12 CONTROL BOX D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-13 SPARED SV CLOCK ACCURACY A
- -----------------------------------------------------------------------------------------------------------
4.1-14 GENERATE DTOA VALUES D 5.4
- -----------------------------------------------------------------------------------------------------------
4.1-15 COMMANDS TO MAINTAIN PARKING ORBIT D 5.3
- -----------------------------------------------------------------------------------------------------------
4.1-16 MANAGE CONSTELLATION POWER D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-17 PREDICT CONSTELLATION THERMAL CONDITIONS D 5.1
- -----------------------------------------------------------------------------------------------------------
4.1-18 COMMAND SV TO ORBIT D 5.3
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
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EXHIBIT C
ACCEPTANCE PLAN
Table 2.2.1 Acceptance Plan Verification Matrix
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SOW TEST
PARA. VERIF. PLAN
NO. REQUIREMENT TITLE METHOD PARA. COMMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
4.1-19 PERFORM ON ORBIT TESTING D 5.2
- -----------------------------------------------------------------------------------------------------------
4.1-20 LOCATE SV IN ANOMALOUS OR UNKNOWN ORBITS A
- -----------------------------------------------------------------------------------------------------------
4.1-21 MANAGE LAUNCH PLANS & SCHEDULES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-22 DETECT NODE/LINK FAILURES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-23 ESTABLISH ALT ROUTES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-24 SET MAX NUMBER OF CROSSLINKS TRAVERSED D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-25 CONTROL ANTENNA BEAM ACTIVATION D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-26 CONTROL OF OPERATIONAL ELEMENTS D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-27 RECONFIGURATION DUE TO MULTIPLE FAILURES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-28 MANAGE PSTN PHONE NUMBER TO GW MAP D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-29 MANAGE PHONE NUMBER TO GW MAP D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-30 ASSIGN CALL SETUP RESPONSIBILITIES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-31 REASSIGN CALL SETUP SERVICE AREAS D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-32 MULTIPLE GW FAILURES A
- -----------------------------------------------------------------------------------------------------------
4.1-33 UPDATE PHONE NUMBER MAP A
- -----------------------------------------------------------------------------------------------------------
4.1-34 MAP UPDATE FOR MULTIPLE FAILURES A
- -----------------------------------------------------------------------------------------------------------
4.1-35 SCHEDULE FEEDER LINKS A
- -----------------------------------------------------------------------------------------------------------
4.1-36 MANAGE SV DATA A 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-37 PROVIDE CAPABILITY TO TEST ALL LINKS D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-38 MASTER SERVICE DENIAL LIST D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-39 MANAGE SERVICE RESTRICTIONS D 5.11
- -----------------------------------------------------------------------------------------------------------
4.1-40 MAINTAIN GW FAULT RESPONSE CRITERIA D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-41 REQUEST GW DIAGNOSTICS A
- -----------------------------------------------------------------------------------------------------------
4.1-42 MONITOR SCS CRITICAL PARAMETERS D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-43 EXECUTE FAULT RESPONSES D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-44 AVOID INTERFERENCE WITH OTHER SYSTEMS A
- -----------------------------------------------------------------------------------------------------------
4.1-45 GRACEFUL DEGRADATION A
- -----------------------------------------------------------------------------------------------------------
4.1-46 MANAGE SOFTWARE/HARDWARE CONFIGURATION D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-47 SV-SCS CHANNEL CAPACITY D 5.10
- -----------------------------------------------------------------------------------------------------------
4.1-48 MONITOR RECEIVED DATA AND GENERATE ALARMS D 5.1
- -----------------------------------------------------------------------------------------------------------
4.1-49 SYSTEM MASTER CLOCK D 5.4
- -----------------------------------------------------------------------------------------------------------
4.1-50 MISSION CONSTELLATION CLOCK ACCURACY D 5.4
- -----------------------------------------------------------------------------------------------------------
4.1-51 SV-SCS PRIMARY DOWNLINK SCD BER A 5.10
- -----------------------------------------------------------------------------------------------------------
4.1-52 SV-SCS SECONDARY DOWNLINK SCD BER A 5.10
- -----------------------------------------------------------------------------------------------------------
4.1-53 UNAUTHORIZED COMMAND ATTEMPTS D 5.13
- -----------------------------------------------------------------------------------------------------------
4.1-54 MINIMIZE ORBITAL DEBRIS A
- -----------------------------------------------------------------------------------------------------------
4.1-55 PHYSICAL AND COMPUTER SECURITY D 5.13
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
4.2 INTERFACES
- -----------------------------------------------------------------------------------------------------------
4.2-1 PROVIDE SV KNOWLEDGE BOX UPDATES D 5.3
- -----------------------------------------------------------------------------------------------------------
4.2-2 GW-SCS CALL DETAIL RECORD TRANSMISSION FREQUENCY D 5.13
- -----------------------------------------------------------------------------------------------------------
4.2-3 EXCHANGE SCD WITH GATEWAYS D Demonstrate at SCS
level
- -----------------------------------------------------------------------------------------------------------
4.2-4 EXCHANGE NOD WITH GATEWAYS D Demonstrate at SCS
level
- -----------------------------------------------------------------------------------------------------------
4.2-5 SATELLITE EPHEMERIS DATA FOR RA A
- -----------------------------------------------------------------------------------------------------------
4.2-6 RADIO ASTRONOMY SCHEDULING INTERFACE A
- -----------------------------------------------------------------------------------------------------------
4.2-7 SV-SCS LINK CAPACITY D 5.2
- -----------------------------------------------------------------------------------------------------------
4.2-8 TRANSPARENCY OF HANDOFFS D 5.8
- -----------------------------------------------------------------------------------------------------------
4.2-9 SV-SCS PRIMARY RF LINK D 5.2
- -----------------------------------------------------------------------------------------------------------
4.2-10 SV-SCS SECONDARY RF LINK D 5.2
- -----------------------------------------------------------------------------------------------------------
4.2-11 ADJUST EIRP D Demonstrate at SCS
level
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
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EXHIBIT C
ACCEPTANCE PLAN
Table 2.2.1 Acceptance Plan Verification Matrix
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SOW TEST
PARA. VERIF. PLAN
NO. REQUIREMENT TITLE METHOD PARA. COMMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
4.2-12 MEASURE/REPORT RECEIVED POWER D 5.2
- -----------------------------------------------------------------------------------------------------------
4.2-13 SCS-GW FEEDER LINK D 5.13
- -----------------------------------------------------------------------------------------------------------
4.2-14 SCS-GW SECURE COMMERCIAL COMM LINK D Demonstrate at SCS
level
- -----------------------------------------------------------------------------------------------------------
4.2-15 SCS-SPACE LAUNCH OPERATIONS INTERFACE D Pre-Launch Tests
- -----------------------------------------------------------------------------------------------------------
4.2-16 SCS UPLINK FREQUENCY D 5.12.2
- -----------------------------------------------------------------------------------------------------------
4.2-17 SCS DOWNLINK FREQUENCY D 5.12.2
- -----------------------------------------------------------------------------------------------------------
4.2-18 PROVIDE TIME OFFSETS D 5.13
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------
4.3 MAINTAINABILITY REQUIREMENTS
- -----------------------------------------------------------------------------------------------------------
4.3-1 CONDUCT PM WITHOUT DEGRADING PERFORMANCE A
- -----------------------------------------------------------------------------------------------------------
4.3-2 DIAGNOSTICS WITHOUT SERVICE DEGRADATION A
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
6.1 AVERAGE ACTUAL SERVICE PROVIDED A 4.0
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2.3 Test Failures/Retest Philosophy
Any of the Acceptance tests or demonstrations that do not meet the
specified requirements will be formally documented as a test
discrepancy. On the occurrence of a test discrepancy the testing
will proceed in parallel with an investigation to determine the
probable cause and the planned disposition.
Failed space vehicles identified during the initial phases of the
Acceptance program will be de-orbited only if they meet the Seller
defined de-orbit criteria. Replacement of space vehicles during
the final phase of the Acceptance program will be as determined by
Seller as required to meet the AASP criteria defined in SOW
Paragraph 6.0.
Failures due to design deficiencies may require redesign of the
affected hardware or software or a formally negotiated change to
the applicable SOW requirement. Retest of any redesigned hardware
or software shall be limited to a retest of the portion of the
original procedure that failed and any portion that was affected
by the changes made to the hardware or software.
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ACCEPTANCE PLAN
3.0 ACCEPTANCE PROGRAM PHASE DESCRIPTIONS
3.1 Space Node
The first phase of the Acceptance Program will encompass the
testing associated with a Space Node. A Space Node configuration
consists of one Space Vehicle capable of utilizing its forward and
backward crosslinks, and that same Space Vehicle capable of
utilizing its plane to plane crosslink with other Space Vehicles.
The types of Acceptance tests to be run to test Space Node are
shown in Table 3.1-1.
Table 3.1-1
Acceptance Tests to be Performed at Each Test Phase
<TABLE>
<CAPTION>
-------------------------------------------------
Test Phase
- ------------------------------------------------------------------------------------------
Test Plan Test Type Segment Test Space Node Incremental
Para. No. Acceptance
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.1 Telemetry Processing X X
5.2 Command and Control X X
5.3 Flight Dynamics X X
5.4 System Synchronization X
5.5 L-Band Characteristics X X
5.6 Time Delay X X
5.7 Call Setup X X
5.8 Handoffs X
5.9 SV Crosslink X
5.10 Feeder Links X X
5.11 Geolocation X
5.12 Frequency of Operation X X
5.13 System Operations X
5.15 Interface Compatibility X
5.16 Lower Level Test Data Rqmnts X
- ------------------------------------------------------------------------------------------
</TABLE>
More detailed discussions on each of these test types is included
in Section 5.0.
Additional space vehicles or SCS facilities added after the
completion of Space Node testing will undergo the incremental
acceptance testing as defined in paragraph 3.2 below. Space
System tests shall be limited to those necessary to constitute
Space Vehicle acceptance and shall not retest existing Space
Vehicles in the network directly.
3.2 Incremental Acceptance
Incremental Acceptance testing refers to intersegment testing that
will be conducted when additional space vehicles or SCS facilities
(Master Control Facility (MCF), TTAC West) are integrated into the
Space System after the completion of the Space Node testing. The
types of tests to be run during Incremental Acceptance are shown
in Table 3.1-1. More detailed
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EXHIBIT C
ACCEPTANCE PLAN
discussions on each of these test types is included in Section
5.0. Acceptance of the Master Control Facility and remaining TTAC
Facility shall occur upon the successful addition of any Space
Vehicle to the Constellation using the Master Control Facility and
remaining TTAC Facility for control of the network and
constellation during any such Space Vehicle incremental acceptance
Tests.
4.0 ACCEPTANCE COMPLETION
Completion of milestone 47 and acceptance of the Space System occurs
on the date of Seller's successful completion of all tests required in
paragraphs 3.1 and 3.2 of this exhibit demonstrating compliance with
the specific listed criteria of the Statement of Work, the completion
of a coverage analysis that verifies the coverages listed as step VII
of Table 3.7.1 of the SOW, and calculation of the Average Actual
Service Provided (AASP) coverage and capacity factors of at least *
for a ninety (90) day period preceding such date. The calculation of
the AASP is as described in Section 6.0 of the Statement of Work. The
Acceptance Completion will include the preparation of an IRIDIUM Space
System Acceptance report. The IRIDIUM Space System Acceptance report
shall contain collected and summarized data that has been compared to
the functional requirements. The report will also include the results
from network analyses and other conclusions resulting from this
acceptance testing.
5.0 DEFINITION OF TEST TYPES - The specific procedures to be employed in
the conducting of these tests shall be specified in the ATP procedures
to be developed by Seller.
5.1 Telemetry Processing
During this test the control facility will be operating in
primarily a passive role where it's primary function is to receive
and process the critical constellation telemetry data. The
digital telemetry data collected will be compared to maximum and
minimum limits. Time elapsed graphics will also be available for
display.
5.2 Command and Control
The Command and Control test will be executed on all Space
Vehicles. During this test the control facility will exercise a
Seller defined set of remote commands, beginning with the least
critical ones and verify the correct execution. During this test
selected Built-in-Test routines will be executed by the Space
Vehicle and the results reviewed at the control facility.
Commands supporting the safe mode operation will also be
exercised.
5.3 Flight Dynamics
The purpose of this test will be to demonstrate the capability to
determine the satellite position and perform any necessary station
keeping maneuvers. During this test periodic ranging measurements
will be made
- ----------------------------------
* Information has been omitted and filed separately with the Commission
pursuant to Rule 406 of the Securities Act of 1933.
Page 7
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EXHIBIT C
ACCEPTANCE PLAN
and the data will be recorded in the control center. After
sufficient data has been collected such that an accurate estimate
of the orbit can be made the next orbital maneuver will be planned
and executed. The space vehicle response will then be analyzed to
ensure the result is within the expected limits.
5.4 System Synchronization
System Synchronization shall be verified by collecting DTOA and
range precorrection values for both ends of the feeder link.
5.5 L-Band Characteristics
L-band IRIDIUM Subscriber Unit interface characteristics shall be
verified by test of a single channel for a minimum of six cells
within each Space Vehicle of the constellation. L-Band paging
interface characteristics shall be verified by testing of each
Space Vehicle of the Constellation. The testing shall be
performed by initiating voice and paging activities using the
subscriber and gateway simulators and measuring the power spectral
density and BER of the paging, ring-alert, and voice channel
downlinks using a calibrated test set with a directional tracking
antenna. The testing will also include measurements of the L-Band
uplink BER for fixed values of EIRP consistent with the
requirements of SOW paragraph 3.2-5. All testing will be
performed at the earth's surface in locations with a clear
unobstructed view of the servicing space vehicle.
5.6 Time Delay
Voice data communications delay shall be verified by test. The
time delay of a voice channel between the gateway simulator and
the subscriber simulator shall be measured when both are serviced
by the same Space Vehicle and again when they are serviced by an
adjacent space vehicle.
5.7 Call Setup
Call Setup shall be verified by establishing a voice link through
the system using the subscriber and gateway simulators and
measuring the Space System contribution to the call setup time as
well as the Space System contribution to the time required to
register a subscriber unit.
5.8 Handoffs
A demonstration of transparency of handoffs shall be accomplished
by establishing a voice link through the system using the
subscriber and gateway simulators. This link will be maintained
for a series of tests during which at least three Space Vehicles
will traverse the subscriber simulator test site thereby
demonstrating both the cell to cell handoff and the handoff from
one Space Vehicle to another Space Vehicle and finally a third
Space Vehicle. Measurements of dropped calls and link integrity
will be performed during the testing.
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ACCEPTANCE PLAN
5.9 SV Crosslink
SV Crosslink performance shall be verified by sending test packets
between two gateway simulators and checking the bit error rate on
the received data. This demonstration will not be sufficient to
characterize the individual link bit error rate performance, it
will intended to only be a demonstration that packets can be sent
through the crosslinks and received with a very low error rate.
Space node testing will include simultaneous testing of all four
crosslinks for a single spacecraft.
5.10 Feeder Links
Gateway link capacity shall be verified by routing test packets
between two earth terminals with the Gateway channel load at
maximum capacity. This demonstration will not be sufficient to
characterize the individual link bit error rate performance, it
will intended to only be a demonstration that packets can be sent
through the Feeder links and received with a very low error rate.
5.11 Geolocation
Geolocation shall be verified by using the subscriber simulator to
initiate a service request. During the service request process it
will be demonstrated that a radio determination of location is
accomplished by the gateway simulator for use in handover
assistance. During this test the capability to deny service based
on geographical location will also be demonstrated.
5.12 Frequency of Operation
5.12.1 L-Band Frequency
Frequency of operation of each Space Vehicle shall be
verified during subtier testing. Performance of the
constellation shall be verified using the subscriber and
gateway simulators and establishing L-band links at
lowband edge, midband and high band edge for each Space
Vehicle of the constellation.
5.12.2 K-Band Frequency
K-band gateway links shall be tested by using the gateway
simulator and System Control Facilities to command
operation of each K-band link frequency. Frequency
verification of Space Vehicle to Space Vehicle frequencies
shall be by demonstration of continued system operation as
the available sets of frequencies are utilized.
5.13 System Operations
The ability of the System Control Segment to manage the
system hardware/software configurations, manage software
uploads, and detect unauthorized command attempts will be
demonstrated. Additional SCS operational capabilities
will also be demonstrated during this one time only test.
Page 9
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IRIDIUM Space System Contract
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ACCEPTANCE PLAN
5.14
5.15 Interface Compatibility
Interface documents shall be validated by successful
utilization of the subscriber and gateway simulators
designed constructed and tested to those documents.
5.16 Sub-tier Data Required for Supporting Analyses
5.16.1 Space Vehicle Capacity
Voice Channel Cell capacity, paging capacity, and
simultaneous operation of the GW links shall be
verified by sub-tier testing and analysis
including the loading of a space vehicle processor
with simulated call and paging traffic. During
this test the capability to assign a channel or
send a service not available indication will also
be demonstrated.
5.16.2 Antenna Patterns
Antenna Beam patterns shall be verified by analysis
using orbital station-keeping data from the System
Control Segment and antenna beam shape analysis
obtained prior to launch.
5.16.3 Coverage
Space Vehicle coverage shall be verified by
analysis that utilizes the constellation
station-keeping data as input into the orbital
model presented as part of the Space System
Design Review technical data package.
Page 10
<PAGE> 1
Exhibit 10.10
The portions of this exhibit for which
confidential treatment has been requested,
have been redacted and filed separately with
the Commission
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MASTER AGREEMENT
By and Between
IRIDIUM LLC
And
ANDERSEN CONSULTING, LLP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE 1. THE WORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Work Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------
1.2 Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------
1.3 Milestone Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------
1.4 Tools and Measurements/Metrics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------------------
1.5 _________________ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2. PURCHASE PRICE; PAYMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----
2.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------
ARTICLE 3. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----
ARTICLE 4. INFRINGEMENT OF THIRD-PARTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------
4.2 Undertakings if Infringement Found. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------------------------------
ARTICLE 5. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Consequential and Special Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------------------------
5.2 Limit of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------
ARTICLE 6. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 Definition of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------------------------
6.2 Restrictions on Use or Disclosure of Confidential Information . . . . . . . . . . . . . . 9
-------------------------------------------------------------
6.4 Disclosure Required by Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------------
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------------
7.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------
7.3 Relationship of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------------------------
7.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------
7.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------
7.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------
7.7 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------------------
7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------
7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------
7.10 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------
7.11 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
DEPLOYMENT WORK ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- ---------------------
MAINTENANCE AND SUPPORT SERVICES AND ENHANCEMENTS WORK
- ------------------------------------------------------
ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
- -----
</TABLE>
<PAGE> 4
This Agreement is made by and between Iridium LLC, a Delaware limited
liability company, having an address at 1401 H Street, N.W., Washington, D.C.
20005 (hereinafter referred to as "Iridium"), and Andersen Consulting, LLP, an
Illinois limited liability partnership, having an address at 1666 K Street,
N.W., Washington, D.C. 20006 (hereinafter referred to as "Andersen").
