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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 AND 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997
IRIDIUM WORLD COMMUNICATIONS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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BERMUDA 0-22637 52-2025291
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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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)
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IRIDIUM LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-22637-01 52-1984342
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
IRIDIUM OPERATING LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-22637-02 52-2066319
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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IRIDIUM IP LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 333-31741-01 52-2048736
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THIS REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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IRIDIUM ROAMING LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 333-31741-02 52-2048734
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THIS REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
------------------------
IRIDIUM CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 333-31741-03 52-2048739
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THIS REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Iridium World Communications Nasdaq National Market
Ltd............................
Class A Common Stock
($0.01 par value)
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Iridium Operating LLC and Iridium Capital Corporation, as issuers, and
Iridium IP LLC and Iridium Roaming LLC, as guarantors, are required to file
reports required by Section 13 of the Act pursuant to Section 15(d) of the Act
in respect of the issuers (i) 13% Senior Notes due 2005, Series A and (ii) 14%
Senior Notes due 2005, Series B.
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X]* No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Iridium World Communications Ltd. voting
stock held by nonaffiliates of the registrants as of March 10, 1998 was
$621,456,021.
At March 10, 1998, there were 12,008,812 shares of Iridium World
Communications Ltd. Class A Common Stock, ($0.01 par value per share)
outstanding.
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* Iridium Capital Corporation, Iridium IP LLC and Iridium Roaming LLC became
subject to the filing requirements of Section 15(d) on September 8, 1997.
Iridium Operating LLC became subject to the filing requirements of Section
15(d) on December 18, 1997.
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DOCUMENTS INCORPORATED BY REFERENCE
None.
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NUMBER
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 29
Item 3. Legal Proceedings........................................... 30
Item 4. Submission of Matters to a Vote of Security Holders......... 30
PART II
Item 5. Market for IWCL's Common Equity and Related Stockholder 30
Matters...................................................
Item 6. Selected Financial Data..................................... 32
Item 7. Management's Discussion and Analysis of Financial Condition 34
and Results of Operation..................................
Item 7A. Quantitative and Qualitative Disclosures About Market 39
Risk......................................................
Item 8. Financial Statements and Supplementary Data................. 39
Item 9. Changes in and Disagreements With Accountants On Accounting 39
and Financial Disclosure..................................
PART III
Item 10. Directors and Executive Officers of the Registrants......... 40
Item 11. Executive Compensation...................................... 47
Item 12. Security Ownership of Certain Beneficial Owners and 51
Management................................................
Item 13. Certain Relationships and Related Transactions.............. 53
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 56
8-K.......................................................
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ITEM 1. BUSINESS
INTRODUCTION
This annual report is filed jointly by Iridium World Communications Ltd.
("IWCL"), Iridium LLC ("Parent"), Iridium Operating LLC ("Iridium"), Iridium
Capital Corporation ("Capital"), Iridium Roaming LLC ("Roaming") and Iridium IP
LLC ("IP").
IWCL was incorporated by Parent as an exempted company under the Companies
Act 1981 of Bermuda on December 12, 1996. IWCL is organized to act as a member
of Parent and to have no other business. On June 13, 1997, IWCL consummated an
initial public offering (the "IWCL IPO") of 12,000,000 shares of its Class A
Common Stock, par value $0.01 per share (the "Class A Common Stock") and applied
the net proceeds of approximately $225 million to purchase 12,000,000 Class 1
Membership Interests in Parent. As of March 10, 1998, IWCL owned approximately
8.5% of the outstanding Class 1 Membership Interests in Parent.
Parent was formed as a limited liability company pursuant to the provisions
of the Delaware Limited Liability Company Act (the "Delaware Act") on July 16,
1996. Parent's purpose is to acquire, own and manage the IRIDIUM communications
system (the "IRIDIUM System").
Iridium was formed as a limited liability company pursuant to the
provisions of the Delaware Act on October 23, 1997. Iridium is a wholly-owned
subsidiary of Parent and has the same purpose as Parent.
On December 18, 1997, Parent and Iridium effected an asset drop-down
transaction (the "Asset Drop-Down Transaction") pursuant to which substantially
all of the assets and liabilities of Parent were transferred to Iridium. The
Asset Drop-Down Transaction was effected for the purpose of providing the agent
for the secured lenders under Iridium's $1 billion Secured Bank Facility (as
defined) with an efficient means for obtaining a security interest in the
membership interests in Iridium.
Capital is a Delaware corporation and a wholly-owned subsidiary of Iridium.
Capital has no business other than serving as a co-issuer of Iridium's $1.1
billion in aggregate principal amount of Senior Notes (as defined) and guarantor
of Iridium's Secured Bank Facility (as defined). Capital has no significant
assets and does not conduct any operations.
Roaming, a Delaware limited liability company and a wholly-owned subsidiary
of Iridium, is the entity that enters into roaming agreements with other
wireless telecommunications providers on behalf of Iridium. IP, also a Delaware
limited liability company and a wholly-owned subsidiary of Iridium, holds the
worldwide trademark registrations of Iridium. Each of Roaming and IP is a
guarantor of the Senior Notes and the Secured Bank Facility. The Senior Notes
and the Secured Bank Facility also are guaranteed by a new wholly-owned
subsidiary of Iridium, Iridium Facilities Corporation, a Delaware Corporation
("Facilities"). Facilities is the entity which holds certain real property of
Iridium.
IWCL acts as a member of Parent and has no other business. The business of
Iridium constitutes substantially all of Parent's business. The business of
Iridium is described below. Any reference below to Iridium relating to any event
prior to the Asset Drop-Down Transaction should be interpreted as a reference to
the Parent, as predecessor to Iridium.
BUSINESS SEGMENT
Iridium operates in one industry segment, telecommunications.
FORWARD LOOKING STATEMENTS
Iridium is a development stage company with no operating history.
Accordingly, many statements in this report are forward looking. Examples of
such forward looking statements include, but are not limited to, the statements
concerning operations, prospects, markets, technical capabilities, funding
needs, financing sources, pricing, launch schedule, commercial operations
schedule, estimates of the size of addressable markets for mobile satellite
services, estimates of customer counts, the last year in which Iridium will have
negative cash
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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, including, but not limited to, systems
contractors, equipment suppliers, gateway operators, service providers and
roaming partners. These forward looking statements are based on a number of
assumptions and are inherently predictive and speculative. One or more of the
assumptions underlying such forward looking statements is likely to be
incorrect. Therefore, actual results may be materially different from those
expressed or implied by such statements.
Factors which may cause IWCL's, the Parent's or Iridium's results to differ
materially from those expressed or implied by such forward looking statements
include, but are not limited to, (i) Iridium's absence of current revenues,
highly leveraged capital structure and significant additional funding needs,
(ii) delays and cost overruns related to the construction and deployment of the
IRIDIUM System, (iii) technological risks related to the development and
implementation of the various components of the IRIDIUM System, (iv) customer
acceptance of Iridium World Services, (v) satellite launch, operation and
maintenance risks, (vi) risks associated with the need to obtain operating
licenses in the numerous countries where Iridium assumes it will provide its
services, (vii) competition from satellite and terrestrial communications
services and (viii) Iridium's dependence on Motorola, Inc. ("Motorola") and
other members of the Parent for the construction and operation of the IRIDIUM
System and the distribution and marketing of Iridium World Services. These
factors, and other factors that may materially affect Iridium's operations, are
described in greater detail in the Securities and Exchange Commission filings of
IWCL, Parent and Iridium, including Exhibit 99 to this report.
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. As of March 1, 1998, Motorola had launched 51 Iridium satellites in ten
separate launches. Motorola has informed Iridium, however, that two of those 51
satellites are not functioning and will not become part of the constellation,
but that Iridium will not bear the financial impact of the loss of the two
satellites and that such loss will not affect the scheduled date for
commencement of commercial operations in September 1998. Iridium expects to
commence commercial service on September 23, 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 Iridium World Cellular Services, Iridium
World Satellite Services and Iridium World Page Services will extend wireless
access globally and allow Iridium's customers to be reached by phone or pager,
and to place phone calls from or to, virtually anywhere in the world with one
phone and one phone number. Iridium World Cellular Services is expected to
enable customers to roam internationally among terrestrial wireless networks
using different protocols that have roaming agreements with Iridium. Iridium
World Satellite Services will extend voice services to the regions of the globe
not served by terrestrial systems. Iridium intends to offer global paging
(Iridium World Page Services) both in combination with Iridium voice services
and as a stand-alone service. The signaling capabilities of the IRIDIUM System
will enable Iridium to track a voice customer's location 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 World 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.
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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 gateways will be owned, operated and financed by one or more
investors in Iridium or their affiliates. Iridium expects that portable,
hand-held Iridium phones will be manufactured by at least two experienced
suppliers, Motorola and Kyocera, both of which have hand-held Iridium phones
under development. The phones are expected to be available in satellite only and
multi-mode models, with the multi-mode model allowing subscribers to access the
IRIDIUM System and most major terrestrial wireless systems using different
protocols with a single phone. Iridium World Cellular Services will support
roaming among the two principal types of terrestrial wireless protocols IS-41
(AMPS, NAMPS and CDMA) and GSM (GSM900). Roaming between these protocols
requires cross-protocol translation which will be accomplished for Iridium World
Cellular Services 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 using different technologies.
STRATEGY
Iridium's strategy is to launch and operate the premier global mobile
wireless telephone 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
World 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 Iridium World Cellular
Services and Iridium World Page Services as complements to Iridium World
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 World Services subscriber will generally have
worldwide wireless coverage wherever Iridium World Services are authorized,
including mid-ocean and remote areas. The availability of the Iridium World
Satellite Services will not be limited by the customer's proximity to a
gateway. Iridium believes this feature will make its Iridium World
Satellite Services particularly well suited for aeronautical and shipping
communications and for service in land areas where LEO MSS systems using
"bent pipe" technology are not expected to have the more extensive gateway
infrastructure needed by such systems to provide global coverage.
Convenient roaming onto terrestrial wireless networks. Iridium will offer
subscribers a combination of Iridium World Satellite Services and Iridium
World Cellular Services. With the addition of Iridium World Cellular
Services, 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 200
characters and numeric messages of up to 20 digits virtually anywhere in
the world. With Iridium World Page Services, users of Iridium World
Satellite Services or Iridium World Cellular Services will generally be
able to update their location on the IRIDIUM System by briefly turning on
their phone, thereby allowing the IRIDIUM System to send a targeted page.
Iridium believes that it will be the first company, and the only company
prior to 2000, which will offer global paging to a belt-worn pager.
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Greater signal strength. The IRIDIUM System is designed to provide
greater signal strength than proposed competing MSS systems. Iridium
believes this greater signal strength will allow it to better serve
hand-held phones, and provide a higher degree of in-building signal
penetration for pagers, than competing MSS systems.
Be the first to market with a global wireless communications
system. Iridium plans to capitalize on the substantial design,
development, fabrication and testing efforts and financial investment to
date of its strategic investors to bring the Iridium World 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
World Services are authorized.
Adapt proven technologies through an industrial team led by Motorola. The
IRIDIUM System adapts proven technology, including GSM cellular call
processing technology, intersatellite links, FDMA/TDMA radio transmission
technology, a 2,400 bps vocoder and business support software. Iridium
believes that the primary technological challenge is the integration of
these proven technologies into a single system. Motorola, the principal
investor in Iridium, is a leading international provider of wireless
communications systems, cellular phones, pagers, semiconductors and other
electronic equipment. The industrial team assembled by Motorola to build
and deliver in orbit the IRIDIUM System consists of major companies
experienced in aerospace and telecommunications, including Telespazio,
Lockheed Martin, Raytheon, Boeing, Khrunichev and China Aerospace.
Capitalize on the strengths of its strategic investors. A number of
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
World Services and equipment to potential subscribers. Because of the
prominence of many of these investors, Iridium believes that their efforts
to obtain the necessary regulatory approvals have been, and will continue
to be, of great importance.
Utilize existing wireless distribution channels. Iridium's strategy is to
target primarily traveling professionals, who are generally wireless phone
users. Iridium's strategy is to provide customers with an enhancement to
their existing terrestrial wireless service through existing marketing and
distribution channels rather than to focus on individuals who have no or
limited landline or wireless communications experience and live in areas
where no marketing and distribution channels currently exist.
IRIDIUM SERVICES
GENERAL
Iridium will provide global communications services primarily to
individuals who require the convenience of having a hand-held wireless phone and
belt-worn pager that can be used virtually anywhere. Iridium will offer Iridium
World Satellite Services to customers who need to send or receive telephone
calls in areas not currently served by terrestrial wireless services. Iridium
will offer Iridium World Cellular Services 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 World Satellite Services and Iridium World
Cellular Services will be offered in combination as Iridium World Services,
which will allow the customer to switch conveniently 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 (Iridium World Page Services) both in combination
with Iridium's voice services and as a stand-alone service.
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IRIDIUM WORLD 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.
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.
IRIDIUM WORLD CELLULAR 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 Iridium World
Cellular Services as a complement to Iridium World 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. As of March 1, 1998, Roaming has entered into more than 90
roaming agreements. Iridium World Cellular Services 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
GSM900). With Iridium World Cellular Services, customers are expected to be able
to overcome (i) the coverage limitations of their "home" wireless network when
traveling to a city served by a wireless operator that does not have a roaming
agreement with the customer's home wireless network but does have one with
Iridium and (ii) the service limitations of satellite-only service when in
buildings and urban canyons, where terrestrial wireless service will typically
be available. Customers who travel between cities that are served by different
terrestrial wireless protocols but do not travel beyond the reach of terrestrial
wireless services will be able to realize the interprotocol benefits of Iridium
World Cellular Services with either Iridium's planned single phone that is
compatible with multiple protocols, or with a combination of cellular phones,
one for each protocol. The availability of Iridium World Cellular Services
depends upon the successful development of the IIU.
IRIDIUM WORLD SERVICES
Iridium intends to offer Iridium World Services to customers who require
both satellite and terrestrial wireless service while traveling outside of their
"home" territories. Iridium World Services will allow a customer to conveniently
use both the Iridium World Satellite Services and any terrestrial wireless
network that has a roaming agreement with Iridium. For Iridium World Services, 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). 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
World Satellite Services and Iridium World Cellular Services customers, Iridium
World Services customers will be able to have one phone number, which can either
be an Iridium phone number (i.e., it will begin with "8816" or "8817," the
international country codes assigned to Iridium by the ITU) or the customer's
"home" cellular number.
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PAGING
Iridium intends to offer global paging both as a stand-alone service
("Iridium World Page Services") 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 200 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.
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 World Satellite Services or Iridium
World Cellular Services 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
Iridium World Cellular Services customers, their terrestrial wireless phone. The
network then can identify the appropriate MDAs to send a page, without further
customer cooperation.
Iridium expects that a caller who is unable to reach an Iridium customer,
because the phone is turned off or the customer is in a building or urban canyon
where satellite voice service is unavailable, will be given the option to send a
page, leave a voice-mail message for the customer or both. By this means,
Iridium expects to provide communications capability virtually anywhere in the
world.
AERONAUTICAL SERVICES
Iridium expects to offer cabin and flightdeck communications to and from
business and commercial aircraft commencing in 1999. This service is expected to
be an extension of Iridium's voice services, since airline passengers,
especially business travelers, have a heightened demand for telephone services
due to the isolated, restrictive, and often time-consuming nature of air travel.
Subscribers to Iridium World 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.
In December 1996, Motorola submitted a request to the FCC to authorize the
IRIDIUM System to provide Aeronautical Mobile-Satellite Route Service ("AMSRS")
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 AMSRS. Several parties
filed comments with and have petitioned the FCC to deny Motorola's application
to provide AMSRS service. Among other arguments, petitioners claim that the
AMSRS 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
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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 World Services 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 200 million
subscribers at year-end 1997 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 World
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 World 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
World Services. Iridium expects that individuals in these markets are more
likely to need and have the ability to afford handheld, global mobile
communications capability than, for example, individuals who live in remote
areas outside existing distribution channels for wireless communications.
Iridium estimates that the addressable traveling professional market, which
it defines as all employed adults living in urban areas who own a wireless phone
and travel at least four times per year beyond the coverage of their current
wireless phone, will include approximately 42 million individuals by 2002. The
global corporate/industrial addressable market, which consists of companies with
more than 1,000 employees in industries with operations that are likely to need
mobile satellite services, is estimated by Iridium to include over 8,800
companies by 2002. Iridium believes that its unique service package is
well-tailored to meet the demands of, and will give Iridium an advantage over
competing MSS systems in, these target markets. Iridium estimates that it will
have customer counts in the year 2002 in the range of 2.2 million to 2.5 million
for its satellite-based voice services, Iridium World Satellite Services
(satellite voice and paging) and Iridium World Service (the combination of
Iridium World Satellite Services and Iridium World Cellular Services), 1.0
million to 1.3 million for stand-alone Iridium World Cellular Services and
350,000 to 500,000 for stand-alone Iridium World Page Services. Iridium's
estimates of target markets and customer counts are based upon a number of
assumptions, one or more of which is likely to be incorrect. There can be no
assurance that actual target markets and actual customer counts for Iridium
World Services will not be materially different from Iridium's estimates or that
Iridium will not revise such estimates substantially from time to time.
TARGET MARKETS
Iridium believes that the traveling professional and corporate/industrial
communications markets will be its principal target markets.
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Traveling Professional. Individuals in the traveling professional market
segment are expected to represent a major market opportunity for Iridium World
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 Iridium World Satellite Services, Iridium World Cellular Services and
Iridium World Page 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 World 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 World Satellite Services are expected to be used in this market segment
for business communication and emergency backup communication. The defining
element for this group is that the handset purchase decision is made by the
business and that the end user is an employee of that business.
Government. Currently, governments are significant users of satellite
services, and Iridium anticipates that the coverage and portability
characteristics of Iridium World Satellite Services and Iridium World Page
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.
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.
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 World Satellite Services to be a
precursor to a permanent wired or terrestrial wireless service in the geographic
area. Iridium World 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.
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DISTRIBUTION AND MARKETING
Iridium's distribution strategy reflects its role as a wholesaler of
Iridium World 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 World Services to their
customers. Iridium will implement the distribution of Iridium World 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 World Services within their territories. Iridium anticipates that
gateway operators will distribute Iridium World Services through their own
distribution channels or through, or in conjunction with, one or more existing
wireless service providers (including Iridium World Cellular Services roaming
partners). As of March 20, 1998, Iridium and its gateway operators currently had
distribution agreements with more than 80 such service providers.
Iridium has targeted key markets and is in active discussions in
conjunction with its gateway operators to contract with entities to act as
service providers and roaming partners in each of these markets. Within each
market, Iridium is targeting those potential service providers and roaming
partners that can reach the targeted Iridium market segments in the most
effective manner. The ability to provide roaming capabilities onto terrestrial
wireless networks is a critical element of establishing a roaming relationship
between roaming partners and the IRIDIUM System. When acquiring a terrestrial
wireless carrier as a retail distribution access point, the benefit of the
incremental roaming revenue brought to that roaming partner from around the
world through the Iridium network relationships could prove to be important in
signing the roaming partner. Iridium World Services can also be easily added to
the terrestrial wireless providers' bundle of services offered to its customer
base.
Iridium's marketing strategy is to position Iridium as the premier brand in
global wireless communications services. Iridium believes that its principal
target markets -- traveling professional and corporate/ industrial -- can be
accessed through established marketing channels, which will permit more
effective marketing compared to MSS systems targeting individuals in remote
areas where marketing opportunities and distribution channels are limited.
Iridium is coordinating with its gateway partners to determine the optimum
allocation of marketing expenditures based on the primary market research that
Iridium has conducted. Iridium plans to engage in direct marketing to certain
markets, such as the utility, oil and gas, mining and maritime industries.
Iridium believes that a coordinated and comprehensive global marketing strategy,
supported by its market research, will promote a consistent message and permit
Iridium to establish a global brand identity.
PRICING
Iridium intends to implement a pricing strategy for its voice services
similar to the prevailing pricing structure for terrestrial wireless calls.
Prices for terrestrial wireless calls generally reflect two components: a charge
based on the landline "dial-up" rate for a comparable call (primarily the long
distance charges) and a mobility premium for the convenience of wireless service
(including any roaming charges). Pricing for both Iridium World Satellite
Services and Iridium World Cellular Services is expected to be based on this
structure.
For international Iridium World Satellite Services calls, which Iridium
expects will constitute the majority of calls over the Iridium World 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 public
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switched telephone network ("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 Iridium World Cellular Services 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 Iridium World Cellular Services
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 World Satellite 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 an additional roaming premium for calls made over the IRIDIUM System.
Initially, Iridium World Page Services 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.
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 are expected to
be priced significantly higher than most terrestrial wireless services.
THE IRIDIUM SYSTEM
The IRIDIUM System is comprised of four functional components: the space
segment, the gateways, the Iridium subscriber equipment and the terrestrial
wireless interprotocol roaming infrastructure. The space segment, which includes
the satellite constellation and the related ground control facilities, will
allow Iridium to route voice, data and paging communications virtually anywhere
in the world. The gateways will link the satellite constellation with
terrestrial communications systems and will provide other call-processing
services, such as subscriber validation and billing information collection. The
Iridium subscriber equipment, which is expected to include single-mode and
multi-mode, portable, hand-held phones, aeronautical equipment, including
installed phones, and belt-worn pagers, will allow subscribers to access the
IRIDIUM System or be contacted via the IRIDIUM System virtually anywhere in the
world. The terrestrial wireless interprotocol roaming infrastructure will
facilitate roaming among the IRIDIUM System and multiple terrestrial wireless
systems that use different wireless protocols. Iridium will own the space
segment and the interprotocol roaming infrastructure, gateway owners will own
and operate the gateways, and subscribers will own the subscriber equipment.
Iridium believes that the capabilities of the IRIDIUM System will allow
Iridium to provide service features that Iridium's principal target markets,
traveling professional and corporate/industrial, will find desirable and that
will differentiate Iridium from its competitors. The number and distribution of
satellites in the Iridium constellation should allow Iridium to provide
virtually global coverage, including mid-ocean and remote area access to the
IRIDIUM System. Multi-mode phones are expected to allow Iridium World Services
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 Iridium World Satellite Services if a terrestrial service cannot be accessed.
With Iridium World Page Services, 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
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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.
SPACE SEGMENT
The satellite constellation of the space segment will consist of a
constellation of 66 operational satellites arranged in six orbital planes in low
earth orbit. To minimize the cost of the constellation and reduce production
time, the design of the satellites emphasizes attributes which facilitate
production in large quantities. The satellites will be placed in six distinct
planes in near-polar orbit at an altitude of approximately 780 kilometers and
will circle the Earth approximately once every 100 minutes. Each satellite will
communicate with subscriber equipment on the ground using main mission antennas,
with gateways using gateway link antennas and with other Iridium satellites in
space using cross-link antennas.
The main mission antennas will communicate with subscriber units through
tightly focused antenna beams forming a continuous pattern on the Earth's
surface. The main mission antenna subsystem of each satellite will include three
phased array antennas, each containing an array of transmit/receive modules.
Collectively, the 48 beams produced by a single satellite will combine to cover
a circular area with a diameter of approximately 4,340 kilometers. The IRIDIUM
System architecture will incorporate certain characteristics, such as call
hand-off, which will allow the space segment communications link with subscriber
equipment to be transferred from satellite to satellite as the satellites move
over the area where the subscriber is located.
The cross-link antennas will permit satellites in the constellation to
communicate with one another. Each Iridium satellite will have four cross-link
antennas to allow it to communicate and route traffic to the two satellites that
are fore and aft of it in the same orbital plane as well as neighboring
satellites in the adjacent co-rotating orbital planes. This intersatellite
networking capability is a significant distinguishing feature of the IRIDIUM
System and provides a number of benefits. These intersatellite links, which
enable the satellites to function as switches in the sky, will allow the IRIDIUM
System to (i) select the optimal space-to-ground path of each call, thereby
enhancing system reliability and capacity while reducing the costs associated
with the use of terrestrial phone systems, (ii) service subscribers in all areas
(including, mid-ocean and remote areas) regardless of the proximity to a
gateway, (iii) provide full global service with a relatively small number of
gateways, thereby lowering total ground segment build-out and operating costs
and (iv) provide enhanced ability to track the location of a voice customer,
allowing Iridium to target calls and pages as customers travel globally.
Operation of the satellites will be monitored, managed and controlled by
the system control segment. The master control facility is located in Virginia,
the back-up control facility is located in Italy, and the TT&C stations are
located in northern Canada and Hawaii, with an additional transportable
telemetry system currently located in Iceland. These facilities will manage the
performance and status of each of the individual satellites. The master control
facility will also manage the network by developing and distributing routing
tables for use by the satellites and gateways, directing traffic routing through
the network, and controlling cell formation by the satellites' main mission
antennas. In addition, the master control facility will manage the system
control segment itself by, for example, assigning earth terminals to satellites
and controlling data flow between the master and back-up control facilities.
Implementation of the Space Segment. The space segment of the IRIDIUM
System is being designed and constructed for Iridium by Motorola.
As of March 1, 1998, Motorola had launched 51 Iridium satellites in ten
separate launches. Motorola has informed Iridium that two of those 51 satellites
are not functioning and will not become part of the constellation, but that
Iridium will not bear the financial impact of the loss of the two satellites and
that such loss will not affect the scheduled date for commencement of commercial
operations in September 1998. Under the Space System Contract, Motorola has
completed 42 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. The remaining five 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
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scheduled under the Space System Contract for completion on September 23, 1998.
Ground testing of satellite hardware has been substantially completed. Motorola
has completed construction of most of the terrestrial facilities necessary to
command the in-space movements of the satellites, including the master control
facilities and the associated TT&C facilities.
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 Parent.
Raytheon Company. Raytheon is providing the main mission satellite
antennas. Raytheon is an investor in Parent.
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 Telecom Italia.
LAUNCH PROVIDERS
The requirements for the deployment of the initial satellite constellation
entail the placement into orbit of a large number of satellites in a relatively
short period of time, using conventional expendable launch vehicles. Based on
technical, commercial and other considerations, Motorola selected the following
three commercially offered launch systems for the deployment phase: Long March
2C through China Great Wall; Proton through Khrunichev; and Delta II through
Boeing.
China Great Wall Industry Corporation. China Great Wall has contracted
with Motorola to provide some of the launches for the initial deployment of the
space segment (and additional launches for the maintenance of the space segment)
utilizing its Long March 2C/SD vehicle, which launches two Iridium satellites
into orbit with each launch. An affiliate of China Great Wall, Iridium China
(Hong Kong) Ltd., is an investor in Parent.
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 launches seven Iridium
satellites into orbit with each launch. Khrunichev is an investor in Parent and
has been allocated the Iridium gateway service territory for Russia and eight
other republics of the former Soviet Union.
Boeing. Boeing, the successor to McDonnell Douglas Corporation, has
contracted to provide the majority of the launches for the initial deployment of
the space segment utilizing the Delta II launch vehicle, which launches five
Iridium satellites into orbit with each launch.
Under the Space System Contract and the Operations and Maintenance
Contract, Motorola has agreed to procure the necessary space segment launch
services, and to place into orbit, and maintain in orbit, the space segment. In
light of the magnitude of the launch services procurement, the risks inherent in
satellite launch activity and the potential impact on Iridium's business if the
provision of launch services fails (including the potential that launch service
problems could give rise to excusable delays under the space System Contract and
Operations and Maintenance Contract), Motorola has developed numerous space
segment launch scenarios using various combinations of available launch systems
to fit the requirements of the IRIDIUM System in terms of cost, reliability,
availability, technical performance, credibility of suppliers and other factors.
The launch of the first five Iridium satellites occurred on May 5, 1997 on
a Delta II launch vehicle. This launch had been scheduled for January 1997 but
was delayed on four successive days and then postponed following a launch
failure involving the Delta II launch vehicle. Following the January 1997
failure of a Delta II launch vehicle, the United States government ordered a
halt to all further Delta II launches pending completion of an internal review
of the failure. That failure review was completed on May 2, 1997 and
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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, however, that, notwithstanding the first launch
postponement, Motorola believes its launch schedule should permit Iridium to
meet its planned September 1998 commencement of commercial operations. This
current launch schedule assumes that there are no additional significant launch
delays and that all three launch providers -- Boeing, Khrunichev and China Great
Wall -- are able to provide launch services as currently planned. The current
launch schedule also creates risks because it has compressed the time otherwise
available for testing. As of March 1, 1998, Motorola had launched 51 Iridium
satellites in ten separate launches. Motorola has informed Iridium, however,
that two of those 51 satellites are not functioning and will not become part of
the constellation, but that Iridium will not bear the financial impact of the
loss of the two satellites and that such loss will not affect the scheduled
completion date for commercial service in September 1998. Motorola's current
launch plans contemplate five more launches of 21 satellites by May 1998, which
would complete the expected constellation of 66 satellites in mission orbit with
4 spare satellites in a lower parking orbit. There can be no assurance that
succeeding launches will proceed as currently contemplated or that the space
segment will be operational on schedule, and there can be no assurance that
problems will not occur with respect to other satellites, or that such problems
will not have an adverse affect on Iridium. In addition, no assurance can be
given that from time to time certain events will not occur that may require
Motorola to conclude that one or more satellites are not performing within the
necessary parameters for such satellite or satellites to be included in the
constellation, or that such a conclusion would not have an adverse effect on the
commercial activation schedule.
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/SD 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.
In addition, Motorola has constructed the master control facility located
in Virginia, the back-up control facility in Italy, two TT&C stations in
northern Canada and one TT&C station in Hawaii, with an additional transportable
telemetry system currently located in Iceland.
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. Parent has authorized the issuance
of warrants to acquire up to 9,165,000 Class 1 Interests at a price of $.00013
per Class 1 Interest to gateway owners who complete construction and
installation of their gateways on schedule and who meet certain revenue criteria
thereafter. None of such warrants has been issued.
Implementation of Gateways. The success of Iridium is dependent upon the
efforts of its gateway owners, all of whom are investors, or affiliates of
investors, in Parent. Iridium is focusing considerable efforts on the
coordination of the development of the gateway infrastructure and business
systems.
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Iridium has assigned all of its gateway service territories to Parent's
equity investors or their affiliates. Iridium expects these gateway service
territories to be served initially by up to 12 gateways. Each gateway owner has
entered into a Gateway Authorization Agreement. The Gateway Authorization
Agreements obligate the gateway operators to use their 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.
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.
Iridium and the gateway operators have established a schedule for the
construction of the necessary gateway facilities by the gateway operators. While
some gateway operators are behind in meeting some of the milestones in this
schedule, Iridium believes that up to 12 gateway facilities will be completed
and operational at the time commercial operations commence. The construction of
the 12 gateway facilities is substantially complete and the telecommunications
equipment has been installed at 10 locations. 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 effect on Iridium. In
particular, the China gateway has not commenced equipment procurement and the
Middle East-Africa gateway is significantly behind schedule with its equipment
procurement. While Iridium believes that it is possible that these two gateways
will be operational by the planned September 1998 commencement of commercial
operations, in order for them to do so they will need to move forward promptly,
including making certain overdue payments under their gateway equipment purchase
agreements with Motorola.
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 one
TRC, and its version of the alphanumeric pager will have an initial retail price
of approximately $500. Iridium expects the price for subscriber equipment that
is manufactured by Kyocera to be similar to Motorola's.
Iridium does not currently intend to manufacture or distribute Iridium
subscriber equipment or derive any income from the sale of Iridium subscriber
equipment. 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. Iridium may, however, need
to take a greater role than currently expected in connection with the
distribution of Iridium subscriber equipment. That increased participation in
the distribution process may require that Iridium incur additional indebtedness
or contingent purchase obligations relating to Iridium subscriber equipment.
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
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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.
The IRIDIUM System phones are still under development, although a
functional unminiaturized prototype has been developed. Motorola has informed
Iridium that the portable, hand-held phone that Motorola has been developing is
expected to be larger and heavier than today's pocket-sized, hand-held cellular
telephones and is expected to have a longer and thicker antenna than hand-held
cellular telephones. Motorola has informed Iridium that the pager Motorola will
develop is expected to be slightly larger than today's standard alphanumeric
belt-worn pagers. The unminiaturized prototypes have been built using the same
or similar components expected to be used in the production model of the Iridium
phone. The prototypes have been built in a larger housing to facilitate testing
and problem solving.
BUSINESS SUPPORT SYSTEMS
The IRIDIUM System will be capable of supporting basic "back office"
business functions required by Iridium, gateway operators, and service
providers, including a clearinghouse operated by Iridium to calculate the
amounts owed to and from Iridium and each gateway operator in order to determine
net settlements of such amounts among such entities. These business support
functions include service provision, customer service, and billing and
collection, as well as clearing and settlements. These functions will be
provided by means of computer and manual processes at each gateway and service
provider location and, most likely, at a central processing point. The gateway
owners and operators will be required to license or purchase software and
equipment in order to exchange information with the clearinghouse and to handle
settlements with service providers, inter-exchange service providers, government
entities and others. Iridium has proposed to develop, and to provide to the
gateways, some of the required software and hardware. In addition, the gateways
will have to enter into settlement agreements with service providers, on behalf
of Iridium, in order to account for and settle the Iridium World Cellular
Services and the non-satellite service portions of the Iridium World Services.
The coordination of business support functions among Iridium, the gateways and
the service providers necessary to the provision of the Iridium World 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.
IRIDIUM WORLD CELLULAR SERVICES
Iridium World Cellular Services 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 Iridium World Cellular Services customer who roams onto a cellular
network that has a roaming agreement with Iridium will be recognized by the
visited network as an Iridium customer when the customer turns on his phone. The
visited network, using an Iridium gateway, will send a request for
authentication either terrestrially or over the IRIDIUM System to the IIU, the
protocol translation device that is being developed under the direction of
Motorola for Iridium. The IIU will search for the home location of the customer
and convert the signal to the appropriate protocol of the customer's home
network. The home network will authenticate the customer by signaling back to
the IIU which will then convert the signal back to the protocol of the visited
network and send the response in the appropriate protocol to the visited
network. When an Iridium World Cellular Services customer is called, the IRIDIUM
network will route the call to the visited network (which is expected to be
completed in seconds). The visited network will perform the necessary
authentication to allow the roaming customer to access the visited network as a
roaming customer and complete a call.
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An Iridium World Cellular Services customer can be "homed" on a cellular
network, in which case the customer's phone number will be his home cellular
phone number. Alternatively, the customer can be "homed" on the IRIDIUM System,
in which case the customer's phone number will begin with "8816" or "8817," the
international "country" codes assigned to Iridium. Customers "homed" on the
IRIDIUM System may pay a monthly subscription fee and a fee for calls made over
the IRIDIUM System. Customers "homed" on a cellular network may pay a feature
charge to Iridium that will be significantly below the monthly subscription fee,
but they may pay an additional roaming premium for calls made over the IRIDIUM
System (retail prices will be determined by the home network provider). In
general, customers who place a large number of Iridium satellite service calls
will have an incentive to be "homed" on the IRIDIUM System, while customers who
place a small number of Iridium World Satellite Services 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 900 network). An Iridium World Cellular Services 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 Iridium World Cellular Services 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.
As of March 1, 1998, Roaming had entered into more than 90 roaming agreements.
Many wireless systems as currently configured, including systems covering large
portions of South America, use a form of wireless technology that does not
permit sufficient anti-fraud security or certain international dialing and,
therefore, it is unlikely that Iridium will provide Iridium World Cellular
Services coverage in areas that are principally served by this type of
technology. Iridium World Cellular Services 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.
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
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1995: Space Segment license awarded by FCC, subject to certain
conditions
IRIDIUM System critical design reviews completed
Terrestrial Network Development Contract executed
Nine Gateway Equipment Purchase Agreements executed
Prototype phones available for lab testing
Additional $300 million raised
1996: Full-scale Iridium satellite manufacture begins
$750 million Guaranteed Bank Facility established
Kyocera begins development of Iridium phones
Construction of gateways begins
1997: First launch of Iridium satellites on a Delta II launch vehicle
IWCL IPO completed
$100 million SPI purchase of Class 1 Interests
First launch of Iridium satellites on a Proton launch vehicle
Offering of Units and Series B Notes completed
Master control facility substantially complete
Offering of Series C Notes completed
$1 billion Secured Bank Facility established
Two-thirds of satellite launches completed
Gateway construction expected to continue and initial testing to
begin
Prototype pagers tested with in-orbit satellites
Limited voice testing with in-orbit satellites
Significant progress in obtaining service providers, roaming
agreements and L-band licenses
1998: Satellite launches expected to be completed
Gateway construction expected to be completed
Subscriber trials expected to be completed
Continued progress expected in obtaining service providers, roaming
agreements and L-band licenses
Commercial operations expected to begin
COMPETITION
Certain sectors of the telecommunications industry are highly competitive
in the United States and other countries. The uncertainties and risks created by
this competition are intensified by the continuous technological advances that
characterize the industry, regulatory developments that affect competition and
alliances between industry participants. While no single existing wireless
communications system serves the global personal communications market today,
Iridium anticipates that more than one system will seek to serve this market in
some fashion in the future. Iridium believes that its most likely direct
competition will come from the planned ICO telecommunications service and from
one or more of the other FCC licensed MSS applicants -- Loral/Qualcomm
Partnership, L.P., on behalf of Globalstar, MCHI, on behalf of Ellipso, and
Constellation, on behalf of Aries.
Iridium believes that its ability to compete successfully in the market for
global personal communications will depend primarily upon the timing of its
entry into the market, the technological qualities of the IRIDIUM System,
including its global coverage, signal strength, dependability and capacity and
the market appeal of Iridium's service offerings, including Iridium World
Cellular Services. 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
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higher signal strength for Iridium World 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
Iridium World Services 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 World 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 global coverage in all
authorized jurisdictions.
MOBILE SATELLITE SYSTEMS
Inmarsat has announced plans for a 12-satellite, MEO system consisting of
ten operational and two spare satellites. This system is to operate in the 2 GHz
band and will be owned by a new Inmarsat affiliate, ICO. Many of the investors
in Inmarsat, including numerous state-owned telecommunications companies,
participate in the ownership of the new venture and ICO has announced the
receipt of significant equity commitments from these investors. Iridium believes
that ICO will be the most direct competitor to Iridium for the traveling
professional market. However, ICO has announced that the full constellation will
not be operational before the year 2000, which should provide Iridium with a
first-to-market advantage.
Globalstar, a 48-satellite LEO system, has been proposed by Loral/Qualcomm.
It will offer both fixed and mobile telecommunications services. The Globalstar
system will employ CDMA digital modulation technology and Globalstar has
announced an expected in-service date in the first or second quarter of 1999.
The Globalstar system utilizes "bent pipe" technology and Globalstar has
indicated that it will require between 50 and 75 gateways to provide full global
land-based coverage of virtually all inhabited areas of the globe. The target
market for Globalstar, like the regional GEO systems described below, covers
persons who lack telephone service or are under served or not served by existing
or future cellular systems.
Ellipso, a 17-satellite NGSO system, has been proposed by MCHI.
Constellation, a 54-satellite NGSO system, has been proposed by Constellation
Inc. Both systems would offer mobile satellite service globally and would use
CDMA digital modulation technology. The licenses for each of the Ellipso and
Constellation systems require that the system be fully operational by July 2003.
MCHI has announced that it intends to begin full operation of its system by the
year 2000, while Constellation has stated that it plans to begin operations in
2001.
Iridium also expects to encounter competition from regional mobile
satellite systems, three of which have been launched and several of which are in
the planning stage, as well as from Inmarsat. In April 1995, AMSC launched a GEO
satellite covering the continental United States, Alaska, Hawaii, Puerto Rico,
the U.S. Virgin Islands and U.S. coastal waters to provide fixed and mobile
voice and data services to briefcase-sized mobile terminals and car-mounted
units. TMI, a spinoff of Telsat Canada, launched a virtually identical satellite
to AMSC's in 1996 to cover Canada and other parts of the Caribbean not served by
AMSC and to provide the same type of service to similar terminals. AMSC and TMI
subsequently agreed to transfer AMSC's to TMI's satellite. In addition, AMSC
announced plans to lease its satellite to ACTel, which plans to reposition the
satellite over Africa to offer MSS services there.
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.
ACeS has proposed a one- or two-satellite GEO satellite system covering Asia,
including Thailand, Indonesia and the Philippines, and offering mobile voice and
data telecommunications to briefcase-sized mobile terminals, car-mounted units
and hand-held units. 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. Satphone and Thuraya are
two consortia proposing GEO systems to serve the North Africa/Middle East
region, with dual-mode hand-held phones. EAST is a hybrid system
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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 World 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 World 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 World Satellite Services
and other satellite-based services will be lost. Moreover, the advent of near
global terrestrial cellular roaming described below will represent a significant
competitive threat to Iridium's satellite-based service and Iridium World
Cellular Services, particularly with respect to traveling professionals who
spend most of their time in regions that are well served by terrestrial-based
wireless services.
TERRESTRIAL CELLULAR INTERPROTOCOL ROAMING SERVICES
Iridium's Iridium World Cellular Services 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.
Two other proposed MSS systems, ICO and Globalstar, and at least one
regional GEO, ACeS, have indicated that they may also offer some form of
dual-mode satellite/cellular service, which may include interprotocol roaming
capabilities such as those expected to be offered by Iridium.
In addition, a number of rental services, primarily United States based,
provide cellular phones to persons traveling in countries with cellular
standards that differ from the traveler's home market. For example, Worldcell
provides United States based travelers GSM phones for travel to Europe, while
Shared Technologies Cellular, in conjunction with United Airlines, provides AMPS
phones for visitors to the United States. These businesses often have rental
locations at airports, hotels and auto rental locations and will also deliver
phones by mail service. These companies' services may compete with Iridium World
Cellular Services and Iridium World Satellite Services.
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PAGING
In addition to competing with paging services offered by proposed regional
MSS systems, Iridium World Page Services will face competition from regional and
nationwide terrestrial paging services, and from M-Tel's SkyTel service which
currently provides paging services to over 20 countries around the world. SkyTel
operates by forwarding paging messages via international circuits to a foreign
paging network that subsequently transmits the message over its local network.
Also, in 1995 Inmarsat introduced an international satellite-based one-way
messaging service. Iridium believes that the relatively higher link margins of
the Iridium World Page Services will provide superior performance to any
proposed satellite paging systems and that Iridium will be the only global
paging service using a belt-worn pager before 2000.
COMPETITION RELATED TO NEW TECHNOLOGIES AND NEW SATELLITE SYSTEMS
Iridium may also face competition in the future from companies using new
technologies and new satellite systems which could render the IRIDIUM System
obsolete or less competitive. Such new technologies, even if not ultimately
successful, could have a material and adverse effect on Iridium as a result of
associated initial marketing efforts. Iridium's business could be materially and
adversely affected if competitors begin operations or existing
telecommunications service providers penetrate Iridium's target markets before
completion of the IRIDIUM System.
REGULATION OF IRIDIUM
TELECOMMUNICATIONS REGULATION AND SPECTRUM ALLOCATION: OVERVIEW
The allocation and use of the radio frequency spectrum for the provision of
communications services are subject to international and national regulation.
The implementation and operation of the IRIDIUM System, like those of all other
satellite and wireless systems, are dependent upon obtaining licenses and other
approvals.
The international regulatory framework for spectrum allocation and use is
established by the International Telecommunication Union ("ITU"). The ITU, which
is composed of representatives from most of the countries of the world, meets
officially at conferences known as World Radio Conferences ("WRCs") (previously
known as World Administrative Radio Conferences or "WARCs") to decide the radio
services that should be permitted to operate in various radio bands and the
rules for operating in those bands.
The national administration of each country decides how the radio
frequencies that the ITU has allocated to particular communications services
should be allocated and assigned domestically to specific radio systems. In
addition, the provision of communications services in most countries is subject
to regulatory controls by the national governments of each country.
In the United States, the FCC is the regulatory agency responsible
domestically for allocating spectrum and for licensing and regulating
communication systems, facilities, and services. The FCC regulates satellites in
accordance with laws passed by the United States Congress, particularly the
Communications Act of 1934, as amended (the "Communications Act"), regulations
adopted pursuant to those laws, and judicial opinions rendered by U.S. courts.
IRIDIUM SYSTEM LICENSING REQUIREMENTS
The IRIDIUM System is being built with the capability to link phones to
Iridium satellites using up to 10.5 MHZ of spectrum in L-band frequencies from
1616-1626.5 MHZ on a bi-directional time division basis, Earth-to-space and
space-to-Earth. The system will also be capable of operating "feeder" links in
the frequencies 19.4-19.6 GHz and 29.1-29.3 GHz (connecting satellites to ground
earth station gateway facilities) and intersatellite links in the frequencies
23.18-23.38 GHz (linking the satellites in the constellation to each other).
The licensing requirements for the IRIDIUM System include: (i) the FCC
license for the space segment; (ii) the licenses in each country where there is
a gateway or TT&C earth station; and (iii) the
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licenses in each country for the Iridium subscriber equipment and service and
for the use of required frequencies. In addition, the IRIDIUM System must be
coordinated with other users of spectrum that have rights to use the same or
adjacent frequencies to the frequencies assigned to the IRIDIUM System. It is
only necessary for one country to license the space segment, which includes
authorizing the construction, launch, and operation of the satellites, including
the use of the intersatellite links and the operation of the primary satellite
control center in the country.
The gateway earth stations provide the feeder link between the satellite
network and the PSTNs around the world. Iridium expects that Iridium gateways
will be located in at least eleven different countries during the first years of
operation. A radio license to operate a gateway earth station in a significant
portion of the 29.1-29.3 GHz (Uplink) and 19.4-19.6 GHz (Downlink) frequency
bands must be issued by the appropriate governmental authority of each of the
countries in which an Iridium gateway is to be located. Similar authorizations
may be obtained in the United States and Canada to operate TT&C earth stations.
Each country in which Iridium intends to operate must authorize the use of
the frequencies linking the phones to the satellites, allowing communication
between end users and the satellite network. At a minimum, the IRIDIUM System
needs exclusive use of the frequencies 1621.35-1626.5 MHZ for this purpose, with
authority to operate bi-directionally within that band. In order to operate the
Iridium subscriber equipment in a country, Iridium or the manufacturers of
Iridium handsets must obtain from the country a certificate of type approval to
permit the operation of phones and pagers within the country. The licensing
procedures vary in different countries. Generally there are three aspects to the
required license(s): (i) authorization for the use of the frequencies requested;
(ii) authorization for the equipment to be marketed and used (including
subscriber equipment that may circulate from country to country); and (iii)
authorization for the service to be provided.
Because of the global mobile nature of the service, each national
administration will be asked to grant a blanket or class license authorizing a
substantial number of handsets, recognize equipment that has been type approved
or certified by other countries and allow for the free circulation and
transborder roaming of terminal equipment.
LICENSING STATUS
General
Iridium, Motorola, and the gateway owners have made substantial progress in
taking the regulatory steps needed for the IRIDIUM System to obtain the coverage
assumed in its business plan, but a significant number of additional regulatory
approvals outside the United States remain to be obtained. Each gateway must be
licensed by the jurisdiction in which it is located. Licenses have been granted
for the gateways in the United States (Tempe), Thailand (Bangkok), Taiwan
(Taipei), Korea (Seoul), Brazil (Rio De Janeiro), Japan (Nagano), Saudi Arabia
(Jeddah) and Italy (Fucino). The North American gateway operator has contracted
to build a second gateway in the United States. Additionally, experimental
licenses have been granted for the gateways in Russia (Moscow) and India
(Bombay) and permit the gateways to test their links between the Iridium
satellites and terrestrial services. In the case of China, approval has been
issued to China Aerospace Corporation, the parent company of Iridium China, and
the Ministry of Posts and Telecommunications (the "MPT") to proceed with the
establishment of a testing gateway for Iridium in China. The MPT will be
primarily responsible for construction, management and operation of the gateway,
and arrangements are being made between China Aerospace and the MPT to take
advantage of that decision. 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 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.
As of March 1, 1998, 51 administrations had given all or a substantial
portion of the authorizations necessary to operate the IRIDIUM System in their
territories. The 51 countries and territories are: the United
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States, Italy, Argentina, Colombia, Honduras, Thailand, Malaysia, Guatemala,
Puerto Rico, Finland, Russia, El Salvador, Brazil, Japan, Philippines, South
Korea, Taiwan, Germany, Austria, Canada, Australia, Venezuela, Sweden, Norway,
Iceland, Uruguay, New Zealand, Chile, Senegal, Morocco, Afghanistan, Panama, San
Marino, Maldives, Micronesia, Cook Islands, American Samoa, Baker Island, Guam,
Jarvis Atoll, Johnston Atoll, Midway Islands, Northern Marianas, Palmyra Atoll,
United States Virgin Islands, Wake Island, Christmas Island, Cocos (Keeling)
Islands, Norfolk Island and Svalbard & Jan Mayen. Iridium is seeking licenses
throughout the world. However, Iridium and its gateway operators are placing
emphasis on obtaining approvals by September 1998 from the 70 to 90 countries
where Iridium expects substantially all of the demand for, and usage of, Iridium
World Services is likely to be generated.
The licenses that have been received generally are subject to conditions
relating to, among other things, (i) confining operations to the scope of the
license; (ii) complying with applicable electronic surveillance laws and (iii)
the continued operation of the IRIDIUM System. While Iridium believes that all
required licenses will be obtained in a substantial majority of the countries it
is placing emphasis on by September 1998 and that the IRIDIUM System would be
able to satisfy the conditions specified in such licenses, there can be no
assurance that additional authorizations will be granted at all, or in a timely
manner, or without burdensome conditions. There can be no assurance that
sufficient licenses for Iridium to obtain the coverage assumed in its business
plan will be obtained on a timely basis or at all. Nor can there be any
assurance that Iridium will be able to secure additional spectrum, if needed. In
addition, while Iridium is not aware of any country that has indicated that it
will not provide a service license by the commencement of commercial operations,
the process of obtaining service licenses in each country of the world is
complex and certain gateway operators, in particular those with responsibility
for obtaining licenses in numerous countries such as Iridium Africa and Iridium
SudAmerica, have indicated that they may not receive regulatory approvals for
some of the countries of their territories at the anticipated commencement of
commercial operations in September 1998.
Spectrum Allocation
At the WARC-92, the ITU allocated to the MSS service: (i) on a primary
basis, 16.5 MHZ of spectrum in the 1610-1626.5 MHZ band (Earth-to-space); and
(ii) on a secondary basis, 12.7 MHZ of spectrum in the 1613.8-1626.5 MHZ band
(space-to-Earth). The ITU had previously authorized the other frequency bands
used in the IRIDIUM System for the purpose for which Iridium intends to use
them. At the 1995 World Radio Conference ("WRC 95"), the ITU defined the
coordination procedure for systems operating in the bands proposed to be used by
Iridium for its feeder links. The ITU's role in allocating frequencies necessary
for the operation of the first generation IRIDIUM System is now essentially
complete.
United States Licensing
The space segment of the IRIDIUM System, including the use of the
intersatellite frequency band (23.18 to 23.38 GHz), has already been licensed by
the FCC in the United States. The license has a term of ten years and contains
other conditions typical of satellite system licenses granted by the FCC. The
license term begins on the date the first satellite is in orbit and the first
transmission occurs. The license states that, absent extensions, the IRIDIUM
System must be fully constructed and operational by October 2002. Two applicants
have appealed the FCC decision which (i) found that they initially had failed to
establish the necessary financial qualifications, and gave them additional time
to demonstrate such qualifications; and (ii) granted licenses to the IRIDIUM
System and two other global MSS systems. The FCC subsequently waived the
financial qualification condition and granted these two applicants a license.
This appeal is being held in abeyance while the FCC considers an application for
review of its decision to waive the financial qualification condition. The
license for the IRIDIUM System remains in full force and effect while this
appeal is 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.
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The IRIDIUM System license is held by Space System License, Inc., a wholly
owned subsidiary of Motorola, which is contractually bound to operate the system
for the exclusive benefit of Iridium. As a result, Motorola, rather than
Iridium, has the responsibility to construct, launch, operate and maintain the
IRIDIUM System in accordance with the terms of the license. Any request to renew
or modify the IRIDIUM System license must be filed and prosecuted by Motorola.
If the Space System Contract or the Operations and Maintenance Contract is ever
terminated or not renewed, Motorola would have to assign the Iridium license to
Iridium or a third party. Any such assignment would be subject to FCC approval.
Under both the ITU's rules and the terms of the IRIDIUM System license, the
IRIDIUM System must be coordinated with all other domestic and foreign users of
the frequency bands assigned to the IRIDIUM System. The United States has
essentially completed the process of registering the Iridium space segment
operations with the ITU. It has submitted the advance publication and
coordination materials to the ITU and coordinated the use of the space segment
with all those administrations expressing concerns that the system might cause
or receive interference to their systems. On this basis, the United States has
requested the ITU to notify the IRIDIUM System in the ITU's Master Frequency
Register, which will give it a legal right to protection from interference from
future systems. The request has been published, and 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 been identified under the coordination process. If further
coordination is required with any identified system, it is possible that such
coordination would not be completed prior to Iridium's projected commencement of
commercial operations. However, Iridium believes that failure to complete such
coordination would be unlikely to have a material adverse effect on Iridium.
There is no other action required from any other country to license the space
segment.
Under the FCC's rules and the terms of the license, prior to commencing
operations Motorola must complete coordination with U.S. radio astronomy sites
and complete consultations with the Inmarsat and Intelsat systems. Both of these
have been accomplished. See "-- Consultations and Coordinations."
In the United States, frequencies have been assigned to the IRIDIUM System
feeder links in the 29.1-29.25 and 19.4-19.6 GHz bands. The 29.1-29.25 GHz
frequencies are shared with the local multipoint distribution service ("LMDS"),
and the FCC has adopted restrictions on LMDS operations that are designed to
protect MSS feeder links from interference. The 19.4-19.6 GHz frequencies are
shared with terrestrial microwave stations and each gateway earth station must
be coordinated in advance with licensed microwave stations. 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.
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<PAGE> 27
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 have conditions attached to
them concerning their operation and there can be no assurance that these
conditions will be satisfied. If the initial spectrum assignments prove
insufficient as demand increases over time, there is no assurance Iridium will
be able to obtain additional spectrum from the FCC or other administrations.
Countries in Europe are approaching frequency assignments and licensing
issues on a regional basis. CEPT, an organization of forty-three countries in
greater Europe, has adopted recommendations regarding the frequency assignment
plan and the authorization process which it will recommend that member countries
follow. These recommendations are voluntary but 16 European countries have
adopted some or all of these recommendations and many other European
countries -- especially EU members -- are expected to follow these
recommendations. These recommendations currently give Iridium the opportunity to
obtain the spectrum it needs to operate initially in Europe. There is a risk
that Iridium may have to share this spectrum with other planned satellite
systems using an FDMA/TDMA access mode. Because European countries must follow
ITU procedures, which Iridium believes will protect Iridium's minimum spectrum
requirements, Iridium believes this risk is unlikely to occur. However, there
can be no assurance that Iridium will receive all the spectrum it needs to
operate in Europe.
Iridium mobile subscriber equipment must be type accepted in many countries
in accordance with national, regional and/or internationally-recognized
standards relating to unwanted emissions, network controls, etc. At the 1996 ITU
World Telecommunication Policy Forum, the participating countries agreed to
start a process that has become known as the GMPCS memorandum of understanding
(the "GMPCS MOU"). Participating countries have concluded the development of a
first set of agreements covering the IRIDIUM System and the Iridium subscriber
equipment, which may facilitate (i) the free circulation of subscriber equipment
and (ii) universal handset type approvals. It is now necessary for countries to
implement these agreements. Absent such implementation, Iridium subscriber
equipment circulation from country to country would require numerous bilateral
agreements. While a first set of agreements has been developed, there can be no
assurance that countries will implement these agreements in time to benefit
Iridium.
In connection with Iridium's efforts to obtain worldwide regulatory
approval for Iridium World Services, governmental, political and security
concerns have arisen. One such concern is that authorization of Iridium World
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 World Services on a timely basis.
Research and Development -- Licensing
In September 1997, Iridium filed an application with the FCC for
authorization to operate a satellite system in the 2 GHz band. Such action is a
preliminary step in the research and development process and Iridium has made no
significant financial commitment to long-term enhancements.
Consultations and Coordinations
Intelsat and Inmarsat are international organizations that own and operate
satellite systems. International obligations undertaken by the nations which
have signed the international agreements creating Intelsat and Inmarsat,
including the United States, require the United States to 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
consultation with Intelsat and Inmarsat have been completed.
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<PAGE> 28
Currently, the Russian global navigation satellite system, GLONASS,
operates in a frequency band that partially overlaps the 1610-1626.5 MHZ MSS
band. When operating co-channel with GLONASS, MSS systems are required to
coordinate their operations with the previously registered operations of
GLONASS. In addition, even when not operating co-channel, they are required to
protect GLONASS operations from harmful interference. Iridium believes that a
bilateral coordination agreement between Russia and the United States is in 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. While that level of
protection has not been determined, Motorola has committed to meeting the most
stringent protection level requested by U.S. aviation interests. During the
three-month period between September 1, 1998, the month Iridium expects to
commence commercial operations, and January 1, 1999, the month the GLONASS
operational frequencies will shift from being below 1616 MHZ to being below 1610
MHZ, and during the interim period between 1999 and when GLONASS shifts to below
1605 MHZ, Iridium believes it will be able to satisfy any reasonable level of
protection that is required although there can be no assurance as to what level
of protection will be required. Iridium believes that it can meet the protection
requested for GLONASS when GLONASS shifts down in frequency to below 1605 MHZ by
January 1, 2005. Other administrations will also need to coordinate with the
Russian Federation concerning the level of protection that will be afforded to
GLONASS in their territory. In Russia itself, additional restrictions may be
imposed which may limit the amount of spectrum available to Iridium in Russia.
There can be no assurance that sufficient spectrum will be available to meet
subscriber demand in Russia or any other country that requires a higher level of
protection for GLONASS than the United States. Moreover, there can be no
assurance that CDMA systems will be able to meet the levels of protection
required for GLONASS, either in the United States, Russia or elsewhere. If such
systems do not meet the protection requirements, the FCC and/or other countries'
regulatory authorities might consider requests to reassign the CDMA systems to
higher frequencies within the 1610-1626.5 MHZ allocation in order to protect
GLONASS. This development might in turn reduce the amount of spectrum available
to Iridium. See "-- Competition."
Under the FCC's rules, the IRIDIUM System also must protect U.S. radio
astronomy sites during periods when they are observing in the 1610.6-1613.8 MHZ
band. Coordination agreements have been reached with respect to all 15 U.S.
radio astronomy sites. There can be no assurance that the technical assumptions
underlying the coordination agreements with the U.S. radio astronomy sites will
not differ from the manner in which the IRIDIUM System performs once it is
operational.
Other administrations may also require that the IRIDIUM System be
coordinated with radio astronomy sites that observe in the 1.6 GHz band. Iridium
believes there are approximately six other countries that have such radio
astronomy sites observing in that band where coordination has not yet been
completed. Iridium and Motorola have commenced coordination discussions with
most of these non-U.S. radio astronomy sites. While Iridium believes that it
will be able to demonstrate that Iridium's operations will not materially and
adversely affect the ability of radio astronomers at these sites to observe in
the 1.6 GHz band, there can be no assurance that these coordinations will be
concluded successfully or in a timely manner.
In addition to potential interference between MSS systems and other users
of the 1.6 GHz band, there is a potential for intersystem interference among the
MSS systems themselves.
Emissions standards have been developed 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
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<PAGE> 29
light of the secondary nature of IRIDIUM's MSS downlinks, the failure by an MSS
operator 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.
UNITED STATES 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
for each wire tap order not fulfilled could be imposed under CALEA as well as an
order of compliance in the case of a failure to comply, and other unspecified
penalties, including injunctions, might otherwise be imposed. The U.S.
government has indicated that CALEA imposes requirements on the IRIDIUM System
similar to the requirements that the U.S. government has requested to be
implemented by the cellular industry. Discussions with the U.S. government are
ongoing to determine the extent of the IRIDIUM System's obligations and the
timing of the implementation of these requirements into the IRIDIUM System. It
is unknown whether an agreement will be reached with the U.S. government which
resolves these issues. Thus, there exists the possibility of a dispute over the
IRIDIUM System's obligations.
UNITED STATES INTERNATIONAL TRAFFIC IN ARMS REGULATIONS; EXPORT
ADMINISTRATIONS ACT
The United States International Traffic in Arms Regulations under the
United States Arms Export Control Act authorize the President of the United
States to control the export and import of articles and services that can be
used in the production of arms. Among other things, these regulations limit the
ability to export certain articles and related technical data to certain
nations. The scope of these regulations is very broad and extends to certain
spacecraft, including certain satellites. Certain information involved in the
performance of Iridium's operations will fall within the scope of these
regulations.
The Export Administrations Act and the regulations thereunder control the
export and re-export of United States-origin technology and commodities capable
of both civilian and military applications (so-called "dual use" items). These
regulations may prohibit or limit export and re-export of certain
telecommunications equipment and related technology which are not affected by
the International Traffic in Arms Regulations by requiring a license from the
Department of Commerce before controlled items may be exported or re-exported to
certain destinations. Although these regulations should not affect Iridium's
ability to put the space segment in place, the export or re-export of Iridium
subscriber equipment as well as earth stations and related equipment and
technical data, may be subject to these regulations, if such equipment is
manufactured in the United States and then exported or re-exported. These
regulations may also affect the export, from one country outside the United
States to another, of United States-origin technical data or the direct products
of such technical data.
Motorola has obtained authorization to export the Iridium satellites,
including associated launch support equipment, currently scheduled to be
launched in Kazakhstan on Khrunichev's Proton launch vehicle. Motorola has
obtained authorization needed to export the Iridium satellites, including
associated launch support equipment, currently scheduled for launch in China on
China Great Wall's Long March 2C launch vehicle.
COMPETITION
At the time that the FCC authorized the construction of the IRIDIUM System,
it also authorized one other competitive MSS systems to operate in the
1610-1626.5 MHZ band. This was the Globalstar System proposed by Loral/Qualcomm
Partnership, L.P. ("Loral/Qualcomm"). The Globalstar and IRIDIUM Systems were
the only big LEO systems initially licensed by the FCC. While the IRIDIUM System
was granted exclusive use of the 1621.35-1626.5 MHZ band in the United States,
Globalstar was granted shared use of the bands 1610-1621.35 MHZ and 2483.5-2500
MHZ. These systems were 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. They were MCHI, Constellation, and American
Mobile Satellite Corporation ("AMSC"). In September 1996, AMSC chose not to
proceed and the FCC dismissed its application.
MCHI and Constellation have filed challenges to the FCC's 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.
This court action has been placed in abeyance pending a final FCC decision on a
petition for review of the FCC's subsequent decision to waive the financial
qualifications rules and grant licenses to MCHI and Constellation.
Following the submission of updated financial information by MCHI and
Constellation to the FCC, by Orders released July 1, 1997, the FCC's
International Bureau granted licenses for the Ellipso system proposed by MCHI
and the Aries system proposed by Constellation. These Orders, which are subject
to review by the full Commission, increase to four the number of U.S.-licensed
global MSS systems (including the IRIDIUM System) and may result in increased
competition for the IRIDIUM System. The licensing of these two Code Division
Multiple Access ("CDMA") systems reduces the possibility that only one CDMA
system will become operational in the 1610-1621.35 MHZ frequency band adjacent
to the IRIDIUM System's frequency assignment. This in turn reduces the
likelihood that the FCC will increase the frequency assignment for the IRIDIUM
System. In addition, MCHI's and Constellation's licenses may cause the CDMA
based global systems to have less capacity available for their use and thereby
make it more difficult for them to accept the protection levels required for
GLONASS, either in the United States, Russia or elsewhere. This could lead to
requests to reassign the CDMA systems to higher frequencies within the
1610-1626.5 MHZ allocation to protect GLONASS. This development might in turn
reduce the amount of spectrum available to Iridium. Furthermore, the possibility
that two more CDMA systems may become operational may increase the risk of
harmful interference into the IRIDIUM System's MSS downlinks.
Competition with the IRIDIUM System is also expected from ICO, the private
company affiliated with Inmarsat to provide a mobile satellite service using
satellites to be positioned in medium earth orbit. ICO's system is expected to
become a significant competitor of the IRIDIUM System. ICO's proposed service
will not operate in the same set of user link frequencies in which the Iridium,
Globalstar and Odyssey systems are proposed to operate.
INTERCONNECTION
The IRIDIUM System is predicated upon an international dialing and
signaling model that treats the system as if it were a separate "country." Most
traffic moving to or from the IRIDIUM network will be considered as
international traffic. The Iridium gateway serves as the link between the
IRIDIUM System and the PSTNs within the gateway territory. Consistent with this
"country" model, an Iridium gateway needs to route traffic between the IRIDIUM
System and the international PSTNs. For a country to send a call originating on
its PSTN to the IRIDIUM System, it must send the call to the nearest IRIDIUM
gateway, which may be in a different country. Similarly, for the IRIDIUM System
to send an IRIDIUM System-originated call to a country's PSTN, it must send the
call through its gateway to the terminating PSTN. In both cases, Iridium
gateways need to interconnect to the PSTN. Thus, interconnection agreements need
to be established between the Iridium gateway operators and the local PSTN
operators in all countries served by the gateway. Some gateways may be required
to achieve carrier status in their countries of origin in order to enter into
such agreements.
Every country should be able to send traffic from its PSTN to the nearest
Iridium gateway. Since the IRIDIUM System will be treated like a "country" with
a dedicated country code, each country will route traffic based on that country
code to the Iridium gateway. To route IRIDIUM System traffic properly, the
network operators in every country must program their international switches
(and domestic ones, if necessary) to include the Iridium country code and
signaling point codes.
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COUNTRY CODE
The ITU Telecommunication Standardization Bureau ("TSB") is empowered to
allocate international dialing codes for countries, geographic areas and global
services. Although there are numerous three-digit "country codes" still
available for allocation, until recently such codes have generally been granted
only to countries and to geographic areas, in order to conserve this limited
resource. The TSB is advised on international code issues by its Study Group 2,
which is composed primarily of representatives of telecommunications service
organizations and representatives of government administrations. Iridium applied
to the TSB for a country code for the IRIDIUM System. ICO, Globalstar and
Odyssey submitted requests for country code resources, as well.
In May 1996, Study Group 2 decided that these systems should share a
country code and allocated code "881" for this purpose. Each eligible system
will receive two values of the digit following the code 881. For example, the
IRIDIUM System will use codes 8816 and 8817, which will enable Iridium to
identify 200 million subscribers. The Director of the TSB has advised Iridium
that these codes have been assigned to 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
four-digit codes assigned to 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.
RESEARCH AND DEVELOPMENT
Iridium has engaged in preliminary discussions with Motorola regarding
possible long-term enhancements to the IRIDIUM System, including a possible
second generation of Iridium satellites, and in September 1997 Iridium filed an
application with the FCC for authorization to operate a satellite system in the
2GHz band. Such actions are preliminary steps in the research and development
process and Iridium has made no significant financial commitment to long-term
enhancements.
EMPLOYEES
Pursuant to the Limited Liability Company Agreement of Iridium each officer
of Parent holds the same position with Iridium. There are 13 persons who are
executive officers of Parent and Iridium. Iridium has no employees other than
its officers. As of March 1, 1998, Parent had approximately 417 full-time
employees. None of Parent's employees are covered by a collective bargaining
agreement. Parent's management considers its relations with its officers and the
employees of Parent to be good.
ITEM 2. 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 in Rome, Italy. Title to these properties is
scheduled to be passed to Iridium prior to the time Motorola completes the final
milestone under the Space System Contract.
Parent leases its corporate headquarters office space in Washington, D.C.
The lease expires in May 2004, and has an option to renew for one three year
period. In addition, Parent leases office space in Reston, Virginia and
Chandler, Arizona. The leases expire in September 2004 and March 1998
respectively. The Reston,
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<PAGE> 32
Virginia lease has an option to renew for one five year period and the Chandler,
Arizona lease has an option to renew for a 3 month period.
Iridium and Parent believe they have adequate facilities to operate their
businesses as currently contemplated.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR IWCL'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
IWCL was formed on December 12, 1996 for the purpose of acting as a member
of the Parent. On June 13, 1997, IWCL consummated an initial public offering of
12,000,000 shares of its Class A Common Stock, par value $.01 per share (the
"Class A Common Stock") and applied the net proceeds of approximately $225
million to purchase 12,000,000 Class 1 Membership Interests of Parent ("Class 1
Interests"). At March 10, 1998, there were 12,008,812 shares of Class A Common
Stock outstanding and IWCL owned 12,008,812 Class 1 Interests, constituting
approximately 8.5% of the outstanding Class 1 Interests.
(A) Market Information
The Class A Common Stock is traded on the Nasdaq National Market ("Nasdaq")
under the symbol "IRIDF". The following table sets forth the high and low sales
prices per share of Class A Common Stock as reported on the Nasdaq.
<TABLE>
<CAPTION>
MARKET PRICE
-------------
HIGH LOW
----- ----
<S> <C> <C>
1997 quarter ended:
June 30 (June 13 to June 30).............................. 22 3/8 18
September 30.............................................. 44 1/4 17
December 31............................................... 54 1/8 32 7/8
January 1, 1998 to March 20, 1998........................... 30 7/8 54 5/8
</TABLE>
On July 16, 1997, IWCL, the Parent and Capital, consummated a private
offering of (i) 300,000 units each consisting of (A) $1,000 principal amount of
13% Senior Notes due 2005 and, Series A of the Parent and Capital (the "Series A
Notes") and (B) one warrant ("Warrant") to purchase 5.2 shares of Class A Common
Stock and (ii) $500,000,000 aggregate principal amount of 14% Senior Notes due
2005, Series B of the Parent and Capital (the "Series B Notes") for aggregate
net proceeds to the Parent of approximately $746 million. The Series A Notes and
Series B Notes are guaranteed by IP, Roaming and Iridium Facilities Corporation
("Facilities"), a Delaware Corporation and a wholly-owned subsidiary of Iridium
which holds Iridium's real property.
In the aggregate, the Warrants entitle the holders thereof to purchase
1,560,000 shares of Class A Common Stock. The exercise price of the Warrants is
$20.90 per share of Class A Common Stock. The Warrants are exercisable at any
time after July 11, 1998, subject to certain conditions. The Warrants expire on
July 15, 2005. In connection with the issuance of the Warrants, the Parent
issued to IWCL warrants to purchase Class 1 Interests (the "Parent Interest
Warrants") having the same tenor and terms as the Warrants. The Parent Interest
Warrants entitle IWCL to purchase, in the aggregate, a number of Class 1
Interests equal to the aggregate number of shares of Class A Common Stock issued
in respect of the Warrants, subject to anti-dilution adjustments. IWCL has
agreed, subject to anti-dilution adjustments, to exercise one such warrant for
each share of Class A Common Stock issued pursuant to the Warrants.
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On October 17, 1997, the Parent and Capital consummated a private offering
of $300,000,000 aggregate principal amount of 11.25% Senior Notes due 2005,
Series C of the Parent and Capital (the "Series C Notes" and together with the
Series A Notes and the Series B Notes, the "Senior Notes") for aggregate net
proceeds to the Parent of $293 million. The Series C Notes are guaranteed by IP,
Roaming and Facilities.
On December 18, 1997, the Parent entered into an asset drop-down
transaction (the "Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed Delaware limited liability company and a
wholly-owned subsidiary of the Parent. The purpose of the Asset Drop-Down
Transaction was to facilitate the pledge the assets held by the Parent in
connection with the establishment of secured bank financing. Pursuant to the
Asset Drop-Down Transaction, substantially all of the assets and liabilities of
the Parent were transferred to Iridium, including, without limitation, the
Senior Notes.
(B) Holders of Class A Common Stock
At March 10, 1998, there were approximately 560 holders of Iridium World
Communications Ltd's Class A Common Stock.
(C) Dividend Policy
IWCL has never declared or paid any dividends on its Class A Common Stock
and the Parent has never made distributions on its Class 1 Interests. IWCL and,
except as described below, the Parent do not currently anticipate paying any
such dividends or distributions until some time following the date on which the
Parent and its consolidated subsidiaries achieve a positive operating cash flow.
Cash distributions by Parent on its Class 1 Interests are expected to be
restricted, either directly or indirectly, by debt covenants of the Parent and
its subsidiaries, including Iridium, potentially long after the achievement of a
positive operating cash flow.
IWCL's only assets are its Class 1 Interests and its Parent Interest
Warrants and IWCL has no independent means of generating revenues. The Parent's
interest in Iridium constitutes substantially all of the Parent's assets.
Accordingly, the ability of the Parent to pay any distributions on its Class 1
Interests, for all practical purposes, is dependent on the ability of Iridium to
pay distributions to the Parent. Iridium's agreements relating to indebtedness
significantly restrict its ability to pay distributions to the Parent. Such
restrictions are expected to be effective long after Iridium and its
consolidated subsidiaries achieve a positive operating cash flow. See
"Management's Discussion and Analysis of Operations and Financial Condition".
The Parent has agreed to pay, and Iridium has agreed to reimburse Parent
for, IWCL's operating expenses, which expenses are not expected to be material,
and to advance funds to IWCL, under certain conditions, to enable IWCL to pay
any income tax liability that cannot be satisfied by distributions to IWCL on
the Class 1 Interests.
The Limited Liability Company Agreement of the Parent requires the Parent
Board, to the extent of legally available funds, to declare and pay a pro rata
dividend in an amount which, when added to any prior dividends paid with respect
to the profits of the same year, is sufficient to ensure that each non-U.S.
member of Parent holding Class 1 Interests receives an amount equal to the
amount of such member's U.S. federal, state and local income tax liability
resulting from allocations of Parent's income to such member. To the extent
permitted by law and by agreements relating to indebtedness, the Parent intends
to distribute to holders of its Class 1 Interests, including IWCL, net cash, if
any, received from its operations, less amounts required to repay outstanding
indebtedness, satisfy other liabilities and fund capital expenditures and
contingencies. IWCL intends to distribute promptly, as dividends to its
shareholders, the distributions on Class 1 Interests, if any, made to IWCL by
the Parent, less any amounts required to be retained for payment of taxes, for
payment of liabilities and to fund contingencies.
31
<PAGE> 34
ITEM 6. SELECTED FINANCIAL DATA
IWCL
The following selected financial data as of December 31, 1997 is derived
from IWCL's financial statements which have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
IWCL and notes thereto included herein.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
--------------------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C>
STATEMENT OF LOSS DATA:
Equity in loss of Iridium LLC............................. $18,834
Net loss.................................................. 18,834
Net loss per Class A Common Share......................... $ 2.79
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash...................................................... $ --
Investment in Iridium LLC................................. 223,922
Total assets.............................................. 223,922
Stockholders' equity...................................... 223,922
</TABLE>
IRIDIUM LLC
The following selected financial data of Parent as of December 31, 1993,
1994, 1995, 1996 and 1997 and for 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, 1996
and 1997, have been derived from the consolidated financial statements of Parent
(and its predecessor prior to the Initial Capital Contribution Date), which have
been audited by KPMG Peat Marwick LLP, independent certified public accountants.
The selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of Parent and notes
thereto included herein. Parent is the predecessor of Iridium, and has
transferred substantially all of its assets and liabilities to Iridium pursuant
to the Asset Transfer Agreement between Parent and Iridium.
<TABLE>
<CAPTION>
PERIOD PRIOR TO
INITIAL CAPITAL
CONTRIBUTION PERIODS FOLLOWING INITIAL
DATE(1) CAPITAL CONTRIBUTION DATE
--------------- ------------------------------------------------------
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31,
TO TO --------------------------------------
JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1997
--------------- ------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF LOSS DATA:
Revenues(2)...................................... $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and administrative................ 5,309 7,141 17,561 27,187 71,404 296,598
Interest income.................................. -- 390 4,252 5,226 2,395 3,045
Provision for income taxes....................... -- 173 1,525 1,684 4,589 --
------ ------ ------- ------- ------- --------
Net loss......................................... $5,309 $6,924 $14,834 $23,645 $73,598 $293,553
====== ====== ======= ======= ======= ========
Net loss per Class 1 Interest.................... $ -- $ .43 $ .38 $ .27 $ .64 $ 2.25
====== ====== ======= ======= ======= ========
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 23,496 $202,391 $ 51,332 $ 1,889 $ 9,040
Restricted cash.......................................... -- -- -- -- 350,220(3)
System under construction................................ 275,000 646,000 1,448,000 2,376,884 1,625,054
Property and equipment, net.............................. 320 1,522 1,264 2,065 1,626,326
Total assets............................................. 299,886 851,809 1,505,383 2,434,081 3,645,687
Long-term debt........................................... -- -- -- 735,904 1,537,590(4)
Total members' equity (deficit).......................... $294,308 $795,813 $1,404,610 $1,572,029 $1,634,637
</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) Restricted cash consists of the first stage of borrowings under the Secured
Bank Facility. The funds were restricted subject to Iridium meeting certain
milestones. Iridium successfully met the conditions for use of the first
stage of borrowings ($350 million) in January 1998, and such funds were
released.
(4) Does not include the $350 million of outstanding borrowings under the
Secured Bank Facility. See note (3) above.
IRIDIUM OPERATING LLC
The following selected financial data of Iridium has been derived from the
consolidated financial statements of Iridium as of December 31, 1993, 1994,
1995, 1996 and 1997 and for the period January 1, 1993 to July 28, 1993 and the
period July 29, 1993 (the Initial Contribution Date) to December 31, 1993, and
the years ended December 31, 1994, 1995, 1996 and 1997, which have been audited
by KPMG Peat Marwick LLP, independent certified public accountants. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of Iridium and notes thereto included
herein. Parent is the predecessor of Iridium, and on December 18, 1997,
transferred substantially all of its assets and liabilities to Iridium pursuant
to the Asset Drop-Down Transaction.
<TABLE>
<CAPTION>
PERIOD PRIOR TO
INITIAL CAPITAL
CONTRIBUTION PERIODS FOLLOWING INITIAL
DATE(1) CAPITAL CONTRIBUTION DATE
--------------- ------------------------------------------------------
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31,
TO TO --------------------------------------
JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1997
--------------- ------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF LOSS DATA:
Revenues(2)...................................... $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and administrative................ 5,309 7,141 17,561 27,187 71,404 296,446
Interest income.................................. -- 390 4,252 5,226 2,395 3,045
Provision for income taxes....................... -- 173 1,525 1,684 4,589 --
------ ------ ------- ------- ------- --------
Net loss......................................... $5,309 $6,924 $14,834 $23,645 $73,598 $293,401
====== ====== ======= ======= ======= ========
OTHER DATA(3):
Ratio of earnings to fixed charges(4)............ -- -- -- -- -- --
Deficiency of earnings to cover fixed charges.... $5,309 $6,751 $13,309 $21,961 $97,136 $457,148
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 23,496 $202,391 $ 51,332 $ 1,889 $ 5,940
Restricted cash.......................................... -- -- -- -- 350,220(5)
System under construction................................ 275,000 646,000 1,448,000 2,376,884 1,625,054
Property and equipment, net.............................. 320 1,522 1,264 2,065 1,526,326
Total assets............................................. 299,886 851,809 1,505,383 2,434,081 3,642,587
Long-term debt........................................... -- -- -- 735,904 1,537,590(6)
Total members' equity (deficit).......................... $294,308 $795,813 $1,404,610 $1,572,029 $1,631,537
</TABLE>
- ---------------
(1) These amounts reflect certain costs incurred by Motorola prior to July 29,
1993, which were reimbursed by Iridium.
(2) Iridium is a development stage company and accordingly has no revenue for
the periods presented.
(3) For purposes of determining the ratio of earnings to fixed charges, and the
deficiency of earnings to cover fixed charges, "earnings" includes pre-tax
income (loss) adjusted for fixed charges. "Fixed charges" consists of
interest capitalized and that portion of operating lease rental expense
(deemed to be one-third of rental expense) representative of interest.
(4) The ratios of earnings to fixed charges are not presented for each of 1993,
1994, 1995, 1996 and 1997 because earnings were inadequate to cover fixed
charges by approximately $12,060,000, $13,309,000, $21,961,000, $97,136,000
and $457,148,000, respectively.
(5) Restricted cash consists of the first stage of borrowings under the Secured
Bank Facility. The funds were restricted subject to Iridium meeting certain
milestones. Iridium successfully met the conditions for use of the first
stage of borrowings ($350 million) in January 1998, and such funds were
released.
(6) Does not include the $350 million of outstanding borrowings under the
Secured Bank Facility. See note (5) above.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
IWCL is a member of Parent and has no other business. IWCL's sole assets
are its Class 1 Interests and its Parent Interest Warrants, and IWCL's results
of operations reflect its proportionate share of the results of operations of
Parent on an equity accounting basis. IWCL has no operations other than those
related to its interest in Parent and, indirectly, Iridium. Accordingly,
management's discussion and analysis addresses the financial condition and
results of operations of Parent and Iridium.
On December 18, 1997, pursuant to the Asset Drop-Down Transaction, Parent
transferred substantially all of its assets and liabilities to Iridium.
Currently, Parent has no significant operations other than its management of
Iridium. Accordingly, the discussion below relates to Parent on an historical
basis (prior to December 18, 1997) and Iridium, as successor to Parent, from
December 18, 1997 forward. Unless otherwise specified, references to Iridium
relating to any action or event prior to the date of the Asset Drop-Down
Transaction should be construed as references to Parent, as predecessor of
Iridium. Each of Capital, Roaming, IP and Facilities is a wholly owned
subsidiary of Iridium, and has no significant assets and does not conduct any
significant operations.
Iridium is currently devoting its entire efforts to establishing and
commercializing 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.
LIQUIDITY AND CAPITAL RESOURCES
Funding Requirements
Iridium expects to commence commercial operations on September 23, 1998.
Iridium currently estimates that aggregate cash funding requirements from the
commencement of development (June 1991) through the anticipated commencement of
commercial operations will be approximately $4.4 billion. At year end 1996 and
1997, Iridium had expended approximately $2.40 billion (or 55%) and
approximately $3.42 billion (or 78%), respectively, of such $4.4 billion
estimate. Iridium estimates aggregate cash funding requirements of approximately
$5.3 billion (net of assumed revenues following commencement of commercial
operations) through year-end 1999, the last year in which Iridium projects
negative cash flow and a net increase in year-end borrowings. At year end 1996
and 1997, Iridium had expended, since inception, approximately $2.40 billion (or
45%) and approximately $3.42 billion (or 65%), respectively, of such $5.3
billion estimate.
34
<PAGE> 37
While Iridium has raised sufficient funds to meet its expected pre-commercial
operations project costs, Iridium expects to require significant additional
funding after commencement of commercial operations. These projections of
aggregate funding needs are forward looking and could vary, perhaps
substantially, from actual results, due to events outside of the control of
Iridium, including without limitation unforeseen construction, systems
integration or regulatory delays, launch failures and lower than anticipated
customer demand.
With respect to the development and construction of the IRIDIUM System,
Iridium and Motorola are parties to (i) the Space System Contract for the
design, development, production and delivery in orbit of the space segment, (ii)
the Terrestrial Network Development Contract to design the gateway hardware and
software, and (iii) 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. Substantially all of the initial capital
raised by Iridium is being used and will continue to be used to make payments to
Motorola under the Space System Contract and, to a lesser extent, the
Terrestrial Network Development Contract. The Space System Contract provides for
a fixed price of $3.45 billion (subject to certain adjustments), scheduled to be
paid by Iridium to Motorola over approximately a five-year period for completion
of milestones under the contract. Payments under the Operations and Maintenance
Contract will be payable quarterly and are expected to aggregate approximately
$2.88 billion over such contract's initial five-year term (assuming commencement
of commercial operations on September 23, 1998 and no excusable delays), in
addition to the cost of certain spare satellites at the completion of the
contract. The payments increase each year, ranging from quarterly payments of
$129.4 million in 1998 to $157.4 million in 2003 to $171.4 million in 2005. If
Iridium exercises its option to extend the Operations and Maintenance Contract
for an additional two years, the payments due for that two-year extension are
expected to aggregate approximately $1.33 billion (assuming commencement of
commercial operations on September 23, 1998 and no excusable delays). The
Terrestrial Network Development Contract provides for payments aggregating
approximately $284 million. As a result of technological developments, changes
in the product mix of Iridium World Services, and scheduling adjustments,
including the implementation of Iridium World Cellular Services into Iridium's
service offerings, there have been, and Iridium anticipates there will be,
amendments and interpretations of the Space System Contract, the Terrestrial
Network Development Contract and the Operations and Maintenance Contract and
other agreements and letters with Motorola which may increase the total costs of
these contracts. While Iridium's estimate of the cost of anticipated amendments
and interpretations is reflected in Iridium's estimates of its funding
requirements, there can be no assurance that any such amendments or
interpretations will not affect the price and terms of those agreements in a
manner not reflected in Iridium's funding estimates.
Through February 1, 1998, the Parent and Iridium incurred expenditures
totaling $2.94 billion to Motorola under the Space System Contract in respect of
completed milestones and expenditures totaling $140 million under the
Terrestrial Network Development Contract. Based on estimates and the planned
schedule, Iridium's expected future cash requirements by year under the
contracts through December 31, 1999 are approximately as follows (in millions):
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Space System Contract....................................... $514 --
Terrestrial Network Development Contract.................... 93 $ 63
Operations and Maintenance Contract......................... 129 537
</TABLE>
Iridium will also require funds for working capital, business software
development, interest on anticipated borrowings, financing costs and operating
expenses until some time after the commencement of commercial operations. The
interest expense associated with the development and construction of the IRIDIUM
System increased significantly in calendar year 1997 as a result of a
substantial increase in debt financing. See "-- Sources of Funding". Iridium
expects interest expense will increase in calendar year 1998 as compared with
calendar years 1997 as a result of its financing plan. Prior to the receipt of
revenues from commercial operations, Iridium expects to service its interest
expense out of available cash and borrowings. From approximately the time of
commencement of commercial operations through approximately year-end 1999
35
<PAGE> 38
(the last year in which Iridium projects negative cash flow and a net increase
in year-end outstanding borrowings) Iridium expects to service its interest
expense partly from available cash and bank facilities and partly from revenues
from operations. During commercialization, Iridium will be required to make
payments to Motorola under the Operations and Maintenance Contract. After
December 31, 1999, Iridium's obligations related to the Operations and
Maintenance Contract, funds needed for working capital, capital expenditures and
debt service are anticipated to be funded through operations.
SOURCES OF FUNDING
As of February 1, 1998, Iridium had indirectly received $1.94 billion from
equity investments in the Parent, and has the right to receive approximately $49
million due from South Pacific Iridium Holdings Limited pursuant to the terms of
a definitive purchase agreement. Iridium's indebtedness for borrowed money
equaled approximately $2.0 billion, including $1.1 billion in aggregate
principal amount of Senior Notes (as defined), approximately $285 million of
borrowings under the $450 million Guaranteed Bank Facility (as defined) and
approximately $350 million of borrowings under the Secured Bank Facility (as
defined).
On July 16, 1997, IWCL, Parent and Capital consummated a private offering
of (i) 300,000 units each consisting of (A) $1,000 principal amount of 13%
Senior Notes due 2005, Series A of the Parent and Capital (the "Series A Notes")
and (B) one warrant ("Warrant") to purchase 5.2 shares of Class A Common Stock
and (ii) $500,000,000 aggregate principal amount of 14% Senior Notes due 2005,
Series B of the Parent and Capital (the "Series B Notes") for aggregate net
proceeds to Parent of $746 million. On October 17, 1997, the Parent and Capital
consummated a private offering of $300,000,000 aggregate principal amount of
11.25% Senior Notes due 2005, Series C of the Parent and Capital (the "Series C
Notes" and together with the Series A Notes and the Series B Notes, the "Senior
Notes") for aggregate net proceeds to Parent of $293 million.
As of February 1, 1998, Iridium had drawn $285 million under a $450 million
unsecured borrowing facility with a syndicate of banks (the "Guaranteed Bank
Facility"). Borrowings under the Guaranteed Bank Facility are guaranteed by
Motorola (the "Motorola Guarantee"). A portion of the proceeds of the Senior
Notes was used to permanently reduce the Guaranteed Bank Facility from $750
million to $450 million. Depending on market conditions, Iridium may make
additional senior note offerings in order to further reduce the Guaranteed Bank
Facility or for other purposes. The Guaranteed Bank Facility matures on June 30,
1999.
On December 18, 1997, pursuant to the Asset Drop-Down Transaction,
substantially all of the assets and liabilities of Parent were transferred to
Iridium, including, without limitation, the Senior Notes and the Guaranteed Bank
Facility, and the Parent was released from such liabilities.
Pursuant to the Memorandum of Understanding, dated July 11, 1997, between
Parent and Motorola, as modified to apply to Iridium in connection with the
Asset Drop-Down Transaction (the "Motorola MOU"), in addition to the Motorola
Guarantee, Motorola has conditionally agreed to guarantee up to $350 million of
additional indebtedness (including principal and interest) under the Guaranteed
Bank Facility or another credit facility on identical terms (the "Motorola
Additional Guarantee"), provided that borrowings under such additional
indebtedness are made on or prior to February 28, 1999. Pursuant to the Motorola
MOU, Motorola has agreed to extend the Motorola Guarantee (including the
Motorola Additional Guarantee, if committed) until after July 15, 2005, if the
Guaranteed Bank Facility is so extended. Iridium believes it would be able to
amend the Guaranteed Bank Facility to increase its amount to the extent of the
Motorola Additional Guarantee and to extend its maturity until after July 15,
2005, if it so requests. There can be no assurance, however, that the bank
lenders will agree to increase the amount of the Guaranteed Bank Facility or to
extend the term of the Guaranteed Bank Facility, if so requested by Iridium, or
that any such other identical credit facility would be available.
Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1.0 billion (the
"Secured Bank Facility"). As of February 1, 1998, Iridium had drawn $350 million
under this Secured Bank Facility. The availability of the Secured Bank Facility
is subject to significant conditions, including
36
<PAGE> 39
technical conditions relating to the IRIDIUM System, conditions relating to
regulatory approvals and conditions relating to other financing sources. $250
million of the Secured Bank Facility is not available prior to the defined
commercial activation date. The Secured Bank Facility is secured by
substantially all of Iridium's assets. The Secured Bank Facility is further
secured by the Reserve Capital Call (as defined) of the Parent and all of the
membership interests in Iridium. In addition, each of Iridium's subsidiaries has
guaranteed Iridium's obligations thereunder. The Reserve Capital Call is the
contractual commitment by 17 of Parent's investors to purchase up to 18,206,550
Class 1 Interests at $13.33 per interest (an aggregate of approximately $243
million).
Borrowings under the Secured Bank Facility mature on September 30, 1998,
subject to Iridium's right to extend such maturity until up to June 30, 1999, if
Iridium can demonstrate by July 1, 1998 that it has sufficient available or
committed funds for its budgeted project costs through such extended maturity.
Assuming approximately $445 million of borrowings under the Guaranteed Bank
Facility and $715 million of borrowings under the Secured Bank Facility, Iridium
expects to have sufficient cash to meet its anticipated funding requirements
through September 23, 1998, the date on which Iridium expects to commence
commercial operations. Iridium expects to seek other senior secured bank
financing in order to meet its expected funding requirements through at least
year-end 1999, the last year in which Iridium projects negative cash flow and a
net increase in year end borrowing.
Additional financing may also need to be obtained through the issuance of
equity or debt securities in the public or private markets. The availability and
terms of any such financing are uncertain and are dependent, in part, on market
conditions existing at the time of any proposed financing. Iridium's estimated
funding requirements will increase, perhaps substantially, in the event of
unexpected cost increases or schedule delays. Additional equity financing, if
pursued, may be raised either privately from strategic or financial investors,
or through additional public offerings. Depending on market conditions, Iridium
may make additional senior note offerings.
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. The debt instruments governing
Iridium's indebtedness are likely to contain restrictions on, among other
things, the incurrence of indebtedness, the granting of liens and the payment of
cash dividends. Iridium's ability to meet all of its debt service obligations
when due will require it to generate significant cash flow from operations or,
if necessary, make additional borrowings to refinance its outstanding
indebtedness. No assurance can be made that Iridium will be able to generate
sufficient cash flow to meet its debt service obligations or that it will be
able to refinance indebtedness. In addition, the debt instruments governing
future indebtedness are likely to contain restrictions on, among other things,
the incurrence of indebtedness.
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. From the commencement of development (June 1991) through
year-end 1997, Iridium had expended approximately $3.42 billion on the
development, construction and commercialization of the IRIDIUM System,
representing 78% of Iridium's estimate of its cash funding requirements through
the anticipated commencement of commercial operations (September 23, 1998) and
65% of Iridium's estimate of its cash funding requirements (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.
To date, Iridium's only source of income has been interest income on the
cash and investment balances from the proceeds of equity commitments in Parent,
which amounted to approximately $15.3 million from July 29, 1993 (the "Initial
Capital Contribution Date") to December 31, 1997. During the same period,
Iridium recorded a net loss of approximately $413 million. In addition, during
the periods ended December 31, 1991 and 1992, and the period from January 1,
1993 to the Initial Capital Contribution Date, aggregate costs
37
<PAGE> 40
of $14.8 million were incurred by Motorola. Such costs were paid by Parent to
Motorola pursuant to a reimbursement agreement.
As a development stage company, Iridium has incurred losses since inception
of its predecessor companies and will continue to do so for the foreseeable
future. Iridium's ability to become profitable and generate positive cash flow
is dependent on the successful and timely commencement of the operation of the
IRIDIUM System, wide subscriber acceptance and numerous other factors.
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 delivery of each satellite to
its mission orbit. Depreciation related to the ground control stations commences
with the placement in service of each such station. Losses from satellite
failures for which Iridium has financial responsibility under its contractual
arrangements with Motorola are recognized currently. Motorola bears the risk of
loss for launch failures and satellite failures before a satellite is placed
into service. Iridium has obtained a satellite insurance policy to cover certain
costs associated with the loss of a satellite. Capitalized amounts under the
Space System Contract and the Terrestrial Network Development Contract
aggregated approximately $3.0 billion through December 31, 1997. In addition,
costs incurred in connection with the issuance by Parent of Class 1 Interests
are reflected as a reduction of Parent's additional paid-in capital and
Iridium's debt issuance costs are deferred and amortized over the term of the
related indebtedness. Payment of these costs and charges has resulted in
significant negative operating cash flow. Certain interest costs also will be
capitalized through the date of commencement of commercial operations.
A portion of the payments made under the Operations and Maintenance
Contract will be capitalized and depreciated. The amount so capitalized will be
determined depending upon the number of replacement satellites put into service.
Any costs under the Operations and Maintenance Contract not capitalized will be
expensed.
OPERATING EXPENSES
For the period from the Initial Capital Contribution Date through December
31, 1997, marketing, general and administrative expenses were approximately $420
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
IRIDIUM System is under construction and will be depreciated thereafter. This
has resulted in all interest costs being capitalized during 1995, 1996, and
1997. It is likely that a meaningful portion of interest cost will be expensed
in 1998 and all interest cost will be expensed beginning in 1999. Some portion
of interest expense will not be paid in cash, including the interest expense
related to Iridium's 14 1/2% Senior Subordinated Notes through March 1, 2001.
Such non-cash interest will be accrued and such accrual will increase
outstanding indebtedness on Iridium's and Parent's consolidated balance sheets.
INCOME TAXES
Each of Parent and Iridium reports its income as a partnership for United
States federal income tax purposes and accordingly, is not expected to be
directly subject to U. S. federal income tax. Iridium may, however, be subject
to tax in some state, local or foreign jurisdictions on portions of its income.
IWCL is taxed directly.
38
<PAGE> 41
YEAR 2000 CONSIDERATIONS
In the next eighteen months, most companies using computer systems will be
confronted with the fact that many software application and operation programs
written in the past may not properly recognize calendar dates beginning in the
Year 2000. This issue could cause computers to shut down or provide incorrect
information. While Year 2000 considerations are not expected to materially
affect Iridium's internal operations, they may adversely affect Iridium's
suppliers, gateway operators, service providers and roaming partners. Iridium
has begun to ask its suppliers, gateway operators, service providers and roaming
partners about their progress in identifying and addressing problems that their
computer systems may face in correctly processing date information for the Year
2000. While Iridium expects that substantially all of its suppliers, gateway
operators, service providers and roaming partners will effectively address the
Year 2000 issue, there can be no assurance that the failure of such persons to
address effectively the issue will not have an adverse effect on Iridium's
results of operations.
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the consolidated financial statements. Parent is required to adopt
the provisions of Statement 130 for the year ending December 31, 1998. Earlier
application is permitted; however, upon adoption of Statement 130, Parent will
be required to reclassify previously reported annual and interim consolidated
financial statements. The disclosure of comprehensive income in accordance with
the provisions of Statement 130 will impact the manner of presentation of
Parent's consolidated financial statements as currently and previously reported.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
39
<PAGE> 42
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
IWCL
The following table information concerning the executive officers and
directors of IWCL as of March 1, 1998. The current members of the IWCL Board of
Directors were elected by Parent. Members of the IWCL Board of Directors will
hereafter be elected at the annual general meeting or at a special meeting of
stockholders. The exclusive right to elect members of the IWCL Board of
Directors is vested with the holders of Class A Common Stock.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edward F. Staiano......................... 61 Chairman of the Board and Chief Executive
Officer
Roy Grant................................. 40 Chief Financial Officer
Wayne Morgan.............................. 53 Secretary
F. Thomas Tuttle.......................... 55 Assistant Secretary
Alberto Finol............................. 62 Deputy Chairman and Director
Ulf Bohla................................. 53 Director
Robert W. Kinzie.......................... 64 Director
Richard Lesher............................ 63 Director
William Schreyer.......................... 69 Director
Yoshiharu Yasuda.......................... 57 Director
</TABLE>
PARENT AND IRIDIUM
The following table sets forth information concerning the executive
officers and directors of Parent and Iridium as of March 1, 1998. Pursuant to
the limited liability company agreement of Iridium, each officer and director of
Parent holds the same position with Iridium. The directors of Parent and Iridium
are designated by the members of Parent and serve until a successor is
designated.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert W. Kinzie(1)....................... 64 Chairman
Edward F. Staiano......................... 61 Vice Chairman and Chief Executive Officer
Mauro Sentinelli.......................... 51 Executive Vice President -- Marketing and
Distribution
Leo Mondale............................... 38 Senior Vice President -- Strategic
Planning and Business Development
O. Bruce Dale............................. 55 Vice President -- Network Operations
Lauri J. Fitz-Pegado...................... 42 Vice President -- Global Gateway Relations
Mark Gercenstein.......................... 46 Vice President -- Business Operations
Roy Grant................................. 40 Vice President -- Chief Financial Officer
Dale F. Hogg.............................. 55 Vice President -- Human Resources
Francis Latapie........................... 56 Vice President -- Government Affairs
Larry G. Rands............................ 57 Vice President -- Engineering
F. Thomas Tuttle.......................... 55 Vice President, General Counsel and
Secretary
Richard L. Lesher(2)(3)(4)................ 63 Vice President and Independent Company
Director
Aburizal Bakrie(4)........................ 50 Director (designated by South Pacific
Iridium Holdings, Inc.)
Hasan M. Binladin(4)...................... 49 Director (designated by Iridium Middle
East)
Ulf Bohla(1)(4)........................... 53 Director (designated by Vebacom Holdings,
Inc.)
Gordon J. Comerford(2).................... 60 Director (designated by Motorola)
Atilano de Oms Sobrinho(2)(4)............. 54 Director (designated by Iridium
SudAmerica)
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert A. Ferchat(4)...................... 63 Director (designated by Iridium Canada)
Alberto Finol(1)(3)(4).................... 62 Director (designated by Iridium
SudAmerica)
Edward Gams(1)............................ 49 Director (designated by Motorola)
Kazuo Inamori(4).......................... 66 Director (designated by Nippon Iridium)
Georg Kellinghusen(4)..................... 50 Director (designated by Vebacom Holdings,
Inc.)
S.H. Khan(4).............................. 59 Director (designated by Iridium India)
Anatoly I. Kiselev(4)..................... 58 Director (designated by Khrunichev)
John F. Mitchell(3)....................... 70 Director (designated by Motorola)
Jung L. Mok(3)(4)......................... 48 Director (designated by SK Telecom)
Giuseppe Morganti(1)(2)(4)................ 65 Director (designated by Iridium Italia)
J. Michael Norris......................... 51 Director (designated by Motorola)
Yusai Okuyama(2)(4)....................... 66 Director (designated by Nippon Iridium)
John A. Richardson........................ 55 Director (designated by Iridium Africa)
John M. Scanlon........................... 56 Director (designated by Motorola)
Theodore H. Schell(1)(4).................. 53 Director (designated by Sprint)
William A. Schreyer(1)(4)................. 69 Independent Company Director
Sribhumi Sukhanetr(1)(3)(4)............... 65 Director (designated by Thai Satellite)
Tao-Tsun Sun(2)(4)........................ 47 Director (designated by Pacific Iridium
Telecommunications Corporation)
Yoshiharu Yasuda(1)(3)(4)................. 57 Director (designated by Nippon Iridium)
Wang Mei Yue(3)(4)........................ 56 Director (designated by Iridium China)
</TABLE>
- ---------------
(1) Members of the Banking and Financing Committee
(2) Members of the Audit Committee
(3) Members of the Compensation Committee
(4) Members of the Related Party Contracts Committee
CAPITAL
The following table sets forth information concerning the executive
officers and directors of Capital as of March 1, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert W. Kinzie.......................... 64 Director
Edward F. Staiano......................... 61 Chairman of the Board and Chief Executive
Officer
Roy Grant................................. 40 Chief Financial Officer
F. Thomas Tuttle.......................... 55 Secretary
</TABLE>
Executive Officers of IWCL, Parent, Iridium and Capital
Set forth below is information concerning each director and executive
officer of IWCL, Parent, Iridium and Capital, including each individual's
principal occupation and employment. Unless otherwise indicated, each executive
officer holds office until a successor is duly elected and qualified. There are
no family relationships between any officers and directors of IWCL, Parent,
Iridium or Capital.
Unless otherwise noted, dates of service refer to positions with Parent.
Each executive officer of Parent became an executive officer of Iridium, in the
same capacity, on December 18, 1997.
EDWARD F. STAIANO -- Vice Chairman and Chief Executive Officer since
January 2, 1997 and Director since October 1994. Chairman of the Board of IWCL
since May 1997 and Chief Executive Officer of IWCL since March 1997. Chairman of
the Board and Chief Executive Office of Capital since June 18, 1997.
41
<PAGE> 44
Dr. Staiano served Motorola as Executive Vice President, President and General
Manager of the General Systems Sector (comprised of the cellular subscriber
group, cellular infrastructure group, network ventures division, personal
communications and the computer group) from 1989 to December 1996.
MAURO SENTINELLI -- Executive Vice President -- Marketing and Distribution
since August 1, 1997. Prior thereto, Mr. Sentinelli was Deputy Director General
in charge of Strategic Planning, Strategic Marketing and International Affairs
for Telecom Italia Mobile from 1995 to 1997 and Deputy Managing Director for
1994 to 1995. He joined SIP, Telecom Italia's predecessor, in 1974, and held
various positions in engineering, marketing and strategic planning. He became
head of Business Development of the Mobile Service Department in 1988 and
launched the company's cellular service.
LEO MONDALE -- Senior Vice President -- Strategic Planning and Business
Development since January 1995. From July 1993 until January 1995, Mr. Mondale
served as Vice President, Government Affairs and Strategic Planning and from
January 1991 to July 1993 as Vice President -- International Relations of
Parent. From July 1, 1990 to January 31, 1992, he was Director of International
Relations for the Satellite Communications unit of Motorola. Before joining
Motorola, Mr. Mondale served as Vice President of the Fairchild Space & Defense
Corporation, where he was responsible for the international and commercial
activities of Fairchild Space from 1989 to 1990. Prior to joining Fairchild, Mr.
Mondale was Legal Counsel to the then Space Division of Matra, S.A. (now
Matra-Marconi Space, N.V.), based in Paris, France, following several years of
private legal practice in Washington, D.C.
O. BRUCE DALE -- Vice President -- Network Operations since April 1995.
Prior thereto, Mr. Dale served in a number of positions at Bell Communications
Research ("Bellcore") including, General Manager, Service Assurance Systems and
General Manager, Planning & Engineering System from March 1993 to April 1995,
Vice President, Customer Service Center from January 1992 to March 1993, and
Assistant Vice President, Provisioning Systems Laboratory from January 1990 to
January 1992. From March 1982 to December 1989, Mr. Dale served as Director of
Data Network Systems Development Laboratory for AT&T Bell Laboratories.
LAURI J. FITZ-PEGADO -- Vice President -- Global Gateway Relations since
May 1997. Prior thereto, Ms. Fitz-Pegado served at the U.S. Department of
Commerce as the Director General and Assistant Secretary of the U.S.&Foreign
Commercial Service (US&FCS) International Trade Administration from June 1994 to
June 1997 and as a Special Advisor to the Secretary of Commerce from June 1993
to June 1994. From June 1982 to June 1993, Ms. Fitz-Pegado worked at Hill &
Knowlton Public Affairs Worldwide, most recently as Managing Director and Senior
Vice president.
MARK GERCENSTEIN -- Vice President -- Business Operations since August
1992. Prior thereto, Mr. Gercenstein was Director of Marketing of Motorola
Satellite Communications from 1990 to 1992. Prior to assuming that position, Mr.
Gercenstein held various marketing and engineering assignments at Motorola
Government Electronics Group from 1984 to 1990, Spar Aerospace from 1985 to 1987
and Bendix Aerospace from 1975 to 1982.
ROY GRANT -- Vice President -- Chief Financial Officer since April 30, 1997
and Vice President -- Treasurer from November 1996 to July 1997. Chief Financial
Officer of IWCL since April 1997. Chief Financial Officer of Capital since June
18, 1997. Prior thereto, Mr. Grant served from 1992 to 1996 as Finance Director
for Edison Mission Energy, the largest independent power developer in the United
States. Mr. Grant also worked for Marriott Corporation from 1988 to 1992 in its
corporate and project finance areas and at American Airlines from 1980 to 1988,
most recently as its Managing Director -- Banking where he was responsible for
all of the airline's banking relationships.
DALE F. HOGG -- Vice President -- Human Resources since August 1996 and
Director of Human Resources since August 1994. Prior thereto, Mr. Hogg was
Corporate Manager, Compensation and Global Staffing for W.R. Grace & Co. He
previously served from 1985 to 1991 as Regional Director, Human Resources for
the Coca-Cola Company, from 1982 to 1985 as Vice President for Warner
Communications and from 1980 to 1982 as Corporate Personnel Manager for the LTV
Corporation. He has also held Human Resources positions at The Williams
Companies and Rockwell International. Additionally, he served as news anchor for
a CBS affiliate from 1972 to 1980.
42
<PAGE> 45
FRANCIS LATAPIE -- Vice President -- Government Affairs since October 1996.
From January 1996 until October 1996, Mr. Latapie served as Executive Director,
Government Affairs of Parent. Prior thereto, Mr. Latapie worked for Intelsat
since 1974 in various management positions. From 1968 to 1974, Mr. Latapie was
Scientific Attache in the United States, representing the French Government in
all matters dealing with space and telecommunications.
WAYNE MORGAN -- Secretary of IWCL. 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 IWCL since December 1996.
LARRY G. RANDS -- Vice President -- Engineering since August 1993. Mr.
Rands was employed by Motorola Satellite Communications as Assistant Manager
System Engineering from November 1991 through July 1993. Prior thereto, Mr.
Rands spent twelve years with COMSAT Corporation, where he served in several
management positions, most recently, Senior Director of System Engineering. He
has also held positions with CONTEL/ASC, RCA Laboratories, Rockwell
International and Hughes Aircraft.
F. THOMAS TUTTLE -- Vice President -- General Counsel and Secretary since
April 1996. Mr. Tuttle had been employed by Parent as Assistant Secretary since
January 1994 and as Deputy General Counsel since November 1993. Assistant
Secretary of IWCL since December 1996. Secretary of Capital since June 18, 1997.
Prior thereto, Mr. Tuttle was in private law practice in Washington, D.C. from
1986 to 1994. Prior thereto, he served as Vice President, Regulatory and
Industry Relations with Satellite Business Systems and held senior legal
positions with COMSAT Corporation.
Directors of IWCL, Parent, Iridium and Capital
Unless otherwise noted, dates of service refer to directorships of Parent.
Each director of Parent became a director of Iridium on December 18, 1997.
ROBERT W. KINZIE -- Chairman of the Board since October 1991; member of the
Banking and Financing Committee. Chief Executive Officer from October 1991 to
January 1, 1997. Director of IWCL since December 1996. Director of Iridium
Capital since June 18, 1997. Prior thereto, Mr. Kinzie was the Director of
Strategic Planning for Intelsat from 1987 to 1991. Prior to joining Intelsat,
Mr. Kinzie worked from 1966 to 1987 in a number of positions with COMSAT
Corporation including President, Communications Services Division and President
of COMSAT General Corporation. Prior to joining COMSAT Corporation in 1966, Mr.
Kinzie was an economist with the FCC from 1962 to 1965.
RICHARD L. LESHER -- Vice Chairman of the Board and Independent Company
Director since June 1997; member of the Audit Committee, the Compensation
Committee and the Related Party Contracts Committee. Director of IWCL since June
1996. Dr. Lesher was appointed Vice Chairman of the Board and Independent
Company Director upon consummation of the IWCL IPO. Dr. Lesher served as the
President of the Chamber of Commerce of the United States, the world's largest
association of business organizations, from 1975 to 1997, when he retired.
ABURIZAL BAKRIE -- Director since July 1997; member of the Related Party
Contracts Committee. Since 1992 Mr. Bakrie has been Chairman of the Bakrie Group
of Companies, a diversified corporation engaged in manufacturing, fabrication,
telecommunications, mining, real estate, financial services, agri-business and
trading activities. Mr. Bakrie is the President of ASEAN Chamber of Commerce and
Industry and President of the Indonesian Chamber of Commerce and Industry. Mr.
Bakrie has served as a member of the People's Consultative Assembly of the
Republic of Indonesia since 1987.
HASAN M. BINLADIN -- Director since January 1996; member of the Related
Party Contracts Committee. During the past five years, Mr. Binladin has served
as Senior Vice President of the Saudi Binladin Group.
43
<PAGE> 46
ULF BOHLA -- Director since October 1994; member of the Banking and
Financing Committee and the Related Party Contracts Committee. Director of IWCL
since December 1996. Mr. Bohla has been the Chief Executive Officer of o.tel.o
communications GmbH & Co. since July 1, 1994 and is currently Chairman of the
Board of Directors of Vebacom Holdings, Inc. Prior thereto, he served in various
positions with IBM since 1970 including General Manager of Telecommunications at
IBM Europe from 1993 to June 1994, Vice President of International Marketing
Operations at IBM USA from 1991 to 1993 and Director of the North German region
at IBM Germany from 1989 to 1991.
GORDON J. COMERFORD -- Director since July 1993; Chairman of the Audit
Committee. Mr. Comerford is a member of the Board of Directors of Iridium
SudAmerica Corporation and Iridium Canada, Inc. Mr. Comerford recently retired
from Motorola, where he served as a Senior Vice President since 1989. He joined
Motorola's communications sector in 1974 as a Director of Business Management
and became a Corporate Vice President in 1980.
ATILANO DE OMS SOBRINHO -- Director since June 1996; member of the Audit
Committee and the Related Party Contracts Committee. Mr. Oms is Chairman of the
Board, President and CEO of Inepar S.A., a diversified Brazilian corporation
with operations in telecommunications, electrical current control equipment and
services, mass transport, vehicle distribution and financial markets. Mr. Oms is
a member of the Board of Directors SudAmerica and Iridium Brasil. He also serves
on the Boards of the National Confederation of Industries (CNI), ABINEE-National
Association of Electro-Electronic Industries and the Federation of Industries of
Parana State.
ROBERT A. FERCHAT -- Director since January 1995; member of the Related
Party Contracts Committee. Mr. Ferchat has served as Chairman and Executive
Officer since May 1995 and as Chairman, President and Chief Executive Officer
from November 1994 to May 1995 at BCE Mobile Communications Inc. Prior thereto,
he served as Chairman, President and Chief Executive Officer of TMI
Communications, a satellite communications company, from 1992 to 1994. He also
served as President of Northern Telecom Canada Ltd. from 1985 to 1990. Mr.
Ferchat has also served as a director at BCE Mobile Communications Inc. since
1994.
ALBERTO FINOL -- Director since July 1993; Chairman of the Banking and
Financing Committee; member of the Compensation Committee and the Related Party
Contracts Committee. Deputy Chairman and Director of IWCL since December 1996.
Mr. Finol has been the President of Ilapeca, a Venezuelan holding company with
interests in dairy products, supermarkets, pharmaceuticals and communications,
since 1990 and has served as a Director since 1966. He is the Chairman of
Iridium SudAmerica and the Chairman and a major shareholder of Iridium
Andes-Caribe Ltd., one of the owners of Iridium SudAmerica. He has also served
as the Director of Group Zuliano, a major Venezuelan petrochemical holding
group. He represented his native region of Zulia on the Venezuelan Congress from
1969 to 1993.
EDWARD GAMS -- Director since July 1993; member of the Banking and
Financing Committee. Mr. Gams has served as Corporate Vice President and
Director of Investor Relations of Motorola since 1996 and Vice President and
Director of Investor Relations of Motorola since 1991. He was first employed by
Motorola in 1979, and has held a variety of positions in operational and
corporate finance, including service as Director of Corporate Financial Planning
from February 1991 to August 1991 and as manager of Corporate Financial Planning
from December 1989 to February 1991.
KAZUO INAMORI -- Director since July 1993; member of the Related Party
Contracts Committee. Dr. Inamori has been Chairman of the Board of DDI
Corporation since 1984, of Kansai Cellular Telephone Co., Ltd. since 1988, of
Taitoh Corporation since 1990, of Nippon Iridium Corporation since 1993, of DDI
Tokyo Pocket Telephone Inc. since 1994, of DDI Kansai Pocket Telephone Co., Ltd.
since 1994, Kyocera Multimedia Corporation since 1995 and at Kyocera DDI
Institute of Future Telecommunications Inc. since 1996. Dr. Inamori established
Kyocera Corporation in 1959 and has been Chairman of the Board since 1986.
GEORG KELLINGHUSEN -- Director since July 1997; member of the Related Party
Contracts Committee. Dr. Kellinghusen has been a member of the Board of Vebacom
GmbH since August 1996. From 1989 to 1996, Dr. Kellinghusen was affiliated with
Varta AG, most recently as the Chairman of the Board of
44
<PAGE> 47
Varta-Bosch Autobatterien GmbH. Prior to joining Varta AG, Dr. Kellinghusen
served as Controller, Commercial Director and Director, German-Language Books
Production Division, for Bertelsmann AG.
S.H. KHAN -- Director since October 1994; member of the Related Party
Contracts Committee. Mr. Khan has served as Chairman and Managing Director of
the Industrial Development Bank of India since December 1993. Prior thereto,
from 1966, he served in various positions with the Industrial Development Bank
of India, including Managing Director from February 1992 to December 1993 and
Executive Director from 1986 to 1992. He also serves as Chairman of the Small
Industries Development Bank of India, Credit Analysis & Research Ltd., National
Securities Depository Ltd. and National Stock Exchange of India Ltd. He is also
Director on the Boards of Export-Import Bank of India, IDBI Bank Ltd., Life
Insurance Corporation of India, General Insurance Corporation of India, Discount
and Finance House of India Ltd., Deposit Insurance and Credit Guarantee
Corporation and Securities Trading Corporation of India Ltd., India Growth Fund
Inc., as a Trustee of Unit Trust of India ("UTI"), and as a Member of the
Advisory Board of UTI Mutual Fund and India Fund.
ANATOLY I. KISELEV -- Director since July 1993; member of the Related party
Contracts Committee. Mr. Kiselev has served as Director General 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.
JOHN F. MITCHELL -- Director since July 1993; Chairman of the Compensation
Committee since July 1993. Mr. Mitchell has served as Vice Chairman of the Board
of Motorola since 1988 and served as Officer of the Board from 1988 to 1995. He
was employed by Motorola from 1953 to 1995 and served as President from 1980 to
1986 and as Chief Operating Officer from 1986 to 1988.
JUNG L. MOK -- Director since October 1994; member of the Compensation
Committee and the Related Party Contracts Committee. Mr. Mok has served as a
director and as the Senior Executive Vice President of SK Telecom since 1994.
Prior thereto, Mr. Mok served as Senior Managing Director and Chief Operating
Officer of Taehan Telecom Limited from 1991 to 1994 and as Managing Director at
USA, Inc. since 1989.
GIUSEPPE MORGANTI -- Director since April 1996; member of the Banking and
Financing Committee, the Audit Committee and the Related Party Contracts
Committee. Since August 1996, Ing. Morganti has served as Chief Executive
Officer and Managing Director of Iridium Italia S.p.A. Ing. Morganti has been
with STET (now Telecom Italia) since 1984 in various management positions within
the Planning and Strategic Control Department, most recently as the head of the
Telecommunications Services Division.
J. MICHAEL NORRIS -- Director since July 1996; Mr. Norris is a Senior Vice
President of Motorola and has been with Motorola for 24 years. He is currently
the Senior Vice President and General Manager of the Network Management Group,
responsible for all Motorola cellular joint ventures and IRIDIUM gateway
operations worldwide. He also sits on the boards of Hutchinson Telephone Company
Ltd. (Hong Kong), World Telecom Holding Company, Ltd. (Thailand) and Pelephone
(Israel).
YUSAI OKUYAMA -- Director since July 1996; member of the Audit Committee
and Related Party Contracts Committee. Mr. Okuyama has been President of DDI
Corporation since 1993 and President of Nippon Iridium (Bermuda) Ltd. since
1995. Mr. Okuyama has been Chairman of the Board at seven of the DDI Pocket
Telephone Companies since 1994 and at five of the DDI Cellular Telephone
companies since 1995. Mr. Okuyama retired from MPT in 1989 as a deputy secretary
of MPT and served at MPT related enterprises as President before joining DDI
Corporation in 1993.
JOHN A. RICHARDSON -- Director since March 1998; Mr. Richardson has been
the Chief Executive Officer of Iridium Africa since January 1998. He previously
was Chairman and CEO of Barclays-BZW Asia and prior thereto was CEO of Hutchison
Whampoa Ltd. from 1980 to 1985.
JOHN M. SCANLON -- Director since January 1997. Mr. Scanlon is Executive
Vice President of Motorola and President of Motorola's Cellular Networks & Space
Sector. Mr. Scanlon joined Motorola in August 1990. Prior to joining Motorola,
Mr. Scanlon spent 24 years with AT&T, rising to the position of Group Vice
President. Mr. Scanlon is also a director of Media.Com.
45
<PAGE> 48
THEODORE H. SCHELL -- Director since July 1993; member of the Banking and
Financing Committee and the Related Party Contract Committee. Mr. Schell has
served as Senior Vice President -- Strategic Planning and Corporate Development
at Sprint since 1990. Prior thereto, he served as President and Chief Executive
Officer of RealCom Communications Corporation, an IBM subsidiary.
WILLIAM A. SCHREYER -- Independent Company Director; member of the Banking
and Financing Committee and the Related Party Contracts Committee. Mr. Schreyer
was appointed Independent Company Director, upon consummation of the IWCL IPO in
June 1997. Director or IWCL since June 1997. Mr. Schreyer is Chairman Emeritus
of Merrill Lynch & Co., Inc. and has served as Chairman of the Board from April
1985 through June 1993 and as Chief Executive Officer from July 1984 through
April 1992. Mr. Schreyer is currently a Director of Callaway Golf Company, Deere
& Company, True North Communications Inc., Schering-Plough Corporation and
Willis Corroon Group.
SRIBHUMI SUKHANETR -- Director since July 1993; member of the Banking and
Financing Committee, the Compensation 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 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., the parent of Pacific
Iridium Telecommunications Corporation, since 1986. Since 1996, he has served as
Executive Director of Taiwan Electric Wire & Cable Ind. Assoc. and of Chinese
National Federation of Industries, and as Honorary Chairman of the Council for
Industry and Commercial Development. He has also served as Chairman of Taiwan
Aerospace Corporation since 1994, Executive Director of Walsin Lihwa Corp. and
Executive Vice Chairman of Charoong Thai Wire & Cable Co., Ltd. since 1993 and
Director of Pacific Construction Co., Ltd. since 1995.
YOSHIHARU YASUDA -- Director since January 1996; member of the Banking and
Financing Committee, the Compensation Committee and the Related Party Contracts
Committee. Director of IWCL since December 1996. Mr. Yasuda is currently
President of Nippon Iridium Corporation and has been a Director since June 1995.
Mr. Yasuda was Vice President of Nippon Iridium Corporation from June 1996
through 1997. Mr. Yasuda was Director of DDI Corporation from 1992 to 1995.
Prior to joining DDI Corporation, Mr. Yasuda was with the Sanwa Research
Institute.
WANG MEI YUE -- Director since October 1995; member of the Compensation
Committee and the Related Party Contracts Committee. Dr. Wang has served as
Chairman and President of Iridium China (Hong Kong) Ltd. since September 1995,
as Chairman and President of China Aerospace International Holdings Ltd., Hong
Kong since 1993 and as Chairman of China Southern Telecommunication Co., Ltd.
since 1991. From 1988 to 1993 Dr. Wang served as Vice Chairman of the Board at
Conic Investment Co. Ltd.
46
<PAGE> 49
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, as applicable, the compensation paid for
the fiscal years ended December 31, 1995, 1996 and 1997 to those persons who
were, at December 31, 1997, the Chief Executive Officer of Parent and Iridium
and the four next most highly compensated executive officers of Parent and
Iridium. Pursuant to the Iridium LLC Agreement, all officers of Parent are also
officers of Iridium. Pursuant to the Management Services Agreement, Iridium is
required to provide sufficient funds to Parent to, among other things, satisfy
Parent's obligations to its employees. IWCL does not have any salaried
employees. All executive officers of IWCL are executive officers of Parent and
Iridium, except for the Secretary who is a Bermuda resident, as required under
Bermuda law.
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>
Edward F. Staiano........... 1997 $500,000 -- $187,827(b) 750,000 -- $ 4,750(c)
Vice Chairman and Chief
Executive Officer
Robert W. Kinzie............ 1997 $368,424 $154,560 -- 90,000 -- $ 8,462(d)
Chairman & Former Chief 1996 $344,000 $117,669 -- 90,000 -- $ 7,819
Executive Officer 1995 $310,000 $102,000 -- -- -- $ 7,469
Mauro Sentinelli............ 1997 $208,333 -- -- 75,000 -- $24,803(e)
Executive Vice
President -- Marketing &
Distribution
Leo Mondale................. 1997 $262,504 $110,000 -- 67,500 -- $ 4,750(c)
Senior Vice President -- 1996 $220,561 $100,000 -- 45,000 -- $ 4,500
Strategic Planning & 1995 $190,000 $ 56,050 -- -- -- $ 4,500
Business Development
Mark Gercenstein............ 1997 $210,613 $ 88,729 -- -- -- $ 4,750(c)
Vice President -- Business 1996 $201,692 $ 62,909 -- 45,000 -- $ 4,500
Operations 1995 $176,250 $ 54,226 -- -- -- $ 4,500
</TABLE>
- ------------
(a) Through the fiscal year ending December 31, 1995 Parent maintained the
Iridium Long Range Incentive Plan of 1993 (the "Plan"). The Plan was
terminated as of December 31, 1995. Final awards for performance in Fiscal
Year 1995 were determined by the Compensation Committee of the Parent Board
in April 1996. The Iridium Option Plan (described under "-- Option Plan"
below) 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.
(b) This amount includes amounts paid to Dr. Staiano for airplane expenses
($53,663), a salary gross-up to cover taxes incurred ($87,880), apartment
($38,447) and car lease ($7,837).
(c) Parent matching contributions to 401(k) plan.
(d) This amount includes the value of term life insurance provided to Mr. Kinzie
($3,712) and Parent's matching contribution to 401(k) plan ($4,750).
(e) This amount includes relocation expenses paid for Mr. Sentinelli ($20,053)
and Parent's matching contribution to 401(k) plan ($4,750).
On January 2, 1997, Edward F. Staiano became Chief Executive Officer of
Parent and Vice Chairman of the Parent Board. Pursuant to the terms of his
employment agreement, Dr. Staiano will receive a base salary
47
<PAGE> 50
of $500,000 per year. In addition to base salary, Parent has agreed to provide
Dr. Staiano, at its expense, with a car, a furnished apartment in Washington,
D.C. and access to a corporate jet aircraft. Parent has agreed to provide
reimbursement for any tax liability created as a result of the use of those
items. Dr. Staiano was also awarded options to purchase 750,000 shares of Class
A Common Stock of IWCL at a price of $13.33 per share. The options vest, pro
rata, over a period of five years. Vested options may be exercised at any time
after a public offering. Dr. Staiano's options will continue to vest even if his
employment is terminated by Iridium, other than for cause, so long as he is not
retained or employed by a competitor. Dr. Staiano does not receive an annual
bonus or participate in Parent's retirement plans.
Option Grants
The following table sets forth the options granted for the fiscal year
ended December 31, 1997 for each named executive officer.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM(a)
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION ----------------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ ---------------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Edward F. Staiano........... 750,000 53.20% $13.33 1/12/07 $6,285,000 $15,930,000
Robert W. Kinzie............ 90,000 6.38 13.33 4/14/07 754,200 1,911,600
Mauro Sentinelli............ 75,000 5.32 13.33 7/31/07 628,500 1,593,000
Leo Mondale................. 67,500 4.79 13.33 4/14/07 565,650 1,433,700
Mark Gercenstein............ -- -- -- -- -- --
</TABLE>
- ---------------
(a) This figure is achieved by multiplying the number of Options by the Final
Assumed Appreciated Stock Price at the end of the Option Term, and then
subtracting the original cost of the Options, which is the number of Options
multiplied by the Exercise or Base Price.
Year End Option/SAR Table
The following table shows certain information with respect to stock options
held as of December 31, 1997 by the named executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNEXERCISED OPTIONS
ACQUIRED AT FISCAL YEAR-END(a)
ON OPTIONS VALUE DATE OF MONTHS ---------------------------
NAME YEAR EXERCISE GRANTED REALIZED OPTION HELD EXERCISABLE UNEXERCISABLE
- ---- ---- -------- ------- -------- ------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward F. Staiano.... 1997 -- 750,000 -- 1/13/97 11 137,500 612,500
Robert W. Kinzie..... 1997 -- 90,000 -- 4/15/97 8 46,500 133,500
Mauro Sentinelli..... 1997 -- 75,000 -- 8/1/97 5 5,000 70,000
Leo Mondale.......... 1997 -- 67,500 -- 4/15/97 8 26,250 86,250
Mark Gercenstein..... 1997 -- 0 -- 1/1/96 23 17,250 27,750
</TABLE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS/SAR
AT FISCAL YEAR-END(b)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------
<S> <C> <C>
Edward F. Staiano.... $5,018,750 $22,356,250
Robert W. Kinzie..... 1,697,250 4,872,750
Mauro Sentinelli..... 182,500 2,555,000
Leo Mondale.......... 958,125 3,148,125
Mark Gercenstein..... 629,625 1,012,875
</TABLE>
- ---------------
(a) These figures include Options granted before fiscal year 1997.
(b) The closing price of Company Stock on the last day of fiscal year was $36.50
per share.
48
<PAGE> 51
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Parent Board and the Iridium Board
determines the compensation of the executive officers of Parent and Iridium
consistent with guidelines established by the Parent Board and the Iridium
Board. The members of the Compensation Committee for the fiscal year ending
December 31, 1997 were Alberto Finol, Richard L. Lesher, George S. Medawar, John
F. Mitchell, Jung L. Mok, Sribhumi Sukhanetr, Wang Mei Yue and Yoshiharu Yasuda.
The Compensation Committee was chaired by Mr. Mitchell, formerly an executive
officer of Motorola, who continues to serve as Vice Chairman of the Board of
Directors of Motorola. Mr. Finol serves as the Deputy Chairman of IWCL.
Pension Plan
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
125,000............................. $ 36,964 $ 49,286 $ 61,607 $ 76,929 $ 86,250
150,000............................. 45,000 60,000 75,000 90,000 105,000
175,000............................. 53,036 70,714 88,393 106,071 123,750
200,000............................. 61,071 81,429 101,786 122,143 142,500
225,000............................. 69,107 92,143 115,179 138,214 161,250
250,000............................. 77,143 102,857 128,571 154,286 180,000
300,000............................. 93,214 124,286 155,357 186,429 217,500
400,000............................. 125,357 167,143 208,929 250,714 292,500
450,000............................. 141,429 188,571 235,714 282,857 330,000
500,000............................. 157,500 210,000 262,500 315,000 367,500
</TABLE>
Parent maintains the Parent Pension Plan (the "Pension Plan") for the
benefit of its employees. The Pension Plan is a defined benefit plan and is
qualified under the provisions of the U.S. Internal Revenue Code related to such
plans. Benefits payable under the Pension Plan are computed on the basis of a
single life annuity payable at age 65 and are subject to a partial offset by
Social Security payments. Compensation taken into account for purposes of
computing the benefits payable under the Pension Plan generally includes final
average salary, bonuses and qualified salary deferrals. Although the U.S.
Internal Revenue Code of 1986, as amended, limits the amount of covered
compensation under the Pension Plan to $150,000 subject to adjustment (the
"Compensation Cap"), the table above also reflects benefits payable under a
supplemental retirement income plan (the "Supplemental Plan") established by
Parent for the benefit of employees whose compensation exceeds the Compensation
Cap or whose benefit would be limited by Section 415 of the U.S. Internal
Revenue Code. Benefits under the Supplemental Plan are calculated in the same
manner as the Pension Plan. Under the Supplemental Plan, Parent will pay the
employee an amount which together with the amounts due under the Pension Plan
will equal what the employee would have received under the Pension Plan if the
Compensation Cap was not in effect. Mr. Staiano has one year of credited
service; Mr. Kinzie has six years of credited service; Mr. Sentinelli has zero
years of credited service; Mr. Mondale has seven years of credit service; and
Mr. Gercenstein has twelve years of credited service. Messrs. Kinzie, Mondale
and Gercenstein participate in the Pension Plan but do not participate in the
Supplemental Plan.
Parent maintains a supplementary retirement plan for selected senior
officers. The plan provides for an annual income, normally beginning at age 60,
equal to the larger of (i) 40% of the participant's compensation (salary plus an
adjustment for bonuses) at retirement or (ii) the annual benefit calculated
using the formula under the Supplemental Plan, in either case reduced by any
amount payable under the Pension Plan. Regardless of which formula is used, the
total retirement income cannot exceed 70% of an individual's retiring salary. At
retirement a participant receives an annuity purchased by Iridium from an
insurance company sufficient to make the payments required. Parent also pays to
the participant or to the proper taxing authorities an amount sufficient to pay
the income taxes arising from the purchase of the annuity for the participant. A
participant also has the option of receiving a lump sum equal to the purchase
price of the annuity. As with the annuity Parent pays the income taxes arising
from the payment of the lump sum.
49
<PAGE> 52
Employment Arrangements
On January 2, 1997, Edward F. Staiano became Chief Executive Officer and
Vice Chairman of the Parent Board. Pursuant to the terms of his employment
agreement, Dr. Staiano will receive a base salary of $500,000 per year. In
addition to base salary, Parent has agreed to provide Dr. Staiano, at its
expense, with a car, a furnished apartment in Washington, D.C. and access to a
corporate jet aircraft. Parent has agreed to provide reimbursement for any tax
liability created as a result of the use of those items. Dr. Staiano was also
awarded options to purchase 750,000 Class 1 Interests of Iridium at a price of
$13.33 per interest. The options vest, pro rata, over a period of five 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 Option Plan
(described under "-- Option Plan" below) except that Dr. Staiano's options will
continue to vest even if his employment is terminated by Parent, other than for
cause, so long as he is not retained or employed by a competitor. Dr. Staiano
does not receive an annual bonus or participate in Parent's pension plans.
Option Plan
Parent has established a plan under which executive officers and managers
of Parent are awarded options to purchase Class A Common Stock ( the "Option
Plan" ). The Option Plan covers 2,625,000 shares of Class A Common Stock. The
Option Plan also permits the award of stock appreciation rights in connection
with any grant of options. As of March 1, 1998, options covering 2,557,085
shares of Class A Common Stock had been granted. Options to purchase 482,154
shares of Class A Common Stock were vested at March 1, 1998. As of that date no
stock appreciation awards had been granted. This amount of outstanding options
includes the options issued to Dr. Staiano when he joined Iridium. If an award
under the Option Plan expires, or is terminated, surrendered or canceled, the
shares of Class A Common Stock subject to such award are added to the number of
shares of Class A Common Stock available for awards under the Option Plan. Under
the Option Plan, option awards are made from time to time by the Compensation
Committee of the Parent Board.
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, Parent is required to purchase each outstanding option
and stock appreciation right for an immediate lump sum payment equal to the
difference between (i) the higher of (x) the fair market value of a share of
Class A Common Stock immediately prior to payment or (y) the highest price
actually paid in connection with the Change in Control, and (ii) the exercise
price. A "Change in Control" is defined in the Option Plan as a sale by one or
more holders of 50% or more of the outstanding Class 1 Interests, other than in
connection with a Public Offering (as defined), to third parties who are not
holders of Class 1 Interests or affiliated with holders of Class 1 Interests and
following which the members of the Parent prior to the sale cease to constitute
a majority of the Parent Board.
The plan was established in April 1996. Except for Dr. Staiano, under the
Option Plan, a participant whose employment is terminated by Parent forfeits any
unvested options. There are exceptions for death, retirement and certain other
situations. Dr. Staiano's options will continue to vest even if his employment
is terminated by Parent, other than for cause, so long as he is not retained or
employed by a competitor.
IWCL has agreed that upon the exercise of any options, it will issue to
Parent, for delivery to an exercising option holder, the number of shares of
Class A Common Stock covered by the exercised options and Parent has agreed to
simultaneously deliver to IWCL a like number of Class 1 Interests, subject to
anti-dilution adjustments. The exercise price of the option will be paid to
Parent and will represent payment for the Class A Common Stock by the exercising
option holder and for the Class 1 Interests by IWCL. See "Certain Matters
Regarding Relationship Among IWCL, Parent and Iridium -- Share Issuance
Agreement."
SUBSIDIARIES OF IRIDIUM
Iridium has four subsidiaries: Iridium Capital Corporation ("Capital"),
Iridium Roaming LLC ("Roaming"), Iridium IP LLC ("IP") and Iridium Facilities
Corporation ("Facilities"). Each of Roaming and IP is a Delaware limited
liability company, of which Iridium is the only member. Each of Capital and
Facilities is a
50
<PAGE> 53
Delaware corporation and is a wholly owned subsidiary of Iridium. Pursuant to
the limited liability company agreement relating to each of Roaming and IP, the
power and authority to manage and conduct the business and affairs of such
company is vested in Iridium, acting through certain of the officers and
directors of Iridium listed above. Each of the directors and officers of Capital
and Facilities is an officer of Iridium.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
IRIDIUM WORLD COMMUNICATIONS LTD.
There are no persons known by IWCL to own beneficially more than five
percent of its Class A Common Stock as of March 1, 1998. The following table
sets forth certain information regarding beneficial ownership of IWCL's Class A
Common Stock as of March 1, 1998 by the Directors and nominees, the named
executive officers in the Summary Compensation Table ("NEOs") and all Directors,
nominees and officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF INDIVIDUAL OWNERSHIP(1)(2) CLASS(1)
- ------------------ ----------------- ----------
<S> <C> <C>
Robert W. Kinzie................................. 78,457(3) *
Edward F. Staiano................................ 250,000 2.05%
Mauro Sentinelli................................. 17,852 *
Leo Mondale...................................... 41,792 *
Mark Gercenstein................................. 25,603 *
Alberto Finol.................................... 127,900(4) 1.07%
Ulf Bohla........................................ 0 --
Richard Lesher................................... 9,183 *
William Schreyer................................. 10,183 *
Yoshiharu Yasuda................................. 2,000 *
All Directors of IWCL and Executive Officers of
IWCL and Parent as a Group..................... 681,030 5.47%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of March 1, 1998, may be acquired within sixty
days pursuant to the exercise of options (which shares are treated as
outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth).
(2) Except as noted, all shares are owned directly with sole investment and
voting power.
(3) Includes 1,500 shares owned by Mr. Kinzie's wife, as to which Mr. Kinzie
disclaims beneficial ownership.
(4) Includes 122,900 shares owned by Mr. Finol's holding company and 5,000
shares owned by Mr. Finol's wife. Mr. Finol disclaims beneficial ownership
of the shares owned by his wife.
51
<PAGE> 54
PARENT
Iridium is wholly owned subsidiary of Parent. The following table sets
forth certain information regarding beneficial ownership of Parent's Class 1
Interests as of March 1, 1998 (i) by each person known by Parent to own
beneficially more than five percent of its Class 1 Interests and (ii) by all of
Iridium's executive officers and directors of Parent and Iridium (named in the
table under "Management" above) as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(1)
- ------------------------------------ ----------------- ----------
<S> <C> <C>
Motorola, Inc.(2)........................................... 39,898,493 27.40%
1303 East Algonquin Rd.
Schaumburg, IL 60196
Nippon Iridium (Bermuda) Limited(3)......................... 15,750,000 11.15
c/o NIPPON IRIDIUM CORPORATION
Ichibancho FS Building 8
Ichibancho Chiyoda-ku
Tokyo 102 Japan
Vebacom Holdings, Inc.(4)................................... 12,427,875 8.80
c/o o.tel.o communications GmbH & Co.
Am Bonneshof 35
D-40474 Dusseldorf Germany
All Directors and Executive Officers as a Group(5).......... 0 0
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power with respect to the
Class 1 Interests. Class 1 Interests subject to options or warrants
currently exercisable or exercisable within 60 days of the date of this Form
10-K are deemed outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
computing the percentage of any other person.
(2) The Class 1 Interests beneficially owned by Motorola include 25,033,425
Class 1 Interests held directly by Motorola and 4,365,068 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 as a result of its guarantee of borrowings by Iridium or Class 1
Interests that may be issued pursuant to the Reserve Capital Call.
(3) Nippon Iridium (Bermuda) Limited is a wholly owned subsidiary of Nippon
Iridium Corporation, which is a consortium formed by DDI Corporation.
(4) Vebacom Holdings, Inc. is a wholly owned subsidiary of o.tel.o
communications GmbH & Co., which is owned by VEBA Telecom GmbH and Lehman
Brothers Bankhaus Aktiengesellschaft (as a fiduciary).
(5) No directors or executive officers of Parent own Class 1 Interests. As of
March 1, 1998, the IWCL directors and the executive officers of IWCL and
Parent owned an aggregate of 681,030 shares of Class A Common Stock and IWCL
owned 681,030 Class 1 Interests in respect of such Class A Common Stock. Up
to 2,625,000 shares of Class A Common Stock may be issued pursuant to the
Option Plan. As of March 1, 1998, options covering an aggregate of 2,572,585
shares of Class A Common Stock had been granted
52
<PAGE> 55
under the Option Plan. Options to purchase 482,487 shares of Class A Common
Stock were vested at March 11, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MOTOROLA RELATED MATTERS
Motorola is one of the world's leading providers of electronic equipment,
systems, components and services. Its products include two-way radios, pagers,
cellular telephones and systems, semiconductors, defense and aerospace
electronics, automotive and industrial electronics and data communications and
information processing equipment.
Motorola created and developed the concept of the IRIDIUM System and
Iridium's initial technical and business plans. Motorola is a founding investor,
has been allocated gateway service territories, shares a gateway service
territory and has additional interests in other entities which have been
allocated gateway service territories. Motorola is Parent's largest member,
owning directly and indirectly approximately 18% of the Class 1 Interests in
Iridium. The directors and officers of Parent and Iridium include numerous
current and former Motorola employees. Motorola is also Iridium's principal
supplier through the Space System Contract, the Operations and Maintenance
Contract and the Terrestrial Network Development Contract. See "Principal
Contracts for the Development of the IRIDIUM System."
Under a Support Agreement, Motorola provides certain general and
administrative support to Iridium. On a cost reimbursable basis, Motorola has
provided payroll processing and related benefits to Iridium employees, processed
payment to certain contractors providing support to Iridium and has provided
other administrative support. The amount of the services provided by Motorola
has declined as Iridium's internal staff has increased. In 1997, total payments
to Motorola under the Support Agreement were approximately $648,000.
Motorola MOU and Agreement Regarding Guarantee
Motorola initially guaranteed up to $750 million of Parent's borrowings
(including principal and interest) under the Guaranteed Bank Facility pursuant
to the Motorola Guarantee. In connection with the execution and delivery of the
Motorola Guarantee, Motorola and Parent entered into an Agreement Regarding
Guarantee (the "Original Agreement Regarding Guarantee"), under which (among
other things) Parent agreed (i) to reimburse Motorola for any payment required
pursuant to the Motorola Guarantee, (ii) not to take certain actions without
Motorola's approval and (iii) to pay to Motorola, as compensation for the
Motorola Guarantee, warrants to purchase Class 1 Interests. In addition,
pursuant to the Original Agreement Regarding Guarantee, Motorola was granted the
right to appoint an additional Director on the Parent Board and as security for
Iridium's reimbursement obligation under the Original Agreement Regarding
Guarantee, Parent granted to Motorola a security interest in substantially all
of its assets.
In connection with the offering of the Initial Senior Notes, Parent and
Motorola entered into a Memorandum of Understanding ("Motorola MOU") and amended
and restated the Original Agreement Regarding Guarantee (as so amended and
restated, the "Agreement Regarding Guarantee"). Pursuant to the Motorola MOU,
(i) Motorola agreed to consent to an amendment of the Guaranteed Bank Facility
(and to enter into related amendments to the Motorola Guarantee) in order to
extend the maturity of such Facility until after the Stated Maturity of the
Initial Senior Notes (which is the same date as the Stated Maturity of the
Notes); (ii) Motorola agreed to consent to an amendment to the Guaranteed Bank
Facility (or to entry into a new bank credit facility on the same terms) in
order to increase such Facility by (or to establish such new facility in the
amount of) $350 million -- the amount of the Motorola Additional
Guarantee -- and to document the Motorola Additional Guarantee; (iii) Parent
agreed that, to the extent the net proceeds to Iridium of senior note offerings
prior to December 31, 1997 exceed $650 million, it would apply such excess to a
prepayment of the Guaranteed Bank Facility and to a permanent reduction of the
commitments of the lenders thereunder (provided that such commitments need not
be reduced to an amount less than $275 million) (as a result, the commitment
under the Guaranteed Bank Facility was reduced from $750 million to $655 million
with the net proceeds of the Initial Senior Notes offering; for the purposes of
the
53
<PAGE> 56
Original Offering only, Motorola waived this requirement upon Iridium's
permanent reduction of the Guaranteed Bank Facility and the corresponding
Motorola Guarantee by $205 million (to $450 million)); (iv) Motorola agreed to
release its security interest in Parent's assets granted pursuant to the
Original Agreement Regarding Guarantee; (v) Parent agreed to repay all amounts
outstanding under the Guaranteed Bank Facility and to terminate the commitments
of the lenders thereunder prior to or simultaneous with any optional redemption
of the Initial Senior Notes or the Notes; (vi) Motorola agreed to subordinate
certain of its claims to the claims of the lenders under the Secured Bank
Facility; (vii) Motorola agreed to allow Iridium to defer, at Iridium's option,
payment of approximately $96 million expected to be due to Motorola on September
30, 1998 and thereafter pursuant to the Terrestrial Network Development Contract
until after the Stated Maturity of the Initial Senior Notes (which is the same
date as the Stated Maturity of the Notes), with the amount deferred being
compensated as part of the Motorola Exposure (the amount of the deferral
pursuant to the Terrestrial Network Development Contract), including accrued
interest thereon, the "FOC Payment Deferral"); and (viii) during certain periods
in which the Motorola Exposure (as defined below) is less than $275 million and
Motorola has not been required to make payments on its guarantee of the
Guaranteed Bank Facility, Motorola will waive certain rights it holds in
connection with the Series B and Series C Class 2 Interests of Iridium (see
"Description of Iridium LLC Limited Liability Company Agreement"). In addition,
in the Motorola MOU Parent agreed that, in certain circumstances, it will not
have outstanding at any time until the maturity of the Guaranteed Bank Facility
(as extended as discussed above) (i) in excess of $1.7 billion in aggregate
principal amount of borrowed money indebtedness that is secured by assets of
Parent; (ii) in excess of $1.25 billion in aggregate principal amount (or
initial gross proceeds in the case of any senior notes issued at a discount) of
senior notes (including the Initial Senior Notes and the Notes), and (iii) total
indebtedness for borrowed money (which shall consist solely of amounts described
in clauses (i) and (ii) above) in excess of $2.95 billion. Certain of the
agreements of Motorola and Iridium in the Motorola MOU are subject to
conditions, including the consistency of definitive documents with the Motorola
MOU and the Agreement Regarding Guarantee. Motorola's agreement to provide the
Motorola Additional Guarantee is subject to the condition that the Parent LLC
Agreement be amended to provide Motorola with additional governance rights if
the Motorola Exposure exceeds $750 million. Some of the obligations of Parent
under the Motorola MOU were transferred to Iridium pursuant to the Asset
Drop-Down Transaction. In addition, the indebtedness for borrowed money
constraints described above apply to Parent, Iridium and Iridium's subsidiaries
on a consolidated basis.
Under the Agreement Regarding Guarantee (and after giving effect to the
transfer of obligations under the Asset Drop-Down Transaction), (i) Iridium is
obligated to reimburse Motorola for any payment required pursuant to the
Motorola Guarantee or the Motorola Additional Guarantee; provided, that if the
Guaranteed Bank Facility is accelerated as a result of a Motorola-Based Default
(as defined in the Agreement Regarding Guarantee) such reimbursement will be
made on the same terms as provided in the Guaranteed Bank Facility or any other
relevant credit agreement; (ii) Iridium shall not, except in situations in which
the Motorola Exposure is $275 million or less and certain other conditions are
satisfied, take certain actions without Motorola's approval; and (iii) Parent
must pay to Motorola, as compensation for the Motorola Exposure, warrants to
purchase Class 1 Interests based on the amount and duration of the Motorola
Exposure. In the event the Motorola Exposure is $275 million or less and certain
other conditions are satisfied, then in lieu of such warrants to purchase Class
1 Interests, Iridium may pay to Motorola, as compensation for the Motorola
Exposure, (i) interest thereon at an interest rate equal to the excess of the
rate borne by the Initial Senior Notes over the rate applicable under the
Guaranteed Bank Facility or any other relevant credit agreement, and (ii) for
each day, the average daily warrant compensation payable to holders of senior
notes of Iridium multiplied by the Motorola Exposure (pro rata based on the
amount and duration of the Motorola Exposure compared with the amount and
duration of such senior notes).
"Motorola Exposure" means the commitments of the lenders under the
Guaranteed Bank Facility, the payments made by Motorola pursuant to the Motorola
Guarantee or the Motorola Additional Guarantee (to the extent not repaid by
Iridium) and the Vendor Financing Amount. "Vendor Financing Amount" means the
amount of the FOC Payment Deferral (if such deferral is exercised) and any other
vendor financing provided by Motorola to or for the benefit of Iridium, other
than any vendor financing or payment deferral under the Terrestrial Network
Development Contract as in effect on the date of the Agreement Regarding
Guarantee.
54
<PAGE> 57
Motorola Conflicts of Interest
Motorola has and may have various conflicts of interest with Iridium and
with other members of Parent. 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. 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. To help ameliorate these conflicts under the Space System
Contract, the Operations and Maintenance Contract and the Terrestrial Network
Development Contract, Iridium maintains a Related Party Contracts Committee of
the Iridium Board which consists of all Board members other than any Board
members who are directors, officers, employees or persons nominated to serve on
the Board of Directors by Motorola (so long as Motorola is a party to the Space
System Contract, the Operations and Maintenance Contract or the Terrestrial
Network Development Contract), Lockheed Martin or Raytheon (so long as Lockheed
Martin or Raytheon, as the case may be, are subcontractors to Motorola under the
Space System Contract or the Operations and Maintenance Contract). The Related
Party Contracts Committee has authority to review and monitor the Space System
Contract, the Operations and Maintenance Contract and the Terrestrial Network
Development Contract and, as it deems appropriate, cause Iridium to enforce its
rights thereunder and propose amendments and waivers to these contracts.
Iridium's payment obligations under these contracts comprised most of Iridium's
expenses and a portion of the proceeds of the Original Offering have been or
will be used primarily to make milestone payments under the Space System
Contract and the Terrestrial Network Development Contract.
Motorola has been involved in the manufacture of components for satellites
for over thirty years. Motorola has informed Iridium that it has under
consideration possible future space-based data and communications systems and
ventures. Motorola has also informed Iridium that Motorola may decide to
undertake further development of one or more such systems or ventures but no
decision has been made as to whether Iridium would be a participant in any such
system or venture. It is possible that any such system could be competitive to
some degree with the IRIDIUM System. Motorola has agreed in the Space System
Contract that, without Iridium's consent, it will not produce for itself or
others a similar satellite-based space system of a global communication system
for commercial use prior to the earlier of July 31, 2003 or the termination date
of the Space System Contract. Subsidiaries of Motorola have applied to the FCC
for licenses to construct, launch and operate satellite-based systems designed
to provide fixed-broadband, fixed-data transmission.
OTHER MATTERS
Iridium Services Deutschland, a wholly owned subsidiary of o.tel.o
communications GmbH & Co., the parent of Vebacom Holdings, Inc., a holder of
approximately 8.8% of the Class 1 Interests, was allocated a gateway service
territory consisting of several countries in or near Europe. Nippon Iridium
Corporation, an affiliate of Nippon Iridium (Bermuda) Corporation, a holder of
approximately 11.2% of the Class 1 Interests, was allocated the Japan gateway
service territory. Each of o.tel.o communications GmbH & Co. and Nippon Iridium
Corporation have entered into a Gateway Authorization Agreement, pursuant to
which they, or their affiliates, will operate their respective Gateway service
territory and provide gateway services. In addition, o.tel.o communications GmbH
& Co. and Nippon Iridium Corporation will serve as service providers to their
respective gateway territory and, as such, will be entitled to payments
associated with sales of IRIDIUM Services.
Kyocera, an affiliate of Nippon Iridium Corporation, a holder of
approximately 11.2% of the Class 1 Interests, has entered into a license
agreement with Motorola with respect to the development and manufacture of
multi-mode phones for use with the IRIDIUM system. This license agreement does
not obligate Kyocera to develop, manufacture 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.
55
<PAGE> 58
Certain of the directors of IWCL are, or have been within the past year,
executive officers of suppliers of Parent and Iridium. In addition, certain of
the directors of Parent and Iridium are executive officers of gateway owners and
service providers.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following are filed as a part of this Report on Form 10-K:
(1) The following financial statements are included at the indicated page
in this Report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Financial Statements............................... F-1
IRIDIUM WORLD COMMUNICATIONS LTD.
Independent Auditors' Report......................... F-2
Balance Sheets....................................... F-3
Statements of Loss................................... F-4
Statements of Stockholders' Equity................... F-5
Statements of Cash Flows............................. F-6
Notes to Financial Statements........................ F-7
IRIDIUM LLC
Independent Auditors' Report......................... F-11
Consolidated Balance Sheets.......................... F-12
Consolidated Statements of Loss...................... F-13
Consolidated Statements of Members' Equity
(Deficit)........................................... F-14
Consolidated Statements of Cash Flows................ F-15
Notes to Consolidated Financial Statements........... F-16
IRIDIUM OPERATING LLC
Independent Auditors' Report......................... F-33
Consolidated Balance Sheets.......................... F-34
Consolidated Statements of Loss...................... F-35
Consolidated Statements of Member's Equity
(Deficit)........................................... F-36
Consolidated Statements of Cash Flows................ F-37
Notes to Consolidated Financial Statements........... F-38
</TABLE>
(2) The following additional financial data are transmitted with this
Report and should be read in conjunction with the Consolidated Financial
Statements and Financial Statements in this Report. Schedules other than those
listed below have been omitted because they are inapplicable or are not
required.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report on Consolidated
Financial Statement Schedule........................ S-1
Schedule 1 -- Condensed Financial Information of
Iridium LLC......................................... S-2
</TABLE>
56
<PAGE> 59
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as
of July 29, 1996, as amended: Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 of
Iridium World Communications Ltd. and Iridium LLC
(Registration Nos. 333-23419 and 333-23419-01) (the "Form
S-1").
3.2 Articles of Incorporation of Iridium Capital Corporation:
Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Iridium LLC, Iridium Capital
Corporation, Iridium Roaming LLC, and Iridium IP LLC
(Registration Nos. 333-31741, -01, -02 and -03) (the "1997
Form S-4").
3.3 By-Laws of Iridium Capital Corporation: Incorporated by
reference to Exhibit 3.3 to the 1997 Form S-4.
3.4 Amended and Restated Limited Liability Company Agreement of
Iridium Roaming LLC: Incorporated by reference to Exhibit
3.4 to the Registration Statement on Form S-4 of Iridium
Operating LLC, Iridium Capital Corporation, Iridium Roaming
LLC and Iridium IP LLC (Registration No. 333-44349, -01,
-02, -03 and -04) (the "1998 Form S-4").
3.5 Amended and Restated Limited Liability Company Agreement of
Iridium IP LLC: Incorporated by reference to Exhibit 3.5 to
the 1998 Form S-4.
3.6 Limited Liability Company Agreement of Iridium Operating
LLC: Incorporated by reference to Exhibit 3.6 to the 1998
Form S-4.
3.7 Articles of Incorporation of Iridium Facilities
Corporation.*
3.8 By-Laws of Iridium Facilities Corporation.*
3.9 Memorandum of Association of Iridium World Communications
Ltd.: Incorporated by reference to Exhibit 3.1 to the Form
S-1.
3.10 By-Laws of Iridium World Communications Ltd.: Incorporated
by reference to Exhibit 3.2 to the Form S-1.
4.1.1 Indenture dated as of July 16, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 13% Senior Notes due
2005, Series A, and 13% Senior Notes due 2005, Series A/EN:
Incorporated by reference to Exhibit 4.1 to the 1997 Form
S-4.
4.1.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 13% Senior Notes due 2005, Series A, and 13%
Senior Notes due 2005, Series A/EN: Incorporated by
reference to Exhibit 4.1.2 to the 1998 Form S-4.
4.1.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 13% Senior Notes due 2005, Series A, and 13%
Senior Notes due 2005, Series A/EN.*
4.2 Forms of Series A Note and Series A/EN Note: Incorporated by
reference to Exhibit 4.1 to the 1997 Form S-4.
4.3.1 Indenture dated as of July 16, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 14% Senior Notes due
2005, Series B, and 14% Senior Notes due 2005, Series B/EN:
Incorporated by reference to Exhibit 4.2 to the 1997 Form
S-4.
4.3.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 14% Senior Notes due 2005, Series B, and 14%
Senior Notes due 2005, Series B/EN: Incorporated by
reference to Exhibit 4.3.2 to the 1998 Form S-4.
4.3.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 14% Senior Notes due 2005, Series B, and 14%
Senior Notes due 2005, Series B/EN.*
4.4 Forms of Series B Note and Series B/EN Note: Incorporated by
reference to Exhibit 4.2 to the 1997 Form S-4.
4.5.1 Indenture dated as of October 17, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 11 1/4% Senior Notes
due 2005, Series C: Incorporated by reference to Exhibit
4.5.1 to the 1998 Form S-4.
4.5.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 11 1/4% Senior Notes due 2005, Series C:
Incorporated by reference to Exhibit 4.5.2 to the 1998 Form
S-4.
</TABLE>
57
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
4.5.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 11 1/4% Senior Notes due 2005, Series C.*
4.6 Forms of Series C Note and Series C/EN Note: contained in an
exhibit to Exhibit 4.5.1: Incorporated by reference to
Exhibit 4.6 to the 1998 Form S-4.
10.1 Form of Interest Exchange Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.2 to the Form
S-1.
10.2 Form of amended and restated Management Services Agreement
between IWCL, Iridium LLC and Iridium Operating LLC:
Incorporated by reference to Exhibit 10.2 to the 1998 Form
S-4.
10.3 Form of 1997 Subscription Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.4 to the Form
S-1.
10.4 Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January
14, 1997: Incorporated by reference to Exhibit 10.6 to the
Form S-1.+
10.5 Communications System Operations & Maintenance Contract
between Iridium LLC and Motorola, Inc. effective July 29,
1993, as amended and conformed on January 14, 1997:
Incorporated by reference to Exhibit 10.7 to the Form S-1.+
10.6 Terrestrial Network Development Contract between Iridium LLC
and Motorola, Inc. effective January 1, 1993, as amended and
conformed on January 14, 1997: Incorporated by reference to
Exhibit 10.8 to the Form S-1.+
10.7 Amendment No. 3 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc. effective
June 20, 1997: Incorporated by reference to Exhibit 10.7 to
the 1997 Form S-4.+
10.8 Support Agreement between Iridium LLC and Motorola, Inc.:
Incorporated by reference to Exhibit 10.9 to the Form S-1.
10.9 Agreement, executed as of December 16, 1996, between
Andersen Consulting LLC and Iridium LLC relating to the
development of business support systems: Incorporated by
reference to Exhibit 10.10 to the Form S-1.+
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of
Iridium: Incorporated by reference to Exhibit 10.11 to the
Form S-1.
10.11 Form of Warrant issued in respect of 14 1/2% Senior
Subordinated Discount Notes: Incorporated by reference to
Exhibit 10.13 to the Form S-1.
10.12 Warrant to purchase Series M Class 2 Interests dated July
29, 1993, as amended: Incorporated by reference to Exhibit
10.13 to the Form S-1.
10.13 Form of Gateway Authorization Agreement: Incorporated by
reference to Exhibit 10.14 to the Form S-1.
10.14 Guaranteed Bank Facility: Incorporated by reference to
Exhibit 10.15 to the Form S-1.
10.15 Amendment dated December 19, 1997 to Guaranteed Bank
Facility.*
10.16 Motorola Agreement regarding Guarantee: Incorporated by
reference to Exhibit 10.16 to the Form S-1.
10.17 Amended and Restated Agreement regarding Guarantee:
Incorporated by reference to Exhibit 10.17 to the 1997 Form
S-4.
10.18 Memorandum of Understanding with Motorola, Inc: Incorporated
by reference to Exhibit 10.18 to the 1997 Form S-4.
10.19 Form of Share Issuance Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.17 to the Form
S-1.
10.20 Purchase Agreement in respect of Series C Notes, dated
October 9, 1997: Incorporated by reference to Exhibit 10.20
to the 1998 Form S-4.
10.21 Exchange and Registration Rights Agreement: contained in an
annex to Exhibit 10.20: Incorporated by reference to Exhibit
10.21 to the 1998 Form S-4.
10.22 Iridium LLC Option Plan: Incorporated by reference to
Exhibit 10.5 to the Form S-1.++
10.23 Iridium LLC Selected Senior Officers' Supplementary
Retirement Plan: Incorporated by reference to Exhibit 10.27
to the 1997 Form S-4.
</TABLE>
58
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.24 Agreement between Dr. Staiano and Iridium LLC: Incorporated
by reference to Exhibit 10.28 to the 1997 Form S-4.
10.25 Asset Transfer Agreement: Incorporated by reference to
Exhibit 10.25 to the 1998 Form S-4.
10.26 Consent of Arthur Andersen LLP to Contract Assignment:
Incorporated by reference to Exhibit 10.26 to the 1998 Form
S-4.
10.27 Consent of Motorola Inc. to Contract Assignment:
Incorporated by reference to Exhibit 10.27 to the 1998 Form
S-4.
10.28 Form of Credit Agreement among Iridium Operating LLC, Chase
Securities Inc., Barclays Capital, The Chase Manhattan Bank
and Barclays Bank PLC.*
10.29 Conditions Precedent to the Disbursement of the Term Loans
under Section 2.01(a) of the Credit Agreement.*
10.30 Regulatory and Technical Conditions Precedent to
availability of funding under the Credit Agreement.*
10.31 Form of Assignment and Acceptance under the Credit
Agreement.*
10.32 Form of Pledge and Security Agreement among Iridium
Operating LLC, each of the Subsidiaries and The Chase
Manhattan Bank.*
10.33 Form of Parent Security Agreement between Iridium LLC and
The Chase Manhattan Bank.*
10.34 Form of Subsidiary Guarantee Agreement between each of the
Subsidiary Guarantors and The Chase Manhattan Bank.*
10.35 Form of Subsidiary Guarantee Assumption Agreement.*
10.36 Form of Depositary Agreement between Iridium Operating LLC
and The Chase Manhattan Bank.*
10.37 Form of Motorola Consent under the Credit Agreement among
Motorola, Iridium Operating LLC and The Chase Manhattan
Bank.*
10.38 Form of Motorola Pledge Agreement between Motorola, Inc. and
The Chase Manhattan Bank.*
10.39 Form of Progress Certificate (Pre-Commercial Activation)
under the Credit Agreement.*
10.40 Form of Verification of Independent Technical Advisor under
the Credit Agreement.*
10.41 Form of Progress Certificate (Post-Commercial Activation)
under the Credit Agreement.*
10.42 Form of Borrowing Request under the Credit Agreement.*
11.1 Statement re Computation of Loss per Class A Common Share:
Iridium World Communications Ltd.*
11.2 Statement re Computation of Loss per Class 1 Interest:
Iridium LLC.*
12 Statement re Computation of Ratios: Iridium Operating LLC.*
21 Subsidiaries of the Registrants.*
23 Consent of KPMG Peat Marwick LLP.*
27.1 Financial Data Schedule -- Iridium World Communications,
Ltd.*
27.2 Financial Data Schedule -- Iridium LLC*
27.3 Financial Data Schedule -- Iridium Operating LLC*
99 Certain Factors Which May Affect Forward Looking
Statements.*
</TABLE>
(b) Reports on Form 8-K
Iridium LLC and Iridium World Communications Ltd. filed an 8-K on July 18,
1997 reporting that Motorola had advised Iridium LLC that it had lost contact
with one of the Iridium satellites. Iridium LLC and Iridium World Communications
Ltd. filed an 8-K on October 13, 1997 reporting that Iridium LLC and Iridium
Capital Corporation issued $300 million aggregate principal amount of 11 1/4%
Senior Notes due 2005, Series C in an unregistered offering.
In addition, such Form 8-K reported that Motorola had informed Iridium LLC
that Motorola had experienced a problem with one of the Iridium satellites prior
to its attaining final orbit. Such Form 8-K also reported that Motorola had
advised Iridium LLC that (i) it factored satellite loss into its planning for
59
<PAGE> 62
constellation deployment, (ii) it remained on course for commercial activation
in September 1998 and (iii) Iridium would not bear the financial risk for loss
of the satellite.
Iridium LLC, Iridium Operating LLC and Iridium World Communications Ltd.
filed an 8-K on December 19, 1997 reporting that Iridium LLC entered into an
asset drop-down transaction with Iridium Operating LLC, a newly formed
wholly-owned subsidiary of Iridium LLC. Such Form 8-K also reported that, (i)
pursuant to the Asset Drop-Down Transaction, substantially all of the assets and
liabilities of Iridium LLC were transferred to Iridium Operating LLC, (ii) the
Asset Drop-Down Transaction was consummated in connection with establishment of
a $1,000,000,000 credit facility by Iridium Operating LLC and (iii) such credit
facility would be secured by a security interest in substantially all of the
assets of Iridium Operating LLC and in all of the membership interests in
Iridium Operating LLC.
60
<PAGE> 63
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IRIDIUM WORLD COMMUNICATIONS LTD.
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Statements of Loss.......................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
IRIDIUM LLC
Independent Auditors' Report................................ F-11
Consolidated Balance Sheets................................. F-12
Consolidated Statements of Loss............................. F-13
Consolidated Statements of Members' Equity (Deficit)........ F-14
Consolidated Statements of Cash Flows....................... F-15
Notes to Consolidated Financial Statements.................. F-16
IRIDIUM OPERATING LLC
Independent Auditors' Report................................ F-33
Consolidated Balance Sheets................................. F-34
Consolidated Statements of Loss............................. F-35
Consolidated Statements of Member's Equity (Deficit)........ F-36
Consolidated Statements of Cash Flows....................... F-37
Notes to Consolidated Financial Statements.................. F-38
</TABLE>
F-1
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Iridium World Communications Ltd.:
We have audited the accompanying balance sheets of Iridium World
Communications Ltd. as of December 31, 1997 and 1996, and the related statements
of loss, stockholders' equity, and cash flows for the year ended December 31,
1997 and for the period December 12, 1996 (inception) through December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Iridium World Communications
Ltd. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for the year ended December 31, 1997, and for the period December 12,
1996 (inception) through December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
McLean, Virginia
January 16, 1998
F-2
<PAGE> 65
IRIDIUM WORLD COMMUNICATIONS LTD
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
<S> <C> <C>
ASSETS
Cash........................................................ $ -- $ --
Investment in Iridium LLC................................... -- 223,922
------- --------
Total Assets...................................... $ -- $223,922
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities................................................. $ -- $ --
Stockholders' equity:
Class B Common stock, non-voting, par value $0.01;
2,500,000 shares authorized; none issued or
outstanding............................................ -- --
Class A Common stock, voting, par value $0.01; 50,000,000
shares authorized; 1,200,000 and 12,003,262 issued and
outstanding............................................ 12 120
Additional paid-in capital................................ -- 242,636
Subscription receivable................................... (12) --
Accumulated deficit....................................... -- (18,834)
------- --------
-- 223,922
------- --------
Total liabilities and stockholders' equity........ $ -- $223,922
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 66
IRIDIUM WORLD COMMUNICATIONS LTD.
STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1996
(INCEPTION) TO YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Equity in loss of Iridium LLC.............................. $ -- $ 18,834
---------- ----------
Loss before income taxes................................... -- 18,834
Income taxes............................................... -- --
---------- ----------
Net loss................................................... $ -- $ 18,834
========== ==========
Net loss per Class A Common share -- basic and diluted..... $ -- $ 2.79
---------- ----------
Weighted average shares used in computing net loss per
Class A Common share -- basic and diluted................ -- 6,739,726
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 67
IRIDIUM WORLD COMMUNICATIONS LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK ADDITIONAL
------------------- PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
---------- ------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Inception, December 12, 1996..... -- $ -- $ -- $ -- $ -- $ --
Class A Common Stock
subscribed..................... 1,200,000 12 -- (12) -- --
---------- ---- -------- ---- -------- --------
BALANCE, December 31, 1996....... 1,200,000 12 -- (12) -- --
Retire subscribed Class A Common
Stock.......................... (1,200,000) (12) -- 12 -- --
Equity offering.................. 12,000,000 120 225,480 -- -- 225,600
Warrants issued in conjunction
with Iridium LLC Series A
Senior Notes................... -- -- 17,113 -- -- 17,113
Exercise of stock options........ 3,262 -- 43 -- -- 43
Net loss......................... -- -- -- -- (18,834) (18,834)
---------- ---- -------- ---- -------- --------
BALANCE, December 31, 1997....... 12,003,262 $120 $242,636 $ -- $(18,834) $223,922
========== ==== ======== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 68
IRIDIUM WORLD COMMUNICATIONS LTD.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1996
(INCEPTION) TO YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ -- $ (18,834)
Adjustments to reconcile net loss to net cash used in
operating activities --
Equity in loss of Iridium LLC......................... -- 18,834
--------- ---------
Net cash used in operating activities...................... -- --
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES :
Investments in Iridium LLC............................... -- (242,756)
--------- ---------
Net cash used in investing activities...................... -- (242,756)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES :
Net proceeds from equity offering........................ -- 225,600
Proceeds from Warrants issued in conjunction with Iridium
LLC, Series A Senior Notes............................ -- 17,113
Proceeds from Class A Common Stock subscribed............ -- 12
Retirement and cancellation of Class A Common Stock...... -- (12)
Proceeds from exercise of stock options.................. -- 43
--------- ---------
Net cash provided by financing activities........ -- 242,756
--------- ---------
Increase (decrease) in cash................................ -- --
CASH, beginning of period.................................. -- --
--------- ---------
CASH, end of period........................................ $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 69
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Iridium World Communications Ltd. ("IWCL") was incorporated under the laws
of Bermuda on December 12, 1996. At inception, IWCL was wholly owned by Iridium
LLC, a limited liability company. In June 1997, IWCL registered with the
Securities and Exchange Commission a total of 13,800,000 shares of its Class A
Common Stock ("Class A Common Stock") for sale in an initial public offering
(the "Offering"), and on June 13, 1997 IWCL consummated the Offering and issued
12,000,000 shares of Class A Common Stock. Pursuant to the 1997 Subscription
Agreement between IWCL and Iridium LLC, approximately $225 million in net
proceeds from the Offering were invested in Class 1 Membership Interests of
Iridium LLC ("Class 1 Interests"), at which time the outstanding shares of Class
A Common Stock held by Iridium LLC were retired, and IWCL became a member of
Iridium LLC.
Iridium LLC through its wholly-owned subsidiary Iridium Operating LLC
("Iridium"), a Delaware limited liability company, is currently devoting
substantially all of its efforts to establishing and commercializing the IRIDIUM
communications system (the "IRIDIUM System").
IWCL's sole asset is its investment in Iridium LLC. At December 31, 1997,
IWCL's investment was approximately 8.5% of the total outstanding Membership
Interests in Iridium LLC.
2. SIGNIFICANT ACCOUNTING POLICIES
Investment in Iridium LLC
The investment in Iridium LLC is accounted for using the equity method. In
accordance with the equity method of accounting, IWCL's carrying amount of the
investment in an affiliate is initially recorded at cost and is increased to
reflect its share of the affiliate's income and is reduced to reflect its share
of the affiliate's losses each period since the initial investment.
At December 31, 1997, Iridium LLC had total assets, total liabilities and
total members' equity of approximately $3,646,000,000, $2,011,000,000 and
$1,635,000,000, respectively. At December 31, 1996, Iridium LLC had total
assets, total liabilities and total members' equity of $2,434,000,000,
$862,000,000 and $1,572,000,000, respectively. Iridium LLC reported a net loss
of $293,553,000 and $73,598,000 for the years ended December 31, 1997 and 1996,
respectively.
Management Estimates
The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.
Income Taxes
IWCL recognizes income taxes using the asset and liability method. Under
the asset and liability method, deferred tax assets and 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 enacted tax rates expected to apply to taxable income in the years in
which those 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.
F-7
<PAGE> 70
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. STOCKHOLDERS' EQUITY
On July 16,1997, Iridium LLC and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering (the "High Yield Offering")
of (i) 300,000 units, each consisting of $1,000 principal amount of Iridium LLC
13% Senior Notes due 2005, Series A ("Series A Notes"), and one IWCL Warrant,
representing the right to purchase 5.2 shares of Class A Common Stock of IWCL
and (ii) $500 million aggregate principal amount of Iridium LLC 14% Senior Notes
due 2005, Series B ("Series B Notes"). Iridium was subsequently substituted for
Iridium LLC as obligor under the Series A Notes and the Series B Notes. The
Series A Notes and Series B Notes are guaranteed by Iridium Roaming LLC and
Iridium IP LLC, also wholly-owned subsidiaries of Iridium. IWCL is not an
obligor or guarantor of the Series A Notes or Series B Notes. The IWCL Warrants
represent, in aggregate, the right to purchase 1,560,000 shares of Class A
Common Stock of IWCL. Approximately $17,113,000 of the proceeds of the High
Yield Offering was allocated to the fair value of the purchase price of the IWCL
Warrants. The exercise price of each IWCL Warrant is $20.90 per share. The IWCL
Warrants are exercisable at anytime on or after one year from the date of
original issuance and expire on July 15, 2005. Concurrent with the issuance of
the IWCL Warrants in the High Yield Offering, Iridium LLC issued to IWCL
1,560,000 LLC Interest Warrants, each exercisable for one Iridium LLC Class 1
Interest at an exercise price of $20.90 per LLC Interest Warrant. IWCL and
Iridium LLC have agreed that IWCL will exercise one LLC Interest Warrant upon
the exercise of each IWCL Warrant.
Exchange Rights of Iridium LLC Members
Concurrent with the Offering, IWCL and Iridium LLC executed an Interest
Exchange Agreement that conditionally permits holders of Class 1 Interests in
Iridium LLC to exchange those interests, subject to the restrictions on transfer
in the Iridium LLC Limited Liability Agreement, for shares of Class A Common
Stock in IWCL at a ratio of one share of Class A Common Stock for each Iridium
LLC Class 1 Interest, subject to anti-dilution adjustments. Under the Interest
Exchange Agreement no exchanges of Iridium LLC Class 1 Interests are permitted
until 90 days after Iridium LLC has achieved one full quarter of positive
earnings before interest, taxes, depreciation and amortization. In addition, no
exchange shall take place unless approved pursuant to authorization of Directors
representing at least 66 2/3% of the Iridium LLC Board of Directors.
Global Ownership Program
IWCL and Iridium LLC intend to commence a Global Ownership Program which is
designed to offer up to an aggregate of 2,500,000 shares of IWCL'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 per share par value 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 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 and expiration of a
minimum holding period. The proceeds generated from each sale of Class B Common
Stock will be used to purchase Class 1 Interests in Iridium LLC. The payment
terms with respect to such Iridium LLC Class 1 Interests will mirror the payment
terms on the Class B Common Stock. As of December 31, 1997, no shares of Class B
Common Stock had been issued under this program.
F-8
<PAGE> 71
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Share Issuance Agreement
IWCL and Iridium LLC have also executed a Share Issuance Agreement which
provides that all net proceeds from future primary offerings of securities by
IWCL will be invested in Class 1 Interests in Iridium LLC.
Voting Rights
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.
Participation in the Governance of Iridium
Providing that IWCL's Interest in Iridium LLC represents five percent or
more of the total outstanding Class 1 Interests of Iridium LLC (which occurred
upon the consummation of the IWCL IPO), IWCL shall be entitled to designate two
Independent Company Directors as Directors of Iridium LLC.
Stock Option Plan of Iridium LLC
Iridium LLC has established a plan under which executive officers, managers
and independent directors of Iridium LLC are awarded options to purchase Class A
Common Stock of IWCL (the "Option Plan"). The Option Plan covers 2,625,000
shares of Class A Common Stock. The Option Plan also permits the award of stock
appreciation rights in connection with any grant of options. As of December 31,
1997, options covering 2,004,556 shares of Class A Common Stock are outstanding
with exercise prices ranging from $13.33 to $52.50. As of December 31, 1997,
there are 397,145 options exercisable at a weighted average exercise price of
$13.33. As of that date no stock appreciation rights had been granted. The right
to exercise the options vest, pro rata, over a period of five years. Pursuant to
the Share Issuance Agreement, IWCL has agreed that upon the exercise of any
options, it will issue to Iridium LLC, for delivery to an exercising option
holder, the number of shares of Class A Common Stock covered by the exercised
options and Iridium LLC has agreed to simultaneously deliver to IWCL a like
number of Iridium LLC Class 1 Interests, subject to anti-dilution adjustments.
The exercise price of the option is paid to Iridium LLC and represents payment
for the Class A Common Stock by the exercising option holder and for the Iridium
LLC Class 1 Interests by IWCL. During the year ended December 31, 1997, options
to acquire 3,262 shares of Class A Common Stock were exercised. IWCL issued such
shares in the names of the optionees and Iridium LLC issued 3,262 Class 1
Interests to IWCL.
Management Services Agreement
In connection with the IWCL IPO, Iridium LLC and IWCL entered into a
Management Services Agreement. Pursuant to the Management Services Agreement,
Iridium LLC has agreed to supervise and manage the day-to-day operations of
IWCL. Among other things, Iridium LLC is responsible for administering the
following functions of IWCL: treasury, accounting, legal, tax, insurance,
licenses and permits and securities law compliance. Iridium LLC receives no fees
or reimbursement from IWCL for its services to IWCL under the Management
Services Agreement. Operating costs incurred by IWCL during the period since
inception and paid for by Iridium LLC have not been significant.
4. EARNINGS PER SHARE
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
F-9
<PAGE> 72
IRIDIUM WORLD COMMUNICATIONS LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
computation and manner of presentation of earnings (loss) per share data.
Statement 128 requires the presentation of basic and diluted earnings (loss) per
share data. Basic earnings (loss) per Class A Common share is calculated by
dividing net income (loss) by the weighted average number of Class A Common
shares outstanding during the period. Diluted earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number of Class
A Common shares and, to the extent dilutive, other potentially dilutive
securities outstanding during the period. Potentially dilutive securities are
comprised of warrants to purchase Class A Common Stock issued in conjunction
with the Series A Notes and stock options. Due to the loss incurred during the
year ended December 31, 1997, the impact of the warrants and stock options is
anti-dilutive and is not included in the diluted earnings (loss) per share
calculation. The adoption of Statement 128 had no effect on earnings (loss) per
share as previously presented.
5. INCOME TAXES
IWCL is subject to income taxation based on its ratable portion of Iridium
LLC's income or loss. During the year ended December 31, 1997 and the period
December 12, 1996 (inception) to December 31, 1996, IWCL recognized no current
or deferred income tax expense or benefit. As of December 31, 1997, IWCL's only
deferred tax asset relates entirely to its investment in Iridium LLC and
amounted to approximately $7,446,000 for which a full valuation allowance has
been established.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented in making this assessment.
F-10
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Members
Iridium LLC and subsidiaries:
We have audited the accompanying consolidated balance sheets of Iridium LLC
and subsidiaries (a development stage limited liability company) as of December
31, 1997 and 1996, 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, 1997, and for the period June 14, 1991 (inception) through
December 31, 1997. 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 subsidiaries (a development stage limited liability company) as of December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1997, and for the
period June 14, 1991 (inception) through December 31, 1997, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
McLean, Virginia
January 16, 1998
F-11
<PAGE> 74
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,889 $ 9,040
Restricted cash (Note 2).................................. -- 350,220
Due from affiliates....................................... 3,476 13,604
Prepaid expenses and other current assets................. 7,154 6,612
---------- ----------
Total current assets.............................. 12,519 379,476
Property and equipment, net (Note 4)........................ 2,065 1,526,326
System under construction (Note 7).......................... 2,388,320 1,625,054
Other assets (Note 2)....................................... 31,177 114,831
---------- ----------
Total assets...................................... $2,434,081 $3,645,687
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 17,937 $ 106,794
Accounts payable to Member (Note 7)....................... 100,563 10,601
Bank facilities, current portion (Note 5)................. -- 350,000
---------- ----------
Total current liabilities......................... 118,500 467,395
Bank facilities, net of current portion (Note 5)............ 505,000 210,000
Long-term debt due to Members (Note 5)...................... 230,904 273,302
Notes payable, $1,100,000 principal amount (Note 5)......... -- 1,054,288
Other liabilities (Note 8).................................. 7,648 6,065
---------- ----------
Total liabilities................................. 862,052 2,011,050
---------- ----------
Commitments and Contingencies (Notes 1, 3, 5, 7, 8 and 10)
Members' equity (Notes 1, 3, 5, 7 and 8):
Class 2 Interests, authorized 50,000 interests for Series
M; authorized an aggregate of 300,000 interests for
Series A, Series B and Series C:
Series M, convertible, no interests issued and
outstanding......................................... -- --
Series A, redeemable, convertible, 46,977 and 39,907
interests issued and outstanding; liquidation value
of $46,977 and $39,907.............................. 46,977 39,907
Series B, redeemable, 1 interest issued and
outstanding......................................... -- --
Series C, redeemable, 75 interests issued and
outstanding......................................... -- --
Class 1 Interests, authorized 225,000,000 interests,
120,836,025 and 141,222,442 interests issued and
outstanding............................................ 1,659,625 2,024,220
Deferred Class 1 Interest compensation.................... -- (1,454)
Adjustment for minimum pension liability (Note 8)......... (733) (643)
Deficit accumulated during the development stage.......... (133,840) (427,393)
---------- ----------
Total members' equity............................. 1,572,029 1,634,637
---------- ----------
Total liabilities and members' equity............. $2,434,081 $3,645,687
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 75
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
-------------------------------------- (INCEPTION) THROUGH
1995 1996 1997 DECEMBER 31, 1997
---------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES
Sales, general and administrative
(Notes 5, 7, 8 and 10)............ $ 26,436 $ 70,730 $ 177,474 $313,301
Depreciation and amortization........ 751 674 119,124 121,429
---------- ----------- ----------- --------
Total operating expenses..... 27,187 71,404 296,598 434,730
OTHER INCOME
Interest income...................... 5,226 2,395 3,045 15,308
---------- ----------- ----------- --------
Loss before provision for income
taxes................................ 21,961 69,009 293,553 419,422
Provision for income taxes (Note 6).... 1,684 4,589 -- 7,971
---------- ----------- ----------- --------
Net loss............................... $ 23,645 $ 73,598 $ 293,553 $427,393
========== =========== =========== ========
Preferred dividend requirement (Note
3)................................... -- 3,652 5,703
---------- ----------- -----------
Net loss applicable to Class 1
Interests............................ $ 23,645 $ 77,250 $ 299,256
========== =========== ===========
Net loss per Class 1 Interest -- basic
and diluted.......................... $ 0.27 $ 0.64 $ 2.25
========== =========== ===========
Weighted average interests used in
computing net loss per Class 1
Interest -- basic and diluted........ 88,162,875 120,115,575 132,879,976
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 76
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT INTEREST DATA)
<TABLE>
<CAPTION>
CLASS 2 INTERESTS, ADJUSTMENT
ALL SERIES CLASS 1 INTERESTS DEFERRED FOR
-------------------- ------------------------ CLASS 1 MINIMUM
NUMBER OF NUMBER OF INTEREST PENSION
INTERESTS AMOUNT INTERESTS AMOUNT COMPENSATION LIABILITY
--------- -------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Inception June 14, 1991........................... -- $ -- -- $ -- $ -- $ --
Net loss.......................................... -- -- -- -- -- --
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1991........................ -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- --
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1992........................ -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- --
------- -------- ----------- ---------- ------- -------
BALANCE, July 29, 1993............................ -- -- -- -- -- --
Class 1 Interests subscribed, July 29, 1993....... -- -- 60,000,000 -- -- --
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- -- -- 324,167 -- --
Costs of raising equity........................... -- -- -- (8,096) -- --
Net loss.......................................... -- -- -- -- -- --
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1993........................ -- -- 60,000,000 316,071 -- --
Class 1 Interests subscribed...................... -- -- 59,458,350 -- -- --
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- -- -- 518,202 -- --
Costs of raising equity........................... -- -- -- (1,863) -- --
Net loss.......................................... -- -- -- -- -- --
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1994........................ -- -- 119,458,350 832,410 -- --
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- -- -- 633,514 -- --
Costs of raising equity........................... -- -- -- (7) -- --
Net loss.......................................... -- -- -- -- -- --
Adjustment for minimum pension liability.......... -- -- -- -- -- (1,065)
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1995........................ -- -- 119,458,350 1,465,917 -- (1,065)
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- -- 1,377,675 140,131 -- --
Class 2 Interests issued for cash at $13.33 per
interest......................................... 43,401 43,325 -- -- -- --
Series A, Class 2 Interests issued in dividends... 3,652 3,652 -- (3,652) -- --
Costs of raising equity........................... -- -- -- (251) -- --
Warrants to purchase Class 1 Interests issued in
connection with 14.5% Senior subordinated
notes............................................ -- -- -- 31,761 -- --
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee................... -- -- -- 25,719 -- --
Net loss.......................................... -- -- -- -- -- --
Adjustment for minimum pension liability.......... -- -- -- -- -- 332
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1996........................ 47,053 46,977 120,836,025 1,659,625 -- (733)
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- -- 7,500,000 59,248 -- --
Exercise of employee stock options................ -- -- 3,262 43 -- --
Initial Public offering........................... 12,000,000 240,000 -- --
Class 2 Interests converted to Class 1
Interests........................................ (12,773) (12,773) 883,155 12,773 -- --
Series A, Class 2 Interests issued in dividends... 5,703 5,703 -- (5,703) -- --
Costs of raising equity........................... -- -- -- (16,100) -- --
Warrants to purchase Class 1 Interests issued in
connection with 13% Senior notes, Series A....... -- -- -- 17,113 -- --
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee................... -- -- -- 55,615 -- --
Deferred Class 1 Interests compensation........... -- -- -- 1,606 (1,454) --
Net loss.......................................... -- -- -- -- -- --
Adjustment for minimum pension liability.......... -- -- -- -- -- 90
------- -------- ----------- ---------- ------- -------
BALANCE, December 31, 1997........................ 39,983 $ 39,907 141,222,442 $2,024,220 $(1,454) $ (643)
======= ======== =========== ========== ======= =======
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENT
STAGE TOTAL
----------- ----------
<S> <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....... -- --
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- 324,167
Costs of raising equity........................... -- (8,096)
Net loss.......................................... (6,924) (6,924)
--------- ----------
BALANCE, December 31, 1993........................ (21,763) 294,308
Class 1 Interests subscribed...................... --
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- 518,202
Costs of raising equity........................... -- (1,863)
Net loss.......................................... (14,834) (14,834)
--------- ----------
BALANCE, December 31, 1994........................ (36,597) 795,813
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- 633,514
Costs of raising equity........................... -- (7)
Net loss.......................................... (23,645) (23,645)
Adjustment for minimum pension liability.......... -- (1,065)
--------- ----------
BALANCE, December 31, 1995........................ (60,242) 1,404,610
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- 140,131
Class 2 Interests issued for cash at $13.33 per
interest......................................... -- 43,325
Series A, Class 2 Interests issued in dividends... -- --
Costs of raising equity........................... -- (251)
Warrants to purchase Class 1 Interests issued in
connection with 14.5% Senior subordinated
notes............................................ -- 31,761
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee................... -- 25,719
Net loss.......................................... (73,598) (73,598)
Adjustment for minimum pension liability.......... -- 332
--------- ----------
BALANCE, December 31, 1996........................ (133,840) 1,572,029
Subscribed Class 1 Interests issued for cash at
$13.33 per interest.............................. -- 59,248
Exercise of employee stock options................ -- 43
Initial Public offering........................... -- 240,000
Class 2 Interests converted to Class 1
Interests........................................ -- --
Series A, Class 2 Interests issued in dividends... -- --
Costs of raising equity........................... -- (16,100)
Warrants to purchase Class 1 Interests issued in
connection with 13% Senior notes, Series A....... -- 17,113
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee................... -- 55,615
Deferred Class 1 Interests compensation........... -- 152
Net loss.......................................... (293,553) (293,553)
Adjustment for minimum pension liability.......... -- 90
--------- ----------
BALANCE, December 31, 1997........................ $(427,393) $1,634,637
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 77
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
---------------------------------- (INCEPTION) THROUGH
1995 1996 1997 DECEMBER 31, 1997
--------- --------- ---------- -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $ (23,645) $ (73,598) $ (293,553) $ (427,393)
Adjustments to reconcile net loss to net cash used
in operating activities --
Depreciation and amortization................... 751 674 119,124 121,429
Expense recognized for warrants issued in
connection with debt guarantee................ -- 25,719 55,615 81,334
Employee Class 1 Interests Compensation......... -- -- 152 152
Loss on disposal of assets...................... -- -- 87 87
Changes in assets and liabilities:
Decrease (Increase) in prepaid expenses and
other current assets....................... (171) (6,281) 542 (6,612)
Increase in due from affiliates............... -- (3,476) (10,128) (13,604)
Increase in other assets...................... (1,633) (4,079) (2,286) (18,659)
Increase in accounts payable and accrued
expenses................................... 1,586 12,968 30,857 48,794
(Decrease) Increase in other liabilities...... 2,126 2,739 (1,493) 5,985
--------- --------- ---------- -----------
Net cash used in operating activities...... (20,986) (45,334) (101,083) (208,487)
--------- --------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (493) (1,475) (18,885) (23,255)
Additions to system under construction............ (762,000) (900,757) (842,678) (3,091,435)
--------- --------- ---------- -----------
Net cash used in investing activities...... (762,493) (902,232) (861,563) (3,114,690)
--------- --------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Class 1 and Class 2
Interests....................................... 633,514 183,205 283,191 1,932,319
Net proceeds from issuance of senior notes and
warrants........................................ -- 238,453 1,039,189 1,277,642
Borrowings under guaranteed bank line of credit... -- 505,000 655,000 1,160,000
Payments under guaranteed bank line of credit..... -- -- (950,000) (950,000)
Borrowings under senior secured line of credit.... -- -- 350,000 350,000
Increase in restricted cash....................... -- -- (350,220) (350,220)
Deferred financing costs.......................... (1,094) (28,535) (57,363) (87,524)
--------- --------- ---------- -----------
Net cash provided by financing
activities............................... 632,420 898,123 969,797 3,332,217
--------- --------- ---------- -----------
Increase (decrease) in cash and cash equivalents.... (151,059) (49,443) 7,151 9,040
CASH AND CASH EQUIVALENTS,
beginning of period............................... 202,391 51,332 1,889 --
--------- --------- ---------- -----------
CASH AND CASH EQUIVALENTS,
end of period..................................... $ 51,332 $ 1,889 $ 9,040 $ 9,040
========= ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 78
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Iridium LLC (the "Parent") and its subsidiaries are devoting their 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. As a result of three private placements of equity, five supplemental
private placements with certain additional equity investors and proceeds
received from the initial public offering of common stock of Iridium World
Communications Ltd. ("IWCL") (See Note 3), Motorola's direct and indirect Class
1 Membership Interest in the Parent has been reduced to approximately 18% as of
December 31, 1997, before considering unexercised warrants held by Motorola.
On July 29, 1996, the Parent 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. Also on July 29, 1996, Iridium, Inc. was merged with and into the
Parent, with the Parent as the surviving entity. Concurrent with the merger, all
shares of Common Stock of Iridium, Inc. were exchanged for Class 1 membership
interests in the Parent ("Class 1 Interests").
On December 18, 1997, the Parent entered into an asset drop-down
transaction (the "Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed wholly-owned subsidiary of the Parent. Pursuant to
the Asset Drop-Down Transaction, substantially all of the assets and liabilities
of the Parent were transferred to Iridium, including, without limitation, all
liabilities with respect to the outstanding 13% Senior Notes due 2005, Series A
and 14% Senior Notes due 2005, Series B and the 11 1/4% Senior Notes due 2005,
Series C (collectively, the "Senior Notes"). Pursuant to the indentures relating
to the Senior Notes, Iridium has been substituted for the Parent, and the Parent
has been released from all obligations under the indentures relating to the
Senior Notes. All assets and liabilities were transferred to Iridium at the
Parent's carrying value. Accordingly, unless otherwise specified, references
within these notes to Iridium that relate to any action prior to the date of the
Asset Drop-Down Transaction should be construed as references to Parent, as
predecessor of Iridium. As a result of the Asset Drop-Down Transaction, the
Parent's only significant asset is its investment 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 September 1998. During 1997,
46 of the 66 satellites in the IRIDIUM System were successfully placed in orbit.
The Iridium Communications 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.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Parent
and its wholly-owned subsidiary, Iridium, and Iridium's wholly-owned
subsidiaries, Iridium Capital Corporation, Iridium Roaming LLC and Iridium IP
LLC. All significant intercompany transactions have been eliminated.
F-16
<PAGE> 79
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Development Stage Enterprise
The Parent, through Iridium, is currently devoting its entire efforts to
establishing and commercializing the IRIDIUM System. On December 18, 1997, the
Parent and Iridium entered into an Asset Drop-Down Transaction whereby
substantially all of the assets and liabilities of the Parent were transferred
to Iridium. The purpose of the Asset Drop-Down Transaction was to facilitate the
pledge of substantially all of the assets of the Parent in connection with the
establishment of secured bank financing for the development and construction of
the IRIDIUM System. At December 31, 1997, the Parent's ownership interest in
Iridium constituted substantially all of the Parent's assets. Accordingly,
Iridium's current principal activities relate to managing the design,
construction and development of the system and preparing for its day-to-day
operations.
Management 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 reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Parent considers all highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash equivalents.
Restricted Cash
Restricted cash consists of the first stage of borrowing under the $1
billion secured credit facility with a syndicate of lenders, led by Chase
Securities, Inc., and Barclays Capital, a division of Barclays Bank PLC. The
funds are restricted subject to Iridium meeting specified milestones.
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>
Satellites in service................. 5 years
Furniture, fixtures and equipment..... 5 years
Leasehold improvements................ Shorter of 5 years or remaining lease term
</TABLE>
The costs of constructing and placing satellites into service are
capitalized. Losses from satellite failures for which Iridium has financial
responsibility under its contractual arrangements with Motorola are recognized
currently. Motorola bears the risk of loss for launch failures and satellite
failures before a satellite is placed into service.
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 is recognized on a satellite-by-satellite basis as the
satellites are placed into service following delivery of each satellite to its
mission orbit. Depreciation related to the ground control stations will commence
with the placement in service of each such station.