ARTICLE 1. THE WORK
1.1 Work Orders. The work to be performed is described in the documents
constituting this Agreement which include work orders and any
documents referenced in a work order. A work order is a document
executed by both parties in accordance with the provisions of this
agreement regarding amendments. As of the execution date of this
agreement only the following three work orders exist: the IBSS
Development and Test Plan, the Deployment Work Order, and the
Maintenance and Support Services and Enhancements Work Order. The
parties recognize that they intend to agree upon replacements for the
Deployment Work Order and the Maintenance and Support Services and
Enhancements Work Order which replacements will become effective upon
execution by both parties as provided herein.
1.2 Scope Changes. A "Scope Change" shall mean any change to the work as
set forth in a work order. Either party may propose a Scope Change.
Upon being informed of any proposed Scope Change, Andersen shall
promptly furnish to Iridium an itemized breakdown of the increased or
decreased cost, if any, created by the change and any other impact
such as impact on Andersen's work schedule and impact on any agreed-to
Milestone Dates. A Scope Change shall not be effective until a
written change order, signed by both parties, has been executed.
Andersen shall have no obligation to commence work in connection with
any change until the fee and/or schedule impact of the change is
agreed upon by the parties in writing. Notwithstanding the foregoing,
the parties may in writing agree that Andersen shall start work
("Interim Work") before executing a written change order, while the
parties are conducting good faith negotiations as to the exact terms
of such written change order. Andersen will be paid on a time and
materials basis for such Interim Work with direct Iridium involvement.
1.3 Milestone Dates. On the terms and subject to the conditions set forth
in this Agreement, the parties shall fulfill each of their respective
obligations in each phase of this Agreement and other related work,
tasks, procedures or the like necessary to meet the Milestone Date
specified for each Phase in the Work Order.
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1.4 Tools and Measurements/Metrics. Andersen shall use appropriate tools
and measurements/metrics to measure the completeness and quality of
each deliverable and phase. Iridium and Andersen shall jointly agree
upon tools and measurements/metrics to be used in gauging the quality
of the System. Andersen shall provide Iridium with access to all
metrics and tools used in the execution of the work orders under this
Agreement. Such access shall include the training of Iridium
personnel associated with the project in the use of the metrics and
tools.
1.5 ____________________. Andersen may not resell any part of the
software originally produced by Andersen or its subcontractors in the
performance of this Agreement, modifications made to commercial
off-the-shelf (COTS) software where Andersen (rather than the COTS
vendor) owns the modifications, requirements definitions, plans or
other documents originally created pursuant to this Agreement without
the _______ and after entering into an agreement to ___________ for
such sale or lease. Modifications to software where Andersen does not
own the modifications are not subject to the restriction in the
previous sentence. The parties agree that the version of the
_________ product existing prior to the modifications made pursuant to
this Agreement shall not be subject to the restriction contained in
the sentence above. ____________________________________________ Key
Individual means the individuals set forth in the IBSS Development and
Test Work Order. Andersen shall propose for addition to this list any
individual who performs work for Iridium where the work involves
in-depth understanding of any significant portion of Iridium's
business plan, technical matters, method of operation, clearinghouse,
business support systems (including the Iridium, Gateway, and Service
Provider Support Systems), and similar matters. Iridium may also
propose individuals meeting the criteria stated in the preceding
sentence for addition to the list. Upon mutual agreement, such
individuals shall be added to the list.
ARTICLE 2. PURCHASE PRICE; PAYMENT SCHEDULES
2.1 Price. The purchase price shall be the total amount set forth in each
work order. Unless otherwise set forth in a work order sales, use,
excise and other similar taxes shall be payable by Iridium in addition
to the amount set forth in the work order on any deliverable upon
which such taxes are required to be assessed and collected. Iridium
shall not be liable for any _____ ________, business license,
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property, or other similar taxes.
2.2 Payments. Iridium shall pay and Andersen shall receive payment in the
manner outlined in each work order. Iridium may not withhold payment
for a satisfactorily completed phase, milestone, deliverable, or work
order on the basis that a subsequent phase, milestone, or deliverable
has not been satisfactorily completed or on the basis that the work
set forth in an unrelated work order has not been satisfactorily
completed.
2.3 Overdue Payments. Amounts which remain unpaid thirty (30) days after
the date upon which payment is due shall accrue interest at a rate of
one percent (1%) per month until paid.
ARTICLE 3. TERM AND TERMINATION
3.1 Term. The terms of this Agreement shall continue until all its
provisions are satisfied or until terminated in accordance with the
provisions of this article.
3.2 Termination. This Agreement may be terminated by Andersen or Iridium
upon 30 days written notice if all of the obligations of both parties
have been performed. Otherwise, this Agreement may only be terminated
by mutual agreement, evidenced in writing. Each work order shall set
forth, if applicable, the terms for termination of the work order.
ARTICLE 4. INFRINGEMENT OF THIRD-PARTY RIGHTS
4.1 Indemnification. Andersen shall (i) indemnify Iridium from and against
any liability, cost, loss, or expense of any kind; (ii) hold Iridium
harmless and save it from any liability, cost, loss, or expense of any
kind; and (iii) defend any suit or proceeding against Iridium arising
out of or based on any claim, demand, or action alleging that the
Andersen Indemnified Software, or any portion thereof as furnished
under this Agreement and used within the scope of the license
hereunder, infringes any third-party intellectual property rights in
the U.S. Additionally, Andersen shall pay any costs, damages, or
awards of settlement, including court costs, arising out of any such
claim, demand, or action, provided that Iridium promptly gives written
notice of the claim, demand, or action to Andersen and that Andersen
may directly and fully participate in the defense to any settlement of
such claim, demand, or action. Andersen will not indemnify Iridium,
however, if the claim of infringement is caused by (1) Iridium's
misuse or modification of the Andersen Indemnified Software, (2)
Iridium's failure to use corrections or enhancements made available by
Andersen, (3) Iridium's use of
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such Andersen Indemnified Software in combination with any product or
information (other than the software with which the Andersen
Indemnified Software is intended to be used pursuant to this
agreement) not owned or developed by Andersen, (4) Iridium's
distribution, marketing or use for the benefit of third parties, other
than Iridium, the gateway operators, service providers, and their
contractors, or (5) information, direction, specification, or software
provided by Iridium.
4.2 Undertakings if Infringement Found In the event that the Andersen
Indemnified Software or any portion thereof, as furnished and used
under this Agreement or pursuant to any licensed purported to be
granted hereunder, are held in such a suit or proceeding to infringe a
third-party intellectual property right in the U.S., and that the use
of the Andersen Indemnified Software or portion thereof is enjoined,
Andersen shall, at its sole option and expense (1) procure for Iridium
the right to continue using the Andersen Indemnified Software or
portion thereof; (2) replace the same with non-infringing software of
equivalent functions and efficiency; or (3) modify the Andersen
Indemnified Software such that it no longer infringes the third-party
intellectual property right in the U.S. In the event Andersen is
unable to accomplish any of the three undertakings set forth above,
Andersen may refund to Iridium the amount paid by Iridium for such
software, less a reasonable amount for Iridium's use of the infringing
Andersen Indemnified Software or portion thereof up to the time of
refund, provided, however that Iridium shall thereafter continue to
have the right, at its own risk, to use said Andersen Indemnified
Software or portion thereof. The foregoing remedies constitute
Iridium's sole and exclusive remedies and Andersen's entire liability
with respect to infringement by the Andersen Indemnified Software.
4.3 Non-U.S. Infringement. In the event of any claim, demand, or action
alleging that the Andersen Indemnified Software or any portion thereof
as furnished under this Agreement and used within the scope of the
license hereunder infringes any third-party intellectual property
rights outside the U.S., Andersen shall cooperate with Iridium in
Iridium's defense of the claim and, if requested by Iridium, undertake
to replace the allegedly infringing software with non-infringing
software of equivalent functions and efficiency or modify the
allegedly infringing software so that it no longer infringes. Iridium
shall pay Andersen for such activities at
___________________________________________.
4.4 Iridium Infringement Responsibilities. To receive the foregoing
indemnity, Iridium must notify Andersen in writing of a claim or suit
promptly and provide reasonable cooperation (at Andersen's expense)
and full authority to defend and settle the claim or suit. Andersen
shall not have any obligation to indemnify
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Iridium under any settlement made without Andersen's consent.
4.5 "Intellectual Property" means patents, trademarks, service marks,
trade names, copyrights, trade secrets.
4.6 "Andersen Indemnified Software" means software produced by Andersen or
its subcontractors in performance of this Agreement but does not
include software which has been modified by Andersen but has been
licensed, in its modified form, to Iridium by a third party. Andersen
Indemnified Software includes modifications to software, but not the
underlying software, if the prior sentence is not applicable. The
_______ Software product is Andersen Indemnified Software.
ARTICLE 5. LIMITATION OF LIABILITY
5.1 Consequential and Special Damages. In no event will either party be
liable to the other for any loss of profits; or any incidental,
special, exemplary, or consequential damages; even if the party has
been advised of the possibility of such claims or demands. The
foregoing limitation shall not apply with respect to (i) Andersen's
obligation to indemnify Iridium for intellectual property infringement
claims by third parties as set forth in Article 4 entitled
"Infringement of Third-Party Rights"; or (ii) damages resulting from
either party's breach of its confidentiality obligations as set forth
in Article 6 entitled "Confidentiality".
5.2 Limit of Liability. The limit of either party's liability (whether in
contract, tort, negligence, strict liability in tort or by statute or
otherwise) to the other or to any third party concerning performance
or non-performance by the other party, or in any manner related to
this Agreement or any Work Order, for any and all claims shall not in
the aggregate exceed ________________________________________________
_____________________________________________________________________
________________________________________________________________. The
foregoing limitation in this article shall not apply with respect to
(i) Andersen's obligation to indemnify Iridium for intellectual
property infringement claims by third parties as set forth in Article
4 entitled "Infringement of Third-Party Rights"; or (ii) damages
resulting from a breach by either party of its confidentiality
obligations as set forth in Article 6 entitled "Confidentiality".
ARTICLE 6. CONFIDENTIALITY
6.1 Definition of Confidential Information.
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"Confidential Information" means any and all information disclosed to,
or otherwise acquired or observed whether in writing, orally,
electronically, photographically, in recorded or any other form,
including, but not limited to, sales and operation information,
existing and potential business plans and strategies and marketing
methods, financial information, costs, pricing information, know-how,
designs, drawings, specifications, technical information, concepts,
knowledge, reports, methods, processes, techniques, whether or not the
foregoing information is patentable, tested, reduced to practice, or
subject to copyright, provided that such information is identified as
confidential. Confidential Information shall not include any
information which
a. was at the time of disclosure in the public domain through no
fault of the disclosing party, or
b. was known to the party (as shown by written records) prior to
receipt thereof from the disclosing party, or
c. was independently developed by the party (as shown by written
records), or
d. was properly received by from an unaffiliated third party
under no obligation of confidentiality.
6.2 Restrictions on Use or Disclosure of Confidential Information. Each
party shall maintain in confidence, applying the same standard of care
as it applies to its own, similar Confidential Information, all
Confidential Information, including this Agreement, and shall not use
or copy any Confidential Information or disclose Confidential
Information to any person or entity without the other party's prior
written consent, except that each party may disclose Confidential
Information to those employees, agents, and contractors of the party
as may be necessary in connection with the party's performance of its
services or obligations under this Agreement. Each party shall be
responsible to ensure that its employees, agents, and contractors
maintain Confidential Information in confidence and do not disclose,
use or copy any Confidential Information except as may be permitted or
required under this Agreement.
6.3 Similar Services and Products. Subject only to its confidentiality
and non-disclosure obligations, and the restrictions on Andersen
contained in artcile 1.5, "Competitors of Iridium" as set forth in
this Agreement, each party's right to develop, use, and market
products and services similar to or competitive with the Confidential
Information of the party shall remain unimpaired. Each party
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acknowledges that the other may already possess or have developed
products or services similar to or competitive with those of the other
party disclosed in the Confidential Information.
6.4 Disclosure Required by Law. Either party may disclose Confidential
Information to the extent required by law; provided, however, that the
party shall give notice of such required disclosure as soon as
reasonably possible prior to any such disclosure. Each party agrees
to cooperate, at the other party's expense, in any lawful effort to
contest the requirement of such disclosure.
ARTICLE 7. MISCELLANEOUS
7.1 Further Assurances. Each party hereto agrees to execute, acknowledge
and deliver such further instruments, and to do all such other acts,
as may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement.
7.2 Notices. All notices, requests or communication required by this
Agreement shall be in writing and shall be made by personal delivery,
telecopy (confirmed within 24 hours) or certified or registered mail,
return receipt requested, or by such other method capable of providing
reasonable proof of receipt thereof, addressed to the parties at the
following addresses or to such other addresses as may be designated in
writing by the respective parties: Iridium - Director of Commercial
Relations, Iridium LLC, 1401 H Street N.W., Suite 800, Washington,
D.C. 20005. Andersen - Albert M. Krall, Andersen Consulting LLP, 1666
K Street, N.W., Washington, D.C. 20006. Any notice shall be deemed
given on the earlier of the date of delivery or on the third business
day after the date of mailing or transmission thereof.
7.3 Relationship of the Parties. Andersen is an independent contractor
under this Agreement. Nothing contained in this Agreement is intended
nor is to be construed so as to constitute the parties as partners or
joint venturers with respect to this Agreement. Neither party hereto,
nor any of their respective employees, agents, officers, directors or
representative shall be construed to be the employee, representative
or agent of the other, nor does either party have any express or
implied right or authority to make any representations or warranties,
or assume or create any obligations or responsibilities, on behalf of
or in the name of the other party hereunder to any third party.
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7.4 Severability. If any provision of this Agreement shall be declared
invalid or illegal for any reason whatsoever, then notwithstanding
such invalidity or illegality, the remaining terms and provisions of
this Agreement shall remain in full force and effect in the same
manner as if the invalid or illegal provision had not been contained
herein.
7.5 Amendments. This Agreement may not be and shall not be deemed or
construed to have been modified, amended, rescinded, canceled or
waived in whole or in part, except by written instrument, signed by
the parties hereto, which makes specific reference to this Agreement
and which specifies that this Agreement is being amended. A Scope
change, work order, or other document shall be considered an amendment
which, to be effective, must comply with this paragraph.
7.6 Waiver. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or a future exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
7.7 Binding Effect; Assignment. This Agreement and the rights and
obligations of the parties hereunder, may not be transferred, assigned
or sublicensed, in whole or in part, by either party hereto without
the prior written consent of the other party, but shall be binding
upon and inure to the benefit of and be enforceable by the parties
hereto and permitted successors, assignees and legal representative;
provided, however, that either party shall be entitled to assign its
obligations under this Agreement, without the prior written consent of
the other party, to any organization which succeeds as a going concern
to the business presently conducted by the party if such assignee
assumes all obligations hereunder.
7.8 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of Virginia without regard to its conflict of
law principles.
7.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. If this
Agreement is executed in counterparts, no signatory hereto shall be
bound until each of the parties named below shall have duly executed
or caused to be executed a counterpart of this Agreement.
7.10 Force Majeure. Each party shall be excused for any reasonable delay
in its
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performance under this Agreement, if such delay shall be due to any
cause beyond its reasonable control, including, but not limited to,
acts of God or the public enemy, valid law, acts or requests of any
national or provincial government, or of any national or provincial
officer or agent purporting to act under duly constituted authority,
wars, floods, fires, storms, strikes, lockouts, interruptions of
transportation, freight embargoes or failures, exhaustion or
unavailability on the open market or delays in delivery of raw
material, supplies, equipment, or services necessary for the
performance of any provision hereof, or happening of any unforeseen
acts, misfortune, or casualty by which performance hereunder is
delayed or prevented, provided, however, that each party will use all
commercially reasonably efforts to remedy the situation. If any such
delay occurs, the party affected by the delay shall inform the other
party of the occurrence of the circumstances causing the delay, and
(unless the cause thereof shall frustrate or render impossible or
illegal the performance of this Agreement or shall otherwise discharge
the same), the period for performing obligations under this Agreement
shall be extended (not limited to the length of the delay) as may
reasonably be required to complete the delayed performance or
obligation.
7.11 Records. ________ shall be solely responsible for maintenance of all
records and for archiving all data required by law. _________ may agree
from time to time to store or keep for ________ records and data
required by law to be maintained or archived by ________ (including,
without limitation, original or electronic signatures); provided,
however, that nothing shall relieve ________ of its obligations (or
otherwise obligate _______) under the law to maintain and/or archive
such records and data and ________ agrees to indemnify _______ and
hold _______ harmless from and against any and all losses, claims,
liabilities, costs and expenses arising in connection with any such
obligation or responsibility (including, without limitation, any
failure to comply with any such obligation or responsibility).
ACCEPTED AND AGREED TO:
IRIDIUM LLC
By: /s/ PAUL V. DAVERIO Date: December 16, 1996
-------------------------- --------------------
Name: Paul V. Daverio
--------------------------
Title: CFO
--------------------------
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ANDERSEN CONSULTING LLP
By: /s/ ALBERT M. KRALL Date: December 10, 1996
-------------------------- --------------------
Name: Albert M. Krall
--------------------------
Title: Partner
--------------------------
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DEPLOYMENT WORK ORDER
Andersen and Iridium shall agree on a comprehensive deployment plan and price
in the form of a proposed deployment work order which shall include deployment
of the Gateway Business System ("GBS") and the Service Provider Business System
("SBS") for each Gateway, language packages, and training. (The work and cost
of Iridium Business System ("IBS") deployment is included in the IBSS
Development and Test Work Order.)
In the absence of a work order, approved by both parties, Andersen shall, upon
Iridium's request, be obligated to perform the deployment work on a time and
materials basis in accordance with the specifications and requirements set
forth in Schedules 1-6 and 8 of the gateway deployment documents sent to
gateway operators on November 12, 1996 and any documents referenced in those
schedules.
This work order and Work Order 001 are "related" for purposes of calculating
Andersen's limit of liability under article 5 of this Agreement.
This Deployment Work Order is a part of the Master Agreement between Iridium
and Andersen to which it is attached. As this work order has been attached to
the Master Agreement prior to the execution of the Master Agreement, the
signatures of the parties upon the Master Agreement shall constitute the
signature of the parties upon this work order.
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MAINTENANCE AND SUPPORT SERVICES AND ENHANCEMENTS WORK ORDER
Andersen and Iridium shall agree on a comprehensive maintenance and support
services and enhancements work order and price in the form of a work order
which is intended to replace this work order.
In the absence of a revised work order, approved by both parties, Andersen
shall, upon Iridium's request, be obligated to perform the maintenance and
support services and enhancements work on a time and materials basis in
accordance with the specifications and requirements set forth below.
Software Support Services. Andersen will provide the support set forth in this
section for the Software (the "Maintenance and Support Services") to the
Iridium Business Entities without fee during the Software Warranty Period and
will provide the support services after the Software Warranty Period at
Iridium's sole option for a fee. The parties contemplate that the fee and
additional provisions related to Maintenance and Support Services will be
included in a subsequent work order. The Maintenance and Support Services Work
Order proposed by Andersen shall be reasonable in terms of plan, schedule, and
price, shall be consistent with this article and shall be subject to Iridium's
approval.