F-17
<PAGE> 80
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest costs incurred during the construction of the IRIDIUM System are
capitalized. Total interest cost incurred and capitalized for the years ended
December 31, 1996 and 1997 was approximately $28,127,000 and $163,747,000,
respectively. Interest paid for the years ended December 31, 1996 and 1997 was
approximately $1,485,000 and $30,191,000, respectively. No interest was
incurred, paid or capitalized for the year ended December 31, 1995.
During 1996, the Parent 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 for impairment whenever events
or 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 the Parent's results of operations for the
years ended December 31, 1996 and 1997.
Member Interest-Based Compensation
During 1996, the Parent 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. The Parent 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 A Common Stock of
IWCL 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. Compensation expense, if any, is
recognized over the period earned by the employee and was $152,000 for the year
ended December 31, 1997. No compensation expense was recognized for the year
ended December 31, 1996 as all options to acquire Class 1 Interests were granted
at an exercise price equal to the fair market value as of the date of grant.
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
The Parent 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 in a manner that
approximates the effective yield method. 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
$30,200,000 and $113,394,000 at December 31, 1996 and 1997, respectively.
During October 1995, the Parent withdrew an intended public offering of
certain subordinated debt financing. Accordingly, the Parent 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.
F-18
<PAGE> 81
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the Parent,
the Parent became a limited liability company. As a limited liability company,
the Parent 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 the Parent's income or loss. However, the Parent's primary
operations are in the District of Columbia which does not recognize the limited
liability status for tax purposes. Accordingly, the Parent is subject to
District of Columbia franchise taxes directly. The Parent 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
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 the Parent's loss per Class 1 Interest
data. Statement 128 requires the presentation of basic and diluted earnings
(loss) per interest data. Basic earnings (loss) per Class 1 Interest is
calculated by dividing net income (loss), after considering required dividends
on Class 2 Interests, by the weighted average number of Class 1 Interests
outstanding during the period. Diluted earnings (loss) per share is calculated
by dividing net income (loss), after considering required dividends on Class 2
Interests, by the weighted average number of Class 1 Interests and, to the
extent dilutive, other potentially dilutive securities outstanding during the
period. Potentially dilutive securities are comprised of options, warrants, and
convertible Class 2 Interests. Due to the losses incurred during the years ended
December 31, 1995, 1996, and 1997, the impact of other potentially dilutive
securities is anti-dilutive and is not included in the diluted earnings (loss)
per Class 1 Interest calculation. The adoption of Statement 128 had no effect on
earnings (loss) per Class 1 Interest as previously presented.
New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the consolidated financial statements. The Parent is required to
adopt the provisions of Statement 130 for the year ending December 31, 1998.
Earlier application is permitted; however, upon adoption of Statement 130, the
Parent will be required to reclassify previously reported annual and interim
consolidated financial statements. The disclosure of comprehensive income in
accordance with the provisions of Statement 130 will impact the manner of
presentation of the Parent's consolidated financial statements as currently and
previously reported.
Reclassifications
Certain 1995 and 1996 amounts have been reclassified to conform to the 1997
presentation.
F-19
<PAGE> 82
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. MEMBERS' EQUITY
Classes of Membership Interests
The members' interests in the Parent 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 the Parent 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 the Parent only through their designated Directors and
have no authority, in their capacity as members, to act on behalf of or
bind the Parent.
The LLC Agreement contains a reserve capital call provision under
which certain members have agreed to purchase additional Class 1 Interests
(the "Reserve Capital Call"). If the Board elects to exercise this option,
the Parent could raise up to an additional $243 million for 18,206,550
Class 1 Interests. However, the Reserve Capital Call is pledged to secure
the Secured Bank Facility (See Note 5).
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 non-voting and
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 the Parent, 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 the Parent legally available for the payment of such
dividends. No dividend may be declared and paid on the Class 1 Interests
unless all accrued dividends on the Series A Class 2 Interests have been
paid in full. The Series A Class 2 Interests are non-voting and 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
the Parent, 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 the $450 million credit facility (the "Guarantee
Agreement") (See Note 5), the Parent issued to Motorola one Series B Class
2 Interest and 75 Series C Class 2 Interests. The Series B Class 2 Interest
and Series C Class 2 Interests do not pay any dividends. The Series B Class
2 Interest entitles Motorola to one seat on the Board of Directors in
addition to Directors it may appoint as the owner of Class 1 Interests and
Series M Class 2 Interests. The Series C Class 2 Interests entitle Motorola
to appoint a majority of the Board of Directors in the event of certain
events of default. The Series B and Series C Class 2 Interests are
redeemable at the option of the Parent 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 (See Note 5).
F-20
<PAGE> 83
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The LLC Agreement provides that the Parent 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 the Parent.
The LLC Agreement requires the 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 the Parent's taxable income to such member. Parent's only current
source of funds is from dividend distributions from Iridium, and Iridium is
required to declare and pay a dividend to the Parent in the same amount as
required by the LLC Agreement. However, Iridium is restricted by the terms of
certain of its debt obligations from declaring and paying dividends in excess of
those required to be made to the Parent.
The LLC Agreement contains significant restrictions on the ability of a
member to transfer any interests in the Parent, 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.
Exchange Rights of Iridium LLC Members
Concurrent with the initial public offering, IWCL and Iridium LLC executed
an Interest Exchange Agreement that conditionally permits holders of Class 1
Interests in Iridium LLC to exchange those interests, subject to the
restrictions on transfer in the Iridium LLC Limited Liability Agreement, for
shares of Class A Common Stock in IWCL at a ratio of one share of Class A Common
Stock for each Iridium LLC Class 1 Interest, subject to anti-dilution
adjustments. Under the Interest Exchange Agreement no exchanges of Iridium LLC
Class 1 Interests are permitted until 90 days after Iridium has achieved one
full quarter of positive earnings before interest, taxes, depreciation and
amortization. In addition, no exchange shall take place unless approved pursuant
to authorization of Directors representing at least 66 2/3% of the Iridium LLC
Board of Directors.
Global Ownership Program
The Parent, in conjunction with IWCL, has commenced a Global Ownership
Program which is designed to offer up to an aggregate of 2,500,000 shares of
IWCL'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. As of
December 31, 1997, no shares had been issued under this program.
Limitations on Liability
Members are generally not liable for the debts, obligations or liabilities
of the Parent.
F-21
<PAGE> 84
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recent Equity Transactions
On April 16, 1997, the LLC Agreement was amended to increase the authorized
number of Class 1 Interests from 3,000,000 to 225,000,000. On May 9, 1997, the
Parent 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 consolidated financial
statements and notes thereto have been retroactively adjusted for the
subdivision.
On May 9, 1997, the Parent entered into a definitive agreement with South
Pacific Iridium Holdings Limited ("SPI"), an affiliate of P. T. Bakrie
Communications Corporation, pursuant to which SPI acquired from Parent 7,500,000
Class 1 Interests at $13.33 per interest. The transaction closed on May 30, 1997
with 40% of the total purchase price paid on that date and the remainder due on
or before May 1998. Through December 31, 1997, the Parent has received an
aggregate of $59.2 million from SPI in satisfaction of the commitment.
On June 13, 1997, IWCL, a wholly-owned subsidiary of the Parent as of that
date, consummated an initial public offering (the "Offering") of 12,000,000
shares of its Class A Common Stock which resulted in proceeds of approximately
$225 million to IWCL (expenses of the offering were paid by the Parent).
Pursuant to the 1997 Subscription Agreement between the Parent and IWCL, such
proceeds were used to purchase 12,000,000 Class 1 Interests in the Parent. Upon
consummation of the Offering, all of the outstanding shares of IWCL held by the
Parent were retired and cancelled, and IWCL became a member of the Parent.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997, consists of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997
------- ----------
<S> <C> <C>
Space system in service............................... $ -- $1,624,120
Office equipment and furniture........................ 3,113 13,920
Trade show booth...................................... 826 --
Leasehold improvements................................ 405 8,424
------- ----------
4,344 1,646,464
Less-accumulated depreciation and amortization........ (2,279) (120,138)
------- ----------
Property and equipment, net........................... $ 2,065 $1,526,326
======= ==========
</TABLE>
5. DEBT
Guaranteed Bank Facility
On August 21, 1996, the Parent entered into a $750 million credit agreement
with a group of banks led by The Chase Manhattan Bank, NA and Barclays Bank,
PLC. On the same date, the Parent entered into the Guarantee Agreement whereby
Motorola agreed to guarantee the entire $750 million commitment amount (the
"Motorola Guarantee"). In connection with the Asset Drop-Down Transaction, the
Parent's obligations under the Guaranteed Bank Facility were assigned to
Iridium. The Guaranteed Bank Facility provides that Iridium may elect to borrow
amounts at the then current short-term Eurodollar rate plus 1/4% or at the then
current Base Rate (generally, the higher of the Federal Funds Rate as
established by the Federal Reserve Bank of New York plus 0.50% or The Chase
Manhattan Bank's prime commercial lending rate). 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 5.63% to 8.50% during
1997 and from 5.75% to 5.94% during 1996. On July 21, 1997, the commitment of
the bank lenders under the Guaranteed Bank Facility was permanently
F-22
<PAGE> 85
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reduced from $750 million to $655 million. On October 22, 1997, the commitment
of the bank lenders under the Guaranteed Bank Facility was further permanently
reduced to $450 million. Depending on market conditions, Iridium may make
additional senior note offerings in order to further reduce the Guaranteed Bank
Facility. The Guaranteed Bank Facility matures on June 30, 1999.
Under the Guarantee Agreement, the Parent is required to issue warrants to
Motorola to purchase up to 150,000 Class 1 Interests. As consideration for its
guarantee, Motorola earns 82,500 warrants for each year the $750 million
guarantee is outstanding. As a result of the permanent reductions in the
Guaranteed Bank Facility, the maximum number of warrants Motorola may earn as
compensation for their guarantee of that facility until maturity in June 1999 is
131,377 warrants to purchase approximately 9,853,275 Class 1 Interests. 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
interest, subject to anti-dilution adjustments. The warrants may be exercised
after five years from date of issuance and expire ten years from date of
issuance. Motorola earned 29,836 and 64,518 warrants to purchase Class 1
Interests in accordance with the Guarantee Agreement during the years ended
December 31, 1996 and 1997, respectively. The Parent recognized $25,719,000 and
$55,615,000 as an expense to reflect the fair market value of the warrants
earned by Motorola for the years ended December 31, 1996 and 1997, respectively.
At December 31, 1996 and 1997, $505,000,000 and $210,000,000, respectively, was
outstanding under the Guaranteed Bank Facility.
Senior Secured Bank Line of Credit
Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1 billion (the
"Secured Bank Facility"), of which $250 million is not available for borrowings
prior to the commercial activation date. The Secured Bank Facility is secured by
substantially all of Iridium's assets. The Secured Bank Facility is further
secured by the Reserve Capital Call and all of the Parent's membership interests
in Iridium. The availability of the Secured Bank Facility is subject to
significant conditions, including technical conditions relating to the IRIDIUM
System, conditions relating to regulatory approvals and conditions relating to
other financing sources. Borrowings under the Secured Bank Facility mature on
September 30, 1998, subject to Iridium's right to extend such maturity until up
to June 30, 1999 if it can demonstrate by July 1, 1998 that it has sufficient
available or committed financing for its budgeted project costs through such
extended maturity. At December 31, 1997, $350,000,000 was outstanding under the
Secured Bank Facility.
Notes Payable
On July 16, 1997, the Parent, IWCL and Iridium Capital Corporation
completed an offering (the "High Yield Offering") of (i) 300,000 units, each
consisting of $1,000 principal amount of 13% Senior Notes due 2005, Series A
("Series A Notes"), and one IWCL Warrant representing the right to purchase 5.2
shares of Class A Common Stock of IWCL, and (ii) $500 million aggregate
principal amount of 14% Senior Notes due 2005, Series B ("Series B Notes").
Concurrent with the Asset Drop-Down Transaction, the Parent's obligations under
the Series A Notes and Series B Notes were assigned to Iridium. The Series A
Notes and Series B Notes are guaranteed by Iridium Roaming LLC and Iridium IP
LLC. The aggregate net proceeds received was approximately $746 million.
Interest on the Series A Notes and Series B Notes is payable in cash
semi-annually on January 15th and July 15th of each year, commencing on January
15, 1998. The notes are redeemable at the option of Iridium, in whole or in
part, at any time on or after July 15, 2002. The Series A and Series B Notes
mature on July 15, 2005. The IWCL Warrants represent, in aggregate, the right to
purchase 1,560,000 shares of Class A Common Stock of IWCL. The exercise price of
each IWCL Warrant is $20.90 per share. The IWCL Warrants are exercisable at any
time on or after one year from the date of the original issuance and expire on
July 15, 2005. Concurrent with the issuance of IWCL Warrants in the High
F-23
<PAGE> 86
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Yield Offering, the Parent issued to IWCL 1,560,000 LLC Interest Warrants, each
exercisable for one Class 1 Interest at an exercise price of $20.90 per LLC
Interest Warrant. IWCL and the Parent have agreed that one LLC Interest Warrant
must be exercised upon the exercise of each IWCL Warrant. Approximately
$17,113,000 of the proceeds of the High Yield Offering was allocated to the
purchase price of the LLC Interest Warrants.
On October 17, 1997, the Parent and Iridium Capital Corporation completed
an offering of $300 million principal amount of 11 1/4% Senior Notes due 2005,
Series C ("Series C Notes"). Concurrent with the Asset Drop-Down Transaction,
the Parent's obligations under the Series C Notes were assigned to Iridium. The
Series C Notes are guaranteed by Iridium Roaming LLC and Iridium IP LLC. The net
proceeds received were approximately $293 million. Interest on the Series C
Notes is payable in cash semi-annually on January 15th and July 15th of each
year, commencing on January 15, 1998. The Series C Notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series C Notes mature on July 15, 2005.
Notes payable, net of discounts, for the year ended December 31, 1997
consists of the following (in thousands):
<TABLE>
<CAPTION>
1997
----------
<S> <C>
13% Senior Notes due 2005, Series A......................... $ 276,439
14% Senior Notes due 2005, Series B......................... 477,849
11 1/4% Senior Notes due 2005, Series C..................... 300,000
----------
$1,054,288
==========
</TABLE>
Long-Term Debt Due to Members
During 1996, the Parent 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 of approximately
$238,453,000. Concurrent with the Asset Drop-Down Transaction, the Parent's
obligations under the Notes were assigned to Iridium. 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 interest, are exercisable on March 1, 2001 and expire on March 1,
2006. The Parent recognized the estimated fair market value of these warrants of
$31,761,000 as an addition to members' equity.
6. 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, the Parent is no longer subject to U.S. federal income tax
directly; however, the Parent is subject to District of Columbia franchise
taxes.
F-24
<PAGE> 87
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Parent's provision for income taxes for the years ended December 31,
1995, 1996, and 1997 consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current
-- Federal..................................... $1,258 $3,435 $ --
-- State and Local............................. 426 1,154 --
Deferred
-- Federal..................................... -- -- --
-- State and Local............................. -- -- --
------ ------ ------
$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, 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,
Inc.'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 the Parent, the Parent recognizes deferred
taxes for those jurisdictions for which the Parent is taxed directly, resulting
in a deferred tax asset for capitalized start-up expenditures of $4,774,000 and
$34,599,000 at December 31, 1996 and 1997, respectively, for which a 100%
valuation allowance has been established.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented in making this assessment.
7. TRANSACTIONS WITH MEMBERS
Management Services Agreement
In connection with the IWCL IPO, the Parent and IWCL entered into a
Management Services Agreement. The Management Services Agreement was amended and
restated in connection with the Asset Drop-Down Transaction to add Iridium as a
party.
Pursuant to the Management Services Agreement, the Parent has agreed to
supervise and manage the day-to-day activities of Iridium. Among other things,
the Parent is responsible for administering the following functions of Iridium:
contract administration (including the Space System Contract, the TNDC and the
O&M Contract), treasury, accounting, legal, tax, insurance, licenses and permits
and securities law compliance. The Parent similarly has agreed to supervise and
manage the day-to-day operations of IWCL. Among other things, the Parent is
responsible for administering the following functions of IWCL: treasury,
accounting, legal, tax, insurance, licenses and permits and securities law
compliance. In addition, Parent has agreed to advance funds to IWCL in the event
that IWCL does not have sufficient funds to pay income or similar taxes. The
Parent does not receive fees or reimbursement from IWCL for its services to IWCL
under the Management Services Agreement; however, the cost of such services
provided to IWCL to date is not significant.
In return for such services, Iridium has agreed to provide sufficient
funds, on a cost reimbursable basis, to the Parent to enable the Parent to
manage the business and operations of each of Iridium and IWCL,
F-25
<PAGE> 88
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
including payments of Parent's obligations to its employees, consultants and
directors, and payments for Parent's office space and equipment, sales, general
operating and administrative expenses, insurance and its obligations under
certain contracts.
Support Agreement
Under a Support Agreement, Motorola provides certain general and
administrative support to the Parent and its subsidiaries. On a cost
reimbursable basis, Motorola has provided payroll processing and related
benefits to the Parent employees, processed payments to certain contractors
providing support to the Parent, and provided other administrative support. In
connection with the Asset Drop-Down Transaction, the Parent assigned the Support
Agreement to Iridium. The amounts and nature of such costs for the years ended
December 31, 1995, 1996 and 1997 consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Consulting............................................ $603 $826 $643
Other................................................. 1 26 5
---- ---- ----
$604 $852 $648
==== ==== ====
</TABLE>
As of December 31, 1996, and 1997, the balance payable to Motorola under
the Support Agreement was approximately $563,000 and $0, respectively.
Space System Contract
The Parent entered into the Space System Contract with Motorola to design,
develop, produce and deliver the Space Segment component of the IRIDIUM System.
In connection with the Asset Drop-Down Transaction, the Parent assigned the
Space System Contract to Iridium. 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, 1995, 1996, and 1997, $802 million, $836 million, and $577
million, respectively, was incurred under the Space System Contract. Such costs
are capitalized as system under construction in the accompanying consolidated
balance sheets and are transferred to property and equipment as the underlying
assets are placed into service. As of December 31, 1996 and 1997, the balance
payable to Motorola under the Space System Contract was $100 million and $0,
respectively.
The aggregate fixed and determinable portion of all remaining obligations
under the Space System Contract is $589 million expected to be payable in 1998.
Terrestrial Network Development Contract
The Parent entered into the Terrestrial Network Development Contract
("TNDC") with Motorola for an original amount of $160 million. In connection
with the Asset Drop-Down Transaction, the Parent assigned the TNDC to Iridium.
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, the TNDC was
amended to obligate Motorola to 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 from Iridium, the Parent may, at its election, issue 5,545
warrants to purchase Class 1 Interests to Motorola. The warrants, if issued,
have an exercise price of $.01 and may be exercised beginning March 1, 2001 and
will expire on March 1, 2006. During 1997, the TNDC was further amended to
obligate Motorola to provide additional services and support bringing the total
contract price of the TNDC to $284 million. Certain of the Parent's members will
own the individual gateways and will have no obligation to
F-26
<PAGE> 89
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Iridium or the Parent for any of the amounts due to Motorola under the TNDC. For
the years ended December 31, 1996 and 1997, Iridium incurred $64 million and $74
million, respectively, under the TNDC. Such costs are capitalized as system
under construction in the accompanying consolidated balance sheets. As of
December 31, 1996 and 1997, the balance payable to Motorola under the TNDC was
$0 and $11 million, respectively.
The aggregate fixed and determinable portion of all remaining obligations
under the TNDC, assuming that all obligations are settled in cash, is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998.................................................... $139,405
1999.................................................... 6,000
--------
$145,405
========
</TABLE>
Operations and Maintenance Contract
To provide for the operations and maintenance of the space segment upon
completion of the Space System Contract, the Parent entered into the Operations
and Maintenance Contract ("O&M") with Motorola. In connection with the Asset
Drop-Down Transaction, the Parent assigned the O&M contract to Iridium. This
contract obligates Motorola for a period of five years after completion of the
final milestone under the Space System Contract to operate the Space System, and
to exert its best efforts to monitor, upgrade and replace hardware and software
of the space segment (including the individual space vehicles) at specified
levels, in exchange for specified quarterly payments. Such payments are expected
to begin in 1998 and to aggregate approximately $2.88 billion. During 1996, a
two-year option agreement was entered into for the extension of 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 $1.33 billion. Upon commencement of the O&M, Iridium
will capitalize the portion of the costs incurred that pertain to hardware and
software components of the space segment that extend its useful life. The
portion of the costs of the O&M associated with day-to-day operations will be
expensed as incurred. 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>
AMOUNT
YEAR ENDING DECEMBER 31, ----------
<S> <C>
1998................................................... $ 129,000
1999................................................... 537,000
2000................................................... 558,000
2001................................................... 581,000
2002................................................... 605,000
2003................................................... 472,000
----------
$2,882,000
==========
</TABLE>
Gateway Owners Incentives
The Parent 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 System service revenue generated within 15 months
of commercial activation, but in no event will warrants to purchase more than 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
F-27
<PAGE> 90
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
under the Guarantee Agreement (see Note 5). IWCL and Iridium LLC have executed a
Share Issuance Agreement which provides that all net proceeds from future
primary offerings of securities by IWCL will be invested in Class 1 Interests in
Iridium LLC.
8. EMPLOYEE BENEFITS
The Parent 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
The Parent has established short- and long-term incentive plans primarily
based on employee performance. Effective December 31, 1995, the Parent
terminated the long-term incentive plan. The remaining liability of the
long-term incentive plan is approximately $2,426,000 and $1,738,000 as of
December 31, 1996 and 1997, respectively, and is expected to be paid in 1999.
Under these plans, the Parent incurred expenses of approximately $1,300,000,
$1,252,000 and $3,412,000 for the years ended December 31, 1995, 1996, and 1997,
respectively.
401(k) Employee Retirement Savings Plan
The Parent adopted a 401(k) employee retirement savings plan in 1994
covering all employees. The Parent 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. The Parent's
contributions vest ratably over a seven-year period, including service credit
for any prior employment with Motorola. Under this plan, the Parent has incurred
approximately $161,000, $288,000, and $558,000 during the years ended December
31, 1995, 1996 and 1997, respectively.
Retirement Plans
All employees of the Parent are covered by a non-contributory defined
benefit retirement plan. Vesting in plan benefits generally occurs after five
years. Benefits under the plan are based on years of credited service (including
any prior employment with Motorola), age at retirement and the average earnings
over the last four years. The plan is funded annually in accordance with the
Employee Retirement Income Security Act of 1974.
In early 1995, the Parent adopted a non-qualified defined benefit plan
covering employees earnings 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
The Parent maintains a non-qualified defined benefit plan for selected
senior officers. Vesting in these plans generally occurs upon the attainment of
age 55 with five years of service. Benefits under these plans are based on
average annual compensation prior to retirement. The Parent 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 $1,256,000, $1,925,000, and
$2,420,000 for the years ended December 31, 1995, 1996, and 1997, respectively.
For the years ended December 31, 1996 and 1997, the amounts provided to cover
taxes associated with the plan benefits were $736,000 and $693,000,
respectively. In addition, the Parent recorded an additional minimum pension
liability
F-28
<PAGE> 91
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment of $332,000 and $90,000 for the years ended December 31, 1996 and
1997, 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, 1995, 1996 and 1997, are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------------------------- ------------------------- -------------------------
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Service Cost..................... $372 $377 $789 $ 438 $1,292 $ 512
Interest cost on projected
benefit obligation............. 70 246 133 339 206 285
Actual return on assets.......... (66) -- (82) -- (138) --
Amortization of actuarial loss... -- -- -- 51 -- 6
Amortization of transition
obligation..................... 19 238 19 238 19 238
---- ---- ---- ------ ------ ------
Net periodic cost................ $395 $861 $859 $1,066 $1,379 $1,041
==== ==== ==== ====== ====== ======
</TABLE>
The following table describes the funded status of the plans at December
31, 1996 and 1997 (in thousands). The actuarial calculations were determined by
the Parent's consulting actuaries:
<TABLE>
<CAPTION>
1996 1997
-------------------------- --------------------------
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Accumulated present value of obligations:
Accumulated benefit obligation, including
vested benefits............................ $(1,828) $(2,746) $(3,334) $(2,269)
======= ======= ======= =======
Projected benefit obligation for service
rendered to date........................... $(2,554) $(5,179) $(4,722) $(5,039)
Plan assets at fair value.................... 1,931 -- 3,757 --
------- ------- ------- -------
Projected benefit obligation in excess of
plan assets................................ (623) (5,179) (965) (5,039)
Unrecognized transition obligation........... 320 2,360 302 2,123
Unrecognized net (gain) loss................. (227) 609 118 870
------- ------- ------- -------
Accrued pension cost......................... (530) (2,210) (545) (2,046)
Adjustment required to recognize minimum
liability.................................. -- (733) -- (643)
------- ------- ------- -------
Pension liability............................ $ (530) $(2,943) $ (545) $(2,689)
======= ======= ======= =======
Actuarial assumptions:
Discount rate................................ 7.5% 7.5% 7% 7%
Long-term rate of return..................... 8% 8% 8% 8%
Salary increases............................. 5% 7.5% 5% 7.5%
</TABLE>
Option Plan of Iridium LLC
The Parent has established a plan under which executive officers and
managers of the Parent are awarded options to purchase Class A Common Stock (the
"Option Plan") of IWCL. The Option Plan covers 2,625,000 shares of Class A
Common Stock of IWCL. The Option Plan also permits the award of stock
appreciation rights in connection with any grant of options. As of December 31,
1997, options covering 2,004,556 shares of Class A Common Stock of IWCL had been
granted. As of that date, no stock appreciation
F-29
<PAGE> 92
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
awards had been granted. The right to exercise the options vests, pro rata, over
a period of five years. Pursuant to the Share Issuance Agreement, IWCL has
agreed that upon the exercise of any options, it will issue to the Parent, for
delivery to an exercising option holder, the number of shares of Class A Common
Stock of IWCL covered by the exercised options and the Parent has agreed to
simultaneously deliver to IWCL a like number of Class 1 Interests, subject to
anti-dilution adjustments. The exercise price of the option will be paid to the
Parent and will represent payment for the Class A Common Stock by the exercising
option holder and for the Class 1 Interests by IWCL.
As of December 31, 1996 and 1997, 2,625,000 Class 1 Interests have been
reserved for issuance to IWCL in connection with the Option Plan. As permitted
by Statement 123, the Parent applies the intrinsic value method in accounting
for compensation cost under this plan. Accordingly, no compensation expense is
recognized for options to acquire Class A Common Stock of IWCL granted at an
exercise price equal to or exceeding the fair market value as of the date of
grant. For the year ended December 31, 1997, the Parent recognized $152,000 in
compensation expense for options to acquire Class A Common Stock of IWCL granted
at an exercise price that was below fair market value at the date of grant. Had
compensation cost been determined consistent with the fair value method of
Statement 123, the Parent's net loss and net loss per Class 1 Interest would
have been increased to the pro forma amounts indicated below (in thousands
except per interest data) for the years ended December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Net loss
As reported......................................... $(73,598) $(293,553)
Pro forma........................................... (74,172) (296,132)
Net loss per Class 1 Interest
As reported......................................... $ .64 $ 2.25
Pro forma........................................... .65 2.27
</TABLE>
During 1996 and 1997, 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 rates from 5.97% to 6.76%, and expected
life of five years. The effects on compensation cost as determined under
Statement 123 on net loss in 1996 and 1997 may not be representative of the
effects on pro forma net income (loss) for future periods. The weighted-average
contractual life for options outstanding at December 31, 1996 and 1997 was 9.39
and 8.92 years, respectively.
A summary of the Parent's stock option activity, and related information
for the years ended December 31, 1996 and 1997 follows:
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
WEIGHTED WEIGHTED
INTERESTS AVERAGE INTERESTS AVERAGE
UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding -- beginning of year.......... -- -- 729,750 $13.33
Granted................................. 729,750 $13.33 1,309,775 14.24
Exercised............................... -- -- (3,262) 13.33
Forfeited............................... -- -- (31,707) 13.33
------- ------ --------- ------
Outstanding -- end of year................ 729,750 $13.33 2,004,556 $13.92
======= ====== ========= ======
Options exercisable at end of year........ -- -- 397,145 $13.33
Weighted-average fair value of options
granted during the year................. $6.50 $8.35
</TABLE>
F-30
<PAGE> 93
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The range of exercise prices of options outstanding at December 31, 1997
was $13.33 to $52.50.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of financial instruments as of December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
-------------------- ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Bank facilities...................... $505,000 $505,000 $ 560,000 $ 560,000
Long-term debt due to Members........ 230,904 230,904 273,302 273,302
Senior Notes, Series A, B, and C..... -- -- 1,054,288 1,156,000
</TABLE>
The fair value of long-term debt is estimated based on the current rates
offered for similar debt. The carrying amounts of due from affiliates and
accounts payable and accrued expenses approximate their fair market value as of
December 31, 1996 and 1997 because of the relatively short duration of these
assets.
10. OPERATING LEASE COMMITMENTS
The Parent leases its corporate headquarters office space and other office
space and equipment under non-cancelable operating lease agreements. The initial
lease term for the corporate headquarters office space is seven years. Future
minimum payments under all operating lease arrangements are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ -------
<S> <C>
1998..................................................... $ 8,417
1999..................................................... 8,459
2000..................................................... 8,440
2001..................................................... 5,755
2002..................................................... 4,951
2003 and beyond.......................................... 7,985
-------
$44,007
=======
</TABLE>
Rental expense under operating leases for the years ended December 31,
1995, 1996, and 1997 was approximately $1,025,000, $1,194,000, and $7,821,000,
respectively.
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
In thousands, except member interest data:
The following is a summary of results of operations for each of the fiscal
quarters during 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating expenses................... $5,753 $6,083 $5,911 $9,440 $27,187
Net loss............................. 4,528 5,033 5,092 8,992 23,645
Net loss applicable to Class 1
Interests.......................... 4,528 5,033 5,092 8,992 23,645
Net loss per Class 1 Interest........ 0.07 0.07 0.06 0.09 0.27
</TABLE>
F-31
<PAGE> 94
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of results of operations for each of the fiscal
quarters during 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating expenses................ $8,410 $10,321 $19,621 $33,052 $71,404
Net loss.......................... 7,663 9,840 24,232 31,863 73,598
Net loss applicable to Class 1
Interests....................... 7,663 10,679 25,812 33,096 77,250
Net loss per Class 1 Interest..... 0.07 0.09 0.21 0.28 0.64
</TABLE>
The following is a summary of results of operations for each of the fiscal
quarters during 1997:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating expenses............. $36,054 $48,414 $84,997 $127,133 $296,598
Net loss....................... 35,928 47,926 84,095 125,604 293,553
Net loss applicable to Class 1
Interests.................... 37,602 49,242 85,412 127,000 299,256
Net loss per Class 1
Interest..................... 0.31 0.40 0.60 0.90 2.25
</TABLE>
F-32
<PAGE> 95
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Member
Iridium Operating LLC and subsidiaries:
We have audited the accompanying consolidated balance sheets of Iridium
Operating LLC and subsidiaries (a wholly-owned subsidiary of Iridium LLC) (a
development stage limited liability company) as of December 31, 1997 and 1996,
and the related consolidated statements of loss, member's equity (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1997, and for the period June 14, 1991 (inception) through December 31, 1997.
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
Operating LLC and subsidiaries (a development stage limited liability company)
as of December 31, 1997 and 1996, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1997, and for the period June 14, 1991 (inception) through December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
McLean, Virginia
January 16, 1998
F-33
<PAGE> 96
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,889 $ 5,940
Restricted Cash (Note 2).................................. -- 350,220
Due from affiliates....................................... 3,476 13,604
Prepaid expenses and other current assets................. 7,154 6,612
---------- ----------
Total current assets.............................. 12,519 376,376
Property and equipment, net (Note 4)........................ 2,065 1,526,326
System under construction (Note 7).......................... 2,388,320 1,625,054
Other assets (Note 2)....................................... 31,177 114,831
---------- ----------
Total assets...................................... $2,434,081 $3,642,587
========== ==========
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 17,937 $ 106,794
Accounts payable to Parent's Members (Note 7)............. 100,563 10,601
Bank facilities, current portion (Note 5)................. -- 350,000
---------- ----------
Total current liabilities......................... 118,500 467,395
Bank facilities, net of current portion (Note 5)............ 505,000 210,000
Long-term debt due to Parent's Members (Note 5)............. 230,904 273,302
Notes payable, $1,100,000 principal amount (Note 5)......... -- 1,054,288
Other liabilities (Note 8).................................. 7,648 6,065
---------- ----------
Total liabilities................................. 862,052 2,011,050
---------- ----------
Commitments and Contingencies (Notes 1, 3, 5, 7, 8 and 10)
Member's equity (Notes 1 and 3):
Member's Interest......................................... 1,706,602 2,059,421
Deficit accumulated during the development stage.......... (133,840) (427,241)
Adjustment for minimum pension liability (Note 8)......... (733) (643)
---------- ----------
Total member's equity............................. 1,572,029 1,631,537
---------- ----------
Total liabilities and member's equity............. $2,434,081 $3,642,587
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE> 97
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
------------------------------ (INCEPTION) THROUGH
1995 1996 1997 DECEMBER 31, 1997
------- ------- -------- -------------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES
Sales, general and administrative (Notes
5, 7, 8 and 10)....................... $26,436 $70,730 $177,322 $313,149
Depreciation and amortization............ 751 674 119,124 121,429
------- ------- -------- --------
Total operating expenses......... 27,187 71,404 296,446 434,578
OTHER INCOME
Interest income.......................... 5,226 2,395 3,045 15,308
------- ------- -------- --------
Loss before provision for income taxes..... 21,961 69,009 293,401 419,270
Provision for income taxes (Note 6)........ 1,684 4,589 -- 7,971
------- ------- -------- --------
Net loss................................... $23,645 $73,598 $293,401 $427,241
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-35
<PAGE> 98
IRIDIUM OPERATING LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENT DEFICIT
FOR ACCUMULATED
MEMBER'S MINIMUM DURING THE
INTEREST PENSION DEVELOPMENT
AMOUNT LIABILITY STAGE TOTAL
---------- ---------- ----------- ----------
<S> <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)
Contributions by Parent.................... 316,071 -- -- 316,071
Net loss................................... -- -- (6,924) (6,924)
---------- ------- --------- ----------
BALANCE, December 31, 1993................. 316,071 -- (21,763) 294,308
Contributions by Parent.................... 516,339 -- -- 516,339
Net loss................................... -- -- (14,834) (14,834)
---------- ------- --------- ----------
BALANCE, December 31, 1994................. 832,410 -- (36,597) 795,813
Contributions by Parent.................... 633,507 -- -- 633,507
Net loss................................... -- -- (23,645) (23,645)
Adjustment for minimum pension liability... -- (1,065) -- (1,065)
---------- ------- --------- ----------
BALANCE, December 31, 1995................. 1,465,917 (1,065) (60,242) 1,404,610
Contributions by Parent.................... 240,685 -- -- 240,685
Net loss................................... -- -- (73,598) (73,598)
Adjustment for minimum pension liability... -- 332 -- 332
---------- ------- --------- ----------
BALANCE, December 31, 1996................. 1,706,602 (733) (133,840) 1,572,029
Contributions by Parent.................... 352,819 -- -- 352,819
Net loss................................... -- -- (293,401) (293,401)
Adjustment for minimum pension liability... -- 90 -- 90
---------- ------- --------- ----------
BALANCE, December 31, 1997................. $2,059,421 $ (643) $(427,241) $1,631,537
========== ======= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-36
<PAGE> 99
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
---------------------------------- (INCEPTION) THROUGH
1995 1996 1997 DECEMBER 31, 1997
--------- --------- ---------- -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................... $ (23,645) $ (73,598) $ (293,401) $ (427,241)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization................ 751 674 119,124 121,429
Expense recognized for warrants issued in
connection with debt guarantee............. -- 25,719 55,615 81,334
Loss on disposal of assets................... -- -- 87 87
Changes in assets and liabilities:
Decrease (Increase) in prepaid expenses and
other current assets.................... (171) (6,281) 542 (6,612)
Increase in due from affiliates............ -- (3,476) (10,128) (13,604)
Increase in other assets................... (1,633) (4,079) (2,286) (18,659)
Increase in accounts payable and accrued
expenses................................ 1,586 12,968 30,857 48,794
(Decrease) Increase in other liabilities... 2,126 2,739 (1,493) 5,985
--------- --------- ---------- -----------
Net cash used in operating activities... (20,986) (45,334) (101,083) (208,487)
--------- --------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (493) (1,475) (18,885) (23,255)
Additions to system under construction......... (762,000) (900,757) (842,678) (3,091,435)
--------- --------- ---------- -----------
Net cash used in investing activities... (762,493) (902,232) (861,563) (3,114,690)
--------- --------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Parent's Class 1
and Class 2 Interests........................ 633,514 183,205 283,191 1,932,319
Net proceeds from issuance of senior notes and
warrants..................................... -- 238,453 1,039,189 1,277,642
Borrowings under guaranteed bank line of
credit....................................... -- 505,000 655,000 1,160,000
Payments under guaranteed bank line of
credit....................................... -- -- (950,000) (950,000)
Borrowings under senior secured line of
credit....................................... -- -- 350,000 350,000
Restricted cash................................ -- -- (350,220) (350,220)
Deferred financing costs....................... (1,094) (28,535) (57,363) (87,524)
Transfer to Parent............................. -- -- (3,100) (3,100)
--------- --------- ---------- -----------
Net cash provided by financing
activities............................ 632,420 898,123 966,697 3,329,117
--------- --------- ---------- -----------
Increase (decrease) in cash and cash
equivalents.................................... (151,059) (49,443) 4,051 5,940
CASH AND CASH EQUIVALENTS, beginning of period... 202,391 51,332 1,889 --
--------- --------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of period......... $ 51,332 $ 1,889 $ 5,940 $ 5,940
========= ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-37
<PAGE> 100
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Iridium Operating LLC ("Iridium"), a wholly-owned subsidiary of Iridium LLC
(the "Parent") 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. As a result of three private placements of equity, five supplemental
private placements with certain additional equity investors and proceeds
received from the initial public offering of common stock of Iridium World
Communications Ltd. ("IWCL") (See Note 3), Motorola's direct and indirect Class
1 Membership Interest in the Parent has been reduced to approximately 18% as of
December 31, 1997, before considering unexercised warrants held by Motorola.
On July 29, 1996, the Parent 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. Also on July 29, 1996, Iridium, Inc. was merged with and into the
Parent, with the Parent as the surviving entity. Concurrent with the merger, all
shares of Common Stock of Iridium, Inc. were exchanged for Class 1 membership
interests in the Parent ("Class 1 Interests").
On December 18, 1997, the Parent entered into an asset drop-down
transaction ("the Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed wholly-owned subsidiary of the Parent. Pursuant to
the Asset Drop-Down Transaction, substantially all of the assets and liabilities
of the Parent were transferred to Iridium, including, without limitation, all
liabilities with respect to the outstanding 13% Senior Notes due 2005, Series A
and 14% Senior Notes due 2005, Series B and the 11 1/4% Senior Notes due 2005,
Series C (collectively, the "Senior Notes"). Pursuant to the indentures relating
to the Senior Notes, Iridium has been substituted for the Parent, and the Parent
has been released from all obligations under the indentures relating to the
Senior Notes. All assets and liabilities were transferred to Iridium at the
Parent's carrying value. Accordingly, unless otherwise specified, references
within these notes to Iridium that relate to any action prior to the date of the
Asset Drop-Down Transaction should be construed as references to Parent, as
predecessor of Iridium. As a result of the Asset Drop-Down Transaction, the
Parent's only significant asset is its investment 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 September 1998. During 1997,
46 of the 66 satellites in the IRIDIUM System were successfully placed in orbit.
The Iridium Communications 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.
F-38
<PAGE> 101
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Iridium and
its wholly-owned subsidiaries, Iridium Capital Corporation, Iridium Roaming LLC
and Iridium IP LLC. All significant intercompany transactions have been
eliminated.
The accompanying consolidated financial statements present the financial
position and results of operations of Iridium for all prior periods as if the
Asset Drop-Down Transaction with Iridium had occurred as of June 14, 1991
(inception).
Development Stage Enterprise
Iridium is currently devoting its entire efforts to establishing and
commercializing the IRIDIUM System. Accordingly, Iridium's current principal
activities relate to managing the design, construction and development of the
system and preparing for its day-to-day operations.
Management 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 reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
Iridium considers all highly liquid investments with an original maturity
of three months or less at the date of purchase to be cash equivalents.
Restricted Cash
Restricted cash consists of the first stage of borrowing under the $1
billion secured credit facility with a syndicate of lenders, led by Chase
Securities, Inc., and Barclays Capital, a division of Barclays Bank PLC. The
funds are restricted subject to Iridium meeting specified milestones.
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>
Satellites in service................. 5 years
Furniture, fixtures and equipment..... 5 years
Leasehold improvements................ Shorter of 5 years or remaining lease term
</TABLE>
The costs of constructing and placing satellites into service are
capitalized. Losses from satellite failures for which Iridium has financial
responsibility under its contractual arrangements with Motorola are recognized
currently. Motorola bears the risk of loss for launch failures and satellite
failures before a satellite is placed into service.
F-39
<PAGE> 102
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 is recognized on a satellite-by-satellite basis as the
satellites are placed into service following delivery of each satellite to its
mission orbit. Depreciation related to the ground control stations will commence
with the placement in service of each such station.
Interest costs incurred during the construction of the IRIDIUM System are
capitalized. Total interest cost incurred and capitalized for the years ended
December 31, 1996 and 1997 was approximately $28,127,000 and $163,747,000,
respectively. Interest paid for the years ended December 31, 1996 and 1997 was
approximately $1,485,000 and $30,191,000, respectively. No interest was
incurred, paid or capitalized for the year ended December 31, 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 for impairment whenever events
or 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 years
ended December 31, 1996 and 1997.
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 in a manner that
approximates the effective yield method. 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
$30,200,000 and $113,394,000 at December 31, 1996 and 1997, respectively.
During October 1995, the Parent withdrew an intended public offering of
certain subordinated debt financing. Accordingly, approximately $3,200,000 of
deferred costs associated with the intended financing were written off. Such
costs are included in operating expenses in the accompanying consolidated
statement of loss for the year ended December 31, 1995.
Income Taxes
Iridium files its Federal and state income tax returns as a member of the
consolidated returns of the Parent. Iridium, Inc. was subject to Federal, state
and local income taxes directly. As a result of the merger of Iridium, Inc. with
and into the Parent, the Parent became a limited liability company. As a limited
liability company, the Parent and Iridium are no longer subject to U. S. federal
income tax directly. Rather, each member in Iridium 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
as if it filed its income tax returns on a separate basis. 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
F-40
<PAGE> 103
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
New Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the consolidated financial statements. Iridium is required to
adopt the provisions of Statement 130 for the year ending December 31, 1998.
Earlier application is permitted; however, upon adoption of Statement 130,
Iridium will be required to reclassify previously reported annual and interim
consolidated financial statements. The disclosure of comprehensive income in
accordance with the provisions of Statement 130 will impact the manner of
presentation of Iridium's consolidated financial statements as currently and
previously reported.
Reclassifications
Certain 1995 and 1996 amounts have been reclassified to conform to the 1997
presentation.
3. MEMBER'S EQUITY
The sole member of Iridium is the Parent and the Parent holds all
outstanding membership interests in Iridium. The limited liability company
agreement of Iridium provides that the members of the Parent may manage Iridium
only through their designated directors and have no authority in their capacity
as members to act on the behalf of Iridium. Parent is generally not liable for
the debts, obligations or liabilities of Iridium.
Parent is entitled to receive dividends, as and when declared by the
Iridium Board of Directors, in its discretion. In the event that Parent is
required by the terms of the Parent's Limited Liability Agreement to declare or
pay a dividend to its members, Iridium is required to declare and pay a dividend
to the Parent in the same amount. Parent is currently required to declare and
pay a dividend sufficient to assure that each non-U.S. Class 1 Member of Parent
receives and amount at least equal to the amount of such member's U.S. federal,
state and local income tax liability resulting from allocations of Parent's
taxable income to such member. Iridium is presently restricted by the terms of
certain of its debt obligations from declaring or paying dividends to the Parent
in amounts in excess of those required to be made to the Parent.
Parent is generally not liable for the debts, obligations or liabilities of
Iridium.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997, consists of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997
------- ----------
<S> <C> <C>
Space system in service............................... $ -- $1,624,120
Office equipment and furniture........................ 3,113 13,920
Trade show booth...................................... 826 --
Leasehold improvements................................ 405 8,424
------- ----------
4,344 1,646,464
Less -- accumulated depreciation and amortization..... (2,279) (120,138)
------- ----------
Property and equipment, net........................... $ 2,065 $1,526,326
======= ==========
</TABLE>
F-41
<PAGE> 104
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
Guaranteed Bank Facility
On August 21, 1996, the Parent entered into a $750 million credit agreement
with a group of banks led by The Chase Manhattan Bank, NA and Barclays Bank,
PLC. On the same date, the Parent entered into the Guarantee Agreement whereby
Motorola agreed to guarantee the entire $750 million commitment amount (the
"Motorola Guarantee"). In connection with the Asset Drop-Down Transaction, the
Parent's obligations under the Guaranteed Bank Facility were assigned to
Iridium. The Guaranteed Bank Facility provides that Iridium may elect to borrow
amounts at the then current short-term Eurodollar rate plus 1/4% or at the then
current Base Rate (generally, the higher of the Federal Funds Rate as
established by the Federal Reserve Bank of New York plus 0.50% or The Chase
Manhattan Bank's prime commercial lending rate). 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 5.63% to 8.50 %
during 1997 and from 5.75% to 5.94% during 1996. On July 21, 1997, the
commitment of the bank lenders under the Guaranteed Bank Facility was
permanently reduced from $750 million to $655 million. On October 22, 1997, the
commitment of the bank lenders under the Guaranteed Bank Facility was further
permanently reduced to $450 million. Depending on market conditions, Iridium may
make additional senior note offerings in order to further reduce the Guaranteed
Bank Facility. The Guaranteed Bank Facility matures on June 30, 1999.
Under the Guarantee Agreement, the Parent is required to issue warrants to
Motorola to purchase up to 150,000 Class 1 Interests. As consideration for its
guarantee, Motorola earns 82,500 warrants for each year the $750 million
guarantee is outstanding. As a result of the permanent reductions in the
Guaranteed Bank Facility, the maximum number of warrants Motorola may earn as
compensation for their guarantee of that facility until maturity in June 1999 is
131,377 warrants to purchase approximately 9,853,275 Class 1 Interests of
Parent. 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 interest, subject to anti-dilution adjustments. The warrants may be
exercised after five years from date of issuance and expire ten years from date
of issuance. Motorola earned 29,836 and 64,518 warrants to purchase Class 1
Interests in accordance with the Guarantee Agreement during the years ended
December 31, 1996 and 1997, respectively. Iridium recognized $25,719,000 and
$55,615,000 as an expense in the accompanying consolidated statements of
operations to reflect the fair market value of the warrants earned by Motorola
for the years ended December 31, 1996 and 1997, respectively. At December 31,
1996 and 1997, $505,000,000 and $210,000,000, respectively, was outstanding
under the Guaranteed Bank Facility.
Senior Secured Bank Line of Credit
Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1 billion (the
"Secured Bank Facility"), of which $250 million is not available for borrowings
prior to the commercial activation date. The Secured Bank Facility is secured by
substantially all of Iridium's assets. The Secured Bank Facility is further
secured by a $243 million Reserve Capital Call of the members of Parent and all
of the Parent's membership interests in Iridium. The availability of the Secured
Bank Facility is subject to significant conditions, including technical
conditions relating to the IRIDIUM System, conditions relating to regulatory
approvals and conditions relating to other financing sources. Borrowings under
the Secured Bank Facility mature on September 30, 1998, subject to Iridium's
right to extend such maturity until up to June 30, 1999 if it can demonstrate by
July 1, 1998 that it has sufficient available or committed financing for its
budgeted project costs through such extended maturity. At December 31, 1997,
$350,000,000 was outstanding under the Secured Bank Facility.
F-42
<PAGE> 105
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes Payable
On July 16, 1997, the Parent, IWCL and Iridium Capital Corporation
completed an offering (the "High Yield Offering") of (i) 300,000 units, each
consisting of $1,000 principal amount of 13% Senior Notes due 2005, Series A
("Series A Notes"), and one IWCL Warrant representing the right to purchase 5.2
shares of Class A Common Stock of IWCL, and (ii) $500 million aggregate
principal amount of 14% Senior Notes due 2005, Series B ("Series B Notes").
Concurrent with the Asset Drop-Down Transaction, the Parent's obligations under
the Series A Notes and Series B Notes were assigned to Iridium. The Series A
Notes and Series B Notes are guaranteed by Iridium Roaming LLC and Iridium IP
LLC. The aggregate net proceeds received was approximately $746 million.
Interest on the Series A Notes and Series B Notes is payable in cash
semi-annually on January 15th and July 15th of each year, commencing on January
15, 1998. The notes are redeemable at the option of Iridium, in whole or in
part, at any time on or after July 15, 2002. The Series A and Series B Notes
mature on July 15, 2005.
On October 17, 1997, the Parent and Iridium Capital Corporation completed
an offering of $300 million principal amount of 11 1/4% Senior Notes due 2005,
Series C ("Series C Notes"). Concurrent with the Asset Drop-Down Transaction,
the Parent's obligations under the Series C Notes were assigned to Iridium. The
Series C Notes are guaranteed by Iridium Roaming LLC and Iridium IP LLC. The net
proceeds received were approximately $293 million. Interest on the Series C
Notes is payable in cash semi-annually on January 15th and July 15th of each
year, commencing on January 15, 1998. The Series C Notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series C Notes mature on July 15, 2005.
Notes payable, net of discounts, for the year ended December 31, 1997
consists of the following (in thousands):
<TABLE>
<CAPTION>
1997
----------
<S> <C>
13% Senior Notes due 2005, Series A......................... $ 276,439
14% Senior Notes due 2005, Series B......................... 477,849
11 1/4% Senior Notes due 2005, Series C..................... 300,000
----------
$1,054,288
==========
</TABLE>
Long-Term Debt Due to Members of the Parent
During 1996, the Parent 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 of the Parent, for aggregate proceeds of
approximately $238,453,000. Concurrent with the Asset Drop-Down Transaction, the
Parent's obligations under the Notes were assigned to Iridium. 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.
6. 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, the Parent
F-43
<PAGE> 106
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and Iridium are no longer subject to U.S. federal income tax directly; however,
Iridium is subject to District of Columbia franchise taxes.
Iridium's provision for income taxes for the years ended December 31, 1995,
1996, and 1997 consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current
-- Federal..................................... $1,258 $3,435 $ --
-- State and Local............................. 426 1,154 --
Deferred
-- Federal..................................... -- -- --
-- State and Local............................. -- -- --
------ ------ ------
$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, 1995 and the period from January 1, 1996 to July 29, 1996 (the date
of the merger of Iridium, Inc. into the Parent) 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
Inc.'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 the Parent, deferred taxes are recognized for
those jurisdictions for which the Parent and Iridium are taxed directly,
resulting in a deferred tax asset for capitalized start-up expenditures of
$4,774,000 and $34,599,000 at December 31, 1996 and 1997, respectively, for
which a 100% valuation allowance has been established.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented in making this assessment.
7. TRANSACTIONS WITH MEMBERS OF THE PARENT
Management Services Agreement
In connection with the IWCL IPO, the Parent and IWCL entered into a
Management Services Agreement. The Management Services Agreement was amended and
restated in connection with the Asset Drop-Down Transaction to add Iridium as a
party.
Pursuant to the Management Services Agreement, the Parent has agreed to
supervise and manage the day-to-day activities of Iridium. Among other things,
the Parent is responsible for administering the following functions of Iridium:
contract administration (including the Space System Contract, the TNDC and the
O&M Contract), treasury, accounting, legal, tax, insurance, licenses and permits
and securities law compliance. The Parent similarly has agreed to supervise and
manage the day-to-day operations of IWCL. Among other things, the Parent is
responsible for administering the following functions of IWCL: treasury,
accounting, legal, tax, insurance, licenses and permits and securities law
compliance. In addition, Parent has agreed to advance funds to IWCL in the event
that IWCL does not have sufficient funds to pay income or similar taxes. The
Parent does not receive fees or reimbursement from IWCL for its services to IWCL
under
F-44
<PAGE> 107
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Management Services Agreement; however, the cost of such services provided
to IWCL to date is not significant.
In return for such services, Iridium has agreed to provide sufficient
funds, on a cost reimbursable basis, to the Parent to enable the Parent to
manage the business and operations of each of Iridium and IWCL, including
payments of Parent's obligations to its employees, consultants and directors,
and payments for Parent's office space and equipment, sales, general operating
and administrative expenses, insurance and its obligations under certain
contracts.
Support Agreement
Under a Support Agreement, Motorola provides certain general and
administrative support to the Parent, Iridium and its subsidiaries. On a cost
reimbursable basis, Motorola has provided payroll processing and related
benefits to the Parent employees, processed payments to certain contractors
providing support to the Parent and Iridium, and provided other administrative
support. In connection with the Asset Drop-Down Transaction, the Parent assigned
the Support Agreement to Iridium. The amounts and nature of such costs for the
years ended December 31, 1995, 1996 and 1997 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Consulting............................................ $603 $826 $643
Other................................................. 1 26 5
---- ---- ----
$604 $852 $648
==== ==== ====
</TABLE>
As of December 31, 1996, and 1997, the balance payable to Motorola under
the Support Agreement was approximately $563,000 and $0, respectively.
Space System Contract
The Parent entered into the Space System Contract with Motorola to design,
develop, produce and deliver the Space Segment component of the IRIDIUM System.
In connection with the Asset Drop-Down Transaction, the Parent assigned the
Space System Contract to Iridium. 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, 1995, 1996, and 1997, $802 million, $836 million, and $577
million, respectively, was incurred under the Space System Contract. Such costs
are capitalized as system under construction in the accompanying consolidated
balance sheets and are transferred to property and equipment as the underlying
assets are placed into service. As of December 31, 1996 and 1997, the balance
payable to Motorola under the Space System Contract was $100 million and $0,
respectively.
The aggregate fixed and determinable portion of all remaining obligations
under the Space System Contract is $589 million expected to be payable in 1998.
Terrestrial Network Development Contract
The Parent entered into the Terrestrial Network Development Contract
("TNDC") with Motorola for an original amount of $160 million. In connection
with the Asset Drop-Down Transaction, the Parent assigned the TNDC to Iridium.
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, the TNDC was
amended to obligate Motorola to provide additional services and support under
the TNDC in exchange for an additional $18.9 million. In lieu of a cash payment
F-45
<PAGE> 108
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for the $18.9 million from Iridium, the Parent may, at its election, issue 5,545
warrants to purchase Class 1 Interests of the Parent to Motorola. The warrants,
if issued, have an exercise price of $.01 and may be exercised beginning March
1, 2001 and will expire on March 1, 2006. During 1997, the TNDC was further
amended to obligate Motorola to provide additional services and support bringing
the total contract price of the TNDC to $284 million. Certain of the Parent's
members will own the individual gateways and will have no obligation to Iridium
or the Parent for any of the amounts due to Motorola under the TNDC. For the
years ended December 31, 1996 and 1997, Iridium incurred $64 million and $74
million, respectively, under the TNDC. Such costs are capitalized as system
under construction in the accompanying consolidated balance sheets. As of
December 31, 1996 and 1997, the balance payable to Motorola under the TNDC was
$0 and $11 million, respectively.
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>
1998.................................................... $139,405
1999.................................................... 6,000
--------
$145,405
========
</TABLE>
Operations and Maintenance Contract
To provide for the operations and maintenance of the space segment upon
completion of the Space System Contract, the Parent entered into the Operations
and Maintenance Contract ("O&M") with Motorola. In connection with the Asset
Drop-Down Transaction, the Parent assigned the O&M contract to Iridium. This
contract obligates Motorola for a period of five years after completion of the
final milestone under the Space System Contract to operate the Space System, and
to exert its best efforts to monitor, upgrade and replace hardware and software
of the space segment (including the individual space vehicles) at specified
levels, in exchange for specified quarterly payments. Such payments are expected
to begin in 1998 and to aggregate approximately $2.88 billion. During 1996, a
two-year option agreement was entered into for the extension of 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 $1.33 billion. Upon commencement of the O&M, Iridium
will capitalize the portion of the costs incurred that pertain to hardware and
software components of the space segment that extend its useful life. The
portion of the costs of the O&M associated with day-to-day operations will be
expensed as incurred. 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>
1998................................................... $ 129,000
1999................................................... 537,000
2000................................................... 558,000
2001................................................... 581,000
2002................................................... 605,000
2003................................................... 472,000
----------
$2,882,000
==========
</TABLE>
F-46
<PAGE> 109
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFITS
The Parent has adopted a comprehensive performance incentive and retirement
benefit package. Under the terms of the Management Services Agreement (See Note
7), Iridium has committed to reimburse the Parent for all costs associated with
employee benefits except for non-cash compensation related to employee stock
options. The performance incentive program became effective in 1993, while the
various retirement plans became effective on February 1, 1994.
Incentive Programs
The Parent has established short- and long-term incentive plans primarily
based on employee performance. Effective December 31, 1995, the Parent
terminated the long-term incentive plan. The remaining liability of the
long-term incentive plan is approximately $2,426,000 and $1,738,000 as of
December 31, 1996 and 1997, respectively, and is expected to be paid in 1999.
Under these plans, the Parent incurred expenses of approximately $1,300,000,
$1,252,000 and $3,412,000 for the years ended December 31, 1995, 1996, and 1997,
respectively.
401(k) Employee Retirement Savings Plan
The Parent adopted a 401(k) employee retirement savings plan in 1994
covering all employees. The Parent 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. The Parent's
contributions vest ratably over a seven-year period, including service credit
for any prior employment with Motorola. Under this plan, the Parent has incurred
approximately $161,000, $288,000, and $558,000 during the years ended December
31, 1995, 1996 and 1997, respectively.
Retirement Plans
All employees of the Parent are covered by a non-contributory defined
benefit retirement plan. Vesting in plan benefits generally occurs after five
years. Benefits under the plan are based on years of credited service (including
any prior employment with Motorola), age at retirement and the average earnings
over the last four years. The plan is funded annually in accordance with the
Employee Retirement Income Security Act of 1974.
In early 1995, the Parent adopted a non-qualified defined benefit plan
covering employees earnings 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
The Parent maintains a non-qualified defined benefit plan for selected
senior officers. Vesting in these plans generally occurs upon the attainment of
age 55 with five years of service. Benefits under these plans are based on
average annual compensation prior to retirement. The Parent 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 $1,256,000, $1,925,000, and
$2,420,000 for the years ended December 31, 1995, 1996, and 1997, respectively.
For the years ended December 31, 1996 and 1997, the amounts provided to cover
taxes associated with the plan benefits were $736,000 and $693,000,
respectively. In addition, an additional minimum pension liability adjustment of
$332,000 and $90,000 has been recorded for the years ended December 31, 1996 and
1997, respectively, for its non-qualified plans. The additional minimum pension
liability is included as a reduction to members' equity.
F-47
<PAGE> 110
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summary of Defined Benefit Plans
Pension cost for the qualified and non-qualified defined benefit plans in
total for the years ended December 31, 1995, 1996 and 1997, are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------------------------- ------------------------- -------------------------
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Service Cost.................... $372 $377 $789 $ 438 $1,292 $ 512
Interest cost on projected
benefit obligation............ 70 246 133 339 206 285
Actual return on assets......... (66) -- (82) -- (138) --
Amortization of actuarial
loss.......................... -- -- -- 51 -- 6
Amortization of transition
obligation.................... 19 238 19 238 19 238
---- ---- ---- ------ ------ ------
Net periodic cost............... $395 $861 $859 $1,066 $1,379 $1,041
==== ==== ==== ====== ====== ======
</TABLE>
The following table describes the funded status of the plans at December
31, 1996 and 1997 (in thousands). The actuarial calculations were determined by
the Parent's consulting actuaries:
<TABLE>
<CAPTION>
1996 1997
-------------------------- --------------------------
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Accumulated present value of
obligations:
Accumulated benefit obligation,
including vested benefits.......... $(1,828) $(2,746) $(3,334) $(2,269)
======= ======= ======= =======
Projected benefit obligation for
service rendered to date........... $(2,554) $(5,179) $(4,722) $(5,039)
Plan assets at fair value............ 1,931 -- 3,757 --
------- ------- ------- -------
Projected benefit obligation in
excess of plan assets.............. (623) (5,179) (965) (5,039)
Unrecognized transition obligation... 320 2,360 302 2,123
Unrecognized net (gain) loss......... (227) 609 118 870
------- ------- ------- -------
Accrued pension cost................. (530) (2,210) (545) (2,046)
Adjustment required to recognize
minimum liability.................. -- (733) -- (643)
------- ------- ------- -------
Pension liability.................... $ (530) $(2,943) $ (545) $(2,689)
======= ======= ======= =======
Actuarial assumptions:
Discount rate........................ 7.5% 7.5% 7% 7%
Long-term rate of return............. 8% 8% 8% 8%
Salary increases..................... 5% 7.5% 5% 7.5%
</TABLE>
F-48
<PAGE> 111
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of financial instruments as of December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
-------------------- ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Bank facilities...................... $505,000 $505,000 $ 560,000 $ 560,000
Long-term debt due to Members........ 230,904 230,904 273,302 273,302
Senior Notes, Series A, B, and C..... -- -- 1,054,288 1,156,000
</TABLE>
The fair value of long-term debt is estimated based on the current rates
offered for similar debt. The carrying amounts of due from affiliates and
accounts payable and accrued expenses approximate their fair market value as of
December 31, 1996 and 1997 because of the relatively short duration of these
assets.
10. OPERATING LEASE COMMITMENTS
The Parent leases its corporate headquarters office space and other office
space and equipment under non-cancelable operating lease agreements. The initial
lease term for the corporate headquarters office space is seven years. Future
minimum payments under all operating lease arrangements are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -------
<S> <C>
1998..................................................... $ 8,417
1999..................................................... 8,459
2000..................................................... 8,440
2001..................................................... 5,755
2002..................................................... 4,951
2003 and beyond.......................................... 7,985
-------
$44,007
=======
</TABLE>
Rental expense under operating leases for the years ended December 31,
1995, 1996, and 1997 was approximately $1,025,000, $1,194,000, and $7,821,000,
respectively.
11. IRIDIUM SUBSIDIARIES
The Series A Notes, Series B Notes and Series C Notes are co-issued by
Iridium and Iridium Capital Corporation ("Capital") and are fully and
unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by Iridium Roaming LLC and Iridium IP LLC (collectively, the "Guarantor
Subsidiaries" and together with Capital, the "Iridium Subsidiaries"). Each of
the Iridium Subsidiaries is a wholly-owned subsidiary of Iridium and, as of
December 31, 1997, Iridium has no subsidiaries other than the Iridium
Subsidiaries. Capital was formed and capitalized by the Parent on June 16, 1997
(subscribed capital of $100). Iridium Roaming LLC was formed by the Parent on
June 15, 1997. Iridium IP LLC was formed by the Parent on February 28, 1997. In
connection with the Asset Drop-Down Transaction, Parent's interest in the
Iridium subsidiaries was transferred to Iridium.
The following is summarized financial information of Capital as of December
31, 1997 and for the period from inception through December 31, 1997. Full
financial statements of Capital are not presented because management believes
they are not material to investors.
F-49
<PAGE> 112
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Current assets.............................................. $0
Total assets................................................ 0
Current liabilities......................................... 0
Total liabilities........................................... 0
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION THROUGH
DECEMBER 31, 1997
-------------------
<S> <C>
Net revenues................................................ $0
Cost of services............................................ 0
Net loss.................................................... 0
</TABLE>
Iridium has recognized the obligations relating to the Series A Notes, the
Series B Notes and the Series C Notes because Iridium will have the operations
to service such obligations.
The following is summarized financial information of the Guarantor
Subsidiaries as of December 31, 1997 and for the period from inception of each
of the Guarantor Subsidiaries through December 31, 1997. Full financial
statements of the Guarantor Subsidiaries are not presented because management
believes they are not material to investors.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Current assets.............................................. $0
Total assets................................................ 0
Current liabilities......................................... 0
Total liabilities........................................... 0
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION THROUGH
DECEMBER 31, 1997
-------------------
<S> <C>
Net revenues................................................ $0
Cost of services............................................ 0
Net loss.................................................... 0
</TABLE>
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
In thousands:
The following is a summary of results of operations for each of the fiscal
quarters during 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating expenses............. $ 5,753 $ 6,083 $ 5,911 $ 9,440 $ 27,187
Net loss....................... 4,528 5,033 5,092 8,992 23,645
</TABLE>
The following is a summary of results of operations for each of the fiscal
quarters during 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating expenses............. $ 8,410 $10,321 $19,621 $ 33,052 $ 71,404
Net loss....................... 7,663 9,840 24,232 31,863 73,598
</TABLE>
F-50
<PAGE> 113
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of results of operations for each of the fiscal
quarters during 1997:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating expenses............. $36,054 $48,414 $84,959 $127,019 $296,446
Net loss....................... 35,928 47,926 84,057 125,490 293,401
</TABLE>
F-51
<PAGE> 114
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Members
Iridium LLC:
Under date of January 16, 1998, we reported on the consolidated balance
sheets of Iridium LLC and subsidiaries (a development stage limited liability
company) as of December 31, 1997 and 1996, 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, 1997, and for the period June
14, 1991 (inception) through December 31, 1997, as contained in the annual
report on Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedule as listed in Item 14(a)2 in the annual report on
Form 10-K for the year 1997. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
McLean, Virginia
January 16, 1998
S-1
<PAGE> 115
SCHEDULE 1
IRIDIUM LLC
SCHEDULE 1 -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS)
Condensed Balance Sheets:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Cash........................................................ $ -- $ 3,100
Investment in Iridium Operating LLC......................... 1,572,029 1,631,537
---------- ----------
Total assets...................................... 1,572,029 1,634,637
========== ==========
Liabilities
Total liabilities................................. $ -- $ --
Members' equity............................................. 1,572,029 1,634,637
---------- ----------
Total liabilities and members' equity............. 1,572,029 1,634,637
========== ==========
</TABLE>
Condensed Statements of Loss:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
---------------------------- (INCEPTION) TO
1995 1996 1997 DECEMBER 31, 1997
------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Equity in loss of Iridium Operating LLC......... $23,645 $73,598 $293,401 $427,241
------- ------- -------- --------
Employee Class 1 Interests compensation......... -- -- 152 152
------- ------- -------- --------
Loss before income taxes.............. 23,645 73,598 293,553 427,393
Income taxes.................................... -- -- -- --
------- ------- -------- --------
Net loss.............................. $23,645 $73,598 $293,553 $427,393
======= ======= ======== ========
</TABLE>
Condensed Statements of Cash Flows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JUNE 14, 1991
--------------------------------- (INCEPTION) TO
1995 1996 1997 DECEMBER 31, 1997
--------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Net loss.................................. $ (23,645) $ (73,598) $(293,553) $ (427,393)
Adjustments to reconcile net loss to cash
flows from operating activities:
Employee Class 1 Interests
compensation......................... -- -- 152 152
--------- --------- --------- -----------
Equity in loss of Iridium Operating
LLC.................................. 23,645 73,598 293,401 427,241
--------- --------- --------- -----------
Cash used in operating activities.... -- -- -- --
Cash flows used in investing
activities --
Investment in Iridium Operating LLC..... (633,507) (193,708) (399,796) (2,059,421)
Cash flows from financing activities
Proceeds from equity transactions.... 633,507 193,708 399,796 2,059,421
Transfer from Iridium Operating
LLC................................ -- -- 3,100 3,100
--------- --------- --------- -----------
Cash provided by financing
activities......................... 633,507 193,708 402,896 2,062,521
--------- --------- --------- -----------
Net increase in cash and cash
equivalents............................. -- -- 3,100 3,100
Cash and cash equivalents at beginning of
period.................................. -- -- -- --
--------- --------- --------- -----------
Cash and cash equivalents at end of
period.................................. $ -- $ -- $ 3,100 $ 3,100
========= ========= ========= ===========
</TABLE>
S-2
<PAGE> 116
Note to Condensed Financial Statements of Registrant:
BASIS OF PRESENTATION
The accompanying condensed financial statements represent the accounts of
Iridium LLC (a development stage limited liability company) on a stand-alone
basis. Substantially all footnote disclosures are omitted. Reference is made to
the audited consolidated financial statements and footnotes of Iridium LLC and
subsidiaries (a development stage limited liability company) as of December 31,
1997 and 1996, and for each of the years in the three-year period December 31,
1997, and for the period June 14, 1991 (inception) through December 31, 1997,
which appear in the 1997 Form 10-K.
S-3
<PAGE> 117
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each of the Registrants has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
IRIDIUM WORLD COMMUNICATIONS LTD.
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman and Chief Executive Officer
Date: March 23, 1998
IRIDIUM LLC
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Chairman
Date: March 23, 1998
IRIDIUM OPERATING LLC
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Vice Chairman and Chief Executive
Officer
Date: March 23, 1998
IRIDIUM CAPITAL CORPORATION
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman and Chief Executive Officer
Date: March 23, 1998
IRIDIUM ROAMING LLC
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Acting Chief Executive Officer
Date: March 23, 1998
IRIDIUM IP LLC
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Acting Chief Executive Officer
Date: March 23, 1998
i
<PAGE> 118
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ ROBERT W. KINZIE Director of Iridium World March 23, 1998
- ------------------------------------------ Communications Ltd.; Chairman of
Robert W. Kinzie Iridium LLC and Iridium Operating
LLC; Director of Iridium Capital
Corporation
/s/ EDWARD F. STAIANO Chairman and Chief Executive Officer of March 23, 1998
- ------------------------------------------ Iridium World Communications Ltd.;
Edward F. Staiano Vice Chairman and Chief Executive
Officer of Iridium LLC and Iridium
Operating LLC; Chairman and Chief
Executive Officer of Iridium Capital
Corporation; Acting Chief Executive
Officer of Iridium Roaming LLC and
Iridium IP LLC
/s/ ROY GRANT Chief Financial Officer of Iridium March 23, 1998
- ------------------------------------------ World Communications Ltd.; Vice
Roy Grant President-Chief Financial Officer of
Iridium LLC and Iridium Operating
LLC; Chief Financial Officer of
Iridium Capital Corporation; Acting
Chief Financial Officer of Iridium
Roaming LLC and Iridium IP LLC
/s/ HASAN M. BINLADIN Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Hasan M. Binladin
/s/ ULF BOHLA Director of Iridium World March 23, 1998
- ------------------------------------------ Communications Ltd., Iridium LLC and
Ulf Bohla Iridium Operating LLC
/s/ GORDON J. COMERFORD Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Gordon J. Comerford
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
Atilano de Oms Sobrinho
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
Robert A. Ferchat
/s/ ALBERTO FINOL Deputy Chairman and Director of Iridium March 23, 1998
- ------------------------------------------ World Communications Ltd.; Director
Alberto Finol of Iridium LLC and Iridium Operating
LLC
/s/ EDWARD GAMS Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Edward Gams
/s/ KAZUO INAMORI Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Kazuo Inamori
</TABLE>
ii
<PAGE> 119
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ HARDIANTO K. KAMARGA Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Hardianto K. Kamarga
/s/ GEORG KELLINGHUSEN Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Georg Kellinghusen
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
S. H. Khan
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
Anatoly I. Kiselev
/s/ RICHARD L. LESHER Director of Iridium World March 23, 1998
- ------------------------------------------ Communications Ltd.; Iridium LLC and
Richard L. Lesher Iridium Operating LLC
/s/ JOHN F. MITCHELL Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
John F. Mitchell
/s/ JUNG L. MOK Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Jung L. Mok
/s/ GIUSEPPE MORGANTI Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Giuseppe Morganti
/s/ J. MICHAEL NORRIS Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
J. Michael Norris
/s/ YUSAI OKUYAMA Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Yusai Okuyama
/s/ JOHN A. RICHARDSON Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
John A. Richardson
/s/ JOHN M. SCANLON Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
John M. Scanlon
/s/ THEODORE H. SCHELL Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Theodore H. Schell
/s/ WILLIAM A. SCHREYER Director of Iridium World March 23, 1998
- ------------------------------------------ Communications Ltd.; Iridium LLC and
William A. Schreyer Iridium Operating LLC
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
Sribhumi Sukhanetr
/s/ TAO-TSUN SUN Director of Iridium LLC and Iridium March 23, 1998
- ------------------------------------------ Operating LLC
Tao-Tsun Sun
</TABLE>
iii
<PAGE> 120
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ YOSHIHARU YASUDA Director of Iridium World March 23, 1998
- ------------------------------------------ Communications Ltd., Iridium LLC and
Yoshiharu Yasuda Iridium Operating LLC
Director of Iridium LLC and Iridium March , 1998
- ------------------------------------------ Operating LLC
Wang Mei Yue
</TABLE>
iv
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as
of July 29, 1996, as amended: Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 of
Iridium World Communications Ltd. and Iridium LLC
(Registration Nos. 333-23419 and 333-23419-01) (the "Form
S-1").
3.2 Articles of Incorporation of Iridium Capital Corporation:
Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Iridium LLC, Iridium Capital
Corporation, Iridium Roaming LLC, and Iridium IP LLC
(Registration Nos. 333-31741, -01, -02 and -03) (the "1997
Form S-4").
3.3 By-Laws of Iridium Capital Corporation: Incorporated by
reference to Exhibit 3.3 to the 1997 Form S-4.
3.4 Amended and Restated Limited Liability Company Agreement of
Iridium Roaming LLC: Incorporated by reference to Exhibit
3.4 to the Registration Statement on Form S-4 of Iridium
Operating LLC, Iridium Capital Corporation, Iridium Roaming
LLC and Iridium IP LLC (Registration No. 333-44349, -01, -02
and -03) (the "1998 Form S-4").
3.5 Amended and Restated Limited Liability Company Agreement of
Iridium IP LLC: Incorporated by reference to Exhibit 3.5 to
the 1998 Form S-4.
3.6 Limited Liability Company Agreement of Iridium Operating
LLC: Incorporated by reference to Exhibit 3.6 to the 1998
Form S-4.
3.7 Articles of Incorporation of Iridium Facilities
Corporation.*
3.8 By-Laws of Iridium Facilities Corporation.*
3.9 Memorandum of Association of Iridium World Communications
Ltd.: Incorporated by reference to Exhibit 3.1 to the Form
S-1.
3.10 By-Laws of Iridium World Communications Ltd.: Incorporated
by reference to Exhibit 3.2 to the Form S-1.
4.1.1 Indenture dated as of July 16, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 13% Senior Notes due
2005, Series A, and 13% Senior Notes due 2005, Series A/EN:
Incorporated by reference to Exhibit 4.1 to the 1997 Form
S-4.
4.1.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 13% Senior Notes due 2005, Series A, and 13%
Senior Notes due 2005, Series A/EN: Incorporated by
reference to Exhibit 4.1.2 to the 1998 Form S-4.
4.1.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 13% Senior Notes due 2005, Series A, and 13%
Senior Notes due 2005, Series A/EN.*
4.2 Forms of Series A Note and Series A/EN Note: Incorporated by
reference to Exhibit 4.1 to the 1997 Form S-4.
4.3.1 Indenture dated as of July 16, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 14% Senior Notes due
2005, Series B, and 14% Senior Notes due 2005, Series B/EN:
Incorporated by reference to Exhibit 4.2 to the 1997 Form
S-4.
4.3.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 14% Senior Notes due 2005, Series B, and 14%
Senior Notes due 2005, Series B/EN: Incorporated by
reference to Exhibit 4.3.2 to the 1998 Form S-4.
4.3.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 14% Senior Notes due 2005, Series B, and 14%
Senior Notes due 2005, Series B/EN.*
4.4 Forms of Series B Note and Series B/EN Note: Incorporated by
reference to Exhibit 4.2 to the 1997 Form S-4.
4.5.1 Indenture dated as of October 17, 1997 relating to Iridium
LLC's and Iridium Capital Corporation's 11 1/4% Senior Notes
due 2005, Series C: Incorporated by reference to Exhibit
4.5.1 to the 1998 Form S-4.
4.5.2 First Supplemental Indenture dated as of December 18, 1997
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 11 1/4% Senior Notes due 2005, Series C:
Incorporated by reference to Exhibit 4.5.2 to the 1998 Form
S-4.
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
4.5.3 Second Supplemental Indenture dated as of February 27, 1998
relating to Iridium Operating LLC's and Iridium Capital
Corporation's 11 1/4% Senior Notes due 2005, Series C.*
4.6 Forms of Series C Note and Series C/EN Note: contained in an
exhibit to Exhibit 4.5.1: Incorporated by reference to
Exhibit 4.6 to the 1998 Form S-4.
10.1 Form of Interest Exchange Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.2 to the Form
S-1.
10.2 Form of amended and restated Management Services Agreement
between IWCL, Iridium LLC and Iridium Operating LLC:
Incorporated by reference to Exhibit 10.2 to the 1998 Form
S-4.
10.3 Form of 1997 Subscription Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.4 to the Form
S-1.
10.4 Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January
14, 1997: Incorporated by reference to Exhibit 10.6 to the
Form S-1.+
10.5 Communications System Operations & Maintenance Contract
between Iridium LLC and Motorola, Inc. effective July 29,
1993, as amended and conformed on January 14, 1997:
Incorporated by reference to Exhibit 10.7 to the Form S-1.+
10.6 Terrestrial Network Development Contract between Iridium LLC
and Motorola, Inc. effective January 1, 1993, as amended and
conformed on January 14, 1997: Incorporated by reference to
Exhibit 10.8 to the Form S-1.+
10.7 Amendment No. 3 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc. effective
June 20, 1997: Incorporated by reference to Exhibit 10.7 to
the 1997 Form S-4.+
10.8 Support Agreement between Iridium LLC and Motorola, Inc.:
Incorporated by reference to Exhibit 10.9 to the Form S-1.
10.9 Agreement, executed as of December 16, 1996, between
Andersen Consulting LLC and Iridium LLC relating to the
development of business support systems: Incorporated by
reference to Exhibit 10.10 to the Form S-1.+
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of
Iridium: Incorporated by reference to Exhibit 10.11 to the
Form S-1.
10.11 Form of Warrant issued in respect of 14 1/2% Senior
Subordinated Discount Notes: Incorporated by reference to
Exhibit 10.13 to the Form S-1.
10.12 Warrant to purchase Series M Class 2 Interests dated July
29, 1993, as amended: Incorporated by reference to Exhibit
10.13 to the Form S-1.
10.13 Form of Gateway Authorization Agreement: Incorporated by
reference to Exhibit 10.14 to the Form S-1.
10.14 Guaranteed Bank Facility: Incorporated by reference to
Exhibit 10.15 to the Form S-1.
10.15 Amendment dated December 19, 1997 to Guaranteed Bank
Facility.*
10.16 Motorola Agreement regarding Guarantee: Incorporated by
reference to Exhibit 10.16 to the Form S-1.
10.17 Amended and Restated Agreement regarding Guarantee:
Incorporated by reference to Exhibit 10.17 to the 1997 Form
S-4.
10.18 Memorandum of Understanding with Motorola, Inc: Incorporated
by reference to Exhibit 10.18 to the 1997 Form S-4.
10.19 Form of Share Issuance Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.17 to the Form
S-1.
10.20 Purchase Agreement in respect of Series C Notes, dated
October 9, 1997: Incorporated by reference to Exhibit 10.20
to the 1998 Form S-4.
10.21 Exchange and Registration Rights Agreement: contained in an
annex to Exhibit 10.20: Incorporated by reference to Exhibit
10.21 to the 1998 Form S-4.
10.22 Iridium LLC Option Plan: Incorporated by reference to
Exhibit 10.5 to the Form S-1.++
10.23 Iridium LLC Selected Senior Officers' Supplementary
Retirement Plan: Incorporated by reference to Exhibit 10.27
to the 1997 Form S-4.
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
10.24 Agreement between Dr. Staiano and Iridium LLC: Incorporated
by reference to Exhibit 10.28 to the 1997 Form S-4.
10.25 Asset Transfer Agreement: Incorporated by reference to
Exhibit 10.25 to the 1998 Form S-4.
10.26 Consent of Arthur Andersen LLP to Contract Assignment:
Incorporated by reference to Exhibit 10.26 to the 1998 Form
S-4.
10.27 Consent of Motorola Inc. to Contract Assignment:
Incorporated by reference to Exhibit 10.27 to the 1998 Form
S-4.
10.28 Form of Credit Agreement among Iridium Operating LLC, Chase
Securities Inc., Barclays Capital, The Chase Manhattan Bank
and Barclays Bank PLC.*
10.29 Conditions Precedent to the Disbursement of the Term Loans
under Section 2.01(a) of the Credit Agreement.*
10.30 Regulatory and Technical Conditions Precedent to
availability of funding under the Credit Agreement.*
10.31 Form of Assignment and Acceptance under the Credit
Agreement.*
10.32 Form of Pledge and Security Agreement among Iridium
Operating LLC, each of the Subsidiaries and The Chase
Manhattan Bank.*
10.33 Form of Parent Security Agreement between Iridium LLC and
The Chase Manhattan Bank.*
10.34 Form of Subsidiary Guarantee Agreement between each of the
Subsidiary Guarantors and The Chase Manhattan Bank.*
10.35 Form of Subsidiary Guarantee Assumption Agreement.*
10.36 Form of Depositary Agreement between Iridium Operating LLC
and The Chase Manhattan Bank.*
10.37 Form of Motorola Consent under the Credit Agreement among
Motorola, Iridium Operating LLC and The Chase Manhattan
Bank.*
10.38 Form of Motorola Pledge Agreement between Motorola, Inc. and
The Chase Manhattan Bank.*
10.39 Form of Progress Certificate (Pre-Commercial Activation)
under the Credit Agreement.*
10.40 Form of Verification of Independent Technical Advisor under
the Credit Agreement.*
10.41 Form of Progress Certificate (Post-Commercial Activation)
under the Credit Agreement.*
10.42 Form of Borrowing Request under the Credit Agreement.*
11.1 Statement re Computation of Loss per Class A Common Share:
Iridium World Communications Ltd.*
11.2 Statement re Computation of Loss per Class 1 Interest:
Iridium LLC.*
12 Statement re Computation of Ratios: Iridium Operating LLC.*
21 Subsidiaries of the Registrants.*
23 Consent of KPMG Peat Marwick LLP.*
27.1 Financial Data Schedule -- Iridium World Communications,
Ltd.*
27.2 Financial Data Schedule -- Iridium LLC*
27.3 Financial Data Schedule -- Iridium Operating LLC*
99 Certain Factors Which May Affect Forward Looking
Statements.*
</TABLE>
- ---------------
* Filed herewith.
+ Confidential treatment previously granted in connection with the Form S-1 or
the 1997 Form S-4.
++ Management Compensation Plan.
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
IRIDIUM FACILITIES CORPORATION
FIRST. The name of the corporation is Iridium Facilities Corporation.
SECOND. The address of the corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 100 shares of Common Stock, and all such shares are to be
without par value.
FIFTH. The name and mailing address of the incorporator is Aretha
Jones, 1575 Eye Street, N.W., Suite 800, Washington, D.C., 20005.
SIXTH. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal by-laws of the corporation.
SEVENTH. Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the corporation.
<PAGE> 2
EIGHTH. Any action required or permitted to be taken by the holders of
Common Stock of the corporation, including but not limited to the election of
directors, may be taken by written consent or consents but only if such consent
or consents are signed by all holders of Common Stock.
NINTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as currently in effect or as the same may be hereafter be amended. No amendment,
modification or repeal of this Article NINTH shall adversely affect any right or
protection of a director that exists at the time of such amendment, modification
or repeal.
IN WITNESS WHEREOF, I have signed this certificate of incorporation
this 6th day of February 1998.
/s/ Aretha Jones
Aretha Jones
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
OF
IRIDIUM FACILITIES CORPORATION
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place either
within or without the State of Delaware as may be designated by the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders may
be called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting. A special meeting of stockholders shall be
called by the Secretary upon the written request, stating the purpose of the
meeting, of stockholders who together own of record a majority of the
outstanding shares of each class of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at
<PAGE> 2
which the adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. In the absence of a quorum of the holders of any class of
stock entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.4 of these by-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence of
the President by a Vice President, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary an Assistant Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary and any Assistant Secretary the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting
-2-
<PAGE> 3
of stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power, regardless of whether the interest with which it is
coupled is an interest in the stock itself or an interest in the Corporation
generally. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
revoking the proxy or another duly executed proxy bearing a later date with the
Secretary of the Corporation. Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors unless the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or represented by proxy at such meeting shall so
determine. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. In all other matters, unless otherwise provided by
law or by the certificate of incorporation or these by-laws, the affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders. Where a separate vote by class or classes is required,
the affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
certificate of incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall not be more than sixty nor
less than ten days before the date of such meeting. If no record date is fixed
by the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A
-3-
<PAGE> 4
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
-4-
<PAGE> 5
Section 1.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of one or
more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any director
may resign at any time upon written notice to the Board of Directors or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. Any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors. Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class or
-5-
<PAGE> 6
from any other cause may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director. Any
director elected or appointed to fill a vacancy shall hold office until the next
annual meeting of the stockholders and his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of
the Board of Directors one-third of the entire Board shall constitute a quorum
for the transaction of business. The vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board unless
the certificate of incorporation or these by-laws shall require a vote of a
greater number. In case at any meeting of the Board a quorum shall not be
present, the members of the Board present may adjourn the meeting from time to
time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in their absence
by a chairman chosen at the meeting.
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<PAGE> 7
The Secretary, or in the absence of the Secretary an Assistant Secretary, shall
act as secretary of the meeting, but in the absence of the Secretary and any
Assistant Secretary the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.9. Compensation of Directors. Unless otherwise restricted
by the certificate of incorporation or these by-laws, the Board of Directors
shall have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors or
in these by-laws, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by law
to be submitted to stockholders for approval, (ii) adopting, amending or
repealing these By-Laws or (iii) removing or indemnifying directors.
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<PAGE> 8
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the same
person unless the certificate of incorporation or these by-laws otherwise
provide.
Section 4.2. Term of Office; Resignation; Removal; Vacancies. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
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<PAGE> 9
death, resignation, removal or otherwise may be filled by the Board at any
regular or special meeting.
Section 4.3. Powers and Duties. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
representing the number of shares of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a
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<PAGE> 10
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
Section 6.4. Indemnification of Directors, Officers and Employees.
The Corporation shall indemnify to the full extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses,
including attorneys' fees, incurred by any such person in defending any such
action, suit or proceeding shall be paid or
-10-
<PAGE> 11
reimbursed by the Corporation promptly upon receipt by it of an undertaking of
such person to repay such expenses if it shall ultimately be determined that
such person is not entitled to be indemnified by the Corporation. The rights
provided to any person by this by-law shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any person arising
at any time with respect to events occurring prior to such amendment. For
purposes of this by-law, the term "Corporation" shall include any predecessor of
the Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation, partnership, joint venture,
trust or employee benefit plan; service "at the request of the Corporation"
shall include service as a director, officer or employee of the Corporation
which imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants or
beneficiaries; any excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and action by a
person with respect to an employee benefit plan which such person reasonably
believes to be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests of the
Corporation.
Section 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, if: (1) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is
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<PAGE> 12
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
ADOPTED this 6th day of February, 1998
/s/ Aretha Jones
---------------------------
Aretha Jones
Sole Incorporator
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<PAGE> 1
EXHIBIT 4.1.3
SECOND SERIES A NOTE
SUPPLEMENTAL INDENTURE
Dated as of February 27, 1998
This SECOND SERIES A NOTE SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of February 27, 1998, is made by and among IRIDIUM
FACILITIES CORPORATION (the "New Guarantor Subsidiary"), a Delaware corporation
and a subsidiary of IRIDIUM OPERATING LLC, a Delaware limited liability company
("Operating"), Operating and IRIDIUM CAPITAL CORPORATION, a Delaware limited
liability company, ("Capital" and together with Operating, the "Note Issuers")
on behalf of themselves and the existing Guarantor Subsidiaries (the "Existing
Guarantor Subsidiaries") under the Indenture referred to below, and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts bank and trust company, as trustee under
the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS Operating, a Delaware limited liability company and Capital,
a Delaware corporation, as joint and several obligors, have heretofore executed
and delivered to the Trustee an Indenture, dated as of July 16, 1997, as amended
by the First Series A Note Supplemental Indenture, dated as of December 19, 1997
(the "Indenture") providing for the issuance of an aggregate principal amount of
up to $300,000,000 of 13% Senior Notes due 2005, Series A (the "Series A Notes")
and the Initial Guarantors agreed to guarantee those obligations;
WHEREAS Section 4.15 of the Indenture provides that under certain
circumstances the Note Issuers are required to cause the New Guarantor
Subsidiary to execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee
all of the Note Issuers' obligations under the Series A Notes pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Note Issuers and Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Note Issuers, the Existing Guarantor Subsidiaries and
the Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Series A Notes as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
<PAGE> 2
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
Guarantee the Note Issuers' obligations under the Series A Notes on the terms
and subject to the conditions set forth in Article X of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Series A Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The recitals contained herein
shall be taken as statements of the Note Issuers and the Guarantor Subsidiaries
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
IRIDIUM FACILITIES CORPORATION,
By: /s/ Roy Grant
--------------------------
Roy Grant
Chief Financial Officer
IRIDIUM LLC, on behalf of
itself and the Existing
Guarantor Subsidiaries,
By: /s/ Roy Grant
--------------------------
Roy Grant
Vice President and
Chief Financial Officer
IRIDIUM CAPITAL CORPORATION
By: /s/ Roy Grant
--------------------------
Roy Grant
Vice President and
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY
as Trustee,
By: /s/ Paul D. Allen
--------------------------
Name: Paul D. Allen
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 4.3.3
SECOND SERIES B NOTE
SUPPLEMENTAL INDENTURE
Dated as of February 27, 1998
This SECOND SERIES B NOTE SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of February 27, 1998, is made by and among IRIDIUM
FACILITIES CORPORATION (the "New Guarantor Subsidiary"), a Delaware corporation
and a subsidiary of IRIDIUM OPERATING LLC, a Delaware limited liability company
("Operating"), Operating and IRIDIUM CAPITAL CORPORATION, a Delaware limited
liability company, ("Capital" and together with Operating, the "Note Issuers")
on behalf of themselves and the existing Guarantor Subsidiaries (the "Existing
Guarantor Subsidiaries") under the Indenture referred to below, and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts bank and trust company, as trustee under
the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS Operating, a Delaware limited liability company and Capital,
a Delaware corporation, as joint and several obligors, have heretofore executed
and delivered to the Trustee an Indenture, dated as of July 16, 1997, as amended
by the First Series B Note Supplemental Indenture, dated as of December 19, 1997
(the "Indenture") providing for the issuance of an aggregate principal amount of
up to $500,000,000 of 14% Senior Notes due 2005, Series B (the "Series B Notes")
and the Initial Guarantors agreed to guarantee those obligations;
WHEREAS Section 4.15 of the Indenture provides that under certain
circumstances the Note Issuers are required to cause the New Guarantor
Subsidiary to execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee
all of the Note Issuers' obligations under the Series B Notes pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Note Issuers and Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Note Issuers, the Existing Guarantor Subsidiaries and
the Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Series B Notes as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
<PAGE> 2
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
Guarantee the Note Issuers' obligations under the Series A Notes on the terms
and subject to the conditions set forth in Article X of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Series B Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The recitals contained herein
shall be taken as statements of the Note Issuers and the Guarantor Subsidiaries
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
IRIDIUM FACILITIES CORPORATION,
By: /s/ Roy Grant
------------------------------
Roy Grant
Chief Financial Officer
IRIDIUM LLC, on behalf of
itself and the Existing
Guarantor Subsidiaries,
By: /s/ Roy Grant
------------------------------
Roy Grant
Vice President and
Chief Financial Officer
IRIDIUM CAPITAL CORPORATION
By: /s/ Roy Grant
------------------------------
Roy Grant
Vice President and
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY
as Trustee,
By: /s/ Paul D. Allen
------------------------------
Name: Paul D. Allen
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 4.5.3
SECOND SERIES C NOTE
SUPPLEMENTAL INDENTURE
Dated as of February 27, 1998
This SECOND SERIES C NOTE SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture"), dated as of February 27, 1998, is made by and among IRIDIUM
FACILITIES CORPORATION (the "New Guarantor Subsidiary"), a Delaware corporation
and a subsidiary of IRIDIUM OPERATING LLC, a Delaware limited liability company
("Operating"), Operating and IRIDIUM CAPITAL CORPORATION, a Delaware limited
liability company, ("Capital" and together with Operating, the "Note Issuers")
on behalf of themselves and the existing Guarantor Subsidiaries (the "Existing
Guarantor Subsidiaries") under the Indenture referred to below, and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts bank and trust company, as trustee under
the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS Operating, a Delaware limited liability company and Capital,
a Delaware corporation, as joint and several obligors, have heretofore executed
and delivered to the Trustee an Indenture, dated as of October 17, 1997, as
amended by the First Series C Note Supplemental Indenture, dated as of December
19, 1997 (the "Indenture") providing for the issuance of an aggregate principal
amount of up to $300,000,000 of 11 1/4% Senior Notes due 2005, Series C (the
"Series C Notes") and the Initial Guarantors agreed to guarantee those
obligations;
WHEREAS Section 4.15 of the Indenture provides that under certain
circumstances the Note Issuers are required to cause the New Guarantor
Subsidiary to execute and deliver to the Trustee a supplemental indenture
pursuant to which the New Guarantor Subsidiary shall unconditionally guarantee
all of the Note Issuers' obligations under the Series C Notes pursuant to a
Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Note Issuers and Existing Guarantor Subsidiaries are authorized to execute and
deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor Subsidiary, the Note Issuers, the Existing Guarantor Subsidiaries and
the Trustee mutually covenant and agree for the equal and ratable benefit of the
holders of the Series C Notes as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
<PAGE> 2
2. Agreement to Guarantee. The New Guarantor Subsidiary hereby
agrees, jointly and severally with all other Guarantor Subsidiaries, to
Guarantee the Note Issuers' obligations under the Series A Notes on the terms
and subject to the conditions set forth in Article X of the Indenture and to be
bound by all other applicable provisions of the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Series C Notes
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The recitals contained herein
shall be taken as statements of the Note Issuers and the Guarantor Subsidiaries
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
IRIDIUM FACILITIES CORPORATION,
By: /s/ Roy Grant
------------------------------
Roy Grant
Chief Financial Officer
IRIDIUM LLC, on behalf of
itself and the Existing
Guarantor Subsidiaries,
By: /s/ Roy Grant
------------------------------
Roy Grant
Vice President and
Chief Financial Officer
IRIDIUM CAPITAL CORPORATION
By: /s/ Roy Grant
------------------------------
Roy Grant
Vice President and
Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY
as Trustee,
By: /s/ Paul D. Allen
------------------------------
Name: Paul D. Allen
Title: Vice President
-3-
<PAGE> 1
EXHIBIT 10.15
EXECUTION COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 19, 1997 among:
IRIDIUM OPERATING LLC (as transferee of IRIDIUM LLC), a
limited liability company duly organized and validly existing under
the laws of the State of Delaware (the "Company");
the Lenders party to the below-mentioned Credit Agreement
(individually, a "Lender" and, collectively, the "Lenders"); and
THE CHASE MANHATTAN BANK, as administrative agent for the
Lenders under the Credit Agreement referred to below (in such
capacity, the "Administrative Agent").
WHEREAS, on or prior to the date hereof, Iridium LLC
transferred pursuant to that certain Asset Transfer Agreement dated as of
December 18, 1997 between Iridium LLC and the Company substantially all of its
assets to the Company and in conjunction with such transfer the Company assumed
all of the obligations of Iridium LLC under the Credit Agreement and the
Revolving Credit Notes;
WHEREAS, the Company, the Lenders and the Administrative Agent
are parties to a Credit Agreement dated as of August 21, 1996 (as heretofore
modified and supplemented and in effect on the date hereof, the "Credit
Agreement") among the Company, the Lenders, Chase Securities Inc. and Barclays
Capital, the investment banking division of Barclays Bank PLC (formerly, BZW, a
division of Barclays Bank PLC), each in its capacity as Global Arranger in
respect of the Credit Agreement, the Administrative Agent and Barclays Bank
PLC, as documentation agent, providing, subject to the terms and conditions
thereof, for loans to be made by said Lenders to the Company up to an original
aggregate principal amount of $750,000,000, which commitments have been
permanently reduced as of the date hereof to $450,000,000;
WHEREAS, concurrently herewith the Company is entering into a
new senior secured credit agreement with certain lenders providing, subject to
the terms and conditions thereof, for additional loans to be made by such
lenders to the Company in an aggregate principal amount up to $1,000,000,000;
WHEREAS, the Company, the Lenders and the Administrative Agent
wish to amend the Credit Agreement in certain respects, and Motorola, which has
guaranteed the prompt
Amendement No. 1
<PAGE> 2
-2-
payment in full of certain amounts owning under the Credit Agreement, wishes to
consent to such amendments and to confirm its guarantee. Accordingly, the
parties hereto hereby agree as follows:
SECTION 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
SECTION 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 4 hereof, the Credit Agreement shall
be amended as of the Effective Date (as defined in said Section 4) as follows:
2.01. Section 1.01 of the Credit Agreement shall be amended
by adding the following new definitions (to the extent not already included in
said Section 1.01) and inserting the same in the appropriate alphabetical
locations and amending in their entirety the following definitions (to the
extent already included in said Section 1.01), as follows:
"Amendment No. 1" shall mean Amendment No. 1 dated as of
December 19, 1997 to this Agreement.
"Average Life" shall mean, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing
(a) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal
payment of such Indebtedness multiplied by the amount of such payment
by (b) the sum of all such payments.
"Commercial Activation" shall mean the date on which the
Company commences generally available commercial service on the
IRIDIUM(R) global wireless communications system.
"Commitment Termination Date" shall mean June 30, 1999.
"LLC Agreement" shall mean the Limited Liability Company
Agreement of Iridium Operating LLC entered into by the members of the
Company, dated as of December 18, 1997, pursuant to which the Company
is organized, as the same shall be amended and otherwise modified and
in effect from time to time.
"Maximum Available Amount" shall mean, as of the date of
determination thereof, an amount (rounded downward to the
Amendment No. 1
<PAGE> 3
-3-
nearest $1,000,000) equal to 99 1/3% of the total Commitments in effect as of
such date of determination.
"Moody's" shall mean Moody's Investors Service, Inc. (or any
successor to the rating business thereof)
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations guaranteed by,
the United States of America for the payment of which obligations or
guarantee the full faith and credit of the United States of America is
pledged and which have a remaining Average Life of not more than 365
days from the date of acquisition thereof;
(b) investments in commercial paper maturing not more
than 270 days after the date of acquisition thereof and having, at
such date of acquisition, a credit rating of at least P-1 from S&P or
A-1 from Moody's (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act of 1933, as amended));
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing not more than 270 days after
the date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by, any
commercial bank or trust company organized under the laws of the
United States of America or any State thereof or any other country
which is a member of the Organization for Economic Cooperation and
Development, in each case which has a combined capital, surplus and
undivided profits of not less than $500,000,000 or its equivalent in
foreign currency, and whose debt is rated at least A- by S&P or A-3 by
Moody's (or such similar equivalent rating by a "nationally recognized
statistical rating organization" (as defined above));
(d) repurchase obligations with a term of not more than 7
days for securities described in clause (a) of this definition and
entered into with a financial institution which has a combined
capital, surplus and undivided profits of not less than $500,000,000
or its equivalent in foreign currency, and whose debt is rated at
least A- by from S&P or A-3 by Moody's (or such similar equivalent
rating by a "nationally recognized statistical rating organization"
(as defined above));
Amendment No. 1
<PAGE> 4
-4-
(e) Interest Rate Protection Agreements entered into by
the Company with one or more counterparties to protect itself from
fluctuations in floating interest rates with respect to Indebtedness
hereunder and other Indebtedness permitted pursuant to Section 8.07
hereof; and
(f) any mutual or similar fund investing exclusively in
Permitted Investments of the type described in clauses (a), (b) and/or
(c) above.
"S&P" shall mean the Standard & Poor's Ratings Services (or
any successor to the rating business thereof).
2.02. The definition of "Aggregate Projected Loan Amount" in
Section 1.01 of the Credit Agreement shall be amended by inserting a new
sentence at the end thereof to read as follows:
"For avoidance of doubt, in calculating the Aggregate Projected Loan
Amount at any time, any amount of principal of or interest on the
Loans, or any other amount owning hereunder, theretofore paid by
Motorola pursuant to Section 2 of the Motorola Guarantee Agreement
shall continue to be reflected as outstanding and unpaid in such
calculation."
2.03. The definition of "Permanent Financing" in Section 1.01
of the Credit Agreement shall be deleted in its entirety.
2.04. Section 2.01 of the Credit Agreement shall be amended
by inserting "(a)" at the beginning of such Section and by deleting the
reference to "six" in the proviso of the second sentence thereof and replacing
it with "ten." In addition, Section 2.01 of the Credit Agreement shall be
further amended by adding the following subsection:
"(b) Effective Date Reallocation. On the Effective Date (as
defined in Amendment No. 1, the "Effective Date") after giving effect
to the assignments contemplated by Section 4.08 of Amendment No. 1,
the following shall become effective:
(i) the Commitments of each Lender shall be as set
forth in Schedule I to Amendment No. 1, which shall be deemed
to replace in its entirety Schedule I hereto as in effect
immediately prior to giving effect to Amendment No. 1;
Amendment No. 1
<PAGE> 5
-5-
(ii) each Lender whose Commitment is decreasing (a
"Decreasing Lender") (relative to the "Commitment" of such
Lender immediately prior to giving effect to Amendment No. 1)
shall assign a portion of its Commitment to each Lender whose
Commitment is increasing (relative to the Commitment of such
Lender under the Credit Agreement immediately prior to giving
effect to Amendment No. 1) (an "Increasing Lender"), and each
such Increasing Lender agrees to take by assignment a portion
of the Commitment of such Decreasing Lender, such that
immediately after giving effect to all such assignments under
this Section 2.01(b)(ii), the Commitments of all Lenders are
as set forth in Schedule I hereto as referred to in Section
2.01(b)(i) hereof;
(iii) if after giving effect to the adjustments
under clauses (i) and (ii) above, any Decreasing Lender does
not hold Loans of each Type ratably with the other Lenders in
accordance with their respective Commitments, the Company
shall prepay (on a non-pro rata basis, notwithstanding
anything to the contrary in Section 4.02 hereof) the Loans of
each Type of such Lender in an amount such that after giving
effect to such non-pro rata payment and the making of Loans in
accordance with Section 2.01(b)(iv) hereof, all Lenders hold
Loans of each Type ratably in accordance with their respective
aggregate Commitments as in effect on the Effective Date;
(iv) if after giving effect to the adjustments under
clauses (i), (ii) and (iii) above, any Increasing Lender does
not hold Loans of each Type hereunder ratably with the Other
Lenders in accordance with their respective Commitments, such
Lender severally agrees to make Loans (on a non-pro rata
basis, notwithstanding anything to the contrary in Section
4.02 hereof) of the Types and in the amounts such that after
giving effect to the making of such Loans, all Lenders hold
Loans of each Type ratably in accordance with their respective
Commitments; and
(v) all "Interest Periods" under the Credit
Agreement as in effect immediately prior to giving effect to
Amendment No. 1 in respect of each Loan held by a Lender
immediately prior to giving effect to Amendment No. 1 (an
"Existing Loan") shall automatically be terminated, and
subject to Section
Amendment No. 1
<PAGE> 6
-6-
3.02 hereof, the Company shall be permitted to Continue such
Existing Loans as Eurodollar Loans of the same Type or (if
applicable) to Convert such Existing Loans into Base Rate
Loans of the appropriate Type hereunder.
After giving effect to the assignments and adjustments contemplated
above, the Lenders shall hold Loans hereunder ratably in accordance
with their respective Commitments as reflected in Schedule I hereto
(as referred to in Section 2.01(b)(i)). Notwithstanding anything to
the contrary in Section 11.06 hereof, any such assignments or
substitutions contemplated above shall be deemed to occur
automatically, without any requirement for additional documentation,
on the Effective Date."
2.05. Section 2.08(b) of the Credit Agreement shall be
amended by deleting the amount "$745,000,000" from clauses (i) and (ii) thereof
and replacing it, in each case, with the words "the Maximum Available Amount".
2.06. Section 4.04 of the Credit Agreement shall be amended
by deleting the reference to "$20,000,00" in the proviso thereof and replacing
it with "$15,000,000".
2.07. Section 6.02(e) of the Credit Agreement shall be
amended by deleting the amount "$745,000,000" and replacing it with the words
"the Maximum Available Amount".
2.08. Section 7.02 of the Credit Agreement shall be amended
by (a) replacing each reference to the words "of the Company" appearing in the
first two sentences thereof with the words "of Iridium LLC" and (b) inserting,
immediately after the date "December 31, 1995" in the last sentence thereof the
words "(and assuming the transfer of substantially all of the assets from
Iridium LLC to the Company effected on December 18, 1997)".
2.09. Section 7.12 of the Credit Agreement shall be amended
by replacing the second sentence thereof in its entirety with the following new
second sentence:
"The only member of the Company on the date of Amendment No. 1 is
Iridium LLC."
2.10. Section 8.05 shall be amended in its entirety to read
as follows:
"8.05 Prohibition of Fundamental Changes. The Company shall
not, and shall not permit any of its Subsidiaries to,
Amendment No. 1
<PAGE> 7
-7-
consolidate with or merge into any other Person or convey, transfer or
lease its Property substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or merge into
it or convey, transfer or lease its Property substantially as an
entirety to it, except that any (a) Subsidiary may enter into any such
transaction with the Company, so long as the Company is the surviving
entity and (b) any Subsidiary may enter into any such transaction with
another Subsidiary."
2.11. Section 8.06 shall be amended by deleting "and" from
the end of clause (k) thereof, replacing the period at the end of clause (1)
thereof with ";" adding at the end of such Section 8.06, the following clauses
(m) and (n):
"(m) Liens on Property to secure up to but no exceeding
$750,000,000 of Indebtedness (prior to Commercial Activation) or
$1,700,000,000 of Indebtedness (after Commercial Activation) permitted
under Section 8.07(g) hereof; and
(n) Liens arising in connection with the Iridium clearinghouse
function (as described in Article IV of the Gateway Authorization
Agreements between the investors party thereto and the Company)."
2.12. Section 8.09 shall be amended in its entirety to read
as follows:
"8.09 Restricted Payments. The Company will not, nor will it
permit any of its Subsidiaries to, declare or make any Restricted
Payment at any time, except that:
(a) so long as no Default shall have occurred and be
continuing, the Company may make distributions to Iridium LLC
to enable Iridium LLC to make distributions to the members of
Iridium LLC pursuant to Section 3.07(c) of the LLC Agreement
with respect to each such member's U.S. income tax liability
(if any);
(b) the Company may make any distribution to Iridium
LLC to enable Iridium LLC to redeem fractional interests of
its equity interests following the exercise of any warrants,
options or other rights to acquire any equity interests in
Iridium LLC by the holders thereof; and
Amendment No. 1
<PAGE> 8
-8-
(c) the Company may make payments (but no
prepayments) of principal of and interest on Indebtedness
incurred under Section 8.07(f) hereof as required in
accordance with the terms thereof, but only, in each case, to
the extent required by the indenture or other agreement
pursuant to which such Indebtedness was issued (and subject to
the subordination provisions applicable thereto).
Except as expressly limited by the preceding sentence, nothing herein
shall be deemed to prohibit the payment of distributions or dividends
by any Subsidiary of the Company to the Company or to any other
Subsidiary of the Company."
2.13. Section 8.13 of the Credit Agreement shall be deleted
in its entirety and replaced by "[Intentionally Left Blank]".
2.14. Section 9(n) of the Credit Agreement shall be deleted
in its entirety and replaced with the following:
"(n) Motorola shall cease to be the direct or indirect,
through a Wholly Owned Subsidiary, record and beneficial owner of at
least 13,266,713 Class 1 Interests of Iridium LLC, free and clear of
any Lien (as such number may be adjusted from time to time by stock
splits, stock dividends, recapitalization or other similar
transactions), or Iridium LLC shall cease to be the sole member of the
Company;".
2.15. Schedule IV of the Credit Agreement (and the title of
Schedule IV in the index to the Credit Agreement) shall be deleted in its
entirety and replaced with "[Intentionally Left Blank]".
2.16. Each reference in the Credit Agreement or the Revolving
Credit Notes to (a) "this Agreement", "the Credit Agreement" or words of
similar import shall be deemed to refer to the Credit Agreement as amended by
this Amendment No. 1, (b) "the Motorola Guarantee" or words of similar import
shall be deemed to refer to the Motorola Guarantee Agreement as amended by
Amendment No. 1 thereto dated as of the date hereof and (c) "the Company" shall
be deemed to refer to Iridium Operating LLC.
SECTION 3. Representations and Warranties. The Company
represents and warrants to the Lenders that:
Amendment No. 1
<PAGE> 9
-9-
(a) The representations and warranties set forth in Section 7
of the Credit Agreement are true and complete on the date hereof as if
made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" included reference to the Credit
Agreement as amended by this Amendment No. 1 and as if each reference
to any Schedule to the Credit Agreement included a reference to said
Schedule as amended or supplemented with the information set forth in
Attachment 1 to this Amendment No. 1 (except that any representation
and warranty that is expressly made "as of the date hereof", which
shall be deemed to mean "as of August 21, 1996", shall be true and
complete as of such date);
(b) Each of the Company and Iridium LLC had the full power
and authority and legal right to execute and deliver the Asset
Transfer Agreement, dated as of December 18, 1997, between Iridium LLC
and the Company (the "Asset Transfer Agreement"), pursuant to which
Iridium LLC has transferred substantially all of its assets and
liabilities to the Company and the Company has assumed all of the
obligations of Iridium LLC under the Credit Agreement and the
Revolving Credit Notes, and to perform its obligations thereunder.
The execution, delivery and performance by the Company and Iridium LLC
of the Asset Transfer Agreement and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company and Iridium LLC.
The execution, delivery and performance by the Company and Iridium LLC
of the Asset Transfer Agreement and the consummation of the Asset
Transfer described therein do not and will not (a) require any consent
or approval of any Person that has not already been obtained and that
remains in full force and effect, (b) violate any material provision
of any Government Rule or any order, writ, judgment, decree,
determination or award having applicability to the Company, Iridium
LLC or any of their respective Subsidiaries, (c) violate any provision
of the charter documents of Iridium LLC or the Company, (d) result in
a breach or constitute a default under any material indenture or
agreement to which the Company, Iridium LLC or any of their respective
Subsidiaries is a party or by which any of their respective property
is bound or affected or (e) result in or require the creation or
imposition of any Lien upon or with respect to any of the properties
or assets now owned or hereafter acquired by such Person (other than
Liens permitted under Section 8.06). The transfer of assets and
liabilities under the Asset Transfer Agreement has been given effect
and all of the assets of
Amendment No. 1
<PAGE> 10
-10-
Iridium LLC required to be transferred by Iridium LLC to the Company
under the Asset Transfer Agreement have been so transferred prior to
the date hereof; and
(c) No Default has occurred and is continuing as of the date
hereof.
SECTION 4. Conditions Precedent to Effectiveness. As
provided in Section 2 hereof, the amendments to the Credit Agreement set forth
in such Section 2 shall become effective as of the date hereof upon
satisfaction of the following conditions precedent (the "Effective Date"):
4.01. Execution by Parties. This Amendment No. 1 shall have
been executed and delivered by each of the parties hereto, and Motorola shall
have consented hereto by executing a counterpart of this Amendment No. 1 on the
signature line provided below.
4.02. Amendment to Motorola Guarantee Agreement. Motorola
and the Administrative Agent shall have executed and delivered an amendment to
the Motorola Guarantee Agreement in substantially the form of Exhibit A hereto,
and each of the conditions precedent set forth in such amendment shall have
been satisfied or (with the consent of the Majority Lenders) waived in
accordance with the terms thereof.
4.03. Corporate Action. The Administrative Agent shall have
received evidence of all action taken by the Company authorizing the execution,
delivery and performance of this Amendment No. 1.
4.04. Representations and Warranties. Each of the
representation and warranties made by the Company in Section 3 of this
Amendment No. 1 shall be true and correct on and as of the Effective Date, with
the same force and effect as if made on and as of the Effective Date, and the
Administrative Agent shall have received a certificate of a senior officer of
the Company dated as of the Effective Date to the effect set forth in clauses
(a), (b) and (c) of said Section 3.
4.05. Opinion of Counsel to the Company and its Subsidiaries.
The Administrative Agent shall have received an opinion of counsel to the
Company satisfactory to the Administrative Agent, dated as of the Effective
Date, in form and substance satisfactory to the Administrative Agent.
Amendment No. 1
<PAGE> 11
-11-
4.06. Interim Credit Agreement. The Credit Agreement dated
as of the date hereof among the Company, the lenders party thereto, Chase
Securities Inc. and Barclays Capital, the investment banking division of
Barclays Bank PLC, each in its capacity as Global Arranger in respect thereof,
Chase as Administrative Agent and Barclays Bank PLC as Documentation Agent
thereunder, providing for loans to be made by said lenders to the Company not
exceeding $1,000,000,000 in aggregate principal amount, shall have been
executed and delivered by each of the parties thereto.
4.07. Payments. The Administrative Agent shall have received
evidence of:
(i) payment in full of all commitment fees payable under the
Existing Credit Agreement accrued to but not including the Effective
Date;
(ii) payment of all interest in the Loans accrued to but not
including the Effective Date; and
(iii) payment of "break funding" costs payable under section
5.05 of the Credit Agreement associated with the termination of the
Interest Periods with respect to the Loans outstanding and the other
adjustments being made as of the Effective Date as contemplated by
Section 2.04 above to the extent necessary to effect the reallocation
referred to in such Section 2.04.
4.08. Assignment and Assumption Agreement. Immediately prior
to the Effective Date, in the event that any Lender under the Credit Agreement
prior to giving effect to this Amendment No. 1 is not contemplated to be a
Lender under the Credit Agreement after giving effect to this Amendment No. 1
(each a "Departing Lender"), each Departing Lender shall have executed and
delivered an Assignment and Assumption Agreement with one or more Lenders (to
be designated) that are continuing as Lenders under the Credit Agreement after
giving effect to this Amendment No. 1 pursuant to which all of the Loans and
Commitments of such Departing Lender are assigned to such continuing Lender(s),
and evidence of receipt by such Departing Lender pursuant to such Assignment
and Assumption Agreement of an amount equal to the principal of the Loan held
by it and all other amounts owing to it under the Credit Agreement as of the
Effective Date.
SECTION 5. Miscellaneous.
Amendment No. 1
<PAGE> 12
-12-
5.01. Assumption of Liability. By its execution and delivery
of this Amendment No. 1, the Company confirms that it has assumed all of the
obligations of Iridium LLC as borrower under the Credit Agreement and the
Revolving Credit Notes in connection with the transfer of assets referred to in
the first recital of this Amendment No. 1 and hereby agrees with the Lenders
and the Agents that it assumes, accepts, is obligated and otherwise agrees to
pay and perform all of such obligations in accordance with the terms of the
Credit Agreement and the Revolving Credit Notes as amended hereby. Upon the
effectiveness of the assumption of liability by the Company pursuant to this
Section 5.01, Iridium LLC shall be released from any obligation under the
Credit Agreement, and the Revolving Credit Notes, as amended hereby.
5.02. Consent to Amendment No. 1 to Motorola Guarantee
Agreement. Each of the Lenders hereby authorizes the Administrative Agent to
execute and deliver on its behalf an amendment to the Motorola Guarantee
Agreement substantially in the form of Exhibit A hereto.
5.03. Binding Effect. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect.
5.04. Counterparts. This Amendment No. 1 may be executed in
any number of counterparts, each of which shall be identical and all of which,
when taken together, shall constitute one and the same instrument, and any of
the parties hereto may execute this Amendment No 1 by signing any such
counterpart.
5.05. Governing Law. This Amendment No. 1 shall be governed
by and construed in accordance with the law of the State of New York.
Amendment No. 1
<PAGE> 13
-13-
IRIDIUM OPERATING LLC
By /s/ Roy Grant
-------------------------------
Name: Roy Grant
Title: Vice President and
Chief Financial Officer
LENDERS
-------
THE CHASE MANHATTAN BANK
By /s/ Bruce Borden
------------------------------
Name: Bruce Borden
Title: Vice President
BARCLAYS BANK PLC
By /s/ John Giannone
------------------------------
Name: John Giannone
Title: Director
ABN AMRO BANK N.V.
By /s/ Thomas M. Toerpe
------------------------------
Name: Thomas M. Toerpe
Title: Vice President
By /s/ Roxana Sopala
------------------------------
Name: Roxana Sopala
Title: Vice President
Amendment No. 1
<PAGE> 14
-14-
BANK OF AMERICA
By /s/ R. Vernon Howard, Jr.
--------------------------------------------
Name: R. Vernon Howard, Jr.
Title: Managing Director
BANK OF MONTREAL
By /s/ W.T. Calder
--------------------------------------------
Name: W.T. Calder
Title: Director
THE BANK OF NEW YORK
By /s/ James W. Whitaker
--------------------------------------------
Name: James W. Whitaker
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ F.C.H. Ashby
--------------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By /s/ Hajime Watanabe
--------------------------------------------
Name: Hajime Watanabe
Title: Deputy General Manager
Amendment No. 1
<PAGE> 15
-15-
BANQUE NATIONALE DE PARIS
By /s/ Frederick H. Moryl
--------------------------------------------
Name: Frederick H. Moryl
Title: Senior Vice President
BAYERISCHE HYPOTHEKEN-UND
WECHSEL-BANK
AKTIENGESELLSCHAFT,
NEW YORK BRANCH
By /s/ Chr. Walter
--------------------------------------------
Name: Chr. Walter
Title: Vice President
By /s/ Andreas Vick
--------------------------------------------
Name: Andreas Vick
Title: Vice President
CICB INC.
By /s/ Mathew Jones
--------------------------------------------
Name: Mathew Jones
Title: Authorized Signatory
CITIBANK, N.A.
By /s/ Anita J. Brickell
--------------------------------------------
Name: Anita J. Brickell
Title: Attorney-in-Fact
Amendment No. 1
<PAGE> 16
-16-
CREDIT LYONNAIS
CHICAGO BRANCH
By /s/ Nigel R. Carter
--------------------------------------------
Name: Nigel R. Carter
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By /s/ Thomas Lake
--------------------------------------------
Name: Thomas Lake
Title: Vice President
By /s/ Michael E. Terry
--------------------------------------------
Name: Michael E. Terry
Title: Assistant Vice President
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ Allison McCloskey
--------------------------------------------
Name: Allison McCloskey
Title: Authorized Agent
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By /s/ Toshihiro Hayashi
--------------------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
Amendment No. 1
<PAGE> 17
-17-
ROYAL BANK OF CANADA
By /s/ John P. Page
--------------------------------------------
Name: John P. Page
Title: Senior Manager
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By /s/ David A. Leech
--------------------------------------------
Name: David A. Leech
Title: Vice President
SOCIETE GENERALE
By /s/ Seth F. Asofsky
--------------------------------------------
Name: Seth F. Asofsky
Title: Vice President
TORONTO-DOMINION (NEW YORK),
INC.
By /s/ Debbie A. Greene
--------------------------------------------
Name: Debbie A. Greene
Title: Vice President
Amendment No. 1
<PAGE> 18
-18-
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ Robert H. Riley III
--------------------------------------------
Name: Robert H. Riley III
Title: Managing Director
By /s/ David G. Dickinson, Jr.
--------------------------------------------
Name: David G. Dickinson, Jr.
Title: Assistant Treasurer
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW
YORK BRANCH
By /s/ Sal Bathnelli
--------------------------------------------
Name: Sal Bathnelli
Title: Vice President
By /s/ Lisa Walker
--------------------------------------------
Name: Lisa Walker
Title: Associate
THE ASAHI BANK, LTD.
By /s/ Douglas E. Price
--------------------------------------------
Name: Douglas E. Price
Title: Senior Vice President
Amendment No. 1
<PAGE> 19
-19-
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
By /s/ Roy Marsden
--------------------------------------------
Name: Roy Marsden
Title: EVP-Americas
BANCA COMMERCIALE ITALIANA -
NEW YORK BRANCH
By /s/ Karen Purelis
--------------------------------------------
Name: Karen Purelis
Title: Vice President
By /s/ T. Gallonetto
--------------------------------------------
Name: T. Gallonetto
Title: Assistant Vice President
BANCA CRT S.p.A.
By /s/ Robert P. DeSantes
--------------------------------------------
Name: Robert P. DeSantes
Title: First Vice President
Head of Corporate Banking
By /s/ Eric S. Salar
--------------------------------------------
Name: Eric S. Salar
Title: Vice President
BANCA MONTE DEI PASCHI DI
SIENA SPA
By /s/ G. Natalicchi
--------------------------------------------
Name: G. Natalicchi
Title: Senior Vice President &
General Manager
By /s/ Brian R. Landy
--------------------------------------------
Name: Brian R. Landy
Title: Vice President
Amendment No. 1
<PAGE> 20
-20-
BANCA NAZIONALE DEL LAVORO
S.p.A. - NEW YORK BRANCH
By /s/ Mr. Carlo Vecchi
--------------------------------------------
Name: Mr. Carlo Vecchi
Title: Senior Vice President
By /s/ Mr. Roberto Mancone
--------------------------------------------
Name: Mr. Roberto Mancone
Title: Assistant Vice President
Senior Loan Officer
BANK AUSTRIA
AKTIENGESELLSCHAFT
By /s/ J. Anthony Seay
--------------------------------------------
Name: J. Anthony Seay
Title: Vice President
Bank Austria
By /s/ Jonathan B. Bakker
--------------------------------------------
Name: Jonathan B. Bakker
Title: Vice President
Bank Austria
BAYERISCHE LANDESBANK
GIROZENTRALE
CAYMAN ISLANDS BRANCH
By /s/ Peter Obermann
--------------------------------------------
Name: Peter Obermann
Title: Senior Vice President
By /s/ Alexander Kohnert
--------------------------------------------
Name: Alexander Kohnert
Title: Vice President
Amendment No. 1
<PAGE> 21
-21-
BHF-BANK AKTIENGESELLSCHAFT
By /s/ John Sykes
--------------------------------------------
Name: John Sykes
Title: Assistant Vice President
By /s/ Ralph Della Rocca
--------------------------------------------
Name: Ralph Della Rocca
Title: Assistant Treasurer
CREDIT AGRICOLE INDOSUEZ
By /s/ David Pouhl
--------------------------------------------
Name: David Pouhl
Title: First Vice President - Head of
Corporate Banking Chicago
By /s/ Katherine L. Abbott
--------------------------------------------
Name: Katherine L. Abbott
Title: First Vice President
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By /s/ Eric Longuet
--------------------------------------------
Name: Eric Longuet
Title: Vice President
By /s/ Marie-Rose Sensenbrenner
--------------------------------------------
Name: Marie-Rose Sensenbrenner
Title: Vice President
Amendment No. 1
<PAGE> 22
-22-
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ Alan E. McLintock
--------------------------------------------
Name: Alan E. McLintock
Title: Vice President
By /s/ W. Pieter C. Kodde
--------------------------------------------
Name: W. Pieter C. Kodde
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Seiichiro Ino
--------------------------------------------
Name: Seiichiro Ino
Title: Vice President
EXPORT DEVELOPMENT CORPORATION
By /s/ Peter Foran
--------------------------------------------
Name: Peter Foran
Title: Vice President
Information Technologies Team
By /s/ Robert Forbes
--------------------------------------------
Name: Robert Forbes
Title: Director
Financial Services
THE FUJI BANK, LIMITED
By /s/ Takeo Kada
--------------------------------------------
Name: Takeo Kada
Title: Senior Vice President
Amendment No. 1
<PAGE> 23
-23-
GULF INTERNATIONAL BANK B.S.C.
By /s/ Thomas E. Fitzherbert
--------------------------------------------
Name: Thomas E. Fitzherbert
Title: Vice President
By /s/ Abdel-Fai Tah Tahoun
--------------------------------------------
Name: Abdel-Fai Tah Tahoun
Title: Senior Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By /s/ Timm Reynolds
--------------------------------------------
Name: Timm Reynolds
Title: Senior Vice President
By /s/ Carlo Persico
--------------------------------------------
Name: Carlo Persico
Title: Deputy General Manager
KB FINANCIAL SERVICES (IRELAND)
By /s/ Cormac O Rourke
--------------------------------------------
Name: Cormac O Rourke
Title: General Manager
By /s/ Brian Dunne
--------------------------------------------
Name: Brian Dunne
Title: Associate Director
LANDESBANK HESSEN-THURINGEN
GIROZENTRALE
By /s/ Dorothy A. Lacher
--------------------------------------------
Name: Dorothy A. Lacher
Title: SVP, Manager - Structured Finance
By /s/ Michael Novack
--------------------------------------------
Name: Michael Novack
Title: Assistant Vice President
Structured Finance
Amendment No. 1
<PAGE> 24
-24-
MERITA BANK LTD-
NEW YORK BRANCH
By /s/ Charles J. Lansdown
--------------------------------------------
Name: Charles J. Lansdown
Title: Vice President
By /s/ Eric I. Mann
--------------------------------------------
Name: Eric I. Mann
Title: Vice President
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED
By /s/ Eiichi Akama
--------------------------------------------
Name: Eiichi Akama
Title: Vice President
THE NORTHERN TRUST COMPANY
By /s/ Keith M. O'Donnell
--------------------------------------------
Name: Keith M. O'Donnell
Title: Commercial Banking Officer
PNC BANK, NATIONAL ASSOCIATION
By /s/ Keith R. White
--------------------------------------------
Name: Keith R. White
Title: Assistant Vice President
Amendment No. 1
<PAGE> 25
-25-
THE SUMITOMO TRUST &
BANKING CO., LTD.
NEW YORK BRANCH
By /s/ Suraj P. Bhatia
--------------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate Finance Dept.
SWISS BANK CORPORATION,
STAMFORD BRANCH
By /s/ Reyo Jenal
--------------------------------------------
Name: Reyo Jenal
Title: Director - Banking Finance
By /s/ Dorothy L. McKinley
--------------------------------------------
Name: Dorothy L. McKinley
Title: Associate Director
Banking Products Support, N.A.
THE TOKAI BANK, LIMITED
By /s/ Kaoru Oda
--------------------------------------------
Name: Kaoru Oda
Title: Assistant General Manager
UNION BANK OF CALIFORNIA, N.A.
By /s/ Kristina M. Mouzakis
--------------------------------------------
Name: Kristina M. Mouzakis
Title: Assistant Vice President
Amendment No. 1
<PAGE> 26
-26-
YASUDA TRUST & BANKING CO., LTD.
By /s/ Rohn Laudenschlager
--------------------------------------------
Name: Rohn Laudenschlager
Title: Senior Vice President
ADMINISTRATIVE AGENT
--------------------
THE CHASE MANHATTAN BANK
By /s/ Bruce Borden
--------------------------------------------
Name: Bruce Borden
Title: Vice President
Amendment No. 1
<PAGE> 27
-27-
AGREED AND ACCEPTED:
MOTOROLA, INC.
By /s/ Garth L. Milne
-----------------------------------------------
Name: Garth L. Milne
Title: Senior Vice President and
Treasurer
<PAGE> 28
SCHEDULE I
Commitments
<TABLE>
<CAPTION>
Lenders Amount
- ------- ------
<S> <C>
THE CHASE MANHATTAN BANK $15,500,000
BARCLAYS BANK PLC 15,500,000
ABN AMRO BANK N.V. 12,000,000
BANK OF AMERICA 12,000,000
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH 12,000,000
BANQUE NATIONALE DE PARIS 12,000,000
BAYERISHCE HYPOTHEKEN-UND WECHSEL-
BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH 12,000,000
CIBC INC. 12,000,000
CITIBANK, N.A. 12,000,000
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES 12,000,000
THE FIRST NATIONAL BANK OF CHICAGO 12,000,000
THE MITSUBISHI TRUST AND BANKING
CORPORATON 12,000,000
ROYAL BANK OF CANADA 12,000,000
THE SANWA BANK, LIMITED
NEW YORK BRANCH 12,000,000
BANCA CRT S.P.A. 9,000,000
BANCA COMMERCIALE ITALIANA-
NEW YORK BRANCH 9,000,000
BAYERISCHE LANDESBANK GIROZENTRALE
CAYMAN ISLANDS BRANCH 9,000,000
BHF-BANK AKTIENGESELLSCHAFT 9,000,000
</TABLE>
Schedule I
<PAGE> 29
<TABLE>
<S> <C>
CREDIT LYONNAIS
CHICAGO BRANCH 9,000,000
EXPORT DEVELOPMENT CORPORATION 9,000,000
THE FUJI BANK, LIMITED 9,000,000
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A. 9,000,000
KB FINANCIAL SERVICES (IRELAND) 9,000,000
LANDESBANK HESSEN-THCRINGEN
GIROZENTRALE 9,000,000
MERITA BANK LTD. -
NEW YORK BRANCH 9,000,000
BANCA MONTE DEI PASCHI DI SIENA SPA 9,000,000
THE NORTHERN TRUST COMPANY 9,000,000
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBAK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH 6,000,000
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH 9,000,000
THE TOKAI BANK, LIMITED 9,000,000
BANCA NAZIONALE DEL LAVORO S.P.A. -
NEW YORK BRANCH 8,000,000
BANK OF MONTREAL 8,000,000
THE BANK OF NEW YORK 8,000,000
THE BANK OF NOVA SCOTIA 8,000,000
SOCIETE GENERALE 8,000,000
TORONTO-DOMINION (NEW YORK), INC. 8,000,000
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH 8,000,000
THE ASAHI BANK, LTD. 6,000,000
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED 6,000,000
BANK AUSTRIA AKTIENGESELLSCHAFT 6,000,000
</TABLE>
Schedule I
<PAGE> 30
<TABLE>
<S> <C>
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENE 6,000,000
CREDIT AGRICOLE INDOSUEZ 6,000,000
THE DA-ICHI KANGYO BANK, LTD. 6,000,000
GULF INTERNATIONAL BANK B.S.C. 6,000,000
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED 6,000,000
PNC BANK, NATIONAL ASSOCIATION 6,000,000
SWISS BANK CORPORATION,
NEW YORK BRANCH 6,000,000
UNION BANK OF CALIFORNIA, N.A. 6,000,000
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH 6,000,000
YASUDA TRUST & BANKING CO., LTD. 6,000,000
============
$450,000,000
</TABLE>
Schedule I
<PAGE> 1
EXHIBIT 10.28
IRIDIUM OPERATING LLC
CREDIT AGREEMENT
dated as of
December 19, 1997
$1,000,000,000
CHASE SECURITIES INC.
and
BARCLAYS CAPITAL,
the investment banking division of
BARCLAYS BANK PLC,
as Global Arrangers,
THE CHASE MANHATTAN BANK,
as Administrative Agent and Collateral Agent
and
BARCLAYS BANK PLC,
as Documentation Agent
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms........................................................................... 1
SECTION 1.02. Classification of Loans and Borrowings. ................................................ 28
SECTION 1.03. Terms Generally......................................................................... 29
SECTION 1.04. Accounting Terms; GAAP.................................................................. 29
ARTICLE II
THE CREDITS
SECTION 2.01. The Commitments......................................................................... 29
SECTION 2.02. Loans and Borrowings.................................................................... 30
SECTION 2.03. Requests for Borrowings................................................................. 31
SECTION 2.04. Funding of Borrowings................................................................... 32
SECTION 2.05. Interest Elections...................................................................... 32
SECTION 2.06. Termination and Reduction of the Commitments............................................ 33
SECTION 2.07. Repayment of Loans; Evidence of Debt.................................................... 34
SECTION 2.08. Optional Prepayment of Loans............................................................ 35
SECTION 2.09. Mandatory Prepayments and Reductions of Commitments..................................... 36
SECTION 2.10. Fees.................................................................................... 38
SECTION 2.11. Interest................................................................................ 39
SECTION 2.12. Alternate Rate of Interest.............................................................. 39
SECTION 2.13. Increased Costs......................................................................... 40
SECTION 2.14. Break Funding Payments.................................................................. 42
SECTION 2.15. Taxes................................................................................... 42
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs............................. 44
SECTION 2.17. Mitigation Obligations; Replacement of Lenders.......................................... 45
SECTION 2.18. Extension of Commitment Termination Date................................................ 46
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Qualification............................................................. 48
SECTION 3.02. Powers.................................................................................. 48
SECTION 3.03. Authorization........................................................................... 48
SECTION 3.04. No Conflicts............................................................................ 48
SECTION 3.05. Enforceability.......................................................................... 49
SECTION 3.06. Government Approvals.................................................................... 49
SECTION 3.07. Financial Condition; No Material Adverse Change......................................... 50
SECTION 3.08. Properties.............................................................................. 51
SECTION 3.09. Proceedings............................................................................. 52
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.10. Environmental Matters................................................................... 52
SECTION 3.11. Investment and Holding Company Status................................................... 53
SECTION 3.12. Taxes................................................................................... 53
SECTION 3.13. ERISA................................................................................... 53
SECTION 3.14. Disclosure.............................................................................. 53
SECTION 3.15. Use of Credit........................................................................... 54
SECTION 3.16. Debt Agreements......................................................................... 54
SECTION 3.17. Liens................................................................................... 54
SECTION 3.18. Capitalization.......................................................................... 54
SECTION 3.19. Subsidiaries............................................................................ 55
SECTION 3.20. Investments............................................................................. 55
SECTION 3.21. Restrictive Agreements.................................................................. 55
SECTION 3.22. Business................................................................................ 55
SECTION 3.23. Collateral; Security Interests.......................................................... 55
SECTION 3.24. Sufficiency of Project Documents........................................................ 56
SECTION 3.25. Employee Matters........................................................................ 57
SECTION 3.26. Other Project Parties................................................................... 57
SECTION 3.27. Asset Transfer.......................................................................... 57
SECTION 3.28. Absence of Immunity..................................................................... 58
ARTICLE IV
CONDITIONS
SECTION 4.01. Pre-Funding of Term Loans............................................................... 58
SECTION 4.02. Disbursement of Term Loans from the Pre-Funding Account................................. 59
SECTION 4.03. Pre-Commercial Activation Revolving Loans............................................... 59
SECTION 4.04. Post-Commercial Activation Loans........................................................ 60
ARTICLE V
INFORMATION
SECTION 5.01. Financial Statements and Other Information.............................................. 61
SECTION 5.02. Notices of Material Events.............................................................. 62
SECTION 5.03. Notices under Principal Project Documents............................................... 63
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01. Maintenance of Existence................................................................ 63
SECTION 6.02. Maintenance of Properties............................................................... 64
SECTION 6.03. Taxes................................................................................... 64
SECTION 6.04. Compliance with Laws.................................................................... 64
SECTION 6.05. Government Approvals.................................................................... 64
SECTION 6.06. Environmental Compliance................................................................ 65
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.07. Books and Records....................................................................... 65
SECTION 6.08. Inspection Rights....................................................................... 65
SECTION 6.09. Use of Proceeds......................................................................... 66
SECTION 6.10. Collateral; Security Interests.......................................................... 66
SECTION 6.11. Certain Obligations Respecting Subsidiaries............................................. 70
SECTION 6.12. License Subsidiaries.................................................................... 71
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.01. Indebtedness............................................................................ 71
SECTION 7.02. Liens................................................................................... 73
SECTION 7.03. Mergers, Consolidations, Etc............................................................ 73
SECTION 7.04. Sale of Assets.......................................................................... 73
SECTION 7.05. Purchase of Assets...................................................................... 73
SECTION 7.06. Investments............................................................................. 74
SECTION 7.07. Restricted Payments..................................................................... 74
SECTION 7.08. Transactions with Affiliates............................................................ 74
SECTION 7.09. Restrictive Agreements.................................................................. 75
SECTION 7.10. Leverage Ratio.......................................................................... 76
SECTION 7.11. Operating Leases........................................................................ 76
SECTION 7.12. Sales and Lease-Backs................................................................... 76
SECTION 7.13. Subordinated Obligations................................................................ 76
SECTION 7.14. Other Debt Obligations.................................................................. 77
SECTION 7.15. Organizational Documents................................................................ 77
SECTION 7.16. Nature of Business...................................................................... 78
SECTION 7.17. Fiscal Year............................................................................. 78
ARTICLE VIII
CERTAIN PROJECT-RELATED COVENANTS
SECTION 8.01. Project Insurance....................................................................... 78
SECTION 8.02. Accounts................................................................................ 80
SECTION 8.03. Approved Budget; Financial Projections.................................................. 81
SECTION 8.04. Adequate Financing...................................................................... 81
SECTION 8.05. Principal Project Documents............................................................. 81
SECTION 8.06. Other Project Documents................................................................. 83
SECTION 8.07. Restoration; Completion; Commercial Activation.......................................... 84
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Iridium Events of Defaults.............................................................. 85
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
SECTION 9.02. Motorola Events of Default.............................................................. 88
SECTION 9.03. Other Project Parties' Events of Default................................................ 91
SECTION 9.04. Other Events of Default................................................................. 92
ARTICLE X
THE AGENTS AND GLOBAL ARRANGERS
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices................................................................................ 96
SECTION 11.02. Waivers; Amendments.................................................................... 97
SECTION 11.03. Expenses; Indemnity; Damage Waiver..................................................... 98
SECTION 11.04. Successors and Assigns................................................................. 99
SECTION 11.05. Survival............................................................................... 102
SECTION 11.06. Counterparts; Integration.............................................................. 102
SECTION 11.07. Severability........................................................................... 102
SECTION 11.08. Right of Setoff........................................................................ 102
SECTION 11.09. Governing Law; Jurisdiction; Consent to Service of Process............................. 103
SECTION 11.10. WAIVER OF JURY TRIAL................................................................... 104
SECTION 11.11. Headings............................................................................... 104
SECTION 11.12. Confidentiality........................................................................ 105
SECTION 11.13. Effective Date......................................................................... 106
SECTION 11.14. No Third Party Beneficiaries........................................................... 106
</TABLE>
- iv -
<PAGE> 6
SCHEDULE I - Commitments
SCHEDULE II - Real Property
SCHEDULE III - Litigation
SCHEDULE IV - Environmental Matters
SCHEDULE V - Indebtedness
SCHEDULE VI - Liens
SCHEDULE VII - Subsidiaries
SCHEDULE VIII - Investments
SCHEDULE IX - Restrictive Agreements
SCHEDULE X - Employee Matters
SCHEDULE XI - Affiliate Agreements
APPENDIX 1 - Initial Approved Budget
APPENDIX 2 - Conditions Precedent
ANNEX A - Regulatory and Technical Conditions Precedent
APPENDIX 3 - Insurance Program
EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Security Agreement
EXHIBIT C - Form of Parent Security Agreement
EXHIBIT D - Form of Subsidiary Guarantee Agreement
EXHIBIT E - Form of Subsidiary Guarantee Assumption
Agreement
EXHIBIT F - Form of Depositary Agreement
EXHIBIT G - Form of Motorola Consent
EXHIBIT H - Form of Motorola Pledge Agreement
EXHIBIT I-1 - Form of Progress Certificate
(Pre-Commercial Activation)
EXHIBIT I-2 - Form of Verification of Independent Technical
Advisor
EXHIBIT I-3 - Form of Progress Certificate
(Post-Commercial Activation)
EXHIBIT J - Form of Borrowing Request
- v -
<PAGE> 7
CREDIT AGREEMENT dated as of December 19, 1997 among:
IRIDIUM OPERATING LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware
(the "Company");
each of the lenders that is a signatory hereto identified
under the caption "LENDERS" on the signature pages hereto and each
lender that becomes a "Lender" after the date hereof pursuant to
Section 11.04(b) (individually, a "Lender" and, collectively, the
"Lenders");
CHASE SECURITIES INC. and BARCLAYS CAPITAL, the investment
banking division of BARCLAYS BANK PLC ("Barclays Capital"), each in its
capacity as arranger in respect of this Agreement (each in such
capacity, together with its successors in such capacity, a "Global
Arranger" and, collectively, the "Global Arrangers");
THE CHASE MANHATTAN BANK, as administrative agent for the
Lenders (in such capacity, together with its successors in such
capacity, the "Administrative Agent") and as collateral agent (the
"Collateral Agent"); and
BARCLAYS BANK PLC, as documentation agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Documentation Agent").
The Company has requested that the Lenders make loans to the
Company in an aggregate principal amount not exceeding $1,000,000,000 at any one
time outstanding for the purpose of financing certain of the costs of
development of the Company's global mobile wireless communications system, and
the Lenders are prepared to make such loans upon the terms and conditions
hereof. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of
Credit Agreement
<PAGE> 8
- 2 -
1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the
Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder and under the other
Credit Documents (or certain of them).
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affected Property" means, with respect to any Event of Loss,
the property of the Company or any of its Subsidiaries lost, destroyed, damaged,
condemned (including, without limitation, through a Condemnation) or otherwise
taken as a result of such Event of Loss.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
Notwithstanding the foregoing, no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of the Company or any
of its Subsidiaries.
"Agents" means the Administrative Agent, the Collateral Agent
and the Documentation Agent.
"Agreement Regarding Guarantee" means the Amended and Restated
Agreement Regarding Guarantee dated as of July 11, 1997, amending and restating
the Agreement Regarding Guarantee dated as of August 21, 1996, between Motorola
and Iridium.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greater of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means, with respect to ABR Loans, 1-1/2%
and with respect to Eurodollar Loans, 2-3/4%, provided that, as of each of
October 1, 1998, January 1, 1999 and April 1, 1999, the Applicable Margin for
each Type of Loans shall be increased by 1/2 of 1% as of each such date.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's aggregate
Commitments. If the Term Commitments or Revolving Commitments (as the case may
be) have terminated or expired, the
Credit Agreement
<PAGE> 9
- 3 -
Applicable Percentages shall be determined based upon the applicable Commitments
most recently in effect, giving effect to any assignments.
"Approved Budget" means the Initial Approved Budget, each
other budget of Project Costs adopted or approved after the date of this
Agreement that covers at least the Budget Period, and each amendment thereof or
supplement thereto, subject to Section 2.18 or 8.03(a).
"Asset Transfer" means the transfer by Iridium LLC of
substantially all of its assets to the Company pursuant to the Asset Transfer
Agreement.
"Asset Transfer Agreement" means the Asset Transfer Agreement
dated as of December 18, 1997 between Iridium LLC and the Company.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 11.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent
and the Company.
"Average Life" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (a) the sum of
the products of the number of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness multiplied
by the amount of such payment by (b) the sum of all such payments.
"Barclays" means Barclays Bank PLC.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"board of directors" means, with respect to the Company or
Iridium LLC, its board of directors or any committee thereof duly authorized by
such board of directors to take action on its behalf.
"Borrowing" means Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect.
"Borrowing Request" means a request by the Company for a
Borrowing in accordance with Section 2.03, substantially in the form of Exhibit
J.
"Budget Period" means the period from and including January 1,
1998 to and including the Commitment Termination Date.
Credit Agreement
<PAGE> 10
- 4 -
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits in the London interbank
market.
"Capital Expenditures" means, for any period, expenditures
(including the aggregate amount of Capital Lease Obligations incurred during
such period) made by the Company or any of its Subsidiaries to acquire or
construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding Restorations and other repairs) during such
period computed in accordance with GAAP.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Chase" means The Chase Manhattan Bank.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Government
Authority after the date of this Agreement or (c) compliance by any Lender (or,
for purposes of Section 2.13(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Government Authority made or
issued after the date of this Agreement.
"Change Order" means any change, modification or variation in
(a) the Description of Work (as referred to in Article 2 of the Space System
Contract) and the related Statement of Work (contained in Exhibit B to the Space
System Contract) made pursuant to Article 10 of the Space System Contract or any
amendment thereto or (b) the Description of Work (as referred to in Article 2 of
the Terrestrial Network Development Contract) or any amendment thereto.
"Class", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans or Term Loans, and, when used in reference to any Commitment,
refers to whether such Commitment is a Revolving Commitment or a Term
Commitment.
Credit Agreement
<PAGE> 11
- 5 -
"Closing Date" means the date on which (a) all of the
conditions set forth in Section 4.01 shall have been satisfied or waived
pursuant to Section 11.02 and (b) all of the conditions set forth in Section
4.02 shall have been satisfied or waived pursuant to Section 11.02.
"Collateral" means the "Collateral" as such term is defined in
the respective Security Documents.
"Collateral Agent" means Chase in its capacity as collateral
agent under the Security Documents (or certain of them).
"Commercial Activation" means the date on which the Company
commences generally available commercial service on the IRIDIUM System, provided
that the following shall have also been completed: (a) subscriber trials with at
least five gateways; and (b) the first productions runs of the subscriber units
and message termination devices for the IRIDIUM System.
"Commitment" means a Revolving Commitment or Term Commitment,
or any combination thereof (as the context requires).
"Commitment Termination Date" means September 30, 1998, as the
same may be extended pursuant to Section 2.18.
"Company LLC Agreement" means the Limited Liability Company
Agreement of Iridium Operating LLC dated as of December 18, 1997 pursuant to
which the Company is organized.
"Condemnation" means the condemnation or seizure by a
Government Authority of, or requisition or taking by a Government Authority of
title to, all or any portion of the property of the Company or any of its
Subsidiaries under power of eminent domain or otherwise.
"Condemnation Proceeds" means all compensation, awards,
damages and other payments received by the Company or any of its Subsidiaries as
a result of any Condemnation.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.
"Controlling" has the meaning correlative to the term
"Control."
"Controlled" has the meaning correlative to the term
"Control."
Credit Agreement
<PAGE> 12
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"Credit Documents" means, collectively, this Agreement, the
promissory notes (if any) issued hereunder, the Security Documents, the
Subsidiary Guarantee Agreement and the Motorola Agreements.
"Credit Parties" means, collectively, the Company and each of
the Subsidiary Guarantors.
"Debt Incurrence" means the incurrence by the Company or any
of its Subsidiaries of any Indebtedness.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Depositary Agreement" means the Deposit, Disbursement and
Account Control Agreement substantially in the form of Exhibit F between the
Company, the Collateral Agent and the Depositary Bank.
"Depositary Bank" means Chase in its capacity as depositary
bank under the Depositary Agreement.
"Development" means the designing, development, acquisition,
construction, manufacture, installation, leasing, licensing, testing,
completion, delivery, acceptance, activation, operation, maintenance,
restoration, improvement, use and ownership of the Project and the financing
thereof (whether through the issuance of debt or equity securities or
otherwise).
"Dispose" has the meaning correlative to the term
"Disposition."
"Disposition" means any sale, assignment, transfer or other
disposition of assets (whether now owned or hereafter acquired) of the Company
or any of its Subsidiaries by the Company or any of its Subsidiaries to any
other Person (other than any such sale, assignment, transfer or other
disposition constituting an Event of Loss).
"Dollars" or "$" refers to lawful money of the United States
of America.
"Domestic Subsidiary" means each Subsidiary of the Company
that is organized under the laws of the United States of America or any
political subdivision thereof.
"Environmental Claim" means, with respect to any Person, any
written notice, claim, administrative, regulatory or judicial action, suit,
judgment, written demand or other written communication by any other Person
alleging or asserting such Person's liability for investigatory costs, cleanup
costs, governmental response costs, damages to natural resources or
Credit Agreement
<PAGE> 13
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other property of such Person, personal injuries, fines, penalties or other
actions arising out of, based on or resulting from (a) the presence, Use,
threatened Release or Release into the environment of any Hazardous Material at
any location, whether or not owned by such Person or (b) any fact, circumstance,
condition or occurrence forming the basis of any violation, or alleged
violation, of any Environmental Law or other failure, or alleged failure, to
comply with the requirements of any Environmental Law.
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Government Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to environmental health and safety matters.
"Equity Issuance" means (a) any issuance or sale by the
Company or any of its Subsidiaries of (i) any of its membership interests,
capital stock or other equity interests, (ii) any warrants or options
exercisable in respect thereof or (iii) any other security or instrument
representing an equity interest in the Company or any of its Subsidiaries (but
excluding, in the case of any convertible security, the equity interests of any
Person other than the Company or any of its Subsidiaries into which such
convertible security is convertible) or (b) the receipt by the Company or any of
its Subsidiaries after the date hereof of any capital contribution (whether or
not evidenced by any equity security issued by the recipient of such
contribution).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the U.S. Tax Code, or, solely for purposes of
Section 302 of ERISA and Section 412 of the U.S. Tax Code, is treated as a
single employer under Section 414 of the U.S. Tax Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the U.S. Tax Code or Section 302 of ERISA), whether or
not waived; (c) the filing pursuant to Section 412(d) of the U.S. Tax Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (d) the incurrence by the Company or any of
its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Company or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by the Company or any of its ERISA Affiliates of
any liability with respect to the withdrawal or partial withdrawal from any Plan
or Multiemployer Plan; or (g) the receipt by the
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<PAGE> 14
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Company or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Company or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article IX.
"Event of Loss" means, with respect to any property of the
Company or any of its Subsidiaries, any loss of, destruction of or damage to, or
any condemnation (including, without limitation, a Condemnation) or other taking
by a Government Authority of, such property of the Company or any such
Subsidiary.
"Excluded Debt Incurrence" means Indebtedness incurred by the
Company or its Subsidiaries under one of the specified clauses of Section 7.01
(other than clause (i) thereof).
"Excluded Disposition" means any Disposition permitted under
one of the specified clauses of Section 7.04 (other than clause (b) thereof).
"Excluded Equity Issuance" means (a) any issuance or sale of
capital stock or other equity interests by any Subsidiary of the Company to the
Company or any Wholly Owned Subsidiary of the Company, (b) any capital
contribution by the Company or any Wholly Owned Subsidiary of the Company to any
Subsidiary of the Company, (c) any capital contribution made by Iridium LLC in
the Company from the proceeds of additional membership interests issued by
Iridium LLC pursuant to the Reserve Capital Call Obligations or (d) any other
Equity Issuance to the extent the proceeds thereof are used, or are committed to
be used (and are actually so used within 180 days of such issuance), to pay
Project Costs for the Budget Period.
"Excluded Taxes" means, with respect to the Administrative
Agent, any Lender or any other recipient of any payment to be made by or on
account of any obligation of the Company hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Company is located and (c) in the case of
a Foreign Lender (other than an assignee pursuant to a request by the Company
under Section 2.17(b)), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement or is attributable to such Foreign Lender's failure or inability to
comply with Section 2.15(e), except to the extent that
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such Foreign Lender's assignor (if any) was entitled, at the time of assignment,
to receive additional amounts from the Company with respect to such withholding
tax pursuant to Section 2.15(a).
"Exposure" means, with respect to any Lender at any time, the
aggregate outstanding principal amount of such Lender's Loans at such time.
"FCC" means the U.S. Federal Communications Commission.
"FCC License" means the authorization of the FCC held by
Motorola Satellite Communications, Inc. as of the date of this Agreement with
respect to the construction, launch and operation of the IRIDIUM System as set
forth in FCC's Orders and Authorizations DA 95-131, released January 31, 1995,
DA 95-372 released February 28, 1995, FCC 96-279, released June 27, 1996, and DA
96-1789, released October 30, 1996.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Foreign Lender" means any Lender organized under the laws of
a jurisdiction other than the United States of America, any State thereof or the
District of Columbia.
"Foreign Subsidiary" means any Subsidiary of the Company other
than a Domestic Subsidiary.
"Gateway Authorization Agreements" means each gateway
authorization agreement between the investor party thereto and the Company (as
transferee of Iridium LLC).
"GAAP" means generally accepted accounting principles in the
United States of America, as in effect from time to time.
"General Receipt & Disbursement Account" has the meaning
assigned to such term in the Depositary Agreement.
"Government Approval" means any authorization, consent,
approval, license, lease, ruling, permit, concession, grant, franchise,
agreement, tariff, rate, certification, exemption, filing or registration by or
with any Government Authority relating to the Development of the
Credit Agreement
<PAGE> 16
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Project, the execution, delivery and performance of the Transaction Documents,
the creation, perfection and enforcement of the Liens contemplated by the
Security Documents and the other transactions contemplated hereby.
"Government Authority" means the government of any nation or
any political subdivision thereof, whether state, territory, province or
otherwise, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Government Rule" means any statute, law, regulation,
ordinance, rule, judgment, order, decree, injunction, permit, concession, grant,
franchise, license, agreement, directive, environmental guideline, policy,
restriction or rule of common law, requirement of, or other governmental
restriction or any similar form of decision of or determination by, or any
interpretation or administration of any of the foregoing by, any Government
Authority, whether now or hereafter in effect.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any direct or indirect obligation of the guarantor (a)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment thereof, (b) to purchase
or lease property, securities or services for the purpose of assuring the owner
of such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other hazardous substances or wastes of any nature
regulated as such pursuant to any applicable Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
Credit Agreement
<PAGE> 17
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"IBSS Agreement" means the Master Agreement executed on or
about December 16, 1996 between the Company (as transferee of Iridium LLC) and
Andersen Consulting, LLP, with respect to the Iridium Business Support System.
"Impair" has a meaning correlative to the term "Impairment."
"Impairment" means, with respect to any Project Document or
Government Approval, any rescission, termination, cancellation, repeal,
invalidity, suspension (other than by reason of an "excusable delay" (as such
term is used in any of the Principal Project Documents) to the extent such
suspension by reason of such excusable delay is expressly permitted by such
Principal Project Document), withdrawal, withholding, injunction, inability to
satisfy stated conditions to effectiveness or amendment, modification or
supplementation (other than, in the case of a Project Document, any such
amendment, modification or supplementation permitted by Section 8.05 or 8.06
and, in the case of a Government Approval, any such amendment, modification or
supplementation permitted by Section 6.05 and, in the case of the FCC License,
the transfer thereof to a Subsidiary of Motorola or to the Company as
contemplated in the Motorola Consent) of such Project Document or Government
Approval in whole or in part, which (in any case) is adverse to the interests of
any Project Party or the Lenders.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business that
are not overdue by more than 30 days or that are being contested in good faith),
(e) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty (excluding any ordinary
trade credit) and (i) all obligations, contingent or otherwise, of such Person
in respect of bankers' acceptances. The Indebtedness of any Person shall
include, without duplication, the Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person's ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor. Indebtedness shall
refer to, in the case of Indebtedness issued at a discount, the accreted value
thereof.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
Credit Agreement
<PAGE> 18
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"Independent Advisors" means the Independent Insurance
Advisor, the Independent Market Consultant and the Independent Technical
Advisor.
"Independent Insurance Advisor" means Sedgwick James of New
Jersey, Inc., or any other Person from time to time appointed by the Global
Arrangers with the consent of the Company to act as insurance advisor for and on
behalf of the Lenders for the purposes of this Agreement and the transactions
contemplated hereby.
"Independent Market Consultant" means Coopers & Lybrand,
L.L.P., or any other Person from time to time appointed by the Global Arrangers
with the consent of the Company to act as advisor with respect to the potential
market for the Company's voice and paging services for and on behalf of the
Lenders for the purposes of this Agreement and the transactions contemplated
hereby.
"Independent Technical Advisor" means Arthur D. Little, Inc.,
or any other Person from time to time appointed by the Administrative Agent with
the consent of the Company to act as technical advisor for and on behalf of the
Lenders for the purposes of this Agreement and the transactions contemplated
hereby.
"Information Memorandum" means the Confidential Information
Memorandum dated October 1997 with respect to the credit facilities provided for
in this Agreement.
"Initial Approved Budget" means the budget for Project Costs
for the fiscal year ending December 31, 1998, approved on October 15, 1997 by
the board of directors of Iridium LLC and attached as Appendix 1.
"Intellectual Property" means patents, patent rights, patent
applications, licenses, inventions, know-how, copyrights, trademarks, trademark
registrations, service marks, service mark registrations, trade names or other
intellectual property, including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures, but
excluding any Government Approvals.
"Interest Election Request" means a request by the Company to
convert or continue a Borrowing in accordance with Section 2.05.
"Interest Payment Date" means (a) with respect to any ABR
Loan, each Quarterly Date and (b) with respect to any Eurodollar Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months' duration after the first day of
such Interest Period.
Credit Agreement
<PAGE> 19
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"Interest Period" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the Company may elect; provided that (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Investment" means, for any Person, (a) the acquisition
(whether for cash, property, services or securities) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale), (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 180 days arising in connection with the
sale of inventory or supplies by such Person in the ordinary course of business,
(c) the entering into of any Guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person and (d) the entering into of any Hedging Agreement.
"Iridium Capital" means Iridium Capital Corporation, a
Delaware corporation.
"Iridium Financial Projections" means the financial
projections of Iridium LLC and its Subsidiaries contained in Section 10 of the
Information Memorandum.
"Iridium IP" means Iridium IP LLC, a Delaware limited
liability company.
"Iridium LLC" means Iridium LLC, a Delaware limited liability
company.
"Iridium LLC Agreement" means the Limited Liability Company
Agreement of Iridium LLC dated as of July 29, 1996, pursuant to which Iridium
LLC is organized.
"Iridium LLC Members" means each of the holders from time to
time of membership interests of Iridium LLC.
Credit Agreement
<PAGE> 20
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"Iridium Roaming" means Iridium Roaming LLC, a Delaware
limited liability company.
"IRIDIUM System" means the Company's global mobile wireless
communications system as described in the Information Memorandum.
"ITU" means the International Telecommunication Union.
"Lenders" means the Persons listed on Schedule I and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Dow Jones
Markets Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to Dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for Dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the LIBO Rate with
respect to such Eurodollar Borrowing for such Interest Period shall be the rate
at which Dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative
Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"License Subsidiary" shall mean any Subsidiary of the Company
established for the purpose of holding a Telecommunications Approval pursuant to
Section 6.12.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset and (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset.
"LLC Agreements" means the Company LLC Agreement and the
Iridium LLC Agreement.
"Loans" means the loans made by the Lenders to the Company
pursuant to this Agreement.
Credit Agreement
<PAGE> 21
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"Loss Proceeds" means, with respect to any Event of Loss,
insurance proceeds, condemnation awards (including, without limitation,
Condemnation Proceeds) or other compensation, awards, damages and other payments
or relief (exclusive, in each case, of the proceeds of liability insurance and
business interruption insurance and other payments for interruption of
operations) with respect to any Event of Loss.
"Management Services Agreement" means the Amended and Restated
Management Services Agreement dated as of December 18, 1997 among, Iridium World
Communications Ltd., Iridium LLC and the Company with respect to the provision
of management, personnel and administrative services by Iridium LLC to the
Company.
"Margin Stock" means "margin stock" within the meaning of
Regulations G, T, U and X of the Board.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, assets, condition (financial or otherwise) or
prospects of the Company and any of its Subsidiaries taken as a whole, (b) the
ability of the Credit Parties (taken as a whole) to perform their respective
obligations under any Credit Document to which any of them is a party, (c) the
validity or enforceability of the Liens under any Security Document or on the
Collateral thereunder or the validity or enforceability of the Credit Documents,
(d) the ability of Motorola to perform its obligations under any Motorola
Agreement or Principal Project Document to which it is a party or (e) the
Development or timely achievement of completion of the Project.
"Maturity Date" means the Commitment Termination Date.
"Moody's" means Moody's Investors Service, Inc. (or any
successor to the rating business thereof).
"Mortgaged Properties" has the meaning assigned to such term
in Section 6.10.
"Mortgages" means, collectively, one or more instruments of
mortgages, deeds of trust or similar instruments in favor of the Collateral
Agent (and/or one or more trustees or other Persons designated therein), in form
and substance satisfactory to the Administrative Agent, executed and delivered
by the Company or one of its Subsidiaries pursuant to Article IV or Section
6.10.
"Motorola" means Motorola, Inc., a Delaware corporation.
"Motorola Agreements" means, collectively, the Motorola
Consent and the Motorola Pledge Agreement.
Credit Agreement
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"Motorola Consent" means the Consent and Agreement
substantially in the form of Exhibit G between Motorola, the Company, the
Administrative Agent and the Collateral Agent.
"Motorola Default" means any Event of Default under Section
9.02.
"Motorola Domestic Subsidiary" means any Subsidiary of
Motorola, except any such Subsidiary (a) that neither transacts any substantial
business nor regularly maintains any substantial portion of its fixed assets
within the United States of America or (b) which is engaged primarily in
financing operations of Motorola or its Subsidiaries outside the United States
of America.
"Motorola Guarantee Agreement" means, collectively, (a) the
Guarantee Agreement dated as of August 21, 1996 between Motorola and Chase, as
administrative agent under the Motorola Guaranteed Credit Agreement, (b) any
guarantee issued by Motorola in respect of the Indebtedness permitted under
Section 7.01(c), and (c) any guarantee issued by Motorola in connection with any
Refinancing of any of the Indebtedness referred to in clause (a) or (b) of this
definition (or any subsequent Refinancing thereof).
"Motorola Guaranteed Credit Agreement" means the Credit
Agreement dated as of August 21, 1996 between the Company (as transferee of
Iridium LLC), the lenders party thereto, Chase Securities Inc. and Barclays
Capital, the investment banking division of Barclays, as global arrangers in
connection therewith, Chase as the administrative agent and Barclays as the
documentation agent thereunder, providing for loans in an aggregate principal
amount not exceeding $450,000,000 as of the date hereof.
"Motorola Pledge Agreement" means the Pledge Agreement
substantially in the form of Exhibit H between Motorola (or, if applicable, the
Subsidiary of Motorola directly owning the capital stock of the Subsidiary of
Motorola that holds the FCC License at the time of execution and delivery of the
Motorola Pledge Agreement pursuant to Article IV) and the Collateral Agent.
"Motorola's Net Worth" has the meaning assigned to such term
in clause (g) of Section 9.02.
"Motorola Vendor Financing" means the FOC Payments (as defined
in the Memorandum of Understanding dated as of July 11, 1997 between Motorola
and Iridium LLC as in effect on the date hereof) to the extent that a deferral
thereof is made pursuant to Section 6 thereof.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
Credit Agreement
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"Net Available Proceeds" means:
(a) in the case of any Disposition, the amount of Net Cash
Payments received by the Company and its Subsidiaries in connection
with such Disposition;
(b) in the case of any Event of Loss, the aggregate amount of
the Loss Proceeds received by the Company and its Subsidiaries in
respect of such Event of Loss, net of reasonable expenses incurred by
the Company and its Subsidiaries in connection therewith;
(c) in the case of any Equity Issuance, the aggregate amount
of all cash received by the Company and its Subsidiaries in respect of
such Equity Issuance, net of reasonable expenses incurred by the
Company and its Subsidiaries in connection therewith;
(d) in the case of any Debt Incurrence, the aggregate amount
of all cash received by the Company and its Subsidiaries in respect of
such Debt Incurrence, net of reasonable expenses incurred by the
Company and its Subsidiaries in connection therewith; and
(e) in the case of any Project Document Claim, the aggregate
amount of all cash received by the Company and its Subsidiaries in
respect of such Project Document Claim, net of reasonable expenses
incurred by the Company and its Subsidiaries in connection with the
collection thereof.
"Net Cash Payments" means, with respect to any Disposition,
the aggregate amount of all cash payments received by the Company and its
Subsidiaries directly or indirectly in connection with such Disposition (or
thereafter received in respect of any non-cash consideration paid to the Company
or any of its Subsidiaries in connection with such Disposition); provided that
Net Cash Payments shall be net of (a) the amount of any legal, title and
recording tax expenses, commissions and other fees and expenses paid or payable
by the Company and its Subsidiaries in connection with such Disposition and (b)
any repayments (and any reasonable expenses in connection therewith) by the
Company or any of its Subsidiaries of Indebtedness to the extent that (i) such
Indebtedness is secured by a Lien on the property that is the subject of such
Disposition and (ii) the transferee of (or holder of a Lien on) such property
requires that such Indebtedness be repaid as a condition to the purchase of such
property.
"O&M Contract" means the Operations and Maintenance Contract,
effective July 29, 1993, between Motorola and the Company (as transferee of
Iridium LLC).
"Operation and Maintenance Expenses" means, for any period,
the sum, computed without duplication, of the following: all (a) expenses of
administering and operating the Project and of maintaining it in good repair and
operating condition payable during such period plus (b) direct operating and
maintenance costs of the Project (including, without limitation, all payments
due and payable under the O&M Contract, the Terrestrial Network Development
Contract and
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other relevant Project Documents) payable during such period, plus (c) insurance
costs of the Company and its Subsidiaries during such period, plus (d) property
taxes due and payable by the Company and its Subsidiaries during such period,
plus (e) sales, use and excise taxes, value added taxes, taxes on
telecommunications services and other similar taxes due and payable by the
Company and its Subsidiaries during such period, plus (f) franchise taxes due
and payable by the Company and its Subsidiaries during such period, plus (g)
income Taxes due and payable by the Company and its Subsidiaries during such
period, plus (h) costs and fees incurred by the Company and its Subsidiaries in
connection with obtaining and maintaining in effect the Government Approvals
during such period, plus (i) legal, accounting, engineering and other
professional fees incurred in connection with any of the foregoing items during
such period, plus (j) marketing and sales expenses (including associated
commissions) of the Company and its Subsidiaries during such period, plus (k)
general and administrative expenses of the Company and its Subsidiaries for such
period plus (l) all fees payable to the Agents, the Global Arrangers or the
Lenders or any of their respective Affiliates hereunder or in connection with
the transactions contemplated hereby during such period plus (m) Capital
Expenditures during such period plus (n) all payments due and payable by the
Company to Iridium LLC under the Management Services Agreement.
"Other Project Document" means any contract or other written
agreement (other than the Credit Documents and the Principal Project Documents)
entered into or assumed by the Company or any of its Subsidiaries with respect
to the Development of the Project, including, without limitation, the Management
Services Agreement.
"Other Subordinated Debt" means Indebtedness of the Company
(in respect of which any of its Subsidiaries may be a guarantor on a
subordinated basis or in respect of which, in the case of any Subsidiary that is
a co-obligor of the Senior Notes, such Subsidiary may be a co-obligor on a
subordinated basis) that is subordinated in right of payment to the obligations
of the Company to pay principal of and interest on the Loans and all other
amounts owing hereunder and the obligations of the Company under any Hedging
Agreements entered into with any of the Lenders in respect of the Loans and that
shall (a) (i) have a maturity date no earlier than the maturity of the Senior
Notes, (ii) not provide for any amortization or redemption at any time prior to
the maturity of the Senior Notes (other than on terms comparable to the Senior
Notes), (iii) contain subordination provisions which, in the reasonable judgment
of the Administrative Agent, are consistent with subordination provisions for a
comparable offering of senior subordinated notes and (iv) contain other terms
and conditions (including, without limitation, covenants and events of default,
but excluding terms as to pricing) not more favorable to the Company than the
terms of the Senior Notes or (b) otherwise be approved by the Required Lenders.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Credit Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Credit
Document.
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"Parent Security Agreement" means a Pledge and Security
Agreement substantially in the form of Exhibit C between Iridium LLC and the
Administrative Agent.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Permitted Investments" means:
(a) direct obligations of, or obligations guaranteed by, the
United States of America for the payment of which obligations or
guarantee the full faith and credit of the United States of America is
pledged and which have a remaining Average Life of not more than 365
days from the date of acquisition thereof;
(b) investments in commercial paper maturing not more than 270
days after the date of acquisition thereof and having, at such date of
acquisition, a credit rating of at least P-1 from S&P or A-1 from
Moody's (or such similar equivalent rating by at least one "nationally
recognized statistical rating organization" (as defined in Rule 436
under the Securities Act of 1933, as amended));
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing not more than 270 days after the
date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any commercial bank
or trust company organized under the laws of the United States of
America or any State thereof or any other country which is a member of
the Organization for Economic Cooperation and Development, in each case
which has a combined capital, surplus and undivided profits of not less
than $500,000,000 or its equivalent in foreign currency, and whose debt
is rated at least A- by S&P or A-3 by Moody's (or such similar
equivalent rating by a "nationally recognized statistical rating
organization" (as defined above));
(d) repurchase obligations with a term of not more than 7 days
for securities described in clause (a) of this definition and entered
into with a financial institution which has a combined capital, surplus
and undivided profits of not less than $500,000,000 or its equivalent
in foreign currency, and whose debt is rated at least A- by from S&P or
A-3 by Moody's (or such similar equivalent rating by a "nationally
recognized statistical rating organization" (as defined above)); and
(e) any mutual or similar fund investing exclusively in
Permitted Investments of the type described in clauses (a), (b) and/or
(c) above.
"Permitted Liens" means:
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(a) Liens created pursuant to the Security Documents;
(b) Liens imposed by any Government Authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if, in the opinion of the Company,
adequate reserves with respect thereto are maintained on the books of
the Company or the affected Subsidiary, as the case may be, in
accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlords' or other like Liens arising in the ordinary
course of business that are not overdue for a period of more than 30
days or that are being contested in good faith and by appropriate
proceedings;
(d) Liens securing judgments but only to the extent for an
amount and for a period not resulting in an Event of Default;
(e) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, utilities, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of property or minor defects, irregularities or
imperfections in title, and encumbrances and statutory Liens, that, in
the aggregate, are not material in amount, and that do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company and
its Subsidiaries;
(h) Liens in favor of any Government Authority to secure
progress, advance or other payments, or pursuant to any contract,
license, permit or provision of any statute;
(i) bankers' Liens arising out of or with respect to the
credit balance maintained by the Company in one or more deposit
accounts;
(j) Liens on Property to secure the payment of all or any part
of the purchase price or construction cost thereof or to secure any
Indebtedness incurred prior to, at the time of, or within 180 days
after, the acquisition of such Property, the completion of any
construction or the commencement of full operation, for the purpose of
financing all or
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any part of the purchase price or construction cost thereof, provided
that such Lien shall not apply to any other property or asset of the
Company or its Subsidiaries;
(k) any Lien on any property or asset of the Company or any of
its Subsidiaries existing on the date hereof and set forth in Schedule
VI; provided that (i) such Lien shall not apply to any other property
or asset of the Company or any of its Subsidiaries and (ii) such Lien
shall secure only those obligations which it secures on the date hereof
(and any Refinancing of such obligations provided the amount secured by
such Lien shall not exceed the amount of such obligations being
Refinanced);
(l) Liens in connection with any Capital Lease Obligation
permitted under Section 7.01(j); and
(m) Liens arising in connection with the Iridium clearinghouse
function (as described in Article IV of the Gateway Authorization
Agreements).
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Government Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the U.S. Tax Code or Section 302 of ERISA, and in respect of which the
Company or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Post-Default Rate" has the meaning assigned to such term in
Section 2.11(c).
"Pre-Funding Account" has the meaning assigned to such term in
the Depositary Agreement.
"Pre-Funding Borrowing Date" means the date, on or before
December 19, 1997 on or prior to which the Company shall have satisfied the
conditions precedent set forth in Section 4.01 and on which the Term Lenders
shall make the Term Loans under Section 2.01(a).
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Chase as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
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"Principal Project Documents" means (a) the Space System
Contract, (b) the O&M Contract, (c) the Terrestrial Network Development
Contract, (d) all Gateway Authorization Agreements and (e) the IBSS Agreement.
"Progress Certificate" means a Progress Certificate,
substantially in the form of Exhibit I-1 or I-3, as applicable, duly completed
and signed by a Responsible Officer.
"Project" shall mean the IRIDIUM(R) global wireless
communications system described in the Information Memorandum and all systems,
property and businesses and activities related thereto.
"Project Accounts" has the meaning assigned to such term in
the Depositary Agreement.
"Project Costs" means, for any period, all costs and expenses
incurred or to be incurred by the Company and it Subsidiaries during such period
in connection with the Development of the Project or any portion thereof,
including, without limitation, all interest on and other regularly scheduled
payments of Indebtedness permitted hereunder payable during such period,
Operation and Maintenance Expenses for such period, and expenses (including,
without limitation, all legal fees and related disbursements) reasonably
incurred in such period by the Company and its Subsidiaries in connection with
the preparation, negotiation, execution and delivery of any of the Transaction
Documents.
"Project Document Claim" means any payment by any Project
Party (other than the Company or any of its Subsidiaries) to the Company or any
of its Subsidiaries under any Principal Project Document in respect of
liquidated damages, warranty payments, indemnity payments or other similar
amounts.
"Project Documents" means the Principal Project Documents and
the Other Project Documents.
"Project Party" means each Person (other than a Secured Party)
from time to time party to a Transaction Document.
"Quarterly Dates" means the 15th day of March, June, September
and December in each year (or, if any such day is not a Business Day, the next
Business Day), the first of which shall be the first such day after the date
hereof.
"Refinance" means, with respect to any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue Indebtedness in exchange or replacement for such Indebtedness.
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"Refinanced" has a meaning correlative to the term
"Refinance."
"Refinancing" has a meaning correlative to the term
"Refinance."
"Register" has the meaning set forth in Section 11.04(c).
"Related Business" means the business of developing, owning,
engaging in and dealing with all or any part of the business of the provision of
telecommunications services and businesses and (a) reasonably related extensions
thereof, including but not limited to the manufacture, purchase, ownership,
operation, leasing, licensing, financing and selling of, and generally dealing
in or with, communications satellites, earth stations, gateways, ground
infrastructure and subscriber equipment, used or intended for use with
telecommunications services and businesses and (b) any other activities that are
reasonably related to the provision of telecommunications services and
businesses.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Release" means, with respect to any Hazardous Material, any
release, spill, emission, emanation, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration of such Hazardous Material
into the indoor or outdoor environment, including, without limitation, the
movement of such Hazardous Material through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"Required Lenders" means, at any time, Lenders having
Revolving Exposures, Term Loans and unused Commitments representing more than
50% of the sum of the total Revolving Exposures, outstanding Term Loans and
unused Commitments at such time.
"Reserve Capital Call Obligations" means the obligations of 17
of the Iridium LLC Members to purchase up to 18,206,550 of additional Class 1
Interests of Iridium LLC at a price of $13.33 per interest pursuant to Section
4.02 of the Iridium LLC Agreement.
"Responsible Officer" means, with respect to the Company, its
chief executive officer, chief financial officer or general counsel or any
senior vice president of the Company or, with respect to any Borrowing Request
and Sections 2.09(a), 2.09(e), 5.02 and 8.01(d), any vice president of the
Company.
"Restoration" has a meaning correlative to the term "Restore."
"Restore" means, with respect to any Affected Property, to
rebuild, repair, restore or replace such Affected Property.
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"Restricted Payment" means distributions of the Company (in
cash, property or obligations) on, or other payments on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any portion of any
membership or other equity interest in the Company or of any warrants, options
or other rights to acquire any such membership or equity interest (or to make
any payments to any Person where the amount thereof is calculated with reference
to fair market or equity value of the Company or any Subsidiary).
"Revolving Commitment" means, with respect to each Revolving
Lender, the commitment, if any, of such Lender to make Revolving Loans,
expressed as an amount representing the maximum aggregate amount of such
Lender's Revolving Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.06 or 2.09 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 11.04. The initial amount of each Revolving Lender's Revolving
Commitment is set forth on Schedule I, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Revolving Commitment, as
applicable. The initial aggregate amount of the Lenders' Revolving Commitments
is $650,000,000.
"Revolving Exposure" means, with respect to any Revolving
Lender at any time, the outstanding principal amount of such Lender's Revolving
Loans at such time.
"Revolving Lenders" means a Lender with a Revolving Commitment
or, if the Revolving Commitments have terminated or expired, a Lender with
Revolving Exposure.
"Revolving Loan" means a Loan made pursuant to Section
2.01(b).
"Revolving Percentage" means, at any time, the percentage of
the aggregate sum of the Revolving Commitments and Term Commitments at such time
represented by the aggregate Revolving Commitments at such time.
"S&P" means the Standard & Poor's Ratings Services (or any
successor to the rating business thereof).
"Scheduled Commercial Activation Date" means September 23,
1998.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means the Agents and the Lenders.
"Security Agreement" means a Pledge and Security Agreement
substantially in the form of Exhibit B between the Company, the Subsidiary
Guarantors and the Collateral Agent.
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"Security Documents" means, collectively, the Security
Agreement, the Parent Security Agreement, the Mortgages, the Depositary
Agreement, the Motorola Pledge Agreement, the consents and agreements referred
to in Section VI of Part B of Appendix 2 and all Uniform Commercial Code
financing statements or other filings and/or recordings required by any thereof
to be filed or made, as the case may be, with respect to the security interests
in or Liens on the property created pursuant to any thereof.
"Senior Note Indentures" means, collectively, the Series A
Note Indenture, the Series B Note Indenture and the Series C Note Indenture.
"Senior Notes" means, collectively, the Series A Senior Notes,
the Series B Senior Notes and the Series C Senior Notes.
"Senior Subordinated Notes" means the Indebtedness of the
Company (as transferee of Iridium LLC) in respect of the 14 1/2% Senior
Subordinated Discount Notes due 2006 in an aggregate fully accreted principal
amount at the maturity of $480,000,000.
"Series A Note Indenture" means the Indenture dated as of July
16, 1997 among the Company (as transferee of Iridium LLC), Iridium Capital,
Iridium IP, Iridium Roaming and State Street Bank and Trust Company, as trustee
thereunder, in respect of the Series A Senior Notes.
"Series A Senior Notes" means 13% Senior Notes due 2005,
Series A and Series A/EN issued by Iridium LLC (which has assigned its
obligations thereunder to the Company) and Iridium Capital, as co-obligors,
under the Series A Note Indenture in an aggregate original principal amount of
$300,000,000, and the guarantees thereof by the Subsidiaries pursuant to the
Series A Note Indenture.
"Series B Note Indenture" means the Note Indenture dated as of
July 16, 1997 among the Company (as transferee of Iridium LLC), Iridium Capital,
Iridium IP, Iridium Roaming and State Street Bank and Trust Company, as trustee
thereunder, in respect of the Series B Senior Notes.
"Series B Senior Notes" means 14% Senior Notes due 2005,
Series B and Series B/EN issued by Iridium LLC (which has assigned its
obligations thereunder to the Company) and Iridium Capital, as co-obligors,
under the Series B Note Indenture in an aggregate original principal amount of
$500,000,000, and the guarantees thereof pursuant to the Series B Note
Indenture.
"Series C Note Indenture" means the Indenture dated as of
October 17, 1997 among the Company (as transferee of Iridium LLC), Iridium
Capital, Iridium IP, Iridium Roaming
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and State Street Bank and Trust Company, as trustee thereunder, in respect of
the Series C Senior Notes.
"Series C Senior Notes" means 11-1/4% Senior Notes due 2005,
Series C and Series C/EN issued by Iridium LLC (which has assigned its
obligations thereunder to the Company) and Iridium Capital, as co-obligors,
under the Series C Note Indenture in an aggregate original principal amount of
$300,000,000, and the guarantees thereof pursuant to the Series C Note
Indenture.
"Space System Contract" means the Space System Contract,
dated, effective as of July 29, 1993, between the Company (as transferee of
Iridium LLC) and Motorola.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D or
any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subordinated Obligations" means, collectively, (a) the Senior
Subordinated Notes, (b) Other Subordinated Debt, (c) the Company's financial
obligations in respect of any and all claims and rights by Motorola against the
Company arising as a result of Motorola's performance of its obligations under
the Motorola Guarantee Agreement, whether by subrogation, contribution,
reimbursement or otherwise, and including, without limitation, any and all
obligations owing by Iridium under Section 1 (other than the obligations
relating to compensation in the form of equity interests or warrants therefor)
of the Agreement Regarding Guarantee, and (d) any and all obligations owing by
the Company to Motorola in respect of the Motorola Vendor Financing.
"Subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as
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of such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent. Unless
otherwise specified, "Subsidiary" means a subsidiary of the Company.
"Subsidiary Guarantee Agreement" means a Subsidiary Guarantee
Agreement substantially in the form of Exhibit D between one or more Subsidiary
Guarantors and the Administrative Agent.
"Subsidiary Guarantee Assumption Agreement" means a Guarantee
Assumption Agreement substantially in the form of Exhibit E by an entity that,
pursuant to Section 6.11, is required to become a "Subsidiary Guarantor"
hereunder in favor of the Administrative Agent.
"Subsidiary Guarantor" means, as of the date hereof, each
Subsidiary identified in Schedule VII and, thereafter, each other Subsidiary
which becomes a Subsidiary Guarantor in accordance with Section 6.11.
"Taxes" means, with respect to any Person, all taxes,
withholdings, assessments, imposts, duties, governmental fees, governmental
charges or levies imposed directly or indirectly on such Person or its income,
profits or property by any Government Authority.
"Telecommunications Approvals" means all Government Approvals
of any applicable telecommunications authority (including all local and national
telecommunications approvals and licenses, including FCC licenses, and
compliance with ITU procedures and requirements) relating to the Development of
the Project, including, without limitation, for spectrum allocation, Ka-band,
L-band, interconnection, type approval, trans-border roaming and other business
operations of the Company and its Subsidiaries.
"Term Commitment" means, with respect to each Term Lender, the
commitment, if any, of such Lender to make Term Loans, expressed as an amount
representing the maximum aggregate amount of such Lender's Term Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.06 or 2.09 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04. The initial amount
of each Term Lender's Term Commitment is set forth on Schedule I, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Term Commitment, as applicable. The initial aggregate amount of the Lenders'
Term Commitments is $350,000,000.
"Term Exposure" means, with respect to any Term Lender at any
time, the outstanding principal amount of such Lender's Term Loans at such time.
"Term Lender" means a Lender with a Term Commitment or, if the
Term Commitments have terminated or expired, a Lender with Term Exposure.
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"Term Loan" means a Loan made pursuant to Section 2.01(a).
"Term Percentage" means, at any time, the percentage of the
aggregate sum of the Revolving Commitments and Term Commitments at such time
represented by the aggregate Term Commitments at such time.
"Terrestrial Network Development Contract" means the
Terrestrial Network Development Contract, effective January 1, 1993, between the
Company (as transferee of Iridium LLC) and Motorola.
"Transaction Documents" means the Credit Documents, the
Project Documents and the LLC Agreements.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"U.S. Bankruptcy Code" shall mean the United States Federal
Bankruptcy Code of 1978, as amended from time to time.
"U.S. Tax Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Use" shall mean, with respect to any Hazardous Material and
with respect to any Person, the generation, manufacture, processing,
distribution, handling, use, treatment, recycling or storage of such Hazardous
Material or transportation to or from the property of such Person of such
Hazardous Material.
"Wholly Owned Subsidiary" means, with respect to any Person,
any Subsidiary all of the capital stock or other equity interests of which are
owned by such Person (other than, in the case of a corporation, directors'
qualifying shares and shares or equity interests required to be held by foreign
nationals, in each case to the extent mandated by applicable law).
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Class
(e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class
and Type (e.g., an "ABR Revolving Loan"). Borrowings also may be classified and
referred to by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g.,
an "ABR Revolving Borrowing").
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SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified, including an amendment
and restatement thereof, but subject to any restrictions on such amendments,
supplements or modifications set forth herein, (b) any reference herein to any
Person shall be construed to include such Person's successors and assigns or, in
the case of any Government Authority, any entity succeeding to any or all of the
functions of such Government Authority, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Company notifies the Administrative Agent that the Company requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Company
that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
THE CREDITS
SECTION 2.01. The Commitments. (a) Subject to the satisfaction
of the conditions precedent set forth in Section 4.01 and the conditions of this
Section 2.01, the Company agrees to request, and each Term Lender agrees to
make, a Term Loan in the full amount of such Term Lender's Term Commitment in
effect as of the Pre-Funding Borrowing Date to the Company on the Pre-Funding
Borrowing Date; provided that the proceeds of such Term Loans shall be deposited
into the Pre-Funding Account and held and/or disbursed by the
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Depositary Bank solely in accordance with Section 4.04(b) of the Depositary
Agreement. The Company shall notify each Term Lender of the expected Pre-Funding
Borrowing Date not less than one Business Day prior thereto by delivering a
Borrowing Request to the Administrative Agent (or, if the Company intends to
borrow Eurodollar Term Loans on such date, three Business Days prior thereto).
Amounts prepaid in respect of Term Loans may not be reborrowed.
(b) Subject to the terms and conditions set forth herein, each
Revolving Lender agrees to make Revolving Loans to the Company from time to time
during the period from and including the Closing Date to but excluding the
earlier of the Commitment Termination Date and the date of termination of the
Revolving Commitments in an aggregate principal amount that will not result in
(i) such Revolving Lender's Revolving Exposure exceeding such Lender's Revolving
Commitment or (ii) the total Revolving Exposures exceeding the total Revolving
Commitments; provided that no Revolving Loans shall be made to the Company until
such time as Term Loans have been made to the Company in accordance with Section
2.01(a) and the conditions precedent to the disbursement of the proceeds of such
Term Loans set forth in Section 4.02 have been satisfied or waived in accordance
with the terms thereof. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Company may borrow, prepay and reborrow
Revolving Loans.
SECTION 2.02. Loans and Borrowings.
(a) Each Loan shall be made as part of a Borrowing consisting
of Loans of the same Class and Type made by the applicable Lenders ratably in
accordance with their respective Commitments of the applicable Class. The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Company may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Company to repay such Loan or any additional amount with respect thereto
in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate principal amount
of $10,000,000 or a larger multiple of $1,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate principal amount
equal to $10,000,000 or a larger multiple of $1,000,000; provided that an ABR
Borrowing may be in an aggregate principal amount that is equal to the entire
unused balance of the total Commitments. Borrowings of more than one Type may be
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outstanding at the same time; provided that there shall not at any time be more
than a total of twelve Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Company shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
SECTION 2.03. Requests for Borrowings. To request a Borrowing,
the Company shall notify the Administrative Agent of such request by telephone
(a) in the case of a Eurodollar Borrowing, not later than 10:00 a.m., New York
City time, three Business Days before the date of the proposed Borrowing or (b)
in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time,
the date of the proposed Borrowing. Each such telephonic Borrowing Request shall
be irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Borrowing Request signed by a Responsible
Officer. Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving
Borrowing or a Term Borrowing;
(ii) the aggregate principal amount of the requested
Borrowing;
(iii) the date of such Borrowing, which shall be a Business
Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(v) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period".
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Company shall be deemed
to have selected an Interest Period of one month's duration. Promptly, and in
any event at least one hour prior to the time each Lender shall make its Loans
hereunder, following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender and the Collateral
Agent of the details thereof and of the amount of such Lender's Loan to be made
as part of the requested Borrowing.
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SECTION 2.04. Funding of Borrowings.
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 12:00 noon, New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Company by
promptly crediting the amounts so received, in like funds, to the General
Receipt & Disbursement Account.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Company a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Company severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Company to but excluding the date of payment to the Administrative Agent, at (i)
in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case
of the Company, the interest rate applicable to ABR Loans. If such Lender pays
such amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
SECTION 2.05. Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in
the applicable Borrowing Request, and in the case of a Eurodollar Borrowing,
shall have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Company may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section. The Company
may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Company
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Company
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by delivery or
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telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Company.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) of this paragraph shall be specified
for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Company shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Company fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Company, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
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SECTION 2.06. Termination and Reduction of the Commitments.
(a) Unless previously terminated, the Term Commitments and the
Revolving Commitments shall terminate on the Commitment Termination Date.
(b) The Company may at any time terminate, or from time to
time reduce, the Commitments of either Class; provided that (i) each reduction
of the Commitments pursuant to this Section shall be in an amount that is
$25,000,000 or a larger multiple of $1,000,000, (ii) the Company shall not
terminate or reduce the Term Commitments except to the extent required under
Section 2.09, (iii) the Company shall not terminate or reduce the Revolving
Commitments if, after giving effect to any concurrent prepayment of the
Revolving Loans in accordance with Section 2.08, the total Revolving Exposures
would exceed the total Revolving Commitments, and (iv) each request for each
such reduction shall be accompanied by a certificate of a Responsible Officer
demonstrating (to the reasonable satisfaction of the Administrative Agent)
compliance by the Company with Section 8.04 after giving effect to such
reduction.
(c) The Company shall notify the Administrative Agent and the
Collateral Agent of any election to terminate or reduce the Commitments of
either Class under paragraph (b) of this Section at least three Business Days
prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt of any
notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Company pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments of either
Class delivered by the Company may state that such notice is conditioned upon
the effectiveness of other credit facilities or upon the issuance of other
indebtedness, in which case such notice may be revoked by the Company (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.
(d) The Commitments shall reduce automatically on the date of
any prepayment of Loans made pursuant to this Section or Section 2.09 in an
amount equal to the amount of such prepayment.
(e) Any termination or reduction of the Commitments shall be
permanent. Each reduction of the Commitments of a Class shall be made ratably
among the Lenders with respect to such Class in accordance with their respective
Commitments.
SECTION 2.07. Repayment of Loans; Evidence of Debt.
(a) The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan of such Lender on the Maturity Date.
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(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Company to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Type and Class
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender's
share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Company
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Company shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent and the Company.
SECTION 2.08. Optional Prepayment of Loans.
(a) The Company shall have the right at any time and from time
to time to prepay any Borrowing of either Class in whole or in part, subject to
the requirements of this Section and provided that each such prepayment that is
not a prepayment of a Borrowing in whole shall be in an aggregate principal
amount not less than $10,000,000.
(b) Prior to any optional prepayment of Borrowings hereunder,
the Company shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to paragraph
(c) of this Section; provided that each prepayment of Borrowings of either Class
shall be applied to prepay any outstanding ABR Borrowings of such Class before
any Eurodollar Borrowings of such Class. If the Company fails to make a timely
selection of the Borrowing or Borrowings to be prepaid, such prepayment shall be
applied, first, to prepay any outstanding ABR Borrowings of the applicable Class
and, second, to Eurodollar Borrowings of such Class in the order of the
remaining duration of their respective Interest Periods (the Borrowing with the
shortest remaining Interest Period to be prepaid first).
(c) The Company shall notify the Administrative Agent and the
Collateral Agent by telephone (confirmed by telecopy) of any optional prepayment
hereunder (i) in the case of
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prepayment of a Eurodollar Borrowing, not later than 10:00 a.m., New York City
time, three Business Days before the date of repayment or (ii) in the case of
prepayment of an ABR Borrowing, not later than 10:00 a.m., New York City time,
the date of prepayment. Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Borrowing or portion
thereof to be prepaid; provided that, if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.06, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.06. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.11.
SECTION 2.09. Mandatory Prepayments and Reductions of
Commitments.
(a) Dispositions. Without limiting the obligation of the
Company to obtain the consent of the Required Lenders pursuant to Section 7.04
to any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition other than any Excluded Disposition
(herein, the "Current Disposition"), and of all prior Dispositions (other than
any Excluded Disposition) as to which neither a prepayment nor a reduction of
Commitments has yet been made under this paragraph, shall exceed $5,000,000
then, promptly upon the occurrence of the Current Disposition, the Company will
deliver to the Administrative Agent a statement, certified by a Responsible
Officer, in form and detail reasonably satisfactory to the Administrative Agent,
of the amount of the Net Available Proceeds of the Current Disposition and of
all such prior Dispositions and, within 30 Business Days after the receipt of
the Net Available Proceeds of the Current Disposition, the Company shall prepay
the Loans, and/or the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 100% of the Net Available Proceeds of the Current
Disposition and such prior Dispositions in the manner and to the extent
specified in paragraph (f) of this Section.
(b) Equity Issuance. Within 30 Business Days after any Equity
Issuance (other than any Excluded Equity Issuance), the Company shall prepay the
Loans, and/or the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 100% of the Net Available Proceeds of such Equity
Issuance in the manner and to the extent specified in paragraph (f) of this
Section.
(c) Debt Incurrence. Without limiting the obligation of the
Company to obtain the consent of the Required Lenders pursuant to Section 7.01
to any incurrence of Indebtedness by the Company or any of its Subsidiaries not
otherwise permitted hereunder, within 30 Business Days after any Debt Incurrence
(other than any Excluded Debt Incurrence), the Company shall prepay the Loans,
and/or the Commitments shall be subject to automatic reduction, in an
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aggregate amount equal to 100% of the Net Available Proceeds of such Debt
Incurrence in the manner and to the extent specified in paragraph (f) of this
Section.
(d) Event of Loss. Within 30 Business Days after receipt of
the Net Available Proceeds of an Event of Loss (other than an Event of Loss (i)
as to which the Net Available Proceeds thereof, together with the Net Available
Proceeds of all previous Events of Loss covered by this clause (i) and not
theretofore applied to either a prepayment hereunder or to the Restoration of
the Affected Property, do not exceed $5,000,000 or (ii) as to which, unless an
Event of Default shall have occurred and be continuing, the Company shall have
notified the Collateral Agent pursuant to Section 4.02(b)(ii) of the Depositary
Agreement that it intends to Restore the Affected Property with respect to such
Event of Loss), the Company shall prepay the Loans and/or the Commitments shall
be subject to automatic reduction, in an aggregate amount equal to 100% of the
Net Available Proceeds of such Event of Loss and of such previous Events of Loss
in the manner and to the extent specified in paragraph (f) of this Section.