Corrective Maintenance. Andersen shall correct defects or errors in the
Software as they are or become known. In the case of any defect or error in
the Software, Andersen shall use its best efforts to repair or replace the
Software until the defect is corrected. Error-correction services, which shall
consist of Andersen using its best efforts to design, code, and implement
programming changes to the Software and modifications to the documentation to
correct errors therein. Andersen's response to any defect or error in the
Software shall be determined by the level of severity of the defect or error,
and such determination shall be in the sole discretion of Iridium. The levels
of severity shall be as follows:
a. Severity One Defect: The System, in whole or in part, is down (not
operable) and some or all business functions affecting system revenues
cannot be supported. Andersen agrees to work continuously around the
clock to fix the defect with a goal of restoring the system within 24
hours at the affected site(s).
b. Severity Two Defect: The System, in whole or in part, is impacted and
the operation of the system is seriously impaired. While operations
can continue, the defect impairs the business and/or computer
operation to a serious extent and must be remedied within a short
period of time. Andersen agrees to work these problems on a priority
basis with a goal of restoring the system to full operation
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within 15 calendar days at the affected site(s).
c. Severity Three Defect: The System is not working according to
requirements and the operation is impacted. Workarounds are available,
however, which enable the operation to continue in a reasonable
fashion, but the defect should be corrected. Andersen agrees to fix
these defects with a goal of 3 (three) months from their
identification at the affected site(s).
d. Severity Four Defect: The System is not working according to
requirements but the impact on the operation is considered minimal.
Operations are able to continue in a reasonable fashion without
workarounds. Andersen agrees to fix these defects as resources are
available. The fixing of these defects should not take priority over
the fixing of any other defects.
Iridium Termination of Support Services. Iridium shall have the right
to discontinue the services set forth herein upon not less than 90
days' prior written notice to Andersen.
Failure to Deliver or Maintain and Support. In the event of (i) a
material breach (whether or not Iridium terminates this Agreement), or
(ii) material failure by Andersen to provide maintenance or support,
Andersen shall promptly provide to Iridium and/or third parties
designated by Iridium the technical, engineering and design
information and specifications that exist relating to the System that
Andersen has the right to use and transfer including Source Code and
those materials necessary for Iridium or qualified third parties to
design any aspect of the System, such materials including functional
specifications, instructions and specifications for any custom
components or assemblies (the "Technical Materials").
This work order is a part of the Master Agreement between Iridium and Andersen
to which it is attached. As this work order has been attached to the Master
Agreement prior to the execution of the Master Agreement, the signatures of the
parties upon the Master Agreement shall constitute the signature of the
parties upon this work order.
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The portions of this Exhibit for which confidential
treatment has been requested have been redacted and
filed separately with the Commission
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORK ODER 001
IBSS DEPLOYMENT AND TEST
By and Between
IRIDIUM LLC
And
ANDERSEN CONSULTING, LLP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 18
IBSS DEVELOPMENT AND TEST WORK ORDER
This Work Order 001 ("Work Order") entered into between Andersen Consulting
("Andersen") and Iridium LLC ("Iridium") on the tenth day of December, 1996
sets forth the terms and conditions under which Andersen will deliver solutions
to Iridium in accordance with this Work Order and documents referenced herein
in relation to Release 1.0 and Release 1.5 of the Iridium Business Support
Systems ("IBSS") as further defined in the Master Agreement ("Agreement")
entered into by the parties on the tenth day of December, 1996 and this Work
Order. This Work Order may be referred to as Work Order 001 or the IBSS
Development and Test Work Order. In the event of an inconsistency between the
terms and conditions of the Agreement and the terms and conditions of this Work
Order, the terms and conditions of this Work Order shall prevail.
This Work Order is organized as follows:
- - General Provisions
- - Section 1.0 IBSS Description
- - Section 2.0 IBSS Payment Schedule and Milestone Descriptions
- - Section 3.0 Assumptions
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IBSS DEVELOPMENT AND TEST WORK ORDER
GENERAL PROVISIONS
1. The parties shall develop and mutually agree to a Program Plan that
will include project schedules with milestones and the strategy and
approach being used to manage the overall project.
2. In connection with Andersen's delivery of the solution contemplated in
this Work Order, Iridium shall perform those tasks and assume those
responsibilities specified in this Work Order ("Iridium
Responsibilities"). This Work Order also contains assumptions related
to this Work Order. Iridium understands that Andersen's performance
is dependent on Iridium's timely and effective satisfaction of Iridium
Responsibilities hereunder and timely decisions and approvals by
Iridium. Andersen shall be entitled to rely on all decisions and
approvals of the Iridium in connection with this Work Order; changes
in decisions and approvals are subject to the section of the Master
Agreement entitled "Scope Changes."
3. Andersen shall use all reasonable efforts to conclude an agreement
with ___ __________________________________ for modifications to the
software to be licensed by ___ to Iridium for use in the solution.
Should the amount to be paid to ___ in such agreement exceed
__________, with a scope and delivery schedule equivalent to the
Release Plan and Program Plan, such excess amount shall be referred to
as the ____ ______ and the payment amounts set forth in Section 2.1 of
this Work Order shall be increased in an amount equal to the _________
__________. In the event that the amount to be paid is less than
____________ with a scope and delivery schedule equivalent to the
Release Plan and Program Plan, the difference shall be applied to
cover Scope Changes.
If the _____ approach as set forth in the Release Plan is not feasible
due to ___ architectural prohibitions and the amount to be paid for
___________, with a scope equivalent to the _____ component and a
delivery schedule consistent with the Program Plan, exceed ___________
such excess amount shall be referred to as the ___________ and the
payment amounts set forth in Section 2.1 of this Work Order shall be
increased in an amount equal to the _________. If the _____ approach
as set forth in the Release Plan is not feasible due to ___
architectural prohibitions and the amount to be paid for ____________,
with a scope equivalent to the _____ component and a delivery schedule
consistent with the Program Plan, is less than _________, the
difference shall be applied to cover Scope Changes.
4. Iridium is acquiring the rights to use the _______ product through
Andersen's affiliate, Proquire LLC. The obligations of Andersen with
respect to ________ as set forth in this Work Order and the Master
Agreement shall not be altered or reduced as a result of such
transaction. By way of example, and not limitation, Andersen's
obligation to provide indemnification with respect to infringement of
intellectual property rights, Andersen's warranty obligation,
Andersen's obligation to correct errors in the _______ software, and
Andersen's obligation to pay the amounts due from Iridium pursuant to
the agreement under which Iridium acquires rights to use the _______
product shall continue notwithstanding that the _______ Product has
been licensed to Iridium by a separate entity that is affiliated with
Andersen.
5. No bailment shall be created and no interest or obligation shall be
conferred upon
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IBSS DEVELOPMENT AND TEST WORK ORDER
Andersen regarding Iridium's property or the property of Iridium's
employees, agents, vendors, or other contractors, beyond the limited
right to use such property in furtherance of the Agreement. All such
property, regardless of its physical location or use, shall be deemed
to be in the care, custody, and control of Iridium.
6. Subject to the following paragraph (General Provision 7) and subject
to Andersen's right to retain copies of its work papers for quality
assurance purposes, the parties acknowledge and agree that the Custom
Software originated and prepared for Iridium by Andersen, pursuant to
this Work Order and all ownership rights therein (including copyrights
_____________ will be and shall at all times remain, the sole property
of Iridium. Andersen hereby assigns to Iridium any copyright
ownership rights to such Custom Software and other related written
materials (except internal Andersen administrative materials) and
agrees to provide written assignments of such ownership in the future
at the request of Iridium. Andersen agrees that it will require any
third party independent contractor hired by it to perform services
pursuant to this Work Order to execute all necessary assignments of
ownership to Andersen in the works created by such third parties, and
Andersen will in turn assign such ownership to Iridium.______________
___________ for the Custom Software, including the _______ product,
shall be provided to Iridium. Iridium shall not own the ________
product but shall have a license to use the _______ product in
accordance with the separate license agreement for _______. Such
license agreement will provide that the Gateways and Service Providers
will have a limited right to use _______ as necessary to conduct
business with Iridium as contemplated by this Work Order and prepare
derivative works therefrom for the conduct of Iridium's business
(which includes mobile satellite services and cellular roaming, but
does not include the business of sublicensing _______). In the event
that Iridium obtains _______ right in any aspects of the Custom
Software, to the extent that any such ______ rights cover activities
outside the scope of the solution, subject to the section of the
Master Agreement titled "Competitors of Iridium", Andersen shall have
a royalty-free, non-transferable, non-exclusive, irrevocable,
worldwide right to practice inventions covered by such ______ rights.
_______________________________ the rights conveyed by the preceding
sentence. "Custom Software", as used throughout this Work Order,
means software which was originally produced by Andersen or its
subcontractors in performance of this Work Order but does not include
Proprietary Items or derivative works of Proprietary Items as set
forth in General Provision 7 below. The ownership and obligations
related to Proprietary Items shall be as set forth in the paragraph
below.
7. In the course of performance hereunder, Andersen may use products,
materials, tools and methodologies that are proprietary to Andersen or
to third parties (collectively, "Proprietary Items"). As between
Iridium and Andersen, Proprietary Items will be deemed Confidential
Information of Andersen. Included among the Proprietary Items of
Andersen are tools that Andersen identifies as Solution Construction
Aids which Andersen makes available to clients under separate
licensing terms. Iridium shall have or obtain no rights in such
Proprietary Items other than (i) to use them as authorized by Andersen
in writing from time to time solely for purposes of performing Iridium
Responsibilities, (ii) to the extent the Proprietary Items are
incorporated into the Custom Software , to use them as part of the
Deliverable for purposes of its internal business only, or (iii)
pursuant to Andersen's standard license for such Proprietary Items or,
in the case of Proprietary Items owned by third parties, pursuant to
terms acceptable to the applicable third party. If Proprietary Items
are made available to Iridium, they will be made available "AS IS" and
without express or implied warranties of any kind. This
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IBSS DEVELOPMENT AND TEST WORK ORDER
provision shall not negate nor diminish Andersen's warranty
obligations regarding the Custom Software as set forth in this Work
Order. Specifically, Proprietary Items which fall within
classification (ii) above shall be considered Custom Software for
purposes of the warranty provided for in this Work Order and will be
delivered in source code and object code. Iridium will have the right
to modify and create derivative works from such items and otherwise
use them in its business operations contemplated in this Work Order
and the Gateways and Service Providers will have a limited right to
use such items as necessary to conduct business with Iridium as
contemplated by this Work Order.
8. Ownership of Technical Materials (other than software) Related to the
Solution. The parties acknowledge and agree that Andersen shall
transfer to Iridium all Technical Materials originally developed
hereunder by Andersen for Iridium in relation to the Custom Software
and such Technical Materials shall be owned by Iridium and shall be
provided with the Custom Software provided, however, that Iridium
shall not own Technical Materials which are the property of third
parties (who are not subcontractors of Andersen). Technical Materials
means documentation, engineering, design, training and other written
materials, other than software, originally prepared for Iridium, but
shall not include internal Andersen administrative materials.
9. Andersen warrants that the solution delivered to Iridium will meet the
specifications set forth in the IBSS Release 1.0 and 1.5 Release Plan
("Release Plan") dated November 12, 1996, including the features,
functions, and performance specifications set forth therein and the
related user documentation. This warranty shall extend for a period
of ___________________________________________________________________
____________________________________. Andersen's obligation under
this warranty shall be to correct any warranty nonconformity that
Iridium reports to Andersen within the time frames set forth in the
Maintenance and Support Services and Enhancements Work Order.
10. Not withstanding General Provision 9.0, in cases where the warranty
nonconformity is attributable to errors or defects in a product
provided by a third party that has been developed or manufactured for
general commercial use and not solely in connection with the project
and for the sole use of Iridium, e.g., the __________________________
product, or operating system, Andersen's sole obligation shall be to
report the error or defect to the third party and to work with the
third party toward its resolution.
11. THE PRECEDING ARE ANDERSEN'S ONLY WARRANTIES CONCERNING THE SERVICES
AND ANY DELIVERABLE PRODUCT AND ANDERSEN DISCLAIMS ANY AND ALL
PROMISES, REPRESENTATIONS AND ALL EXPRESS OR IMPLIED WARRANTIES,
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, AND SPECIFICALLY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
12. Either party may, upon giving thirty (30) days written notice
identifying specifically the basis for such notice, terminate this
Work Order for breach of a material term or condition of this Work
Order provided the breaching party shall not have cured such breach
within the thirty (30) day period. Such termination shall not limit
the party's rights with respect to breach, if any, as provided
elsewhere in this Work Order or the Master Agreement.
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IBSS DEVELOPMENT AND TEST WORK ORDER
13. Iridium may terminate this Work Order for convenience at any time by
providing Andersen with written notice of such termination, such
termination to be effective upon delivery of such notice. In such
event Iridium agrees to compensate Andersen for all fees and expenses
incurred up to the date of termination, including software license
fees. In addition, if Iridium terminates this Work Order under this
provision, Iridium shall pay Andersen's reasonable project
demobilization costs to be agreed to by both parties.
14. The parties further agree that, in the event of a dispute or alleged
breach they will work together in good faith first, to resolve the
matter internally by escalating it to higher levels of management and,
then if necessary, to use a mutually agreed alternative dispute
resolution technique prior to resorting to litigation, other than
disputes involving confidentiality or infringement of intellectual
property rights (in which case either party shall be free to seek
available remedies in any forum).
15. The parties acknowledge that certain Services contemplated by this
Work Order commenced prior to execution of this Work Order. This Work
Order shall be applicable to all such Services as if it had been
executed prior to the beginning of the Services. All payments made by
Iridium to Andersen for such Services shall be considered as payments
under this Work Order.
16. The Custom Software, the _______ product, and Proprietary Items
incorporated in the Custom Software (collectively "Andersen
Software"), when used in accordance with its associated documentation,
will be capable of correctly processing, providing and/or receiving
date data within and between the twentieth and twenty-first centuries,
provided that all products (i.e., hardware, software and firmware)
used with the Andersen Software properly exchange accurate date data
with it. For Andersen Software, Andersen will test the software to
handle 20th and 21st century dates at the component level. Andersen
will also select representative product test cycles to test dates in
the years 1999 and 2000. For third party software and software
components, Andersen will test that year 2000 dates can be accepted
and processed by the third-party product. If year 2000 compliance
violations are found in the third party product, Andersen will report
the defect to the software vendor. Andersen will use all reasonable
efforts to have third party vendors agree to similar language and if
the third party vendor contract is between Andersen and a third party,
Andersen will pass on any year 2000 warranty to Iridium.
17. ________________________________________________________
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18. __________________ Iridium and Andersen agree that the baselined
Business Operations Model ("the Model") is a ______________ design
which describes at a generic level the way in which Iridium LLC will
do ___________ and that it supports ________________________ as it was
known as of the baseline date. Iridium and Andersen recognize that
the Model may require modifications to _____________
__________________________________________________________________
______________ The Model comprises ____________ that may be
_____________________________________________ that the _______________
requirements specified in the baselined
________________________________ will support those activities
identified in the model as ____________________ Should it be found
that the _______________ specified in the Model could not be satisfied
unless additional requirements are implemented, then this condition
will be considered _______________. Should such additional
requirements arise because of ___________
___________________________________________________________________
_________________________, such requirements are excluded
_______________.
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IBSS DEVELOPMENT AND TEST WORK ORDER
SECTION 1.0 IBSS DESCRIPTION
IBSS is the planned IRIDIUM Business Support System. IBSS is composed of three
functional component "levels" where application systems will reside. The three
levels reflect the IRIDIUM business model, which is composed of Iridium LLC,
Gateway Operator(s), and Service Provider(s).
IRIDIUM LLC
Iridium LLC will have overall responsibility for the management of the IRIDIUM
satellite constellation, ground based components, and the terrestrial network.
It will also have responsibility, in conjunction with the Gateway Operators,
for the management and settlement of revenues.
GATEWAY OPERATORS
There are currently 15 defined Gateways territories and 15 Gateway Business
System (GBS) installations. Each GBS is operated by a Gateway Operator, all of
whom are, currently, also IRIDIUM investors. Each Gateway Operator is a
distinct business. It is expected that the Gateway Operator will perform,
among other obligations, the following with respect to its designated
geographic territory: (i) purchase and install a physical gateway (if
applicable), along with a Gateway Business System (GBS), (ii) obtain all
required governmental licenses and permits for equipment importation,
exportation and gateway operation; (iii) promote the distribution of IRIDIUM
Subscriber Equipment; (iv) authorize IRIDIUM Service Providers; (v) cooperate
with Iridium LLC, IRIDIUM Service Providers and other gateway operators to
facilitate worldwide operation of the IRIDIUM communications system.
Gateway Operators will be expected to negotiate interconnection terms with
wireline and/or wireless telephone companies, as well as obtain access to the
international transit network as part of their interconnection agreements.
SERVICE PROVIDERS
Service Providers will be the retailers of IRIDIUM Service in their service
areas, marketing IRIDIUM Service directly to their subscribers. Gateway
Operators may also be Service Providers. Iridium LLC expects that Service
Providers will have primary responsibility for retail distribution and
marketing as well as service negotiation, customer care, billing and
collections, and aspects of provisioning.
IRIDIUM Business Support Systems (IBSS)
IBSS refers to the collection of systems that are used by each IRIDIUM business
entity to enable its business processes. These are divided into three
subsystems that are generally aligned with the three business entity tiers.
These subsystems are illustrated and defined in figure 1.1 below:
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IBSS DEVELOPMENT AND TEST WORK ORDER
[CHART]
Figure 1.1 IBSS Overview
- IRIDIUM BUSINESS SYSTEMS (IBS) - Refers to the set of systems used by
Iridium LLC.
- GATEWAY BUSINESS SYSTEMS (GBS) - Refers to the set of systems used by
Gateway Operators, with processing decentralized from Iridium LLC.
- SERVICE PROVIDER BUSINESS SYSTEMS (SBS) - Refers to the set of systems
used by the service providers (SP's).
IRIDIUM LLC / GATEWAY BUSINESS SYSTEMS
This section describes the business functions that are the responsibility of
Iridium LLC and the Gateway Operators. These functions are divided between the
IBS and GBS subsystems.
Iridium LLC will have overall responsibility for the management of the
satellite constellation. It will also have responsibility, in conjunction with
the Gateway Operators, for the management and settlement of revenues. This
requires business systems that support the means to:
- Collect and distribute IRIDIUM system network usage. This will
facilitate the allocation of revenue between IRIDIUM entities and
support the billing of subscribers by Service Providers.
- Calculate financial liabilities and allocate revenue between IRIDIUM
business entities, including Iridium LLC, Gateways, Service Providers,
Authorizing Entities, Taxing Authorities, and Public Telephone
Operators.