(e) Project Document Claims. In the event that the Net
Available Proceeds of any Project Document Claim (herein, the "Current
Payment"), and of all prior amounts received by the Company in respect of
Project Document Claims as to which neither a prepayment nor a reduction of
Commitments has yet been made under this paragraph, shall exceed $5,000,000 in
the aggregate then, promptly upon the receipt of the Current Payment, the
Company will deliver to the Administrative Agent a statement, certified by a
Responsible Officer, in form and detail reasonably satisfactory to the
Administrative Agent, of the aggregate amount of the Current Payment and of all
such prior payments and, within 30 Business Days after receipt of the Net
Available Proceeds of the Current Payment, will prepay the Loans, and/or the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Payment and such
prior payments in the manner and to the extent specified in paragraph (f) of
this Section.
(f) Application. Prepayments and/or reductions of Commitments
described in the foregoing paragraphs of this Section shall be applied ratably
as between the Term Commitments and the Revolving Commitment and with respect to
the respective Commitments, as follows:
(i) the aggregate amount of the Term Commitments shall be
reduced by an amount equal to the Term Percentage of the amount of such
prepayment and/or reduction (and to the extent that, after giving
effect to such reduction, the sum of the Term Exposures would exceed
the Term Commitments, the Company shall prepay Term Loans in an
aggregate amount equal to such excess); and
(ii) the aggregate amount of the Revolving Commitments shall
be reduced by an amount equal to the Revolving Percentage of such
prepayment and/or reduction (and to the extent that, after giving
effect to such reduction, the sum of the Revolving Exposures
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would exceed the Revolving Commitments, the Company shall prepay
Revolving Loans in an aggregate amount equal to such excess).
(g) Selection of Borrowings to be Prepaid. Prior to any
mandatory prepayment of Borrowings under this Section, the Company shall select
the Borrowing or Borrowings of each Class to be prepaid and shall specify such
selection in a notice to the Administrative Agent not less than three Business
Days prior to the date of such prepayment; provided that each prepayment of
Borrowings of either Class shall be applied to prepay any outstanding ABR
Borrowings of such Class before any other Borrowings of such Class. If the
Company fails to make a timely selection of the Borrowing or Borrowings to be
prepaid, such prepayment shall be applied, first, to prepay any outstanding ABR
Borrowings of the applicable Class and, second, to other Borrowings of such
Class in the order of the remaining duration of their respective Interest
Periods (the Borrowing with the shortest remaining Interest Period to be prepaid
first).
(h) Payment into Project Accounts. Nothing in this Section
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries hereunder or under the Depositary Agreement to deposit (or cause to
be deposited), promptly upon receipt, the proceeds in respect of any
Disposition, Equity Issuance, Debt Incurrence, Event of Loss or Project Document
Claim in the appropriate Project Account in accordance with the Depositary
Agreement.
SECTION 2.10. Fees.
(a) The Company agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee, which shall accrue at a rate per
annum equal to 1/2 of 1% on the average daily unused amount of the Commitment of
such Lender during the period from and including the date hereof to but
excluding the earlier of (i) the date such Commitment terminates and (ii) the
Commitment Termination Date. Accrued commitment fees shall be payable on each
Quarterly Date and on the earlier of the date the Commitment terminates and the
Maturity Date, commencing on the first such date to occur after the date hereof.
All commitment fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
(b) The Company agrees to pay to each Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Company and such Agent.
(c) All fees payable hereunder shall be paid on the due date
thereof, in immediately available funds, to the Administrative Agent for
distribution, in the case of commitment fees, to the Lenders entitled thereto.
Fees paid shall not be refundable under any circumstances.
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SECTION 2.11. Interest.
(a) The Loans comprising each ABR Borrowing shall bear
interest at a rate per annum equal to the Alternate Base Rate plus the
Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Company hereunder
is not paid when due, whether at stated maturity, upon acceleration, by
mandatory prepayment or otherwise, such overdue amount shall bear interest,
after as well as before judgment, at a rate per annum (the "Post-Default Rate")
equal to 2% plus the rate applicable to ABR Loans as provided in paragraph (a)
of this Section.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and upon termination of the
applicable Commitments; provided that (i) interest accrued pursuant to paragraph
(c) of this Section shall be payable on demand, (ii) in the event of any
prepayment of any Loan (other than a prepayment of an ABR Loan prior to the
Maturity Date), accrued interest on the principal amount prepaid shall be
payable on the date of such prepayment and (iii) in the event of any conversion
of any Eurodollar Borrowing prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate for such
Interest Period; or
(b) the Administrative Agent is advised by the Required
Lenders that the Adjusted LIBO Rate for such Interest Period will not
adequately and fairly reflect the cost to such
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Lenders of making or maintaining their Loans included in such Borrowing
for such Interest Period;
then the Administrative Agent shall give notice thereof to the Company and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Company and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing; provided that if the circumstances
giving rise to such notice affect only one Type of Borrowings, then the other
Type of Borrowings shall be permitted.
SECTION 2.13. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by
such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lenders of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Company will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.
Without limiting the rights and obligations of the Lenders and
the Company under Section 2.17, if any Lender requests compensation from the
Company under this Section, the Company may, by notice to such Lender (with a
copy to the Administrative Agent), suspend the obligation of such Lender
thereafter to make or continue Eurodollar Loans, or to convert ABR Loans into
Eurodollar Loans, until the Change in Law giving rise to such request ceases to
be in effect; provided that such suspension shall not affect the right of such
Lender to receive the compensation so requested. If the obligation of any Lender
to make Eurodollar Loans or to continue, or to convert ABR Loans into,
Eurodollar Loans shall be suspended pursuant to the preceding sentence, such
Lender's Eurodollar Loans shall be automatically converted into ABR Loans on the
last day(s) of the then current Interest Period(s) for Eurodollar Loans and,
unless
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and until such Lender gives notice as provided below that the Change in Law is
no longer in effect:
(x) to the extent that such Lender's Eurodollar Loans have
been so converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its ABR Loans; and
(y) all Loans that would otherwise be made or continued by
such Lender as Eurodollar Loans shall be made or continued instead as
ABR Loans, and all ABR Loans of such Lender that would otherwise be
converted into Eurodollar Loans shall remain as ABR Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the Change in Law that gave rise to the conversion of such Lender's
Eurodollar Loans pursuant to this Section is no longer in effect at a time when
Eurodollar Loans made by other Lenders are outstanding, such Lender's ABR Loans
shall be automatically converted, on the first day(s) of the next succeeding
Interest Period(s) for such outstanding Eurodollar Loans, to the extent
necessary so that, after giving effect thereto, all ABR and Eurodollar Loans of
the same Class are allocated among the Lenders ratably (as to principal amounts,
Types and Interest Periods) in accordance with their respective Commitments with
respect to such Class.
(b) If any Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by such Lender to a
level below that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Company will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or
amounts necessary to compensate such Lender or its holding company, as the case
may be, as specified in paragraph (a) or (b) of this Section shall be delivered
to the Company and shall be conclusive absent manifest error. The Company shall
pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender's right to demand such compensation; provided that the Company shall not
be required to compensate a Lender pursuant to this Section for any increased
costs or reductions incurred more than six months prior to the date that such
Lender notifies the Company of the Change in Law giving rise to such increased
costs or
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reductions and of such Lender's intention to claim compensation therefor;
provided, further, that, if the Change in Law giving rise to such increased
costs or reductions is retroactive, then the six-month period referred to above
shall be extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of Default
or in connection with any mandatory prepayment pursuant to Section 2.09), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice is permitted to be revocable
under Section 2.08(c) and is revoked in accordance herewith), or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Company pursuant to
Section 2.17, then, in any such event, the Company shall compensate each Lender
for the loss (other than lost profit), cost and expense attributable to such
event. In the case of a Eurodollar Loan, the loss to any Lender attributable to
any such event shall be deemed to include an amount determined by such Lender to
be equal to the excess, if any, of (i) the amount of interest that such Lender
would pay for a deposit equal to the principal amount of such Loan for the
period from the date of such payment, conversion, failure or assignment to the
last day of the then current Interest Period for such Loan (or, in the case of a
failure to borrow, convert or continue, the duration of the Interest Period that
would have resulted from such borrowing, conversion or continuation) if the
interest rate payable on such deposit were equal to the Adjusted LIBO Rate for
such Interest Period, over (ii) the amount of interest that such Lender would
earn on such principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by such
Lender (or, if not so bid by the Lender, by an affiliate of such Lender) for
Dollar deposits from other banks in the eurodollar market at the commencement of
such period. A certificate of any Lender setting forth any amount or amounts
that such Lender is entitled to receive pursuant to this Section shall be
delivered to the Company and shall be conclusive absent manifest error. The
Company shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
SECTION 2.15. Taxes.
(a) Any and all payments by or on account of any obligation of
the Company hereunder or under any other Credit Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Company shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent or Lender (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Company shall
make such deductions and (iii) the Company
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shall pay the full amount deducted to the relevant Government Authority in
accordance with any applicable Government Rule.
(b) In addition, the Company shall pay any Other Taxes to the
relevant Government Authority in accordance with any applicable Government Rule.
(c) The Company shall indemnify the Administrative Agent and
each Lender, within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) paid by the Administrative Agent or such Lender, as the case may be,
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Government Authority. A
certificate as to the amount of such payment or liability delivered to the
Company by a Lender, or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Company to a Government Authority, the Company shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Government Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Each Foreign Lender shall (i) deliver to the Company and
the Administrative Agent (x) on or before the date on which it becomes a Lender
(A) (1) two properly completed and duly executed copies of United States
Internal Revenue Service Form 1001 or 4224 (or successor applicable form, as the
case may be) claiming complete exemption from United States withholding tax with
respect to payments by the Company under this Agreement and the other Credit
Documents and (2) a duly completed United States Internal Revenue Service Form
W-8 or W-9 certifying that such Lender is entitled to an exemption from United
States backup withholding tax or (B), in the case of a Lender not treated as a
bank for regulatory, tax or other legal purposes in any jurisdiction, (1) a
certificate under penalties of perjury that such Lender is not (x) a bank, a
shareholder of the Company or a controlled foreign corporation related to the
Company for purposes of section 881(c)(3) of the Code or (y) a conduit entity
within the meaning of United States Treasury Regulations section 1.881-3 and (2)
two duly completed Internal Revenue Service Forms W-8, and (y) two further
copies of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously delivered; and
(ii) obtain such extensions of time for filing and complete such forms or
certifications as may reasonably be requested by the Company or the
Administrative Agent; provided, however, that the Lender shall not be required
to perform the obligations under this paragraph if any change in treaty, law or
regulation has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such
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Lender from duly completing and delivering any such form with respect to it and
such Lender so advises the Company and the Administrative Agent.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing
of Set-offs.
(a) The Company shall make each payment required to be made by
it hereunder (whether of principal, interest or fees, or under Section 2.13,
2.14 or 2.15, or otherwise) or under any other Credit Document (except to the
extent otherwise provided therein) prior to 1:00 p.m., New York City time, on
the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except as otherwise expressly provided in the
relevant Credit Document, and except that payments pursuant to Sections 2.13,
2.14, 2.15 and 11.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day and, in the case of any payment accruing interest, interest thereon
shall be payable for the period of such extension. All payments hereunder or
under any other Credit Document (except to the extent otherwise provided
therein) shall be made in Dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
interest and fees then due hereunder, such funds shall be applied (i) first, to
pay interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, to pay principal then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of principal then due to
such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Company pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of
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a participation in any of its Loans to any assignee or participant, other than
to the Company or any Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). The Company consents to the foregoing
and agrees, to the extent it may effectively do so under applicable Government
Rule, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Company rights of set-off and counterclaim
with respect to such participation as fully as if such Lender were a direct
creditor of the Company in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Company prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that the Company
will not make such payment, the Administrative Agent may assume that the Company
has made such payment on such date in accordance herewith and may, in reliance
upon such assumption, distribute to the Lenders the amount due. In such event,
if the Company has not in fact made such payment, then each of the Lenders
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the Federal Funds Effective
Rate.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.04(b) or 2.16(d), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.
SECTION 2.17. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under Section 2.13, or
if the Company is required to pay any additional amount to any Lender or any
Government Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Company
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13, or
if the Company is required to pay any additional amount to any Lender or any
Government Authority for the account of any Lender pursuant to Section 2.15, or
if any Lender defaults in its obligation to fund Loans hereunder, then the
Company may, at its sole expense, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in
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accordance with and subject to the restrictions contained in Section 11.04), all
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Company shall have received the
prior written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Company (in the case of all other amounts) and (iii) in the case of
any such assignment resulting from a claim for compensation under Section 2.13
or payments required to be made pursuant to Section 2.15, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Company to require such assignment and delegation cease to apply.
SECTION 2.18. Extension of Commitment Termination Date.
(a) The Company may, at any time prior to July 1, 1998,
request in writing to the Administrative Agent (the "Extension Request") an
extension of the Commitment Termination Date to the last Business Day of any
calendar month occurring after September 30, 1998 (the "Existing Commitment
Termination Date"), but in no event later than June 30, 1999. The date on which
such request is received by the Administrative Agent is herein called the
"Request Date". The Extension Request shall be signed by a Responsible Officer
and:
(i) specify the date to which the Existing Commitment
Termination is requested to be extended (the "Proposed Commitment
Termination Date");
(ii) contain a certification by such Responsible Officer to
the effect that, as of the Request Date:
(x) no Event of Default shall have occurred and be
continuing; and
(y) the Company is in compliance with the
requirements of Section 8.04 for the period from and including
the Request Date to and including the Proposed Commitment
Termination Date based upon the Project Costs for such period
specified in then current Approved Budget (as amended or
supplemented under clause (iii) below, if applicable) (and
setting forth, in detail reasonably satisfactory to the
Administrative Agent, the basis for such compliance together
with any other documentation reasonably requested by the
Administrative Agent to demonstrate such compliance); and
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(iii) if the Proposed Commitment Termination Date shall be
later than December 31, 1998, be accompanied by an amended or
supplemental budget, as approved by the board of directors of the
Company, setting forth the Project Costs projected to be payable by
Company and its Subsidiaries during the period from January 1, 1998 to
and including the Proposed Commitment Termination Date (and, upon the
effectiveness of such extension as provided below, such amended budget
or supplemental budget shall be deemed an "Approved Budget" for
purposes of this Agreement).
The Administrative Agent shall promptly upon receipt of the Extension Request
forward a copy thereof to each Lender.
(b) The extension of the Existing Commitment Termination Date
requested in the Extension Request shall be effective if the Administrative
Agent shall (i) be reasonably satisfied that each of the matters set forth in
clause (ii) of paragraph (a) above shall be true and correct as of the Request
Date and (ii) have received the amended or supplemental budget required under
clause (iii) of paragraph (a) above, if applicable (provided, however, that if
the basis for the Company's certification as to compliance with Section 8.04
under clause (ii)(y) of paragraph (a) above includes any written financing
commitment (other than a financing commitment which has theretofore been
approved by the Required Lenders for purposes of complying with Section 8.04),
the acceptability of such commitment for purposes of satisfying the requirement
of such clause (ii)(y) shall be determined by the Required Lenders). The
Administrative Agent (and, if applicable, the Required Lenders) agree to make
such determination within 30 days of the Request Date, provided that if no such
determination shall be made on or prior to such date, such request shall be
deemed denied. If the conditions to such extension are determined to be
satisfied as provided above, the Administrative Agent shall notify the Company
and the Lenders as to such extension whereupon the Commitment Termination Date
shall be the date set forth in such Extension Request for all purposes of this
Agreement.
(c) The Company shall not have the right to extend the
Commitment Termination Date pursuant to this Section more than once.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
SECTION 3.01. Organization; Qualification. Each of the Company
and its Subsidiaries is a limited liability company, corporation, partnership or
other entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, and is qualified to do business
and is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify could
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reasonably be expected (either individually or in the aggregate) to result in a
Material Adverse Effect.
SECTION 3.02. Powers. Each of the Company and its Subsidiaries
has all requisite corporate or other power to own its assets and carry on its
business as now being or as proposed to be conducted; provided that no
representation or warranty is made under this Section 3.02 with respect to any
Government Approvals.
SECTION 3.03. Authorization. The Company and each of its
Subsidiaries has full power, authority and legal right to execute and deliver
each of the Credit Documents and Principal Project Documents to which it is a
party and to perform its obligations thereunder. The execution, delivery and
performance by the Company and each of its Subsidiaries of each of the Credit
Documents and Principal Project Documents to which it is a party and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of the Company or such Subsidiary.
SECTION 3.04. No Conflicts. The execution, delivery and
performance by the Company and each of its Subsidiaries of the Credit Documents
and Principal Project Documents to which it is a party and the consummation of
the transactions contemplated thereby do not and will not (a) require any
consent or approval of the membership committee or board of directors (as the
case may be) or any shareholders or members of the Company or any of its
Subsidiaries or any other Person that has not been obtained and each such
consent and approval that has been obtained is adequate for its intended purpose
and is in full force and effect, (b) violate any material provision of any
Government Rule or any order, writ, judgment, decree, determination or award
having applicability to the Company or any of its Subsidiaries or the Project,
(c) violate any provision of the Company LLC Agreement (in the case of the
Company) or the certificate of incorporation or by-laws (or the applicable
constitutive documents) of any of the Company's Subsidiaries, (d) result in a
breach of or constitute a default under any Credit Document or Principal Project
Documents to which it is a party or any material indenture or loan or credit
agreement or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which it or its properties and assets
is or are bound or affected or (e) result in or require the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any
of their respective properties and assets now owned or hereafter acquired.
SECTION 3.05. Enforceability. Each of the Credit Documents (in
each case, from and after the date of execution and delivery thereof by the
parties thereto) and Principal Project Documents to which the Company or any of
its Subsidiaries is a party has been duly executed and delivered by the Company
or such Subsidiary and constitutes the legal, valid and binding obligation of
the Company or such Subsidiary enforceable against the Company or such
Subsidiary in accordance with its terms, except as the enforceability thereof
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (b) the application of
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general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
SECTION 3.06. Government Approvals.
(a) All Telecommunications Approvals required to be obtained
by the Company or any of its Subsidiaries for the current stage of the
Development of the Project have been duly obtained, are validly issued, are in
full force and effect, are held in the name or extend to the benefit of the
Company or one of its Subsidiaries and are free from any conditions or
requirements that the Company could not reasonably be expected to satisfy on or
prior to the date such Telecommunications Approval is required for the
appropriate stage of the Development of the Project or to be fully effective.
(b) To the best knowledge of the Company, all other
Telecommunications Approvals required to be obtained by any Person (other than
the Company or any of it Subsidiaries) for the current stage of the Development
of the Project have been duly obtained, are validly issued, are in full force
and effect, are held in the name or extend to the benefit of such other Person
and are free from any conditions or requirements that the Company could not
reasonably expect such other Person to satisfy on or prior to the date such
Telecommunications Approval is required for the appropriate stage of the
Development of the Project or to be fully effective.
(c) All Government Approvals (other than Telecommunications
Approvals) required to be obtained by the Company or any of its Subsidiaries for
the current stage of the Development of the Project have been duly obtained, are
validly issued, are in full force and effect, are held in the name or extend to
the benefit of the Company or one of its Subsidiaries and are free from any
conditions or requirements that the Company could not reasonably be expected to
satisfy on or prior to the date such Government Approval is required for the
appropriate stage of the Development of the Project or to be fully effective.
(d) To the best knowledge of the Company, all other Government
Approvals (other than Telecommunications Approvals) required to be obtained by
any Person (other than the Company or any of it Subsidiaries) for the current
stage of the Development of the Project have been duly obtained, are validly
issued, are in full force and effect, are held in the name or extend to the
benefit of the relevant Person and are free from any conditions or requirements
that the Company could not reasonably expect such other Person to satisfy on or
prior to the date such Government Approval is required for the appropriate stage
of the Development of the Project or to be fully effective.
(e) The Company has no reasonable basis to believe that any
Government Approval required for the Development of the Project that has not
been obtained or has not become final and non-appealable as of the date hereof:
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(i) will not be obtained in due course on or prior to the
commencement of the appropriate stage of Development of the Project,
unless the failure to obtain such Government Approval could not
reasonably be expected to result in a Material Adverse Effect;
(ii) will contain any conditions or requirements compliance
with which could reasonably be expected to result in a Material Adverse
Effect; or
(iii) will be subject to an appeal the outcome of which could
reasonably be expected to result in a Material Adverse Effect.
(f) The Project, if constructed and operated in accordance
with the requirements of the Principal Project Documents, will in all material
respects conform to and comply with all applicable covenants, conditions,
restrictions and reservations in all Government Approvals required for the
Development of the Project and all Government Rules applicable thereto.
(g) Neither the Company nor any of its Subsidiaries is in
violation in any material respect of any Government Rule applicable to any of
the Credit Parties in connection with the Development of the Project or any
Government Approval required for the Development of the Project and obtained by
any of the Credit Parties. To the best knowledge of the Company, no Person
(other than the Credit Parties) is in violation of any Government Rule
applicable to it in connection with the Development of the Project or any
Government Approval required for the Development of the Project and obtained by
such Person, the violation of which could reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.07. Financial Condition; No Material Adverse Change.
(a) The Company has heretofore furnished to the Lenders the
consolidated balance sheet and statements of income, stockholders' equity and
cash flows for Iridium LLC (i) as of and for the fiscal year ended December 31,
1996, reported on by KPMG Peat Marwick LLP, independent public accountants and
(ii) as of and for the fiscal quarter and the portion of the fiscal year ended
September 30, 1997, certified by the chief financial officer of Iridium LLC.
Such financial statements present fairly, in all material respects, the
consolidated financial position and results of operations and cash flows of
Iridium LLC and its Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.
(b) Since December 31, 1996 (and giving effect to the Asset
Transfer as of such date), there has been no change in the business, assets,
operations, prospects or condition, financial or otherwise, of Iridium LLC and
its Subsidiaries, taken as a whole, that (either individually or in the
aggregate) could reasonably be expected to result in a Material Adverse Effect.
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SECTION 3.08. Properties.
(a) Each of the Company and its Subsidiaries owns and has, or
when acquired will own and have, good, legal and marketable title to its
property which it purports to own (other than its leasehold or licensed
properties) free and clear of all Liens other than Permitted Liens.
(b) Each of the Company and its Subsidiaries is, or when
leases creating leasehold properties are executed will be, lawfully possessed of
a valid and subsisting leasehold estate in and to its leasehold properties which
it purports to lease free and clear of all Liens other than Permitted Liens.
(c) Each of the Company and its Subsidiaries enjoys, and will
enjoy, peaceful and undisturbed possession of, or a license to use, all property
(subject only to Permitted Liens) that are necessary for the current stage of
Development of the Project.
(d) Each of the Company and its Subsidiaries owns or
possesses, or is licensed to use (or believes it can acquire on reasonable
terms), all material Intellectual Property necessary for the Development of the
Project or (to the extent not required to be obtained on or prior to the date
hereof) will be obtained in due course when so necessary, and licenses,
contracts or other agreements in respect of such Intellectual Property are (or
when obtained, will be) final and are (or will be) in full force and effect. To
the best knowledge of the Company, the use thereof by the Company and its
Subsidiaries does not infringe upon, or conflict with, the rights of any other
Person.
(e) Set forth on Part A of Schedule II is a list, as of the
date hereof, of all of the real property interests held by the Company and its
Subsidiaries, indicating in each case whether the respective property is owned
or leased, the identity of the owner or lessee, the location of the respective
property and the approximate value of such property. Part B of Schedule II sets
forth real property interests which the Company or any of its Subsidiaries
reasonably expects as of the date hereof will be acquired prior to the
Commitment Termination Date, indicating in each case the estimated date of
acquisition thereof, whether the respective property will be owned or leased,
the identity of the intended owner or lessee and the location and estimated
value of such property.
SECTION 3.09. Proceedings. Except as described in Schedule
III, there is no action, suit or proceeding at law or in equity or by or before
any Government Authority, arbitral tribunal or other similar body now pending
or, to the best knowledge of the Company, threatened against the Company or any
of its Subsidiaries or any of their respective property (including, without
limitation, the Project), which could reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. Environmental Matters. Except as described in
Schedule IV, neither the Company nor any of its Subsidiaries (a) has failed to
comply, in any material respect,
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with any Environmental Law or to obtain, maintain or comply, in any material
respect, with any permit, license or other approval required under any
Environmental Law or (b) has received notice of any Environmental Claim that
could reasonably be expected to result in liability to the Company or any of its
Subsidiaries in excess of $2,000,000.
Except as set forth in Schedule IV:
(i) there are no facts, circumstances, conditions or
occurrences regarding the Project that could reasonably be expected (x)
to form the basis of an Environmental Claim arising with respect to or
relating to any property of the Company or any of its Subsidiaries
associated with the Project, (y) to cause the Project (or any property
of the Company or any of its Subsidiaries associated therewith) to be
subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law or (z) to require the
filing or recording of any notice, registration, permit or disclosure
documents under any Environmental Law other than routine filings or
recordings;
(ii) there are no past, pending or, to the best knowledge of
the Company, threatened Environmental Claims arising with respect to or
relating to any property of the Company or any of its Subsidiaries
associated with the Project;
(iii) to the best knowledge of the Company, Hazardous
Materials have not at any time been used or Released at, on, under or
from any property of the Company or any of its Subsidiaries associated
with the Project in a manner that creates any risk of any material
liability under applicable Environmental Laws or that otherwise could
reasonably be expected to result in a Material Adverse Effect; and
(iv) There have been no environmental investigations, studies,
audits, assessments, reviews or other analyses conducted by or which
are in the possession of the Company in relation to any property of the
Company or any of its Subsidiaries associated with the Project which
have not been provided to the Administrative Agent.
SECTION 3.11. Investment and Holding Company Status. Neither
the Company nor any of its Subsidiaries is (a) an "investment company" or a
company "controlled" by a company registered as an "investment company", as such
terms are defined in the Investment Company Act of 1940 or (b) a "holding
company", or an "affiliate" of a company registered as a "holding company" or a
"subsidiary company" of a company registered as a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935.
SECTION 3.12. Taxes. Each of the Company and its Subsidiaries
has filed or caused to be filed all tax returns that are required to be filed,
and has paid all Taxes shown to be due and payable on said returns or on any
assessments made against the Company or any of its Subsidiaries or any of their
respective property (other than Taxes the payment of which is not yet
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due or which is being contested in good faith by appropriate proceedings and for
which such Person has set aside on its books adequate reserves), and no tax
Liens (other than Permitted Liens) have been filed and no claims are being
asserted with respect to any such Taxes. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of Taxes and other
governmental charges are, in the opinion of the Company, adequate.
SECTION 3.13. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. As of the date hereof, the
Company does not have any Plans and is not obligated or required to contribute
to any Plan or Multiemployer Plan.
SECTION 3.14. Disclosure. The information, reports, financial
statements, exhibits and schedules (other than projections) furnished in writing
by or on behalf of the Company to any Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Credit
Documents or included herein or therein or delivered pursuant hereto or thereto
(other than projections), when taken as a whole (together with the Information
Memorandum, but excluding the reports contained in Section 9 thereof (Technical
Due Diligence Report and Marketing Due Diligence Report) which were not prepared
by the Company) and after giving effect to the Asset Transfer, do not contain
any untrue statement of material fact or omit to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made (including the time of the making of
such statements), not misleading, except that the Asset Transfer was not
described therein. The projections, estimates and/or pro forma financial
statements (including, without limitation the Iridium Financial Projections)
furnished by or on behalf of the Company to the Agents or any Lender in
connection with the negotiation, execution and delivery of this Agreement and
the other Credit Documents or included herein or therein or delivered pursuant
hereto or thereto, have been prepared by the Company in good faith on the basis
of information and assumptions that the Company believed to be reasonable as of
the date of such information. All written information furnished after the date
hereof by the Company and its Subsidiaries to the Agents and the Lenders in
connection with this Agreement and the other Credit Documents and the
transactions contemplated hereby and thereby will not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or (in the case of projections, estimates and pro forma
financial statements) will be prepared in good faith on the basis of information
and assumptions believed by the Company to be reasonable as of the date of such
information. There is no fact known to the Company that could reasonably be
likely to result in a Material Adverse Effect that has not been disclosed
herein, in the other Credit Documents, in the Information Memorandum or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
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SECTION 3.15. Use of Credit. Neither the Company nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose, whether immediate,
incidental or ultimate, of buying or carrying Margin Stock, and no part of the
proceeds of any Loan hereunder will be used to buy or carry any Margin Stock and
the proceeds of the Loans hereunder shall be used in accordance with Section
6.09.
SECTION 3.16. Debt Agreements. Schedule V is a complete and
correct list of each credit agreement, loan agreement, indenture, purchase
agreement, guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Indebtedness or any extension of credit (or commitment
for any extension of credit) to, or guarantee by, the Company or any of its
Subsidiaries outstanding on the date hereof, and the aggregate principal amount
outstanding or that may become outstanding under the then current terms of each
such arrangement is as of the date hereof correctly described in Schedule V.
SECTION 3.17. Liens. Schedule VI is a complete and correct
list of each Lien securing Indebtedness of the Company or any of its
Subsidiaries outstanding on the date hereof, and the aggregate Indebtedness
secured (or that may be secured) by each such Lien and the property covered by
each such Lien is as of the date hereof correctly described in Schedule VI.
SECTION 3.18. Capitalization. The Company has heretofore
delivered to the Lenders a true and complete copy of the Company LLC Agreement.
The only member of the Company on the date hereof is Iridium LLC. The membership
and other ownership interests in the Company are legally owned solely by Iridium
LLC, and all such interests have been validly issued and are fully paid-in and
non-assessable (except for the restriction contained in Section 6.07 of the
Delaware LLC Act). The Company does not have outstanding any securities
convertible into or exchangeable for any of its membership interests or other
ownership interests in or any rights to subscribe for or to purchase, or any
warrants or options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, any such membership interests or other ownership
interests.
SECTION 3.19. Subsidiaries. Schedule VII is a complete and
correct list of all of the Subsidiaries of the Company as of the date hereof,
together with, for each such Subsidiary, (a) the jurisdiction of organization of
such Subsidiary, (b) each Person holding equity interests in such Subsidiary and
(c) the nature of the equity interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such equity interests.
Except as disclosed in Schedule VII, (i) each of the Company and its
Subsidiaries owns, free and clear of Liens, and has the unencumbered right to
vote, all outstanding ownership interests in each Person shown to be held by it
in Schedule VII, (ii) all of such issued and outstanding equity interests are
validly issued, fully paid and nonassessable and (iii) there are no outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any shareholders' or voting trust
agreements) for the issuance, sale, registration or
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voting of, or securities convertible into, any additional shares of equity
interests of any type in, such Person.
SECTION 3.20. Investments. Schedule VIII is a complete and
correct list of all Investments (other than Investments disclosed in Schedule
VII and Permitted Investments existing as of the date hereof) held by the
Company or any of its Subsidiaries in any Person on the date hereof and, for
each such Investment, (a) the identity of the Person or Persons holding such
Investment and (b) the nature of such Investment. Except as disclosed in
Schedule VIII, each of the Company and its Subsidiaries owns all such
Investments as of the date hereof, free and clear of all Liens other than
Permitted Liens.
SECTION 3.21. Restrictive Agreements. None of the Subsidiaries
of the Company is, on the date hereof, subject to any indenture, agreement,
instrument or other arrangement of the type described in Section 7.09 (other
than as permitted thereunder).
SECTION 3.22. Business. Neither the Company nor any of its
Subsidiaries has conducted any business other than any business associated with
or related to the Development of the Project or any Related Business.
SECTION 3.23. Collateral; Security Interests. As of the
Closing Date and at all times thereafter, the provisions of the Security
Documents to which any Credit Party is a party are effective to create, in favor
of the Collateral Agent for the benefit of the Secured Parties, a legal, valid
and enforceable Lien on and security interest in all of the then existing
Collateral purported to be covered thereby. Except as set forth in the Security
Documents, as of the Closing Date and at all times thereafter, all necessary and
appropriate filings (including filings for the purpose of recording) have been
made in all necessary and appropriate public offices (in the case of such
Collateral consisting of satellites, in accordance with the Security Agreement)
and all other necessary and appropriate action has been taken, so that each such
Security Document creates a perfected Lien on and security interest in all
right, title, estate and interest of the Company or any of its Subsidiaries in
the then existing Collateral covered thereby, free and clear of all Liens (other
than Permitted Liens), and all necessary and appropriate consents to the
creation, perfection and enforcement of such Liens have been obtained from each
of the parties to the Principal Project Documents. No mortgage or financing
statement or other instrument or recordation covering all or any part of the
then existing Collateral purported to be covered by the Security Documents is on
file in any recording office, except such as may have been filed in favor of the
Collateral Agent for the benefit of the Secured Parties or in respect of any
Permitted Lien.
SECTION 3.24. Sufficiency of Project Documents.
(a) The Administrative Agent has received a certified copy of
each Principal Project Document in effect on the date hereof and each amendment,
modification or supplement thereto.
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(b) Except as permitted pursuant to, or not prohibited by,
Section 8.05 or 8.06, since the date hereof none of the Project Documents has
been amended, modified or supplemented or has been materially Impaired and all
of the Project Documents are in full force and effect (except to the extent any
such Project Document has expired or terminated in accordance with its terms).
(c) All conditions precedent to the obligations of the
respective parties under the Project Documents have been satisfied or waived
except for such conditions precedent which are not required to be satisfied
until a later stage of Development of the Project, and the Company has no reason
to believe that any such condition precedent cannot be satisfied on or prior to
the commencement of the appropriate stage of Development of the Project.
(d) No Credit Party is in default in the performance of any
material covenant or obligation set forth in or otherwise in default in any
material respect under any Principal Project Document to which it is a party. No
Credit Party is in default in the performance of any covenant or obligation set
forth in or otherwise in default under any Other Project Document to which it is
a party, the effect of which could reasonably be expected to result in a
Material Adverse Effect.
(e) To the best knowledge of the Company, no Project Party
(other than any Credit Party) is in default in the performance of any material
covenant or obligation set forth in or otherwise in default in any material
respect under any Principal Project Document to which it is a party. To the best
knowledge of the Company, no such Project Party is in default in the performance
of any covenant or obligation set forth in or is otherwise in default under any
Other Project Document to which it is a party, the effect of which could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.25. Employee Matters. Except as set forth on
Schedule X, (a) on the date hereof, neither Company nor any of its Subsidiaries
nor any of their respective employees is subject to any collective bargaining
agreement, (b) on the date hereof, no petition for certification or union
election is pending with respect to the employees of the Company or any of its
Subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any such Person
and (c) there are no strikes, slowdowns, work stoppages or controversies pending
or, to the knowledge of Company, threatened between the Company or any of its
Subsidiaries and their respective employees relating to the Project, other than
any thereof which could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.26. Other Project Parties.
(a) To the best knowledge of the Company, (i) the execution,
delivery and performance by each Project Party (other than the Credit Parties
and Motorola) of each of the Transaction Documents to which it is a party and
the consummation of the transactions
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contemplated thereby have been duly authorized by all necessary corporate or
other action on the part of such other Project Party, (ii) each such other
Project Party has the full power, authority and legal right to execute and
deliver each of the Transaction Documents to which it is a party and to perform
its obligations thereunder, (iii) the execution, delivery and performance by
each such other Project Party of each of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate or other action on the part of
such other Project Party, and (iv) each of the Project Documents to which any
such other Project Party is a party has been duly executed and delivered by such
other Project Party and constitutes the legal, valid and binding obligation of
such other Project Party enforceable against such other Project Party in
accordance with its terms, except as the enforceability thereof may be limited
by (a) applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity),
unless the failure of the accuracy of any of the representations and warranties
contained in clauses (i) through (iv) above could not reasonably be expected to
result in a Material Adverse Effect.
(b) To the best knowledge of the Company, there is no action,
suit or proceeding at law or in equity or by or before any Government Authority,
arbitral tribunal or other body now pending or threatened against or affecting
any such other Project Party or any of its property which could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.27. Asset Transfer. Each of the Company and Iridium
LLC has the full power and authority and legal right to execute and deliver the
Asset Transfer Agreement and to perform its obligations thereunder. The
execution, delivery and performance by the Company and Iridium LLC of the Asset
Transfer Agreement and the consummation of the transactions contemplated thereby
have been duly authorized by all necessary corporate action of the part of the
Company and Iridium LLC. The execution, delivery and performance by the Company
and Iridium LLC of the Asset Transfer Agreement and the consummation of the
Asset Transfer do not and will not (a) require any consent or approval of any
Person that has not already been obtained and that remains in full force and
effect, (b) violate any material provision of any Government Rule or any order,
writ, judgment, decree, determination or award having applicability to the
Company, Iridium LLC or any of their respective Subsidiaries, (c) violate any
provision of the LLC Agreements, (d) result in a breach or constitute a default
under any material indenture or agreement to which the Company, Iridium LLC or
any of their respective Subsidiaries is a party or by which any of their
respective property is bound or affected or (e) result in or require the
creation or imposition of any Lien upon or with respect to any of the properties
or assets now owned or hereafter acquired by such Person. The Asset Transfer has
been given effect and all of the assets of Iridium LLC required to be
transferred by Iridium LLC to the Company under the Asset Transfer Agreement
have been so transferred prior to the date hereof.
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SECTION 3.28. Absence of Immunity. Neither the Company nor any
of its property or revenue is entitled to any right of immunity in any
jurisdiction from suit, court jurisdiction, judgment, attachment, set-off or
execution of a judgment or from any other legal process or remedy relating to
the obligations of the Company under this Agreement or any other Credit
Document.
ARTICLE IV
CONDITIONS
SECTION 4.01. Pre-Funding of Term Loans. The obligations of
each Term Lender to make its Term Loan in accordance with Section 2.01(a) is
subject to the satisfaction of the following conditions precedent:
(a) the conditions set forth in Part A of Appendix 2 (and
receipt by the Administrative Agent of each of the documents listed
therein), each of which shall be in form and substance satisfactory to
the Administrative Agent (or such condition shall have been waived in
accordance with Section 11.02); and
(b) the conditions precedent that:
(i) the representations and warranties of the Company
set forth in this Agreement and of the Company and each other
Credit Party in each of the other Credit Documents then in
effect to which it is a party, and, to the best knowledge of
the Company, of each other Project Party in each of the Credit
Documents then in effect to which it is a party, shall be true
and correct on and as of the date of such Loans (or, if stated
to have been made solely as of an earlier date, were true and
correct as of such earlier date); and
(ii) at the time of and immediately after giving
effect to the making of such Loans, no Default shall have
occurred and be continuing.
SECTION 4.02. Disbursement of Term Loans from the Pre-Funding
Account. The proceeds of the Term Loans shall be disbursed to the Company
pursuant to Section 4.04(b) of the Depositary Agreement upon the satisfaction of
the following conditions precedent:
(a) the conditions set forth in Part B of Appendix 2 (and
receipt by the Administrative Agent of each of the documents listed
therein), each of which shall be in form and substance satisfactory to
the Administrative Agent (or such condition shall have been waived in
accordance with Section 11.02); and
(b) the conditions precedent that:
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(i) the representations and warranties of the Company
set forth in this Agreement and of the Company and each other
Credit Party in each of the other Credit Documents to which it
is a party, and, to the best knowledge of the Company, of each
other Project Party in each of the Credit Documents to which
it is a party, shall be true and correct on and as of the date
on which such proceeds are so disbursed (or, if stated to have
been made solely as of an earlier date, were true and correct
as of such earlier date); and
(ii) at the time of and immediately after giving
effect to such disbursement, no Default shall have occurred
and be continuing.
SECTION 4.03. Pre-Commercial Activation Revolving Loans. The
obligation of each Revolving Lender to make each Revolving Loan on the occasion
of each Borrowing, but not exceeding $400,000,000 of Revolving Loans in
aggregate outstanding principal amount, is subject to the satisfaction on the
date of such Loan of:
(a) the conditions set forth in Part C of Appendix 2 (and
receipt by the Administrative Agent of each of the documents listed
therein), each of which shall be in form and substance satisfactory to
the Administrative Agent (or such condition shall have been waived in
accordance with Section 11.02); and
(b) the conditions precedent that:
(i) the representations and warranties of the Company
set forth in this Agreement and of the Company and each other
Credit Party in each of the other Credit Documents to which it
is a party, and, to the best knowledge of the Company, of each
other Project Party in each of the Credit Documents to which
it is a party, shall be true and correct on and as of the date
of such Borrowing (or, if stated to have been made solely as
of an earlier date, were true and correct as of such earlier
date); and
(ii) at the time of and immediately after giving
effect to such Borrowing, no Default shall have occurred and
be continuing.
Each such Borrowing shall be deemed to constitute a representation and warranty
by the Company on the date thereof as to the matters specified in clause (b)
above.
SECTION 4.04. Post-Commercial Activation Loans. The obligation
of each Revolving Lender to make each Revolving Loan on the occasion of each
Borrowing, in excess of $400,000,000 of Revolving Loans in aggregate outstanding
principal amount, is subject to the satisfaction of the following conditions
precedent:
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(a) the Commitment Termination Date shall have been extended
pursuant to Section 2.18 to a date not earlier than October 31, 1998;
(b) the conditions set forth in Part D of Appendix 2 (and
receipt by the Administrative Agent of each of the documents listed
therein), each of which shall be in form and substance satisfactory to
the Administrative Agent (and to the extent specified therein, to each
Lender) (or such condition shall have been waived in accordance with
Section 11.02); and
(c) the conditions precedent that:
(i) the representations and warranties of the Company
set forth in this Agreement and of the Company and each other
Credit Party in each of the other Credit Documents to which it
is a party, and, to the best knowledge of the Company, of each
other Project Party in each of the Credit Documents to which
it is a party, shall be true and correct on and as of the date
of such Borrowing (or, if stated to have been made solely as
of an earlier date, were true and correct as of such earlier
date); and
(ii) at the time of and immediately after giving
effect to such Borrowing, no Default shall have occurred and
be continuing.
Each such Borrowing shall be deemed to constitute a representation and warranty
by the Company on the date thereof as to the matters specified in clause (c)
above.
ARTICLE V
INFORMATION
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Company covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
Company will furnish to the Administrative Agent and each Lender:
(a) within 120 days after the end of each fiscal year of the
Company, the audited consolidated balance sheet and related statements
of operations, members' equity and cash flows of the Company and its
Subsidiaries as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
reported on by KPMG Peat Marwick LLP or other independent public
accountants of recognized national standing (without a "going concern"
or like qualification or exception and without any
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qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of
the Company and its Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, the consolidated
balance sheet and related statements of operations, members' equity and
cash flows of the Company and its Subsidiaries as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for (or, in
the case of the balance sheet, as of the end of) the corresponding
period or periods of the previous fiscal year, all certified by a
Responsible Officer as presenting fairly in all material respects the
financial condition and results of operations of the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) of this Section, a certificate of a Responsible
Officer (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
7.01, 7.06, 7.07, 7.10, 7.11 and 8.04, and (iii) stating whether any
change in GAAP or in the application thereof has occurred since the
date of the most recent audited financial statements delivered to the
Administrative Agent pursuant hereto and, if any such change has
occurred, specifying the effect of such change on the financial
statements accompanying such certificate;
(d) concurrently with any delivery of financial statements
under clause (a) of this Section, a certificate of the accounting firm
that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such
financial statements of any Default (which certificate may be limited
to the extent required by accounting rules or guidelines);
(e) promptly upon receipt, copies of all formal accountants'
letters received by the Company's management in respect of the Company;
(f) within 10 days after the end of each month, a
reconciliation of the actual Project Costs expended during such month
versus the budgeted amount thereof for such month as set forth in the
Approved Budget, broken down by the following six categories: Space
System Contract; O&M Contract; Terrestrial Network Development
Contract; Debt Service and Other Financing Costs; Business Support
Systems and Fixed Asset Expenditures; and Operating Expenditures,
Satellite Insurance and Other;
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(g) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by the Company or any of its Subsidiaries, with the SEC, or with
any national securities exchange, or distributed by the Company to its
members generally;
(h) promptly upon receipt, copies of any notice of default
received by the Company or any of its Subsidiaries under any instrument
or agreement evidencing or providing for Indebtedness (other than this
Agreement) and any notice of acceleration of any such Indebtedness and,
if the Company or any Subsidiary gives any such notice of default, a
copy thereof simultaneously therewith; and
(i) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of the Company or any of its Subsidiaries, the Project
(including, without limitation, information as to the Government
Approvals required for the Development of the Project) or compliance
with the terms of this Agreement and the other Credit Documents, as the
Administrative Agent or any Lender (through the Administrative Agent)
may reasonably request.
SECTION 5.02. Notices of Material Events. The Company will
furnish, or will cause to be furnished, to the Administrative Agent and each
Lender prompt written notice of the following:
(a) the Company or any Subsidiary becoming aware of the
occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Government Authority against
or affecting the Company or any of its Subsidiaries that, if adversely
determined, could reasonably be expected to result in a Material
Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Company and its Subsidiaries in
an aggregate amount exceeding $2,000,000;
(d) any material fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of
God or of the public enemy or other casualty (whether or not covered by
insurance) affecting the Project or the business or property of the
Company or any of its Subsidiaries (unless notice thereof shall be
required to be furnished pursuant to Section 8.01(g)); and
(e) any other circumstance, act or condition (including,
without limitation, the adoption, amendment or repeal of any Government
Rule applicable to the Project or the
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Impairment of any Government Approval or notice (whether formal or
informal, written or oral) of the failure to comply with the terms and
conditions of any Government Approval) which could reasonably be
expected to result in a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Responsible Officer setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.
SECTION 5.03. Notices under Principal Project Documents. The
Company will furnish to the Administrative Agent and each Lender promptly upon
their becoming available, copies of all material notices or material documents
received or delivered by the Company pursuant to any Principal Project Document
(including, without limitation, any notice or other document relating to a
failure by the Company to perform any of its covenants or obligations under such
Principal Project Document but excluding notices and other communications given
or received by the Company in the ordinary course of administration or
performance of such Principal Project Document).
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01. Maintenance of Existence. The Company will, and
will cause each of its Subsidiaries to, preserve and maintain (a) its legal
existence and (b) all of its material licenses, rights, privileges and
franchises required for the Development of the Project and the due performance
of all of its obligations and the exercise of all of its rights under the
Principal Project Documents to which it is party, provided that nothing in this
Section shall prohibit any transaction expressly permitted under Section 7.03.
SECTION 6.02. Maintenance of Properties. The Company will, and
will cause each of its Subsidiaries to, keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted.
SECTION 6.03. Taxes. The Company will, and will cause each of
its Subsidiaries to, (a) pay and discharge, or effectively provide for, all
Taxes imposed on the Company or on its income or profits or on any of its
property prior to the date on which penalties for the failure to pay or
discharge such Taxes attach thereto, provided that the Company shall have the
right to contest in good faith by appropriate proceedings the validity or amount
of any such Tax, and (b) promptly pay any valid, final judgment enforcing any
such Tax and cause the same to be satisfied of record.
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SECTION 6.04. Compliance with Laws. The Company will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable Government Rules applicable to it or its property.
SECTION 6.05. Government Approvals.
(a) The Company will, and will cause each of its Subsidiaries
to, comply in all material respects with, all Government Approvals obtained by
it and required for the Development of the Project as shall now or hereafter be
necessary under applicable Government Rules.
(b) The Company will not, and will not permit any of its
Subsidiaries to, take any legal or administrative action that seeks to amend,
supplement or modify in any material adverse respect any Government Approval
obtained by the Company or any of its Subsidiaries and required for the
Development of the Project. To the extent the Company has the contractual or
legal right to prevent such action, the Company will not permit any other Person
to take any legal or administrative action that seeks to amend, supplement or
modify any Government Approval required for the Development of the Project if
such action could reasonably be expected to result in a Material Adverse Effect.
(c) If any Government Approval obtained by the Company or any
of its Subsidiaries and required for the Development of the Project is
materially Impaired, the Company will diligently and timely (i) make all
filings, (ii) pursue all remedies and appeals which the Company determines, in
good faith, to be necessary or appropriate and (iii) take such other lawful
action, in each case, as shall be necessary or, in the good faith opinion of the
Company, desirable to (x) prevent such Impairment from becoming final and
non-appealable or otherwise irrevocable, (y) postpone the effectiveness of such
Impairment and (y) cause such Impairment to be revoked or amended or modified so
as to eliminate the reasonable possibility of such Impairment. To the extent the
Company has the contractual or legal right to do so, if any Government Approval
obtained by any Person (other than the Company or any of its Subsidiaries) and
required for the Development of the Project is materially Impaired, the Company
will diligently and timely, and will cause such Person diligently and timely to,
(i) make all filings, (ii) pursue all remedies and appeals which the Company
determines, in good faith, to be necessary or appropriate and (iii) take such
other lawful action, in each case, as shall be necessary or, in the good faith
opinion of the Company, desirable to (x) prevent such Impairment from becoming
final and non-appealable or otherwise irrevocable, (y) postpone the
effectiveness of such Impairment and (y) cause such Impairment to be revoked or
amended or modified so as to eliminate the reasonable possibility of such
Impairment, unless in each case such Impairment could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 6.06. Environmental Compliance.
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(a) The Company shall not Use or Release, or permit the Use or
Release of, Hazardous Materials on any property of the Company or any of its
Subsidiaries other than in accordance with the requirements of all applicable
Environmental Laws.
(b) To the extent required by Environmental Laws, the Company
shall conduct and complete any investigation, assessment, study, sampling and
testing and undertake any cleanup, removal, remedial or other action necessary
to remove and clean up all Hazardous Materials Released at, on, in, under or
from any property of the Company or any of its Subsidiaries associated with the
Project, in accordance with the requirements of all applicable Environmental
Laws.
(c) The Company shall deliver to the Administrative Agent
promptly upon obtaining knowledge of any fact, circumstance, condition or
occurrence that could reasonably be expected to form the basis of an
Environmental Claim in excess of $2,000,000 arising with respect to or relating
to any property of the Company or any of its Subsidiaries associated with the
Project, a notice thereof describing the same in reasonable detail and, together
with such notice or as soon thereafter as possible, a description of the action
that the Company has taken or proposes to take with respect thereto and,
thereafter, from time to time such detailed reports with respect thereto as the
Administrative Agent may reasonably request.
SECTION 6.07. Books and Records. The Company will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
accordance with GAAP in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities.
SECTION 6.08. Inspection Rights. Subject to the
confidentiality requirements set forth in Section 11.12, the Company will, and
will cause each of its Subsidiaries to, permit representatives of the Global
Arrangers, the Agents or any Lender (including, without limitation, any
Independent Advisor, at the reasonable request of the Global Arrangers), upon
reasonable prior notice to the Company unless a Default shall have occurred and
is continuing, to visit and inspect its property, to examine, copy or make
excerpts from its books, records and documents and to discuss its affairs,
finances and accounts with its principal officers, engineers and independent
accountants, all at such reasonable times during normal business hours and at
such intervals as such representatives may reasonably request. The Company
hereby authorizes each of its principal officers, engineers and independent
accountants to discuss the Company's affairs, finances and accounts as
contemplated by this Section.
SECTION 6.09. Use of Proceeds. The proceeds of the Loans on
the occasion of each Borrowing will be used solely to pay (a) Project Costs for
the Budget Period not exceeding an aggregate amount equal to the sum of the
aggregate Project Costs for such period as set forth in the Initial Approved
Budget (as such budget may be amended or supplemented pursuant to Section 2.18)
plus $75,000,000 and (b) fees and expenses reasonably incurred by the Company
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under, or in connection with the execution and delivery of, the Credit
Documents. No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations G, U and X. Notwithstanding anything to the
contrary contained in this Section, neither any of the Agents nor any of the
Lenders shall have any responsibility as to the use of any proceeds of the Loans
by the Company.
SECTION 6.10. Collateral; Security Interests.
(a) Except as may be provided in the Security Documents and
subject to any Disposition permitted under Section 7.04, the Company will, and
will cause each of its Subsidiaries to, at all times after the Closing Date: (i)
take, or cause to be taken, all action required (x) to maintain good, legal and
marketable title to the Collateral purported to be pledged by it pursuant to the
Security Documents to which it is party (other than any leasehold properties
covered thereby) free and clear of all Liens other than Permitted Liens and (y)
to remain lawfully possessed of a valid and subsisting leasehold estate in and
to any leasehold properties purported to be pledged by it pursuant to such
Security Documents free and clear of all Liens other than Permitted Liens; (ii)
at all times, maintain and preserve the Liens created on the Collateral
purported to be pledged by it pursuant to such Security Documents and the first
priority thereof (subject to Permitted Liens); and (iii) cause all such Security
Documents to be in full force and effect.
(b) Except as may be provided in the Security Documents and
subject to any Disposition permitted under Section 7.04, the Company will, and
will cause each Subsidiary Guarantor to, execute any and all further documents,
financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents), which may be required
under any applicable law, or which any Agent or the Required Lenders may
reasonably request, to effectuate the transactions contemplated by the Credit
Documents then in effect or (after the Closing Date) to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security Documents
to which any Credit Party is a party or the validity or priority of any such
Lien, all at the expense of the Company. Without limiting the foregoing, the
Company shall promptly discharge, at its own cost and expense, any Lien (other
than Permitted Liens) on the Collateral purported to be pledged by it pursuant
to such a Security Document.
(c) If any assets (including any real property or improvements
thereto or any interest therein, including any leasehold interests, having a
value in excess of $10,000,000, other than the real property interests
identified in Part B of Schedule II as to which the Company agrees to execute
and deliver a Mortgage), are acquired by the Company or any Domestic Subsidiary
after the Closing Date (other than assets constituting Collateral under the
Security Agreement), the Company will notify the Administrative Agent thereof
(unless such assets were acquired by the Company or its Subsidiary in the
ordinary course of its business), and the Company will cause
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such assets (in the case of any real property including leasehold interests,
upon the request of the Required Lenders) to be subjected to a Lien under the
relevant Security Documents, and will take, and cause its Domestic Subsidiaries
to take, such actions as shall be necessary or reasonably requested by the
Administrative Agent to grant and perfect such Liens, including actions
described in paragraph (b) of this Section, all at the expense of the Company.
If the Required Lenders shall have reasonably requested a mortgage, deed of
trust or similar instrument to be delivered in respect of any such real
property, fixtures and/or leasehold interests in respect of real property, the
Company shall deliver, or cause to be delivered, the following documents and/or
satisfy the following conditions (in each case to the reasonable satisfaction of
the Administrative Agent):
(i) The following documents each of which shall be duly
executed (and, where appropriate, acknowledged) by the party or parties
thereto and delivered to the Administrative Agent:
(A) one or more Mortgages covering the subject real
property, fixtures and/or leasehold interests (the "Mortgaged
Properties"), in recordable form (in such number of copies as
the Administrative Agent shall have requested);
(B) with respect to the Mortgaged Properties, one or
more mortgagee policies of title insurance on A.L.T.A. forms
reasonably satisfactory to the Administrative Agent and issued
by one or more title companies satisfactory to the
Administrative Agent (the "Title Companies"), insuring the
validity and priority of the Liens created under each such
Mortgage for and in amounts reasonably satisfactory to the
Administrative Agent, subject only to such exceptions as are
reasonably satisfactory to the Administrative Agent, and, to
the extent necessary under applicable law, for filing in the
appropriate county land office(s), Uniform Commercial Code
financing statements covering fixtures relating to the
Mortgaged Properties, in each case appropriately completed and
duly executed;
(C) with respect to the Mortgaged Properties,
as-built surveys of recent date of each facility to be covered
by each such Mortgage, showing such matters as may be
reasonably required by the Administrative Agent, which surveys
shall be in form and content reasonably acceptable to the
Administrative Agent, and certified to the Administrative
Agent, the Lenders and the Title Companies, and shall have
been prepared by a registered surveyor reasonably acceptable
to the Administrative Agent;
(D) if reasonably requested by the Administrative
Agent, certified copies of certificates of occupancy (or, if
it is not the practice to issue certificates of occupancy in
the jurisdiction in which the facilities to be covered by such
Mortgage are located, then such other evidence reasonably
satisfactory to the
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Administrative Agent) permitting the fully functioning
operation and occupancy of each such facility, zoning
correspondence and such other permits necessary for the use
and operation of each such facility issued by the respective
governmental authorities having jurisdiction over each such
facility;
(E) Uniform Commercial Code searches in each of the
jurisdictions (both state and county levels) where the
Mortgaged Properties are located;
(F) if reasonably requested by the Administrative
Agent, appraisals as of recent date of each of the Mortgaged
Properties (including the facilities and other improvements
located thereon and machinery and equipment), such appraisals
to be prepared by an appraiser, and to use a methodology,
acceptable to the Administrative Agent, or other evidence of
the value of such Mortgaged Properties reasonably satisfactory
to the Administrative Agent;
(G) if reasonably requested by the Administrative
Agent, an environmental survey and assessment of recent date
prepared by a firm of licensed engineers (familiar with the
identification of toxic and hazardous substances) in form and
substance satisfactory to the Administrative Agent, such
environmental survey and assessment to be based upon physical
on-site inspections by such firm of the sites comprising the
Mortgaged Properties and the related facilities, whether
owned, operated or leased by the Company and its Subsidiaries,
as well as a historical review of the uses of such sites and
facilities and of the business and operations of the Company
and to provide that the Lenders may rely on the results of
such audits;
(H) in the case of any leasehold interests covered by
the Mortgages, such estoppels, consents, subordination
agreements and other agreements from the lessor, the holder of
a fee mortgage or a sublessee, as the Administrative Agent may
reasonably request;
(I) evidence reasonably satisfactory to the
Administrative Agent of the existence of insurance with
respect to such Mortgaged Properties that complies with the
requirements of Section 8.01, and that such insurance is in
full force and effect and that all premiums then due and
payable thereon have been paid;
(J) opinions, each dated on or about the date the
conditions set forth in this Section are satisfied, of local
counsel in the respective jurisdictions in which such
Mortgaged Properties are located, in form and substance
reasonably satisfactory to the Administrative Agent (and the
Company hereby instructs such counsel to deliver such
opinion(s) to the Lenders and the Agents); and
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(K) such other documents and evidence relating to the
foregoing conditions as the Administrative Agent or the
Required Lenders (through the Administrative Agent) may
reasonably request.
(ii) The Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the
issuance of such policies and in addition shall have paid to the Title
Companies an amount equal to the recording and stamp taxes payable in
connection with recording each Mortgage and the Uniform Commercial Code
financing statements in the appropriate county land office or state
recording office, as the case may be.
(iii) If any Property which is to be subject to a Mortgage or
similar instrument under this Section is located in any jurisdiction
other than the United States of America or any State thereof, in lieu
of the conditions specified above in this Section the Company or the
relevant Subsidiary, as the case may be, shall comply with such similar
conditions and requirements that are appropriate for such jurisdiction
and provide similar protections to the interests of the Lenders as the
Administrative Agent may reasonably request.
(iv) The Company shall have paid or reimbursed Administrative
Agent for all reasonable out-of-pocket costs and expenses not
theretofore paid or reimbursed in connection with the foregoing,
including, without limitation, the reasonable fees and expenses of
counsel, in connection with the negotiation, preparation, execution and
delivery of the documents contemplated by this Section.
SECTION 6.11. Certain Obligations Respecting Subsidiaries.
(a) The Company will, and will cause each of its Subsidiaries
to, take such action from time to time as shall be necessary to ensure that each
Subsidiary of the Company is, directly or indirectly, a Wholly Owned Subsidiary
(subject to Section 7.03).
(b) After the Closing Date, the Company will take such action,
and will cause each of its Subsidiaries to take such action, from time to time
as shall be necessary to ensure that (i) 100% of the outstanding equity
interests of each Domestic Subsidiary owned by the Company or any other Domestic
Subsidiary and (ii) 65% of the outstanding equity interests of each Foreign
Subsidiary owned by the Company or any Domestic Subsidiary is pledged to the
Collateral Agent pursuant to the Security Agreement. Subject to and in
furtherance of the foregoing, in the event that any additional shares of capital
stock or other certificated equity interests shall be issued by any such
Subsidiary after the Closing Date, the Company agrees forthwith to deliver to
the Collateral Agent pursuant to the Security Agreement the certificates
evidencing such shares of stock or equity interests, as the case may be,
accompanied by undated stock (or transfer, as the case may be) powers executed
in blank and to take such other action as the Collateral Agent shall request to
perfect the security interest created therein pursuant to the Security
Agreement.
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(c) After the Closing Date, the Company will take such action,
and will cause each of its Domestic Subsidiaries to take such action, from time
to time as shall be necessary to ensure that all Domestic Subsidiaries of the
Company which are directly owned by the Company or another Domestic Subsidiary
are "Subsidiary Guarantors" under the Subsidiary Guarantee Agreement, and have
assigned to the Collateral Agent for the benefit of the Secured Parties all of
its right, title and interest in any Collateral held by such Domestic Subsidiary
to the extent required herein or in any Security Document to which it is a
party. Without limiting the generality of the foregoing, in the event that the
Company or any of its Domestic Subsidiaries shall form or acquire any new
Domestic Subsidiary after the Closing Date that shall constitute a Subsidiary
hereunder, the Company or such Domestic Subsidiary, as the case may be, will
cause such new Subsidiary to after the Closing Date:
(i) become a "Subsidiary Guarantor" under the Subsidiary
Guarantee Agreement, and an "Obligor" under the Security Agreement
pursuant to a Subsidiary Guarantee Assumption Agreement;
(ii) cause such Subsidiary to take such action (including,
without limitation, delivering such certificated equity interests and
executing and delivering such Uniform Commercial Code financing
statements, if applicable) as shall be necessary to create and perfect
valid and enforceable first priority Liens on substantially all of the
personal property of such new Subsidiary, to the extent required herein
or in any Security Document to which it is a party; and
(iii) deliver such proof of corporate or other action,
incumbency of officers, opinions of counsel and other documents as is
consistent with those delivered by the Subsidiaries of the Company
pursuant to Article IV or as reasonably requested by the Administrative
Agent.
SECTION 6.12. License Subsidiaries. The Company will take such
action, and will cause each of its Subsidiaries to take such action, as shall be
necessary so that, from and after the transfer of the FCC License by Motorola
pursuant to Section 18.H of the Space System Contract, the FCC License and the
other Telecommunications Approvals (if any) identified on Schedule II or III
from time to time issued to the Company or any of its Subsidiaries will be held
by a separate License Subsidiary. Anything in this Agreement to the contrary
notwithstanding, the Company will not permit any License Subsidiary to: (i)
sell, assign or otherwise dispose of the FCC License or any other
Telecommunications Approval held by it; (ii) create, assume, incur or suffer to
exist any Lien on any of its properties or any Indebtedness; or (iii) engage in
any business or other transaction other than holding the Telecommunications
Approval(s) held by it and activities reasonably incidental thereto.
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ARTICLE VII
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full, the Company covenants and agrees with the Lenders that:
SECTION 7.01. Indebtedness. The Company will not, and will not
permit any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder and the other Credit
Documents;
(b) Indebtedness under the Motorola Guaranteed Credit
Agreement (or the Agreement Regarding Guarantee) not exceeding
$450,000,000 in aggregate principal amount outstanding at any one time
(and, without duplication, any Subordinated Obligations owing to
Motorola in respect thereof referred to in clause (c) of the definition
of "Subordinated Obligations");
(c) additional unsecured Indebtedness of the Company
guaranteed by Motorola not exceeding $350,000,000 in aggregate
principal amount outstanding at any one time, which may be incurred
under the Motorola Guaranteed Credit Agreement or a new credit
agreement, or any Guarantee thereof by any Subsidiary (and, without
duplication, any Subordinated Obligations owing to Motorola in respect
thereof referred to in clause (c) of the definition of "Subordinated
Obligations");
(d) the Senior Notes;
(e) additional unsecured, senior Indebtedness of the Company,
which shall (A) (i) have a maturity date no earlier than the maturity
of the Senior Notes, (ii) not provide for any amortization or
redemption at any time prior to the maturity of the Senior Notes (other
than on terms comparable to the Senior Notes and other than, if such
Indebtedness is convertible into equity, a right in favor of the
Company to redeem at par such Indebtedness in the event that the holder
of such Indebtedness does not so convert, provided that the Company
does not exercise any such right) and (iii) contain other terms and
conditions (including, without limitation, covenants and events of
default, but excluding terms as to pricing) not more restrictive than
the terms of the Senior Notes or (B) otherwise be approved by the
Required Lenders.
(f) the Senior Subordinated Notes;
(g) any Motorola Vendor Financing;
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(h) Other Subordinated Debt not exceeding $300,000,000 in
aggregate principal amount at any time outstanding, provided that the
proceeds thereof are used, or are committed to be used (and are
actually so used within 180 days of the date of issuance of such
Indebtedness), to pay Project Costs for the Budget Period;
(i) any additional Other Subordinated Debt (other than that
referred to in clause (h) above), provided that the Net Available
Proceeds thereof are used to reduce the Commitments and prepay the
Loans pursuant to Section 2.09(c);
(j) Indebtedness in respect of Capital Lease Obligations not
exceeding $10,000,000 in aggregate principal amount outstanding at any
one time;
(k) obligations of the Company in respect of the Space System
Contract, the O&M Contract and the Terrestrial Network Development
Contract; and
(l) Indebtedness incurred to Refinance any Indebtedness under
clauses (b), (c) and (g) above, provided that (i) such Refinancing
Indebtedness does not exceed the amount of Indebtedness being so
Refinanced and (ii) the terms of such Refinancing Indebtedness comply
with the requirements of Indebtedness permitted under clause (e) above
or of Other Subordinated Indebtedness;
provided that the sum of the aggregate outstanding principal amount of
Indebtedness permitted under clauses (b), (c), (d) and (e) above (and any
Refinancing thereof permitted under clause (l) above) shall not exceed (i) at
any time prior to the aggregate principal amount of the Revolving Loans
outstanding hereunder exceeding $400,000,000, $2,100,000,000 and (ii) at any
time from and after the aggregate principal amount of the Revolving Loans
outstanding hereunder exceeding $400,000,000, $1,900,000,000 (provided that if
the aggregate principal amount of such Indebtedness under this clause (ii)
exceeds $1,850,000,000, at least $100,000,000 of such Indebtedness shall consist
of Indebtedness of the type referred to in clause (b) or (c) above).
SECTION 7.02. Liens. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except for Permitted Liens.
SECTION 7.03. Mergers, Consolidations, Etc. The Company will
not, and will not permit any of its Subsidiaries to, enter into any transaction
of merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation of dissolution), or convey, transfer or lease
its property substantially as an entirety to any person, except that (a) any
Subsidiary (other than a License Subsidiary) may enter into any such transaction
with the Company, so long as the Company is the surviving entity and (b) any
Subsidiary (other than a License Subsidiary) may enter into any such transaction
with any other Subsidiary (other than a
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License Subsidiary), provided that no Domestic Subsidiary may merge with or into
any Foreign Subsidiary unless the Domestic Subsidiary is the surviving entity of
such merger.
SECTION 7.04. Sale of Assets. The Company will not, and will
not permit any of its Subsidiaries to, Dispose of any assets, except:
(a) sales of communications and related services and equipment
in the ordinary course of business;
(b) sales of obsolete assets or assets no longer used or
useful in the ordinary course of the business of the Company and its
Subsidiaries; and
(c) sales of Permitted Investments on or prior to the maturity
thereof in accordance with the Depositary Agreement.
SECTION 7.05. Purchase of Assets. The Company will not, and
will not permit any of its Subsidiaries to, purchase any assets, except:
(a) the purchase of assets in connection with the Development
of the Project in accordance with the Project Documents;
(b) the purchase of assets in connection with the Restoration
of Affected Property; and
(c) Investments permitted under Section 7.06.
SECTION 7.06. Investments. The Company will not, and will not
permit any of its Subsidiaries to, make or permit to remain outstanding any
Investments, except:
(a) Investments outstanding on the date hereof and identified
in Schedule VIII;
(b) deposit and other accounts permitted to be maintained by
the Company pursuant to Section 8.02;
(c) Permitted Investments;
(d) Hedging Agreements entered into by the Company in the
ordinary course of business and not for speculative purposes; and
(e) other Investments in an aggregate outstanding amount not
at any time exceeding $5,000,000 (measured by the amount of each such
Investment as of the time
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such Investment is made), provided that such Investments are made only
in Related Businesses.
SECTION 7.07. Restricted Payments. The Company will not make,
or agree to pay or make, directly or indirectly, any Restricted Payment, except:
(a) so long as no Default shall have occurred and be
continuing, distributions to Iridium LLC to enable Iridium LLC to make
distributions to the Iridium LLC Members pursuant to Section 3.07(c) of
the Iridium LLC Agreement with respect to each such Member's U.S.
income tax liability (if any); and
(b) any distribution to Iridium LLC to enable Iridium LLC to
redeem fractional interests of its equity interests following the
exercise of any warrants, options or other rights to acquire any equity
interests in Iridium LLC by the holders thereof.
Nothing herein shall be deemed to prohibit the payment of dividends by any
Subsidiary of the Company to the Company or to any other Subsidiary of the
Company.
SECTION 7.08. Transactions with Affiliates. The Company will
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except:
(a) transactions on terms which, in the opinion of the
Company, are not less favorable to the Company or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third
parties;
(b) transactions between or among the Company and its
Subsidiaries not involving any other Affiliate;
(c) any Restricted Payment permitted by Section 7.07;
(d) the Company and its Subsidiaries may enter into, engage in
the transactions contemplated by, and perform its obligations under,
the Project Documents to which it is a party;
(e) a transaction pursuant to any of the agreements specified
in Schedule XI, including any amendment thereto after the date hereof,
provided that the terms of such amendment are not less favorable to the
Company and its Subsidiaries than the terms of the relevant agreement
prior to such amendment; and
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(f) other transactions with Affiliates not permitted under any
of the foregoing clauses (a) through (e) that involve aggregate
consideration of less than $10,000,000.
SECTION 7.09. Restrictive Agreements. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Company or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets or to sell, transfer or otherwise dispose of its
assets, (b) the ability of any Subsidiary to (i) pay dividends or other
distributions with respect to any shares of its equity interests, (ii) make or
repay loans or advances to the Company or any other Subsidiary or (iii)
Guarantee Indebtedness of the Company or any other Subsidiary under any of the
Credit Documents or (c) the ability of the Company or any Subsidiary to enter
into amendments, modifications, supplements or waivers of any of the Credit
Documents or Principal Project Documents; provided that (i) the foregoing shall
not apply to restrictions and conditions imposed by any applicable Government
Rule or by any Credit Document, (ii) the foregoing shall not apply to (A)
restrictions and conditions existing on the date hereof in the Motorola
Guaranteed Credit Agreement, the Senior Note Indentures or otherwise identified
on Schedule IX (but shall apply to any amendment or modification thereof
expanding the scope of any such restriction or condition) or (B) any comparable
restrictions and conditions contained in any agreement or instrument relating to
Indebtedness permitted under clause (c), (e), (g), (h), (i), (j), (k) or (l) (to
the extent the Indebtedness being Refinanced pursuant to such clause (l)
contains any such restriction or condition) of Section 7.01, (iii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided that such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases
restricting the assignment thereof.
SECTION 7.10. Leverage Ratio. The Company will not at any time
permit the ratio of (a) the aggregate principal amount of Indebtedness (or
accreted value, in the case of Indebtedness issued at a discount) of the Company
and its Subsidiaries to (b) the sum of (i) Indebtedness as calculated in clause
(a) above and (ii) $1,982,000,000 plus the aggregate proceeds received by
Iridium LLC or any Subsidiary in respect of the issuance of capital stock of
Iridium LLC to exceed 0.667:1.0.
SECTION 7.11. Operating Leases. The Company will not, and will
not permit any of its Subsidiaries to, become or remain liable in any way,
whether directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any operating lease (other than intercompany
leases between Company and its Subsidiaries), if the aggregate amount of all
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rents paid by the Company and its Subsidiaries under all such operating leases
would exceed $25,000,000 in any fiscal year of the Company.
SECTION 7.12. Sales and Lease-Backs. The Company will not, and
will not permit any of its Subsidiaries to, become or remain liable as lessee or
as guarantor or other surety with respect to any lease of any property whether
real or personal or mixed or whether now owned or hereafter acquired that the
Company or any of its Subsidiaries has sold or transferred or intends to sell or
transfer to any other Person.
SECTION 7.13. Subordinated Obligations.
(a) The Company will not, and will not permit any of its
Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set
apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any of the Subordinated Obligations, except (i) regularly
scheduled payments, prepayments or redemptions of principal and interest in
respect thereof required to be made pursuant to the instruments evidencing such
Subordinated Obligation (and subject to the subordination provisions applicable
thereto) and (ii) any Refinancing thereof to the extent permitted under Section
7.01(l).
(b) The Company will not consent to any modification,
supplement or waiver of any of the provisions of any agreement, instrument or
other document evidencing or relating to any Subordinated Obligation without the
prior consent of the Administrative Agent (acting with the approval of the
Required Lenders). The Company shall provide the Administrative Agent with prior
written notice of each proposed modification, supplement or waiver in respect of
any instrument or agreement evidencing or providing for any Subordinated
Obligation (and the Administrative Agent shall promptly provide copies thereof
to each Lender). Promptly following the effectiveness of each such modification,
supplement or waiver, the Company shall provide the Administrative Agent with a
copy thereof as executed and delivered by the parties thereto (and the
Administrative Agent shall promptly provide a copy thereof to each Lender).
SECTION 7.14. Other Debt Obligations.
(a) The Company will not, and will not permit any of its
Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set
apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any of the Senior Notes or Indebtedness permitted under
Section 7.01(e), except regularly scheduled payments of interest in respect
thereof required pursuant to the instruments evidencing such Indebtedness.
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(b) The Company will not consent to any modification,
supplement or waiver of any of the provisions of any agreement, instrument or
other document evidencing or relating to any of the Motorola Guaranteed Credit
Agreement (other than Amendment No. 1 thereto dated on or about the date
hereof), the Senior Notes, Indebtedness permitted under Section 7.01(c) or (e)
or any Refinancing of any thereof, in each case which could reasonably be
expected to be materially adverse to the interests of the Lenders, without the
prior consent of the Administrative Agent (acting with the approval of the
Required Lenders), provided that no such consent will be required for (i) any
reduction of the commitments under the Motorola Guaranteed Credit Agreement,
(ii) any Indebtedness incurred pursuant to Section 7.01(c) or (iii) any
Refinancing of the Motorola Guaranteed Credit Agreement permitted under Section
7.01(l).
(c) The Company shall provide the Administrative Agent with
prior written notice of each proposed modification, supplement or waiver in
respect of the instrument or agreement evidencing or providing for the Senior
Notes or other Indebtedness referred to in clause (b) above (and the
Administrative Agent shall promptly provide copies thereof to each Lender).
Promptly following the effectiveness of each such modification, supplement or
waiver, the Company shall provide the Administrative Agent with a copy thereof
as executed and delivered by the parties thereto (and the Administrative Agent
shall promptly provide a copy thereof to each Lender).
SECTION 7.15. Organizational Documents. The Company will not,
and will not permit any of its Subsidiaries to, consent to any modification,
supplement or waiver of any of the provisions of the Company LLC Agreement, the
charter or by-laws of any Subsidiary, in each case which could reasonably be
expected to be materially adverse to the interests of the Lenders, without the
prior consent of the Administrative Agent (acting with the approval of the
Required Lenders). The Company shall provide the Administrative Agent with prior
written notice of each proposed modification, supplement or waiver in respect of
thereof not less than 10 Business Days prior to the proposed effective date
thereof (and the Administrative Agent shall promptly provide copies thereof to
each Lender). Promptly following the effectiveness of each such modification,
supplement or waiver, the Company shall provide the Administrative Agent with a
copy thereof as executed and delivered by the parties thereto (and the
Administrative Agent shall promptly provide a copy thereof to each Lender).
SECTION 7.16. Nature of Business. The Company will not, and
will not permit any of its Subsidiaries to, engage in any business, activities
or transactions other than in connection with the Development of the Project and
any Related Business.
SECTION 7.17. Fiscal Year. To enable the ready and consistent
determination of compliance with the covenants set forth herein, the Company
shall not change the last day of its fiscal year from December 31, or the last
days of the first three fiscal quarters in each of its fiscal years from March
31, June 30 or September 30, respectively.
ARTICLE VIII
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CERTAIN PROJECT-RELATED COVENANTS
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full, the Company covenants and agrees with the Lenders that:
SECTION 8.01. Project Insurance.
(a) Insurance Maintained by Motorola. The Company will cause
Motorola to procure at its own expense and maintain in full force and effect at
all times the insurance required by the Space System Contract and the O&M
Contract. The Company will, or will cause Motorola to, upon request from time to
time, deliver to the Administrative Agent such evidence of such insurance as may
be reasonably requested by the Administrative Agent (or any Lender through the
Administrative Agent). The Company will cause each other Project Party to a
Principal Project Document to procure at its own expense and maintain in full
force and effect at all times the insurance, if any, required by such Project
Document.
(b) Insurance Maintained by the Company. The Company will, and
will cause each of its Subsidiaries to, maintain insurance with financially
sound and reputable insurance companies, and with respect to property and risks
of a character usually maintained by entities engaged in the same or similar
business similarly situated, against loss, damage and liability of the kinds and
in the amounts customarily maintained by such entities. Without limiting the
foregoing, the Company will procure at its own expense and maintain in full
force and effect at all times, with financially sound and reputable insurance
companies, the insurance set forth in Appendix 3. In addition to the insurance
coverage otherwise required by this paragraph (b), the Company will at all times
maintain the insurance coverage required of it under the terms of each of the
Project Documents. The Company will not obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section unless the Administrative Agent is the named insured thereunder,
with loss payable as provided herein. The Company will immediately notify the
Administrative Agent whenever any such separate insurance is obtained and shall
deliver to the Administrative Agent copies of the certificates evidencing the
same.
(c) Certain Insurance Policy Provisions. All policies of
insurance required to be maintained pursuant to this Section covering loss or
damage to any property shall provide that (i) there shall be no recourse against
the Secured Parties for payment of premiums or other amounts with respect
thereto, (ii) the insurer is required to provide the Administrative Agent with
at least 30 days' (or ten days' in the case of nonpayment of premiums) prior
notice of reduction in coverage or amount (other than a reduction in coverage or
amount resulting from a payment thereunder), cancellation or non-renewal of any
policy and (iii) the proceeds of all policies (other than in respect of
professional liability, aircraft liability, pollution legal liability,
comprehensive general liability, workers' compensation and comprehensive
automobile liability insurance) shall be payable to the Collateral Agent
pursuant to a standard first mortgagee endorsement, without
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contribution, substantially equivalent to the New York standard mortgagee
endorsement. The Administrative Agent and the Lender shall be named as
additional insureds on all such liability policies. All policies (other than in
respect of professional liability, aircraft liability, pollution legal
liability, comprehensive general liability, comprehensive automobile liability
and workers' compensation insurance) shall insure the interests of the Secured
Parties regardless of any breach or violation by the Company of warranties,
declarations or conditions contained in such policies, any action or inaction of
the Company or others, or any foreclosure relating to the Project or any change
in ownership of all or any portion of the Project. The Company shall comply with
the orders, rules and regulations of the American Insurance Association or any
other body now or hereafter constituted exercising similar functions which are
at any time applicable to the Project (except any thereof the non-compliance
with which could not reasonably be expected to result in a Material Adverse
Effect or which could not adversely effect the availability or the effectiveness
of insurance coverage required by this Section).
(d) Copies of Insurance Certificates. The Company will deliver
to the Administrative Agent, within 30 days after the end of each fiscal year of
the Company, a certificate of a Responsible Officer:
(i) confirming that all insurance policies in respect of the
Project required pursuant to this Section are in force on the date
thereof;
(ii) confirming the names of the insurers issuing such
policies;
(iii) confirming the amounts and expiration date or dates of
such policies;
(iv) including copies of certificates evidencing such policies
marked "premium paid" or accompanied by other evidence of such payment
reasonably satisfactory to the Administrative Agent; and
(v) stating that such policies comply with the requirements of
this Section.
Such certificate shall be accompanied by a certificate of a nationally
recognized independent insurance broker reasonably satisfactory to the
Administrative Agent (an "Acceptable Insurance Broker"), to the effect specified
in the foregoing clauses of this paragraph (d).
(e) Copies of Insurance Policies. Promptly upon receipt
thereof after the Closing Date, the Company will deliver to the Administrative
Agent a duplicate, certified by an Acceptable Insurance Broker, of each policy
of insurance required to be in effect hereunder, bearing a notation evidencing
payment of the premium therefor or accompanied by other proof of payment
reasonably satisfactory to the Administrative Agent. Not less than 15 days prior
to the expiration date of any policy of insurance required to be in effect
hereunder, the Company shall deliver to the Administrative Agent a certificate
of insurance with respect to each renewal policy,
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certified by an Acceptable Insurance Broker, bearing a notation evidencing
payment of the premium therefor or accompanied by other proof of payment
reasonably satisfactory to the Administrative Agent. Promptly after receipt
thereof by the Company, the Company shall deliver to the Administrative Agent a
duplicate, certified by an Acceptable Insurance Broker, of each such renewal
policy.
(f) Right to Procure Insurance. In the event the Company
fails, or fails to cause Motorola, to procure or maintain the full insurance
coverage required by this Section, the Administrative Agent and the Required
Lenders, upon 10 days' prior notice (unless such insurance coverage would lapse
within such period, in which event notice should be given as soon as reasonably
possible) to the Company of any such failure, may (but shall not be obligated
to) take out the required policies of insurance and pay the premiums on the
same. All amounts so advanced therefor by the Administrative Agent and the
Lenders shall become an additional obligation of the Company to the
Administrative Agent and the Lenders, and the Company shall forthwith pay such
amounts to the Administrative Agent, together with interest thereon at the
Post-Default Rate from the date so advanced.
(g) Notice of Event of Loss or Change in Insurance Coverage.
The Company shall promptly notify the Administrative Agent and each Lender upon
obtaining knowledge of any Event of Loss that could reasonably be expected to
result in loss or damage exceeding $2,000,000. The Administrative Agent shall
promptly notify each Lender of each written notice received by it with respect
to the cancellation of, adverse change in, or default under, any insurance
policy required to be maintained in accordance with this Section.
SECTION 8.02. Accounts. The Company will not, and will not
permit any of its Subsidiaries to, maintain any deposit or other similar account
with any financial institution other than Permitted Investments and as permitted
or contemplated under the Depositary Agreement.
SECTION 8.03. Approved Budget; Financial Projections.
(a) The Company will not amend or modify the Initial Approved
Budget, or adopt or approve any replacement or new budget for Project Costs
covering the Budget Period or any amendment or supplement thereto, without the
prior written consent of the Required Lenders, unless such amendment or
modification would not cause the aggregate Project Costs for the Budget Period
to exceed the sum of the aggregate Project Costs for such period as set forth in
the Initial Approved Budget (as such budget may be amended or supplemented
pursuant to Section 2.18) plus $75,000,000. The Company will furnish the
Administrative Agent and the Lenders with certified copies of each Approved
Budget or any amendment or supplement thereto promptly following the adoption
thereof by the board of directors or approval thereof by the Company.
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(b) If at any time after the date hereof the Company shall
prepare and have approved by the board of directors of the Company financial
projections for the Project it shall promptly furnish a copy thereof to the
Administrative Agent and the Lenders, together with a certificate of a
Responsible Officer that such projections have been prepared by the Company in
good faith on the basis of information and assumptions that the Company believed
to be reasonable as of the date of such projections.
SECTION 8.04. Adequate Financing. The Company will at all
times have and maintain (a) available cash or Permitted Investments (valued at
the face amount thereof), (b) undrawn commitments under fully executed financing
agreements and/or (c) written financing commitments (of which the terms and
conditions relating to the availability thereof shall be reasonably acceptable
to the Required Lenders) from one or more lenders and/or other entities to
provide financing, in an aggregate amount sufficient to provide for the payment
of the aggregate Project Costs for the Budget Period under the Approved Budget,
provided that the written commitment of Motorola to provide its unconditional
guarantee in respect of an additional $350,000,000 of Indebtedness of the
Company shall be deemed to be acceptable to the Lenders for purposes of this
Section and Section 2.18.
SECTION 8.05. Principal Project Documents.
(a) Performance of Obligations and Enforcement of Rights. The
Company will, and will cause each of its Subsidiaries to, (i) perform and
observe in all material respects all of its covenants and obligations contained
in each of the Principal Project Documents to which it is a party, (ii) take all
reasonable and necessary action to prevent the termination or cancellation of
any Principal Project Documents other than in accordance with the terms thereof
and (iii) use commercially reasonable efforts to enforce against the relevant
Project Party thereto each material covenant or obligation of such Principal
Project Document in accordance with its terms. Anything in the foregoing to the
contrary notwithstanding, the Company shall pay, or cause to be paid, when due,
all claims for labor, material, supplies or services (under the Principal
Project Documents or otherwise) that, if unpaid could by law result in a Lien on
the property of the Company or any Subsidiary, other than a Permitted Lien;
provided that the Company shall have the right to contest in good faith by
appropriate proceedings diligently conducted the validity or amount of such
claim, so long as adequate reserves have been established with respect thereto
in accordance with GAAP.
(b) Cancellation; Termination; Amendments, Etc. The Company
will not, without the prior consent of the Required Lenders, (i) cancel or
terminate any Principal Project Document to which it is a party or consent to or
accept any cancellation or termination thereof, (ii) sell, assign (other than
pursuant to the Security Documents) or otherwise dispose of (by operation of law
or otherwise) any part of its interest in any Principal Project Document, (iii)
waive any default under, or breach of, any Principal Project Document or waive,
fail to use commercially reasonable efforts to enforce, forgive, compromise,
settle, adjust or release any
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right, interest or entitlement, howsoever arising, under, or in respect of any
Principal Project Document or in any way vary, or agree to the variation of, any
provision of such Principal Project Document or of the performance of any
covenant or obligation by any Person under any Principal Project Document, (iv)
exercise any right to initiate an arbitration proceeding under any Principal
Project Document or take any action with respect to any arbitration proceeding
initiated by any other Project Party or compelled by the provisions of any
Principal Project Document, (v) petition, request or take any other legal or
administrative action that seeks, or may reasonably be expected, to materially
Impair any Principal Project Document, (vi) consent, or agree to consent, to any
Person party to a Principal Project Document to assign or delegate its right
under such Principal Project Document, or (vii) amend, supplement or modify any
Principal Project Document (other than pursuant to a Change Order), unless (x)
the monetary obligations of the Company or its Subsidiaries under such Principal
Project Document after giving effect to such amendment, supplement or
modification, together with any additional Project Costs resulting from any
action under this Section or Section 8.06, would not cause the aggregate Project
Costs for the Budget Period to exceed the sum of the aggregate Project Costs for
such period as set forth in the Initial Approved Budget (as such budget may be
amended or supplemented pursuant to Section 2.18) plus $75,000,000 or (y) the
performance by the Company or any of its Subsidiaries of any non-monetary
obligations under such Project Document after giving effect to such amendment,
supplement or modification could not reasonably be expected to result in a
Material Adverse Effect. Promptly after the execution and delivery thereof, the
Company shall furnish the Administrative Agent and the Lenders with certified
copies of all amendments, supplements or modifications of any Principal Project
Document.
(c) Change Orders. Notwithstanding the foregoing clause (b),
the Company may not issue or accept any Change Order unless the Company has
provided at least 20 Business Days' prior notice thereof to the Administrative
Agent and the Independent Technical Advisor and certified to the effect that
such Change Order: (i) does not change the Statement of Work (as set forth in
the Space System Contract) or the Description of Work (as set forth in the
Terrestrial Network Development Contract) in any material adverse respect, (ii)
the cost of such Change Order (together with the cost of all Change Orders made
since the date of this Agreement) will not cause the aggregate Project Costs for
the Budget Period to exceed the sum of the aggregate Project Costs for such
period as set forth in the Initial Approved Budget (as such budget may be
amended or supplemented pursuant to Section 2.18) plus $75,000,000 (and
specifying the cost of such Change Order in such certification), (iii) will not
result in a delay of Commercial Activation beyond December 23, 1998, (iv) does
not result in any material reduction of Motorola's obligations under the Space
System Contract and the Terrestrial Network Development Contract, the tests
contemplated thereby or the conditions pursuant to which any such payment is
required to be made, (v) does not result in a material acceleration of the
existing payment obligations of the Company and (vi) could not reasonably be
expected to result in a Material Adverse Effect. Promptly following delivery of
such notice the Company will provide to the Administrative Agent and the
Independent Technical Advisor a briefing, in reasonable detail, conducted by
representatives of the Company and/or Motorola who are informed as to the
matters covered by
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the briefing, regarding the proposed Change Order and the impact thereof on the
Development of the Project.
SECTION 8.06. Other Project Documents.
(a) Additional Project Documents; Additional Project Costs.
The Company will not, and will not permit any of its Subsidiaries to, enter into
any Other Project Document, or otherwise incur any other obligation or expend
any amount in respect of Project Costs during the Budget Period, without the
prior consent of the Required Lenders, unless (i) the monetary obligations of
the Company or such Subsidiary under such Other Project Document or the
incurrence of such obligation or the expenditure of such amount, as the case may
be, together with any additional Project Costs resulting from any action under
this Section 8.06 or Section 8.05, would not cause the aggregate Project Costs
for the Budget Period to exceed the sum of the aggregate Project Costs for such
period as set forth in the Initial Approved Budget (as such budget may be
amended or supplemented pursuant to Section 2.18) plus $75,000,000 or (ii) the
performance by the Company or such Subsidiary of any non-monetary obligations
under such Other Project Document could not reasonably be expected to result in
a Material Adverse Effect.
(b) Cancellation; Termination; Amendments, Etc. The Company
will not, without the prior consent of the Required Lenders: (i) cancel or
terminate any Other Project Document to which it is a party or consent to or
accept any cancellation or termination thereof, (ii) sell, assign (other than
pursuant to the Security Documents) or otherwise dispose of (by operation of law
or otherwise) any part of its interest in any Other Project Document, (iii)
waive any default under, or breach of, any Other Project Document or waive, fail
to enforce, forgive, compromise, settle, adjust or release any right, interest
or entitlement, howsoever arising, under, or in respect of any Other Project
Document or in any way vary, or agree to the variation of, any provision of such
Other Project Document or of the performance of any covenant or obligation by
any Person under any Project Document, (iv) exercise any right to initiate an
arbitration proceeding under any Project Document or take any action with
respect to any arbitration proceeding initiated by any other Person or compelled
by the provisions of any Other Project Document (except, in each case, upon
instructions of the Required Lenders), (v) petition, request or take any other
legal or administrative action that seeks, or may reasonably be expected, to
Impair any Other Project Document or amend, modify or supplement any Project
Document, (vi) amend, supplement or modify any Other Project Document or (vii)
consent, or agree to consent, to any Person party to any Other Project Document
assigning or delegating its rights and obligations under such Other Project
Document, unless (in the case of any of the actions covered in clauses (i)
through (vii) above) the taking of such action, or omitting to take such action,
(x) together with any additional Project Costs resulting from any actions under
this Section and Section 8.05, would not cause the aggregate Project Costs for
the Budget Period to exceed the sum of the aggregate Project Costs for such
period as set forth in the Initial Approved Budget (as such budget may be
amended or supplemented pursuant to Section 2.18) plus $75,000,000 or (y) could
not reasonably be expected to result in a Material Adverse Effect. Upon request
of the Administrative Agent, the Company
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shall furnish the Administrative Agent and the Lenders with certified copies of
each Other Project Document and all amendments, supplements or modifications
thereto.
(c) Performance of Obligations and Enforcement of Rights. The
Company will, and will cause each of its Subsidiaries to, (i) perform and
observe all of its covenants and obligations contained in each of the Other
Project Documents to which it is a party, (ii) take all reasonable and necessary
action to prevent the termination or cancellation of any Other Project Documents
other than in accordance with the terms thereof and (iii) enforce against the
relevant party thereto each covenant or obligation of such Other Project
Document other than in accordance with its terms, unless, in the case of each of
clauses (i) through (iii) above, the failure to take any such action could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 8.07. Restoration; Completion; Commercial Activation.
(a) Subject to Section 4.02(b) of the Depositary Agreement and
Section 2.09(d), the Company shall have the right to Restore any of its property
that is the subject of an Event of Loss (whether or not insured against or
insurable), provided that in the event that the Company elects not to restore
any such property the Net Available Proceeds of such Event of Loss (if any)
shall be required to be applied in accordance with Section 2.09(d).
(b) The Company will use all reasonable efforts to cause the
Project to be duly constructed and completed in all material respects in
accordance with the terms of the Principal Project Documents.
(c) The Company will use all reasonable efforts to cause
Commercial Activation to occur not later than December 23, 1998.
ARTICLE IX
EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall
occur:
SECTION 9.01. Iridium Events of Defaults.
(a) the Company shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise; or
(b) the Company shall fail to pay any interest on any Loan or
any fee under this Agreement or under any other Credit Document when and as the
same shall become due and
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payable, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise and such default shall continue unremedied for three or
more Business Days; or
(c) the Company shall fail to pay any other amount (other than
the amounts covered under clause (a) or (b) above) payable under this Agreement
or under any other Credit Document when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise and such default shall continue unremedied for fifteen or
more days; or
(d) any representation or warranty made or deemed made by the
Company or any of its Subsidiaries or Iridium LLC in or pursuant to with this
Agreement or any other Credit Document to which it is a party or any amendment
or modification hereof or thereof, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with this
Agreement or any other Credit Document or any amendment or modification hereof
or thereof, shall prove to have been incorrect in any material respect when made
or deemed made; or
(e) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02(a) or 6.01 (with respect to the
Company's existence) or in Article VII (other than Sections 7.06 and 7.09) or
VIII (other than Section 8.01); or
(f) the Company shall default in the performance of any of its
obligations contained in Section 4.01(d) of the Depositary Agreement; after the
Closing Date the Company or any other Credit Party shall default in the
performance of any of its obligations contained in Section 4.04(d) of the
Security Agreement; or
(g) any Credit Party or Iridium LLC shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (in the
case of the Company) (other than those specified in clauses (a) through (f)
above (inclusive) of this Section) or any other Credit Document to which it is a
party and such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent (given at the request of any
Lender) to the Company; or
(h) the Company or any of its Subsidiaries or Iridium LLC
shall default in the payment when due (after the expiration of applicable grace
periods) of any principal of or interest on any of its other Indebtedness having
an outstanding principal amount of $10,000,000 individually or in the aggregate;
or any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Indebtedness shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the interest
rate thereon reset to
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a level so that securities evidencing such Indebtedness trade at a level
specified in relation to the par value thereof; or
(i) the Company or one or more of its Subsidiaries or Iridium
LLC shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner or liquidator of itself
or of all or a substantial part of its Property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the U.
S. Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the U.S.