- Assist management in overall decision making via the collection of
summarized data and key performance indicators from the entire IRIDIUM
enterprise.
IBS will support:
- Usage Collection
- Usage Processing & Wholesale Rating & Revenue Allocation
- Clearing and Settlement (Net Settlement Clearinghouse for all IRIDIUM
entities)
- Decision Support
- General Ledger for Network Settlements Operations (NSO)
- Dispute Resolution
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IBSS DEVELOPMENT AND TEST WORK ORDER
GATEWAY / SERVICE PROVIDER BUSINESS SYSTEMS
This section describes the business functions that are the responsibility of
Service Providers and Gateway Operators. These functions are divided between
the SBS and GBS subsystems.
Gateway Operators and Service Providers are central to the operation of the
IRIDIUM Communications System. Gateway Operators will have the authority to
offer IRIDIUM Service directly to end users, or indirectly through Service
Providers. This requires business operations that provide the means to:
- Acquire subscribers, distribute equipment, and negotiate / activate
IRIDIUM services for these customers (Service Delivery)
- Provide on-going customer support (Customer Care)
- Render invoices and accept customer payments (Billing and Collections)
- Accept and manage customer problems (Trouble Management)
GBS/SBS will support:
- Subscriber Activation/Deactivation
- Customer Service
- Maintenance Tickets
- Retail Rating and Billing
- Invoicing
- Fraud Management
- Settlement Reporting for Service Providers
- SIM Card Management
- Number Management
- EIR/IMEI Management
- Equipment Inventory
- Network Advisories
The IRIDIUM business systems will support a number of diverse market
environments, Gateway Operators and Service Providers with varying degrees of
infrastructure and capabilities. The IRIDIUM businesses have therefore
designed their business operations model to fit a variety of scenarios, ranging
from the full integration of Gateway Service Provider operations, to complete
decentralization of all customer contact functions to the Service Provider are
shown in figure 1.2 below. The result of this flexibility is that the systems
functionality can vary for each Gateway-Service Provider combination.
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IBSS DEVELOPMENT AND TEST WORK ORDER
[CHART]
FIGURE 1.2 SERVICE PROVIDER RELATIONSHIPS
SCOPE OF ANDERSEN CONSULTING'S SERVICES
The scope of Andersen Consulting's services will be as specified in this Work
Order.
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IBSS DEVELOPMENT AND TEST WORK ORDER
SECTION 2.0 IBSS PAYMENT SCHEDULE AND MILESTONE DESCRIPTIONS
The payments for work performed under this Work Order are separated into two
major categories:
1. Labor, expenses, and facilities
2. Hardware, systems software, and software license fees
The total fixed fee arrangement is $43,050,000, payable to Andersen Consulting
according to the schedules set forth below. Changes to this Work Order shall
constitute changes in scope and shall be handled as provided in this Work Order
and the Agreement.
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IBSS DEVELOPMENT AND TEST WORK ORDER
2.1 LABOR, EXPENSES, AND FACILITIES
Payments for these items are subject to acceptance of the deliverables outlined
in the this section. Specifically, there are 16 milestones with associated
deliverables and Acceptance Criteria that form the basis of the payment
schedule. Each milestone has a payment value and estimated completion date.
<TABLE>
<CAPTION>
=======================================================================================
MILESTONE PAYMENT TARGET COMPLETION DATE
<S> <C> <C>
=======================================================================================
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
=======================================================================================
=======================================================================================
</TABLE>
- - for the following Milestones:
------------------
- -
------------------
- -
-----------------------------------------------
- -
-----------------------------------------------
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IBSS DEVELOPMENT AND TEST WORK ORDER
CONTINGENCY MANAGEMENT
The Contingency funds included in the above fees amount to _________. Andersen
management will control the use of contingency funds to cover errors in
estimation and additional tasks needed to fulfill its obligations under this
Work Order. Andersen will disclose to Iridium its use of the contingency
funds. Andersen and Iridium agree that they will ___________ the contingency
funds unused when this Work Order has been satisfied.
ACCEPTANCE CRITERIA
Andersen and Iridium will work together at the start of each phase to develop
mutually agreed-to, clearly defined, objective Acceptance Criteria ("Acceptance
Criteria") and Entry and Exit Criteria. The Acceptance Criteria will be based
on documentation such as the Release Plan, user documentation, design
documents, and other materials as appropriate. In the case where deliverables
do not conform with the Acceptance Criteria, those areas requiring additional
strengthening will be communicated in writing to Andersen within five business
days of Iridium's receiving the milestone deliverables. If the deliverables
conform with the Acceptance Criteria, then Iridium will sign-off on the
deliverables within five business days. Andersen will respond within five
business days with the required updates to the deliverables and/or a plan and
schedule to implement the required updates to conform with the Acceptance
Criteria.
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IBSS DEVELOPMENT AND TEST WORK ORDER
1. REQUIREMENTS AND ANALYSIS
During the Requirements and Analysis phase, Andersen and Iridium
compiled detailed business and system requirements. The requirements
were developed from higher level business functions identified during
the development of the IBSS Business Operations Model.
The Requirements and Analysis phase resulted in the set of documents
and deliverables listed below. An objective of this phase was to
achieve a common understanding of the requirements objectives between
the development and IBSS stakeholder teams. The functional needs of
the system were captured in an electronic form and then analyzed as to
how they were satisfied by COTS packages. Approaches to filling the
resulting gaps were documented as an input to the User and Technical
Design phase.
DELIVERABLES:
IBSS SYSTEM REQUIREMENTS DOCUMENT
The IBSS System Requirements document specifies and describes the long
term requirements for each functional area to be supported by the IBSS
set of systems. The document provides a high level description of
each functional area, and details each specific requirement in a
Requirements Traceability Matrix (RTM).
GAP ANALYSIS RESULTS
The Gap Analysis Results deliverables document the work of the gap
analysis process conducted for IBSS COTS packages. The documents
identify the degree to which each COTS package meets the system
requirement as documented in the IBSS System Requirements Deliverable.
THREAD DIAGRAMS
This deliverable will document Intra-IBSS thread diagrams for major
business events to be supported by IBSS.
ANALYSIS FOR CUSTOM DEVELOPMENT ANALYSIS
This deliverable documents Data Flow Diagrams (DFDs), Logical Data
Models (LDMs), and Low Fidelity User Interface Prototypes for those
IBSS components requiring custom software development (e.g.,
settlements).
COTS DEMONSTRATION SOFTWARE AND DOCUMENTATION
Makes available to the project team demo copies of the COTS software
and related system and user documentation for further analysis.
WWW HTML DEMO "VISION FOR IRIDIUM LEVERAGING INTRANET TECHNOLOGIES"
_____ TECHNICAL FEASIBILITY ANALYSIS
- _____ Preliminary Functional Scope and Requirements
Definition
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IBSS DEVELOPMENT AND TEST WORK ORDER
- _____Technical Security Analysis
- _____ Network Connectivity Analysis
Acceptance Criteria
The Requirements and Analysis payment milestone was met on June 20,
1996 when Iridium signed-off on the Requirements.
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IBSS DEVELOPMENT AND TEST WORK ORDER
2. USER AND TECHNICAL DESIGN
The Application Architecture defines the distribution of data and
processes over the network. Inputs include response time and
availability requirements. The overall application structure is
determined in this phase. Data models are augmented as necessary for
COTS packages and system interface designs and user interface designs
are produced in this phase.
DELIVERABLES:
IBS USER DESIGN
The IBS User Design Document presents the user interface components of
the usage processing and settlements systems. The document is
intended to be the vehicle through which the user community can
evaluate the user interface windows and user reports. The document
contains the user interface components and high level business
processes that they support for the following areas: Audits and
Controls, Error Administration, Settlements Processing, Reporting,
Post Processing Analysis, and Table Maintenance.
IBS TECHNICAL DESIGN
The IBS Technical Design Document defines the technical approach to
implementing the system requirements as described in the IBS
Preliminary Systems Design Document. The document describes the IBS
application architecture, high level object diagram, logical data
model, preliminary physical data model, and interface definitions.
GBS/SBS USER DESIGN
The GBS/SBS User Design Document presents how the GBS/SBS support the
high level business processes required for _____________ (and the
selected fraud package if necessary). The purpose of the document is
intended to be the vehicle through which the user community can
evaluate the manner in which the COTS packages are to support user
requirements.
GBS/SBS TECHNICAL DESIGN
The GBS/SBS Technical Design Document defines the technical approach
to implementing the system requirements as described in the GBS/SBS
Gap Analysis Documents. The document describes the GBS and SBS
application architectures, and system modifications required.
INTERFACE SPECIFICATION TOOL
The interface specification tool is a Microsoft Access-based database
which contains information about IBSS logical and physical interfaces.
The tool provides the ability to track and generate interface
specification reports.
IBSS/SATCOM INTERFACE SPECIFICATION
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IBSS DEVELOPMENT AND TEST WORK ORDER
The IBSS/SATCOM interface specification is a collection of system
functional specifications and interface control documents addressing
the following interfaces: IBS-GW including SSS-GBS, MOC-GBS, OMCG-GBS,
OMCG-IBS, and IBSS-SCS.
IBSS INTERNAL INTERFACE SPECIFICATION
The IBSS internal interface specification is a collection of system
functional specifications and interface control documents addressing
the interfaces for IBS-GBS and GBS-SBS.
IBSS TESTING STRATEGY
This document describes the test strategy for IBSS. It describes the
testing approach, methodology, schedule, timeline, tools, environment,
and metrics to be used during each phase of IBSS testing. It also
describes each testing phase (e.g., component, assembly, product,
etc.), and each application to be tested (e.g., ________________
etc.).
COMPONENT AND ASSEMBLY TEST STANDARDS
This document describes the standards to be used by the IBS, GBS, and
SBS development teams governing component and assembly testing of
compiled modules.
PRODUCT AND ACCEPTANCE TEST STANDARDS
This document describes the standards to be used by the IBS, GBS, and
SBS development teams governing the product test of application
software developed by the IBSS team, and acceptance testing of
application software developed by outside vendors.
IBSS HARDWARE/SOFTWARE PURCHASE PLAN
This document defines the hardware and software configurations
required to support the IBSS development, product test, integration
test and production environments. This document also provides cost
estimates for these environments for budgeting and planning purposes.
IBSS NETWORK ARCHITECTURE
This document defines the configuration of the network required to
support the development, testing, and deployment of IBSS. This
document also contains detailed analysis of the network security
architecture and the network performance model.
IBS CAPACITY PLANNING MODEL
This document defines a capacity planning model for estimating the
hardware and system software required to support IBS applications to
the year 2000. The capacity planning model will be based on call
volume estimates provided by Iridium.
GBS CAPACITY PLANNING MODEL
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IBSS DEVELOPMENT AND TEST WORK ORDER
This document defines a capacity planning model for estimating the
hardware and system software required to support GBS applications to
the year 2000. The capacity planning model will be based on call
volume estimates provided by Iridium.
DEVELOPMENT TOOLS AND STANDARDS
This deliverable consists of a number of different documents which
together, describe the standards, procedures, and tools that will be
used in the development and testing of IBSS applications.
IBS EXECUTION ARCHITECTURE
This document presents high-level system and technical architecture
diagrams for the IBS applications. In addition, the document
describes the run-time services and control structures that provide
the infrastructure for these applications to operate.
GBS/SBS EXECUTION ARCHITECTURE
This document presents high-level system and technical architecture
diagrams for the GBS/SBS applications. In addition, the document
describes the run-time services and control structures that provide
the infrastructure for these applications to operate.
CONFIGURATION MANAGEMENT APPROACH
The Configuration Management deliverable defines the policies and
procedures for coordinating and controlling all changes to the IBSS
production environment. A change request submission process, change
review board, code acceptance standards, change migration path, and
release planning procedures are defined.
INTERNATIONAL TEAM
This phase also includes work by the "International Team" and
Rotational Program support. The International Requirements team
collected IBSS requirements associated with
internationalization/localization issues resulting from Gateways'
differing business and regulatory environments. The team's objective
was to record these requirements.
The effort encompassed site-specific IBSS system requirements
including: Language, Currency, Taxation, Billing interfaces, General
Ledger interfaces, Payments/Receivables, Late Fees processing,
Formats, Regulatory, Credit Assessment, Deposits, Commissions,
Services, Equipment/SIM Card ordering and distribution, and Clearing
and Settlement. A more detailed explanation of International Team
activities can be found in the International Requirements Plan
Refinement Memo dated October 2, 1996.
DELIVERABLES:
- Requirements Backlog Summary Report
- Prioritized International Requirements Matrix
- IBSS Functional Description
Acceptance Criteria
Acceptance Criteria will be met when the User and Technical Design
milestone deliverables are delivered to Iridium and exit criteria are
satisfied.
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3. IBSS PROGRAM PLAN AND RELEASE 1.0 IBS DETAILED DESIGN
IBSS PROGRAM PLAN
The mutually agreed to IBSS Program Plan will outline the IBSS Project
management methodology and tools.
DELIVERABLES:
PROGRAM WORKPLANS AND SCHEDULE
The Program Workplans document the work breakdown structure,
associated workday estimates, and start and completion dates by task
for each IBSS team (e.g., IBS Development, ______________, Testing,
Deployment). The IBSS Schedule documents the major IBSS program
phases, start and stop dates, milestones, and dependencies among IBSS
component and with external interfaces.
PROJECT MANAGEMENT APPROACH
This document describes the disciplines, standards, metrics, and
procedures that will govern the execution of the IBSS program. For
example, this deliverable documents the manner in which PWW is to be
used for workplanning, and project tracking. It also specifies
regular status and issues meetings that are to be conducted in
managing the effort; entry/exit criteria; required document reviews
and inspections, etc.
RESOURCE PLAN
This deliverable describes the acquisition plan for human resources,
hardware, software, and facilities required to accomplish the IBSS
program.
QUALITY PLAN
The quality plan is primarily composed of an expectations matrix
outlining the various expectations of major stakeholders of the IBSS
application. This matrix includes measures used to determine whether
expectations have been met.
RISK MANAGEMENT PLAN
This document describes the program and team level risks to the
successful completion of the IBSS program. Strategies for risk
mitigation and retirement are documented in the Risk Management Plan.
BASELINING PROCEDURES
This document describes the procedures through which the various IBSS
deliverables are completed, reviewed/inspected, approved, and placed
under version/change control.
CHANGE CONTROL PROCEDURES
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IBSS DEVELOPMENT AND TEST WORK ORDER
This document describes the procedures and tools the IBSS team is to
use when modifications are required to any baselined component of the
IBSS program (e.g., deliverables, work breakdown structure, scope,
etc.). It also describes the process by which change control items
are evaluated for inclusion in, or exclusion from the IBSS program.
PHASE ENTRY AND EXIT CRITERIA
This document specifies the criteria which must be met in order for
the project to complete a given program phase, and the criteria which
must be met in order for the project to begin a phase.
IBS DETAILED DESIGN
Andersen will create specifications for programming IBS Release 1.0.
This specification includes batch, on-line, and report module designs.
DELIVERABLES:
IBS DETAILED DESIGN SPECIFICATIONS
This deliverable specifies the inputs, outputs, and processing logic
required for each programming work unit as specified during the User
and Technical Design phase for the IBS. Modifications are specified
to existing COTS programs, and new programs are designed where needed.
IBS PROGRAMMING, COMPONENT TEST, AND PRODUCT TEST ENVIRONMENT
This deliverable establishes the computing environment, tools and
procedures required to conduct the programming, component, assembly,
product, and acceptance tests for the IBS applications.
DEPLOYMENT PLANNING STRATEGY
The Deployment Planning Strategy document identifies tasks and
deliverables required for GBS deployments. The document describes
those activities for which Iridium has responsibility, as well as
Gateway Owner responsibilities.
FACILITY REQUIREMENTS
This document describes the GBS facility requirements including:
physical and electrical specifications for hardware, clearance and
service access guidelines, mounting and placement requirements, and
environmental specifications. The purpose of this document is to help
the gateways plan for their local fixture, electrical, and HVAC
requirements.
COMMUNICATION INSTALLATION PROCEDURES
The Communication Installation Procedures Document describes the GBS
communications hardware installation, configuration, testing, and
acceptance sign-off procedures. The document includes: GBS hardware
list, hardware purpose, export restrictions, export license
requirements, communications hardware installation procedures,
communications hardware
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IBSS DEVELOPMENT AND TEST WORK ORDER
configuration procedures, hardware test procedures, and hardware
acceptance sign-off PROCEDURES.
HARDWARE INSTALLATION PROCEDURES
The Hardware Installation Procedures Document describes the GBS
hardware installation and configuration, language configuration,
testing, and hardware acceptance sign-off procedures. The document
also includes: hardware list, hardware purpose, export restrictions,
and export license requirements.
SOFTWARE INSTALLATION PROCEDURES
The Software Installation Procedures Document describes the GBS
software installation and configuration, language configuration,
testing, and acceptance sign-off procedures. The document also
includes: software list, software purpose, export restrictions, and
export license requirements.
TRAINING PLAN
The Training Plan document describes the approach for developing IBS,
GBS/SBS System Administration Training, IBS, GBS/SBS User Training,
and SBS Installation Training. It will also contain training course
curriculum outlines.
Acceptance Criteria
Acceptance Criteria will be met when the IBSS Program Plan and Release
1.0 IBS Detailed Design milestone deliverables are delivered to
Iridium and exit criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
4. RELEASE 1.0 - GBS/SBS DETAILED DESIGN
During GBS/SBS Detailed Design for Release 1.0, the project team will
create specifications for programming GBS/SBS Release 1.0. This
specification includes online, batch, and report module designs for
COTS modifications and custom software.
DELIVERABLES:
GBS/SBS PROGRAMMING SPECIFICATION PACKAGES
This deliverable specifies that inputs, outputs, and processing logic
required for each programming work unit as specified during the User
and Technical Design phase for the GBS and SBS for Release 1.0.
Modifications are specified to existing COTS programs, and new
programs are designed where needed.
IBSS PRODUCT TESTING ENVIRONMENT AND PROCEDURES
This deliverable establishes the computing environment, standards, and
procedures required to plan and execute each Product and Acceptance
test for the IBSS.
GBS/SBS PROGRAMMING, COMPONENT TEST, AND PRODUCT TEST ENVIRONMENT
This deliverable establishes the computing environment, tools, and
procedures required to conduct the Programming, Component, Assembly,
Product, and Acceptance tests for the GBS/SBS applications.
PLANNED DELIVERABLE TITLES
System Architecture Diagram
Data Architecture Diagram
Application Software Inventory
HW/System SW Inventory
Interface Specifications
Modifications/Custom Design
GBS Execution Architecture Direction
GBS/SBS Development Server Configuration
GBS/SBS Development Workstation Configuration
GSM ___ Detailed Design
Messaging ___ Detailed Design (Release 1.0)
___ Testing Approach
Asian Suite Multiple Language Prototype
_____ Profile Management Prototype
_____ Detailed Design Specifications
____ Prototype I Development SW
____ Prototype II Development SW
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IBSS DEVELOPMENT AND TEST WORK ORDER
Acceptance Criteria
Acceptance Criteria will be met when the GBS/SBS Detailed Design
Release 1.0 milestone deliverables are delivered to Iridium and exit
criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
5. RELEASE 1.0 - GBS COMPONENT TEST
Andersen will create programming work units utilizing the agreed to
programming specifications from the GBS/SBS Detailed Design
deliverables. The programming work units will be designed to support
the business requirements and functions identified for Release 1.0 in
the Release Plan.