Bankruptcy Code or (vi) take any corporate or other analogous action for the
purpose of effecting any of the foregoing; or
(j) a proceeding or case shall be commenced, without the
application or consent of the Company or one or more Subsidiaries or Iridium LLC
in any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Company or such Subsidiary or
Iridium LLC, as the case may be, or of all or any substantial part of its
Property or (iii) similar relief in respect of the Company or such Subsidiary or
Iridium LLC, as the case may be, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more days; or an order for relief
against the Company or one or more Subsidiaries or Iridium LLC shall be entered
in an involuntary case under the U.S. Bankruptcy Code; or
(k) a final judgment or judgments for the payment of money of
$10,000,000 or more in the aggregate (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect of such
judgment) shall be rendered by one or more courts, administrative tribunals or
other bodies having jurisdiction against the Company or any of its Subsidiaries
or Iridium LLC and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company, the relevant
Subsidiary or Iridium LLC, as the case may be, shall not, within said period of
30 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(l) an ERISA Event shall have occurred which, when taken
together with all other ERISA Events that have occurred, could reasonably be
expected to result in a Material Adverse Effect; or
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(m) the Company or any of its Subsidiaries or Iridium LLC
shall be terminated, dissolved or liquidated (as a matter of law or otherwise)
or proceedings shall be commenced by any Person (including the Company) seeking
the termination, dissolution or liquidation of the Company or such Subsidiary or
Iridium LLC, as the case may be, other than as permitted under Section 7.03; or
(n) an Environmental Claim arising with respect to the Project
shall have been asserted against the Project or any Credit Party or Iridium LLC
which could reasonably be expected to result in a Material Adverse Effect; or
(o) the Company or any of its Subsidiaries shall fail to
obtain (or obtain the benefit of), renew, maintain or comply in all material
respects with the FCC License (from and after the transfer thereof by Motorola
to the Company pursuant to the Space System Contract), any other
Telecommunications Approval or any other Government Approval required for the
Development of the Project; or the FCC License (from and after the transfer
thereof by Motorola to the Company pursuant to the Space System Contract) or any
such Telecommunications Approval or any other Government Approval shall be
materially Impaired in whole or in part or shall cease to be in full force and
effect; or any action, suit, proceeding or investigation shall be commenced by
or before any Government Authority which could reasonably be expected to result
in such Impairment and (in any case) such Impairment could reasonably be
expected to result in a Material Adverse Effect; or
(p) the Liens created by the Security Documents shall at any
time after the Closing Date not constitute a valid and perfected Lien on the
Collateral intended to be covered thereby (to the extent perfection by filing,
registration, recordation or possession is required herein or therein) in favor
of the Collateral Agent, free and clear of all other Liens (other than Permitted
Liens); or
(q) any material provision of any Credit Document or Principal
Project Document to which any Credit Party or Iridium LLC is a party shall at
any time for any reason cease to be valid and binding or in full force and
effect (except, in the case of any of the Credit Documents, for expiration or
termination in accordance with its respective terms); or any such Credit
Document or Principal Project Document shall be materially Impaired in whole or
part; or the validity or enforceability of any such Credit Document or Principal
Project Document shall be contested by any Credit Party or Iridium LLC, as the
case may be; or any Credit Party shall deny that it has any or further liability
or obligation under any such Credit Document or Principal Project Document; or
(r) any material provision of any Transaction Document to
which any Credit Party or Iridium LLC is a party shall at any time for any
reason cease to be valid and binding or in full force and effect; or any such
Transaction Document shall be Impaired in whole or part; or the validity or
enforceability of any such Transaction Document shall be contested by any Credit
Party or Iridium LLC; or any Credit Party or Iridium LLC shall deny that it has
any or further liability or
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obligation under any such Transaction Document; and (in any case) such event
could reasonably be expected to result in a Material Adverse Effect; or
(s) Iridium LLC shall cease to be the sole member of the
Company or any Subsidiary of the Company shall cease to be a Wholly Owned
Subsidiary;
SECTION 9.02. Motorola Events of Default.
(a) any representation or warranty made or deemed made by
Motorola in or pursuant to any Motorola Agreement or any amendment or
modification thereof, or in any report, certificate, financial statement or
other document furnished by Motorola pursuant thereto or in connection therewith
(including, without limitation, each written statement furnished to the
Independent Technical Advisor pursuant to Section 5.05 of the Motorola Consent)
shall prove to have been incorrect in any material respect when made or deemed
made; or
(b) Motorola shall fail to observe or perform any covenant,
condition or agreement contained in Articles IV, V and VI of the Motorola
Consent; or
(c) Motorola shall fail to observe or perform any material
covenant, condition or agreement (including, without limitation, any payment
obligation of Motorola) contained in any of the Motorola Agreements or the
Principal Project Documents to which Motorola is a party (other than those
specified in clause (a) and (b) above of this Section) and such failure shall
continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent (given at the request of any Lender) to the Company and
Motorola; or
(d) Motorola or any of the Motorola Domestic Subsidiaries
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner or liquidator of itself
or of all or a substantial part of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the U.
S. Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the U.S.
Bankruptcy Code or (vi) take any corporate or other analogous action for the
purpose of effecting any of the foregoing; or
(e) a proceeding or case shall be commenced, without the
application or consent of Motorola, against Motorola or any of the Motorola
Domestic Subsidiaries, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of Motorola or such
Motorola Domestic Subsidiary or of all or any substantial part of its property
or (iii) similar relief in respect of
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Motorola or such Motorola Domestic Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against Motorola or such Motorola Domestic Subsidiary shall be
entered in an involuntary case under the U.S. Bankruptcy Code; or
(f) Motorola or any of the Motorola Domestic Subsidiaries
shall admit in writing its inability to, or be generally unable to, pay its
debts as such debts become due; or
(g) Motorola or any of the Motorola Domestic Subsidiaries
shall default in the payment when due (after the expiration of applicable grace
periods) of any principal of or interest on any of its Indebtedness aggregating
in amount at least equal to 3% of the amount of total stockholders' equity for
Motorola and its consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with generally accepted accounting principles)
as at the last day of the most recently completed fiscal quarter of Motorola
("Motorola's Net Worth"); or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity or to have the interest rate thereon reset to a level so that
securities evidencing such Indebtedness trade at a level specified in relation
to the par value thereof; or
(h) a final judgment or judgments for the payment of money in
excess of 3% of Motorola's Net Worth (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect of such
judgment) shall be rendered by one or more courts, administrative tribunals or
other bodies having jurisdiction against the Motorola or any of the Motorola
Domestic Subsidiaries and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and Motorola or the
relevant Motorola Domestic Subsidiary shall not, within said period of 60 days,
or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) Motorola shall fail to obtain, renew, maintain or comply
in all material respects with the FCC License (at all times prior to the
transfer thereof to the Company pursuant to the Space System Contract); or the
FCC License shall be materially Impaired or shall cease to be in full force and
effect; or any action, suit, proceeding or investigation shall be commenced by
or before any Government Authority which could reasonably be expected to result
in such Impairment and (in any case) such Impairment could reasonably be
expected to result in a Material Adverse Effect; or
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(j) at any time after the execution and delivery of the
Motorola Pledge Agreement but prior to the transfer of the FCC License by
Motorola to the Company pursuant to the Space System Contract, the Liens created
by the Motorola Pledge Agreement shall cease to constitute a valid and perfected
Lien on the Collateral intended to be covered thereby (to the extent perfection
by filing, registration, recordation or possession is required herein or
therein) in favor of the Collateral Agent, free and clear of all other Liens; or
(k) any material provision of any Motorola Agreement or any
Principal Project Document to which Motorola is a party shall at any time for
any reason cease to be valid and binding or in full force and effect; or any
Motorola Agreement (excluding the Motorola Pledge Agreement, prior to the date
of the execution and delivery thereof) or any such Principal Project Document
shall be materially Impaired in whole or part; or the validity or enforceability
of any Motorola Agreement (excluding the Motorola Pledge Agreement, prior to the
date of execution and delivery thereof) or any such Principal Project Document
shall be contested by Motorola; or Motorola shall deny that it has any or
further liability or obligation under any Motorola Agreement (excluding the
Motorola Pledge Agreement, prior to the date of execution and delivery thereof)
or any such Principal Project Document; or
(l) any gateway equipment purchase agreement and/or agreement
for the manufacture and delivery of handsets and/or paging units shall at any
time for any reason cease to be valid and binding or in full force and effect,
or the validity or enforceability of any such agreement shall be contested by
Motorola or Motorola shall deny that it has any or further liability or
obligation under any such agreement, and (in any case) such event could
reasonably be expected to result in a Material Adverse Effect;
SECTION 9.03. Other Project Parties' Events of Default.
(a) any Project Party (other than the Credit Parties, Iridium
LLC, Motorola and the Secured Parties) (each an "Other Project Party") shall
fail to pay to the Company or any of its Subsidiaries when due any amount
payable by such Other Project Party under any Transaction Document to which it
is a party or any Iridium LLC Member shall fail to pay when due any amount in
respect of its Reserve Capital Call Obligations; or
(b) any representation or warranty made or deemed made by any
Other Project Party in or pursuant to any Transaction Document to which it is a
party or any amendment or modification thereof, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with this Agreement or any such Transaction Document or any amendment or
modification hereof or thereof, shall prove to have been incorrect in any
material respect when made or deemed made; or
(c) any Other Project Party shall fail to observe or perform
any covenant, condition or agreement contained in any Transaction Document to
which it is a party and such
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failure shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent (given at the request of any Lender) to the
Company and such Other Project Party; or
(d) a proceeding or case shall be commenced, without the
application or consent of any Other Project Party or its parent company in any
court of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of such Other Project Party or of all or any substantial
part of its property or (iii) similar relief in respect of such Other Project
Party under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief against such
Other Project Party shall be entered in an involuntary case under applicable
law; or
(e) any Other Project Party shall fail to obtain, renew,
maintain or comply in all material respects with any Telecommunications Approval
or any other Government Approval that is required by the terms of any
Transaction Document to which it is a party to be obtained and/or maintained by
such Other Project Party and is necessary for the Development of the Project; or
any such Telecommunications Approval or any such other Government Approval shall
be Impaired or shall cease to be in full force and effect; or any action, suit,
proceeding or investigation shall be commenced by or before any Government
Authority which could reasonably be expected to result in such Impairment and
such action, suit or proceeding is reasonably likely to be successful; or
(f) any material provision of any Transaction Document to
which any Other Project Party is a party shall at any time for any reason cease
to be valid and binding or in full force and effect; or any such Transaction
Document shall be Impaired in whole or part; or the validity or enforceability
of any such Transaction Document shall be contested by any Other Project Party
or any Government Authority; or any Other Project Party shall deny that it has
any or further liability or obligation under any such Transaction Document;
provided that, in the case of each event under this Section 9.03, such event
shall not be an Event of Default unless the occurrence of such event could
reasonably be expected to result in a Material Adverse Effect;
SECTION 9.04. Other Events of Default.
(a) an announcement by the Company of a decision to abandon or
indefinitely defer the construction or completion of the Project or the
abandonment or indefinite deferral of the construction or operation of the
Project; or
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(b) a material portion of the Project shall be permanently
condemned or seized or title thereto shall be permanently requisitioned or taken
by any Government Authority under power of eminent domain or otherwise; or a
material portion of the Project shall be temporarily condemned or seized or
title thereto shall be temporarily requisitioned or taken by any Government
Authority under power of eminent domain or otherwise and such temporary
condemnation, seizure, requisition or taking shall last for at least 90 days and
could reasonably be expected to result in a Material Adverse Effect; or
(c) any Event of Loss (other than under Section 9.04(b)) shall
have occurred with respect to a material portion of the Iridium satellite
constellation or the Project and such Event of Loss could reasonably be expected
to result in a Material Adverse Effect;
then, and in every such event under Sections 9.01, 9.02, 9.03 and 9.04 (other
than an event with respect to any Credit Party or Iridium LLC described in
clause (i) or (j) of Section 9.01, and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Company, take either or both of the
following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Credit Parties accrued hereunder and under the
other Credit Documents, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Credit Party; and in case of any event with respect to any
Credit Party or Iridium LLC described in such clause (i) or (j), the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Credit Parties accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Credit Party.
ARTICLE X
THE AGENTS AND GLOBAL ARRANGERS
Each of the Lenders hereby irrevocably appoints (a) the
Administrative Agent as its agent hereunder and under the other Credit Documents
to which it is a party and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto and (b) the Collateral Agent as
its agent under the Credit Documents to which it is a party and authorizes the
Collateral Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Collateral Agent by the terms thereof, together with
such actions and powers as are reasonably incidental thereto.
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The bank serving as the Administrative Agent or the Collateral
Agent hereunder or thereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent or Collateral Agent (as the case may be), and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Company or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent or Collateral
Agent (as the case may be) hereunder.
None of the Agents shall have any duties or obligations except
those expressly set forth herein and in the other Credit Documents. Without
limiting the generality of the foregoing, (a) no Agent shall be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) no Agent shall have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby or by the other Credit Documents that (in
the case of the Administrative Agent or the Collateral Agent) such Agent is
required to exercise in writing by the Required Lenders, and (c) except as
expressly set forth herein and in the other Credit Documents, no Agent shall
have any duty to disclose, nor shall any Agent be liable for the failure to
disclose, any information relating to the Company or any of its Subsidiaries
that is communicated to or obtained by the bank serving as an Agent or any of
its Affiliates in any capacity. None of the Agents shall be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders or in the absence of its own gross negligence or wilful
misconduct. None of the Agents shall be deemed to have knowledge of any Default
unless and until written notice thereof is given to such Agent by the Company or
a Lender, and none of the Agents shall be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Credit Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Credit Document or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article IV or elsewhere herein or therein, other than (in the case of the
Administrative Agent) to confirm receipt of items expressly required to be
delivered to the Administrative Agent. Notwithstanding anything herein to the
contrary, neither the Documentation Agent nor Global Arrangers, in their
respective capacities as such, shall have any duties, responsibilities or
liabilities whatsoever under this Agreement or the other Credit Documents.
Each Agent shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for a
Credit Party), independent accountants and
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other experts selected by the Administrative Agent, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
Each Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by it in
good faith. Each Agent and any such sub-agent may perform any and all its duties
and exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent or Collateral Agent as provided in this paragraph, the
Administrative Agent or the Collateral Agent may resign at any time by notifying
the Lenders and the Company. Upon any such resignation, the Required Lenders
shall have the right to appoint a successor thereto with the prior consent of
the Company (which consent shall not be unreasonably withheld or delayed). If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative Agent
or Collateral Agent (as the case may be) gives notice of its resignation, then
the retiring Administrative Agent or Collateral Agent (as the case may be) may,
on behalf of the Lenders, appoint a successor Administrative Agent or Collateral
Agent (as the case may be) which shall be a bank with an office in New York, New
York with a combined capital and surplus of at least $500,000,000, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent or Collateral Agent (as the case may be) hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent or
Collateral Agent (as the case may be) and the retiring Administrative Agent or
Collateral Agent (as the case may be) shall be discharged from its duties and
obligations hereunder. The fees payable by the Company to a successor
Administrative Agent or Collateral Agent (as the case may be) shall be the same
as those payable to its predecessor unless otherwise agreed between the Company
and such successor. After the Administrative Agent's or Collateral Agent's (as
the case may be) resignation hereunder, the provisions of this Article and
Section 11.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent
or Collateral Agent (as the case may be).
Each Lender acknowledges that it has, independently and
without reliance upon the Agents, the Global Arrangers or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agents,
the Global Arrangers or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Credit Document or any related agreement or any document furnished
hereunder or thereunder.
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Except as otherwise provided in Section 11.02(b) with respect
to this Agreement, the Administrative Agent and/or the Collateral Agent (as the
case may be) may, with the prior consent of the Required Lenders (but not
otherwise), consent to any modification, supplement or waiver under any of the
Credit Documents or grant any consent thereunder, provided that, without the
prior consent of each Lender, the Administrative Agent and/or Collateral Agent
(as the case may be) shall not (except as provided herein or in the Security
Documents) (i) release all or any part of the Collateral or otherwise terminate
any Lien relating thereto under any Security Document providing for collateral
security, (ii) agree to additional obligations being secured by such Collateral
or alter the relative priorities of the obligations entitled to the benefits of
the Liens created under the Security Documents, (iii) release any Subsidiary
Guarantor under the Subsidiary Guarantee Agreement from its guarantee
obligations thereunder or (iv) without limiting any of the foregoing clauses,
agree to any modification or the termination or release of the Reserve Capital
Call Obligations, except that no such consent shall be required, and the
Administrative Agent or Collateral Agent (as the case may be) is hereby
authorized, to release any Lien covering property and/or to release any such
Subsidiary Guarantor that is the subject of either a disposition of property
permitted hereunder or a disposition to which the Required Lenders have
consented.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Company, to:
Iridium Operating LLC
1575 Eye Street, N.W.,
Washington, D.C. 20005
Attention: General Counsel
(Telecopy No.: 202-408-3761);
(b) if to the Administrative Agent, to:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Loan and Agency Services Group
(Telecopy No.: (212) 552-5658);
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with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann Kearns,
37th Floor
(Telecopy No.: (212) 270-0858);
(c) if to the Documentation Agent, to:
Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Peter Yetman
(Telecopy No.: (212) 412-7511);
(d) if to the Global Arrangers, to:
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Attention: Ronald Lepes
(Telecopy No.: (212) 270-6125) and
Barclays Capital, the investment banking division of
Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Peter Feltman
(Telecopy No.: (212) 412-7511)
(e) if to a Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
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SECTION 11.02. Waivers; Amendments.
(a) No failure or delay by any Agent or any Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents and the Lenders hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Credit Party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default, regardless
of whether any Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Company and the Required Lenders or by the Company
and the Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the prior written consent of each Lender affected thereby, (iii)
postpone the scheduled date of payment (including any payment under Section
2.09) of the principal amount of any Loan, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby (other than the extension of the
Commitment Termination Date under Section 2.18), (iv) change Section 2.16(b) or
(c) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, or (v) change any of the
provisions of this Section or the definition of the term "Required Lenders" or
any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; provided, further, that no such agreement shall amend, modify or
otherwise affect the rights or duties of any Agent hereunder or under any other
Credit Document without the prior written consent of such Agent.
SECTION 11.03. Expenses; Indemnity; Damage Waiver.
(a) The Company shall pay (i) all reasonable out-of-pocket
expenses incurred by the Global Arrangers and the Agents, including the
reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Global Arrangers and the Agents, in connection
with the syndication of the credit facilities provided for herein, the
preparation, negotiation, execution, delivery and administration of this
Agreement and the other
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Credit Documents or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by any Agent or any Lender, including the fees, charges and
disbursements of such special New York counsel and/or any other counsel selected
by the Global Arrangers, the Agents or the Required Lenders, in connection with
the enforcement or protection of its rights in connection with this Agreement
and the other Credit Documents, including its rights under this Section, or in
connection with the Loans made hereunder, including in connection with any
workout, restructuring or negotiations in respect thereof, (iii) all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including the
fees, charges and disbursements of said special New York counsel) incurred in
connection with the negotiation, preparation, execution and delivery of any
waiver or amendment of, or supplement or modification to, any of the Credit
Documents, (iv) and all reasonable costs, expenses, taxes, assessments and other
charges incurred in connection with any filing, registration, recording or
perfection of any security interest contemplated by any Security Document or any
other document referred to therein and (v) all transfer, stamp, documentary or
other similar taxes, assessments or charges, if any, upon any of the Credit
Documents.
(b) The Company shall indemnify the Global Arrangers, the
Agents and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "Indemnitee") against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the transactions contemplated hereby, (ii) any Loan or the use of the
proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous
Materials on or from any property owned or operated by the Company or any of its
Subsidiaries, or any Environmental Claim related in any way to the Company or
any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.
(c) To the extent that the Company fails to pay any amount
required to be paid by it to any Agent under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to such Agent such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against such Agent in its capacity as such.
Credit Agreement
<PAGE> 105
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(d) To the extent permitted by applicable Government Rule, the
Company shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any agreement or instrument
contemplated hereby, any Loan or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable
promptly after written demand therefor.
SECTION 11.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Company may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Company
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Administrative Agent and the Lenders) any legal or equitable right, remedy
or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an affiliate of a Lender
or, in the case of a Lender that is an investment fund, to another investment
fund with the same investment advisor as such Lender, each of the Company and
the Administrative Agent must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment shall not be less than $5,000,000 and, after giving effect to such
assignment, the assigning Lender's Commitment and Loans shall not be less than
$5,000,000, in each case determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Administrative Agent, unless
each of the Company and the Administrative Agent otherwise consent, (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender's rights and obligations under this Agreement, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance, together with a processing and recordation fee of
$3,500 for such assignment (except that in the case of contemporaneous
assignments to assignees that are investment funds with the same investment
advisor, such fee shall be payable with respect to one assignment only), and (v)
the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire; provided, further, that any consent of
the Company otherwise
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<PAGE> 106
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required under this paragraph shall not be required if an Event of Default under
clause (j) of Section 9.01 has occurred and is continuing. Upon acceptance and
recording pursuant to paragraph (d) of this Section, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 11.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Company, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans owing to, each Lender pursuant to the
terms hereof from time to time (the "Register"). The entries in the Register
shall be conclusive, and the Company, the Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Company and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Company or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement and the other Credit Documents (including all or a portion
of its Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement and the other Credit Documents shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Company, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such
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<PAGE> 107
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Lender's rights and obligations under this Agreement and the other Credit
Documents. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and the other Credit Documents and to approve any
amendment, modification or waiver of any provision of this Agreement or any
other Credit Document; provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
11.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Company agrees that each Participant shall be entitled to the
benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.13 or 2.15 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Company's prior written consent. A Participant that would be a Foreign Lender if
it were a Lender shall not be entitled to the benefits of Section 2.15 unless
the Company is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Company, to comply with Section
2.15(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any such pledge or assignment to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such assignee for such Lender as a party hereto.
SECTION 11.05. Survival. All covenants, agreements,
representations and warranties made by the Company herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15, 3.03 and
11.03 and Article X shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of
the Loans, the expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.
Credit Agreement
<PAGE> 108
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SECTION 11.06. Counterparts; Integration. This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Global Arrangers
and/or the Agents constitute the entire contract among the parties relating to
the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.07. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 11.08. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or the account of any Credit Party against any of and all
the obligations of any Credit Party now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff) which such Lender may
have.
SECTION 11.09. Governing Law; Jurisdiction; Consent to Service
of Process.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) The Company hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any other Credit Document to which it is a party,
or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative
Credit Agreement
<PAGE> 109
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Agent or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement against the Company or its properties in the courts
of any jurisdiction.
(c) The Company hereby irrevocably appoints CT Corporation
(the "Process Agent") with an office on the date hereof at 1633 Broadway, New
York, New York 10019 as its agent to receive on behalf of it and its property
service of copies of the summons and complaint and any other process which may
be served in any such suit, action or proceeding. Such service may be made by
mailing or delivering a copy of such process to the Company, in care of the
Process Agent at the Process Agent's above address and the Company hereby
irrevocably authorizes and directs the Process Agent to receive such service on
its behalf. The Administrative Agent and each Lender agree to mail to the
Company at its address provided under Section 11.01 a copy of any summons,
complaint, or other process mailed or delivered by it to the Company in care of
the Process Agent. As an alternate method of service, the Company also
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by mailing of copies of such process to it at its address
provided under Section 11.01. All mailings under this Section shall be by
certified mail, return receipt requested. Nothing in this Agreement will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
(d) The Company hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(e) To the extent that the Company may be or become entitled,
in any jurisdiction in which judicial proceedings may at any time be commenced
with respect to this Agreement or any other Credit Document, to claim for itself
or its property or revenues any immunity from suit, court jurisdiction,
attachment prior to judgment, attachment in aid of execution of a judgment,
execution of a judgment or from any other legal process or remedy relating to
its obligations under this Agreement or any other Credit Agreement and to the
extent that in any such jurisdiction there may be attributed such an immunity
(whether or not claimed), the Company hereby irrevocably agrees not to claim and
hereby irrevocably waives such immunity to the fullest extent permitted by the
laws of such jurisdiction.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
Credit Agreement
<PAGE> 110
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REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 11.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 11.12. Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender. The Company hereby agrees that, in the event any such
services are provided to the Company or any of its Subsidiaries, each Lender
providing such services is authorized to share any information delivered to such
Lender by the Company and its Subsidiaries pursuant to this Agreement, or in
connection with the decision of such Lender to enter into this Agreement, to any
such subsidiary or affiliate providing such services, provided that any such
subsidiary or affiliate receiving such information agrees to be bound by the
provisions of paragraph (b) of this Section as if it were a Lender hereunder.
Such authorization shall survive the repayment of the Loans and the termination
of the Commitments.
(b) Each Lender, each Agent and each Global Arranger agrees
(on behalf of itself and each of its affiliates, directors, officers, employees
and representatives) to restrict dissemination of any Confidential Information
(as defined below) only to those of its directors, officers, employees and
representatives who are involved in the evaluation of such information, and to
use reasonable precautions to keep such information confidential, in accordance
with its customary procedures for handling confidential information of the same
nature and in accordance with safe and sound banking practices. For purposes of
this Agreement, "Confidential Information" shall mean any non-public information
supplied to it by the Company, including its contractors, consultants or
sponsors, pursuant to this Agreement or by Motorola in connection with this
Agreement or any Motorola Agreement, that is identified (in writing, in the case
of written information) by the Company or Motorola, as the case may be, as being
confidential at the time the same is delivered to the Lenders, the Agents or the
Global Arrangers, provided that nothing herein shall limit the disclosure of any
such information by any Lender, Agent or Global Arranger (i) after such
information shall have become public (other than through a violation of this
Section by such Lender, Agent or Global Arranger), (ii) to the extent required
by statute, rule, regulation or judicial process, (iii) to counsel or other
experts for any of the Lenders, Agents or Global Arrangers, provided that such
counsel or experts shall be bound by the requirements of this paragraph (b) with
respect to any such information, (iv) to bank examiners (or any other
Credit Agreement
<PAGE> 111
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regulatory authority having jurisdiction over any Lender, Agent or Global
Arranger), or to auditors or accountants, (v) to any Global Arranger, any Agent
or any other Lender (or to any of their respective affiliates, provided that any
such disclosure to any such affiliate shall be made on a "need to know" basis
only for use by such affiliates (and each of its officers, directors and
employees) solely in connection with the transactions contemplated by this
Agreement and each such affiliate (and each of its officers, directors and
employees) shall agree (for the benefit of the Company and Motorola) to be bound
to keep such information confidential on the same terms as set forth in this
Section), (vi) in connection with any litigation to which any one or more of the
Lenders, the Global Arrangers or the Agents is a party, or in connection with
the enforcement of rights or remedies hereunder or under any other Credit
Document, provided that the party intending to make such disclosure shall use
reasonable efforts to cooperate with the Company or with Motorola, as the case
may be, to reasonably minimize the extent of any such disclosure or to obtain
confidential treatment of information to be disclosed, (vii) to a subsidiary or
affiliate of such Lender as provided in paragraph (a) of this Section or (viii)
to any assignee or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Lender, the Company and Motorola a
confidentiality agreement containing provisions substantially the same as those
in this Section; provided, further, that in no event shall any Lender, Agent or
Global Arranger be obligated or required to return any materials furnished by
the Company or Motorola hereunder or under the Motorola Consent, respectively,
except to the extent it has agreed to do so in writing in conjunction with the
receipt of such information. The obligations of any assignee that has executed a
confidentiality agreement as provided above shall be superseded by this Section
on the date upon which such assignee becomes a Lender hereunder pursuant to
Section 11.04(b).
SECTION 11.13. Effective Date. This Agreement shall become
effective upon the date, which shall not be later than December 19, 1997, of (a)
receipt by the Administrative Agent of one or more counterparts of this
Agreement executed by each of the parties hereto (or evidence satisfactory to
the Administrative Agent of such execution and delivery) and (b) the payment by
the Company of such fees or other amounts as the Company shall have agreed to
pay to any Lender or any Agent, including, without limitation, the reasonable
fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy, special New
York counsel to the Global Arrangers and the Agents, and of the Independent
Advisors, in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Credit Documents (to the extent that
statements for such fees and other amounts have been delivered to the Company).
From and after such effective date, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The Administrative Agent shall promptly notify the Company and the
Lenders of such effective date, and such notice shall be conclusive and binding
on all parties hereto. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
Credit Agreement
<PAGE> 112
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SECTION 11.14. No Third Party Beneficiaries. The agreement of
the Lenders to make the Loans to the Company on the terms and conditions set
forth herein are solely for the benefit of the Company, and no other Person
(including, without limitation, any other Credit Party or any contractor,
subcontractor, supplier or materialman furnishing supplies, goods or services to
or for the benefit of the Project) shall have any rights hereunder or, as
against any Agent or any Lender, under any other Transaction Document, or with
respect to the Loans or the proceeds thereof.
Credit Agreement
<PAGE> 113
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
IRIDIUM OPERATING LLC
By_________________________
Name:
Title:
Credit Agreement
<PAGE> 114
- 108 -
LENDERS
THE CHASE MANHATTAN BANK
By_________________________
Name:
Title:
BARCLAYS BANK PLC
By_________________________
Name:
Title:
[COMPLETE FOR EACH OTHER LENDER.]
[NAME OF LENDER]
By_________________________
Name:
Title:
Credit Agreement
<PAGE> 115
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GLOBAL ARRANGERS
CHASE SECURITIES INC.,
as a Global Arranger
By_________________________
Name:
Title:
BARCLAYS CAPITAL, a division of
BARCLAYS BANK PLC,
as a Global Arranger
By_________________________
Name:
Title:
Credit Agreement
<PAGE> 116
- 110 -
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
By_________________________
Name:
Title:
DOCUMENTATION AGENT
BARCLAYS BANK PLC
By_________________________
Name:
Credit Agreement
<PAGE> 117
SCHEDULE I
Commitments
Schedule I - Commitments
<PAGE> 118
SCHEDULE II
Real Property
Schedule II - Real Property
<PAGE> 119
SCHEDULE III
Litigation
Schedule III - Litigation
<PAGE> 120
SCHEDULE IV
Environmental Matters
Schedule IV - Environmental Matters
<PAGE> 121
SCHEDULE V
Indebtedness
Schedule V - Indebtedness
<PAGE> 122
SCHEDULE VI
Liens
Schedule VI - Liens
<PAGE> 123
SCHEDULE VII
Subsidiaries
Schedule VII - Subsidiaries
<PAGE> 124
SCHEDULE VIII
Investments
Schedule VIII - Investments
<PAGE> 125
SCHEDULE IX
Restrictive Agreements
Schedule IX - Restrictive Agreements
<PAGE> 126
SCHEDULE X
Employee Matters
Schedule X - Employee Matters
<PAGE> 127
SCHEDULE XI
Affiliate Agreements
Schedule XI - Affiliate Agreements
<PAGE> 128
APPENDIX 1
Initial Approved Budget
Appendix 1 - Initial Approved Budget
<PAGE> 129
APPENDIX 2
Conditions Precedent
(See Exhibit 10.29 to this Registration Statement)
Appendix 2 - Conditions Precedent
<PAGE> 130
APPENDIX 3
Insurance Program
Appendix 3 - Insurance Program
<PAGE> 131
EXHIBIT A
Form of Assignment and Acceptance
(See Exhibit 10.31 to this Registration Statement)
Assignment and Acceptance
<PAGE> 132
EXHIBIT B
Form of Security Agreement
(See Exhibit 10.32 to this Registration Statement)
Security Agreement
<PAGE> 133
EXHIBIT C
Form of Parent Security Agreement
(See Exhibit 10.33 to this Registration Statement)
Parent Security Agreement
<PAGE> 134
EXHIBIT D
Form of Subsidiary Guarantee Agreement
(See Exhibit 10.34 to this Registration Statement)
Subsidiary Guarantee Agreement
<PAGE> 135
EXHIBIT E
Form of Subsidiary Guarantee Assumption Agreement
(See Exhibit 10.35 to this Registration Statement)
Subsidiary Guarantee Assumption Agreement
<PAGE> 136
EXHIBIT F
Form of Depositary Agreement
(See Exhibit 10.36 to this Registration Statement)
Depositary Agreement
<PAGE> 137
EXHIBIT G
Form of Motorola Consent
(See Exhibit 10.37 to this Registration Statement)
Motorola Consent
<PAGE> 138
EXHIBIT H
Form of Motorola Pledge Agreement
(See Exhibit 10.38 to this Registration Statement)
Motorola Pledge Agreement
<PAGE> 139
EXHIBIT I-1
Form of Progress Certificate
(Pre-Commercial Activation)
(See Exhibit 10.39 to this Registration Statement)
Progress Certificate (Pre-Commercial Activation)
<PAGE> 140
EXHIBIT I-2
Form of Verification of
Independent Technical Advisor
(See Exhibit 10.40 to this Registration Statement)
Verification of Independent Technical Advisor
<PAGE> 141
EXHIBIT I-3
Form of Progress Certificate
(Post-Commercial Activation)
(See Exhibit 10.41 to this Registration Statement)
Progress Certificate (Post-Commercial Activation)
<PAGE> 142
EXHIBIT J
Form of Borrowing Request
(See Exhibit 10.42 to this Registration Statement)
Borrowing Request
<PAGE> 1
EXHIBIT 10.29
APPENDIX 2
to
Credit Agreement
CONDITIONS PRECEDENT
PART A: CONDITIONS PRECEDENT TO THE DISBURSEMENT OF THE TERM
LOANS UNDER SECTION 2.01(a)
1. Credit Agreement. This Agreement, duly executed and delivered
by each of the Company, the Agents and the Lenders, and this
Agreement shall have become effective pursuant to Section
11.13.
2. Borrowing Request. A Borrowing Request with respect to such
Term Loans.
3. Depositary Agreement. The Depositary Agreement, duly executed
and delivered by the Company, the Collateral Agent and the
Depositary Bank.
4. Filings, Registrations and Recordings. Evidence that all
filings (including applicable Uniform Commercial Code
financing statements), recordings, registrations and similar
action under the Depositary Agreement have been duly made in
order to create a first priority security interest in the
Collateral covered thereby (except as may be provided therein)
and that the payment of all filing, recordation, registration
and similar fees and all taxes and other similar charges in
connection therewith and with the execution and delivery of
the Depositary Agreement has been made, or arrangements for
any of the foregoing satisfactory to the Collateral Agent have
been made.
5. Management Services Agreement. A certified copy of the
Management Services Agreement as in effect, duly executed and
delivered by Iridium World Communications Ltd., Iridium LLC
and the Company.
6. Asset Transfer Agreement. The Asset Transfer Agreement, duly
executed and delivered by Iridium LLC and the Company, and
evidence that the transfer of substantially all of the assets
of Iridium LLC to the Company contemplated thereby has been
effected pursuant thereto.
Appendix 2 - Conditions Precedent
<PAGE> 2
- 2 -
PART B: CONDITIONS PRECEDENT TO THE DISBURSEMENT OF THE TERM
LOANS FROM THE PRE-FUNDING ACCOUNT
I. DOCUMENTS AND INFORMATION TO BE DELIVERED BY THE CREDIT PARTIES
1. Security Agreement. The Security Agreement, duly executed and
delivered by the Company, the Subsidiary Guarantors and the
Collateral Agent.
2. Subsidiary Guarantee Agreement. The Subsidiary Guarantee
Agreement, duly executed and delivered by each Subsidiary
Guarantor and the Administrative Agent.
3. Promissory Notes. If requested by any Lender, the promissory
notes or promissory notes for such Lender each duly executed
and delivered by the Company.
4. Mortgages. The Mortgage(s) with respect to each parcel of real
property or leasehold interest of the Company or any of its
Subsidiaries identified on Part A of Schedule II to the Credit
Agreement required to be subject to a Mortgage as of the
Closing Date, each duly executed and delivered by the Company
or the relevant Subsidiary, as the case may be.
5. Financial Statements. Copies of the most recent audited and
(if any) unaudited consolidated financial statements of the
Company required to delivered under Section 5.01 of the Credit
Agreement.
6. Company Secretary's Certificate. A certificate of the
Secretary or an Assistant Secretary of the Company, dated the
Closing Date, as to: (i) the Company LLC Agreement; (ii)
resolutions relating to the execution, delivery and
performance by the Company of the Credit Documents to which it
is a party; and (iii) incumbency and specimen signatures of
each officer of the Company executing any such Credit Document
(and the Agents and each Lender may conclusively rely on such
officer's certificate until it receives notice in writing from
the Company).
7. Subsidiary Secretary's Certificate. A certificate of the
Secretary or an Assistant Secretary of each Subsidiary, dated
the Closing Date, as to: (i) the limited liability company or
charter; (ii) resolutions relating to the execution, delivery
and performance by such Subsidiary of the Credit Documents to
which it is a party; (iii) incumbency and specimen signature
of each officer of the Subsidiary executing any such Credit
Document (and the Agents and each Lender may conclusively rely
on such officer's certificate until it receives notice in
writing from such Subsidiary).
8. Company Responsible Officer's Certificate. A certificate of a
Responsible Officer, dated the Closing Date, as to:
Appendix 2 - Conditions Precedent
<PAGE> 3
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(i) the accuracy of the representations and
warranties made by the Company and its Subsidiaries in the
Credit Documents to which any of them is a party;
(ii) to the best knowledge of the Company, the
accuracy of the representations and warranties made by each
other Project Party in each Credit Document to which it is a
party;
(iii) the absence of any Default;
(iv) the insurance obtained by the Company being in
accordance with the insurance requirements under Section 8.01,
and that such insurance is in full force and effect and all
insurance premiums and deposits then due and payable thereon
have been paid or made;
(v) (i) the Senior Subordinated Notes shall be
outstanding as of the Closing Date and (ii) (x) the Company
shall have outstanding unsecured senior debt of at least
$1,900,000,000 in aggregate principal amount (of which up to
$350,000,000 may consist of Motorola's commitment to issue its
Guarantee of the Company's senior unsecured Indebtedness up to
$350,000,000 (inclusive of principal, interest and other
amounts)) and (y) the net cash proceeds thereof have been (or
in the case of such commitment, will be) applied by the
Company to the payment of Project Costs.
9. Subscriber Units. A letter from Motorola to Iridium as to the
supply of subscriber units in sufficient quantities to cover
at least the projected level of subscribers for the first year
of commercial operation for the Project and at a price
consistent with achievement of the Financial Projections.
10. Insurance. Certificates of insurance from the Company's
insurance brokers showing that (i) the Agents and the Lenders
are additional insureds under all liability insurance policies
of the Company and (ii) The Chase Manhattan Bank, as
Collateral Agent, is named as loss payee under all casualty
insurance policies of the Company (including, without
limitation, the in-orbit insurance policies referred to in
Appendix 3) and (if requested by the Administrative Agent)
true and complete copy of the insurance policies required to
be in effect as of the Closing Date.
11. Stock Certificates. If the equity interests of any of the
Subsidiaries pledged to the Collateral Agent under any
Security Document to which any Credit Party is a party are
evidenced by a certificate, the Collateral Agent shall have
received such certificate(s) together with in each case an
undated stock power executed in blank, in order to create a
first priority perfected security interest in such equity
interests.
12. Filings, Registrations and Recordings. Evidence that all
filings (including, applicable, Uniform Commercial Code
financing statements), recordings,
Appendix 2 - Conditions Precedent
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registrations and similar action under each Security Document
to which any Credit Party is a party as of the Closing Date
have been duly made in order to create a first priority
security interest in the Collateral covered by such Security
Document (except as may be provided therein) and that the
payment of all filing, recordation, registration and similar
fees and all taxes and other similar charges in connection
therewith and with the execution and delivery of each such
Security Document has been made, or arrangements for any of
the foregoing satisfactory to the Collateral Agent have been
made.
13. UCC Searches, Etc. Satisfactory results of UCC, tax and
judgment lien searches in each jurisdiction reasonably
requested by the Administrative Agent and under the names of
the Company, Iridium LLC and each other name reasonably
requested by the Administrative Agent.
14. Title Insurance, Etc. The issuance of a mortgagee title
insurance policy in respect of each of the properties subject
to the Mortgage(s) being entered into as of the Closing Date,
together with delivery of each of the related documentation
that complies with the requirements of Section 6.10(c).
15. Process Agent. Letter from one or more persons satisfactory to
the Administrative Agent accepting its appointment as process
agent in New York for each Credit Party under the relevant
Credit Documents.
16. Payment of Fees and Expenses. Evidence that the Company shall
have paid such fees, expenses and other amounts as the Company
shall have agreed to pay to any Lender or any Agent on or
prior to the Closing Date, including, without limitation, the
reasonable fees, charges and disbursements of Milbank, Tweed,
Hadley & McCloy, special New York counsel to the Global
Arrangers and the Agents, and of each of the Independent
Advisors (to the extent that statements for such fees and
other amounts have been delivered to the Company).
17. Opinions of Counsel. The opinions of counsel to the Credit
Parties referred to below in Section VII of this Part A.
18. Other Documents. Receipt of such other documents,
certificates, instruments and information as the
Administrative Agent or special counsel to the Global
Arrangers may reasonably request.
Appendix 2 - Conditions Precedent
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II. DOCUMENTS AND INFORMATION TO BE DELIVERED BY IRIDIUM LLC
1. Parent Security Agreement. The Parent Security Agreement, duly
executed and delivered by Iridium LLC and the Collateral
Agent.
2. Financial Statements. Copies of the most recent audited and
(if any) unaudited consolidated financial statements of
Iridium LLC referred to in Section 4.01 of the Parent Security
Agreement and unaudited quarterly consolidated financial
statements of Iridium LLC for each quarterly period ended
subsequent to such audited financial statements.
3. Iridium LLC Secretary's Certificate
A certificate of the Secretary or an Assistant Secretary of
Iridium LLC, dated the Closing Date, as to: (i) the Iridium
LLC Agreement as amended and in effect on the Closing Date
(including an amendment thereto pursuant to which the Iridium
LLC Members have consented to the assignment of the rights in
favor of Iridium LLC with respect to the Reserve Capital Call
Obligations pursuant to the Parent Security Agreement); (ii)
resolutions relating to the execution, delivery and
performance by Iridium LLC of the Credit Documents to which it
is a party; and (iii) incumbency and specimen signatures of
each officer of Iridium LLC executing any such Credit Document
(and the Agents and each Lender may conclusively rely on such
officer's certificate until it receives notice in writing from
Iridium LLC).
4. Iridium LLC Responsible Officer's Certificate. A certificate
of a senior officer of Iridium LLC, dated the Closing Date, as
to:
(i) the accuracy of the representations and
warranties made by Iridium LLC in each Credit
Document to which it is a party;
(ii) the absence of any Default relating to
Iridium LLC; and
(iii) prior to the Closing Date, receipt by
Iridium LLC of aggregate net cash proceeds from the
issuance of equity of at least $1,985,000,000 (of
which up to $50,000,000 may consist of a receivable
from P.T. Bakrie Communications) and that such cash
proceeds have been fully applied by the Company to
the payment of Project Costs.
5. Stock Certificates. If the equity interests of the Company
pledged to the Collateral Agent under the Parent Security
Agreement are evidenced by a certificate, the Collateral Agent
shall have received such certificate(s) together with in each
case an undated stock power executed in blank, in order to
create a first priority perfected security interest in such
equity interests.
Appendix 2 - Conditions Precedent
<PAGE> 6
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6. Filings, Registrations and Recordings. Evidence that all
filings (including, applicable, Uniform Commercial Code
financing statements), recordings, registrations and similar
action under the Parent Security Agreement have been duly made
in order to create a first priority security interest in the
Collateral covered by the Parent Security Agreement (except as
may be provided therein) and that the payment of all filing,
recordation, registration and similar fees and all taxes and
other similar charges in connection therewith and with the
execution and delivery of the Parent Security Agreement has
been made, or arrangements for any of the foregoing
satisfactory to the Collateral Agent have been made.
7. Process Agent. Letter from one or more persons satisfactory to
the Administrative Agent accepting its appointment as process
agent in New York for Iridium LLC under the relevant Credit
Documents.
Appendix 2 - Conditions Precedent
<PAGE> 7
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III. DOCUMENTS AND INFORMATION TO BE DELIVERED BY MOTOROLA
1. Motorola Consent. The Motorola Consent, duly executed and
delivered by each of Motorola, the Company, the Administrative
Agent and the Collateral Agent.
2. Motorola Pledge Agreement. If required by Section 4.01 of the
Motorola Consent to be executed and delivered as of the
Closing Date, the Motorola Pledge Agreement, duly executed and
delivered by Motorola and the Collateral Agent.
3. Stock Certificates. At the time of the entering into of the
Motorola Pledge Agreement, the stock certificate evidencing
the capital stock of the Subsidiary of Motorola holding the
FCC License pledged under the Motorola Pledge Agreement,
together with an undated stock power executed in blank, and
Motorola shall have taken all other action under the Motorola
Pledge Agreement reasonably requested by the Collateral Agent
in order to create a first priority security interest in the
Collateral covered thereby.
4. FCC License. A certified copy of the FCC License.
5. Insurance. Evidence that the Lenders and the Agents shall be
additional insureds under the liability insurance policy of
Motorola and its Subsidiaries specifically procured in
connection with the Development of the Project.
6. Financial Statements of Motorola. Copies of the consolidated
financial statements of Motorola referred to in Section 2.02
of the Motorola Consent.
7. Senior Officer's Certificate. A certificate of a senior
officer of Motorola certifying as to: (i) the accuracy of the
representations and warranties made by Motorola in the Credit
Documents to which it is party; and (ii) the absence of any
Motorola Default.
8. Secretary's Certificate. An officer's certificate of the
Secretary or an Assistant Secretary of Motorola, dated the
Closing Date, as to: (i) the charter and by-laws of Motorola;
(ii) the resolutions relating to the execution, delivery and
performance by Motorola of the Credit Documents to which it is
a party; and (iii) the incumbency and specimen signatures of
each officer of Motorola executing any such Credit Document
(and the Agents and each Lender may conclusively rely on such
officer's certificate until it receives notice in writing from
Motorola).
9. Opinions of Counsel. The opinions of counsel to Motorola
referred to below in Section VII of this Part A.
Appendix 2 - Conditions Precedent
<PAGE> 8
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IV. PRINCIPAL PROJECT DOCUMENTS AND CERTAIN OTHER DOCUMENTS
1. Space System Contract. A certified copy of the Space System
Contract as amended and in effect on the Closing Date, duly
executed and delivered by each of the parties thereto.
2. Terrestrial Network Development Contract. A certified copy of
the Terrestrial Network Development Contract as amended and in
effect on the Closing Date, duly executed and delivered by
each of the parties thereto.
3. O&M Contract. A certified copy of the O&M Contract as amended
and in effect on the Closing Date, duly executed and delivered
by each of the parties thereto.
4. Gateway Authorization Agreements. Certified copies of each
Gateway Authorization Agreement as amended and in effect on
the Closing Date, in each case duly executed and delivered by
each of the parties thereto.
5. IBSS Agreement. A certified copy of the IBSS Agreement as
amended and in effect on the Closing Date, duly executed and
delivered by each of the parties thereto.
Appendix 2 - Conditions Precedent
<PAGE> 9
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V. INDEPENDENT ADVISORS REPORTS
1. Technical Advisor. A copy of the report of Arthur D. Little,
Inc., the Independent Technical Advisor, dated October 8, 1997
(delivered in connection with the Information Memorandum).
2. Market Consultant. A copy of the report of Coopers & Lybrand
L.L.P., the Independent Market Consultant, appearing in
Section 9 of the Information Memorandum.
3. Insurance Advisor. A written report of Sedgwick James of New
Jersey, Inc., the Independent Insurance Advisor, dated on or
prior to the Closing Date, as to the adequacy of the insurance
program of the Company and its Subsidiaries and confirming
compliance thereof with the insurance requirements under
Section 8.01.
Appendix 2 - Conditions Precedent
<PAGE> 10
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VI. CERTAIN OTHER DOCUMENTS AND INFORMATION
1. Assignment Consents. A consent to the assignment by the
Company of its rights in each Principal Project Document
pursuant to the Security Agreement, duly executed and
delivered by each Project Party party thereto (other than the
Credit Parties. Motorola and the Secured Parties), in form and
substance satisfactory to the Administrative Agent.
2. Certain Project Parties' Financial Statements. Copies of the
audited financial statements of each Person (if available,
otherwise unaudited and certified by a senior financial
officer of such party) obligated in respect of the Reserve
Capital Call Obligations, for the two most recent fiscal years
and unaudited quarterly financial statements of such party for
each quarterly period ended subsequent to the date of such
audited financial statements, but only to the extent that the
Company, using reasonable efforts has been able to obtain the
same.
Appendix 2 - Conditions Precedent
<PAGE> 11
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VII. LEGAL OPINIONS
1. Opinion(s) of Counsel to the Credit Parties and Iridium LLC.
Opinions of counsel to the Credit Parties in form and
substance satisfactory to the Administrative Agent.
2. Opinion of Counsel to Motorola. Opinions of counsel to
Motorola in form and substance satisfactory to the
Administrative Agent.
3. Opinion of Milbank, Tweed, Hadley & McCloy. An opinion of
Milbank, Tweed, Hadley & McCloy, special New York counsel to
the Global Arrangers and the Agents, in form and substance
satisfactory to the Administrative Agent.
4. Other Opinions. If any Mortgage is being executed and
delivered as of the Closing Date, an opinion of counsel to the
Company or the relevant Subsidiary in the jurisdiction where
the property subject to such Mortgage is located in form and
substance satisfactory to the Administrative Agent.
Appendix 2 - Conditions Precedent
<PAGE> 12
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VIII. TECHNICAL AND REGULATORY CONDITIONS
1. Progress Certificate.(1) A Progress Certificate, substantially
in the form of Exhibit I-1, duly completed and executed by a
Responsible Officer, certifying (in the form specified in
Exhibit I-1 and the basis for which certifications shall be
satisfactory to the Administrative Agent) as to:
(i) achievement of, or satisfaction with,
each of the technical requirements for "Stage 1" as
specified in Annex A to this Appendix 2 that are
required to be met on or prior to the Closing Date;
(ii) minimum regulatory approvals and PSTN
access for "Stage 1" as specified in Attachment 3 of
Annex A to this Appendix 2 required to be achieved on
or prior to the Closing Date (and providing and/or
attaching the legal opinions and other information
and/or documentation with respect thereto
contemplated by Exhibit I-1); and
(iii) the Company's compliance with the
requirements of Section 8.04 as of the Closing Date.
2. Verification of Independent Technical Advisor. A certificate
of the Independent Technical Advisor, in the form of Exhibit
I-2, duly completed and executed, with respect to the
achievement of, or satisfaction with, each of the technical
requirements for "Stage 1" as specified in Annex A to this
Appendix 2 that are required to be met on or prior to the
Closing Date (and attaching copies of the related statements
of Motorola referred to therein).
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(1) This Progress Certificate, fully competed (including completed
schedules together with all relevant attachments) other than the
execution and dating of this Certificate, shall be required to be
delivered to the Administrative Agent not less than 5 Business Days
prior to the date of the Borrowing Request.
Appendix 2 - Conditions Precedent
<PAGE> 13
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PART C: CONDITIONS PRECEDENT TO PRE-COMMERCIAL ACTIVATION
REVOLVING LOANS (I.E. REVOLVING LOANS UP TO BUT NOT
EXCEEDING THE FIRST $400,000,000)(2)
1. Borrowing Request. A Borrowing Request with respect to such
Borrowing.
2. Progress Certificate. A Progress Certificate,(3) substantially
in the form of Exhibit I-1, duly completed and executed by a
Responsible Officer, certifying (in the form specified in
Exhibit I-1 and the basis for which certifications shall be
satisfactory to the Administrative Agent) as to:
(i) achievement of, or satisfaction with,
each of the technical requirements for "Stage 2" or
"Stage 3", as applicable to such Borrowing, as
specified in Annex A to this Appendix 2 that are
required to be met on or prior to the date of such
Borrowing;
(ii) minimum regulatory approvals for "Stage
2" or "Stage 3", as applicable to such Borrowing, as
specified in Attachment 3 of Annex A to this Appendix
2 required to be achieved on or prior to the date of
such Borrowing (and providing and/or attaching the
legal opinions and other information and/or
documentation with respect thereto contemplated by
Exhibit I-1); and
(iii) the Company's compliance with the
requirements of Section 8.04 as of the date of such
Borrowing.
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(2) The conditions precedent set forth below in this Part C shall be
satisfied in connection with each Borrowing under "Stages 2 and 3" (as
such Stages are identified in Annex A to this Appendix 2). In
connection with any Borrowing under each such Stage other than the
first Borrowing thereunder, in lieu of items 2 and 3 above, the Company
may provide a certificate of a Responsible Officer, in form and
substance satisfactory to the Administrative Agent, that the technical
and regulatory conditions precedent for such Stage, as certified to by
the Company in the Progress Certificate delivered for such initial
Borrowing, remain satisfied as of the date of such Borrowing (together
with, to the extent the Company shall be relying on information that
differs from the information that served as the basis for the
certifications in such initial Progress Certificate, such other
information (and any related documentation) in a form satisfactory to
the Administrative Agent and consistent with the requirements for such
initial Progress Certificate).
(3) This Progress Certificate, fully competed (including completed
schedules together with all relevant attachments) other than the
execution and dating of this Certificate, shall be required to be
delivered to the Administrative Agent not less than 5 Business Days
prior to the date of the Borrowing Request.
Appendix 2 - Conditions Precedent
<PAGE> 14
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3. Verification of Independent Technical Advisor. A certificate
of the Independent Technical Advisor, substantially in the
form of Exhibit I-2, duly completed and executed, with respect
to the achievement of, or satisfaction with, each of the
technical requirements for "Stage 2" or "Stage 3", as
applicable to such Borrowing, as specified in Annex A to this
Appendix 2 that are required to be met on or prior to the date
of such Borrowing (and attaching copies of the related
statements of Motorola referred to therein).
Appendix 2 - Conditions Precedent
<PAGE> 15
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PART D: CONDITIONS PRECEDENT TO POST-COMMERCIAL ACTIVATION
REVOLVING LOANS (I.E. REVOLVING LOANS IN EXCESS OF
$400,000,000)(4)
1. Borrowing Request. A Borrowing Request with respect to such
Borrowing.
2. Commercial Activation. Evidence that Commercial Activation
shall have occurred.
3. Progress Certificate. A Progress Certificate,(5) substantially
in the form of Exhibit I-3, duly completed and executed by a
Responsible Officer, certifying (in the form specified in
Exhibit I-3 and the basis for which certifications shall be
satisfactory to the Administrative Agent) as to:
(i) all regulatory approvals (including PSTN
access) necessary for commercial operation in each of
the countries specified in Attachment 3 of Annex A to
this Appendix 2 (and providing and/or attaching the
legal opinions and other information and/or
documentation with respect thereto contemplated by
Exhibit I-3); and
(ii) the Company's compliance with the
requirements of Section 8.04 as of the date of such
Borrowing.
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(4) The conditions precedent set forth below in this Part D shall be
satisfied in connection with each Borrowing under the "Post-Commercial
Activation Stage" (as such Stage is identified in Annex A to this
Appendix 2). In connection with any Borrowing under such Stage other
than the first Borrowing thereunder, in lieu of item 3 above, the
Company may provide a certificate of a Responsible Officer, in form and
substance satisfactory to the Administrative Agent, that the technical
and regulatory conditions precedent for such Stage, as certified to by
the Company in the Progress Certificate delivered for such initial
Borrowing, remain satisfied as of the date of such Borrowing (together
with, to the extent the Company shall be relying on information that
differs from the information that served as the basis for the
certifications in such initial Progress Certificate, such other
information (and any related documentation) in a form satisfactory to
the Administrative Agent and consistent with the requirements for such
initial Progress Certificate).
(5) This Progress Certificate, fully competed (including completed
schedules together with all relevant attachments) other than the
execution and dating of this Certificate, shall be required to be
delivered to the Administrative Agent not less than 5 Business Days
prior to the date of the Borrowing Request.
Appendix 2 - Conditions Precedent
<PAGE> 1
EXHIBIT 10.30
ANNEX A to
APPENDIX 2
REGULATORY AND TECHNICAL CONDITIONS PRECEDENT
The conditions precedent set forth in this Annex A to availability of funding
under the Credit Agreement fall into two areas, regulatory and technical.
Availability under the Credit Agreement will occur during the following four
stages:
<TABLE>
<S> <C> <C>
Stage 1: January 1, 1998 ($350,000,000)
Stage 2: April 1, 1998 ($200,000,000)
Stage 3: August 1, 1998 ($200,000,000)
Stage 4
(Post-Commercial
Activation): October 1, 1998 ($250,000,000)
</TABLE>
If the Company and its contractors satisfy all conditions precedent to funding
for a particular stage, amounts up to the specified amount for such stage can be
drawn down in one or more Borrowings under the Credit Agreement. All conditions
precedent are treated on a cumulative basis within each stage. The dates
specified above are merely the dates by which it is anticipated that such
conditions will be satisfied.
The first three stages above are tied to certain planned regulatory
accomplishments and the timing of specific milestones within various project
contracts. Examples of such contracts include the Space System Contract, the
Terrestrial Network Development Contract, and billing system, ICRS interworking
unit, control system and other contracts. The Independent Technical Advisor,
Arthur D. Little, Inc., has divided the technical milestones into seven
categories within each of the three stages. Specific milestones/technical tests
(described as "phase tests") are discussed below within each stage. The fourth
stage above is tied to certain planned regulatory accomplishments following
Commercial Activation.
The following paragraphs detail the specific regulatory and technical conditions
precedent that are required to be satisfied in order to draw funds under the
Credit Agreement at each stage.
Annex A to Appendix 2
<PAGE> 2
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STAGE 1 - $350 MILLION AVAILABILITY ON OR ABOUT JANUARY 1, 1998
Regulatory Conditions Precedent:
The Company will need to obtain the Stage 1 regulatory approvals as required by
Attachment 3.
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestones 38-39 have been successfully achieved in the Space System Contract.
There are at least 33 operational satellites in mission orbit, and the following
specific tests (details of which can be found within the Satcom test
documentation) have been successfully completed:
Phase 0 Testing: First Flight -- Basic command and control of
satellites demonstrated, including successful testing
of secondary and feeder links.
Phase B Testing: L-Band capability demonstrated, allowing on-orbit
testing of L-Band functionality and performance, and
hand-offs between beams and channels in a satellite.
Phase A/C Testing: Satellite cross-link, feeder-link and routing are
functional and successfully tested.
Phase D/E Testing: Demonstration that the Iridium Subscriber Unit (ISU)
can establish a voice call through the constellation
and hold a conversation (basic telephony) with an
engineering gateway, and that the IRIDIUM system can
also support cross-link and hand-offs between
satellites.
Attachment 1 provides a graphical presentation of the "phase tests" embodied
within this category.
Category 2 Gateway Implementation
Milestones 4-5 have been successfully achieved in the Terrestrial Network
Development Contract.
Gateway designs are verified with release 1.0 hardware and software in an
engineering gateway.
Annex A to Appendix 2
<PAGE> 3
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Release 1.0 hardware is installed and operating using test software in the
Iridium North America (INA) Gateway.
Category 3 Systems Control Segment
The Master Control Facility is fully operational for satellite launch and
control using version 3.5 of system control software.
Category 4 Iridium Business Support Systems (IBSS)
Version 1.0 of the IBSS (comprising IBS 1.0 and GBS 0.9), supporting basic
telephony services, has been developed and product tested.
Category 5 Iridium Interoperability Unit (IIU)
IIU 2.0 acceptance test successfully completed at Aldiscon Lab.
Category 6 Iridium Subscriber Units (ISUs) and Message Termination Devices
(MTDs)
Prototype, non-miniaturized ISUs and MTDs are available for testing the IRIDIUM
network.
Category 7 Voice, Messaging and ICRS Testing and Demonstration Program
This category encompasses demonstrations of the release 1.0 of the Company's
basic service offerings -- voice telephony of adequate quality via satellite, as
well as Iridium Cellular Roaming Services (ICRS).
Early-stage demonstration utilizing on-orbit satellites, an engineering gateway
and prototype ISUs of satellite-based voice telephony including call set-up,
satellite cross-links, and hand-offs between satellites. No interconnection
between the engineering gateway and PSTN is required.
Early-stage, laboratory-based demonstration of messaging capability consisting
of two parts: (1) the ability of an engineering gateway to accept and process
messages up to the Message Termination Controller interface; and (2) the ability
to deliver a simulated message from an on-orbit satellite to a prototype MTD.
Neither of the above requires the use of the Message Termination Controller.
Annex A to Appendix 2
<PAGE> 4
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Simulations, updated as appropriate with pertinent test results, have been
completed that demonstrate that the IRIDIUM network design provides planned
level of capacity in accordance with the Iridium Business Plan (Version 2.0,
March 31, 1997).
Annex A to Appendix 2
<PAGE> 5
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STAGE 2 - $200 MILLION AVAILABILITY ON OR ABOUT APRIL 1, 1998
Regulatory Conditions Precedent:
The Company will need to obtain the Stage 2 regulatory approvals as required by
Attachment 3.
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestone 42 has been successfully achieved in the Space System Contract.
There are at least 44 operational satellites in mission orbit, and the following
specific test (details of which can be found within the Satcom test
documentation) has been successfully completed:
Phase F Testing: There are multiple engineering gateways available for
testing with network management functionality
available.
Category 2 Gateway Implementation
Milestone 6 has been successfully achieved in the Terrestrial Network
Development Contract.
At least three gateways are installed, functional and pass conditional
acceptance for release 1.0 service.
Category 3 Systems Control Segment
The Master Control Facility integration and tests are successfully completed for
all facility functions.
Category 4 Iridium Business Support Systems (IBSS)
Annex A to Appendix 2
<PAGE> 6
- 6 -
Version 1.5 of the IBSS (comprising IBS 1.5 and GBS 1.0), supporting basic and
planned supplementary telephony, messaging and ICRS services, has been
successfully developed and product tested.
Category 5 Iridium Interoperability Unit (IIU)
IIU is installed, functional and successfully tested.
Category 6 Iridium Subscriber Units (ISUs) and Message Termination Devices
(MTDs)
Full functionality ISUs and MTDs are available for testing (miniaturization not
required).
Category 7 Voice, Messaging and ICRS Testing and Demonstration Program
Satellite-based voice telephony of adequate quality and messaging demonstrated
utilizing on-orbit satellites, multiple gateways, and fully functional ISUs and
MTDs (miniaturization not required).
Link margin level tests (i.e., strength of signal to the ISU/MTD from the
satellite) have been successfully completed, and the results comply with
specifications.
A successful ICRS demonstration of roaming among the IRIDIUM network, GSM and
IS-41 protocol networks, using signalling network simulators, has been
completed.
Annex A to Appendix 2
<PAGE> 7
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STAGE 3 - $200 MILLION AVAILABILITY ON OR ABOUT AUGUST 1, 1998
Regulatory Conditions Precedent:
The Company will need to obtain the Stage 3 regulatory approvals as required by
Attachment 3.
Technical Conditions Precedent:
Category 1 Constellation Implementation
Milestones 46 and 47 have been successfully achieved in the Space System
Contract.
The constellation is ready to support commercial service (at least 65
operational satellites in mission orbit), and the following specific tests
(details of which can be found within the Satcom test documentation) have been
successfully completed:
Phase G Testing: The Iridium network successfully interfaces
with the Iridium Business System (record,
rate & bill calls).
Phase H Testing: The Iridium network can send and receive
pages, as well as voice mailbox
functionality. There is upgraded network
management capability, as well as resource
management capability for the paging
function.
Category 2 Gateway Implementation
Milestones 7-9 have been successfully achieved in the Terrestrial Network
Development Contract.
At least seven gateways are deployed and commissioned by the Company (only four
offering messaging services).
Category 3 Systems Control Segment
The Systems Control Segment, including the Backup Control Facility, is fully
operational.
Annex A to Appendix 2
<PAGE> 8
- 8 -
Category 4 Iridium Business Support Systems (IBSS)
IBSS is deployed and operational at the Master Control Facility (IBS) and the
operational gateways (GBS).
Category 5 Iridium Interoperability Unit (IIU)
IIU interconnected and tested with at least one IS-41 and one GSM cellular
network.
Category 6 Iridium Subscriber Units (ISUs) and Message Termination Devices
(MTDs)
Final manufacturable forms of the handset and pager (function and form) are
available.
Category 7 Voice, Messaging and ICRS Testing and Demonstration Program
Satellite-based voice telephony of adequate quality, satellite-based messaging
with at least four gateways, and ICRS are fully functional.
Voice subscriber trials have commenced and are working satisfactorily.
Simulations, updated as appropriate with pertinent test results, have been
completed that demonstrate that the IRIDIUM network as completed provides
planned level of capacity in accordance with the Iridium Business Plan (Version
2.0, March 31, 1997).
Attachment 2 is a chart that summarizes the technical conditions precedent for
the Credit Agreement.
Annex A to Appendix 2
<PAGE> 9
ATTACHMENT 2 to
ANNEX A to
APPENDIX 2
TECHNICAL CONDITIONS PRECEDENT CHART
<TABLE>
<CAPTION>
STAGE 1 STAGE 2 STAGE 3
CATEGORY TESTS/MILESTONES TESTS/MILESTONES TESTS/MILESTONES
(FIRST $350 MILLION) (NEXT $200 MILLION) (NEXT $200 MILLION)
-------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
1. CONSTELLATION Milestones 38 and 39 Milestone 42 completed Milestones 46 and 47
IMPLEMENTATION completed (per SSC); at (per SSC); at least 44 completed (per SSC);
least 33 operational operational satellites in constellation ready to
satellites in mission orbit mission orbit support commercial service
(at least 65 operational
satellites in mission orbit)
Phase 0, B, D/E & A/C Phase F testing completed Phase G & H testing
testing completed completed
2. GATEWAY Milestones 4 and 5 (per Milestone 6 completed (per Milestones 7, 8 and 9 (per
IMPLEMENTATION TNDC) completed; gateway TNDC); at least 3 gateways TNDC) completed; at least
design verified with release installed, functional and 7 gateways deployed and
1.0 hardware and software pass conditional acceptance commissioned (only 4
in an engineering gateway; for release 1.0 service offering messaging
release 1.0 hardware ` services)
installed and operating
using test software
in INA Gateway
3. SYSTEMS CONTROL Master Control Facility for Master Control Facility Systems Control Segment,
SEGMENT satellite launch and control integration and tests including Backup Control
using version 3.5 of system completed for all facility Facility, fully operational
control software functions
4. IRIDIUM BUSINESS IBSS version 1.0 developed IBSS version 1.5 IBSS deployed and
SUPPORT SYSTEMS and product tested successfully developed and operational at Master
(IBSS) product tested Control Facility and
operational gateways
5. IRIDIUM IIU 2.0 acceptance test IIU installed, functional and IIU interconnected with at
INTEROPERABILITY successfully completed at successfully tested at INA least one IS-41 and one
UNIT (IIU) Aldiscon lab Gateway GSM cellular network
6. IRIDIUM Prototypes, non- Full functionality Final manufacturable forms
SUBSCRIBER UNIT miniaturized available for subscriber units available of subscriber units (function
AND MESSAGE testing IRIDIUM network for testing (miniaturization and form) available
TERMINATION not required)
DEVICE
</TABLE>
Annex A to Appendix 2
<PAGE> 10
- 2 -
<TABLE>
<S> <C> <C> <C>
7. VOICE, MESSAGING Early demonstration of Satellite-based voice Satellite-based voice
AND ICRS voice telephony in a telephony of adequate telephony, satellite
TESTING AND laboratory setting, including quality and messaging messaging service with at
DEMONSTRATION call set-up, satellite cross- demonstrated using on-orbit least 4 gateways, and ICRS
PROGRAM links, and hand-offs satellites, multiple fully functional
between satellites. No gateways, and fully
interconnection between the functional ISUs and MTDs Voice subscriber trials
engineering gateway and (miniaturization not commenced and working
PSTN is required. required) satisfactorily
Early demonstration of Link margin level tests Simulations, updated as
messaging in a laboratory completed for voice appropriate with pertinent
setting, consisting of two telephony and messaging, test results, completed that
parts: (1) ability of an and results comply with demonstrate that the
engineering gateway to specifications IRIDIUM network as
accept and process completed provides planned
messages up to the Message ICRS demonstration of level of capacity in
Termination Controller roaming among IRIDIUM accordance with the Iridium
interface; and (2) ability to system, IS-41 and GSM Business Plan.
deliver a simulated message protocol networks using
from an on-orbit satellite to signalling network
a prototype MTD. Neither simulators
of the above requires the
use of the Message
Termination Controller.
Simulations, updated as
appropriate with pertinent
test results, completed that
demonstrate that the
IRIDIUM network design
provides planned level of
capacity in accordance with
the Iridium Business Plan.
</TABLE>
Annex A to Appendix 2
<PAGE> 11
- 3 -
ATTACHMENT 3 to
ANNEX A to
APPENDIX 2
REGULATORY CONDITIONS PRECEDENT CHART
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
STAGE 1 STAGE 2 STAGE 3 POST-COMMERCIAL
------- ------- ------- ---------------
ACTIVATION STAGE
----------------
1. PERCENTAGE OF IRIDIUM 33% 50% 66% 72.5%(1)
BUSINESS PLAN REVENUES
REPRESENTED BY
JURISDICTIONS FOR
WHICH L-BAND SPECTRUM
LICENSES HAVE BEEN
OBTAINED (OF WHICH COUNTRIES
REPRESENTING AT LEAST
75% OF SUCH REVENUES
SHALL ALSO HAVE SERVICE PROVIDER
AND/OR ROAMING AGREEMENTS IN
PLACE)
2. MINIMUM NUMBER OF 20 50 75 85
SERVICE PROVIDER
AGREEMENTS
3. MINIMUM NUMBER 40 60 75 85
OF ROAMING AGREEMENTS
4. MINIMUM NUMBER 40 60 75 85(2)
OF COUNTRIES REPRESENTED
BY SERVICE PROVIDER
AND/OR ROAMING AGREEMENTS(3)
</TABLE>
- --------
(1) For Commercial Activation the Company will have commenced generally
available services on the IRIDIUM System in at least a substantial
portion of those countries whose revenues are used to satisfy this
requirement.
(2) For purposes of satisfying this requirement for the Post-Commercial
Activation Stage, with respect to each of the 85 countries the Company
shall have obtained all necessary Government Approvals (including, but
not limited to, L-band spectrum licenses) for commercial operation in
such country and be able offering commercial services according to the
minimum requirements of the service provider and/or roaming agreements
for such country.
(3) For purposes of satisfying the requirement under item 4 above as to a
minimum number of countries represented by service provider and/or
roaming agreements, execution of satisfactory roaming agreements and
service provider agreements (including, if then made available under
such agreements, pricing terms) with "qualified" service providers
(defined as PTTs, national cellular operators and other entities
acceptable to the Administrative Agent) will be required, and for any
country to be counted toward such requirement such
(continued)
Annex A to Appendix 2
<PAGE> 12
- 4 -
5. MINIMUM NUMBER OF NON-GATEWAY 0 25 50 60
COUNTRIES FOR PSTN ACCESS
- --------------
(...continued)
agreement(s) for such country, collectively, are required to provide a
"national" (i.e. covering at least 75% of such country's population)
sales distribution for IRIDIUM services in that country.
Annex A to Appendix 2
<PAGE> 1
EXHIBIT 10.31
(EXHIBIT A TO THE CREDIT AGREEMENT)
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of December
19, 1997 (as amended, supplemented or otherwise modified and in effect on date
hereof, the "Credit Agreement") among Iridium Operating LLC, a Delaware limited
liability company, the lenders named therein, the Global Arrangers, The Chase
Manhattan Bank, as administrative agent for such lenders and or collateral
agent, and Barclays Capital, the investment banking division of Barclays Bank
PLC, as documentation agent thereunder. Terms defined in the Credit Agreement
are used herein with the same meanings.
The Assignor named below hereby sells and assigns, without
recourse, to the Assignee named below, and the Assignee hereby purchases and
assumes, without recourse, from the Assignor, effective as of the Assignment
Date set forth below, the interests set forth below (the "Assigned Interest") in
the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the interests set forth below in the Commitment of the
Assignor on the Assignment Date and Loans owing to the Assignor which are
outstanding on the Assignment Date, together with unpaid interest accrued on the
assigned Loans to the Assignment Date, and the amount, if any, set forth below
of the fees accrued to the Assignment Date for the account of the Assignor. The
Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and
after the Assignment Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the interests
assigned by this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent of the interests
assigned by this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Credit Document or any instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; and (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Company, any of its Subsidiaries or any other Project Party or the performance
or observance by the Company, any of its Subsidiaries or any other Project Party
of any of their respective obligations under the Credit Agreement or any other
Transaction Document or any other instrument or document furnished pursuant
hereto or thereto.
The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received such documents and
Assignment and Acceptance
<PAGE> 2
- 2 -
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agents or any other
person that has become a Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; and (d) appoints and
authorizes (i) the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement and the other
Credit Documents to which it is a party as are delegated to the Administrative
Agent by the terms thereof and (ii) the Collateral Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Documents to
which it is a party as are delegated to the Collateral Agent by the terms
thereof, together, in each case, with such powers as are incidental thereto.
This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is a Foreign Lender, any
documentation required to be delivered by the Assignee pursuant to Section
2.15(e) of the Credit Agreement, duly completed and executed by the Assignee,
and (ii) if the Assignee is not already a Lender under the Credit Agreement, an
administrative questionnaire in the form supplied by the Administrative Agent,
duly completed by the Assignee. The [Assignee/Assignor] shall pay the fee
payable to the Administrative Agent pursuant to Section 11.04(b) of the Credit
Agreement.
This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Assignment and Acceptance
<PAGE> 3
- 3 -
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date"):
Percentage Assigned of
Facility/Commitment
(set forth, to at
least 8 decimals, as a
percentage of the
Facility and the
aggregate Commitments
Principal Amount of all Lenders
Facility Assigned thereunder
Commitment Assigned: $
Loans:
%
Fees Assigned (if any):
The terms set forth above are hereby agreed to as of [_____________]:
[NAME OF ASSIGNOR], as Assignor
By_____________________________
Name:
Title:
[NAME OF ASSIGNEE], as Assignee
Assignment and Acceptance
<PAGE> 4
- 4 -
By______________________________
Name:
Title:
Assignment and Acceptance
<PAGE> 5
- 5 -
The undersigned hereby consent to the within assignment:(1)
IRIDIUM OPERATING LLC
By_________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_________________________
Name:
Title:
- --------
(1) Consents to be included to the extent required by Section 11.04(b) of
the Credit Agreement.
Assignment and Acceptance
<PAGE> 1
EXHIBIT 10.32
(EXHIBIT B TO THE CREDIT AGREEMENT)
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of [___________, 199_]
between: IRIDIUM OPERATING LLC, a limited liability company duly organized and
validly existing under the laws of the State of Delaware (the "Company"); each
of the Subsidiaries of the Company identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereof (individually, a "Subsidiary
Guarantor" and, collectively, the "Subsidiary Guarantors" and, together with the
Company, the "Obligors"); and THE CHASE MANHATTAN BANK, as collateral agent
hereunder for the lenders party to the Credit Agreement referred to below (in
such capacity, together with its successors in such capacity, the "Collateral
Agent").
The Company, the Subsidiary Guarantors, certain lenders, the Global
Arrangers, the Collateral Agent, The Chase Manhattan Bank, as the Administrative
Agent, and Barclays Capital, the investment banking division of Barclays Bank
PLC, as the Documentation Agent, are parties to a Credit Agreement dated as of
December 19, 1997 (as modified, supplemented or otherwise modified and in effect
from time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for loans to be made by said lenders to the Company in an
aggregate principal amount not exceeding $1,000,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Obligor has
agreed to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Capitalized terms used but not defined
herein shall have their respective meanings in the Credit Agreement. In
addition, as used herein:
"Accounts" has the meaning assigned to such term in paragraph (g) of
Article III.
"Assigned Agreement" has the meaning assigned to such term in
paragraph (e) of Article III.
"Collateral" has the meaning assigned to such term in Article III.
Security Agreement
<PAGE> 2
- 2 -
"Copyright Collateral" means all Copyrights, whether now owned or
hereafter acquired by any Obligor, including each Copyright identified in
Annex 2.
"Copyrights" has the meaning assigned to such term in paragraph (o)
of Article III.
"Documents" has the meaning assigned to such term in paragraph (n)
of Article III.
"Equipment" has the meaning assigned to such term in paragraph (j)
of Article III.
"Hawaiian TTAC License" means the License Agreement dated December
1, 1993 between the Estate of James Campbell, as Licensor, and Motorola,
Inc., as Licensee, relating to all that certain real property consisting
of approximately 250,034 square feet or 5.74 acres, said property being a
portion of Lot 46, comprising 118, 207 acres, located in Kaunala, District
of Koolauloa, City and County of Honolulu, State of Hawaii, as shown on
Map 7, filed in the Office of the Assistant Registrar of the land court of
the Sate of Hawaii with Land Court application No. 1095 of the Trustees
under the Will and of the Estate of James Campbell, deceased, being a
portion of the land(s) described in Certificate of Title No. 17,854 issued
to the Trustees under the Will and of the Estate of James Campbell,
deceased.
"Instruments" has the meaning assigned to such term in paragraph (h)
of Article III.
"Intellectual Property" means, collectively, all Copyright
Collateral, all Patent Collateral, all Trademark Collateral and all of the
Collateral referred to in paragraphs (r), (s) and (u) of Article III.
"Inventory" has the meaning assigned to such term in paragraph (l)
of Article III.
"Iridium Clearing Account" has the meaning assigned to such term in
the Depositary Agreement.
"Patent Collateral" means all Patents, whether now owned or
hereafter acquired by any Obligor, including each Patent identified in
Annex 3.
"Patents" has the meaning assigned to such term in paragraph (p) of
Article III.
Security Agreement
<PAGE> 3
- 3 -
"Pledged Collateral" has the meaning assigned to such term in
paragraph (d) of Article III.
"Pledged Interests" has the meaning assigned to such term in
paragraph (b) of Article III.
"Pledged Stock" has the meaning assigned to such term in paragraph
(a) of Article III.
"Rolling Stock" has the meaning assigned to such term in paragraph
(k) of Article III.
"Secured Obligations" means, collectively, (a) in the case of the
Company, the principal of and interest on the Loans, all other amounts
from time to time owing to the Lenders or the Agents by the Company under
the Credit Documents (including, without limitation, hereunder) and (b) in
the case of each Subsidiary Guarantor, all obligations of such Subsidiary
Guarantor hereunder and under the Subsidiary Guarantee Agreement.
"Secured Parties" means, collectively, the Lenders, the Collateral
Agent and the other Agents.
"Trademark Collateral" means all Trademarks, whether now owned or
hereafter acquired by any Obligor, including each Trademark identified in
Annex 4. Notwithstanding the foregoing, the Trademark Collateral does not
and shall not include any Trademark which would be rendered invalid,
abandoned, void or unenforceable by reason of its being included as part
of the Trademark Collateral.
"Trademarks" has the meaning assigned to such term in paragraph (q)
of Article III.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement,
Security Agreement
<PAGE> 4
- 4 -
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, including an amendment and restatement
thereof, but subject to any restrictions on such amendments, supplements or
modifications set forth herein, (b) any reference herein to any Person shall be
construed to include such Person's successors and assigns or, in the case of any
Governmental Authority, any entity succeeding to any or all of the functions of
such Governmental Authority, (c) the words "herein", "hereof" and "hereunder",
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, (d) all references
herein to Sections and Annexes shall be construed to refer to Sections of, and
Annexes to, this Agreement and (e) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to the Secured Parties that:
(a) Such Obligor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Article III and
no Lien exists or will exist upon such Collateral at any time (and no
right or option to acquire the same exists in favor of any other Person),
except for Liens permitted under Section 7.02 of the Credit Agreement and
except for the pledge and security interest in favor of the Collateral
Agent for the benefit of the Lenders created or provided for herein, which
pledge and security interest constitute a first priority perfected pledge
and security interest in and to all of such Collateral (other than
Intellectual Property registered or otherwise located outside of the
United States of America and except as permitted under Section 7.02 of the
Credit Agreement).
(b) Each of the Pledged Stock and the Pledged Interests identified
under the name of such Obligor in Annex 1 is, and all other Pledged Stock
and Pledged Interests in which such Obligor shall hereafter grant a
security interest pursuant to Article III will be, duly authorized,
validly existing, fully paid and non-assessable and none of the Pledged
Collateral is or will be subject to any contractual restriction, or any
restriction under the charter, by-laws or other organizational documents
of the respective issuer thereof, upon the transfer of such Pledged
Collateral (except for any such restriction contained herein or in the
Credit Agreement or as required by law).
Security Agreement
<PAGE> 5
- 5 -
(c) The Pledged Stock and the Pledged Interests identified in Annex
1 constitutes all (or, in the case of any Foreign Subsidiary, 66%) of the
issued and outstanding ownership interests of the issuer thereof on the
date hereof (whether or not registered in the name of any Obligor) and
said Annex 1 correctly identifies, as at the date hereof, the respective
issuers thereof, the type or class and par value of such ownership
interests (if any), the respective number of shares or units thereof, and
registered owners thereof.
(d) Annexes 2, 3 and 4, respectively, set forth under the name of
such Obligor a complete and correct list of all Copyrights, Patents and
Trademarks owned by such Obligor on the date hereof; except pursuant to
licenses and other user agreements entered into by such Obligor in the
ordinary course of business, that are listed in Annex 5, such Obligor owns
and possesses the right to use, and has done nothing to authorize or
enable any other Person to use, any Copyright, Patent or Trademark listed
in said Annexes 2, 3 and 4, and all registrations listed in said Annexes
2, 3 and 4 are valid and in full force and effect; except as may be set
forth in said Annex 5, such Obligor owns and possesses the right to use
all Copyrights, Patents and Trademarks.
(e) Annex 5 sets forth a complete and correct list of all material
licenses and other user agreements included in the Intellectual Property
on the date hereof.
(f) To such Obligor's knowledge, (i) except as set forth in Annex 5,
there is no violation by others of any right of such Obligor with respect
to any Copyright, Patent or Trademark listed in Annexes 2, 3 and 4,
respectively, under the name of such Obligor and (ii) such Obligor is not
infringing in any respect upon any Copyright, Patent or Trademark of any
other Person; and no proceedings have been instituted or are pending
against such Obligor or, to such Obligor's knowledge, threatened, and no
claim against such Obligor has been received by such Obligor, alleging any
such violation, except as may be set forth in said Annex 5.
(g) Such Obligor does not own any Trademarks registered in the
United States of America to which the last sentence of the definition of
Trademark Collateral applies.
ARTICLE III
COLLATERAL
As collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations, each Obligor hereby pledges, assigns, hypothecates and transfers to
the Collateral Agent for the equal and ratable benefit of the
Security Agreement
<PAGE> 6
- 6 -
Secured Parties, and grants to the Collateral Agent for the equal and ratable
benefit of the Secured Parties a Lien on and security interest in, all of such
Obligor's right, title and interest in the following property, whether now owned
by such Obligor or hereafter acquired and whether now existing or hereafter
coming into existence (all being collectively referred to herein as
"Collateral"):
(a) all shares of capital stock or other evidence of beneficial
interest of whatever class of any corporation, including, without
limitation, the shares of capital stock of each corporation identified in
Annex 1, now or hereafter owned by such Obligor, in each case together
with the certificates evidencing the same, but in the case of a Foreign
Subsidiary only to the extent set forth in Section 4.04(a)(i)
(collectively, the "Pledged Stock");
(b) all membership or other ownership interests of such Obligor in
any limited liability company, all limited partnership interests in any
limited partnership, all general partnership interests in any general
partnership, all joint venture interests in any joint venture and all
other equity or ownership interests of any Person of whatever kind or
nature, including, without limitation, the membership interests of the
limited liability companies identified in Annex 1, now or hereafter owned
by such Obligor, in each case together with the certificates (if any)
evidencing the same, including, without limitation, all of the right,
title and interest of such Obligor as a member, partner or other equity
holder in, to and under any agreement or other instrument organizing or
forming such entity, as said agreement or instrument may be amended,
supplemented or modified and in effect from time to time, and (i) all
rights of such Obligor to receive moneys due but unpaid and to become due
under or pursuant to such agreement or instrument, (ii) all rights of such
Obligor to participate in the operation or management of such entity and
to take actions or consent to actions in accordance with the provisions of
such agreement or instrument, (iii) all rights of such Obligor to property
of such entity, (iv) all rights of such Obligor to receive proceeds of any
insurance, bond, indemnity, warranty or guaranty with respect to such
agreement or instrument, (v) all claims of such Obligor for damages
arising out of or for breach of or default under such agreement or
instrument and (vi) all rights of such Obligor to terminate, amend,
supplement, modify or waive performance under such agreement or
instrument, to perform thereunder and to compel performance and otherwise
to exercise all remedies thereunder, but in the case of a Foreign
Subsidiary only to the extent set forth in Section 4.04(a)(i)
(collectively, the "Pledged Interests"), and any right, title and interest
of the Company in, to and under the Company LLC Agreement;
(c) all shares, interests, securities, moneys or other property
representing a dividend on any of the Pledged Stock or the Pledged
Interests, or representing a distribution or return of capital upon or in
respect of the Pledged Stock or the Pledged
Security Agreement
<PAGE> 7
- 7 -
Interests, or resulting from a split-up, revision, reclassification or
other like change of the Pledged Stock or the Pledged Interests or
otherwise received in exchange therefor, and all options, warrants and
similar rights issued to the holders of, or otherwise in respect of, the
Pledged Stock or the Pledged Interests;
(d) without affecting the obligations of such Obligor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger of a Subsidiary in which one
of the Obligors is not the surviving entity, all ownership interests of
whatever class owned by such Obligor of the successor entity formed by or
resulting from such consolidation or merger (the Pledged Stock and the
Pledged Interests, together with all shares, interests, securities, moneys
or property as may from time to time be pledged hereunder pursuant to
clause (a), (b) or (c) above and this clause (d) being herein, and the
proceeds of and to any such property and, to the extent related to any
such property or such proceeds, all books, correspondence, credit files,
records, invoices and other papers, collectively called the "Pledged
Collateral");
(e) all contracts and agreements to which such Obligor is a party
and other similar consensual obligations owed to such Obligor including,
without limitation, the following:
(i) the Space System Contract;
(ii) the O&M Contract;
(iii) the Terrestrial Network Development Contract;
(iv) each Gateway Authorization Agreement;
(v) the IBSS Agreement; and
(vi) the Management Services Agreement.
(said contracts, agreements and obligations, as so amended, supplemented
renewed or modified, including any such replacement or substitution
contracts, agreements and obligations, being, individually, an "Assigned
Agreement", and, collectively, the "Assigned Agreements"), including,
without limitation, (1) all rights of such Obligor to receive moneys due
and to become due under or pursuant to the Assigned Agreements, (2) all
rights to receive property, assets, services or other performance
thereunder, (3) all rights of such Obligor to receive return of any
premiums for or proceeds of any insurance,
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payment and/or performance bond, indemnity, warranty or guaranty with
respect to the Assigned Agreements or to receive condemnation proceeds
thereof, (4) all claims of such Obligor for damages arising out of or for
breach of or default under the Assigned Agreements and (5) all rights of
such Obligor to terminate, amend, supplement, modify or waive performance
under the Assigned Agreements, to perform thereunder and to compel
performance and otherwise to exercise all remedies thereunder, in each
case as such contract, agreement and obligation may be amended,
supplemented, renewed or otherwise modified, including, without
limitation, any agreement, contract or document replacing or substituting
for such contract, agreement or obligation from time to time;
(f) all Government Approvals (including, without limitation, the FCC
License) now or hereafter held in the name, or for the benefit, of the
Company or any of its Subsidiaries, provided that any such Government
Approval which by its terms or by operation of law would become void,
voidable, terminable or revocable if mortgaged, pledged or assigned
hereunder or if a security interest therein was granted hereunder are
expressly excepted and excluded from the Lien and terms of this Agreement
to the extent necessary so as to avoid such voidness, avoidability,
terminability or revocability, but such security interest does include, to
the maximum extent permitted by law, all rights of such Obligor incident
or appurtenant to such Government Approval and the right of such Obligor
to receive all proceeds derived from or in connection with the sale,
assignment or transfer of such Government Approval;
(g) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Obligor constituting any right of such
Obligor to the payment of money, including, without limitation, all moneys
due and to become due to such Obligor under or in respect of the Assigned
Agreements, Government Approvals, franchises, licenses, permits,
subscriptions or other agreements or at law or in equity (whether or not
earned by performance and whether arising directly or indirectly and
including claims for reimbursement, contribution, indemnity and
subrogation), rights of such Obligor to receive payments from any other
source but excluding the Pledged Collateral, and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(h) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Obligor evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments");
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(i) all other accounts or general intangibles of such Obligor not
constituting Accounts to the extent not otherwise specifically excluded in
this Article III;
(j) all equipment (as such term is defined in the Uniform Commercial
Code) of such Obligor including, without limitation, all machinery,
apparatus, installation facilities, satellites and other tangible personal
property of such Obligor of any nature whatsoever, wherever located, and
whether on earth or in orbit (herein collectively called "Equipment");
(k) all automobiles, trucks, tractors, trailers and other rolling
stock or moveable personal property, including, without limitation,
rolling stock for which the title thereto is evidenced by a certificate of
title issued by the United States of America or any State thereof which
permits or requires a Lien thereon to be evidenced upon such title (herein
collectively called "Rolling Stock");
(l) all inventory (as such term is defined in the Uniform Commercial
Code) in all of its forms, wherever located (including, without
limitation: (i) spare parts inventory, consumable supplies inventory and
maintenance materials inventory and raw materials and work in progress
therefor, finished goods thereof, and materials used or consumed in the
manufacture or production thereof, (ii) goods in which such Obligor has an
interest in mass or a joint or other interest or right of any kind and
(iii) goods which are returned to or repossessed by such Obligor), and all
accessions thereto and products thereof and documentation therefor (herein
collectively called "Inventory");
(m) all rights, claims and benefits of such Obligor against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by such Obligor, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
(n) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of such Obligor covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(o) all copyrights, copyright registrations and applications for
copyright registrations, including, without limitation, all renewals and
extensions thereof, the right to recover for all past, present and future
infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto (herein collectively called
"Copyrights");
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(p) all patents and patent applications, including, without
limitation, the inventions and improvements described and claimed therein
together with the reissues, divisions, continuations, renewals, extensions
and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for all past,
present and future infringements thereof, the right to sue for past,
present and future infringements thereof, and all rights corresponding
thereto throughout the world (herein collectively called "Patents");
(q) all trade names, trademarks and service marks, logos, trademark
and service mark registrations, and applications for trademark and service
mark registrations (including, without limitation, all renewals of
trademark and service mark registrations, and all rights corresponding
thereto throughout the world, but excluding any such registration that
would be rendered invalid, abandoned, void or unenforceable by reason of
its being included as part of the Collateral), the right to recover for
all past, present and future infringements thereof, all other rights of
any kind whatsoever accruing thereunder or pertaining thereto, together,
in each case, with the product lines and goodwill of the business
connected with the use of, and symbolized by, each such trade name,
trademark and service mark (herein collectively called "Trademarks");
(r) all inventions, processes, production methods, proprietary
information, know-how and trade secrets used in or relating to the
Project, and all licenses or user or other agreements granted to such
Obligor with respect to any of the foregoing in each case whether now or
hereafter owned or used including, without limitation, the material
licenses or other agreements with respect to any of the Copyright
Collateral, Patent Collateral or Trademark Collateral listed in Annex 5;
(s) all causes of action, claims and warranties now or hereafter
owned or acquired by such Obligor in respect of any of the items listed in
subsection (r) or (t) of this Article III or any of the Copyright
Collateral, Patent Collateral or Trademark Collateral;
(t) all information, customer lists, identification of suppliers,
data, plans, blueprints, designs, models, recorded knowledge, surveys,
architectural, structural, mechanical and engineering plans and
specifications, studies, reports and drawings, test reports, manuals,
material standards, processing standards, performance standards, catalogs,
computer and automatic machinery software and programs, all accounting
information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer
programs used for the compilation or
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printout of such information, knowledge, records or data, prepared by or
on behalf of such Obligor for the Development of the Project or any part
thereof;
(u) the Project Accounts (as such term is defined in the Depositary
Agreement), and all balances in each thereof and all instruments,
certificates and notes in respect of Permitted Investments of such
balances held or maintained from time to time in each thereof;
(v) all other general or special deposit accounts, including any
demand, time, savings, passbook or similar account maintained by such
Obligor with any bank, trust company, savings and loan association, credit
union or similar organization, and all money, cash, securities and other
properties of such Obligor deposited in any such account;
(w) all leases of personal property, whether such Obligor is the
lessor or the lessee thereunder, excluding leases of automobiles, fax
machines, copiers, typewriters and similar office equipment, but
specifically including (except as specifically excluded above in this
clause (w) and regardless of whether such items would constitute office
equipment) computers, computer peripherals, telephone equipment, telephone
switches, and all other types of communications equipment;
(x) all insurance policies (except, in the case of any insurance
policy not required to be maintained under Section 8.01 of the Credit
Agreement, to the extent the transfer or assignment of such insurance
policy would render such insurance policy void), whether owned by or
payable to such Obligor, insuring against any risks whatsoever (including,
without limitation, casualty, property damage, liability and death),
including, without limitation, all such policies required to be maintained
under Section 8.01 of the Credit Agreement with respect to any in-orbit
satellite or other property of such Obligor, all loss proceeds and other
amounts payable to such Obligor thereunder, any indemnity, warranty or
guaranty in respect of the property insured thereby, and all eminent
domain or similar proceeds or awards with respect thereto and all other
rights of such Obligor with respect thereto;
(y) to the extent the same constitutes personal property, the
Hawaiian TTAC License;
(z) all other tangible and intangible personal property and fixtures
of such Obligor (except to the extent expressly excluded above);
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(aa) all books, correspondence, credit files, records, invoices,
ledgers and other papers of every kind and nature, including without
limitation all tapes, cards, computer runs and other papers and documents
in the possession or under the control of such Obligor or any computer
bureau or service company from time to time acting for such Obligor; and
(bb) all proceeds, products, offspring, rents, profits, royalties,
revenues, issues, income, benefits, accessions, additions, substitutions
and replacements of and to any of the property of such Obligor described
in the preceding clauses of this Section (including, without limitation,
all causes of action, claims and warranties now or hereafter held by any
Obligor in respect of any of the items listed above).
Notwithstanding anything in this Article III to the contrary, the
Collateral shall not include the Iridium Clearing Account and any cash or other
property held therein or credited thereto from time to time.
ARTICLE IV
REMEDIES
In furtherance of the grant of the pledge and security interest
pursuant to Article III, the Obligors hereby jointly and severally agree with
the Secured Parties as follows:
SECTION 4.01. Delivery and Other Perfection. Each Obligor shall:
(a) if any of the shares, interests, securities, moneys or property
required to be pledged by such Obligor under clauses (a), (b) (c) and (d)
of Article III are received by such Obligor, forthwith either (i) transfer
and deliver to the Collateral Agent such shares or securities so received
by such Obligor (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank), all of which thereafter shall be held by the
Collateral Agent, pursuant to the terms of this Agreement, as part of the
Collateral, (ii) with respect to any Pledged Collateral that is not
evidenced by a certificate, execute and deliver written instructions to
the issuer thereof to register the Lien created hereunder in such Pledged
Collateral in the registration books maintained by such issuer for such
purpose and cause the respective Obligor to execute and deliver to the
Collateral Agent a written confirmation to the effect that the Lien
created hereunder in such Pledged Collateral has been duly registered in
such registration books, all in form and substance satisfactory to the
Collateral Agent or (iii) take such other action as the Collateral Agent
shall deem necessary or appropriate to
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duly perfect the Lien created hereunder in such shares, interests,
securities, moneys or property in said clauses (a), (b), (c) and (d);
(b) deliver and pledge to the Collateral Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Collateral Agent may
reasonably request; provided that so long as no Event of Default shall
have occurred and be continuing, such Obligor may retain for collection in
the ordinary course any Instruments, Accounts or General Intangibles
received by such Obligor and the Collateral Agent shall, promptly upon
request of such Obligor through the Company, make appropriate arrangements
for making any Instrument pledged by such Obligor available to such
Obligor for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent reasonably deemed appropriate by
the Collateral Agent, against a trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Collateral Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Collateral Agent to exercise and enforce
its rights hereunder with respect to such pledge and security interest (it
being understood that the provisions of this Section will apply to all
Collateral, whether personal property or real property, whether tangible
or intangible, and wherever located and whenever acquired, including,
without limitation, Collateral located outside the United States or in
space), including, without limitation, causing any or all of the Pledged
Collateral to be transferred of record into the name of the Collateral
Agent or its nominee (and the Collateral Agent agrees that if any Pledged
Collateral is transferred into its name or the name of its nominee, the
Collateral Agent will thereafter promptly give to the respective Obligor
copies of any notices and communications received by it with respect to
the Pledged Collateral pledged by such Obligor hereunder), provided that
notices to account debtors [or unaffiliated parties] in respect of any
Accounts, Instruments or other Collateral referred to in clause (i) of
Article III shall be subject to the provisions of clause (h) below;
(d) keep full and accurate books and records in accordance with
generally accepted business practices relating to the Collateral, and
stamp or otherwise mark such books and records in such manner as the
Collateral Agent may reasonably require in order to reflect the security
interests granted by this Agreement;
(e) furnish to the Collateral Agent from time to time (but, unless
an Event of Default shall have occurred and be continuing, no more
frequently than quarterly) statements and schedules identifying and
describing any changes since the preceding such
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statement or schedule regarding the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, respectively, and such other
reports in connection with the Copyright Collateral, the Patent Collateral
and the Trademark Collateral, as the Collateral Agent may reasonably
request, all in reasonable detail;
(f) promptly upon request of the Collateral Agent, following receipt
by the Collateral Agent of any statements, schedules or reports pursuant
to clause (e) above, modify this Agreement by amending Annexes 2, 3 and/or
4, as the case may be, to include any Copyright, Patent or Trademark that
becomes part of the Collateral under this Agreement;
(g) permit representatives of the Collateral Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Collateral Agent to be present at such
Obligor's place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any notices
or communications received by such Obligor with respect to the Collateral,
all in such manner as the Collateral Agent may require; and
(h) upon the occurrence and during the continuance of any Event of
Default, upon request of the Collateral Agent, promptly notify (and such
Obligor hereby authorizes the Collateral Agent so to notify) each account
debtor in respect of any Accounts or Instruments that such Collateral has
been assigned to the Collateral Agent hereunder, and that any payments due
or to become due in respect of such Collateral are to be made directly to
the Depositary Agent for deposit into the General Receipt & Disbursement
Account pursuant to the Depositary Agreement.