In the Component test activity of this phase, Andersen will verify the
programming work units have been designed to correctly implement the
detailed design specifications. This aspect of the phase exercises
code at the line level, tests looping and branching conditions, and
tests other conditions. Work units developed by the GBS/SBS
development team for Release 1.0 will be component tested.
DELIVERABLES:
EXECUTABLE CODE MODULES
This deliverable yields coded, compiled, and component tested code
modules for each of the programs developed and/or modified by the GBS
team.
COMPONENT TEST CONDITIONS, DATA AND RESULTS
This deliverable documents the component test plan and test results
(conditions, cycles, data, expected results) for each GBS module coded
and tested during Release 1.0. It includes Component Test Execution
Log (actual results, Purify log, Quantify log) and component test
metrics reports.
PRODUCT TEST PLAN
The Product Test Plan describes the test cycles, test conditions, test
data, and expected results that will be used during the execution of
each product and acceptance test conducted for the GBS applications.
Product tests will be conducted for application software developed by
the IBSS team. Acceptance tests will be conducted for software
developed by COTS vendors.
PLANNED DELIVERABLE TITLES
Messaging ___ Detailed Design (Release 1.5)
Release 1.0 ___ Delivered to ____ Assembly Test
Updated Release 1.0 ___ Component Testing Summary
____ SW level Use Case Document
____ SW Design Document
____ Build 6 Software
Acceptance Criteria
Acceptance Criteria will be met when the GBS/SBS Component Test for
Release 1.0 milestone deliverables are delivered to Iridium and exit
criteria are satisfied.
RELEASE 1.5 - GBS/SBS DETAILED DESIGN
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<PAGE> 42
IBSS DEVELOPMENT AND TEST WORK ORDER
Andersen will create specifications for programming GBS/SBS Release
1.5. This specification includes designing modifications to COTS.
This includes batch, online, reporting, and client server
applications.
DELIVERABLES:
GBS AND SBS PROGRAMMING SPECIFICATION PACKAGES
This deliverable specifies that inputs, outputs, and processing logic
required for each programming work unit as specified during the User
and Technical Design phase for the GBS and SBS for Release 1.5.
Modifications are specified to existing COTS programs, and new
programs are designed where needed.
WORKAROUNDS INVENTORY
This deliverable contains the complete list of workarounds identified
during the detailed design phase.
Acceptance Criteria
Acceptance Criteria will be met when GBS/SBS Detailed Design for
Release 1.5 milestone deliverables are delivered to Iridium and exit
criteria are satisfied.
25
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IBSS DEVELOPMENT AND TEST WORK ORDER
7. RELEASE 1.0 - IBS COMPONENT TEST
Andersen will create programming work units utilizing the agreed to
programming specifications from the IBS Detailed Design deliverables.
The programming work units will be designed to support the business
requirements and functions identified in the Release Plan.
In the Component test activity of this phase, Andersen will verify the
programming work units have been designed to correctly implement the
detailed design specifications. This aspect of the phase exercises
code at the line level, tests looping and branching conditions, and
tests other conditions. The testing will include testing of input and
output data to the objects. Work units developed by the IBS
development team for Release 1.0 will be component tested.
DELIVERABLES:
EXECUTABLE CODE MODULES
This deliverable yields coded, compiled, and component tested code
modules for each of the programs developed and/or modified by the IBS
team.
COMPONENT TEST CONDITIONS, DATA AND RESULTS
This deliverable documents the component test plan and test results
for each IBS module coded and tested during Release 1.0. It includes
Component Test Execution Log (actual results, Purify log, Quantify
log) and component test metrics reports.
PRODUCT TEST PLAN
The Product Test Plan describes the test cycles, test conditions, test
data, and expected results that will be used during the execution of
the product test conducted for the IBS application
PLANNED DELIVERABLE TITLES
Shared IBS Unit Test Data
IBSS Operations Monitoring Tool Standards & Procedures
IBS Workstation Configuration
IBS Server Configuration
Acceptance Criteria
Acceptance Criteria will be met when IBS Component Test for Release
1.0 milestone deliverables are delivered to Iridium and exit criteria
are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
8. RELEASE 1.0 - GBS PRODUCT AND ACCEPTANCE TEST
For applications developed partially or fully in the GBS development
environment (e.g., ____), Andersen will conduct an Assembly Test and a
Product Test. For applications developed or modified entirely outside
of the GBS development environment (e.g., ____), the project team will
conduct an Acceptance Test.
Assembly tests are internal to a single application. Assembly tests
will be conducted between work units developed in the GBS environment.
Assembly tests will also be conducted between work units developed in
the GBS environment and work units supplied by outside vendors. This
aspect of the phase tests interaction between work units, and verifies
that the dialogs and transactions perform according to the design
specifications.
The Product Test will verify that the documented requirements of the
application have been met for a specific application. These
requirements will be tested across components built by Andersen and
those supplied by outside vendors. Interaction between assembled
product components is tested during this stage.
During Acceptance Testing, Andersen will verify that products
developed or modified outside of the GBS development environment meet
the requirements as delivered to the outside vendor. Acceptance
Testing takes the place of Product Testing for COTS products or other
products subcontracted for development. The Acceptance Test Team will
validate that software products have been customized by outside
parties to meet GBS functional and technical requirements and
specifications. As in Product Testing, interaction between assembled
product components is tested during this stage.
The last phase of Product or Acceptance Test will be the Requirements
Confirmation (or "User Acceptance") phase. During this phase, Iridium
will participate in the execution of cycles selected from the Product
or Acceptance Test. These cycles will be jointly determined by
Iridium and Andersen to cover representative business requirements.
Following the successful execution of these cycles, Iridium will sign
off that the application meets the documented requirements.
Andersen will provide four days review of the GBS Acceptance Test Plan
for the Gateways' representatives. The review of the Acceptance Test
Plan including test cycles, test conditions, acceptance criteria, and
the testing process will communicate the detail, breadth and general
content of the plan. Questions and issues regarding changing the
functionality of the system will be captured by Iridium, but will not
be discussed during the review. Iridium will consider issues relating
to GBS functionality for future GBS releases.
Iridium will send the Release 1.0 GBS Acceptance Test Approach and
Acceptance Test Plan documents to the Gateways, receive any feedback,
clarify the feedback with the Gateways, and provide consolidated Test
Plan change proposals to Andersen.
DELIVERABLES:
PRODUCT TEST SIGN OFF MEMORANDUM
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IBSS DEVELOPMENT AND TEST WORK ORDER
This memorandum serves to document Iridium's sign-off and approval of
the product and/or acceptance tests executed for the GBS/SBS
applications including: __________________, _________.
IBSS SOFTWARE/DATA DISTRIBUTION PROCEDURES
This document defines the standards, procedures, and tools used to
distribute IBSS software and data between the development and testing
environments, as well as to each of the GBS and IBS production
environments.
PLANNED DELIVERABLE TITLES
HW/System SW Checklist (Revised)
GBS Release 1.0 Product Test Approach
GBS Release 1.0 Product Test Plan
GBS Release 1.0 Product Test Model
GBS Release 1.0 Product Test Execution Log
____ Acceptance Test
Detailed HW and SW List (by GBS size)
Export Restrictions
Messaging ___ Component Specs (Release 1.5)
SSS GBS Interface Control Document
Acceptance Criteria
Acceptance Criteria will be met when GBS Product and Acceptance Test
for Release 1.0 milestone deliverables are delivered to Iridium and
exit criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
9. RELEASE 1.5 - GBS COMPONENT TEST
Andersen will create programming work units utilizing the agreed-to
programming specifications from the GBS/SBS Detailed Design
deliverables. The programming work units will be designed to support
the business requirements and functions identified in the Release
Plan.
In the Component test aspect of this phase, Andersen will verify the
programming work units have been designed to correctly implement the
detailed design specifications. This aspect of the phase exercises
code at the line level, tests looping and branching conditions, and
tests other conditions. Work units developed by the GBS/SBS
development team will be component tested.
DELIVERABLES:
EXECUTABLE CODE MODULES
This deliverable yields coded, compiled, and component tested code
modules for each of the programs developed and/or modified by the GBS
team for Release 1.5.
COMPONENT TEST CONDITIONS, DATA AND RESULTS
This deliverable documents the component test plan and test results
for each GBS module coded and tested during Release 1.5. It includes
Component Test Execution Log (actual results, Purify log, Quantify
log) and component test metrics reports.
PRODUCT TEST PLAN
The Product Test Plan describes the test cycles, test conditions, test
data, and expected results that will be used during the execution of
the product test conducted for the relevant components of the GBS
application.
PLANNED DELIVERABLE TITLES
IBSS SW/Data Distribution Standards & Procedures
IBSS New System Configuration, Standards & Procedures
IBSS Trouble Management Tool Standards & Procedures
GBS/SBS Server Configuration
GBS/SBS Workstation Configuration
GBS Operating Procedures
_________________ Delivered to ____ Assembly Test
Updated _______________ Detailed Design Documents
_________________ Component Testing Summary
29
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IBSS DEVELOPMENT AND TEST WORK ORDER
Acceptance Criteria
Acceptance Criteria will be met when GBS Component Test for Release
1.5 milestone deliverables are delivered to Iridium and exit criteria
are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
10. RELEASE 1.0 - IBS PRODUCT TEST
Andersen will execute Assembly tests between the work units for IBS
Release 1.0. This aspect of the phase tests interaction between work
units, and verifies that the dialogs and transactions perform
according to the design specifications.
Andersen will execute the Product Test that will verify that each IBS
application developed or modified functions as designed across all
product business functions. Product Testing validates that the
requirements of each IBS application have been met. Interaction
between assembled product components and external systems interfaces
is thoroughly tested during this stage.
DELIVERABLES:
PRODUCT TEST SIGN OFF MEMORANDUM
This memorandum serves to document Iridium's sign-off and approval of
the product test executed for the IBS application.
IBS RESTART/RECOVERY PLAN
This document defines the tools, standards, and procedures used to
restart and recover IBS applications in the event of critical hardware
or software failure. This document includes procedures for restoring
data from backup and/or archive volumes as well as procedures for
returning applications to a point of consistency.
IBS PERFORMANCE TEST PLAN
This document defines the approach, standards, procedures, tools, and
environment used to test the performance of the IBS applications.
This document also describes the cycles and conditions required to
test the performance of each application.
PLANNED DELIVERABLE TITLES
Package Installation Checklist
HW/System SW Checklist (Revised)
IBS Operations Architecture Test Plan
IBS User Procedures and Training Materials (includes on-line help)
IBS Product Test Planning
IBS Product Test Strategy and Approach
IBS Product Test Plan
Common Test Scenarios
Test Methods
Success Criteria
IBS Product Test
IBS Product Test Results
Test Method results
Success Criteria Results
Shared Integration Test Data
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IBSS DEVELOPMENT AND TEST WORK ORDER
Acceptance Criteria
Acceptance Criteria will be met when IBS Product Test for Release 1.0
milestone deliverables are delivered to Iridium and exit criteria are
satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
11. RELEASE 1.0 - INTEGRATION TEST
Andersen will perform Integration Testing for Release 1.0 to validate
that specified business functions can be performed on an end-to-end
basis across the IBSS solution. Integration test will verify that the
IBSS applications interact with each other and that transactions which
cross IBSS applications can be successfully executed across the
involved IBSS applications. Integration test of Release 1.0 will
exercise transactions among IBS Release 1.0, GBS/SBS Release 1.0, and
____ Release 1.0. It will also exercise transactions between those
systems and the Gateway components SSS and OMC-G.
The IBS and GBS Operations Training Plan will be developed during this
phase. This plan will outline the steps and deliverables necessary to
train the IBS and GBS/SBS System Operators.
At the conclusion of Integration Test, an Integration Acceptance test
will be conducted. During this phase, Iridium will participate in
the execution of cycles selected from the Integration Test. These
cycles will be jointly determined by Iridium and Andersen to cover
representative integration cases. Following the successful execution
of these cycles, Iridium will sign off that the applications as
delivered from Product Test have been successfully integrated.
DELIVERABLES:
IBSS INTEGRATION TEST PLAN
The IBSS integration test plan describes the test cycles, test
conditions, test data, and expected results that will be used during
the execution of the integration test across IBSS applications.
IBSS INTEGRATION TEST SIGN-OFF MEMORANDUM
This memorandum serves to document Iridium's sign-off and approval of
the Release 1.0 Integration Test executed for the IBSS application.
PLANNED DELIVERABLE TITLES
Release 1.0 Integration Test Approach
Release 1.0 Integration Test Plan
Release 1.0 Integration Test Model
Release 1.0 Integration Test Execution Log
Integration Tested IBSS Components
GBS Operations Test Plan
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IBSS DEVELOPMENT AND TEST WORK ORDER
Acceptance Criteria
Acceptance Criteria will be met when Integration Test for Release 1.0
milestone deliverables are delivered to Iridium and exit criteria are
satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
12. RELEASE 1.5 - GBS PRODUCT AND ACCEPTANCE TEST
For applications developed partially or fully in the GBS development
environment (e.g., ____), Andersen will conduct an Assembly Test and a
Product Test. For applications developed or modified entirely outside
of the GBS development environment, the project team will conduct an
Acceptance Test.
Assembly tests are internal to a single application. Assembly tests
will be conducted between work units developed in the GBS environment.
Assembly tests will also be conducted between work units developed in
the GBS environment and work units supplied by outside vendors. This
aspect of the phase tests interaction between work units, and verifies
that the dialogs and transactions perform according to the design
specifications.
The Product Test will verify that the documented requirements of the
application have been met. These requirements will be tested across
components built by Andersen and those supplied by outside vendors.
Interaction between assembled product components and external systems
interfaces is thoroughly tested during this stage.
During Acceptance Testing, Andersen will verify that products
developed or modified outside of the GBS development environment meet
the requirements as delivered to the outside vendor. Acceptance
Testing takes the place of Product Testing for Commercial Off the
Shelf ("COTS") products or other products subcontracted for
development. The Acceptance Test Team will validate that software
products have been customized by outside parties to meet GBS
functional and technical requirements and specifications. As in
Product Testing, interaction between assembled product components and
external systems interfaces is thoroughly tested during this stage.
The last phase of Product or Acceptance Test will be the Requirements
Confirmation (or "User Acceptance") phase. During this phase, Iridium
will participate in the execution of cycles selected from the Product
or Acceptance Test. These cycles will be jointly determined by
Iridium and Andersen to cover representative business requirements.
Following successful execution of these cycles, Iridium will sign off
that the application meets the documented requirements.
Iridium will send the Release 1.5 GBS Acceptance Test Approach and
Acceptance Test Plan documents to the Gateways, receive any feedback,
clarify the feedback with the Gateways, and provide consolidated Test
Plan change proposals to Andersen.
DELIVERABLES:
PRODUCT/ACCEPTANCE TEST SIGN-OFF MEMORANDA
This memorandum serves to document Iridium's sign-off and approval of
the Product Test executed for the GBS/SBS applications developed by
the IBSS team, and Iridium's acceptance of the application code
developed by COTS vendors.
GBS/SBS RESTART/RECOVERY PLAN
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IBSS DEVELOPMENT AND TEST WORK ORDER
This document defines the tools, standards, and procedures used to
restart and recover GBS/SBS applications in the event of critical
hardware or software failure. This document also includes procedures
for restoring data from backup and/or archive volumes as well as
procedures for returning applications to a point of consistency.
GBS PERFORMANCE TEST PLAN
This document defines the approach, standards, procedures, tools, and
environment used to test the performance of the GBS applications. This
document also describes the cycles and conditions required to test the
performance of each application.
WORKAROUNDS
This document contains the complete descriptions of the identified
workarounds - this effort will not exceed 200 Andersen staff days.
PLANNED DELIVERABLE TITLES
GBS Release 1.5 Product Test Approach
GBS Release 1.5 Product Test Plan
GBS Release 1.5 Product Test Model
GBS Release 1.5 Product Test Execution Log
Acceptance Criteria
Acceptance Criteria will be met when GBS Product and Acceptance Test
for Release 1.5 milestone deliverables are delivered to Iridium and
exit criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
13. RELEASE 1.0 - IBS DEPLOYMENT
The IBS will be deployed at the Main Control Facility (MCF) in
Lansdowne, Virginia. Prior to deployment, Andersen will produce a
Facilities Requirements document detailing the specifications of the
MCF for IBS Deployment. The IBS Deployment Plan will indicate
detailed deliverables and time lines for supporting the IBS hardware
and software purchase and delivery. The plan will also detail the
schedule and dependencies of any subcontractors. To support the IBS
deployment, the IBS Deployment team will perform the following tasks:
1. Site Inspection
Based on the specifications of the Facilities Requirements,
the IBS Deployment team will inspect the MCF for compliance
with the site requirements prior to deployment.
2. Hardware and System Software Ordering
Based on the detailed configurations in the IBSS
Hardware/Software Purchase Plan, Andersen will order the
required hardware and system software for the IBS.
3. Hardware Configuration and Installation
This activity takes place at the MCF. As ordered hardware and
system software arrives at the MCF, the team will perform the
following staging activities: hardware receiving and
inventory, hardware mounting, hardware burn-in, and hardware
cabling.
Once completed, hardware configuration will take place. This
includes: operating system installation, configuration and
fine-tuning, disk partitioning, database engine installation,
connectivity testing between components, and configuration and
testing client workstations over the application server.
4. Software Configuration and Installation
Once the hardware installation and configuration are complete,
the IBS system software, application software, license
agreements, and all related materials associated with the IBS
deployment effort will be sent to the MCF site. During this
activity, the application software is installed. Application
software for the IBS is detailed in the IBSS Hardware/Software
Purchase Plan.
5. Training & Training Material
Training and documentation will be provided for IBS system
operators. This training includes instruction in system
administration and software application operations. Training
and Documentation will be provided to the Iridium Network
Settlement Operations users. These users are limited to the
staff expected to perform data maintenance, report generation
and maintenance, and usage of the DSS system and General
Ledger as necessary to meet the IBS requirements.
DELIVERABLES:
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IBSS DEVELOPMENT AND TEST WORK ORDER
MCF SITE INSPECTION MEMORANDUM
This memorandum serves to document that the Deployment team conducted
the pre-installation gateway site inspection.
INSTALLATION SIGN-OFF MEMORANDUM
This memorandum serves to document that Iridium has accepted the
hardware and system software installation at the MCF.
ACCEPTANCE SIGN-OFF MEMORANDUM
This memorandum serves to document Iridium's acceptance of the
application software installed and tested at the MCF.