SECTION 4.02. Other Financing Statements and Liens. Except as
otherwise permitted under Section 7.02 of the Credit Agreement, without the
prior written consent of the Collateral Agent, no Obligor shall file or suffer
to be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the benefit of the Lenders.
SECTION 4.03. Preservation of Rights. The Collateral Agent shall not
be required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
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SECTION 4.04. Special Provisions Relating to Certain Collateral.
(a) Pledged Collateral.
(i) The Obligors will cause the Pledged Collateral to constitute at
all times 100% of the aggregate ownership interests of each Subsidiary of
the Company (other than any Foreign Subsidiary or any Domestic Subsidiary
directly owned by any Foreign Subsidiary) then outstanding and, in the
case of each Foreign Subsidiary directly owned by the Company and/or by
any other Obligor which is a Domestic Subsidiary, 65% of the total number
of shares or other ownership interests having ordinary voting power for
the election of the board of directors (or equivalent body) of such
Foreign Subsidiary and 100% of each other class or type of ownership
interests of such Foreign Subsidiary.
(ii) So long as no Event of Default shall have occurred and be
continuing, the Obligors shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Pledged
Collateral, provided that each Obligor agrees that it will not vote the
Pledged Collateral pledged by it hereunder in any manner that is
inconsistent with the terms of this Agreement, the Credit Agreement or any
such other instrument or agreement; and the Collateral Agent shall execute
and deliver to the Obligors or cause to be executed and delivered to the
Obligors all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Obligors may reasonably
request for the purpose of enabling the Obligors to exercise the rights
and powers that they are entitled to exercise pursuant to this paragraph
(a)(ii).
(iii) No Subsidiary of the Company shall be restricted from
declaring and paying to any Obligor any dividends or distributions in
respect of its ownership interests held by the Obligor, provided that all
such dividends and distributions shall be paid directly to the Depositary
Agent for deposit into the General Receipt & Disbursement Account and
shall be held therein and/or applied for the purposes permitted under the
Depositary Agreement. If, notwithstanding the foregoing, such dividends or
distributions shall be paid to any Obligor, the same shall be held by such
Obligor in trust for the Collateral Agent and the other Secured Parties,
segregated from the other funds of such Obligor, and be turned over to the
Depositary Agent for deposit into the aforesaid account.
(b) Assigned and Other Agreements. Anything herein to the contrary
notwithstanding, each Obligor party to any Assigned Agreement or other relevant
agreement shall remain liable under such Assigned Agreement or other agreement
to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed. The
exercise by the Collateral Agent of any of the rights hereunder shall not
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release any Obligor from any of its duties or obligations under any Assigned
Agreement or any such other agreement, except to the extent provided therein or
any consent and agreement relating thereto and upon foreclosure and assignment
of such Assigned Agreement. Neither the Collateral Agent nor any of the other
Secured Parties shall have any obligation or liability under any Assigned
Agreement or such other agreement, by reason of the existence of this Agreement,
nor shall the Collateral Agent, nor any of the other Secured Parties, be
obligated to perform any of the obligations or duties of any Obligor thereunder
or to take action to collect or enforce any claim for payment assigned
hereunder, except to the extent provided therein or any such consent and
agreement. If any Obligor fails to perform any agreement contained herein or in
any of the Assigned Agreements or other agreements constituting part of the
Collateral required to be performed by such Obligor, within 30 days after
receipt by the Company of written notice from the Collateral Agent informing it
of such failure, the Collateral Agent may itself perform, or cause the
performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Company and shall be
Secured Obligations entitled to the benefits of the collateral security provided
pursuant to Article III.
(c) Intellectual Property.
(i) For the purpose of enabling the Collateral Agent to exercise
rights and remedies under Section 4.05 at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, and
for no other purpose, each Obligor hereby grants to the Collateral Agent,
to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such
Obligor) to use, assign, license or sublicense any of the Intellectual
Property now owned or hereafter acquired by such Obligor, wherever the
same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.
(ii) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 7.04 of the Credit Agreement that
limit the right of the Obligors to dispose of their property, so long as
no Event of Default shall have occurred and be continuing, the Obligors
will be permitted to exploit, use, enjoy, protect, license, sublicense,
assign, sell, dispose of or take other actions with respect to the
Intellectual Property in the ordinary course of the business of the
Obligors. In furtherance of the foregoing, unless an Event of Default
shall have occurred and be continuing the Collateral Agent shall from time
to time, upon the request of the respective Obligor through the Company,
execute and deliver any instruments, certificates or other documents, in
the form so requested, that such Obligor through the Company shall have
certified are appropriate (in their judgment) to allow them to take any
action permitted above
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(including relinquishment of the license provided pursuant to paragraph
(i) immediately above as to any specific Intellectual Property). Further,
upon the payment in full of all of the Secured Obligations and
cancellation or termination of the Commitments or earlier expiration of
this Agreement or release of the Collateral, the Collateral Agent shall
grant back to the Obligors the license granted pursuant to said paragraph
(i). The exercise of rights and remedies under Section 4.05 by the
Collateral Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by the Obligors in accordance
with the first sentence of this paragraph (ii).
(d) FCC License. The Company agrees to request a transfer of the FCC
License to a wholly-owned Subsidiary of the Company pursuant to Section 18.H of
the Space System Contract at the earliest time as the Company reasonably
believes that it can satisfy the qualifications of an FCC licensee under
applicable law and FCC regulations and policy. Upon such transfer the FCC
License shall be held in the name of such Subsidiary and, subject to Section
5.13 and any restriction under any then effective Government Rule, the Company
shall forthwith comply with the requirements of Section 4.01 in order to provide
the Collateral Agent a first priority perfected security interest in all of the
ownership interests of such Subsidiary and the requirements of Section 6.12 of
the Credit Agreement with respect to such Subsidiary. If the Company shall fail
for any reason to make such request at such time and such failure shall continue
unremedied for a period of 30 days or any Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to make such
request and the Company will take any action that the Collateral Agent shall
reasonably request in order to facilitate such transfer to a Subsidiary of the
Company as contemplated hereby. Notwithstanding anything herein or in the Credit
Agreement to the contrary, the Company will not create, incur, assume or permit
to exist any Lien on the ownership interests of such Subsidiary or the assets
thereof, including, without limitation, the FCC License (except any Permitted
Lien). If there shall be a change in law, or the rules or policies of the FCC
which would permit the granting of a security interest in the FCC License prior
to or after the date of the transfer of the FCC License as contemplated herein,
the Company will, and will cause its relevant License Subsidiary to, take such
action as the Administrative Agent may reasonably request (including, without
limitation an amendment to this Agreement or the execution and delivery of a new
Security Agreement), in order to create a first priority perfected security
interest in the FCC License in favor of the Collateral Agent for the benefit of
the Secured Parties.
(e) Satellites. Each Obligor agrees and acknowledges that the
Collateral includes satellites and that the Collateral Agent intends to perfect
its security interest in and Lien on all such satellites. Without limiting in
any respect any other provisions of this Agreement, each Obligor agrees to
assist the Collateral Agent in achieving such perfection through whatever method
or methods the Collateral Agent may from time to time reasonably request,
including
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(i) filing UCC financing statements on the basis that satellites constitute
"mobile goods" under the Uniform Commercial Code, (ii) filing UCC financing
statements or other Lien perfection documents in each jurisdiction in which any
satellite is manufactured, integrated or processed, from where any satellite is
launched, from where it is controlled or in which it may from time to time be
deemed located to the extent such filing in such jurisdiction is reasonably
required in order to perfect and maintain the perfection of the Collateral
Agent's security interests therein and Liens thereon, (iii) taking all actions
required to be consistent with present and future practices of third-party
creditors intending to perfect security interests in satellites owned by United
States persons launched from the United States or from any other location from
which the satellites for the IRIDIUM System are intended to be launched, and
(iv) taking all actions reasonably required from time to time to create,
maintain and perfect security interests in satellites (both before and after
launch and while in orbit) as specified in any United States, foreign or
international law, regulation, convention or treaty relating to the creation,
perfection and/or priority of security interests and Liens in satellites that is
applicable to satellites of the type deployed in the IRIDIUM System.
(f) Rolling Stock. At any time after the occurrence and during the
continuance of an Event of Default, each Obligor shall, upon the request of the
Collateral Agent, deliver to the Collateral Agent originals of the certificates
of title or ownership for the Rolling Stock owned by it with a fair market value
in excess of $100,000 with the Collateral Agent listed as lienholder and take
such other action as the Collateral Agent shall reasonably deem appropriate to
perfect the security interest created hereunder in all such Rolling Stock. Upon
the sale of any such Rolling Stock permitted under the Credit Agreement, so long
as no Event of Default shall have occurred and be continuing, upon the request
of any Obligor, the Collateral Agent shall execute and deliver to such Obligor
such instruments as such Obligor shall reasonably request to remove the notation
of the Collateral Agent as lienholder on the certificate of title or ownership
for any such Rolling Stock; provided that any such instruments shall be
delivered, and the release effective only upon receipt by the Collateral Agent
of a certificate from such Obligor stating that the Rolling Stock the lien on
which is to be released is to be sold or has suffered a casualty loss (with
title thereto passing to the casualty insurance company therefor in settlement
of the claim for such loss).
(g) Governmental Collateral. The Company shall notify the Collateral
Agent of any Collateral which constitutes a claim against the United States or
any foreign government or state or any instrumentality, agency or subdivision
thereof, the assignment of which claim is restricted by applicable law or
requires particular procedures. Upon the request of the Collateral Agent, the
relevant Obligor will take all reasonable actions required to comply, to the
Collateral Agent's satisfaction, with such legal requirements and procedures
applicable with respect to such Collateral, including, without limitation, the
Assignment of Claims Act of 1940, as amended, or any similar applicable law.
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SECTION 4.05. Events of Default. During the period during which an
Event of Default shall have occurred and be continuing:
(a) each Obligor shall, at the request of the Collateral Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Collateral Agent and such Obligor, designated in
its request;
(b) the Collateral Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Collateral Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Collateral Agent were the sole and
absolute owner thereof (and each Obligor agrees to take all such action as
may be reasonably necessary to give effect to such right);
(d) the Collateral Agent in its discretion may, in its name or in
the name of the Obligors or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no obligation to
do so; and
(e) the Collateral Agent may, upon 30 days' prior written notice to
the Obligors of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Secured Parties or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Collateral Agent
deems best, and for cash or for credit or for future delivery, at public
or private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived), and any Secured Party or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private
sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of
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the Obligors, any such demand, notice and right or equity being hereby
expressly waived and released. In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill
connected with and symbolized by the Trademark Collateral subject to such
disposition shall be included, and the Obligors shall supply to the
Collateral Agent or its designee, for inclusion in such sale, assignment
or other disposition, all Intellectual Property relating to such Trademark
Collateral. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
Notwithstanding anything herein or in any other Security Document to
the contrary, neither the Collateral Agent nor any of the other Secured Parties
shall sell, lease, assign or otherwise dispose, or cause the sale, lease,
assignment or other disposition, of all or any part of the Collateral pursuant
to this Agreement unless not less than 10 days prior thereto the Collateral
Agent shall have made a demand (or caused a demand to be made) in respect of the
Reserve Capital Call Obligations in accordance with Section 4.02 of the Iridium
LLC Agreement, provided that (i) nothing herein shall be construed to limit the
rights of the Collateral Agent to exercise any other remedies hereunder prior to
any such sale, lease, assignment or other disposition or from and after any
event affecting any Credit Party or Iridium LLC described in clause (i) or (j)
of Section 9.01 of the Credit Agreement and (ii) the requirement of this
paragraph shall not apply if the aggregate outstanding amount in respect of the
Loans (net of any cash balances in the Project Accounts) shall exceed the
aggregate amount of the Reserve Capital Call Obligations.
The proceeds of each collection, sale or other disposition under
this Section, including by virtue of the exercise of the license granted to the
Collateral Agent in Section 4.04(b), shall be applied in accordance with Section
4.09. Any such sale or other disposition under this Section shall be conducted
in a commercially reasonable manner.
The Obligors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Agent may be compelled, with respect to any sale
of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Obligors acknowledge that any such private sales may be at prices and on terms
less favorable to the Collateral Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Collateral Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral for
the period of time necessary to permit the respective issuer thereof to register
it for public sale.
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<PAGE> 21
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SECTION 4.06. Deficiency. If the proceeds of sale, collection or
other realization of or upon the Collateral pursuant to Section 4.05 are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Obligors shall remain (in the case of
each Subsidiary Obligor, jointly and severally) liable for any deficiency.
SECTION 4.07. Removals, Etc. Without at least 30 days' prior written
notice to the Collateral Agent, no Obligor shall (i) maintain the original or
"master" copies of any of its books and records with respect to the Collateral
at any office or maintain its principal place of business at any place, or
(except with respect to Collateral in the possession of the Collateral Agent)
permit any property to be located anywhere other than at one of the locations
identified in Annex 6 under its name (other than satellites in orbit), (ii)
change its name from the name shown on the signature pages hereto or (iii) adopt
or do business under any name other than a name beginning with the word
"Iridium".
SECTION 4.08. Private Sale. No Secured Party shall incur any
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 4.05 conducted in a commercially reasonable
manner. Each Obligor hereby waives any claims against the Secured Parties
arising by reason of the fact that the price at which the Collateral may have
been sold at such a private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the Secured
Obligations, even if the Collateral Agent accepts the first offer received and
does not offer the Collateral to more than one offeree.
SECTION 4.09. Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral pursuant hereto, and any other cash at the
time held by the Collateral Agent under this Agreement, shall be applied by the
Collateral Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Collateral Agent and the reasonable fees and expenses of
its agents and counsel, and all reasonable expenses incurred and advances
made by the Collateral Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each
case equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Lenders holding the same may otherwise agree;
and
Finally, to the payment to the respective Obligor, or their
respective successors or assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining.
Security Agreement
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As used in this Article, "proceeds" of Collateral means cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Obligors or any issuer of or obligor on
any of the Collateral.
SECTION 4.10. Attorney-in-Fact. Without limiting any rights or
powers granted by this Agreement to the Collateral Agent while no Event of
Default has occurred and is continuing, upon the occurrence and during the
continuance of any Event of Default the Collateral Agent is hereby appointed the
attorney-in-fact of each Obligor for the purpose of carrying out the provisions
hereof and taking any action and executing any instruments that the Collateral
Agent may reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Collateral Agent shall be entitled under this Article IV to make collections in
respect of the Collateral, the Collateral Agent shall have the right and power
to receive, endorse and collect all checks made payable to the order of any
Obligor representing any dividend, payment or other distribution in respect of
the Collateral or any part thereof and to give full discharge for the same.
SECTION 4.11. Perfection. Prior to or concurrently with the
execution and delivery of this Agreement, each Obligor shall (i) file such
financing statements and other documents in such offices as the Collateral Agent
may reasonably request to perfect the security interests granted by Article III,
(ii) take any action (including establishing satisfactory control arrangements)
as the Collateral Agent may reasonably request to perfect the pledge of any
ownership interests for purposes of Article 8 of the Uniform Commercial Code
and/or (iii) deliver to the Collateral Agent all certificates identified in
Annex 1, accompanied by undated stock or transfer powers duly executed in blank.
SECTION 4.12. Release of Collateral; Termination.
(a) Upon any disposition of property permitted under the Credit
Documents or any disposition to which the Required Lenders have consented or
upon any disposition in connection with any Event of Loss, the Lien on such
property shall be released, and the Collateral Agent shall promptly execute and
deliver, at the expense of the relevant Obligor, such release and/or other
documents related thereto as reasonably requested by such Obligor.
(b) When all Secured Obligations shall have been paid in full and
the Commitments of the Lenders under the Credit Agreement shall have expired or
been terminated, this Agreement shall terminate, and the Collateral Agent shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation
Security Agreement
<PAGE> 23
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whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the respective Obligor and to be released and canceled all
licenses and rights referred to in Section 4.04(c). The Collateral Agent shall
also execute and deliver to the respective Obligor upon such termination such
Uniform Commercial Code termination statements and such other documentation as
shall be reasonably requested by the respective Obligor to effect the
termination and release of the Liens on the Collateral.
SECTION 4.13. Further Assurances. Each Obligor agrees that, from
time to time upon the written request of the Collateral Agent, such Obligor will
execute and deliver such further documents and do such other acts and things as
the Collateral Agent may reasonably request in order fully to effect the
purposes of this Agreement. Without limiting the foregoing, each Obligor hereby
authorizes the Collateral Agent to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of such Obligor where permitted by law,
provided that copies of any such statement or amendment thereto shall promptly
be delivered to the Company.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. No Waiver. No failure on the part of the Collateral
Agent or any other Secured Party to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Collateral Agent or any other Secured Party of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
SECTION 5.02. Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at (i) in the case of each Obligor, the "Address for Notices" for the
Company specified pursuant to Section 11.01 of the Credit Agreement and (ii) in
the case of the Collateral Agent, at the "Address for Notices" for the
Administrative Agent specified in Section 11.01 of the Credit Agreement, and
shall be deemed to have been given at the times specified in said Section 11.01.
SECTION 5.03. Expenses.
(a) The Obligors jointly and severally agree to reimburse each of
the Lenders and the Collateral Agent for all reasonable costs and expenses of
the Lenders and the Collateral Agent
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<PAGE> 24
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(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Event of Default and any enforcement or
collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (w) performance by the
Collateral Agent of any obligations of the Obligors in respect of the Collateral
that the Obligors have failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Collateral Agent
in respect thereof, by litigation or otherwise, including expenses of insurance,
(y) judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Article
III.
(b) The Company will pay all filing, registration and recording fees
or refiling, re-registration and re-recording fees, and all expenses incident to
the execution and delivery of this Agreement, any agreement supplemental hereto
and any instruments of further assurance, and all federal, state, county and
municipal stamp taxes and other taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this
Agreement, any agreement supplemental hereto and any instruments of further
assurance.
(c) The Company will pay, before any fine, penalty, interest or cost
attaches thereto, all taxes, assessments and other governmental or
non-governmental charges or levies now or hereafter assessed or levied against
the Collateral or upon the Liens provided for herein (except for taxes and
assessments not then delinquent or which the Company may, pursuant to the
provisions of Section 6.03 of the Credit Agreement, permit to remain unpaid) as
well as pay, or cause to be paid, all claims for labor, materials or supplies
which, if unpaid, might by law become a Lien (other than a Lien permitted under
Section 7.02 of the Credit Agreement) thereon, and will retain copies of, and,
upon request, permit the Collateral Agent to examine, receipts showing payment
of any of the foregoing.
SECTION 5.04. Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
each Obligor and the Collateral Agent. Any such amendment or waiver shall be
binding upon the Collateral Agent, each other Secured Party and each Obligor.
SECTION 5.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of each Obligor, the Collateral
Security Agreement
<PAGE> 25
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Agent and each other Secured Party provided, however, that no Obligor shall
assign or transfer its rights hereunder without the prior written consent of the
Collateral Agent.
SECTION 5.06. Captions. The caption and section headings used herein
are for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Agreement.
SECTION 5.07. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.
SECTION 5.08. Governing Law; Jurisdiction; Consent to Service of
Process.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each Obligor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Collateral Agent or any other Secured Party may
otherwise have to bring any action or proceeding relating to this Agreement
against any Obligor or its properties in the courts of any jurisdiction.
(c) Each Obligor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) To the extent that any Obligor may be or become entitled, in any
jurisdiction in which judicial proceedings may at any time be commenced with
respect to this Agreement, to
Security Agreement
<PAGE> 26
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claim for itself or its property or revenues any immunity from suit, court
jurisdiction, attachment prior to judgment, attachment in aid of execution of a
judgment, execution of a judgment or from any other legal process or remedy
relating to its obligations under this Agreement and to the extent that in any
such jurisdiction there may be attributed such an immunity (whether or not
claimed), such Obligor hereby irrevocably agrees not to claim and hereby
irrevocably waives such immunity to the fullest extent permitted by the laws of
such jurisdiction.
SECTION 5.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 5.10. No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the Obligors, the Collateral Agent
and the other Secured Parties, and no other Person (including, without
limitation, any other Credit Party, any contractor, subcontractor, supplier or
materialman furnishing supplies, goods or services to or for the benefit of the
Project or any other creditor of the Company or any of its Subsidiaries) shall
have any rights hereunder.
SECTION 5.11. Agents and Attorneys-in-Fact. The Collateral Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
SECTION 5.12. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 5.13. FCC Approval. Notwithstanding any other provision of
this Agreement, from and after the transfer of the FCC License to the Company or
any of its
Security Agreement
<PAGE> 27
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Subsidiaries pursuant to Section 18.H of the Space System Contract, no action
shall be taken hereunder by the Collateral Agent or any other Secured Party with
respect to any item of Collateral that would constitute or result in any
assignment of the FCC License or any change of control of the holder of the FCC
License, if, under then existing applicable law, regulations and FCC policies,
such assignment or change of control would require the prior approval of the
FCC. The Company agrees to take, or to cause its Subsidiaries to take, at the
Company's expense, any action that the Collateral Agent may reasonably request
in order to obtain from the FCC such approval as may be necessary (a) to enable
the Collateral Agent to exercise and enjoy the full rights and benefits granted
to the Collateral Agent by this Agreement and each other agreement, instrument
and document delivered to the Collateral Agent in connection herewith and (b)
for any action or transaction contemplated by this Agreement for which such
approval is or shall be required by law, and specifically, without limitation,
upon request by the Collateral Agent, to prepare, sign and file with the FCC the
assignor's or transferor's portion of any application or applications for
consent to the assignment of any license or transfer of control necessary or
appropriate under the FCC's rules and regulations, or for approval of any sale
of the Collateral provided by this Agreement by or on behalf of the Collateral
Agent or assumption by the Collateral Agent of voting rights relating thereto
effected in accordance with the terms hereof.
Security Agreement
<PAGE> 28
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed and delivered as of the day and year
first above written.
COMPANY
IRIDIUM OPERATING LLC
By
------------------------------------
Title:
Security Agreement
<PAGE> 29
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SUBSIDIARY GUARANTORS
IRIDIUM CAPITAL CORPORATION
By
------------------------------------
Title:
IRIDIUM IP LLC
By
------------------------------------
Title:
IRIDIUM ROAMING LLC
By
------------------------------------
Title:
[INSERT SIGNATURE LINE FOR EACH
OTHER SUBSIDIARY GUARANTOR:]
[NAME OF SUBSIDIARY GUARANTOR]
By
------------------------------------
Title:
Security Agreement
<PAGE> 30
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COLLATERAL AGENT
THE CHASE MANHATTAN BANK,
as Collateral Agent
By
------------------------------------
Title:
Security Agreement
<PAGE> 31
ANNEX 1
PLEDGED COLLATERAL
[See Sections 2(b) and (c) and 3(a) and (b)]
<TABLE>
<CAPTION>
Type or
Class of Number of
Certificate Registered Ownership Shares or
Issuer Nos. (if any) Owner Interests Interests
<S> <C> <C> <C> <C>
[to be inserted]
</TABLE>
Annex 1 to Security Agreement
<PAGE> 32
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[See Section 2(d)]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
Title Date Filed Registration No. Effective Date
Annex 2 to Security Agreement
<PAGE> 33
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
[See Section 2(d)]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
File Patent Country Registration No. Date
Annex 3 to Security Agreement
<PAGE> 34
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
[See Section 2(d)]
U.S. TRADEMARKS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
Annex 4 to Security Agreement
<PAGE> 35
- 2 -
FOREIGN TRADEMARKS
[Complete for each Obligor:]
[NAME OF OBLIGOR]
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
Annex 4 to Security Agreement
<PAGE> 36
ANNEX 5
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[See Section 2(d), (e) and (f)]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
Annex 5 to Security Agreement
<PAGE> 37
ANNEX 6
LIST OF LOCATIONS
[See Section 5.07]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
Annex 6 to Security Agreement
<PAGE> 1
EXHIBIT 10.33
(EXHIBIT C TO THE CREDIT AGREEMENT)
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of [___________, 199_]
between: IRIDIUM LLC, a limited liability company duly organized and validly
existing under the laws of the State of Delaware ("Iridium LLC"); and THE CHASE
MANHATTAN BANK, as collateral agent for the Secured Parties referred to below
(in such capacity, together with its successors in such capacity, the
"Collateral Agent").
Iridium Operating LLC (the "Company"), a Delaware limited
liability company and wholly-owned Subsidiary of Iridium LLC, certain lenders,
the collateral agent and The Chase Manhattan Bank as Administrative Agent and
Barclays Capital, the investment banking division of Barclays Bank PLC, as
Documentation Agent are parties to a Credit Agreement dated as of December 19,
1997 (as modified, supplemented or otherwise modified and in effect from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for loans to be made by said lenders to the Company in an aggregate
principal amount not exceeding $1,000,000,000.
To induce said lenders to enter into the Credit Agreement and
to extend credit thereunder and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Iridium LLC has agreed
to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Capitalized terms used but not
defined herein shall have their respective meanings in the Credit Agreement. In
addition, as used herein:
"Asset Transfer" means the transfer by Iridium LLC of
substantially all of its assets to the Company pursuant to the Asset
Transfer Agreement.
"Asset Transfer Agreement" means the Asset Transfer Agreement
dated as of December 18, 1997 between Iridium LLC and the Company.
"Collateral" has the meaning assigned to such term in Section
3.01.
"Iridium LLC Agreement" means the Limited Liability Company
Agreement of Iridium LLC dated as of July 29, 1996, pursuant to which
Iridium LLC is organized.
Parent Security Agreement
<PAGE> 2
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"Iridium LLC Members" means each of the holders from time to
time of membership interests of Iridium LLC.
"IWCL" means Iridium World Communications Ltd.
"Management Services Agreement" means the Amended and Restated
Management Services Agreement dated as of December 18, 1997 among IWCL,
Iridium LLC and the Company with respect to, among other things, the
provision of management, personnel and administrative services by
Iridium LLC to the Company.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, assets, condition (financial or
otherwise) or prospects of the Company and any of its Subsidiaries
taken as a whole, (b) the ability of Iridium LLC to perform its
obligations hereunder or under the Management Services Agreement, (c)
the validity or enforceability of the Liens under any Security Document
(including without limitation the Liens created hereunder) or on the
Collateral thereunder or hereunder or the validity or enforceability
thereof or hereof or (d) the Development or timely achievement of
completion of the Project.
"Related Business" means the business of developing, owning,
engaging in and dealing with all or any part of the business of the
provision of telecommunications services and businesses and (a)
reasonably related extensions thereof, including but not limited to the
manufacture, purchase, ownership, operation, leasing, licensing,
financing and selling of, and generally dealing in or with,
communications satellites, earth stations, gateways, ground
infrastructure and subscriber equipment, used or intended for use with
telecommunications services and businesses and (b) any other activities
that are reasonably related to the provision of telecommunications
services and businesses. For avoidance of doubt, "Related Business"
shall include any business or activities carried out by Iridium or any
Unrelated Subsidiary in connection with the development of the next
generation Iridium global wireless communications system.
"Reserve Capital Call Obligations" means the obligations of
certain of the Iridium LLC Members (as identified in Annex D to the
Iridium LLC Agreement) to purchase up to a total of 18,206,550 of
additional Class 1 Interests of Iridium LLC at a price of $13.33 per
interest pursuant to Section 4.02 of the Iridium LLC Agreement.
"Responsible Officer" means the chief executive officer, chief
financial officer or general counsel or any senior vice president of
Iridium LLC or, with respect to Section 4.02, any vice president of
Iridium LLC.
Parent Security Agreement
<PAGE> 3
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"Secured Obligations" means collectively, (a) all obligations
of the Company in respect of principal of and interest on the Loans and
all other amounts owing by the Company and its Subsidiaries to the
Lenders or the Agents under the Credit Agreement and the other Credit
Documents and (b) all obligations of Iridium LLC to the Collateral
Agent and other Secured Parties hereunder.
"Secured Parties" means the Agents (including the Collateral
Agent) and the Lenders.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of New York.
"Unrelated Subsidiary" means a Subsidiary of Iridium LLC
(other than the Company) that is not a Subsidiary of the Company and
which is engaged in a Related Business.
SECTION 1.02. Terms Generally. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified, including an
amendment and restatement thereof, but subject to any restrictions on such
amendments, supplements or modifications set forth herein, (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns or, in the case of any Government Authority, any entity succeeding to
any or all of the functions of such Government Authority, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Sections and Annexes shall be
construed to refer to Sections of, and Annexes to, this Agreement and (e) the
words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Iridium LLC represents and warrants to the Secured Parties
that:
SECTION 2.01. Corporate Existence. Iridium LLC: (a) is a
limited liability company duly organized and validly existing under the laws of
the State of Delaware; (b) has all requisite corporate or other power, and has
all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) reasonably to be expected to result in a
Material Adverse Effect.
SECTION 2.02. No Breach. None of the execution and delivery of
this Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the Iridium LLC Agreement or the
Company LLC Agreement, or any applicable law or regulation, or any material
order, writ, injunction or decree of any court or governmental authority or
agency, or any material agreement or instrument to which Iridium LLC or any of
its Subsidiaries is a party or by which any of them is bound or to which any of
them is subject, or constitute a default under any such agreement or instrument,
or (except for Permitted Liens) result in the creation or imposition of any Lien
upon any of the Collateral pursuant to the terms of any such agreement or
instrument.
SECTION 2.03. Action. Iridium LLC has all necessary limited
liability company power and authority to execute, deliver and perform its
obligations under this Agreement; the execution, delivery and performance by
Iridium LLC of this Agreement have been duly authorized by all necessary action
on its part; and this Agreement has been duly and validly executed and delivered
by Iridium LLC and constitutes its legal, valid and binding obligation,
enforceable against Iridium LLC in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of equity (regardless of whether considered in a proceeding in equity or at
law).
SECTION 2.04. Approvals. No authorizations, approvals
or consents of, and no filings or registrations with, any Government Authority
are necessary for the execution, delivery or performance by Iridium LLC of this
Agreement or for the validity or enforceability
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hereof, except (i) for filings and recordings in respect of the Liens created
pursuant hereto and (ii) that, at any time after the transfer of the FCC License
to the Company or any of its Subsidiaries pursuant to the Space System Contract,
the exercise of certain remedies hereunder may require the prior approval of the
FCC.
SECTION 2.05. Financial Condition. Iridium LLC has heretofore
furnished to the Lenders the consolidated balance sheet and statements of
income, stockholders' equity and cash flows for Iridium LLC (i) as of and for
the fiscal year ended December 31, 1996, reported on by KPMG Peat Marwick LLP,
independent public accountants and (ii) as of and for the fiscal quarter and the
portion of the fiscal year ended September 30, 1997, certified by the chief
financial officer of Iridium LLC. Such financial statements present fairly, in
all material respects, the consolidated financial position and results of
operations and cash flows of Iridium LLC and its Subsidiaries as of such dates
and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred
to in clause (ii) above. Since December 31, 1996 (and giving effect to the Asset
Transfer as of such date), there has been no change in the business, assets,
operations, prospects or condition, financial or otherwise, of Iridium LLC and
its Subsidiaries, taken as a whole, that (either individually or in the
aggregate) could reasonably be expected to result in a Material Adverse Effect.
SECTION 2.06. Proceedings. Except as described in Schedule V
to the Credit Agreement, there is no action, suit or proceeding at law or in
equity or by or before any Government Authority, arbitral tribunal or other
similar body now pending or, to the best knowledge of Iridium LLC, threatened
against Iridium LLC or any of its Subsidiaries or any of their respective
property (including, without limitation, the Project), which has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect.
SECTION 2.07. Investment and Holding Company Status. Iridium
LLC is not (a) an "investment company" or a company "controlled" by a company
registered as an "investment company", as such terms are defined in the
Investment Company Act of 1940 or (b) a "holding company", or an "affiliate" of
a company registered as a "holding company" or a "subsidiary company" of a
company registered as a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935.
SECTION 2.08. Taxes. Iridium LLC has filed or caused to be
filed all tax returns that are required to be filed, and has paid all Taxes
shown to be due and payable on said returns or on any assessments made against
Iridium LLC or any of its property (other than Taxes (i) the payment of which is
not yet due or which are being contested in good faith by appropriate
proceedings and for which such Person has set aside on its books adequate
reserves or (ii) the failure of which to pay could not reasonably be expected to
result in a Material
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Adverse Effect), and no tax Liens have been filed (a) with respect to any of the
Collateral (other than Permitted Liens) or (b) that would have a Material
Adverse Effect, and no claims are being asserted with respect to any such Taxes.
The charges, accruals and reserves on the books of Iridium LLC in respect of
Taxes and other governmental charges are, in the opinion of Iridium LLC,
adequate.
SECTION 2.09. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 2.10. Capitalization. Iridium LLC has heretofore
delivered to the Lenders a true and complete copy of the Iridium LLC Agreement.
The members of Iridium LLC on the date hereof are those identified in Schedule
I.
SECTION 2.11. Asset Transfer. Iridium LLC has the full power
and authority and legal right to execute and deliver the Asset Transfer
Agreement and to perform its obligations thereunder. The execution, delivery and
performance by Iridium LLC of the Asset Transfer Agreement and the consummation
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action of the part of Iridium LLC. The execution, delivery
and performance by Iridium LLC of the Asset Transfer Agreement and the
consummation of the Asset Transfer do not and will not (a) require any consent
or approval of any Person that has not already been obtained and that remains in
full force and effect, (b) violate any material provision of any Government Rule
or any order, writ, judgment, decree, determination or award having
applicability to Iridium LLC or any of its Subsidiaries, (c) violate any
provision of the Iridium LLC Agreement, (d) result in a breach or constitute a
default under any material indenture or agreement to which Iridium LLC or any of
its Subsidiaries is a party or by which any of their respective property is
bound or affected or (e) result in or require the creation or imposition of any
Lien upon or with respect to any of the properties or assets now owned or
hereafter acquired by such Person. The Asset Transfer has been given effect and
all of the assets of Iridium LLC required to be transferred by Iridium LLC to
the Company under the Asset Transfer Agreement have been so transferred prior to
the date hereof.
SECTION 2.12. Collateral.
(a) Iridium LLC has all right, title and interest in, to and
under, and is the record owner of, the Collateral in which it purports to grant
a security interest pursuant to Section 3.01 and no Lien exists or will exist
upon the Collateral at any time (and no right or option to acquire the same
exists in favor of any other Person), except for the pledge and
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security interest in favor of the Collateral Agent for the benefit of the
Secured Parties created or provided for herein, which pledge and security
interest constitute a first priority perfected pledge and security interest in
and to all of the Collateral (except for Permitted Liens).
(b) The membership interests of the Company identified in
Annex 1 are, and all other membership interests of the Company in which Iridium
LLC shall hereafter grant a security interest pursuant to Section 3.01 will be,
duly authorized, validly existing, fully paid and non-assessable (except as
provided in Section 6.07 of the Delaware LLC Act). Except for any restriction
contained herein, there does not exist any contractual restriction on (i) the
sale, assignment, transfer or disposition by the Collateral Agent of any of the
membership interests of the Company pledged hereunder in connection with the
exercise by the Collateral Agent of its remedies hereunder, (ii) the admission
of any transferee of such membership interests as a member of the Company or
(iii) otherwise on the exercise by the Collateral Agent of any of its remedies
hereunder in respect of such membership interests.
(c) The membership interests of the Company identified in
Annex 1 constitute all of the ownership interests of the Company issued and
outstanding on the date hereof (whether or not registered in the name of Iridium
LLC) and Iridium LLC is the owner of all such ownership interests.
ARTICLE III
PLEDGE AND SECURITY INTEREST
SECTION 3.01. Pledge. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations now existing or hereafter arising, Iridium
LLC hereby pledges, assigns, hypothecates and transfers to the Collateral Agent
for the equal and ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent for the equal and ratable benefit of the Secured Parties a
Lien on and security interest in, all of Iridium LLC's right, title and interest
in, to and under the following, whether now owned by Iridium LLC or hereafter
acquired and whether now existing or hereafter coming into existence and
wherever located (all being collectively referred to herein as the
"Collateral"):
(a) all of its membership interests in the Company together
with the certificate or certificates (if any) evidencing the same and
all of its right, title and interest in, to and under the Company LLC
Agreement, including, without limitation, (i) all rights of Iridium LLC
to receive moneys due but unpaid and to become due thereunder or
pursuant thereto, (ii) all rights of Iridium LLC to participate in the
operation or management of the Company and to take actions or consent
to actions in
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accordance with the provisions thereof, (iii) all rights of Iridium LLC
pursuant thereto to property of the Company, (iv) all rights of Iridium
LLC to receive proceeds of any insurance, bond, indemnity, warranty or
guaranty with respect thereto, (v) all claims of Iridium LLC for
damages arising out of or for breach of or default thereunder and (vi)
all rights of Iridium LLC to terminate, amend, supplement, modify or
waive performance under any of the terms provisions of the Company LLC
Agreement, to perform thereunder and to compel performance and
otherwise to exercise all remedies thereunder;
(b) all shares, interests, securities, moneys or property
representing a dividend upon, or representing a distribution or return
of capital upon or with respect to, such membership interests or
resulting from a split-up, revision, reclassification or other like
change thereof or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of thereof;
(c) without affecting the obligations of Iridium LLC under any
provision prohibiting such action hereunder, in the event of any
consolidation or merger of the Company in which the Company is not the
surviving entity, all ownership interests of whatever class owned by
Iridium LLC of the successor entity formed by or resulting from such
consolidation or merger (such membership interests, together with all
shares, interests, securities, moneys or property as may from time to
time be pledged hereunder pursuant to clause (a) or (b) above and this
clause (c) being herein, and the proceeds of and to any such property
and, to the extent related to any such property or such proceeds, all
books, correspondence, credit files, records, invoices and other
papers, collectively called the "Member Collateral");
(d) all rights of Iridium LLC (including rights delegated to
its directors or officers) in respect of the Reserve Capital Call
Obligations, including, without limitation, all rights to compel
performance of the Reserve Capital Call Obligations, to terminate,
amend, supplement, modify or waive performance thereof and otherwise to
exercise rights and remedies in respect thereof (but not including any
indemnity rights which any of the directors or officers of Iridium LLC
may have relating to the Reserve Capital Call Obligations); and
(e) all proceeds, products, offspring, rents, profits,
royalties, revenues, issues, income, benefits, accessions, additions,
substitutions and replacements of and to any and all of the property of
Iridium LLC described in the preceding clauses of this Section and, to
the extent related to any such property, all books, correspondence,
credit files, records, invoices and other papers.
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SECTION 3.02. Member Remains Liable. Anything herein to the
contrary notwithstanding, Iridium LLC shall remain liable under the Company LLC
Agreement to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed. The exercise by the Collateral Agent of any of the rights hereunder
shall not release Iridium LLC from any of its duties or obligations under the
Company LLC Agreement. The Collateral Agent shall not have any obligation or
liability under the Company LLC Agreement by reason of this Agreement, nor shall
the Collateral Agent be obligated to perform any of the obligations or duties of
Iridium LLC thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder. In the event that the Collateral Agent on behalf of
the Secured Parties or its designee(s) succeeds to Iridium LLC's interest in, to
and under the membership interests of the Company whether by foreclosure or
otherwise, the Collateral Agent on behalf of the Secured Parties or its
designee(s) shall assume liability for all of the obligations of Iridium LLC as
a member under the Company LLC Agreement, provided that such liability shall not
include any liability for claims against Iridium LLC arising from Iridium LLC's
failure to perform during the period prior to the Collateral Agent's or such
designee(s)' succession to Iridium LLC's interest in, to and under such
membership interests.
ARTICLE IV
COVENANTS
Iridium LLC agrees that, until the payment and satisfaction in
full of the Secured Obligations and the expiration or termination of the
Commitments of the Lenders under the Credit Agreement:
SECTION 4.01. Financial Statements and Other Information.
Iridium LLC will furnish to the Administrative Agent and each Lender (but, in
the case of clauses (a) through (d) below, only if at such time Iridium LLC
shall be required to prepare financial statements of the type referred to below
for filing with the SEC):
(a) within 120 days after the end of each fiscal year of
Iridium LLC, the audited consolidated balance sheet and related
statements of operations, members' equity and cash flows of Iridium LLC
and its Subsidiaries as of the end of and for such year, setting forth
in each case in comparative form the figures for the previous fiscal
year, all reported on by KPMG Peat Marwick LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all
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material respects the financial condition and results of operations of
Iridium LLC and its Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of Iridium LLC, the consolidated
balance sheet and related statements of operations, members' equity and
cash flows of Iridium LLC and its Subsidiaries as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for (or, in
the case of the balance sheet, as of the end of) the corresponding
period or periods of the previous fiscal year, all certified by a
Responsible Officer as presenting fairly in all material respects the
financial condition and results of operations of Iridium LLC and its
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) of this Section, a certificate of a Responsible
Officer stating whether any change in GAAP or in the application
thereof has occurred since the date of the most recent audited
financial statements delivered to the Administrative Agent pursuant
hereto and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;
(d) promptly upon receipt, copies of all formal accountants'
letters received by Iridium LLC's management in respect of Iridium LLC
(other than any such letters relating solely to Unrelated
Subsidiaries);
(e) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by IWCL or Iridium LLC with the SEC or any national securities
exchange or distributed by Iridium LLC to its members generally; and
(f) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of Iridium LLC (but excluding any information not included
under Section 4.06), as the Administrative Agent or any Lender (through
the Administrative Agent) may reasonably request.
SECTION 4.02. Notices of Material Events. Iridium LLC will
furnish, or will cause to be furnished, to the Administrative Agent and each
Lender prompt written notice of:
(a) Iridium LLC becoming aware of the occurrence of any
Default relating to Iridium LLC;
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(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Government Authority against
or affecting Iridium LLC that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of Iridium LLC and its Subsidiaries in
an aggregate amount exceeding $2,000,000; and
(d) any other circumstance, act or condition relating to
Iridium LLC which could reasonably be expected to result in a Material
Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Responsible Officer setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.
SECTION 4.03. Maintenance of Existence. Iridium LLC will
preserve and maintain (a) its legal existence and (b) all of its licenses,
Government Approvals, rights, privileges, franchises and property (if any) which
are material to the Development of the Project and the due performance of all of
its obligations and the exercise of all of its rights under the Transaction
Documents to which it is party, provided that nothing in this Section shall be
construed to prohibit any transaction permitted under this Article IV.
SECTION 4.04. Taxes. Iridium LLC will (a) pay and discharge,
or effectively provide for, all Taxes that are imposed on Iridium LLC or on its
income or profits or on any of its property prior to the date on which penalties
for the failure to pay or discharge such Taxes attach thereto, other than Taxes
the failure of which to pay could not reasonably be expected to have a Material
Adverse Effect, provided that Iridium LLC shall have the right to contest in
good faith by appropriate proceedings the validity or amount of any such Tax,
and (b) promptly pay any valid, final judgment enforcing any such Tax and cause
the same to be satisfied of record.
SECTION 4.05. Compliance with Laws; Government Approvals.
Iridium LLC will comply in all respects with all applicable Government Rules
applicable to it or its property and all Government Approvals now or hereafter
held by it, unless the failure to so comply could not reasonably be expected to
have a Material Adverse Effect.
SECTION 4.06. Inspection Rights. Subject to the same
confidentiality requirements set forth in Section 11.12 of the Credit Agreement
that are applicable to the Company, Iridium LLC will permit representatives of
any of the Global Arrangers, the Agents
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or the Lenders (including, without limitation, any Independent Advisor, at the
reasonable request of the Global Arrangers), upon reasonable prior notice to
Iridium LLC unless a Default shall have occurred and is continuing, to visit and
inspect its property, to examine, copy or make excerpts from its books, records
and documents and to discuss its affairs, finances and accounts with its
principal officers, engineers and independent accountants to the extent such
property, books, records, documents, affairs, finances and accounts relate to
the business or operation of Company, the Development of the Project or the
Collateral hereunder, all at such reasonable times during normal business hours
and at such intervals as such representatives may reasonably request. Iridium
LLC hereby authorizes each of its principal officers, engineers and independent
accountants to discuss Iridium LLC's affairs, finances and accounts as
contemplated by this Section.
SECTION 4.07. Indebtedness. Iridium LLC will not create,
incur, assume or permit to exist any Indebtedness of Iridium LLC, except: (a)
Indebtedness (including Capital Lease Obligations) incurred in the ordinary
course of business of Iridium LLC in the performance of its duties under the
Management Services Agreement or otherwise in carrying out its activities in
connection with the Development of the Project; (b) other Indebtedness of
Iridium LLC, provided that (i) the proceeds of such Indebtedness (or, in the
case of any Indebtedness of an Unrelated Subsidiary that is Guaranteed by
Iridium LLC, such Indebtedness) shall be used in the business of an Unrelated
Subsidiary, (ii) such Indebtedness shall not have a maturity earlier than one
year after the Maturity Date or provide any amortization or redemption of
principal prior to such date, (iii) such Indebtedness shall not place any
limitations on the activities of the Company and its Subsidiaries or the
activities of Iridium LLC in connection with the Development of the Project,
(iv) such Indebtedness may contain such other terms and conditions (including,
without limitation, covenants and events of default, but excluding terms as to
pricing) applicable to Iridium LLC that are not more restrictive than the terms
set forth in the Credit Agreement (assuming such terms were applicable to
Iridium LLC) and (v) such Indebtedness may not be secured by a Lien on any
property of Iridium LLC other than the equity interests of such Unrelated
Subsidiary; and (c) other Indebtedness not exceeding $10,000,000 in the
aggregate principal amount outstanding at any one time; provided that this
Section shall not (A) be construed to restrict the ability of any Unrelated
Subsidiary to incur or have outstanding any Indebtedness and (B) apply to any
Indebtedness incurred by any Unrelated Subsidiary that is secured by a pledge of
the equity interests of such Unrelated Subsidiary (and no other property of
Iridium LLC) and is not Guaranteed by Iridium LLC.
SECTION 4.08. Liens. Iridium LLC will not create, incur,
assume or suffer to exist any Lien on any property, except (a) the Liens created
pursuant to this Agreement and (b) any other Lien that could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 4.09. Membership Interests. Iridium LLC will not
consent to, or take any other action to effect, (a) the creation of any other
membership or other ownership interest in the Company (other than the membership
interests in the Company outstanding as of the date hereof) or (b) (except for
any restriction contained herein) the creation of any contractual restriction on
(i) the sale, assignment, transfer or the disposition by the Collateral Agent of
any of the membership interests of the Company pledged hereunder in connection
with the exercise by the Collateral Agent of its remedies hereunder, (ii) the
admission of any transferee of such membership interests as a member of the
Company or (iii) otherwise on the exercise by the Collateral Agent of any of its
remedies hereunder in respect of such membership interests.
SECTION 4.10. Mergers, Consolidations, Etc. Iridium LLC will
not enter into any transaction of merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation of
dissolution), or convey, transfer or lease its property substantially as an
entirety to any person.
SECTION 4.11. Investments. Iridium LLC will not make or permit
to remain outstanding any Investments other than (a) the investment in the
membership interests of the Company, (b) Permitted Investments and (c) equity
investments in Unrelated Subsidiaries or other Persons engaged in any Related
Business that are made from the proceeds of the additional membership interests
issued by Iridium LLC or of Indebtedness of Iridium LLC permitted under Section
4.07.
SECTION 4.12. Transactions with Affiliates. Iridium LLC will
not sell, lease or otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or otherwise engage in
any other transactions with, any of its Affiliates, except (a) transactions on
terms which, in the opinion of Iridium LLC, are not less favorable to Iridium
LLC than could be obtained on an arm's-length basis from unrelated third parties
and (b) transaction which could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.13. Nature of Business. Iridium LLC will not engage
in any business, activities or transactions other than in connection with the
Development of the Project and any Related Business. Without limiting the
foregoing, Iridium LLC will take from time to time all necessary action to
ensure that the Development of the Project is carried out in all substantial
respects by the Company and its Subsidiaries and that at all times substantially
all of the assets related to the Development of the Project that are owned or
held by Iridium LLC and its Subsidiaries are owned or held by the Company and
its Subsidiaries.
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SECTION 4.14. Company LLC Agreement. Iridium LLC will not (a)
cancel or terminate the Company LLC Agreement or consent to or accept any
cancellation or termination thereof, (b) amend, supplement or otherwise modify
the Company LLC Agreement in a manner that would be materially adverse to the
interests of the Lenders under the Credit Documents or materially adversely
affect the rights or remedies of the Collateral Agent hereunder or the
Collateral or (c) petition, request or take any other legal or administrative
action that seeks, or may reasonably be expected, to rescind, terminate, amend,
modify or suspend in any way prohibited under clause (b) above the Company LLC
Agreement, without the prior consent of the Administrative Agent (acting with
the approval of the Required Lenders). Iridium LLC shall provide the
Administrative Agent with prior written notice of each proposed modification,
supplement or waiver in respect of thereof not less than 10 Business Days prior
to the proposed effective date thereof (and the Administrative Agent shall
promptly provide copies thereof to each Lender). Promptly following the
effectiveness of each such modification, supplement or waiver, Iridium LLC shall
provide the Administrative Agent with a copy thereof as executed and delivered
by the parties thereto (and the Administrative Agent shall promptly provide a
copy thereof to each Lender).
SECTION 4.15. Iridium LLC Agreement.
(a) Iridium LLC will not (i) take any action, or permit any
action to be taken, to effect (x) the cancellation or termination of the Iridium
LLC Agreement or (y) any amendment, supplement or otherwise modification of the
Iridium LLC Agreement in a manner that would be materially adverse to the
interests of the Lenders under the Credit Documents or materially adversely
affect the rights or remedies of the Collateral Agent hereunder or the
Collateral or (ii) petition, request or take any other legal or administrative
action that seeks, or may reasonably be expected, to rescind, terminate, amend,
modify or suspend in any way prohibited under clause (i) above the Iridium LLC
Agreement, without the prior consent of the Administrative Agent (acting with
the approval of the Required Lenders). Iridium LLC shall provide the
Administrative Agent with prior written notice of each proposed modification,
supplement or waiver in respect of thereof not less than 10 Business Days prior
to the proposed effective date thereof (and the Administrative Agent shall
promptly provide copies thereof to each Lender). Promptly following the
effectiveness of each such modification, supplement or waiver, Iridium LLC shall
provide the Administrative Agent with a copy thereof as executed and delivered
by the parties thereto (and the Administrative Agent shall promptly provide a
copy thereof to each Lender).
(b) Iridium LLC will not approve, consent to or otherwise
permit, or take any other action to effect, the transfer of any membership
interests of Iridium LLC if such transfer would violate Section 5.01 of the
Motorola Consent.
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(c) Neither Iridium LLC nor any of its directors or officers
will exercise any rights under the Iridium LLC Agreement with respect to the
Reserve Capital Call Obligations unless directed so to do by the Administrative
Agent (acting upon the instructions of the Required Lenders). Upon payment by
any Iridium LLC Member of all or any part of the Reserve Capital Call
Obligations payable by such member to the Collateral Agent pursuant to Section
4.02 of the Iridium LLC Agreement, such payment will constitute a capital
contribution by such member to Iridium LLC and Iridium LLC will be deemed to
have made a capital contribution in the same amount in the Company.
SECTION 4.16. Project Costs. If Iridium LLC shall issue any
equity securities or incur any Indebtedness after the date hereof the proceeds
of which are intended to be used to pay for Project Costs, Iridium LLC will make
a capital contribution in the Company in the amount of such net proceeds
promptly following such issuance or incurrence, as the case may be.
SECTION 4.17. Restrictive Agreements. Iridium LLC will not
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Company or any of its Subsidiaries to create, incur or permit to exist any Lien
upon any of its property or assets or to sell, transfer or otherwise dispose of
its assets, (b) the ability of any such Subsidiary to (i) pay dividends or other
distributions with respect to any shares of its equity interests, (ii) make or
repay loans or advances to the Company or any other Subsidiary of the Company or
(iii) Guarantee Indebtedness of the Company or any such other Subsidiary under
any of the Credit Documents or (c) the ability of the Company or any such
Subsidiary to enter into amendments, modifications, supplements or waivers of
any of the Credit Documents or Principal Project Documents; provided that (i)
the foregoing shall not apply to restrictions and conditions imposed by any
applicable Government Rule or by any Credit Document, (ii) the foregoing shall
not apply to (A) restrictions and conditions existing on the date hereof in the
Motorola Guaranteed Credit Agreement, the Senior Note Indentures or otherwise
identified on Schedule IX to the Credit Agreement (but shall apply to any
amendment or modification thereof expanding the scope of any such restriction or
condition) or (B) any comparable restrictions and conditions contained in any
agreement or instrument relating to Indebtedness permitted under clause (c),
(e), (g), (h), (i), (j), (k) or (l) (to the extent the Indebtedness being
Refinanced pursuant to such clause (l) contains any such restriction or
condition) of Section 7.01 of the Credit Agreement, (iii) the foregoing shall
not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided that such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets
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securing such Indebtedness and (v) clause (a) of the foregoing shall not apply
to customary provisions in leases restricting the assignment thereof.
ARTICLE V
REMEDIES
In furtherance of the grant of the pledge and security
interest pursuant to Section 3.01, Iridium LLC hereby agrees with the Secured
Parties as follows:
SECTION 5.01. Delivery and Other Perfection. Iridium LLC
shall:
(a) if any of the shares, interests, securities, moneys or
property required to be pledged by Iridium LLC under clauses (a), (b)
and (c) of Section 3.01 are received by Iridium LLC, forthwith either
(i) transfer and deliver to the Collateral Agent such shares or
securities so received by Iridium LLC (together with the certificates
for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of
which thereafter shall be held by the Collateral Agent, pursuant to the
terms of this Agreement, as part of the Collateral, (ii) with respect
to any Member Collateral that is not evidenced by a certificate,
execute and deliver written instructions to the issuer thereof to
register the Lien created hereunder in such Member Collateral in the
registration books maintained by such issuer for such purpose and cause
Iridium LLC to execute and deliver to the Collateral Agent a written
confirmation to the effect that the Lien created hereunder in such
Member Collateral has been duly registered in such registration books,
all in form and substance satisfactory to the Collateral Agent or (iii)
take such other action as the Collateral Agent shall deem necessary or
appropriate to duly perfect the Lien created hereunder in such shares,
interests, securities, moneys or property in said clauses (a), (b) and
(c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Collateral Agent)
to create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Collateral which is represented by a certificate to be transferred of
record into the name of the Collateral Agent or its nominee (and the
Collateral Agent agrees that if any Collateral is transferred into its
name or the name of its nominee, the Collateral Agent will thereafter
promptly give to Iridium LLC copies of any notices and communications
received by it with respect to the Collateral pledged by Iridium LLC
hereunder);
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(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably require in order to
reflect the security interests granted by this Agreement; and
(d) permit representatives of the Collateral Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, all in such manner as the Collateral Agent may require.
SECTION 5.02. Other Financing Statements and Liens. Without
the prior written consent of the Collateral Agent, Iridium LLC shall not file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the benefit of the Secured Parties.
SECTION 5.03. Preservation of Rights. The Collateral Agent
shall not be required to take steps necessary to preserve any rights against
prior parties to any of the Collateral.
SECTION 5.04. Collateral.
(a) Iridium LLC will cause to be pledged hereunder at all
times 100% of the aggregate ownership interests of the Company then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, Iridium LLC shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Member Collateral, provided that
Iridium LLC agrees that it will not vote the Collateral in any manner that is
inconsistent with the terms of this Agreement, the Credit Agreement or any other
instrument or agreement referred to herein or therein; and the Collateral Agent
shall execute and deliver to Iridium LLC or cause to be executed and delivered
to Iridium LLC all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as Iridium LLC may reasonably
request for the purpose of enabling Iridium LLC to exercise the rights and
powers that they are entitled to exercise pursuant to this paragraph (b).
(c) Except as permitted under, and subject to any conditions
set forth in, Section 7.07 of the Credit Agreement, no distributions, dividends
or other payments shall be paid by the Company to Iridium LLC in its capacity as
a member of the Company, and Iridium LLC shall not be entitled to receive and
retain any such distribution, dividends or
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other payments, in respect of the Collateral; provided that nothing herein shall
be construed to limit the payment by the Company to Iridium LLC of the Iridium
Management Expenses under, and as defined in, the Management Services Agreement.
In the event that, notwithstanding the foregoing, Iridium LLC shall receive any
such distribution, dividend or other payment, Iridium LLC shall hold the same in
trust for the Collateral Agent and the other Secured Parties, segregated from
other funds of Iridium LLC and forthwith turn over the same to the Collateral
Agent in the exact form received by Iridium LLC for deposit into the appropriate
Project Account pursuant to the Depositary Agreement.
(d) Without limiting any other rights of the Collateral Agent
under this Agreement (but subject to the second paragraph of Section 5.05), upon
and during the continuance of any Event of Default, the Collateral Agent may
(but shall not be obligated to) make a demand for payment in respect of the
Reserve Capital Call Obligations in accordance with Section 4.02 of the Iridium
LLC Agreement, without notice to or consent from or any other action required to
be taken by Iridium LLC.
SECTION 5.05. Events of Default, Etc. During the period during
which an Event of Default shall have occurred and be continuing:
(a) the Collateral Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Collateral Agent were the sole and absolute owner thereof
(and Iridium LLC agrees to take all such action as may be reasonably
necessary to give effect to such right);
(b) the Collateral Agent in its discretion may, in its name or
in the name of Iridium LLC or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, but shall be under
no obligation to do so; and
(c) the Collateral Agent may, upon 30 days' prior written
notice to Iridium LLC of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Secured Parties or
any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of the Collateral, at such place or places
as the Collateral Agent deems best,
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and for cash or for credit or for future delivery, at public or private
sale, without demand of performance or notice of intention to effect
any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived), and any Secured Party or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at
any private sale) and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of Iridium LLC, any such demand,
notice and right or equity being hereby expressly waived and released.
The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the sale may be so
adjourned.
Notwithstanding anything herein or in any other Security
Document to the contrary, neither the Collateral Agent nor any of the other
Secured Parties shall sell, lease, assign or otherwise dispose, or cause the
sale, lease, assignment or other disposition, of all or any part of the
Collateral (other than the rights of Iridium LLC in respect of the Reserve
Capital Call Obligations) pursuant to this Agreement unless not less than 10
days prior thereto the Collateral Agent shall have made a demand (or caused a
demand to be made) in respect of the Reserve Capital Call Obligations in
accordance with Section 4.02 of the Iridium LLC Agreement, provided that (i)
nothing herein shall be construed to limit the rights of the Collateral Agent to
exercise any other right or remedies hereunder prior to any such sale, lease,
assignment or other disposition or from and after any event affecting any Credit
Party or Iridium LLC described in clause (i) or (j) of Section 9.01 of the
Credit Agreement and (ii) the requirement of this paragraph shall not apply if
the aggregate outstanding amount in respect of the Loans (net of any cash
balances in the Project Accounts) shall exceed the aggregate amount of the
Reserve Capital Call Obligations.
The proceeds of each collection, sale or other disposition
under this Section shall be applied in accordance with Section 5.08.
Iridium LLC recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Agent may be compelled, with respect to any sale
of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Iridium
LLC acknowledges that any such private sales may be at prices and on terms less
favorable to the Collateral Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have
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been made in a commercially reasonable manner and that the Collateral Agent
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit Iridium
LLC or the issuer of such Collateral to register it for public sale.
SECTION 5.06. Removals, Etc. Without at least 30 days' prior
written notice to the Collateral Agent, Iridium LLC shall not (i) maintain any
of its books and records with respect to the Collateral at any office or
maintain its principal place of business at any place other than at the address
indicated beneath its signature hereto or (ii) change its corporate name, or the
name under which it does business, from the name shown on the signature pages
hereto.
SECTION 5.07. Private Sale. No Secured Party shall incur any
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 5.05 conducted in a commercially reasonable
manner. Iridium LLC hereby waives any claims against the Secured Parties arising
by reason of the fact that the price at which the Collateral may have been sold
at such a private sale was less than the price that might have been obtained at
a public sale or was less than the aggregate amount of the Secured Obligations,
even if the Collateral Agent accepts the first offer received and does not offer
Collateral to more than one offeree.
SECTION 5.08. Application of Proceeds. Except as otherwise
herein expressly provided, the proceeds of any collection, sale or other
realization of all or any part of the Collateral pursuant hereto, and any other
cash at the time held by the Collateral Agent under this Agreement, shall be
applied by the Collateral Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Collateral Agent and the
reasonable fees and expenses of its agents and counsel, and all
reasonable expenses incurred and advances made by the Collateral Agent
in connection therewith;
Next, to the payment in full of the Secured Obligations, in
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Lenders holding the same may
otherwise agree; and
Finally, to the payment to Iridium LLC, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
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As used in this Article V, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, the Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of Iridium LLC or any issuer
of or obligor on any of the Collateral.
SECTION 5.09. Attorney-in-Fact. Without limiting any rights or
powers granted by this Agreement to the Collateral Agent while no Event of
Default has occurred and is continuing, upon the occurrence and during the
continuance of any Event of Default the Collateral Agent is hereby appointed the
attorney-in-fact of Iridium LLC for the purpose of carrying out the provisions
hereof and taking any action and executing any instruments that the Collateral
Agent may reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Collateral Agent shall be entitled under this Article to make collections in
respect of the Collateral, the Collateral Agent shall have the right and power
to receive, endorse and collect all checks made payable to the order of Iridium
LLC representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
SECTION 5.10. Perfection. Prior to or concurrently with the
execution and delivery of this Agreement, Iridium LLC shall take such action,
including without limitation filing UCC financing statements, establishing
control arrangements (within the meaning of Article 8 of the UCC) and delivering
to the Collateral Agent any certificates representing the Collateral
(accompanied by undated stock or transfer powers duly executed in blank) as the
Collateral Agent may reasonably request to perfect the security interests
granted pursuant to Section 3.01.
SECTION 5.11. Termination. When all Secured Obligations shall
have been paid in full and the Commitments of the Lenders under the Credit
Agreement shall have expired or been terminated, this Agreement shall terminate
and all rights to the Collateral shall revert to Iridium LLC, and the Collateral
Agent shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the order
of Iridium LLC.
SECTION 5.12. Further Assurances. Iridium LLC agrees that,
from time to time upon the written request of the Collateral Agent, Iridium LLC
will execute and deliver such further documents and do such other acts and
things as the Collateral Agent may reasonably request in order fully to effect
the purposes of this Agreement.
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ARTICLE VI
CONSENT AND AGREEMENT
Iridium LLC hereby acknowledges and agrees:
SECTION 6.01. Iridium LLC hereby acknowledges notice and
receipt of the Security Agreement and consents to the assignment by the Company
of all its rights in and under the Management Services Agreement pursuant to the
Security Agreement.
SECTION 6.02. In connection with any exercise by the
Collateral Agent of any of its remedies under the Security Agreement, the
Collateral Agent shall be entitled to exercise any and all rights of the Company
under the Management Services Agreement in accordance with its terms, and
Iridium LLC shall comply in all respects with such exercise. Without limiting
the foregoing, in connection with the exercise by the Collateral Agent of such
remedies, the Collateral Agent shall have the full right and power to enforce
directly against Iridium LLC all obligations of Iridium LLC owing to the Company
under the Management Services Agreement and otherwise to exercise all remedies
of the Company thereunder and to make all demands and give all notices and make
all requests required or permitted to be made by the Company under the
Management Services Agreement. The Collateral Agent shall have the right, but
not the obligation, to cure all defaults of the Company and to pay all sums
owing by the Company under the Management Services Agreement in accordance with
this Article.
SECTION 6.03. Iridium LLC will not, without the prior written
consent of the Collateral Agent, (i) cancel or terminate, or suspend performance
under, or exercise any right to consent to or accept any cancellation,
termination or suspension of, the Management Services Agreement, unless prior
thereto Iridium LLC shall have delivered to the Collateral Agent written notice
stating that it intends to take such action on a date not less than 90 days
after the date of such notice, specifying the nature of the default or other
event under the Management Services Agreement entitling Iridium LLC to take such
action (and, in the case of a payment default by the Company, specifying the
amount thereof) and permitting the Collateral Agent to cure such payment default
by making a payment equal to the amount in default or by performing or causing
to be performed any other obligation in default, (ii) transfer, sell, assign,
delegate or otherwise dispose of any part of its interests in the Management
Services Agreement, or (iii) petition, request or take any other legal or
administrative action which seeks, or may reasonably be expected, to rescind,
terminate or suspend or amend or modify the Management Services Agreement or any
part thereof in any manner prohibited by clause (i) or (ii) above. In
furtherance of clause (i) of the immediately preceding sentence, Iridium LLC
agrees that, notwithstanding anything contained in the Management Services
Agreement to the contrary, upon the occurrence of a default by the
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Company under such Management Services Agreement entitling Iridium LLC to cancel
or terminate such Management Services Agreement or to suspend performance
thereunder, Iridium LLC will not take any action to cancel or terminate, or
suspend performance under, such Management Services Agreement if, within a
90-day period after the date on which the Collateral Agent shall have received
notice of such default from Iridium LLC, the Collateral Agent commences steps to
cure such default and/or otherwise to institute enforcement proceedings to
acquire the Company's interest in the Management Services Agreement or the
Project and thereafter the Collateral Agent diligently pursues such steps or
proceedings and all payment defaults of the Company under the Management
Services Agreement have been cured within such 90-day period. Effective upon any
transfer of the Company's interest in the Management Services Agreement to any
other Person, Iridium LLC will grant the relevant transferee a reasonable period
of time to cure such default (but, in no event with respect to any payment
default, exceeding a maximum of 90 days after receipt of notice of such payment
default by the Collateral Agent, as contemplated above). Except as provided in
Section 6.05, no curing or attempt to cure any of the Company's defaults under
the Management Services Agreement shall be construed as an assumption by the
Collateral Agent or any other Secured Party of any covenants, agreements or
obligations of the Company under the Management Services Agreement and neither
the Collateral Agent nor any other Secured Party shall have any obligation to
Iridium LLC for the performance of any obligation under the Management Services
Agreement. In connection with any cure pursuant to this Section of the Company's
default(s) under the Management Services Agreement or any assumption by any
Person of the Company's liabilities thereunder, only those obligations and
liabilities arising expressly under the Management Services Agreement shall be
required to be cured or assumed, as the case may be. Notwithstanding anything in
this Agreement to the contrary, no provision of this Agreement shall be intended
to restrict in any way any merger or consolidation to which Iridium LLC is a
party or the sale of all or substantially all of the assets of Iridium LLC and
its Subsidiaries, provided that, in connection with any such transaction, if
Iridium LLC is not the surviving entity of such transaction, the surviving
entity or purchaser, as the case may be, expressly assumes in writing the
obligations of Iridium LLC under the Management Services Agreement.
Notwithstanding anything herein to the contrary, the restrictions under this
Article shall not apply to any of the arrangements between Iridium LLC and IWCL
as set forth in the Management Services Agreement.
SECTION 6.04. Iridium LLC shall deliver to the Administrative
Agent at the address provided for in Section 11.01 of the Credit Agreement, or
at such other address as the Administrative Agent may designate in writing from
time to time to Iridium LLC, promptly following the delivery thereof to the
Company, a copy of each material notice from Iridium LLC to the Company under
the Management Services Agreement other than periodic demands for payment not
then overdue. Promptly following its receipt thereof, Iridium LLC will
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deliver to the Administrative Agent at the address specified above a copy of
each material notice from the Company to Iridium LLC under the Management
Services Agreement.
SECTION 6.05. Iridium LLC agrees that, in connection with the
exercise by the Collateral Agent of its remedies under the Security Agreement
with respect to the Management Services Agreement, Iridium LLC shall recognize
the Collateral Agent as the Company for purposes of the Management Services
Agreement in accordance with this Agreement. In the event that the Collateral
Agent succeeds to the Company's interests under the Management Services
Agreement in accordance with the Security Agreement, the Collateral Agent shall
assume liability for all of the Company's obligations under the Management
Services Agreement, provided, however, that such liability shall not include any
liability for claims of Iridium LLC against the Company arising from the
Company's failure to perform during the period prior to the Collateral Agent's
succession to the Company's interests under the Management Services Agreement
other than the payments obligations of the Company expressly provided for in the
Management Services Agreement. Except as otherwise set forth in the immediately
preceding sentence, none of the Secured Parties shall be liable for the
performance or observance or any of the obligations or duties of the Company
under any of the Management Services Agreement, nor shall the assignment of the
Management Services Agreement by the Company to the Collateral Agent pursuant to
the Security Agreement give rise to any duties or obligations whatsoever on the
part of any of the Secured Parties owing to Iridium LLC. If the Collateral Agent
succeeds to the Company's interests under the Management Services Agreement
pursuant to the Security Agreement, Iridium LLC and the Collateral Agent shall
negotiate in good faith an equitable adjustment to the amounts payable
thereunder to compensate Iridium LLC for any additional costs reasonably
incurred by Iridium LLC following the failure of the Company to perform its
obligations that resulted in the enforcement by the Collateral Agent of its
remedies under the Security Agreement until the date on which the Collateral
Agent shall have assumed the obligations of the Company under the Management
Services Agreement. Notwithstanding the foregoing, Iridium LLC shall not be
relieved of its obligations to perform under the Management Services Agreement
as a result of the parties' failure to agree upon an equitable adjustment to the
amounts payable thereunder.
SECTION 6.06. In the event that (i) the Management Services
Agreement is rejected by a trustee, liquidator, debtor-in-possession or similar
entity or person in any bankruptcy, insolvency or other similar proceeding
involving the Company or (ii) the Management Services Agreement is terminated as
a result of any bankruptcy, insolvency or similar proceeding involving the
Company and, if within 90 days after such rejection, the Collateral Agent shall
so request and shall certify in writing to Iridium LLC that it intends to
perform the obligations of the Company as and to the extent required under the
Management Services Agreement (as if it had not been rejected or terminated, but
otherwise only to the extent such obligations would be undertaken had such
person or entity succeeded to the
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Company thereunder pursuant to Section 6.07, Iridium LLC will execute and
deliver to the Collateral Agent a new agreement amending or replacing the
original affected Management Services Agreement which shall be for the balance
of the remaining term under such affected Management Services Agreement before
giving effect to such rejection or termination and shall contain the same
conditions, agreements, terms, provisions and limitations as such affected
Management Services Agreement (except for any requirements which have been
fulfilled by the Company and Iridium LLC prior to such rejection or termination
or which are not required to be undertaken by such person or entity). If the
Collateral Agent and Iridium LLC enter into such a new agreement in accordance
with this Section, Iridium LLC and the Collateral Agent shall negotiate in good
faith an equitable adjustment to the amounts payable thereunder to compensate
Iridium LLC for any additional costs reasonably incurred by Iridium LLC during
the period from and including the date such bankruptcy, insolvency or similar
proceeding was commenced to and including the date on which the Collateral Agent
shall certify in writing that it intends to perform the obligations of the
Company with respect to such new agreement. Notwithstanding the foregoing
provisions, Iridium LLC shall not be relieved of its obligations to perform
under such new agreement as result of the parties' failure to agree upon such an
equitable adjustment. References in this Agreement to a "Management Services
Agreement" shall be deemed also to refer to the new Management Services
Agreement in replacement thereof.
SECTION 6.07. In connection with the exercise by the
Collateral Agent of its remedies under the Security Agreement, the Collateral
Agent may assign its rights and interests and the rights and interests of the
Company under the Management Services Agreement to any other Person, provided
that such Person shall assume all of the obligations of the Company under the
Management Services Agreement(s) and shall have obtained all Government
Approvals (if any) necessary to perform such obligations. Upon such assignment
and assumption, the Collateral Agent shall be relieved of all obligations (if
any) under the Management Services Agreement(s) arising after such assignment
and assumption.
SECTION 6.08. Designees and Transferees. It is acknowledged
and agreed that the Collateral Agent may employ agents and attorneys-in-fact in
exercising its remedies under the Security Agreement, and in that connection may
designate another entity to take action on behalf of the Collateral Agent
including, but not limited to, the enforcement of and/or acquisition of the
Company's rights in the Management Services Agreement or otherwise in respect of
the Project. It is further acknowledged and agreed that in connection with the
exercise by the Collateral Agent of such remedies, the Collateral Agent may
cause the Company's rights in any or all of the Management Services Agreement
(and/or other assets associated with the Project) to be transferred or assigned
to a third party pursuant to the Security Agreement (a "transferee"). The
provisions of this Article are intended to benefit the Collateral Agent, its
agents, attorneys-in-fact and designees (collectively, the "designees") and
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each transferee. Accordingly, unless the context otherwise requires, references
to "Collateral Agent" or "Administrative Agent" in this Article shall be deemed
to include references to designees and transferees thereof permitted pursuant to
the Security Agreement (regardless of whether so expressly provided herein), and
all actions permitted to be taken by the Collateral Agent or the Administrative
Agent, as the case may be, under this Agreement may be taken by any such
designee or transferee, as appropriate.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. No Waiver. No failure on the part of the
Collateral Agent or any other Secured Party to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent or any other Secured Party of any right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by law.
SECTION 7.02. Notices. All notices, requests, consents and
demands hereunder shall be in writing and telecopied or delivered to the
intended recipient at the "Address for Notices" specified beneath its name on
the signature pages hereof or, as to any party, at such other address as shall
be designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
SECTION 7.03. Expenses. Iridium LLC agrees to reimburse each
of the Lenders and the Collateral Agent for all reasonable costs and expenses of
the Lenders and the Collateral Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (a) any Event
of Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (i) performance by the Collateral Agent of any obligations of
Iridium LLC in respect of the Collateral that Iridium LLC have failed or refused
to perform, (ii) bankruptcy, insolvency, receivership, foreclosure, winding up
or liquidation proceedings, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or asserting rights
and claims of the Collateral Agent in respect thereof, by litigation or
otherwise, (iii) judicial or regulatory proceedings and (iv) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction
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contemplated thereby is consummated) and (b) the enforcement of this Section,
and all such costs and expenses shall be Secured Obligations entitled to the
benefits of the collateral security provided pursuant to Section 3.01.
SECTION 7.04. Amendments, Etc. The terms of this Agreement may
be waived, altered or amended only by an instrument in writing duly executed by
Iridium LLC and the Collateral Agent. Any such amendment or waiver shall be
binding upon the Collateral Agent, each other Secured Party and Iridium LLC.
SECTION 7.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of Iridium LLC, the Collateral Agent and each other Secured Party, provided,
however, that Iridium LLC shall not assign or transfer its rights hereunder
without the prior written consent of the Collateral Agent.
SECTION 7.06. Captions. The caption and section headings used
herein are for convenience of reference only, are not part of this Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.
SECTION 7.07. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.
SECTION 7.08. Governing Law; Jurisdiction; Consent to Service
of Process.
(a) This Agreement shall be construed in accordance
with and governed by the law of the State of New York.
(b) Iridium LLC hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement against Iridium LLC or its
properties in the courts of any jurisdiction.
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(c) Iridium LLC hereby irrevocably appoints CT
Corporation (the "Process Agent") with an office on the date hereof at 1633
Broadway New York, New York 10019 as its agent to receive on behalf of it and
its property service of copies of the summons and complaint and any other
process which may be served in any such suit, action or proceeding. Such service
may be made by mailing or delivering a copy of such process to Iridium LLC, in
care of the Process Agent at the Process Agent's above address and Iridium LLC
hereby irrevocably authorizes and directs the Process Agent to receive such
service on its behalf. The Administrative Agent and each Lender agree to mail to
Iridium LLC at its address provided under Section 7.02 a copy of any summons,
complaint, or other process mailed or delivered by it to Iridium LLC in care of
the Process Agent. As an alternate method of service, Iridium LLC also
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by mailing of copies of such process to it at its address
provided under Section 7.02. All mailings under this Section shall be by
certified mail, return receipt requested. Nothing in this Agreement will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
(d) Iridium LLC hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(e) To the extent that Iridium LLC may be or become
entitled, in any jurisdiction in which judicial proceedings may at any time be
commenced with respect to this Agreement, to claim for itself or its property or
revenues any immunity from suit, court jurisdiction, attachment prior to
judgment, attachment in aid of execution of a judgment, execution of a judgment
or from any other legal process or remedy relating to its obligations under this
Agreement and to the extent that in any such jurisdiction there may be
attributed such an immunity (whether or not claimed), Iridium LLC hereby
irrevocably agrees not to claim and hereby irrevocably waives such immunity to
the fullest extent permitted by the laws of such jurisdiction.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
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OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 7.10. No Third Party Beneficiaries. The agreements of
the parties hereto are solely for the benefit of Iridium LLC, the Collateral
Agent and the other Secured Parties, and no other Person shall have any rights
hereunder.
SECTION 7.11. Agents and Attorneys-in-Fact. The Collateral
Agent may employ agents and attorneys-in-fact in connection herewith and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
SECTION 7.12. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 7.13. Security Interest Absolute. The rights and
remedies of the Collateral Agent hereunder, the Liens created hereby and the
obligations of Iridium LLC hereunder are absolute, irrevocable and
unconditional, irrespective of:
(a) the validity or enforceability of any of the
Secured Obligations, any LLC Agreement, any Credit Document or any
other agreement or instrument relating thereto (other than this
Agreement);
(b) any amendment to, waiver of, consent to or
departure from, or failure to exercise any right, remedy, power or
privileges under or in respect of, any of the Secured Obligations, any
LLC Agreement, any Credit Document or any other agreement or instrument
relating thereto (other than this Agreement);
(c) the acceleration of the maturity of any of the
Secured Obligations or any other modification of the time of payment
thereof;
(d) any substitution, release or exchange of any
other security for or guarantee of any of the Secured Obligations or
the failure to create, preserve, validate,
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perfect or protect any other Lien granted to, or purported to be
granted to, or in favor of, the Collateral Agent or any other Secured
Party; or
(e) any other event or circumstance whatsoever which
might otherwise constitute a legal or equitable discharge of a surety
or a guarantor, it being the intent of this Section that the
obligations of Iridium LLC hereunder shall be absolute, irrevocable and
unconditional under any and all circumstances.
SECTION 7.14. Subrogation. Iridium LLC shall not exercise, and
hereby irrevocably waives, any claim, right or remedy that it may now have or
may hereafter acquire against the Company arising under or in connection with
this Agreement, including, without limitation, any claim, right or remedy of
subrogation, contribution, reimbursement, exoneration, indemnification or
participation arising under contract, by Government Rule or otherwise in any
claim, right or remedy of the Collateral Agent or any other Secured Party
against the Company or any other Person or any Collateral which the Collateral
Agent or any other Secured Party may now have or may hereafter acquire until
such time as all of the Secured Obligations have been paid in full. If,
notwithstanding the preceding sentence, any amount shall be paid to Iridium LLC
on account of such claim, right or remedy at any time when any of the Secured
Obligations shall not have been paid in full, such amount shall be held by
Iridium LLC in trust for the Collateral Agent and the other Secured Parties,
segregated from other funds of Iridium LLC, and be turned over to the Collateral
Agent in the exact form received by Iridium LLC (duly endorsed by Iridium LLC to
the Collateral Agent, if required), to be applied against the Secured
Obligations, whether matured or unmatured, in accordance with this Agreement.
SECTION 7.15. Reinstatement. This Agreement and the Lien
created hereunder shall automatically be reinstated if and to the extent that
for any reason any payment by or on behalf of the Company in respect of the
Secured Obligations is rescinded or must otherwise be restored by any holder of
the Secured Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and Iridium LLC shall indemnify the Collateral
Agent and each other Secured Party on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees of counsel) incurred by
the Collateral Agent or such other Secured Party in connection with such
rescission or restoration.
SECTION 7.16. FCC Approval. Notwithstanding any other
provision of this Agreement, from and after the transfer of the FCC License to
the Company or any of its Subsidiaries pursuant to Section 18.H of the Space
System Contract, no action shall be taken hereunder by the Collateral Agent or
any other Secured Party with respect to any of the membership interests of the
Company that would constitute or result in any assignment of the FCC License or
any change of control of the holder of the FCC License, if, under then
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existing applicable law, regulations and FCC policies, such assignment or change
of control would require the prior approval of the FCC. Iridium LLC agrees to
take, at its expense, any action that the Collateral Agent may reasonably
request in order to obtain from the FCC such approval as may be necessary (a) to
enable the Collateral Agent to exercise and enjoy the full rights and benefits
granted to the Collateral Agent by this Agreement and (b) for any action or
transaction contemplated by this Agreement for which such approval is or shall
be required by law, and specifically, without limitation, upon request by the
Collateral Agent, to prepare, sign and file with the FCC the assignor's or
transferor's portion of any application or applications for consent to the
assignment of any license or transfer of control necessary or appropriate under
the FCC's rules, regulations and policies, or for approval of any sale of the
membership interests of the Company provided by this Agreement by or on behalf
of the Collateral Agent or any assumption by the Collateral Agent of voting
rights relating thereto effected in accordance with the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed and delivered as of the day and year
first above written.
PLEDGOR
IRIDIUM LLC
By ________________________
Name:
Title:
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
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COLLATERAL AGENT
THE CHASE MANHATTAN BANK,
as Collateral Agent
By ________________________
Name:
Title:
Address for Notices:
The Chase Manhattan Bank,
as Collateral Agent
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Loan and Agency Services Group
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: ______________________
Parent Security Agreement
<PAGE> 34
ANNEX 1
Membership Interests
[See Section 2.05(b) and (c)]
Type of Certificate
Membership Number of No(s).
Interests Units (if any)
--------- ----- --------
Annex 1 to Parent Security Agreement
Parent Security Agreement
<PAGE> 35
SCHEDULE I
Iridium LLC Members
Type of
Name Interests Percentage
---- --------- ----------
Schedule I
Parent Security Agreement
<PAGE> 1
EXHIBIT 10.34
(EXHIBIT D TO THE CREDIT AGREEMENT)
SUBSIDIARY GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of [__________, 199_] between: each of
the entities identified under the caption "SUBSIDIARY GUARANTOR" on the
signature pages hereto or which shall become a Subsidiary Guarantor for purposes
hereof pursuant to Section 6.11 of the Credit Agreement referred to below (each
individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors"); and THE CHASE MANHATTAN BANK, as administrative agent for the
lenders party to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
Iridium Operating LLC, a Delaware limited liability company (the
"Company"), certain lenders, the Administrative Agent, The Chase Manhattan Bank,
as Collateral Agent, and Barclays Capital, the investment banking division of
Barclays Bank PLC, as Documentation Agent are parties to a Credit Agreement
dated as of December 19, 1997 (as modified, supplemented or otherwise modified
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for loans to be made by said lenders to the
Company in an aggregate principal amount not exceeding $1,000,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Subsidiary
Guarantor has agreed to guarantee the Guaranteed Obligations (as hereinafter
defined). Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Capitalized terms used but not defined
herein shall have their respective defined meanings in the Credit Agreement.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, including an amendment and restatement
thereof, but subject to any restrictions on such amendments,
Subsidiary Guarantee Agreement
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supplements or modifications set forth herein, (b) any reference herein to any
Person shall be construed to include such Person's successors and assigns or, in
the case of any Governmental Authority, any entity succeeding to any or all of
the functions of such Governmental Authority, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles and Sections shall be construed to refer to
Articles and Sections of this Agreement and (e) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II
GUARANTEE
SECTION 2.01. The Guarantee. The Subsidiary Guarantors hereby
jointly and severally guarantee to each Lender and each Agent and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Lenders to the Company and all other amounts
from time to time owing to the Lenders or the Agents by the Company under the
Credit Agreement and the other Credit Document, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Subsidiary Guarantors hereby further
jointly and severally agree that if the Company shall fail to pay in full when
due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
SECTION 2.02. Obligations Unconditional. The obligations of the
Subsidiary Guarantors under Section 2.01 are absolute and unconditional, joint
and several, irrespective of the value, genuineness, validity, regularity or
enforceability of the Credit Agreement, any other Credit Document or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Article II that the obligations of the Subsidiary
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of
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any one or more of the following shall not alter or impair the liability of the
Subsidiary Guarantors hereunder which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance
or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement, any other Credit Document or any other agreement or
instrument referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement, any other Credit Document or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
any Agent or any Lender or Lenders as security for any of the Guaranteed
Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that any
Agent or Lender exhaust any right, power or remedy or proceed against the
Company under the Credit Agreement, any other Credit Document or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
SECTION 2.03. Reinstatement. The obligations of the Subsidiary
Guarantors under this Article II shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Company in respect
of the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary
Guarantors jointly and severally agree that they will indemnify the
Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
Subsidiary Guarantee Agreement
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SECTION 2.04. Subrogation. The Subsidiary Guarantors hereby jointly
and severally agree that until the payment and satisfaction in full of all
Guaranteed Obligations and the expiration or termination of the Commitments of
the Lenders under the Credit Agreement they shall not exercise any right or
remedy arising by reason of any performance by them of their guarantee in
Section 2.01, whether by subrogation or otherwise, against the Company or any
other guarantor of any of the Guaranteed Obligations or any security for any of
the Guaranteed Obligations.
SECTION 2.05. Remedies. The Subsidiary Guarantors jointly and
severally agree that, as between the Subsidiary Guarantors and the Lenders, the
obligations of the Company under the Credit Agreement may be declared to be
forthwith due and payable as provided in Article IX of the Credit Agreement (and
shall be deemed to have become automatically due and payable in the
circumstances provided in said Article IX) for purposes of Section 2.01
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against the Company and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Subsidiary Guarantors for purposes of Section
2.01.
SECTION 2.06. Instrument for the Payment of Money. Each Subsidiary
Guarantor hereby acknowledges that the guarantee in this Article II constitutes
an instrument for the payment of money, and consents and agrees that any Lender
or the Administrative Agent, at its sole option, in the event of a dispute by
such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have
the right to bring motion-action under New York CPLR Section 3213.
SECTION 2.07. Continuing Guarantee. The guarantee in this Article II
is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
SECTION 2.08. Rights of Contribution. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Subsidiary Guarantor (as defined below) by reason of
the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each
other Subsidiary Guarantor shall, on demand of such Excess Funding Subsidiary
Guarantor (but subject to the next sentence), pay to such Excess Funding
Subsidiary Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the Properties, debts and liabilities of such Excess Funding Subsidiary
Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any
Excess Funding Subsidiary Guarantor under this Section shall be subordinate and
subject in
Subsidiary Guarantee Agreement
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right of payment to the prior payment in full of the obligations of such
Subsidiary Guarantor under the other provisions of this Article II and such
Excess Funding Subsidiary Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.
For purposes of this Section, (i) "Excess Funding Subsidiary
Guarantor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Subsidiary
Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and
(iii) "Pro Rata Share" shall mean, for any Subsidiary Guarantor, the ratio
(expressed as a percentage) of (x) the amount by which the aggregate fair
saleable value of all Properties of such Subsidiary Guarantor (excluding any
shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the
debts and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of all
Properties of all of the Subsidiary Guarantors exceeds the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the Subsidiary
Guarantors hereunder) of all of the Subsidiary Guarantors, determined (A) with
respect to any Subsidiary Guarantor that is a party hereto on the date hereof,
as of the date hereof, and (B) with respect to any other Subsidiary Guarantor,
as of the date such Subsidiary Guarantor becomes a Subsidiary Guarantor
hereunder.
SECTION 2.09. General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 2.01 would otherwise, taking into account the provisions of Section
2.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 2.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, the Administrative Agent, the Lenders or
any other Person, be automatically limited and reduced to the highest amount
that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Subsidiary Guarantee Agreement
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Each Subsidiary Guarantor represents and warrants to the Lenders and
the Administrative Agent that:
SECTION 3.01. Corporate Existence. Such Subsidiary Guarantor: (a) is
a corporation, limited liability company, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; (b) has all requisite corporate power to own
its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could reasonably be
likely (either individually or in the aggregate) to have a Material Adverse
Effect.
SECTION 3.02. No Conflicts. None of the execution and delivery of
this Agreement and the Security Agreement, the consummation of the transactions
herein or therein contemplated or compliance with the terms and provisions
hereof or thereof will conflict with or result in a breach of, or require any
consent under, the charter, by-laws or other organizational documents of such
Subsidiary Guarantor, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which such Subsidiary Guarantor is a party or by
which any of them is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of such Subsidiary
Guarantor pursuant to the terms of any such agreement or instrument.
SECTION 3.03. Corporate Action. Such Subsidiary Guarantor has all
necessary corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Security Agreement; the execution,
delivery and performance by such Subsidiary Guarantor of this Agreement and the
Security Agreement have been duly authorized by all necessary corporate action
on its part; and each of this Agreement and the Security Agreement has been duly
and validly executed and delivered by such Subsidiary Guarantor and constitutes
its legal, valid and binding obligation, enforceable in accordance with its
respective terms.
SECTION 3.04. Approvals. No authorizations, approvals or consents
of, and no filings or registrations with, any Governmental Authority are
necessary for the execution, delivery or performance by such Subsidiary
Guarantor of this Agreement or the Security Agreement or for the validity or
enforceability hereof or thereof.
Subsidiary Guarantee Agreement
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ARTICLE IV
MISCELLANEOUS
SECTION 4.01. No Waiver. No failure on the part of the
Administrative Agent or any Lender to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Administrative Agent or any Lender of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.
SECTION 4.02. Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at its respective address specified in Section 11.01 of the Credit
Agreement (or, in the case of the Subsidiary Guarantors, such address of the
Company) or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
SECTION 4.03. Expenses. The Subsidiary Guarantors jointly and
severally agree to reimburse each of the Lenders and the Administrative Agent
for all reasonable costs and expenses of the Lenders and the Administrative
Agent (including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Event of Default and any enforcement or
collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section.
SECTION 4.04. Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
each Subsidiary Guarantor and the Administrative Agent. Any such amendment or
waiver shall be binding upon the Administrative Agent, each Lender, each holder
of any of the Guaranteed Obligations and each Subsidiary Guarantor.
SECTION 4.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of each Subsidiary Guarantor, the
Subsidiary Guarantee Agreement
<PAGE> 8
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Administrative Agent, the Lenders and each holder of any of the Guaranteed
Obligations, provided, however, that no Subsidiary Guarantor shall assign or
transfer its rights hereunder without the prior written consent of the
Administrative Agent.
SECTION 4.06. Captions. The captions and section headings used
herein are for convenience of reference only, are not part of this Agreement and
shall not effect construction of, or be taken into consideration, in the
interpreting of this Agreement.
SECTION 4.07. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.
SECTION 4.08. Governing Law; Jurisdiction; Consent to Service of
Process.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each Subsidiary Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any other Credit Document to which it is a party,
or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement against any
Subsidiary Guarantor or its properties in the courts of any jurisdiction.
(c) Each Subsidiary Guarantor hereby irrevocably appoints CT
Corporation (the "Process Agent") with an office on the date hereof at 1633
Broadway, New York, New York 10019 as its agent to receive on behalf of it and
its property service of copies of the summons and complaint and any other
process which may be served in any such suit, action or proceeding. Such service
may be made by mailing or delivering a copy of such process to any Subsidiary
Guarantor, in care of the Process Agent at the Process Agent's above address and
each Subsidiary Guarantor hereby irrevocably authorizes and directs the Process
Agent to receive such service on its behalf. The Administrative Agent and each
Lender agree to mail to each Subsidiary Guarantor
Subsidiary Guarantee Agreement
<PAGE> 9
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at its address provided under Section 4.02 a copy of any summons, complaint, or
other process mailed or delivered by it to such Subsidiary Guarantor in care of
the Process Agent. As an alternate method of service, each Subsidiary Guarantor
also irrevocably consents to the service of any and all process in any such
suit, action or proceeding by mailing of copies of such process to it at its
address provided under Section 4.02. All mailings under this Section shall be by
certified mail, return receipt requested. Nothing in this Agreement will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
(d) Each Subsidiary Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(e) To the extent that any Subsidiary Guarantor may be or become
entitled, in any jurisdiction in which judicial proceedings may at any time be
commenced with respect to this Agreement, to claim for itself or its property or
revenues any immunity from suit, court jurisdiction, attachment prior to
judgment, attachment in aid of execution of a judgment, execution of a judgment
or from any other legal process or remedy relating to its obligations under this
Agreement and to the extent that in any such jurisdiction there may be
attributed such an immunity (whether or not claimed), such Subsidiary Guarantor
hereby irrevocably agrees not to claim and hereby irrevocably waives such
immunity to the fullest extent permitted by the laws of such jurisdiction.
SECTION 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Subsidiary Guarantee Agreement
<PAGE> 10
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SECTION 4.10. No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the Subsidiary Guarantors, the
Administrative Agent and the Lenders, and no other Person (including, without
limitation, any other Credit Party, any contractor, subcontractor, supplier or
materialman furnishing supplies, goods or services to or for the benefit of the
Project or any other creditor of the Company or any of its Subsidiaries) shall
have any rights hereunder.
SECTION 4.11. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Subsidiary Guarantee Agreement
<PAGE> 11
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IN WITNESS WHEREOF, the parties hereto have caused this Guarantee
Agreement to be duly executed and delivered as of the day and year first above
written.
SUBSIDIARY GUARANTORS
IRIDIUM CAPITAL CORPORATION
By ________________________
Name:
Title:
IRIDIUM IP LLC
By ________________________
Name:
Title:
IRIDIUM ROAMING LLC
By ________________________
Name:
Title:
Subsidiary Guarantee Agreement
<PAGE> 12
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[REPEAT FOR EACH OTHER SUBSIDIARY
GUARANTOR (IF ANY):]
[NAME OF GUARANTOR]
By ________________________
Name:
Title:
Subsidiary Guarantee Agreement
<PAGE> 13
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ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By ________________________
Name:
Title:
Subsidiary Guarantee Agreement
<PAGE> 1
EXHIBIT 10.35
(EXHIBIT E TO THE CREDIT AGREEMENT)
[FORM OF GUARANTEE ASSUMPTION AGREEMENT]
GUARANTEE ASSUMPTION AGREEMENT
GUARANTEE ASSUMPTION AGREEMENT dated as of [_______________, 199_], by
[_______________________], a [______________ corporation/limited liability
company/partnership] (the "Additional Subsidiary Guarantor"), in favor of THE
CHASE MANHATTAN BANK, as administrative agent for the lenders party to the
Credit Agreement referred to below (in such capacity together with its
successors in such capacity, the "Administrative Agent").
Iridium Operating LLC, a Delaware limited liability company, certain
lenders named therein (the "Lenders"), the Global Arrangers, the Administrative
Agent and the Documentation Agent are parties to a Credit Agreement dated as of
December 19, 1997 (as modified, supplemented or otherwise modified and in effect
from time to time, the "Credit Agreement", the terms defined therein and not
otherwise defined herein being used as therein defined).
Pursuant to Section 6.11 of the Credit Agreement, the Additional
Subsidiary Guarantor hereby agrees to become a "Subsidiary Guarantor" for all
purposes of the Subsidiary Guarantee Agreement, and an "Obligor" for all
purposes of the Security Agreement. Without limiting the generality of the
foregoing, the Additional Subsidiary Guarantor hereby, jointly and severally
with the other Subsidiary Guarantors, guarantees to each Lender and each Agent
and their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of all Guaranteed
Obligations (as defined in the Subsidiary Guarantee Agreement) in the same
manner and to the same extent as is provided in Article II of the Subsidiary
Guarantee Agreement. In addition, the Additional Subsidiary Guarantor hereby
makes the representations and warranties set forth in Article III of the
Subsidiary Guarantee Agreement, and in Article II of the Security Agreement,
with respect to itself and its obligations under this Agreement (with any
reference in said Sections to the Credit Documents being deemed to include a
reference to this Agreement). In addition, Annexes 1, 2, 3, 4, 5 and 6 to the
Security Agreement shall be deemed to be supplemented in respect of the
Additional Subsidiary Guarantor as specified in Appendix A hereto.
Guarantee Assumption Agreement
<PAGE> 2
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IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused this
Guarantee Assumption Agreement to be duly executed and delivered as of the day
and year first above written.
[ADDITIONAL SUBSIDIARY GUARANTOR]
By_______________________
Title:
Accepted and Agreed:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_________________________
Title:
Guarantee Assumption Agreement
<PAGE> 3
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Appendix A to Guarantee
Assumption Agreement
Supplement to Annex 1:
[To be completed]
Supplement to Annex 2:
[To be completed]
Supplement to Annex 3:
[To be completed]
Supplement to Annex 4:
[To be completed]
Supplement to Annex 5:
[To be completed]
Supplement to Annex 6:
[To be completed]
Guarantee Assumption Agreement
<PAGE> 1
EXHIBIT 10.36
(EXHIBIT F TO THE CREDIT AGREEMENT)
DEPOSIT, DISBURSEMENT AND ACCOUNT CONTROL AGREEMENT dated as of
December 19, 1997 between: IRIDIUM OPERATING LLC, a Delaware limited liability
company (the "Company"); THE CHASE MANHATTAN BANK ("Chase"), in its capacity as
collateral agent under the Credit Agreement and the other Credit Documents
referred to below (together with its successors and permitted assigns in such
capacity, the "Collateral Agent"); and THE CHASE MANHATTAN BANK in its capacity
as depositary bank (together with its successors in such capacity, the
"Depositary Bank").
R E C I T A L S
WHEREAS, the Company (as transferee of Iridium LLC) is currently
developing the Iridium global mobile wireless communications system (the
"Project");
WHEREAS, to finance a portion of the costs of the Project, the
Company, the Global Arrangers named therein, the Lenders parties thereto, the
Collateral Agent, Chase, in its capacity as the Administrative Agent, and
Barclays Bank PLC, in its capacity as the Documentation Agent, have entered into
the Credit Agreement dated as of December 19, 1997 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for the Lenders to make
loans to the Company in an aggregate principal amount not exceeding
$1,000,000,000;
WHEREAS, the obligations of the Company under the Credit Agreement
and the other Credit Documents (as defined in the Credit Agreement) will be
secured by certain of the assets of the Company pursuant to certain of the
Security Documents;
WHEREAS, the Collateral Agent and the Company desire to appoint
the Depositary Bank to act as depositary bank with respect to the various
Project Accounts (as defined below) established with the corporate trust
department of the Depositary Bank at its office at 450 West 33rd Street, 15th
Floor, New York, New York 10001 pursuant to this Agreement; and
WHEREAS, the Depositary Bank has agreed to establish and maintain
the Project Accounts in accordance with this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Depositary Agreement
<PAGE> 2
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto in the Credit
Agreement, whether specifically set forth therein or by reference to another
document. Unless otherwise stated, any reference in this Agreement to any Person
shall include its permitted successors and assigns and, in the case of any
Government Authority, any Person succeeding to its functions and capacities. In
addition, as used herein the following terms shall have the following respective
meanings (all terms defined in this Section and in the other provisions of this
Agreement in the singular to have the same meanings when used in the plural and
vice versa):
"Authorized Officer" means (a) with respect to the Company, any
Responsible Officer the names (and specimen signatures) of which shall be
specified in writing from time to time by the Company to the Depositary Bank and
(b) with respect to the Collateral Agent, any officer or other representative of
the Collateral Agent designated in writing to the Depositary Bank to act for the
Collateral Agent for purposes of this Agreement.
"General Receipt & Disbursement Account" means the account
entitled "Iridium General Receipt & Disbursement Account" established and
maintained by the Depositary Bank.
"Iridium Clearing Account" means one or more Dollar accounts
(including, without limitation, the Iridium Sub-Clearing Account) of the Company
established and maintained with depository institutions that may be located in
the United States of America or offshore and will be used for the purpose of
settling payments due to the Company and its Subsidiaries from, and payments due
by the Company and its Subsidiaries to, other parties in connection with the
operation of the IRIDIUM System, all as generally contemplated by Article VI of
the Gateway Authorization Agreements.
"Iridium Sub-Clearing Account" means one or more accounts that are
part of the Iridium Clearing Account and hold moneys paid from time to time to
the Company or any of its Subsidiaries as a result of the settlement process
effected through the Iridium Clearing Account.
"Loss Proceeds Account" means the account entitled "Iridium Loss
Proceeds Account" established and maintained by the Depositary Bank.
"Permitted Investments" means:
(a) direct obligations of, or obligations guaranteed by, the
United States of America for the payment of which obligations or
guarantee the full faith and credit of the
Depositary Agreement
<PAGE> 3
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United States of America is pledged and which have a remaining Average
Life of not more than 365 days from the date of acquisition thereof;
(b) investments in commercial paper maturing not more than 270
days after the date of acquisition thereof and having, at such date of
acquisition, a credit rating of at least P-1 from S&P or A-1 from
Moody's (or such similar equivalent rating by at least one "nationally
recognized statistical rating organization" (as defined in Rule 436
under the Securities Act of 1933, as amended));
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing not more than 270 days after the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any commercial bank or
trust company organized under the laws of the United States of America
or any State thereof or any other country which is a member of the
Organization for Economic Cooperation and Development, in each case
which has a combined capital, surplus and undivided profits of not less
than $500,000,000 or its equivalent in foreign currency, and whose debt
is rated at least A- by S&P or A-3 by Moody's (or such similar
equivalent rating by a "nationally recognized statistical rating
organization" (as defined above);
(d) repurchase obligations with a term of not more than 7 days for
securities described in clause (a) of this definition and entered into
with a financial institution which has a combined capital, surplus and
undivided profits of not less than $500,000,000 or its equivalent in
foreign currency, and whose debt is rated at least A- by from S&P or
A-3 by Moody's (or such similar equivalent rating by a "nationally
recognized statistical rating organization" (as defined above); and
(e) any mutual or similar fund investing exclusively in Permitted
Investments of the type described in clauses (a), (b) and/or (c) above.
"Pre-Funding Account" means the account entitled "Iridium
Pre-Funding Account" established and maintained by the Depositary Bank.
"Prepayment Account" means the account entitled "Iridium
Prepayment Account" established and maintained by the Depositary Bank.
"Project Accounts" means the accounts specified in Section 3.01.
"Responsible Officer" means the chief executive officer, chief
financial officer, general counsel, any senior vice president or any vice
president of the Company.
Depositary Agreement
<PAGE> 4
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"Restoration Sub-Account" means the "Iridium Restoration
Sub-Account" established and maintained by the Depositary Bank.
"Secured Obligations" has the meaning assigned to such term in the
Security Agreement.
"Termination Date" means the date on which the Collateral Agent
shall advise the Depositary Bank in writing that all principal of and interest
on the Loans and all other amounts owing by the Company or any of its
Subsidiaries under the Credit Agreement and the other Credit Documents have been
paid in full and that the Commitments have expired or terminated.
SECTION 1.02. Uniform Commercial Code. As used herein, the term
"UCC" shall mean the Uniform Commercial Code as in effect in the State of New
York. All terms defined in the UCC shall have the respective meanings given to
those terms in the UCC, except where the context otherwise requires.
SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified, including an amendment
and restatement thereof, but subject to any restrictions on such amendments,
supplements or modifications set forth herein, (b) any reference herein to any
Person shall be construed to include such Person's successors and assigns or, in
the case of any Government Authority, any successor or other entity that
performs equivalent functions in whole or in part, (c) the words "herein",
"hereof" and "hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Agreement and (e) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
Depositary Agreement
<PAGE> 5
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ARTICLE II
ACCEPTANCE OF APPOINTMENT AS COLLATERAL AGENT
AND DEPOSITARY BANK
SECTION 2.01. Acceptance of Appointment as Collateral Agent .
Chase does hereby agree to serve as Collateral Agent for the benefit of the
Secured Parties under this Agreement.
SECTION 2.02. Depositary Bank.
(a) Acceptance of Appointment of Depositary Bank. Chase hereby
agrees to act as Depositary Bank under this Agreement. The Company and the
Collateral Agent hereby acknowledge and agree that the Depositary Bank shall act
as Depositary Bank under this Agreement.
(b) Confirmation and Agreement. The Depositary Bank acknowledges,
confirms and agrees that (i) the Depositary Bank has established the Project
Accounts as set forth in Section 3.01, (ii) each Project Account is a securities
account, (iii) the Company is the entitlement holder of the Project Accounts
other than the Pre-Funding Account, which shall be held in the name of the
Collateral Agent, (iv) all cash and other property delivered to the Depositary
Bank pursuant to this Agreement or the other Security Documents will be promptly
credited to a Project Account, (v) all securities in registered form or payable
to, or to order of a person, and credited to any Project Account shall be
registered in the name of, payable to or to the order of, or specially indorsed
to, the Depositary Bank or in blank, or credited to another securities account
maintained in the name of the Depositary Bank, and in no case will any
securities credited to any Project Account be registered in the name of, payable
to or to the order of, or specially indorsed to, the Company except to the
extent the foregoing have been specially indorsed by the Company to the
Depositary Bank or in blank, (vi) the Depositary Bank shall promptly comply with
all instructions of the Collateral Agent and, to the limited extent set forth in
Section 2.03, the Company in connection with the transfer or withdrawal of
amounts in the Project Accounts and (vii) the Depositary Bank shall not change
the name or account number of any Project Account without the prior written
consent of the Collateral Agent and at least 5 Business Days prior notice to the
Company.
(c) Financial Assets Election. Each of the Company, the Collateral
Agent and the Depositary Bank agrees that each item of property (whether cash, a
security, an instrument or obligation, share, participation, interest or any
other property whatsoever) credited to any Project Account shall be treated as a
financial asset under Article 8 of the UCC.
(d) Entitlement Orders. Anything herein to the contrary
notwithstanding, the Company irrevocably agrees that the Depositary Bank may,
and the Depositary Bank agrees that
Depositary Agreement
<PAGE> 6
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it shall, comply with entitlement orders originated by the Collateral Agent and
relating to any Project Account without further consent by the Company or any
other Person and without regard to whether the Collateral Agent is, under the
terms and conditions of this Agreement, entitled to give such entitlement
orders. If there is any conflict between entitlement orders originated by the
Company and entitlement orders originated by the Collateral Agent, the latter
shall control.
(e) Subordination of Lien; Waiver of Set-Off. In the event that
the Depositary Bank has or subsequently obtains by agreement, operation of law
or otherwise a lien or security interest in any Project Account or any security
entitlement credited thereto, the Depositary Bank agrees that such lien or
security interest shall be subordinate to the lien and security interest of the
Collateral Agent. The financial assets standing to the credit of the Project
Accounts will not be subject to deduction, set-off, banker's lien, or any other
right in favor of any Person other than the Collateral Agent (except the amount
of any checks which have been credited to any Project Account but are
subsequently returned unpaid because of uncollected or insufficient funds).
(f) No Other Agreements. None of the Depositary Bank, the
Collateral Agent or the Company has entered into any agreement with respect to
the Project Accounts or any financial assets credited to any Project Account
other than this Agreement, in the case of the parties hereto, and the Credit
Agreement and the Security Agreement, in the case of the Company and the
Collateral Agent and agreements to which payments are to be made into the
Project Accounts. The Depositary Bank has not entered into any agreement with
the Company or any other Person purporting to limit or condition the obligation
of the Depositary Bank to comply with entitlement orders originated by the
Collateral Agent in accordance with Section 2.02(d). In the event of any
conflict between this Agreement (or any portion hereof) or any other Security
Document or any other agreement now existing or hereafter entered into (other
than the Credit Agreement), the terms of this Agreement shall prevail for
purposes hereof.
(g) Notice of Adverse Claims. Except for the claims and interest
of the Collateral Agent and the Company in each of the Project Accounts, the
Depositary Bank does not know of any claim to, or interest in, any Project
Account or in any financial asset credited thereto. If any Person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
warrant of attachment, execution or similar process) against any Project Account
or in any financial asset credited thereto, the Depositary Bank will promptly
notify the Collateral Agent and the Company thereof.
(h) Rights and Powers of the Collateral Agent. The agreement
hereunder of the Depositary Bank to comply with entitlement orders of the
Collateral Agent is irrevocable during the term of this Agreement and has been
made in order to perfect the lien upon and security interests in the Project
Accounts in favor of the Collateral Agent and will be affected by neither the
bankruptcy of the Company nor the lapse of time.
Depositary Agreement
<PAGE> 7
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SECTION 2.03. Limitation on Company's Rights. Until the
Termination Date, the Company shall not have any rights to withdraw cash or
other property held in or credited to the Project Accounts, except for the right
to give instructions to the Depositary Bank to make withdrawals of moneys held
in the Project Accounts as permitted by this Agreement and the right to direct
the investment of moneys held in the Project Accounts as permitted by Section
5.03. Without limiting the foregoing (but notwithstanding anything to the
contrary herein or in any other Credit Document), the Company will have no
rights in or any claim whatsoever on any cash or other property held in or
credited to the Pre-Funding Account prior to satisfaction of the conditions
precedent set forth in Section 4.02 of the Credit Agreement and the transfer
thereof to the General Receipt & Disbursement Account pursuant to Section
4.04(b).
ARTICLE III
ESTABLISHMENT OF THE PROJECT ACCOUNTS
SECTION 3.01. Establishment of the Project Accounts. The
Depositary Bank has established the following special, segregated securities
accounts (the "Project Accounts") which (except as expressly provided herein)
shall be maintained at all times until the termination of this Agreement:
(1) the General Receipt & Disbursement Account;
(2) the Loss Proceeds Account;
(3) the Prepayment Account; and
(4) the Pre-Funding Account.
The Depositary Bank has established the Restoration Sub-Account
within the Loss Proceeds Account.
In the event that, in accordance with this Agreement, the
Depositary Bank is required to segregate certain moneys in any Project Account
from any other amounts on deposit in such Project Account pending transfer or
withdrawal in accordance with this Agreement, the Depositary Bank shall (subject
to Section 5.03) either (i) hold such moneys in such Project Account for use
solely for such transfer or withdrawal or (ii) if requested in a certificate of
an Authorized Officer of the Collateral Agent, create a separate sub-account for
such purpose. For ease of administration or if deemed advisable or necessary by
the Collateral Agent to give effect to the purposes of this Agreement, the
Depositary Bank may, with the consent of the Collateral Agent and upon notice to
the Company and the Collateral Agent, establish other sub-accounts within any
Project Account.
SECTION 3.02. Lien and Security Interest, Etc. As collateral
security for the prompt payment in full when due of the Secured Obligations, the
Company hereby pledges,
Depositary Agreement
<PAGE> 8
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assigns, hypothecates and transfers to the Collateral Agent for the equal and
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent for the equal and ratable benefit of the Secured Parties a lien on and
security interest in, all of the Company's right, title and interest, whether
now owned or hereafter acquired, in and to (i) each Project Account and (ii) all
cash, investments, securities or other property at any time on deposit in or
credited to any Project Account, including all income or gain earned thereon and
any proceeds thereof. For avoidance of doubt, the security interests purported
to be created by this Agreement and the Security Agreement do not include the
Iridium Clearing Account or any cash or other property on deposit therein or
credited thereto.
SECTION 3.03. Termination. This Agreement shall remain in full
force and effect until the Termination Date.
ARTICLE IV
OPERATION OF THE PROJECT ACCOUNTS
SECTION 4.01. General Receipt & Disbursement Account.
(a) Deposits into General Receipt & Disbursement Account. The
Company agrees, and will take all necessary action to ensure, that the following
amounts shall be deposited directly into the General Receipt & Disbursement
Account:
(i) all proceeds of the Loans under the Credit Agreement (other
than the proceeds of the Term Loans made pursuant to Section 2.01(a) of
the Credit Agreement, which initially shall be deposited into the
Pre-Funding Account);
(ii) all proceeds of the loans under the Motorola Guaranteed
Credit Agreement made after the date of this Agreement;
(iii) all amounts transferred from the Loss Proceeds Account
pursuant to Section 4.02(b)(iii);
(iv) all amounts transferred from the Prepayment Account pursuant
to Section 4.03(b)(iii);
(v) all amounts transferred from the Pre-Funding Account
pursuant to Section 4.04(b)(i);
(vi) all dividends or other distributions, or other payments, in
cash by any Subsidiary of the Company to the Company;
Depositary Agreement
<PAGE> 9
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(vii) any income from the investment of moneys in the Project
Accounts pursuant to Section 5.03;
(viii) all other income (howsoever earned), revenue (howsoever
generated) and proceeds of any nature whatsoever received by the
Company or any of its Subsidiaries (but excluding (i) any amounts
required or permitted by this Agreement to be deposited to another
Project Account and (ii) any amounts which are held in, or to be
credited to, the Iridium Clearing Account, or any interest earned with
respect to such amount while so held in the Iridium Clearing Account
(other than the Iridium Sub-Clearing Account to the extent provided in
clause (ix) below)); and
(ix) all amounts in the Iridium Sub-Clearing Account to the
extent required to be transferred to the General Receipt & Disbursement
Account pursuant to Section 4.01(d).
(b) Disbursements from General Receipt & Disbursement Account.
Except as otherwise provided in this Agreement, the amounts held in the General
Receipt & Disbursement Account shall be applied solely for the payment of
Project Costs. All moneys withdrawn from the General Receipt & Disbursement
Account shall be withdrawn in accordance with the disbursement procedures set
forth below:
(i) The Company may request the withdrawal of moneys in the
General Receipt & Disbursement Account for the purpose of paying
Project Costs or to transfer funds to one or more of the Local
Accounts. Upon receipt of instructions from an Authorized Officer of
the Company requesting a withdrawal of funds from the General Receipt &
Disbursement Account, the Depositary Bank shall effect such withdrawal
and either pay such funds to the intended payee(s) thereof or transfer
such funds to a Local Account, in each case as specified in such
instructions. The Company will furnish a copy of each such instruction
to the Collateral Agent. All funds held in the General Receipt &
Disbursement Account shall be used by the Company from time to time to
make payment of Project Costs as the Company shall direct, but in any
event all payments in respect of the Space System Contract, the
Terrestrial Network Development Contract and the O&M Contract and all
payments in respect of Indebtedness of the Company and its Subsidiaries
will be made from funds in the General Receipt & Disbursement Account.
(ii) If at any time the amount available to be applied to the
payment of any of the Company's obligations under clause (i) above is
insufficient to pay in full all amounts required to be paid thereunder,
the Depositary Bank shall promptly advise the Company (with a copy to
the Collateral Agents) of such insufficiency and shall not make payment
of any amounts unless and until the Company has specified in writing to
the Depositary Bank the payee(s) and amount(s) to be so paid with the
amounts available.
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(iii) Notwithstanding anything herein to the contrary, the amount
of any proceeds of workers' compensation insurance, comprehensive
general liability insurance and comprehensive automobile liability
insurance received by the Company and deposited into the General
Receipt & Disbursement Account which is required to be paid over by the
Company to any Person other than the Company or any of its Subsidiaries
shall be, upon receipt of a written request from an Authorized Officer
of the Company that such proceeds that have been deposited into the
General Receipt & Disbursement Account are required to be so paid over,
promptly disbursed to the Company, whereupon such proceeds shall be
paid over by the Company to the Person(s) entitled thereto.
(c) Local Accounts. In addition to the Project Accounts, the
Company may at any time from and after the date hereof establish and maintain
one or more other deposit accounts (each hereinafter referred to as a "Local
Account") with (i) The Chase Manhattan Bank (or such other commercial bank which
shall from time to time act as the Collateral Agent hereunder) (the "Chase Local
Account") and (ii) any other depository institution designated by the Company
located in the United States of America (the "Other Local Account"); provided
that (x) the maximum aggregate amount of cash or other property at any time held
in or credited to the Other Local Account shall be $7,500,000; and (y) each
Local Account shall be and at all times remain subject to the security interest
created under this Agreement and the Security Agreement, and the Company shall
cause each such depositary institution therefor to execute and deliver such
acknowledgment, agreement or other documentation, and/or establish such control
arrangements, as the Collateral Agent may reasonably request to give effect to
the purposes of this Section. All funds held in the Local Accounts may be used
by the Company from time to time to make payment of Project Costs as the Company
shall direct (subject to the last sentence of Section 4.01(b)(i)). The Local
Accounts shall not constitute Project Accounts and, except as provided in this
Section 4.01(c), shall not be subject to the terms of this Agreement.
(d) Iridium Clearing Account. Notwithstanding anything herein to
the contrary, no cash or other property in the Iridium Clearing Account shall be
required to be deposited into any of the Project Accounts (nor shall the Secured
Parties have any interest in such cash or other property), except as provided in
this paragraph. So long as no Event of Default shall have occurred and be
continuing, the Company will cause, within two Business Days following the last
day of each calendar month, all cash and other property held in or credited to
the Iridium Sub-Clearing Account as of such last day to be transferred into the
General Receipt & Disbursement Account. Upon deposit into the General Receipt &
Disbursement Account, such cash and other property may be withdrawn in
accordance with the provisions of Section 4.01(b). If at any time an Event of
Default shall have occurred and be continuing, the Depositary Bank, upon
direction of an Authorized Officer of the Collateral Agent, shall direct the
Company to, and upon receipt of any such direction the Company will, immediately
transfer all cash or other property then held in or credited to the Iridium
Sub-Clearing Account to the General Receipt & Disbursement Account and,
thereafter so long as any Event of Default shall continue, will sweep all cash
and other
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property on a periodic basis (as directed by the Collateral Agent) from the
Iridium Sub-Clearing Account into the General Receipt & Disbursement Account.
SECTION 4.02. Loss Proceeds Account.
(a) Deposits into Loss Proceeds Account. The Company agrees, and
will take all necessary action to ensure, that all Loss Proceeds in respect of
each Event of Loss payable to or received by the Company or any of its
Subsidiaries shall be deposited directly into the Loss Proceeds Account.
(b) Disbursements from Loss Proceeds Account.
(i) The Depositary Bank shall, subject to Section 5.04, from
time to time upon instructions of the Collateral Agent transfer the
amounts on deposit in the Loss Proceeds Account to the Administrative
Agent for application to a prepayment of the Loans at the times and in
the amounts in accordance with Section 2.09(d) of the Credit Agreement.
(ii) If the Company wishes to apply any Loss Proceeds deposited
to the Loss Proceeds Account to the Restoration of the property
affected by an Event of Loss, the Company shall give written notice
thereof to the Depositary Bank (with a copy to the Collateral Agent)
prior to the date 20 Business Days following receipt of such Loss
Proceeds by delivering a certificate of an Authorized Officer of the
Company to that effect and specifying that portion of such Loss
Proceeds that the Company intends to use for such Restoration. Upon
receipt of such notice, the Depositary Bank will segregate in the
Restoration Sub-Account such portion of the Loss Proceeds. Thereafter,
the Company shall, upon request to the Depositary Bank, be permitted to
withdraw from time to time all and any portion of such amounts from the
Restoration Sub-Account to make expenditures in respect of such
Restoration. Upon receipt of each such request, the Depositary Bank
shall withdraw and transfer from the Restoration Sub-Account and shall
remit to the Company (or such payee(s) as the Company shall direct) the
amount specified in such request, and (if remitted to the Company), the
Company shall remit to the relevant payees the amounts the Company
receives. Upon completion of such Restoration, the Company shall advise
the Depositary Bank and the Collateral Agent thereof, and the
Depositary Bank shall transfer any portion of such amount remaining in
the Restoration Sub-Account in respect of the relevant Event of Loss to
the Loss Proceeds Account for application to a prepayment of the Loans
to the extent required by Section 2.09(d) of the Credit Agreement or
otherwise as provided in this Section.
(iii) Notwithstanding anything herein to the contrary, any amounts
payable by the Company or any of its Subsidiaries with respect to fees,
costs, taxes or other amounts specified in determining the Net
Available Proceeds of any Event of Loss shall, upon a
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written request of the Company, be remitted to the Company for payment
to the applicable payee(s) thereof. For avoidance of doubt, if any such
amount is deducted from proceeds to the Company or any of its
Subsidiaries before the receipt thereof, it shall not be a violation of
Section 4.02(a).
SECTION 4.03. Prepayment Account.
(a) Deposits into Prepayment Account. The Company agrees, and will
take all necessary action to ensure, that the following amounts shall be
deposited directly into the Prepayment Account:
(i) all proceeds of any Disposition received by the Company or
any of its Subsidiaries;
(ii) all proceeds of any Equity Issuance (other than an Excluded
Equity Issuance) received by the Company or any of its Subsidiaries
(including, without limitation, all amounts paid (or deemed paid) by
Iridium LLC as a capital contribution in the Company in respect of the
Reserve Capital Call Obligations);
(iii) all proceeds of any Debt Incurrence (other than an Excluded
Debt Issuance) received by the Company or any of its Subsidiaries;
(iv) all proceeds of any Project Document Claim; and
(v) all other amounts collected or received by the Collateral
Agent or by any other Secured Party in respect of any exercise of
Security Agreement Remedies with respect to the Collateral under the
Security Documents.
(b) Disbursements from Prepayment Account.
(i) The Depositary Bank shall, subject to Section 5.04, from
time to time upon instructions of the Collateral Agent transfer the
amounts on deposit in the Prepayment Account to the Administrative
Agent for application to a prepayment of the Loans at the times and in
the amounts in accordance with Section 2.09 of the Credit Agreement.
(ii) Subject to Section 5.04, the Depositary Bank shall, at the
written instructions of an Authorized Officer of the Collateral Agent,
transfer to the General Receipt & Disbursement Account any amounts
deposited in the Prepayment Account to the extent (x) not required to
be applied to the prepayment of outstanding Loans pursuant to Section
2.09 of the Credit Agreement and (y) not used for the Restoration of
property affected by
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the relevant Event of Loss or for fees, costs, taxes or other such
amounts, as permitted under Section 4.02(b)(iii), as determined by the
Collateral Agent.
(iii) Notwithstanding anything herein to the contrary, any amounts
payable by the Company or any of its Subsidiaries with respect to fees,
costs, taxes or other amounts specified in determining the Net Cash
Proceeds or the Net Available Proceeds, as the case may be, of any
Disposition, Equity Issuance, Debt Incurrence or Project Document Claim
shall, upon the written request of an Authorized Officer of the
Company, be remitted to the Company for payment to the applicable
payee(s) thereof. For avoidance of doubt, if any such amount is
deducted from proceeds to the Company or any of its Subsidiaries before
the receipt thereof, it shall not be a violation of Section 4.03(a).
(iv) Notwithstanding anything herein to the contrary, any amounts
referred to in clause (v) of paragraph (a) above shall be applied to
the payment of the Secured Obligations (as defined in the relevant
Security Documents) in accordance with the terms of the respective
Security Document under which such amounts were received as directed by
the Collateral Agent, and upon receiving such direction the Depositary
Bank shall pay such amount as so directed.
(c) Instructions to Project Parties. The Company hereby
acknowledges that it has irrevocably instructed each Project Party that is a
party to each Principal Project Document to make all payments that may be made
to or received by the Company thereunder directly to the Depositary Bank for
deposit into the Prepayment Account and that such payment will be credited to
the Prepayment Account in accordance with the terms of this Agreement.
SECTION 4.04. Pre-Funding Account.
(a) Deposits into Pre-Funding Account. The Company agrees that the
proceeds of the Term Loans made pursuant to Section 2.01(a) of the Credit
Agreement shall be deposited by the Term Lenders into the Pre-Funding Account.
(b) Disbursements from Pre-Funding Account.
(i) Upon written notification by the Collateral Agent to the
Depositary Bank that the conditions precedent set forth in Section 4.02
of the Credit Agreement have been satisfied, the Depositary Bank shall
transfer all cash and other property held in or credited to the
Pre-Funding Account as of the relevant date to the General Receipt &
Disbursement Account. Upon such transfer, the Pre-Funding Account will
be closed and no longer used under this Agreement.
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(ii) If prior to the transfer of moneys in the Pre-Funding
Account pursuant to clause (i) above the Collateral Agent shall notify
the Depositary Bank that the Commitments have been terminated, the
Depositary Bank shall immediately liquidate all investments in respect
of funds held in or credited to the Pre-Funding Account and transfer
all cash to the Administrative Agent for application to the prepayment
of the Term Loans on a pro rata basis to the Term Lenders holding the
outstanding Term Loans.
ARTICLE V
OTHER ACCOUNT MATTERS
SECTION 5.01. Remittances to the Company or the Collateral Agent.
(a) In the event that any payments or other amounts required
pursuant to this Agreement to be deposited directly into one of the Project
Accounts are remitted instead to the Company or any of its Subsidiaries, the
Company shall (or shall cause any such Subsidiary to) promptly remit such
payments or other amounts, in the form received, with any necessary
endorsements, to the Depositary Bank for deposit into the relevant Project
Account as provided herein and, pending such remittance to the Depositary Bank,
the Company shall (or shall cause any such Subsidiary to) segregate such
payments and other amounts from all other funds of the Company (or such
Subsidiary, as the case may be) and hold the same in trust for the Secured
Parties.
(b) In the event that any payments or other amounts required
pursuant to this Agreement to be deposited directly into one of the Project
Accounts are remitted instead to the Collateral Agent, the Collateral Agent
shall promptly remit such payments or other amounts, in the form received, with
any necessary endorsements, to the Depositary Bank for deposit to the relevant
Project Account as provided herein.
SECTION 5.02. Right of Withdrawal. Except as specifically set
forth in this Agreement, the Company shall have no right of withdrawal in
respect of any of the Project Accounts.
SECTION 5.03. Permitted Investments.
(a) Moneys held in any Project Account shall be invested and
reinvested in Permitted Investments at the written direction (which may be in
the form of a standing instruction) of an Authorized Officer of the Company;
provided, however, that at any time when (i) the Depositary Bank shall have
received written notice from the Collateral Agent that an Event of Default shall
have occurred and be continuing or (ii) an Authorized Officer of the Company has
not timely furnished such a written direction or, after a request by the
Depositary Bank, has not so
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confirmed a standing instruction to the Depositary Bank, the Depositary Bank
shall invest such moneys only in Permitted Investments described in clause (e)
of the definition thereof that have a maturity of 30 days or less. Any written
direction of an Authorized Officer of the Company with respect to the investment
or reinvestment of moneys held in any Project Account shall direct investment or
reinvestment only in Permitted Investments. All Permitted Investments shall be
credited to the relevant Project Account and shall comply with Section
2.02(b)(v) hereof.
(b) Earnings on Permitted Investments held in each Project Account
(other than the Pre-Funding Account) shall be deposited upon receipt in the
General Receipt & Disbursement Account as provided in Section 4.01(a). Earnings
on Permitted Investments held in the Pre-Funding Account shall be deposited in
the Pre-Funding Account.
(c) The Depositary Bank shall have no liability for any loss
resulting from any investment contemplated by this Section other than by reason
of its bad faith, intentional misconduct or gross negligence.
(d) The Depositary Bank may sell or liquidate any Permitted
Investment (without regard to maturity date) whenever the Depositary Bank
reasonably deems it necessary to make any deposit, transfer or distribution
required by this Agreement (using reasonable efforts to minimize the costs or
losses resulting from such liquidation), provided that the Depositary Bank shall
not be liable to any Person for any loss suffered because of such sale or
liquidation or by any delay in liquidation other than by reason of its bad
faith, intentional misconduct or gross negligence.
(e) For purposes of any income tax payable on account of any
income or gain on an investment, such income or gain shall be for the account of
the Company.
(f) Each of the parties hereto acknowledges that in connection
with Permitted Investments of the type described in clause (c) of the definition
of "Permitted Investments" for which the Depositary Bank or an affiliate of the
Depositary Bank serves as an investment advisor, administrator, shareholder,
servicing agent and/or custodian or subcustodian (i) the Depositary Bank or an
affiliate of the Depositary Bank charges and collects fees and expenses from
such funds for services rendered, (ii) the Depositary Bank charges and collects
fees and expenses for services rendered pursuant to the standard terms and
conditions and (iii) services performed for such Permitted Investments and
pursuant to the standard terms and conditions may converge at any time. Each of
the parties hereto hereby specifically authorizes the Depositary Bank or an
affiliate of the Depositary Bank to charge and collect all fees and expenses
from such funds for services rendered to such funds, in addition to any fees and
expenses the Depositary Bank may charge and collect for services rendered
pursuant to the standard terms and conditions.
Depositary Agreement
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SECTION 5.04. Defaults. Notwithstanding anything contained in this
Agreement to the contrary, upon receiving notice from the Collateral Agent of
the occurrence and during the continuation of an Event of Default, the
Depositary Bank shall accept all notices and instructions required to be given
to the Depositary Bank pursuant to the terms of this Agreement only from the
Collateral Agent and not from any other Person, and, notwithstanding anything
herein to the contrary, the Depositary Bank shall not withdraw, transfer, pay or
otherwise distribute any moneys in any of the Project Accounts except pursuant
to such notices and instructions from the Collateral Agent (it being understood
that, upon and during the continuance of an Event of Default, the Collateral
Agent may direct any or all of the moneys in the Project Accounts to be applied
to pay when due any of the Secured Obligations). No amounts from time to time
held in each Project Account shall constitute payment of any Indebtedness or any
other obligation of the Company until applied as herein provided.
SECTION 5.05. Identification of Amounts. In the event the
Depositary Bank receives moneys without adequate identification or adequate
instruction with respect to the proper Project Account in which such moneys are
to be deposited, the Depositary Bank shall deposit such moneys into the General
Receipt & Disbursement Account and segregate such moneys from all other amounts
on deposit in the General Receipt & Disbursement Account and notify the Company
of the receipt of such moneys. Upon receipt of instructions of an Authorized
Officer of the Company as to identification of such moneys, the Depositary Bank
shall transfer such moneys from the General Receipt & Disbursement Account to
the Project Account as so instructed by the Company.
SECTION 5.06. Other Transfers. If at any time any amount required
hereby to be deposited into a particular Project Account is deposited into
another Project Account, the Depositary Bank shall have the right to transfer
such amount to the proper Project Account.
SECTION 5.07. Account Balance Statements. The Depositary Bank
shall, on a monthly basis, provide to the Collateral Agent and the Company,
account statements in respect of each of the Project Accounts, sub-accounts and
amounts segregated in any of the Project Accounts or sub-accounts. Such account
statement shall also include deposits, withdrawals and transfers from and to
each Project Account and sub-account and any segregated amounts. At such other
times as the Collateral Agent or the Company may from time to time reasonably
request (but not more frequently than once each week unless an Event of Default
shall have occurred and is continuing), the Depositary Bank shall provide
written informal account information regarding (a) cash and other items credited
to each of the Project Accounts, sub-accounts and, to the extent reasonably
available, amounts segregated in any of the Project Accounts or sub-accounts and
(b) deposits, withdrawals and transfers from and to any Project Account,
sub-account and, to the extent reasonably available, segregated amounts.
ARTICLE VI
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THE DEPOSITARY BANK
SECTION 6.01. Tax Identification. The Company shall on the
signature page of this Agreement provide the Depositary Bank with its Tax
Identification Number (TIN) as assigned by the Internal Revenue Service. All
interest or other income earned hereunder shall be allocated and paid as
provided herein and reported by the recipient to the Internal Revenue Service as
having been so allocated and paid.
SECTION 6.02. Action. (a) The Depositary Bank may rely and shall
be protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder (or, as contemplated in this
Agreement, any telephonic notice, instruction or request) and believed by it to
be genuine and to have been signed or presented by an Authorized Officer of the
proper party or parties. The Depositary Bank shall be under no duty to inquire
into or investigate the validity, accuracy or content of any such notice,
instruction or request. The Depositary Bank shall have no duty to solicit any
payments which may be due it hereunder.
(b) The Depositary Bank shall not be liable for any action taken
or omitted by it in good faith unless a court of competent jurisdiction
determines that the Depositary Bank's gross negligence, intentional misconduct
or bad faith was the primary cause of any loss to any such party. In the
administration of the Project Accounts hereunder, the Depositary Bank may
execute any of its powers and perform its duties hereunder directly or through
agents or attorneys and may consult with counsel, accountants and other skilled
persons to be selected and retained by it. The Depositary Bank shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the advice or opinion of any such counsel, accountants or other skilled
persons.
(c) The duties and responsibilities of the Depositary Bank
hereunder shall be determined solely by the express provisions of this
Agreement, and no other or further duties or responsibilities shall be implied.
The Depositary Bank shall not have any liability under, nor duty to inquire into
the terms and provisions of, any agreement or instructions, other than as
provided in the Agreement.
(d) In the event that the Depositary Bank shall be uncertain as to
its duties or rights hereunder or shall receive notice, instructions or requests
from any party hereto which, in its opinion, conflict with any of the provisions
of this Agreement, it shall be entitled to refrain from taking any action and
its sole obligation shall be to keep safely all property held by it until it
shall be directed otherwise in writing by all of the other parties hereto or by
a final order or judgment of a court of competent jurisdiction.
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SECTION 6.03. Resignation. Subject to the appointment and
acceptance of a successor Depositary Bank, the Depositary Bank may resign and be
discharged from its duties or obligations hereunder by giving notice in writing
to the Collateral Agent and the Company of such resignation specifying a date
when such resignation shall take effect. Upon receipt of such notice, the
Collateral Agent shall have the right to designate a successor Depositary Bank
which shall be a Lender and a bank with an office in New York, New York and a
combined capital and surplus of at least $500,000,000, with the prior consent of
the Company (which consent shall not be unreasonably withheld). If no successor
shall have been so designated and shall have accepted such designation within 30
days of the retiring Depositary Bank's giving notice of such resignation, the
retiring Depositary Bank may appoint its successor provided such appointed
successor is a Lender and a bank with an office in the New York, New York with a
combined capital surplus of at least $500,000,000. Upon acceptance by a
successor Depositary Bank of its appointment hereunder, the retiring Depositary
Bank shall be discharged from its duties and obligations hereunder. In
connection with its resignation hereunder, the Depositary Bank shall have the
right to withhold an amount equal to the amount due and owing to the Depositary
Bank plus any costs and expenses the Depositary Bank shall reasonably believe
may be incurred by the Depositary Bank in connection with its resignation.
SECTION 6.04. Compensation. The Company hereby agrees to (i) pay
the Depositary Bank upon execution of this Agreement reasonable compensation for
the services to be rendered hereunder, as described in a written schedule
provided from time to time by the Depositary Bank to the Company and (ii) pay or
reimburse the Depositary Bank upon request for all expenses, disbursements and
advances, including reasonable attorney's fees, incurred or made by it in
connection with the preparation, execution, performance, delivery modification,
and termination of this Agreement.
SECTION 6.05. Indemnification. The Company hereby agrees to
indemnify the Depositary Bank for, and to hold it harmless against, any loss,
liability or expense arising out of or in connection with this Agreement and
carrying out its duties hereunder, including the costs and expenses of defending
itself against any claim of liability, except for costs and expenses resulting
from the gross negligence, intentional misconduct or bad faith of the Depositary
Bank. Anything in this Agreement to the contrary notwithstanding, in no event
shall the Depositary Bank be liable for special, indirect or consequential loss
or damage of any kind whatsoever (including but not limited to lost profits),
even if the Depositary Bank has been advised of the likelihood of such loss or
damage and regardless of the form of action.
SECTION 6.06. Transfer Instructions. (a) In the event funds
transfer instructions are given, whether in writing, by telecopier or otherwise,
the Depositary Bank is authorized to seek confirmation of such instructions by
telephone call-back to an Authorized Person, and the Depositary Bank may rely
upon the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may be
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changed only in a writing actually received and acknowledged by the Depositary
Bank. The parties to this Agreement acknowledge that such security procedure is
commercially reasonable.
(b) It is understood that, with respect to any funds transfer, the
Depositary Bank may rely solely upon any account numbers or similar identifying
number provided by either of the other parties hereto to identify (i) the
intended payee, (ii) such payee's bank, or (iii) an intermediary bank through
which such funds transfer is to be made. The Depositary Bank may apply any of
the funds for any payment order it executes using any such identifying number,
even where its use may result in a person other than the intended payee being
paid, or the transfer of funds to a bank other than the intended payee's bank or
an intermediary bank designated.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. No Waiver. No failure on the part of the Collateral
Agent or any of its agents to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power or remedy hereunder shall operate
as a waiver thereof, and no single or partial exercise by the Collateral Agent
or any of its agents of any right, power or remedy hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided herein are cumulative and are not exclusive of any
remedies provided by law.
SECTION 7.02. Notices. All notices, requests and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telex or telecopy) and
delivered (a) if to the Depositary Bank, the Company or the Collateral Agent, at
the "Address for Notices" specified beneath its name on the signature page
hereof or (b) as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telex or telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
SECTION 7.03. Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Company, the Collateral Agent and the Depositary Bank. Any such amendment or
waiver shall be binding upon the Collateral Agent, each other Secured Party and
the Company.
SECTION 7.04. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the Company, the Collateral
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Agent and the Depositary Bank; provided, however, that the Company shall not
assign or transfer its rights hereunder without the prior written consent of the
Collateral Agent.
SECTION 7.05. Captions. The caption and section headings used
herein are for convenience of reference only, are not part of this Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.
SECTION 7.06. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.
SECTION 7.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the lien and security interest hereunder, or the
remedies hereunder, are governed by the law of any jurisdiction other than the
State of New York. Regardless of any provision in any other agreement, for
purposes of the UCC, the "securities intermediary's jurisdiction" of the
Depositary Bank with respect to the Project Accounts is the State of New York.
SECTION 7.08. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 7.09. No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the Company, the Collateral Agent,
the Depositary Bank and the other Secured Parties, and no other Person
(including, without limitation, any other Credit Party, any contractor,
subcontractor, supplier or materialman furnishing supplies, goods or services to
or for the benefit of the Project or any other creditor of the Company or any of
its Subsidiaries) shall have any rights hereunder.
Depositary Agreement
<PAGE> 21
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SECTION 7.10. Agents and Attorneys-in-Fact. The Collateral Agent
may employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
SECTION 7.11. Severability. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 7.12. Reinstatement. This Agreement and any Lien created
hereunder shall automatically be reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Secured
Obligations is rescinded or must otherwise be restored by any holder of the
Secured Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
Depositary Agreement
<PAGE> 22
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IN WITNESS WHEREOF, the parties hereto have caused this Deposit,
Disbursement and Account Control Agreement to be duly executed and delivered as
of the day and year first above written.
IRIDIUM OPERATING LLC
By__________________________
Name:
Title:
Address for Notices:
Iridium Operating LLC
1575 Eye Street, N.W.,
Washington, D.C. 20005
Attention: General Counsel
(Telecopy No.: 202-408-3761)
Tax Identification No.: ____________
Depositary Agreement
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THE CHASE MANHATTAN BANK,
as Collateral Agent
By__________________________
Name:
Title:
Address for Notices:
Attention:
Telephone:
Telecopier:
Depositary Agreement
<PAGE> 24
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THE CHASE MANHATTAN BANK,
as Depositary Bank
By_____________________________
Name:
Title:
Address for Notices:
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust
Telephone: 212-946-3013
Telecopier: 212-946-8177/8178
Depositary Agreement
<PAGE> 1
EXHIBIT 10.37
(EXHIBIT G TO THE CREDIT AGREEMENT)
MOTOROLA CONSENT
CONSENT AND AGREEMENT dated as of [__________, 199_] among:
MOTOROLA, INC., a Delaware corporation ("Motorola"); IRIDIUM OPERATING LLC, a
Delaware limited liability company ("Iridium"); and THE CHASE MANHATTAN BANK
("Chase"), as administrative agent for the lenders or other financial
institutions or entities party, as lenders, to the Credit Agreement referred to
below (the "Lenders") (in such capacity, together with its successors in such
capacity, the "Administrative Agent"), and as collateral agent for the Lenders
under the Security Documents (in such capacity, together with its successors in
such capacity, the "Collateral Agent").
Iridium, certain lenders (each, a "Lender" and, collectively,
the "Lenders"), the Collateral Agent, Chase Securities Inc. and Barclays
Capital, the investment banking division of Barclays Bank PLC ("Barclays"), as
Global Arrangers (collectively, the "Global Arrangers"), the Administrative
Agent, and Barclays as the Documentation Agent are parties to a certain Credit
Agreement dated as of December 19, 1997 (as amended and modified and in effect
from time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for loans to be made by the Lenders to Iridium in an
aggregate principal amount not exceeding $1,000,000,000.
To induce the Lenders to enter into the Credit Agreement and
to extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Motorola and Iridium
have agreed to enter into this Agreement, and Motorola has agreed to enter into
the Motorola Pledge Agreement, for the benefit of the Agents and the Lenders.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions and Other Terms. Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
thereto in the Credit Agreement. As used herein, the following terms shall have
the following meanings (all terms defined in this Section or in other provisions
of this Agreement to have the same meanings when used in the plural and vice
versa):
"FCC License" means the authorization granted by the FCC in
respect of the construction, launch and operation of the IRIDIUM System, as set
forth in the FCC's Orders and
<PAGE> 2
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Authorizations DA 95-131, released January 31, 1995, DA 95-372, released
February 28, 1995, FCC 96-279, released June 27, 1996, and DA 96-1789, released
October 30, 1996.
"Material Motorola Domestic Subsidiary" means, at any time,
any Motorola Domestic Subsidiary that as of such time meets the definition of a
"significant subsidiary" contained as of the date hereof in Regulation S-X of
the SEC.
"Motorola Assigned Agreements" means, collectively, (a) the
Space System Contract, (b) the Terrestrial Network Development Contract and (c)
the O&M Contract.
"Motorola Domestic Subsidiary" means any Subsidiary of
Motorola, except any such Subsidiary (a) that neither transacts any substantial
business nor regularly maintains any substantial portion of its fixed assets
within the United States of America or (b) which is engaged primarily in
financing operations of Motorola or its Subsidiaries outside the United States
of America.
"Motorola Subordinated Claims" means (a) any claim or right of
Motorola against Iridium or any of its property arising as a result of any
payment by Motorola of any amount under the Motorola Guarantee Agreement,
whether by subrogation, contribution, reimbursement or otherwise, and including
without limitation all obligations owing by Iridium to Motorola under Section 1
of the Agreement Regarding Guarantee and (b) all obligations owing by Iridium to
Motorola in respect of the Motorola Vendor Financing.
"Motorola Vendor Financing" means the FOC Payments (as defined
in the the Memorandum of Understanding dated as of the July 11, 1997 between
Motorola and Iridium LLC as in effect on the date hereof) to the extent that a
deferral thereof is made pursuant to the Section 6 thereof.
"Security Agreement Remedies" mean the remedies of the
Collateral Agent under the Security Agreement.
"Senior Bank Debt" means the following obligations of Iridium:
(a) all principal of the loans outstanding under the Senior
Credit Agreement, all interest thereon (including any interest accruing
after the date of any filing by Iridium of any petition in bankruptcy
or the commencing of any bankruptcy, insolvency or similar proceedings
with respect to Iridium whether or not the same is allowed as a claim
in any such proceeding) and all other amounts outstanding under the
Senior Credit Agreement and the other Senior Credit Documents,
including, without limitation, all expenses, indemnities, premiums,
penalties and fees payable by Iridium from time to time thereunder;
Motorola Consent
<PAGE> 3
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(b) all obligations of Iridium owing from time to time to any
holder of Senior Bank Debt of the type described in clause (a) above,
or any refinancing, replacement or refunding thereof permitted under
clause (c) below, in respect of any Hedging Agreement entered into
between Iridium and such holder; and
(c) any and all refinancings, replacements or refundings of
any or all of the foregoing amounts effected through one or more
secured credit facilities having a maturity not later than July 15,
2005 and (together with all other secured debt of Iridium) not
exceeding $1,700,000,000 in aggregate principal amount.
"Senior Bank Debt Representative" means (a) the Administrative
Agent from time to time under the Credit Agreement (which, as of the date
hereof, is Chase) and (b) at any time following the refinancing, replacement or
refunding of the Credit Agreement, the entity acting in the capacity as
administrative agent for the lenders (or exercising the equivalent functions)
under such refinancing, replacement or refunding.
"Senior Credit Agreement" means the Credit Agreement, and/or
any refinancing, refunding, extension or renewal thereof, whether in whole or
part and whether or not with any of the lenders then party to the outstanding
Senior Credit Agreement, in each case as amended or modified and in effect from
time to time.
"Senior Credit Documents" means the Senior Credit Agreement
and any and all guarantees, security agreements, pledge agreements, mortgages,
and other instruments and agreements providing for or evidencing Senior Bank
Debt, in each case as modified or supplemented and in effect from time to time.
"Space Segment" has the definition provided in the Space
System Contract.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company or other entity of which at
least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership, limited liability company or other entity (irrespective of whether
or not at the time securities or other ownership interests of any other class or
classes of such corporation, partnership, limited liability company or other
entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person.
SECTION 1.02. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require,
Motorola Consent
<PAGE> 4
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any pronoun shall include the corresponding masculine, feminine and neuter
forms. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". The word "will" shall be construed
to have the same meaning and effect as the word "shall". Unless the context
requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, including an amendment and restatement
thereof, but subject to any restrictions on such amendments, supplements or
modifications set forth herein, (b) any reference herein to any Person shall be
construed to include such Person's successors and assigns or, in the case of any
Governmental Authority, any successor or other entity that performs equivalent
functions in whole or in part, (c) the words "herein", "hereof" and "hereunder",
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections and Schedules shall be construed to refer to
Articles and Sections of, and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Motorola represents and warrants to the Lenders and the Agents
that:
SECTION 2.01. Corporate Existence. Motorola (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (b) has all requisite corporate or other power, and
has all material governmental licenses, authorizations, consents and approvals
necessary, to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
reasonably be likely to (either individually or in the aggregate) have a
material adverse effect on the ability of Motorola to perform any of its
obligations under the Credit Documents and the Principal Project Documents to
which it is a party.
SECTION 2.02. Financial Condition.(1) Motorola has heretofore
furnished to each of the Lenders the consolidated balance sheet of Motorola and
its consolidated Subsidiaries as at
(1) This representation is to be updated as appropriate to the date of
execution of this Agreement to refer to the latest available annual
audited and unaudited quarterly consolidated financial statements of
Motorola.
Motorola Consent
<PAGE> 5
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December 31, 1996 and the related statements of consolidated earnings,
stockholders' equity and cash flows of Motorola and its consolidated
Subsidiaries for the fiscal year ended on said date, with the opinion thereon of
KPMG Peat Marwick, and the unaudited consolidated balance sheet of Motorola and
its Subsidiaries as at the end of the [_______] fiscal quarter of Motorola's
1997 fiscal year and the related statements of consolidated earnings,
stockholders' equity and cash flows of Motorola and its consolidated
Subsidiaries for the [______]-month period ended on such date. All such
financial statements present fairly, in all material respects, the financial
condition of Motorola and its consolidated Subsidiaries as at said dates and the
results of their operations for the fiscal year and [six/nine]-month period
ended on said dates (subject, in the case of such financial statements as at the
end of such [________]-month period to normal year-end audit adjustments), all
in conformity with generally accepted accounting principles. Since December 31,
1996, there has been no material adverse change in the consolidated business,
operations or financial condition taken as a whole of Motorola and its
consolidated Subsidiaries from that set forth in said financial statements as at
said date.
SECTION 2.03. Litigation. Except as disclosed in Motorola's
Report on Form 10-K filed with the SEC for the fiscal year ended December 31,
1996 or in Motorola's Reports on Form 10-Q filed with the SEC during 1997 prior
to the date hereof, each of which has been delivered to the Lenders prior to the
date hereof, there are no legal or arbitral proceedings, or any proceedings by
or before any governmental or regulatory authority or agency, now pending or (to
the knowledge of Motorola) threatened against Motorola or any of the Material
Motorola Domestic Subsidiaries which if adversely determined, (either
individually or in the aggregate) could reasonably be likely to have a material
adverse effect on the ability of Motorola to perform any of its obligations
under the Credit Documents and the Principal Project Documents to which it is a
party.
SECTION 2.04. No Breach. None of the execution and delivery of
any of the Motorola Agreements, the consummation of the transactions
contemplated thereby or compliance with the terms and provisions thereof will
conflict with or result in a breach of, or require any consent under, the
charter or by-laws of Motorola, or any applicable law or regulation or any
order, writ, judgment, decree, determination or award having applicability to
Motorola or any of its Subsidiaries, or any agreement or instrument to which
Motorola or any of the Material Motorola Domestic Subsidiaries is a party, or by
which any of them or any of their respective property is bound or to which any
of them is subject, or constitute a default under any such agreement or
instrument.
SECTION 2.05. Action. Motorola has all necessary corporate
power, authority and legal right to execute, deliver and perform each of its
obligations under the Motorola Agreements and the Motorola Assigned Agreements.
The execution, delivery and performance by Motorola of each of the Motorola
Agreements and the Motorola Assigned Agreements, and the consummation of the
transactions contemplated thereby, have been duly authorized by all
Motorola Consent
<PAGE> 6
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necessary corporate action on its part. Each of the Motorola Agreements and the
Motorola Assigned Agreements has been duly and validly executed and delivered by
Motorola and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights.
SECTION 2.06. Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any governmental or
regulatory authority or agency, any securities exchange or any other Person are
necessary for the execution, delivery or performance by Motorola of any of the
Motorola Agreements or the Motorola Assigned Agreements or for the legality,
validity or enforceability hereof or thereof, except that the exercise of
remedies under the Motorola Pledge Agreement may require prior approval of the
FCC.
SECTION 2.07. Motorola Assigned Agreements. As of the date
hereof, Motorola is not in default under any of its material covenants or
obligations under the Motorola Assigned Agreements and each of the Motorola
Assigned Agreements is in full force and effect. Iridium or Motorola has
furnished to the Administrative Agent true and complete copies of each of the
Motorola Assigned Agreements as in effect on the date hereof. As of the date
hereof, no event or condition exists which would either immediately or with the
passage of any applicable grace period or giving of notice, or both, enable
Motorola to terminate, or suspend performance of its obligations under, any of
the Motorola Assigned Agreements.
SECTION 2.08 No Motorola Default. No Motorola Default has
occurred and is continuing.
SECTION 2.09 FCC License. The FCC License is validly issued,
as of the date hereof in the name of [________________________](2), a Delaware
corporation and a wholly owned Subsidiary of Motorola, and the FCC License will,
at all times prior to the transfer thereof to Iridium pursuant to the Space
System Contract, be held by a wholly owned Subsidiary of Motorola. Except as
described in Schedule 1, the FCC License is a final and non-appealable order of
the FCC and in full force and effect, and Motorola is in compliance with all
material terms and conditions applicable to, or set forth in, the FCC License
and with all material provisions of any Government Rule applicable thereto.
Except (i) in connection with any of the gateways in which Motorola is an
investor, (ii) the tracking, telemetry and command stations and (iii) otherwise
as described in Schedule 1, Motorola is not responsible for obtaining any other
Telecommunications Approval in connection with the Development of the Project.
Except as set forth in Schedule 1, there is not now pending or, to the knowledge
of Motorola, threatened any
- --------
2 Insert name of FCC License holder as of the date of this Agreement.
Motorola Consent
<PAGE> 7
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petition, complaint, objection (whether formal or informal), investigation, or
any other proceeding before the FCC or any other Government Authority of
competent jurisdiction relating to the FCC License or the IRIDIUM System.
ARTICLE III
CONSENT AND AGREEMENT
Motorola hereby acknowledges and agrees:
SECTION 3.01. Motorola hereby acknowledges notice and receipt
of the Security Agreement and consents to the assignment by Iridium of all its
rights in and under each of the Motorola Assigned Agreements pursuant to the
Security Agreement and any and all moneys payable by Motorola to Iridium under
any of the Motorola Assigned Agreements.
SECTION 3.02. In connection with any exercise by the
Collateral Agent of the Security Agreement Remedies, the Collateral Agent shall
be entitled to exercise any and all rights of Iridium under each of the Motorola
Assigned Agreements in accordance with their respective terms, and Motorola
shall comply in all respects with such exercise. Without limiting the foregoing,
in connection with the exercise by the Collateral Agent of the Security
Agreement Remedies, the Collateral Agent shall have the full right and power to
enforce directly against Motorola all obligations of Motorola owing to Iridium
under each Motorola Assigned Agreement and otherwise to exercise all remedies of
Iridium thereunder and to make all demands and give all notices and make all
requests required or permitted to be made by Iridium under each Motorola
Assigned Agreement. The Collateral Agent shall have the right, but not the
obligation, to cure all defaults of Iridium and to pay all sums owing by Iridium
under any Motorola Assigned Agreement in accordance with this Agreement.
SECTION 3.03. Motorola will not, without the prior written
consent of the Collateral Agent, (i) cancel or terminate, or suspend performance
under, or exercise any right to consent to or accept any cancellation,
termination or suspension of, any Motorola Assigned Agreement, unless prior
thereto Motorola shall have delivered to the Collateral Agent written notice
stating that it intends to take such action on a date not less than 30 days
after the date of such notice, specifying the nature of the default or other
event under such Motorola Assigned Agreement entitling Motorola to take such
action (and, in the case of a payment default by Iridium, specifying the amount
thereof) and permitting the Collateral Agent to cure such payment default by
making a payment equal to the amount in default or by performing or causing to
be performed any other obligation in default, (ii) transfer, sell, assign,
delegate or otherwise dispose of any part of its interests in any of the
Motorola Assigned Agreement, or (iii) petition, request or take any other legal
or administrative action which seeks, or may reasonably be expected, to rescind,
terminate or suspend or amend or modify any Motorola Assigned Agreement or any
part
Motorola Consent
<PAGE> 8
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thereof. In furtherance of clause (i) of the immediately preceding sentence,
Motorola agrees that, notwithstanding anything contained in any Motorola
Assigned Agreement to the contrary, upon the occurrence of a default by Iridium
under such Motorola Assigned Agreement entitling Motorola to cancel or terminate
such Motorola Assigned Agreement or to suspend performance thereunder, Motorola
will not take any action to cancel or terminate, or suspend performance under,
such Motorola Assigned Agreement if, within a 30-day period after the date on
which the Collateral Agent shall have received notice of such default from
Motorola, the Collateral Agent commences steps to cure such default and/or
otherwise to institute enforcement proceedings to acquire Iridium's interest in
such Motorola Assigned Agreement or the Project and thereafter the Collateral
Agent diligently pursues such steps or proceedings and all payment defaults of
Iridium under such Motorola Assigned Agreement have been cured within such
30-day period. Effective upon any transfer of Iridium's interest in such
Motorola Assigned Agreement to any other Person, Motorola will grant the
relevant transferee a reasonable period of time to cure such default (but, in no
event with respect to any payment default, exceeding a maximum of 30 days after
receipt of notice of such payment default by the Collateral Agent, as
contemplated above). Except as provided in Section 3.05, no curing or attempt to
cure any of Iridium's defaults under any Motorola Assigned Agreement shall be
construed as an assumption by the Collateral Agent or any other Secured Party of
any covenants, agreements or obligations of Iridium under such Motorola Assigned
Agreement and neither the Collateral Agent nor any other Secured Party shall
have any obligation to Motorola for the performance of any obligation under any
Motorola Assigned Agreement. In connection with any cure pursuant to this
Section of Iridium's default(s) under any Motorola Assigned Agreement or any
assumption by any Person of Iridium's liabilities thereunder, only those
obligations and liabilities arising expressly under such Motorola Assigned
Agreement shall be required to be cured or assumed, as the case may be.
Notwithstanding anything in this Agreement to the contrary, no provision of this
Agreement shall be intended to restrict in any way any merger or consolidation
to which Motorola is a party or the sale of all or substantially all of the
assets of Motorola and its Subsidiaries, provided that, in connection with any
such transaction if Motorola is not the surviving entity of such transaction,
the surviving entity or purchaser, as the case may be, expressly assumes in
writing the obligations of Motorola under the Motorola Assigned Agreements and
the Motorola Agreements, as applicable.
SECTION 3.04. Motorola shall deliver to the Administrative
Agent at the address provided for in Section 11.01 of the Credit Agreement, or
at such other address as the Administrative Agent may designate in writing from
time to time to Motorola, promptly following the delivery thereof to Iridium, a
copy of each notice from Motorola to Iridium under any Motorola Assigned
Agreement of default, termination, arbitration, force majeure or any event
giving rise to a right to terminate or cancel such Motorola Assigned Agreement
or suspend performance thereunder or of any indemnity payment to be made by
Iridium which is in an amount of at least $2,000,000. Promptly following its
receipt thereof, Motorola will deliver to the Administrative Agent at the
address specified above a copy of each notice from Iridium to Motorola under any
Motorola Assigned Agreement of default, termination, arbitration or force
Motorola Consent
<PAGE> 9
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majeure or of any indemnity payment to be made by Motorola which is in an amount
of at least $2,000,000. Notwithstanding anything herein to the contrary,
Motorola shall not be liable for any failure to provide, or delay in providing,
any notice or other information to the Collateral Agent under this Section 3.04.
SECTION 3.05. Motorola agrees that, in connection with the
exercise by the Collateral Agent of the Security Agreement Remedies with respect
to any Motorola Assigned Agreement, Motorola shall recognize the Collateral
Agent as Iridium for purposes of such Motorola Assigned Agreement in accordance
with this Agreement. In the event that the Collateral Agent succeeds to
Iridium's interests under any Motorola Assigned Agreement in accordance with the
Security Agreement, the Collateral Agent shall assume liability for all of
Iridium's obligations under such Motorola Assigned Agreement, provided, however,
that such liability shall not include any liability for claims of Motorola
against Iridium arising from Iridium's failure to perform during the period
prior to the Collateral Agent's succession to Iridium's interests under such
Motorola Assigned Agreement other than the payments obligations of Iridium
expressly provided for in such Motorola Assigned Agreement. Except as otherwise
set forth in the immediately preceding sentence, none of the Secured Parties
shall be liable for the performance or observance or any of the obligations or
duties of Iridium under any of the Motorola Assigned Agreements, nor shall the
assignment of the Motorola Assigned Agreements by Iridium to the Collateral
Agent pursuant to the Security Agreement give rise to any duties or obligations
whatsoever on the part of any of the Secured Parties owing to Motorola. If the
Collateral Agent succeeds to Iridium's interests under any Motorola Assigned
Agreement pursuant to the Security Agreement, Motorola and the Collateral Agent
shall negotiate in good faith an equitable adjustment to the milestone and/or
scheduled completion dates and/or the prices or amounts payable thereunder to
compensate Motorola for any additional costs reasonably and necessarily incurred
by Motorola following the failure of Iridium to perform its obligations that
resulted in the enforcement by the Collateral Agent of the Security Agreement
Remedies until the date on which the Collateral Agent shall have assumed the
obligations of Iridium under such Motorola Assigned Agreement. Notwithstanding
the foregoing, Motorola shall not be relieved of its obligations to perform
under any Motorola Assigned Agreement as a result of the parties' failure to
agree upon an equitable adjustment to the milestone and/or scheduled completion
dates and/or the prices or amounts payable thereunder and such failure shall be
subject to resolution in accordance with the dispute resolution procedures set
forth in such Motorola Assigned Agreement.
SECTION 3.06. In the event that (i) any Motorola Assigned
Agreement is rejected by a trustee, liquidator, debtor-in-possession or similar
entity or person in any bankruptcy, insolvency or other similar proceeding
involving Iridium or (ii) any Motorola Assigned Agreement is terminated as a
result of any bankruptcy, insolvency or similar proceeding involving Iridium
and, if within 90 days after such rejection, the Collateral Agent shall so
request and shall certify in writing to Motorola that it intends to perform the
obligations of Iridium as and
Motorola Consent
<PAGE> 10
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to the extent required under such Motorola Assigned Agreement (as if it had not
been rejected or terminated, but otherwise only to the extent such obligations
would be undertaken had such person or entity succeeded to Iridium thereunder
pursuant to Section 3.07), Motorola will execute and deliver to the Collateral
Agent a new agreement amending or replacing the original affected Motorola
Assigned Agreement which shall be for the balance of the remaining term under
such affected Motorola Assigned Agreement before giving effect to such rejection
or termination and shall contain the same conditions, agreements, terms,
provisions and limitations as such affected Motorola Assigned Agreement (except
for any requirements which have been fulfilled by Iridium and Motorola prior to
such rejection or termination or which are not required to be undertaken by such
person or entity). If the Collateral Agent and Motorola enter into such a new
agreement in accordance with this Section, Motorola and the Collateral Agent
shall negotiate in good faith an equitable adjustment to the milestone and/or
scheduled completion dates and/or the prices or amounts payable thereunder to
compensate Motorola for any additional costs reasonably and necessarily incurred
by Motorola during the period from and including the date such bankruptcy,
insolvency or similar proceeding was commenced to and including the date on
which the Collateral Agent shall certify in writing that it intends to perform
the obligations of Iridium with respect to such new agreement. Notwithstanding
the foregoing provisions, Motorola shall not be relieved of its obligations to
perform under such new agreement as result of the parties' failure to agree upon
an equitable adjustment to the milestone and/or scheduled completion dates and
such failure shall be subject to resolution in accordance with the disputes
resolution procedures set forth therein. References in this Agreement to a
"Motorola Assigned Agreement" shall be deemed also to refer to the new Motorola
Assigned Agreement in replacement thereof.
SECTION 3.07. In connection with the exercise by the
Collateral Agent of the Security Agreement Remedies, the Collateral Agent may
assign its rights and interests and the rights and interests of Iridium under
any or all of the Motorola Assigned Agreements to any other Person, provided
that such Person shall assume all of the obligations of Iridium under such
Motorola Assigned Agreement(s) and shall have obtained all Government Approvals
(if any) necessary to perform such obligations. Upon such assignment and
assumption, the Collateral Agent shall be relieved of all obligations (if any)
under such Motorola Assigned Agreement(s) arising after such assignment and
assumption. In the event that the Collateral Agent or its designee or any
transferee of the interests of the Collateral Agent in any or all of the
Motorola Assigned Agreements or otherwise in respect of the Project shall assume
or be liable under any of the Motorola Assigned Agreements (as contemplated in
Section 3.05 or 3.06), liability in respect of any and all obligations of any
such party under such Motorola Assigned Agreement shall be limited solely to
such party's interest in the Project (and any officer, director, employee,
shareholder or agent thereof shall have no liability with respect thereto).
Motorola Consent
<PAGE> 11
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ARTICLE IV
SPECIAL AGREEMENTS RELATING TO MOTOROLA ASSIGNED AGREEMENTS
Motorola hereby further acknowledges and agrees that, prior to
the transfer of the FCC License to Iridium:
SECTION 4.01. FCC License.
(a) Without limiting the provisions of Section 3, Motorola
consents to the assignment by Iridium to the Collateral Agent of all of its
rights in and to the Space System Contract pursuant to the Security Agreement,
including, without limitation, the right of Iridium under Section 18.H of the
Space System Contract to require, subject to certain conditions set forth
therein, the transfer of the FCC License to Iridium (or a Subsidiary of Iridium
designated for that purpose) by Motorola. Iridium agrees to request a transfer
of the FCC License pursuant to said Section 18.H at the earliest time as Iridium
reasonably believes that it can satisfy the qualifications of an FCC licensee
under applicable law and FCC regulations and policies. Motorola agrees that (i)
if Iridium fails to so request a transfer (or send a notice to the Collateral
Agent stating that it believes the conditions to such request have not been
satisfied within 30 days after notice from the Collateral Agent to Iridium and
Motorola requesting Iridium to request such a transfer) or (ii) an Event of
Default shall have occurred and be continuing, the Collateral Agent shall be
entitled to enforce the rights of Iridium under said Section 18.H in accordance
with its terms and, in that connection, may request such transfer or may direct
Iridium to request such transfer, subject to the FCC approval to be jointly
applied for by the parties. Motorola agrees to comply as promptly as practicable
with any such request under said Section 18.H, whether made by Iridium or (as
authorized by this paragraph) the Collateral Agent, provided that the conditions
to such transfer set forth in said Section 18.H have been satisfied. Without
limiting the foregoing, in the event that, as a result of the exercise by the
Collateral Agent of the Security Agreement Remedies, Iridium's interest in the
Space System Contract is (or is to be) transferred to another Person, Motorola
agrees to comply with its obligation under such Section 18.H with respect to the
transfer of the FCC License and, if directed by the Collateral Agent or such
Person, to use all reasonable efforts to apply to the FCC for consent to
transfer the FCC License to such Person, subject to satisfaction of all of the
conditions set forth in said Section 18.H (and assuming any such condition
relating to Iridium shall be complied with by such Person). To the extent
Motorola is not obligated under the Space System Contract to pay for the costs
and expenses associated with any such transfer, Iridium will pay such costs and
expenses.
(b) Motorola will not, and will not permit any of its
Subsidiaries to, sell or otherwise dispose (by whatever means) of, or create or
suffer to exist any Lien on, the FCC License or the capital stock of the
Subsidiary of Motorola which holds the FCC License, nor shall such Subsidiary be
party to any merger or consolidation or take any action to dissolve or liquidate
Motorola Consent
<PAGE> 12
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itself, other than (i) a transfer of the FCC License in accordance with Section
18.H of the Space System Contract and (ii) the creation of the Lien on such
capital stock or the FCC License pursuant to the Motorola Pledge Agreement or
this Agreement. If as of the date of this Agreement the FCC License is held by
Motorola Satellite Communications, Inc. ("MSC") and MSC shall hold assets other
than the FCC License, Motorola agrees, within 45 days thereafter, to cause the
FCC License to be transferred to another wholly-owned Subsidiary of Motorola,
which will not have any other assets or engage in any business or enter into any
transaction, including, without limitation, the incurrence of any liabilities of
any kind whatsoever, other than the holding and ownership of the FCC License and
any activities reasonably incidental thereto and as provided in any Motorola
Assigned Agreement or Motorola Agreement and, within 5 Business Days after such
transfer becomes effective, Motorola or its appropriate Subsidiary will enter
into the Motorola Pledge Agreement for the purpose of pledging the capital stock
of the Subsidiary of Motorola holding the FCC License thereunder and satisfy the
other conditions precedent with respect thereto contemplated by Section 4.01 of
the Credit Agreement. If for any reason such transfer shall not occur by the
expiration of such 45-day period, then Motorola will, or will cause its
appropriate Subsidiary to, enter into the Motorola Pledge Agreement within 5
Business Days thereafter and pledge the capital stock of MSC thereunder, and
thereafter if at any time the FCC License is transferred to another Subsidiary
of Motorola such pledge of MSC stock shall be released and the capital stock of
the Subsidiary then holding the FCC License shall be pledged pursuant to the
Motorola Pledge Agreement (as may be required to be amended to give effect to
the purposes of this Section, as reasonably requested by the Collateral Agent).
Iridium will be responsible for all costs and expenses associated with the
perfection of the security interests under the Motorola Pledge Agreement.
(c) Motorola agrees that it will not take any action or omit
to take any action that could reasonably be expected to result in the material
Impairment of the FCC License, unless such action or inaction would not violate
its obligations with respect to the FCC License under Article 18 of the Space
System Contract.
(d) If there shall be a change in law, or the rules or
policies of the FCC which would permit the granting of a security interest in
the FCC License after the date hereof, upon the request of the Collateral Agent
(and at the expense of Iridium), Motorola will, and will cause the Subsidiary of
Motorola which holds the FCC License to, execute and deliver all such
instruments and documents, and to take such other actions, as shall be necessary
or appropriate, or that the Collateral Agent may reasonably request, in order to
create a first priority perfected security interest in the FCC License in favor
of the Collateral Agent for the benefit of the Secured Parties.
Motorola Consent
<PAGE> 13
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SECTION 4.02. Intellectual Property Rights.
(a) Motorola acknowledges that in connection with the
Development of the Project Motorola has granted, and will grant, to Iridium
rights in certain intellectual property owned or held by Motorola and its
Subsidiaries on the terms (but only to the extent) provided in Article 14 of the
Space System Contract and Article 11 of the O&M Contract (collectively, the
"Motorola Intellectual Property"). Without limiting any other provision of this
Agreement (including, without limitation, Section 3), Motorola consents to the
assignment by Iridium to the Collateral Agent of all of Iridium's rights in and
to the Motorola Intellectual Property pursuant to the Security Agreement.
(b) In furtherance of the foregoing, Motorola agrees that (i)
for any period during which the Collateral Agent shall be exercising its
Security Agreement Remedies (including in the event that the Collateral Agent or
any of its designees shall succeed to Iridium's interest in the Space System
Contract and/or the O&M Contract) or (ii) in the event that, as a result of the
exercise by the Collateral Agent of the Security Agreement Remedies, Iridium's
rights in the Space System Contract and/or the O&M Contract are transferred to
another Person, Motorola hereby grants to the Collateral Agent or the relevant
transferee, as the case may be (herein, including any designee, each a
"Licensee") a license to access, use and maintain, and (if deemed by the
relevant Licensee reasonably necessary for the operation of the Space Segment,
to modify and enhance) all Motorola Intellectual Property on the same terms as
are applicable to Iridium (except as otherwise expressly provided herein) or
otherwise on terms reasonably acceptable to Motorola and the relevant Licensee;
provided that (i) no fee, royalty or other amount shall be required to be paid
by any Licensee to Motorola with respect thereto (except as expressly set forth
in the Motorola Assigned Agreements), (ii) any Licensee shall be entitled to use
the Motorola Intellectual Property for so long as such Licensee is operating the
Space Segment, but solely in connection with the operation of the Space Segment
and for no other purpose and (iii) except as set forth herein (including,
without limitation, the last sentence of this paragraph (b)), without the prior
written consent of Motorola, no Licensee shall be permitted to assign, license
or otherwise transfer to any other Person any of its rights in the Motorola
Intellectual Property (and any such assignment, license or transfer in violation
of this clause shall be null and void). Without limiting the foregoing, each
Licensee shall be permitted to sublicense the Motorola Intellectual Property to
any of its respective subcontractors, agents or affiliates, provided that any
such sublicensee shall be subject to the same terms and conditions set forth in
this Section as are applicable to such Licensee.
(c) In the event that at any time after the date hereof other
intellectual property rights (other than the Motorola Intellectual Property)
which are then owned or held by Motorola or any of its Subsidiaries are required
for the operation of the Space Segment, Motorola shall promptly notify the
Collateral Agent or, following a transfer of Iridium's rights in the Space
System Contract and/or the O&M Contract to any other Person, such other Person
and will
Motorola Consent
<PAGE> 14
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license, or cause to be licensed, to the Collateral Agent or such other Person,
as the case may be, such other intellectual property rights on the same terms
and conditions as shall be applicable hereunder to the Motorola Intellectual
Property, and such other intellectual property rights shall be deemed to be
Motorola Intellectual Property for purposes of the agreements contained in this
Section 4.02.
(d) Motorola agrees, solely for the benefit of the Collateral
Agent or any other Licensee, not to assert against the Collateral Agent or any
other Licensee any violation of the terms of any intellectual property rights
(including, without limitation, the Motorola Intellectual Property) now or
hereafter owned or held by Motorola (i) by the Collateral Agent in connection
with its exercise of the Security Agreement Remedies or (ii) by any other
Licensee in connection with its operation and maintenance of the Space Segment,
but only for so long as the license or permitted use under this Section 4.02 is
effective as provided in paragraph (b) above.
(e) Upon the reasonable request of the Collateral Agent in
connection with the exercise of the Security Agreement Remedies or, from and
after the transfer of Iridium's rights in the Space System Contract and/or the
O&M Contract, any other Licensee, Motorola agrees to deliver to the Collateral
Agent or such other Licensee copies of all software documentation required to be
delivered by Motorola under the Motorola Assigned Agreements, subject to the
terms and conditions of the Motorola Assigned Agreements.
(f) Upon exercise of the license granted herein to the
Collateral Agent or any other Licensee, Motorola will provide technical
assistance services and training upon the reasonable request (and at the cost)
of the Collateral Agent in connection with its exercise of the Security
Agreement Remedies or any other Licensee, as the case may be. To the extent any
filing, registration or similar action under applicable Government Rule is
required with respect to the use of the Motorola Intellectual Property by any
Licensee, Motorola agrees to use all reasonable efforts to make all necessary
filings or registration, or to take other similar action, at the cost of Iridium
(at any time prior to the transfer of Iridium's rights in the Space System
Contract to any Licensee) or otherwise at the cost of such Licensee, in order to
provide to such Licensee the full intended benefits of the license granted
herein.
(g) Motorola hereby agrees to indemnify and hold harmless the
Collateral Agent and each other Licensee on the same terms and conditions
(including, without limitation, the same limitations, which shall be applicable
to the Collateral Agent and each other Licensee in the aggregate) (mutatis
mutandis) as set forth in Article 15 of the Space System Contract and Article 12
of the O&M Contract (as if each reference therein to "Buyer" or "Owner" referred
to the Collateral Agent or such other Licensee, as the case may be), provided
that notwithstanding anything herein to the contrary, neither the Collateral
Agent nor any other Licensee shall assume any liability for the obligations of
Iridium under the Space System Contract or the O&M Contract
Motorola Consent
<PAGE> 15
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unless and until such entity shall have expressly assumed any such obligations
in connection with the exercise of the Security Agreement Remedies.
ARTICLE V
OTHER AGREEMENTS
Motorola hereby further acknowledges and agrees that, so long
as this Agreement remains in effect:
SECTION 5.01. Minimum Ownership. Motorola will be at all
times, directly or through a wholly-owned Subsidiary, the record and beneficial
owner of at least 13,266,713 Class 1 Interests of Iridium LLC, free and clear of
any Lien (as such number may be adjusted from time to time by stock splits,
stock dividends, recapitalizations or other similar transactions).
SECTION 5.02. Non-Compete. Motorola will not produce for
itself or others a commercial satellite-based space system of a global
communications system similar to the IRIDIUM System, which satellite-based space
system provides direct coverage to the entire earth and is designed to
principally provide direct voice service to and from hand-held, fully portable
subscriber units no larger than the first-generation IRIDIUM handheld voice
units; provided that: (a) nothing in this Section shall be construed to prohibit
Motorola from producing satellite-based space systems for Iridium or any
successor or related entity; and (b) notwithstanding anything in this Agreement
to the contrary, the agreement of Motorola under this Section shall terminate
and be of no further force and effect upon the earliest to occur of (i) the date
on which this Agreement shall terminate pursuant to Section 7.13, (ii) the date
on which the Space System Contract shall be terminated in accordance with the
terms thereof (but in no event earlier than December 31, 1999) and (iii) July
31, 2003.
SECTION 5.03. Conditions Precedent. In order to satisfy
certain of the conditions precedent specified in Section 4.02 of the Credit
Agreement, Motorola agrees to deliver the documents specified in Section III of
Part B of Appendix 2 to the Credit Agreement.
SECTION 5.04. Payments. Motorola hereby acknowledges and
agrees that all payments to be made by Motorola to Iridium under the Motorola
Assigned Agreements shall be made in lawful money of the United States of
America, directly to the Collateral Agent, for deposit into the Prepayment
Account (details of which account shall be provided in writing to Motorola by
the Collateral Agent) or to such other Person and/or at such other address as
the Collateral Agent may from time to time specify in writing to Motorola, for
application by the Collateral Agent in the manner contemplated by the Depositary
Agreement, and shall be accompanied by a notice from Motorola stating that such
payments are made under the applicable Motorola Assigned Agreement and
identifying the relevant provision thereof which such payment
Motorola Consent
<PAGE> 16
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was made. Iridium hereby irrevocably authorizes and directs Motorola to make
such payments in respect of each Motorola Assigned Agreement as provided above
and the Collateral Agent (to the extent owed any payments under such Motorola
Assigned Agreement by virtue of this Agreement) and Iridium confirms that any
such payment made in the manner herein provided will constitute a valid
discharge of the relevant payment obligations of Motorola under such Motorola
Assigned Agreement, provided that the Collateral Agent shall have no liability
or responsibility hereunder for determining the correctness of the amount of any
payment made or required to be made by Motorola under Motorola Assigned
Agreement. Motorola will not, without the prior written consent of the
Collateral Agent, make any payments to or for the benefit of Iridium under any
of the Motorola Assigned Agreements except in accordance with this Section.
SECTION 5.05. Cooperation with the Independent Technical
Advisor. Subject to the confidentiality requirements set forth in Section 7.12,
Motorola will use all reasonable efforts to cooperate with the Independent
Technical Advisor to provide information, and to allow reasonable access to, and
inspection of, the facilities of Motorola or any of its Subsidiaries used in the
Development of the Project and to allow reasonable access to the relevant senior
representatives of Motorola who are principally involved therewith, for the
purpose of ensuring that the Independent Technical Advisor shall be informed as
to the progress of the completion of the Project and the achievement of the
technical conditions precedent set forth in Appendix A to Appendix 2 of the
Credit Agreement (the "Technical Conditions"). Without limiting the foregoing,
the Company and Motorola agree to hold at least one meeting per calendar month,
at a time and location to be mutually agreed upon by Motorola, Iridium and the
Independent Technical Advisor, which shall be attended by appropriate senior
representatives of Motorola, Iridium and the Independent Technical Advisor for
the primary purpose of providing the Independent Technical Advisor with an
update as to the progress achieved by Motorola since the date of the last such
meeting (the "Relevant Period") in satisfying the Technical Conditions. In
connection with each such meeting Motorola will present to the Independent
Technical Advisor a briefing, in reasonable detail, conducted by representatives
of Motorola who are informed as to the matters covered by the briefing, setting
forth the results of such tests or milestones associated with the Technical
Conditions that are pertinent to the current stage of financing. In connection
with each such briefing Motorola shall provide to the Independent Technical
Advisor a statement in writing identifying the Technical Conditions that, in
Motorola's view, have been completed during the Relevant Period and copies of
test cases and test reports referenced in the briefing. The test reports shall
be accompanied by "pointers" which identify the relevant sections of the report,
including those sections which identify any qualifications or discrepancies (if
any) that have been encountered in performing such tests. Motorola and Iridium
further acknowledge and agree that in order to enable the Independent Technical
Advisor to determine whether or not it is able to provide the verification
contemplated to be provided under the Credit Agreement by the Independent
Technical Advisor with respect to satisfaction of the Technical Conditions, it
may be necessary for the Independent Technical Advisor to witness certain tests
that are reasonably necessary for the validation by the Independent Technical
Advisor of completion of the Technical
Motorola Consent
<PAGE> 17
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Conditions. Motorola and Iridium agree to determine in good faith with the
Independent Technical Advisor which tests will be so witnessed and Motorola will
provide reasonable prior notice as to the time and location of each such test to
the Independent Technical Advisor.
SECTION 5.06. Designees and Transferees. It is acknowledged
and agreed that the Collateral Agent may employ agents and attorneys-in-fact in
exercising the Security Agreement Remedies, and in that connection may designate
another entity to take action on behalf of the Collateral Agent including, but
not limited to, the enforcement of and/or acquisition of Iridium's rights in any
or all of the Motorola Assigned Agreements or otherwise in respect of the
Project. It is further acknowledged and agreed that in connection with the
exercise by the Collateral Agent of the Securities Agreement Remedies, the
Collateral Agent may cause Iridium's rights in any or all of the Motorola
Assigned Agreements (and/or other assets associated with the Project) to be
transferred or assigned to a third party pursuant to the Security Agreement (a
"transferee"). The provisions of this Agreement (including, without limitation,
in Articles III and IV and this Article) are intended to benefit the Collateral
Agent, its agents, attorneys-in-fact and designees (collectively, the
"designees") and each transferee. Accordingly, unless the context otherwise
requires, references to "Collateral Agent" or "Administrative Agent" shall be
deemed to include references to designees and transferees thereof permitted
pursuant to the Security Documents (regardless of whether so expressly provided
herein), and all actions permitted to be taken by the Collateral Agent or the
Administrative Agent, as the case may be, under this Agreement may be taken by
any such designee or transferee, as appropriate.
ARTICLE VI
SUBORDINATION
SECTION 6.01. Agreement to Subordinate. Motorola covenants and
agrees, and Iridium likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Section, the payment of the Motorola
Subordinated Claims is hereby expressly made subordinate and subject in right of
payment to the prior indefeasible payment in full in cash of all Senior Bank
Debt. In further of the foregoing, Motorola and Iridium agree that no payment
shall be made by Iridium, nor accepted by Motorola, on account of the Motorola
Subordinated Claims unless and until all Senior Bank Debt shall have been paid
in full in cash and all commitments of the holders of Senior Bank Debt to make
loans under the Senior Credit Agreement shall have expired or terminated. In the
event that, notwithstanding the foregoing (but subject to Section 6.02 in the
circumstances described therein), Motorola shall have received any payment
prohibited by the foregoing provisions of this Section, then and in such event
such payment shall be held in trust for the holders of the Senior Bank Debt and
paid over or delivered forthwith to the Senior Bank Debt Representative for
application to the Senior Bank Debt remaining unpaid after giving effect to any
concurrent payment of or distribution to or for the holders of Senior Bank Debt.
Motorola Consent
<PAGE> 18
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SECTION 6.02. Bankruptcy, Liquidation, 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 Iridium or to its creditors, as such, or to
its assets, or (b) any liquidation, dissolution or other winding up of Iridium,
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 Iridium, then and in any such event:
(i) the holders of Senior Bank Debt shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Bank Debt, before Motorola is entitled to
receive any payment on account of the Motorola Subordinated Claims; and
(ii) any payment or distribution of assets of Iridium of any
kind or character, whether in cash, property or securities, by set-off
or otherwise, to which Motorola would be entitled but for the
provisions of this Agreement, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of Iridium being subordinated to the
payment of the Motorola Subordinated Claims shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Bank Debt or the Senior Bank Debt Representative or to the trustee or
trustees under any indenture under which any instruments evidencing any
of such Senior Bank Debt may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Bank Debt
held or represented by each such holder, to the extent necessary to
make payment in full in cash of all Senior Bank Debt remaining unpaid,
after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Bank Debt; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section, Motorola shall have received any such
payment or distribution of assets of Iridium of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of Iridium being subordinated to the
payment of the Motorola Subordinated Claims before all Senior Bank Debt
is paid in full in cash, then and in such event such payment or
distribution shall be held in trust for the holders of Senior Bank Debt
and 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 Iridium for
application to the payment of all Senior Bank Debt remaining unpaid, to
the extent necessary to pay all Senior Bank Debt in full in cash, after
giving effect to any concurrent payment or distribution to or for the
holders of Senior Bank Debt.
Motorola Consent
<PAGE> 19
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If Motorola shall have failed to file proper claims or proofs
of claim with respect to the Motorola Subordinated Claims in any proceeding of
the type referred to in the first sentence of this Section prior to 30 days
before the expiration of the time to file such claims or proofs of claim,
Motorola hereby appoints and empowers the Senior Bank Debt Representative (i) to
file such claims or proofs of claim and/or (ii) if Motorola shall fail to vote
any such claim at least 15 days prior to the expiration of the time to vote such
claim, to vote such claim; provided that the Senior Bank Debt Representative
shall have no obligation to file and/or vote any such claim. If the Senior Bank
Debt Representative votes any such claim in accordance with the provisions of
this paragraph Motorola shall not be entitled to modify, revoke or withdraw such
vote. Motorola shall execute and deliver, at the expense of the holders of the
Senior Bank Debt, such agreements, instruments and documents as the holders of
the Senior Bank Debt the Senior Bank Debt Representative may reasonably request
to carry out the intent of this paragraph.
SECTION 6.03. Subrogation. Subject to the payment in full in
cash of all Senior Bank Debt and the expiration or termination of the
commitments of the holders of Senior Bank Debt to make extensions of credit
under the Senior Credit Agreement, Motorola shall be subrogated to the rights of
the holders of Senior Bank Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Bank Debt until the Motorola
Subordinated Claims shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Bank Debt of any cash,
property or securities to which Motorola would be entitled except for the
provisions of this Section, and no payments over pursuant to the provisions of
this Section to the holders of Senior Bank Debt by Motorola shall, as among
Iridium, its creditors (other than holders of Senior Bank Debt), and Motorola be
deemed to be a payment or distribution by Iridium to or on account of the Senior
Bank Debt.
SECTION 6.04. Provisions Solely to Define Relative Rights. The
provisions of this Section are and are intended solely for the purpose of
defining the relative rights of Motorola as the holder of the Motorola
Subordinated Claims, on the one hand, and the holders of Senior Bank Debt, on
the other hand. Nothing contained in this Section or elsewhere in this Agreement
is intended to or shall (a) impair, as among Iridium, its creditors (other than
holders of Senior Bank Debt) and Motorola, the obligation of Iridium, which is
absolute and unconditional, to pay to Motorola the Motorola Subordinated Claims
as and when the same shall become due and payable in accordance with their
respective terms, or (b) affect the relative rights against Iridium of Motorola
and creditors of Iridium (other than the holders of Senior Bank Debt).
SECTION 6.05. No Waiver of Subordination Provisions. No right
of any present or future holder of any Senior Bank 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 Iridium or by any act or failure to act, in
good faith, by any such holder, or by any non-compliance by Iridium with the
terms, provisions and covenants of this Agreement, regardless of any knowledge
thereof any such holder may have or be otherwise charged with. Without in any
way limiting the
Motorola Consent
<PAGE> 20
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generality of the foregoing sentence, the holders of Senior Bank Debt may
(except as provided in Section 6.08), at any time and from time to time, without
the consent of or notice to Motorola, without incurring responsibility to
Motorola and without impairing or releasing the subordination provided in this
Section or the obligations hereunder of Motorola to the holders of Senior Bank
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 Bank Debt or any
instrument evidencing the same or any agreement under which Senior Bank
Debt is outstanding;
(ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Bank Debt, or
waive any provision thereof or the occurrence of any default
thereunder;
(iii) release any Person liable in any manner for the
collection of Senior Bank Debt; and
(iv) exercise or refrain from exercising any rights against
Iridium and any other Person.
SECTION 6.06. Limitations on Remedies. Notwithstanding
anything contained herein to the contrary, prior to the payment of all Senior
Bank Debt in full in cash and the expiration or termination of the commitments
of the holders of Senior Bank Debt to make extensions of credit under the Senior
Credit Agreement, Motorola will not ask, demand, claim or sue for payment of, or
take any other action to collect, any of the Motorola Subordinated Claims,
whether by set-off or in any other manner, and, without limiting the foregoing,
Motorola will not (i) initiate any judicial proceeding or action to collect all
or any portion of the Motorola Subordinated Claims or (ii) file or join with
others in filing a petition against Iridium or any of its Subsidiaries under any
bankruptcy or similar law; provided that, notwithstanding the foregoing,
Motorola shall be permitted to commence judicial proceedings against Iridium to
the extent (but only to the extent) necessary to avoid being barred by any
relevant statute of limitations from pursuing any such right or remedy against
Iridium and thereafter shall take only such action in connection with such
proceeding as shall be reasonably necessary to preserve such right or remedy.
Motorola agrees to notify the Administrative Agent of the commencement of any
such proceeding and of any material development in connection therewith.
SECTION 6.07. Covenants Relating to Motorola Subordinated
Claims. Motorola covenants and agrees with the Lenders and the Administrative
Agent that, until the payment and satisfaction in full of the Senior Bank Debt
and the expiration or termination of the Commitments of the Lenders under the
Credit Agreement:
Motorola Consent
<PAGE> 21
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(a) the Motorola Subordinated Claims shall be unsecured
obligations of Iridium (and not of any of Iridium's Subsidiaries), and
Motorola will not ask, demand, take or receive any property of Iridium
or any of its Subsidiaries as security for all or any portion of the
Motorola Subordinated Claims;
(b) Motorola agrees that it does not, and will not, have or
acquire any claim against any Subsidiary of Iridium with respect to any
of the Motorola Subordinated Claims;
(c) Motorola will not, without the prior written consent of
the Administrative Agent, assign or otherwise transfer, in whole or in
part, or encumber any of its rights or obligations in respect of the
Motorola Subordinated Claims (other than in connection with any
transaction permitted under the last sentence of Section 3.03);
(d) Motorola will not, without the prior written consent of
the Administrative Agent, amend or otherwise modify the provisions of
the Motorola Subordinated Claims or any Motorola Guarantee Agreement in
any way which could reasonably be expected to be adverse to the
interests of the holders of Senior Bank Debt under this Agreement.
(e) Motorola will promptly following the request of the
Administrative Agent execute and deliver such further documents and do
such other acts and things as the Administrative Agent or any Lender
may reasonably request from time to time in order to more fully effect
the purposes of this Section.
SECTION 6.08. Modification of the Credit Agreement.
Notwithstanding anything herein or in the Credit Agreement to the contrary, no
amendment or modification to the Credit Agreement or any refinancing thereof
shall be effective as against Motorola for purposes of the subordination
provisions set forth in this Article (and the related definitions) without the
prior written consent thereto by Motorola if such amendment, modification or
refinancing (a) increases the aggregate commitments under the Senior Credit
Agreement to an aggregate amount in excess of $1,700,000,000, (b) alters in any
material respect the types of obligations that constitute Senior Debt, (c)
extends the maturity of the Loans under the Senior Credit Agreement beyond July
15, 2005 or (d) modifies any of the subordination provisions set forth in this
Article.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. No Waiver. No failure on the part of any Agent
or any Lender to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by
Motorola Consent
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any Agent or any Lender of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
SECTION 7.02. Notices. All notices, requests, consents and
demands hereunder shall be in writing and telecopied or delivered to the
intended recipient at the "Address for Notices" specified beneath its name on
the signature pages hereof or, as to either party, at such other address as
shall be designated by such party in a notice to the other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
SECTION 7.03. Expenses. Motorola agrees to reimburse each of
the Lenders and the Agents for all reasonable out-of-pocket costs and expenses
of the Lenders and the Agents (including, without limitation, the reasonable
fees and expenses of legal counsel) in connection with (a) any default by
Motorola in the performance of any of its obligations hereunder and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (i)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (ii) judicial or regulatory proceedings and (iii) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (b) the
enforcement of this Section.
SECTION 7.04. Amendments. The terms of this Agreement may be
amended or modified only by an instrument in writing duly executed by Motorola,
Iridium and the Administrative Agent and the Collateral Agent, and any provision
of this Agreement may be waived by the Administrative Agent acting with the
consent of such Lenders. Any such amendment or waiver shall be binding upon
Motorola, Iridium, each Agent, each Lender and (in the case of any amendment or
waiver relating to Article VI or any related definitions or terms) any other
holder of Senior Bank Debt. Any waiver shall be effective only for the specified
purpose for which it was given.
SECTION 7.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of Motorola, Iridium, the Agents and the Lenders, provided, however, that
Motorola shall not assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Administrative Agent. The agreements of
the parties hereto are solely for the benefit of Motorola, the Agents and the
other Secured Parties, and no person or entity (other than the foregoing parties
and their respective permitted successors and assigns) shall have any rights
hereunder.
Motorola Consent
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SECTION 7.06. Captions. The captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
SECTION 7.07. Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and either of the parties hereto may execute this Agreement
by signing any such counterpart.
SECTION 7.08. Governing Law; Submission to Jurisdiction. This
Agreement shall be governed by, and construed in accordance with, the law of the
State of New York. Motorola hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Motorola hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Motorola
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by mailing of copies of such process to it at its address
provided under Section 7.02. All mailings under this Section shall be by
certified mail, return receipt requested. Nothing in this Agreement will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
SECTION 7.09. Waiver of Jury Trial. EACH OF MOTOROLA, IRIDIUM,
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT (IN EACH CASE, ON BEHALF OF
ITSELF AND THE LENDERS) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 7.10. Agents and Attorneys-in-Fact. Each Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
SECTION 7.11. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Agents and
the Lenders in order to carry out the intentions of the parties hereto as nearly
as may
Motorola Consent
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be possible and (b) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 7.12. Confidentiality.
(a) Motorola acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
Motorola or one or more of its Subsidiaries (in connection with this Agreement
or otherwise) by any Lender or by one or more subsidiaries or affiliates of such
Lender. Motorola hereby agrees that, in the event any such services are provided
to Motorola or any of its Subsidiaries, each Lender providing such services is
authorized to share any information delivered to such Lender by Motorola and its
Subsidiaries pursuant to the Credit Documents, or in connection with the
decision of such Lender to enter into the Credit Agreement, to any such
subsidiary or affiliate providing such services, provided that any such
subsidiary or affiliate receiving such information agrees to be bound by the
provisions of paragraph (b) of this Section as if it were a Lender hereunder.
Such authorization shall survive the repayment of the Loans and the termination
of the Commitments.
(b) Each Agent agrees on behalf of itself, each Lender and
each Global Arranger (and on behalf of their respective affiliates, directors,
officers, employees and representatives) to restrict dissemination of any
Confidential Information (as defined below) only to those of its directors,
officers, employees and representatives who are involved in the evaluation of
such information, and to use reasonable precautions to keep such information
confidential, in accordance with its customary procedures for handling
confidential information of the same nature and in accordance with safe and
sound banking practices. For purposes of the Credit Documents, "Confidential
Information" shall mean any non-public information supplied to it by