Acceptance Criteria
Acceptance Criteria will be met when IBS Deployment for Release 1.0
milestone deliverables are delivered to Iridium and exit criteria are
satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
14. RELEASE 1.5 - INTEGRATION TEST AND IRIDIUM SYSTEM TEST
Integration Testing for Release 1.5 validates that business functions
can be performed on an end-to-end basis across the IBSS solution.
Integration test verifies that the IBSS applications interact with
each other and that transactions which cross IBSS applications can be
successfully executed across the involved IBSS applications.
Integration test of Release 1.5 will exercise transactions among IBS
as delivered with Release 1.0, ____ as delivered with Release 1.0, and
GBS/SBS as delivered with Release 1.5. It will also exercise
transactions between those systems and the Gateway components SSS and
OMC-G.
Andersen will test, with the support of SATCOM and Iridium, the IBSS
software applications to confirm that the software applications
correctly communicate with the System Control Segment (SCS) and
Gateways. System Test planning and execution will require joint
efforts and coordination between Iridium, Andersen, and SATCOM. The
System Testing Team will include functional and technical experts from
Iridium and SATCOM. Actual IRIDIUM customer equipment will be
required, including ISUs and SIM cards.
At the conclusion of Integration & System Test, an Integration &
System Acceptance test will be conducted. During this phase, Iridium
will participate in the execution of cycles selected from the
Integration & System Test. These cycles will be jointly determined by
Iridium and Andersen to cover representative system integration cases.
Following the successful execution of these cycles, Iridium will sign
off that the applications as delivered from Product Test have been
successfully integrated.
Iridium will send the Release 1.5 Integration Test Approach and
Acceptance Test Plan documents to the Gateways, receive any feedback,
clarify the feedback with the Gateways, and provide consolidated
Integration Test Plan change proposals to Andersen.
DELIVERABLES:
IBSS INTEGRATION AND SYSTEM TEST PLAN
The IBSS Integration Test Plan describes the test cycles, test
conditions, test data, and expected results that will be used during
the execution of the integration test across IBSS applications, and
for testing with SATCOM interfaces.
INTEGRATION AND SYSTEM TEST SIGN-OFF MEMORANDUM
This memorandum serves to document Iridium's sign-off and approval of
the Release 1.5 Integration Test executed across the IBSS application,
and interface tests conducted with SATCOM.
IBS PERFORMANCE TEST SIGN-OFF MEMORANDUM
This memorandum summarizes the results of the IBS performance testing
activities. It documents that the test cycles and test conditions
defined in the IBS Performance Test Plan were executed.
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IBSS DEVELOPMENT AND TEST WORK ORDER
GBS PERFORMANCE TEST SIGN-OFF MEMORANDUM
This memorandum summarizes the results of the GBS performance testing
activities. It confirms that the test cycles and test conditions
defined in the GBS Performance Test Plan were executed.
Acceptance Criteria
Acceptance Criteria will be met when the Integration Test for Release
1.5 and IRIDIUM System Test milestone deliverables are delivered to
Iridium and exit criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
15. BETA GATEWAY ACCEPTANCE AND IBS ACCEPTANCE
Beta Gateway Deployment, Testing, and Acceptance support are part of
the Deployment Work Order. Development of deliverables for this phase
are, therefore, part of the Deployment Work Order. The final list of
deliverables and Acceptance Criteria will be included in the
Deployment Work Order.
IBS DEPLOYMENT ACCEPTANCE TEST
The purpose of the IBS Deployment Acceptance Test is to verify that
the IBS functions as shipped. Although this will not serve as a
functional test, a series of functional regression tests will be
executed to verify a complete implementation. At the completion of
this activity, the IBS should be operational in terms of hardware,
network connectivity, and external interfaces.
Acceptance Criteria
Acceptance Criteria will be met when the Beta Gateway Acceptance and
IBS Acceptance milestone deliverables are delivered to Iridium and
exit criteria are satisfied.
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IBSS DEVELOPMENT AND TEST WORK ORDER
16. COMMERCIAL ACTIVATION
At Commercial Activation, Iridium will initiate revenue generating
calls across the IRIDIUM network.
Acceptance Criteria:
The Commercial Activation milestone will be considered the initiation
of revenue generating calls across the Iridium network. It will occur
at the conclusion of subscriber trials. At Commercial Activation, an
Iridium subscriber will be able to buy service, be provisioned on the
IRIDIUM network, and be billed correctly for the services purchased
and use of the network. Settlement among Iridium, the deployed
Gateways, and associated Service Providers will occur at this time.
Commercial Activation is anticipated to be September 23, 1998.
Payment for this milestone will occur at Commercial Activation or
January 1, 1999 which ever comes first.
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IBSS DEVELOPMENT AND TEST WORK ORDER
2.2 HARDWARE, SYSTEM SOFTWARE, AND SOFTWARE LICENSE FEES
A complete listing and detailed configuration of the hardware and software to
be provided as part of this Work Order is included in the "IBSS
Hardware/Software Purchase Plan (Version 1.0)" document dated November 15,
1996.
<TABLE>
<CAPTION>
===============================================================================================================
ESTIMATED 1996 PAYMENT ESTIMATED 1997 PAYMENT
===============================================================================================================
<S> <C> <C> <C>
HARDWARE
- ---------------------------------------------------------------------------------------------------------------
SOFTWARE
===============================================================================================================
TOTAL
===============================================================================================================
GRAND TOTAL
===============================================================================================================
</TABLE>
Andersen Consulting's affiliated entity Proquire LLC ("Proquire"), formerly
named Andersen Consulting Financial Limited Partnership ("ACFLP"), will procure
for Iridium the hardware and software listed in this section. This list may be
amended by Andersen upon reasonable notice to Iridium. Proquire shall provide
such third party hardware and software products subject to the terms and
conditions set forth on Proquire's Sales Contract executed by the parties and
dated May, 1, 1996. Andersen, as agent for Proquire, shall invoice, collect,
and receive from Iridium all sums that are or become due to Proquire, including
taxes and shipping charges as applicable. Andersen shall remain accountable to
Iridium for its obligations as set forth in this Agreement.
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IBSS DEVELOPMENT AND TEST WORK ORDER
SECTION 3.0 ASSUMPTIONS
1. The project team will be staffed with full-time personnel with the
appropriate skills in keeping with the requirements of the Program
Plan.
2. Iridium and Andersen management will support timely resolution of
issues.
3. Participation by outside parties in testing other than as planned
between Iridium and Andersen will be to observe and on a
non-interference basis. There is no separate testing effort for these
outside parties.
4. ________ will be responsible for all IBS shipping and shipping costs
to the production facility.
5. The GBS and SBS were designed to be a generic solution to meet common
requirements. It is understood that some Gateways will need to
separately procure additional modifications to support their unique
business needs.
6. This Work Order includes the following interfaces with Network
Operations:
- Call Detail Record file collection by the IBS and GBS from
each OMC-G (Operations and Maintenance Control - Gateway)
- Call Detail Record files made available to SCS (System Control
Segment) for performance analysis
- Hot Call Detail Records sent to the IBS and GBS from each
OMC-G
- Call Detail Record collection schedules sent from IBS to each
OMC-G
- Inter-administrative Revenue Accounting and Statistics report
files sent to the IBS from each OMC-G
- Mobile subscriber administration (provisioning) commands sent
to the telephony and paging switches from each GBS
- Network Status and Gateway Status sent to the IBS and GBS from
each OMC-G and the SCS
- Fault Management event notification sent to IBS and each GBS
from each OMC-G
- Network Advisories sent to IBS and each GBS from SCS, and each
OMC-G
- Trouble tickets exchanged between all systems
- Email exchanged between all systems
- Network time received from OMC-G by GBS
- Arbitrary file transfers to/from IBS, GBS, SCS, OMC-G
- Connectivity checks (ping) between interfacing systems
- Remote access to the OMC-G from GBS
7. Call volumes will be as specified in the Iridium IBS Capacity Planning
and Iridium GBS Capacity Planning documents dated November 1996.
8. Taxation will be provided based on Service Category, Service Type, and
Service Code as outlined in the __________________ document dated
November 1996.
9. ___________ will create and maintain a central IBSS Project Library
containing all project documents and relevant material and accessible
by the project team.
10. Configuring the data for Gateway Deployment is not covered in the
scope of Work Order 001.
11. Fixes applied to software during Acceptance Tests will be re-tested
only as necessary to verify that the software fix has resolved the
test issue.
12. If dependencies (external to IBSS) required to meet Acceptance
Criteria prevent Andersen from completing milestones and Andersen can
show that they have met their obligations (e.g., using simulated
production test data to run test cycles) with respect to those
milestones, Iridium shall pay Andersen for successfully completing
that milestone.
44
<PAGE> 62
IBSS DEVELOPMENT AND TEST WORK ORDER
13. IBSS-J requirements documented in the RTM are not part of this Work
Order. IBSS-J represents the work commissioned by Nippon Iridium Corp.
with Andersen to address their unique gateway requirements.
14. Test scripts will be automated to the extent possible so they can be
re-used in future testing efforts.
15. Fraud functionality is expected to be provided by the product
___________________ interfaced with ____.
16. The list of required RTM updates in the RTM binder will be entered
into the RTM database.
17. The IBSS interfaces that will be built will be documented as
specifications. Andersen to provide the following specifications:
- ____________
- ____________
- ____________
- Invoice Viewer (will provide one standard viewer)
- SPEdi
- GBS - IBS Interfaces (BER/SER flows)
___ to provide the following specifications:
- Address Validation
- Commission Payments
- Credit Card Charge Authorization/Validation/Debits
- Credit Scoring
- Dunning & Welcome Letters
- External Identification Validation
- General Ledger
- Report Generator (data layout)
- Taxation
18. For third-party software and software components, Andersen will test
those functions within the software to demonstrate compliance with the
Release Plan. Testing of software capabilities beyond those necessary
to meet the IBSS requirements is out of the scope of this Work Order.
19. Iridium personnel working with the Gateways to review Product and
Acceptance Test Planning documentation will have a detailed knowledge
of the test methodology, test plans, and test models. Andersen will
train Iridium testing personnel to use the test planning tools.
20. Services to be supported at Commercial Activation by IBSS:
TELEPHONY
BASIC
* Telephony
* Emergency Calls
SUPPLEMENTARY TELEPHONY SERVICES
* Call Forward unconditional
* Call Forward on busy
* Call Forward on not reachable
* Barring of Outgoing Calls
* Barring of Incoming Calls
* Enhanced Call Completion
* Voice Mail
MESSAGING
BASIC MESSAGING
* Direct Messaging Service (DMS)
45
<PAGE> 63
IBSS DEVELOPMENT AND TEST WORK ORDER
SUPPLEMENTARY MESSAGING SERVICES
* Subscriber Service Session
* Delivery Area Specification
* Message Recall/Retransmit
* Message Blocking/Override
* Group Messaging
* Message Diversion
* Message Hold
* Voice Mail
BUNDLED MESSAGING SERVICES (MTLI)
MXU
SOLAR POWER BOOTH
46
<PAGE> 64
IBSS DEVELOPMENT AND TEST WORK ORDER
ACCEPTED AND AGREED TO:
IRIDIUM LLC
By: /s/ PAUL V. DAVERIO
--------------------------------
Name: Paul V. Daverio
--------------------------------
Title: CFO
--------------------------------
Date: December 16, 1996
--------------------------------
ANDERSEN CONSULTING LLP
By: /s/ ALBERT M. KRALL
--------------------------------
Name: Albert M. Krall
--------------------------------
Title: Partner
--------------------------------
Date: December 10, 1996
--------------------------------
47
<PAGE> 1
EXHIBIT 10.17
Draft of May 29, 1997
SHARE ISSUANCE AGREEMENT
DATED AS OF JUNE [ ], 1997
BY AND BETWEEN
IRIDIUM WORLD COMMUNICATIONS LTD.
AND
IRIDIUM LLC
<PAGE> 2
SHARE ISSUANCE AGREEMENT
This SHARE ISSUANCE AGREEMENT (this "Agreement") is made by
and between Iridium LLC, a limited liability company organized under the laws
of the State of Delaware ("Iridium"), and Iridium World Communications Ltd., a
company incorporated under the laws of Bermuda (the "Company"), and is made and
entered into as of June __, 1997.
WHEREAS, Iridium is commercializing the IRIDIUM System, a
wireless communications system designed to provide global wireless personal
communications services;
WHEREAS, the Company was formed to act as a special-purpose
member of Iridium and to have no other business; and pursuant to the 1997
Subscription Agreement between the Company and Iridium, Iridium has agreed to
create, issue and sell, and the Company has agreed to purchase, Class 1
Membership Interests of Iridium ("Class 1 Interests") at an aggregate purchase
price equal to the net proceeds to the Company from the initial public offering
(the "IPO") of its Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"); and upon the purchase of such Class 1 Interests with the net
proceeds from the IPO the Company will be admitted as a member of Iridium;
WHEREAS, Iridium may desire that the Company authorize, issue,
offer and sell its securities (the "Company Securities") from time to time and
invest the net proceeds from such sales of Company Securities in limited
liability company interests of Iridium ("Iridium Interests"); and the Company
desires to acquire from time to time Iridium Interests, including Class 1
Interests, with the proceeds from any such issuance of Company Securities;
WHEREAS, Iridium has adopted the Iridium Option Plan (the
"Option Plan")and Iridium may desire to adopt other employee benefit plans from
time to time (each such plan, an "Iridium Benefit Plan"); and Iridium desires
to have the ability to (i) issue options to purchase Class A Common Stock
("Class A Options") from time to time pursuant to the Option Plan and (ii) to
issue Class A Options and other rights to acquire Class A Common Stock ("Class
A Rights") pursuant to other Iridium Benefit Plans;
WHEREAS, the Company desires to facilitate Iridium's granting
of Class A Options and Class A Rights
<PAGE> 3
pursuant to Iridium Benefit Plans, and the Company desires to acquire Class 1
Interests in exchange for shares of Class A Common Stock issued by the Company
in connection with the exercise of such Class A Options and the exercise or
conversion of Class A Rights.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICABILITY
Section 1.01. Definitions. As used in this Agreement,
the following terms have the following respective meanings:
"Agreement" means this Share Issuance Agreement.
"Authorized Shares" has the meaning assigned thereto in
Section 4.02.
"Benefit Plan Schedule" has the meaning assigned thereto in
Section 4.02.
"Business Day" means a day other than a Saturday, Sunday,
national or New York State holiday or other day on which commercial banks in
New York City are authorized or required by law to close.
"Class A Common Stock" means Class A Common Stock, par value
$.01 per share, of the Company.
"Class A Option" means an option to purchase one or more
shares of Class A Common Stock that is issued pursuant to an Iridium Benefit
Plan.
"Class A Right" means a right (other than a Class A Option) to
acquire, either directly or beneficially, one or more shares of Class A Common
Stock that is issued pursuant to an Iridium Benefit Plan.
"Class 1 Interests" means Class 1 Membership Interests of
Iridium.
"Closing Price" means, for each Trading Day, the last reported
sale price regular way or, in case no such reported sale takes place on such
day, the average of the
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<PAGE> 4
reported closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Class A Common Stock is
listed or admitted to trading, or, if the Class A Common Stock is not so listed
or admitted to trading on a national securities exchange, on the Nasdaq
National Market System or, if the Class A Common Stock is not quoted on the
Nasdaq National Market System, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by Iridium for that purpose or, if the
Class A Common Stock is not traded in the over-the-counter market, the fair
market value per share of the Class A Common Stock as determined by Iridium
Board (whose determination shall be conclusive).
"Commission" means the U.S. Securities and Exchange
Commission, or any other federal agency at the time admin-istering the Exchange
Act or the Securities Act, whichever is the relevant statute for the particular
purpose.
"Common Stock" means the Class A Common Stock and any stock of
any class of the Company which has no preference in respect of dividends or
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which is not subject to redemption
by the Company. However, shares issuable on exchange of Class 1 Interests
pursuant to Article IV shall include only shares of the class designated as
Class A Common Stock of the Company on the date hereof, or shares of any class
or classes resulting from any reclassification thereof and which have no
preferences in respect of dividends or amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which are not subject to redemption by the Company; provided that, if at
any time there shall be more than one such resulting class, the shares of each
such class then so issuable and registerable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
"Company" has the meaning set forth in the preamble and shall
also include the Company's successors, if any.
"Company Board" means the Board of Directors of the Company.
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<PAGE> 5
"Company Securities" means (i) equity securities of the
Company, including Common Stock and any class of preferred stock and (ii) any
security issued by the Company that is convertible into, or exchangeable or
exercisable for, equity securities of the Company.
"Directed Offering" has the meaning assigned thereto in
Section 2.03.
"Directed Offering Period" means the period commencing on the
date Iridium delivers a Sale Notice to the Company and ending on the 90th day
following such date; provided that the Directed Offering Period may be extended
and further extended by Iridium, at its sole discretion, by delivering written
notice of such extension to the Company.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Notice" has the meaning assigned thereto in Section
4.02.
"Exchange Rate" has the meaning assigned thereto in Section
4.01.
"Holder" has the meaning assigned thereto in Section 4.01.
"IPO" means the initial underwritten public offering of the
Class A Common Stock as contemplated by the registration statement on Form S-1
under the Securities Act filed by the Company (file No. 333-23419) on March 14,
1997, as such registration statement is amended from time to time.
"IPO Date" means the date of the consummation of the IPO.
"indemnified party" has the meaning assigned thereto in
Section 7.01.
"Interest Exchange Agreement" means the Interest Exchange
Agreement, dated as of June __, 1997, between the Company and Iridium.
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<PAGE> 6
"Iridium" has the meaning set forth in the preamble and shall
also include Iridium's successors.
"Iridium Benefit Plan" means any employee benefit plan of
Iridium existing on the date hereof or hereafter created, each as adopted by
the Iridium Board and as amended from time to time, including the Option Plan.
"Iridium Board" means the Board of Directors of Iridium.
"Iridium Interests" means any limited liability company
interest in Iridium, including the Class 1 Interests, and any security issued
by Iridium that is convertible into, or exchangeable or exercisable for,
limited liability company interests in Iridium.
"LLC Agreement" means the Limited Liability Company Agreement
of Iridium LLC dated as of July 29, 1996, as amended from time to time.
"managing underwriter or underwriters" means the person or
persons selected by Iridium and the Company in a Directed Offering to manage an
underwritten offering of Company Securities.
"Master Subscription Agreement" means the Master Subscription
Agreement, dated as of June __, 1997, between the Company and Iridium.
"Noticed Interests" has the meaning assigned thereto in
Section 2.02.
"Offering Documents" has the meaning assigned thereto in
Section 3.02.
"Option Plan" means the Iridium Option Plan.
"person" means a natural person, partnership (whether general
or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any representative capacity.
"Process Agent" has the meaning assigned thereto in Section
8.07.
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<PAGE> 7
"Sale Notice" has the meaning assigned thereto in Section
2.02.
"Sale Right" has the meaning assigned thereto in Section 2.01.
"Securities Act" means the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday, other than any day on which securities are not traded on the
applicable exchange or in the applicable market.
"Transfer" has the meaning assigned thereto in Article VI.
"Underlying Shares of Class A Common Stock" has the meaning
assigned thereto in Section 4.01.
"underwriter" means any underwriter of an underwritten
offering of Company Securities pursuant to Article III.
Section 1.02. Interpretation. The following provisions shall
govern the interpretation of this Agreement:
(a) The singular form of any word used herein, including the
terms defined in Section 1.01, includes the plural, and vice versa, unless the
context otherwise requires. The use herein of a pronoun of any gender shall
include correlative words of the other gender.
(b) Unless otherwise expressly indicated, all references
herein to "Articles", "Sections" and other subdivisions hereof are to the
corresponding Articles, Sections or subdivisions of this Agreement; and the
words "herein", "hereof", "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or
subdivision hereof.
(c) The headings or titles of the several Articles and
Sections hereof, and any table of contents appended to copies hereof, shall be
solely for convenience of reference and shall not affect the meaning,
construction or effect of this Agreement.
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<PAGE> 8
(d) Each reference herein to any agreement, instrument or
other document shall mean such agreement, instrument or document as from time
to time amended, modified or supplemented in accordance with the terms hereof
and thereof. The term "including" shall be construed to mean "including but
not limited to".
ARTICLE II
IRIDIUM'S RIGHT TO REQUIRE
FUTURE PURCHASES OF IRIDIUM INTERESTS
Section 2.01. General Sale Rights of Iridium. Subject to the
terms and conditions set forth herein, at any time and from time to time after
the IPO Date, Iridium shall have the right (the "Sale Right") to create, issue
and sell to the Company, and the Company shall have the obligation to purchase
from Iridium, Iridium Interests.
Section 2.02. Notice Required for Exercise of Sale Right. In
order to exercise its Sale Right, Iridium shall deliver written notice (a "Sale
Notice") to the Company of (i) its intent to exercise its rights under this
Article II and (ii) the type and number of Iridium Interests intended to be
sold to the Company (the "Noticed Interests"); provided that if Iridium elects
to change the number or type of Noticed Interests during a Directed Offering
Period an additional Sale Notice shall not be required.
Section 2.03. Company's Obligation to Consummate Offering of
Company Securities in Respect of Noticed Interests. The Company hereby agrees
that upon receipt of a Sale Notice the Company shall, within the Directed
Offering Period and in accordance with Article III, use its best reasonable
efforts to consummate an offering of Company Securities (a "Directed
Offering"), and apply the net proceeds received by the Company from such
Directed Offering to the purchase of the Noticed Interests, on terms and
conditions determined by Iridium; provided that the Company shall not be
required to purchase Noticed Interest until the date it first receives proceeds
from the Directed Offering.
Section 2.04. Terms of Noticed Interests and Company
Securities. (a) If the Noticed Interests are Class 1 Interests, the Company
Securities shall be Common Stock. The Company shall purchase such number of
Class 1 Interests as is equal to the number of shares included in
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<PAGE> 9
the Company Securities divided by the Exchange Rate and the purchase price per
Class 1 Interest shall be equal to the net price per share received by the
Company in the Directed Offering multiplied by the Exchange Rate. The terms of
the Directed Offering shall otherwise be designed to reflect the terms upon
which the Company is to acquire the Noticed Interests.
(b) If the Noticed Interests are other than Class 1 Interests,
the Company Securities shall be such as to reflect as closely as possible the
economic and other characteristics of the Noticed Interests. The terms of the
Directed Offering shall otherwise be designed to reflect the terms upon which
the Company is to acquire the Noticed Interests. The price per Noticed
Interest shall be set, and the terms of the Directed Offering shall be
designed, to eliminate any impact on the Company from underwriting discounts or
commissions.
(c) Iridium shall not deliver any Sale Notice unless the
Noticed Interests, by their terms, will provide adequate assurance (as to time
and amounts) that the Company can meet its obligations under the related
Company Securities. This provision shall be satisfied if the terms of the
Noticed Interests are satisfactory without any inquiry into credit or similar
issues.
Section 2.05. Limitation of Issuances of Company Securities.
The Company agrees that it will not issue any securities without the prior
written consent of Iridium except for issuances of securities pursuant to this
Agreement, the Interest Exchange Agreement and the Master Subscription
Agreement.
ARTICLE III
PROCEDURES FOR DIRECTED OFFERINGS
Section 3.01. Terms of Directed Offerings; Corporate Action
by the Company. (a) Subject to Section 2.04, the Company hereby agrees that,
subject to applicable law, the terms of any Directed Offering shall be
structured at the direction of Iridium, including (i) the
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<PAGE> 10
quantity, class and terms of the Company Securities to be offered, (ii) whether
the Company Securities to be offered will be registered under the Securities
Act or whether such Company Securities will be sold pursuant to an exemption
from such registration, (iii) whether the Directed Offering will be consummated
on a date certain or will be made on a delayed or continuous basis, (iv)
whether the Company Securities will be offered by the Company or by Iridium or
jointly by the Company and Iridium and (v) the terms under which the proceeds
from the sale of the Company Securities will be applied to the purchase of the
Noticed Interests.
(b) The Company hereby agrees, subject to applicable law,
to take all action necessary to consummate any Directed Offering in accordance
with the terms of this Agreement, including (i) authorizing the issuance and
sale of the Company Securities (and authorizing and reserving for issuance all
Company Securities issuable upon the exercise, conversion or exchange of the
Company Securities to be issued in the Directed Offering) and (ii) amending or
supplementing the Company's governing documents as required by the terms of the
Directed Offering and seeking shareholder or other approval, if necessary, for
such action.
(c) In addition to any other obligation of the Company
hereunder, the Company hereby agrees that at any time and from time to time
after the IPO Date, it will increase its authorized share capital as directed
by Iridium, including creating additional shares of Class A Common Stock and
creating and authorizing one or more series of preferred stock, within thirty
days of receipt of written instructions from Iridium to effect such an
increase.
Section 3.02. Cooperation in Preparation of Offering
Documents. Iridium and the Company hereby agree to cooperate in the
preparation of any offering documents relating to a Directed Offering (the
"Offering Documents"), including (i) any registration statements or amendments
thereto required to be filed with the Commission pursuant to Section 3.04 in
connection with the registration of Company Securities to be issued in a
Directed Offering and (ii) any disclosure memoranda or amendments thereto to be
used in connection with a Directed Offering of Company Securities exempt from
registration under the Securities Act.
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<PAGE> 11
Section 3.03. Customary Agreements. Iridium and the Company
hereby agree to enter into and deliver all customary agreements (including
underwriting or purchase agreements) as are reasonably requested of the Company
or Iridium to expedite or facilitate any Directed Offering.
Section 3.04. Registration Statements. (a) In connection
with the obligations of the Company under Articles II and III in respect of any
Directed Offering of Company Securities registered under the Securities Act the
Company hereby agrees to:
(i) prepare and file with the Commission, a registration
statement with respect to the Company Securities on any form which may
be utilized by the Company and which shall permit the disposition of
such Company Securities in accordance with the terms of the Directed
Offering and use its reasonable best efforts to cause such
registration statement to become effective as directed by Iridium;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such registration statement for the period required for the
disposition of the Company Securities in accordance with the terms of
the Directed Offering and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of the
Company Securities covered by such registration statement;
(iii) for a reasonable period prior to the filing of such
registration statement, and throughout the period required for the
disposition of the Company Securities in accordance with the terms of
the Directed Offering, and upon reasonable notice, make available for
inspection by Iridium, any underwriter participating in any
distribution pursuant to the registration statement, and any attorney
or accountant designated by Iridium, at a reasonable time and in a
reasonable manner, financial and other information and books and
records of the Company, and cause the officers, directors and
employees of the Company to respond to such inquiries and supply
information reasonably requested by Iridium and any such underwriter,
attorney or accountant in the course of conducting a reasonable
investigation within the meaning of Section 11 of the Securities Act;
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<PAGE> 12
(iv) promptly notify Iridium, and the managing underwriter
or underwriters, if any, thereof and confirm such advice in writing,
(A) when such registration statement or supplement or post-effective
amendment has been declared or becomes effective, (B) of the issuance
by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation or threatening of any
proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Company Securities Offered in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, or (D) of the
happening of any event during the period such registration statement
is effective which makes any statement made in such registration
statement or the related prospectus untrue in any material respect or
which requires the making of any changes in such registration
statement or prospectus in order to make the statements therein not
misleading;
(v) upon the occurrence of any event contemplated by
Section 3.04(a)(iv)(D) hereof, use its reasonable best efforts to
prepare a supplement or post-effective amendment to such registration
statement or the related prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Company Securities, such
prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(vi) use its reasonable best efforts to obtain promptly
the withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto;
(vii) provide copies of any prospectus, any amendment to
the registration statement or amendment or supplement to any
prospectus or any document which is to be incorporated by reference
into such registration statement or any prospectus after the initial
filing of such registration statement, a reasonable time prior to the
filing of any such prospectus, amendment, supplement or document, to
Iridium and the underwriters, if any, and make the representatives of
the Company available to Iridium and the underwriters, if any, for
discussion of any such document;
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<PAGE> 13
(viii) use its reasonable best efforts to (A) register or
qualify the Company Securities to be included in such registration
statement under such securities laws or blue sky laws of such
jurisdictions as Iridium and each placement or sales agent, if any,
therefor and each underwriter, if any, thereof shall reasonably
request in writing on a timely basis, (B) take any and all other
actions as may be reasonably necessary or advisable to enable each
such holder, agent, if any, and each underwriter, if any, to
consummate the disposition in such jurisdictions of the Company
Securities; and
(ix) use its reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether federal,
state or local, in the U.S. or Bermuda which may be required to effect
the registration or the offering or sale in connection therewith of
the Company Securities;
(b) Iridium hereby agrees to provide the Company with all
assistance reasonably necessary for the Company to comply with its obligations
under Section 3.04(a).
Section 3.05. Expenses of Directed Offerings. Iridium shall
promptly pay all expenses incurred by the Company in connection with any
Directed Offering conducted pursuant to this Agreement. Such expenses shall
include underwriting discounts and commissions unless such amounts have been
reflected in the price per Noticed Interest to be paid by the Company pursuant
to Section 2.04.
ARTICLE IV
IRIDIUM'S EXCHANGE RIGHTS WITH RESPECT
TO CLASS A OPTIONS AND CLASS A RIGHTS
Section 4.01. General Exchange Rights of Iridium. Upon
exercise of any Class A Options or exercise or conversion of Class A Rights by
the holder thereof (the "Holder") and notice by Iridium of such exercise or
conversion pursuant to Section 4.02(c), the Company shall have the obligation
to issue and deliver, in accordance with Section 4.03, the number of
registered, fully paid and non-assessable shares of Class A Common Stock such
Holder is entitled to have delivered upon exercise of such Class A Options or
Class A Rights (the "Underlying Shares of Class A Common Stock"). In exchange
for each Underlying Share of
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<PAGE> 14
Class A Common Stock delivered by the Company pursuant to this Article IV,
Iridium shall create, issue and deliver to the Company one fully paid and
non-assessable Class 1 Interest, subject to adjustment as provided in Article
V. The number of shares of Class A Common Stock to be delivered by the Company
pursuant to this Article V in exchange for one such Class 1 Interest is
hereinafter referred to as the "Exchange Rate." At any time and from time to
time after the IPO Date, Iridium shall have the right to issue additional Class
A Options and Class A Rights pursuant to any Iridium Benefit Plan.
Section 4.02. Information and Notice Obligations of Iridium;
Share Reservation Obligations of the Company. (a) Iridium has heretofore
delivered to the Company a copy of the Option Plan and agrees to provide the
Company with copies of any amendments thereto and of any other Iridium Benefit
Plan that permits Iridium to issue Class A Options or Class A Rights. Iridium
hereby agrees to provide the Company with a schedule no later than the 30th
Business Day following the last day of each calendar quarter listing (i) all
authorized and outstanding Class A Options and Class A Rights under Iridium
Benefit Plans and (ii) the total number of Underlying Shares of Class A Common
Stock issuable in respect of all authorized and outstanding Class A Options and
Class A Rights (the "Authorized Shares") as of the last Business Day of such
calendar quarter (the "Benefit Plan Schedule"); provided that (i) Iridium may
provide a Benefit Plan Schedule at any time and (ii) Iridium shall not be
required to provide a Benefit Plan Schedule if there has been no change from
the most recently provided Benefit Plan Schedule.
(b) The Company hereby agrees to create and reserve for
issuance pursuant to this Agreement a number of shares of Class A Common Stock
that is not less than the number of Authorized Shares; and the Company agrees
that, if a Benefit Plan Schedule lists a greater number of Authorized Shares
than the number of shares of Class A Common Stock the Company has created and
reserved for issuance pursuant to this Agreement, the Company shall immediately
act to increase the number of shares of Class A Common Stock created and
reserved for issuance pursuant to this Agreement to a number of shares of Class
A Common Stock that is not less than the number of Authorized Shares listed in
such Benefit Plan Schedule.
(c) In order for the Company to have the obligation to
deliver Underlying Shares of Class A Common
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<PAGE> 15
Stock upon a Holder's exercise or conversion of a Class A Option or a Class A
Right, Iridium must provide the Company with written notice (an "Exchange
Notice") of (i) such Holder's exercise of, or intention to exercise, Class A
Options or Class A Rights, (ii) the number of Underlying Shares of Class A
Common Stock to be delivered by the Company as a result of such exercise and
(iii) the person in whose name such Underlying Shares of Class A Common Stock
are to be registered.
Section 4.03. Procedures for Delivery by the Company and
Iridium. On a date that is not more than three Business Days after the date
the Company receives the Exchange Notice or on such other date as the Company
and Iridium may mutually agree, the Company shall deliver to Iridium the number
of Underlying Shares of Class A Common Stock requested by the Exchange Notice,
registered in the names specified in the Exchange Notice, and Iridium shall
deliver to the Company certificates representing the Class 1 Interests to be
exchanged for such Underlying Shares of Class A Common Stock pursuant to this
Article IV.
Section 4.04. Company's Obligation to Maintain Effective
Registration Statement. The Company hereby agrees to prepare and file with the
Commission, a registration statement with respect to the Underlying Shares of
Class A Common Stock to be delivered pursuant to this Article IV on any form
which may be used by the Company and will permit the delivery of registered
Underlying Shares of Class A Common Stock in accordance with this Article IV
and to use its best efforts to cause such registration statement or statements
to become effective as of the IPO Date or as soon as practicable thereafter;
and the Company hereby agrees to use its best efforts to prepare and file with
the Commission such amendments and supplements to such registration statement,
or to file and seek the effectiveness of additional registration statements, if
any, as may be necessary to maintain an effective registration statement that
will permit the delivery of registered Underlying Shares of Class A Common
Stock in accordance with this Article IV at any time after the IPO Date.
Section 4.05. Cooperation in Preparation of Registration
Statements; Customary Agreements. Iridium and the Company hereby agree to
cooperate in the preparation of any registration statement required to be filed
with the Commission pursuant to Section 4.04. Iridium and the Company hereby
agree to enter into and deliver all customary agreements as are reasonably
requested of the Company or Iridium to expedite or facilitate the issuance of
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registered Underlying Shares of Class A Common Stock in accordance with this
Article IV.
Section 4.06. Expenses. Iridium shall promptly pay, or
reimburse the Company for the payment of, all expenses incurred by the Company
in connection with the transactions contemplated by this Article IV.
ARTICLE V
ADJUSTMENT OF EXCHANGE RATE
Section 5.01. Exchange Rate Adjustments -- Company Actions.
The Exchange Rate shall be adjusted from time to time as follows:
(a) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in Class A
Common Stock or any other class of Common Stock, the Exchange Rate in effect at
the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Exchange Rate by a fraction
the numerator of which shall be the sum of the number of shares of Class A
Common Stock (Common Stock in the case of a dividend in another class of Common
Stock) outstanding at the close of business on the date fixed for such
determination and the total number of shares constituting such dividend or
other distribution and the denominator of which shall be such number of shares
of Class A Common Stock (Common Stock in the case of a dividend in another
class of Common Stock) outstanding at the close of business on the date fixed
for such determination, such increase to become effective immediately after the
opening of business on the day following the date fixed for such determination.
For the purposes of this subsection (a), the number of shares of Class A Common
Stock or Common Stock at any time outstanding shall not include shares held in
the treasury of the Company.
(b) In case the Company shall issue rights or warrants to
all holders of any class of Capital Stock of the Company entitling them to
subscribe for, purchase or acquire shares of Class A Common Stock or any other
class of Common Stock at a price per share less than the current market price
per share (determined as provided in subsection
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(f) below) of the Class A Common Stock (or Common Stock in the case of rights
or warrants to acquire another class of Common Stock) on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, the
Exchange Rate in effect at the opening of business on the day following the
date fixed for such determination shall be increased by multiplying such
Exchange Rate by a fraction the numerator of which shall be the number of
shares of Class A Common Stock (or Common Stock in the case of rights or
warrants to acquire another class of Common Stock) outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Class A Common Stock (or Common Stock in the case of rights or warrants to
acquire another class of Common Stock) so offered for subscription, purchase or
acquisition, and the denominator of which shall be the number of shares of
Class A Common Stock (or Common Stock in the case of rights or warrants to
acquire another class of Common Stock) outstanding at the close of business on
the date fixed for such determination plus the number of shares of Class A
Common Stock (or Common Stock in the case of rights or warrants to acquire
another class of Common Stock) which the aggregate of the offering price of the
total number of shares of Class A Common Stock (or Common Stock in the case of
rights or warrants to acquire another class of Common Stock) so offered for
subscription, purchase or acquisition would purchase at such current market
price, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this subsection (b), the number of shares of Class A Common Stock
(or Common Stock in the case of rights or warrants to acquire another class of
Common Stock) at any time outstanding shall not include shares held in the
treasury of the Company. The Company agrees not to pay any dividend or make
any distribution on shares of Common Stock held in its treasury.
(c) In case the outstanding shares of Class A Common
Stock shall be subdivided into a greater number of shares of Class A Common
Stock, the Exchange Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately increased, and, conversely, in case the outstanding shares of
Class A Common Stock shall each be combined into a smaller number of shares of
Class A Common
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Stock, the Exchange Rate in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Class A Common Stock or any other class of
Common Stock evidences of its indebtedness or assets (including securities but
excluding (i) any rights or warrants referred to in subsection (b) above, (ii)
any dividend or distribution referred to in subsection (a) above, and (iii) any
dividend or distribution paid in cash out of current or accumulated earnings),
then in each case, the Exchange Rate in effect at the opening of business on
the day following the date fixed for the determination of holders of Class A
Common Stock or other class of Common Stock entitled to receive such
distribution shall be adjusted by multiplying such Exchange Rate by a fraction
of which the denominator shall be the current market price per share
(determined as provided in subsection (f) below) of the Class A Common Stock
(or Common Stock in the case of a dividend or distribution on Common Stock) on
such date of determination (or, if earlier, on the date on which the Class A
Common Stock (or Common Stock in the case of a dividend or distribution on
Common Stock) goes "ex-dividend" in respect of such distribution) less the then
fair market value as determined by the Company Board (whose determination shall
be conclusive) of the portion of the assets or evidences of indebtedness so
distributed (and for which an adjustment to the Exchange Rate has not
previously been made pursuant to the terms of this Section 5.01) applicable to
one share of Class A Common Stock (or Common Stock in the case of a dividend or
distribution on Common Stock), and the numerator shall be such current market
price per share of the Class A Common Stock (or Common Stock in the case of a
dividend or distribution on Common Stock), such adjustment to become effective
immediately after the opening of business on the day following such date of
determination.
(e) The reclassification or change of Class A Common
Stock or any other class of Common Stock into
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securities including securities other than Class A Common Stock (or Common
Stock in the case of a reclassification or change of Common Stock) (other than
any reclassification upon a consolidation or merger to which subsection (i)
below applies) shall be deemed to involve (i) a distribution of such securities
other than Class A Common Stock (or Common Stock in the case of a
reclassification or change of Common Stock) to all holders of Class A Common
Stock (or Common Stock in the case of a reclassification or change of Common
Stock) (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of holders of Class A Common Stock (or
Common Stock) entitled to receive such distribution" within the meaning of
subsection (d) above), and, in the case of Class A Common Stock, (ii) a
subdivision or combination, as the case may be, of the number of shares of
Class A Common Stock outstanding immediately prior to such reclassification
into the number of shares of Class A Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective" or "the day upon
which such combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the
meaning of subsection (c) above).
(f) For the purpose of any computation under subsection
(b) or (d) above, the current market price per share of Class A Common Stock or
Common Stock on any day shall be deemed to be the average of the Closing Prices
of the Class A Common Stock (or Common Stock in the case of Common Stock) for
the 20 consecutive Trading Days selected by the Company Board commencing no
more than 30 Trading Days before and ending no later than the second Trading
Day before the day in question; provided, that, in the case of subsection (d),
if the period between the date of the public announcement of the dividend or
distribution and the date for the determination of holders of Class A Common
Stock or other class of Common Stock entitled to receive such dividend or
distribution (or, if earlier, the date on which the Class A Common Stock or
other class of Common Stock goes "ex-dividend" in respect of such dividend or
distribution) shall be less than 20 Trading Days, the period shall be such
lesser number of Trading Days but, in any event, not less than five Trading
Days.
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(g) No adjustment in the Exchange Rate in respect of this
Section 5.01 shall be required unless such adjustment would require an increase
or decrease of at least 1% in such rate; provided, however, that any
adjustments which by reason of this clause (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and provided, further, that adjustments shall be required and made in
accordance with the provisions of this Section 5.01 (other than this clause
(g)) not later than such time as may be required in order to preserve the tax
free nature of a distribution to the holders of shares of Class A Common Stock
or other class of Common Stock. Anything in this clause (g) to the contrary
notwithstanding, the Company shall be entitled, at its option, to make such
increases in the Exchange Rate, in addition to those required by this Section
5.01, as it in its discretion shall determine to be advisable in order that any
stock dividend, subdivision or combination of shares, distribution of capital
stock or rights or warrants to purchase stock or securities, or distribution of
evidences of indebtedness or assets (other than cash dividends or distributions
paid from current or accumulated earnings) or other event shall be a tax free
distribution to holders for United States federal income tax purposes. All
calculations under this clause (g) shall be made to the nearest cent.
(h) Whenever the Exchange Rate is adjusted as provided in
this Section 5.01, the Company shall provide written notice of such adjustment
to Iridium, which notice shall include the Exchange Rate after such adjustment
and shall set forth a brief statement of the facts requiring such adjustment
and the manner of computing the same.
(i) In case of any consolidation of the Company with, or
merger of the Company into, any other entity, any merger of another entity into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Class A Common
Stock) or any sale or transfer of all or substantially all of the assets of the
Company, Iridium shall have the right thereafter to exchange Class 1 Membership
only into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by a holder of the number of
shares of Class A Common Stock or Common Stock into which such Class 1
Interests might have been exchanged immediately prior to such consolidation,
merger, sale or transfer,
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assuming such holder of Class A Common Stock or Common Stock is not the entity
with which the Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was made, as the case
may be (a "constituent person"), or an affiliate of a constituent person and
failed to exercise its rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer is
not the same for each share of Class A Common Stock or Common Stock held
immediately prior to such consolidation, merger, sale or transfer by others
than a constituent entity or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("non-electing share"), then
for the purpose of this subsection (i) the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, sale or transfer
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares. If necessary,
appropriate adjustment shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of Iridium, so
that the provisions set forth herein shall thereafter be applicable, as nearly
as may reasonably be practicable, to any shares of stock or other securities or
property thereafter deliverable on the exchange of the Class 1 Interests. Any
adjustment under this subsection (i) shall be evidenced by written notice of
such adjustment in the manner set forth in subsection (h). The above
provisions shall similarly apply to successive consolidations, mergers, sales
or transfers.
In case (x) the Company shall take any action that would
result in an adjustment to the Exchange Rate; or (y) of any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or (z) of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company; then the
Company shall provide to Iridium, at least 15 days prior to the applicable
record or effective date hereinafter specified, a notice stating (i) the date
on which a record is to be taken for the purpose of such actions, or, if the
record is not to be taken, the date as of which the holders of Common Stock or
Class A Common Stock, as the case may be, of record are to be determined, or
(ii) the date on which such
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consolidation, merger, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Class A Common Stock or Common Stock of record shall be entitled to
exchange their shares of Class A Common Stock or Common Stock for securities,
cash or other property deliverable upon such consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Neither the failure to give
such notice nor any defect therein shall affect the legality or validity of the
proceedings described in clauses (x) through (z) above.
Section 5.02. Exchange Rate Adjustments -- Iridium Actions.
The Exchange Rate shall be adjusted from time to time as follows:
(a) In case Iridium shall pay or make a dividend or other
distribution on any class of Iridium Interests in Class 1 Interests, the
Exchange Rate in effect at the opening of business on the day following the
date fixed for the determination of Iridium members entitled to receive such
dividend or other distribution shall be decreased by multiplying such Exchange
Rate by a fraction the denominator of which shall be the sum of the number of
Class 1 Interests outstanding at the close of business on the date fixed for
such determination and the total number of Class 1 Interests constituting such
dividend or other distribution and the numerator of which shall be such number
of Class 1 Interests outstanding at the close of business on the date fixed for
such determination, such decrease to become effective immediately after the
opening of business on the day following the date fixed for such determination.
For the purposes of this subsection (a), the number of Class 1 Interests at any
time outstanding shall not include interests held in the treasury of Iridium.
(b) In case Iridium shall issue rights or warrants to all
holders of any class of Iridium Interests entitling them to subscribe for,
purchase or acquire Class 1 Interests at a price per Class 1 Interest less than
the current market price per share (determined as provided in subsection (f)
below) of Class A Common Stock multiplied by the Exchange Rate on the date
fixed for the determination of Iridium Interest holders entitled to receive
such rights or
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warrants, the Exchange Rate in effect at the opening of business on the day
following the date fixed for such determination shall be decreased by
multiplying such Exchange Rate by a fraction the denominator of which shall be
the number of Class 1 Interests outstanding at the close of business on the
date fixed for such determination plus the number of Class 1 Interests so
offered for subscription, purchase or acquisition, and the numerator of which
shall be the number of Class 1 Interests outstanding at the close of business
on the date fixed for such determination plus the number of Class 1 Interests
which the aggregate of the offering price of the total number of Class 1
Interests so offered for subscription, purchase or acquisition would purchase
at a price per Class 1 Interest equal to the market price per Share of Class A
Common Stock multiplied by the Exchange Rate in effect at the opening of
business on the day following the date fixed for the determination of Iridium
Interest holders entitled to receive such rights or warrants, such increase to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this subsection
(b), the number of Class 1 Interests at any time outstanding shall not include
shares held in the treasury of Iridium. Iridium agrees not to pay any dividend
or make any distribution on Iridium Interests held in its treasury.
(c) In case the outstanding Class 1 Interests shall be
subdivided into a greater number of Class 1 Interests, the Exchange Rate in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately decreased, and,
conversely, in case the outstanding Class 1 Interests shall each be combined
into a smaller number of Class 1 Interests, the Exchange Rate in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
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<PAGE> 24
(d) In case Iridium shall, by dividend or otherwise,
distribute to all holders of its Class 1 Interests evidence of its indebtedness
or assets (including securities but excluding (i) any rights or warrants
referred to in subsection (b) above, (ii) any dividend or distribution referred
to in subsection (a) above, and (iii) any dividend or distribution paid in cash
out of current or accumulated earnings), then in each case, the Exchange Rate
in effect at the opening of business on the day following the date fixed for
the determination of holders of Class 1 Interests entitled to receive such
distribution shall be adjusted by multiplying such Exchange Rate by a fraction
of which the numerator shall be the current market price per share (determined
as provided in subsection (f) below) of the Class A Common Stock on such date
of determination multiplied by the Exchange Rate (or, if earlier, on the date
on which the Class 1 Interests go "ex-dividend" in respect of such
distribution) less the then fair market value as determined by the Iridium
Board (whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed (and for which an adjustment to the
Exchange Rate has not previously been made pursuant to the terms of this
Section 5.02) applicable to one Class 1 Interest, and the denominator shall be
such current market price per share of the Class A Common Stock multiplied by
the Exchange Rate, such adjustment to become effective immediately after the
opening of business on the day following such date of determination.
(e) The reclassification or change of Class 1 Interests
into interests or securities including Iridium Interests other than Class 1
Interests shall be deemed to involve (i) a distribution of such interests or
securities other than Class 1 Interests to all holders of Class 1 Interests
(and the effective date of such reclassification shall be deemed to be "the
date fixed for the determination of holders of Class 1 Interests entitled to
receive such distribution" within the meaning of subsection (d) above), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Class 1 Interests outstanding immediately prior to such reclassification
into the number of Class 1 Interests outstanding immediately thereafter (and
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the effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
subdivision becomes effective," as the case may be, and "the day upon which
such subdivision or combination become effective" within the meaning of
subsection (c) above).
(f) For the purpose of any computation under subsection
(b) or (d) above, the current market price per share of Class A Common Stock on
any day shall be deemed to be the average of the Closing Prices of the Class A
Common Stock for the 20 consecutive Trading Days selected by the Company Board
commencing no more than 30 Trading Days before and ending no later than the
second Trading Day before the day in question (adjusted as necessary in the
discretion of the Iridium Board to reflect any dividends or other distributions
on the Class A Common Stock).
(g) No adjustment in the Exchange Rate in respect of this
Section 5.02 shall be required unless such adjustment would require an increase
or decrease of at least 1% in such rate; provided, however, that any
adjustments which by reason of this clause (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and provided, further, that adjustments shall be required and made in
accordance with the provisions of this Section 5.02 (other than this clause
(g)) not later than such time as may be required in order to preserve the tax
free nature of a distribution to the holders of Iridium Interests. Anything in
this clause (g) to the contrary notwithstanding, Iridium shall be entitled, at
its option, to make such decreases in the Exchange Rate, in addition to those
required by this Section 5.02, as it in its discretion shall determine to be
advisable in order that any interest dividend, subdivision or combination of
interests, distribution of interests or rights or warrants to purchase
interests, or distribution of evidences of indebtedness or assets (other than
cash dividends or distributions paid from current or accumulated earnings) or
other event shall be a tax free distribution to holders for United States
federal income tax purposes. All calculations under this clause (g) shall be
made to the nearest cent.
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(h) Whenever the Exchange Rate is adjusted as provided in
this Section 5.02, the Iridium shall provide written notice of such adjustment
to the Company, which notice shall include the Exchange Rate after such
adjustment and shall set forth a brief statement of the facts requiring such
adjustment and the manner of computing the same.
Section 5.03. Exchange Rate Adjustments -- General. Anything
in this Article V to the contrary notwithstanding, it is the intent of the
parties that the Exchange Rate be adjusted to reflect events affecting the
capital structure of Iridium and the Company, including those events described
in this Article V, as necessary or appropriate to place the parties to this
Agreement in the same relative position which they would have been had such
events not occurred, and the parties hereby agree that Exchange Rate in effect
at any time shall reflect such intent.
ARTICLE VI
RESTRICTIONS ON TRANSFER
The Iridium Interests sold or exchanged hereunder are subject
to the restrictions on Transfer (as hereinafter defined) contained in the LLC
Agreement. In addition, such Iridium Interests may not be registered under any
United States federal or state securities laws and may not be Transferred
unless such laws do not apply or unless such registration is otherwise not
required. As used herein, "Transfer" means to sell, transfer, assign, pledge
or otherwise encumber or dispose of (whether with or without consideration and
whether voluntarily or involuntarily or by operation of law), directly or
indirectly.
ARTICLE VII
INDEMNIFICATION
Section 7.01. Indemnification by Iridium. Iridium will
indemnify and hold harmless the Company and each of its officers, directors and
employees (each an "indemnified party") against any losses, claims, damages or
liabilities to which such indemnified party may become subject, under the
Securities Act or otherwise, that
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directly or indirectly, arise out of or are related to, the transactions
contemplated by this Agreement, and will reimburse such indemnified party for
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim, as such
losses, damages, liabilities or expenses are incurred; provided, however, that
Iridium shall not be liable in any such case to any indemnified party to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an intentional act or omission of the indemnified party which was contrary
to any written instruction or request of Iridium or which amounted to willful
misconduct on the part of the indemnified party.
Section 7.02. Proceedings. Promptly after receipt by an
indemnified party of notice of the commencement of any action, suit or
proceeding as to which a claim in respect thereof is to be made against Iridium
under Section 7.01, the indemnified party shall notify Iridium in writing of
the commencement thereof, but the omission so to notify Iridium shall not
relieve Iridium from any liability which it may have to any indemnified party
otherwise than under such section. In case any such action shall be brought
against any indemnified party and it shall notify Iridium of the commencement
thereof, Iridium shall be entitled to participate therein and, to the extent
that it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to Iridium), and, after notice
from Iridium to such indemnified party of its election so to assume the defense
thereof, Iridium shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. Iridium
shall not, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (a) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (b) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party. No
indemnified party shall effect the settlement or compromise of, or consent to
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the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution has been or may be
sought hereunder without the prior written consent of Iridium.
Section 7.03. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 7.01 is for any reason held to be unenforceable
although applicable in accordance with its terms, Iridium shall contribute to
the losses, liabilities, claims, damages and expenses of the type contemplated
by such indemnity agreement incurred by any indemnified party in such
proportion as shall be appropriate to reflect (i) the relative benefits
received, directly or indirectly, by Iridium on the one hand and the
indemnified party on the other hand, from the sale or exchange of the Company
Securities and the issuance and sale of the Class 1 Interests, and (ii) the
relative fault of Iridium on the one hand and the indemnified party on the
other, with respect to the acts or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. Iridium and the Company agree
that it would not be just and equitable if contribution pursuant to this
Section 7.03 were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from Iridium if Iridium was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution obligations in this Article VII
are solely obligations of Iridium and no recourse may be had thereunder against
any member, director, officer, employee or agent of Iridium.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Effectiveness of Agreement. This Agreement
shall become effective only upon the first date on which the Company purchases
Class 1 Interests from Iridium.
Section 8.02. Acknowledgment. The Company hereby
acknowledges pursuant to the Option Plan that shares of
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Class A Common Stock are available for purposes of the Option Plan.
Section 8.03. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties; provided that this Agreement may not be
assigned by the Company without the written consent of Iridium.
Section 8.04. Notices. All notices and other communications
provided for in this Agreement shall be in writing, shall be in the English
language and shall be sufficiently given if made (i) by hand delivery, (ii) by
telecopier, or (iii) by reputable express courier service (charges prepaid), if
to the Company, at the following address:
Iridium World Communications Ltd.
c/o Iridium, LLC
1575 I Street, N.W.
Washington, D.C. 20005
U.S.A.
Attention: General Counsel
Phone: (202) 326-5600
Telecopier: (202) 842-0006
or if to Iridium, at the following address:
Iridium, LLC
1575 I Street, N.W.
Washington, D.C. 20005
U.S.A.
Attention: General Counsel
Phone: (202) 326-5600
Telecopier: (202) 842-0006
or at such other address as the Company or Iridium shall have furnished in
writing one to the other. Such notice shall be deemed to have been given when
actually received.
Section 8.05. Entire Agreement. This Agreement constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior understandings among such parties with
respect to such subject matter. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, other than the
parties hereto and their respective
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successors and permitted assigns any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement is intended to be for the benefit of the parties hereto and their
respective successors and permitted assigns and for the benefit of no other
person.
Section 8.06. Governing Law; Severability. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE DOMESTIC
LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. If it shall be determined by a
court of competent jurisdiction that any provision or wording of this Agreement
shall be invalid or unenforceable under applicable law, such invalidity or
unenforceability shall not invalidate this entire Agreement. In that case,
this Agreement shall be construed so as to limit any term or provision so as to
make it enforceable or valid within the requirements of any applicable law,
and, in the event such term or provision cannot be so limited, this Agreement
shall be construed to omit such invalid or unenforceable provisions.
Section 8.07. Jurisdiction and Service of Process. Any suit,
action or proceeding against any party with respect to this Agreement may be
brought in a court of the United States sitting in the State of Delaware or, if
jurisdiction is lacking in such a court, in a court of record in the State of
Delaware, and each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may have, whether now or in the future,
to the laying of venue in, or to the jurisdiction of, any and each of such
courts for the purpose of any such suit, action, proceeding or judgment and
further waives any claim that any such suit, action, proceeding or judgment has
been brought in an inconvenient forum, and the party hereby submits to such
jurisdiction. Each party hereto hereby agrees that service of all writs,
process and summonses in any such suit, action or proceeding brought in the
State of Delaware may be made upon The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, or such alternate process agent in the
United States designated with respect to the party in a writing delivered to
the other party (the "Process Agent") and each of the parties hereto hereby
irrevocably appoints the Process Agent in its name, place and stead to receive
and forward such service of any and all such writs, process and summonses and
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<PAGE> 31
agrees that the failure of the Process Agent to give any notice of any such
service of process to such party shall not impair or affect the validity of
such service or of any judgment based thereon. If the Process Agent is no
longer able to so act for any reason whatsoever, the party agrees to appoint a
substitute process agent, which substitute process agent shall thereafter be
deemed to be the Process Agent hereunder, and to give notice of such
appointment to the other party.
Section 8.08. Amendments to the Agreement. This Agreement
may not be changed or amended or the observance of any provisions waived
without the written consent of each of the Company and Iridium.
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<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
IRIDIUM WORLD COMMUNICATIONS LTD.
By:
-----------------------------
Name:
Title:
IRIDIUM LLC
By:
-----------------------------
Name:
Title:
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<PAGE> 1
Exhibit 23.1
Accountants' Consent
The Boards of Directors, Members and Stockholders
Iridium LLC and Iridium World Communications Ltd.:
We consent to the use of our reports included herein and to the references to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
Washington, D.C.
June 4, 1997
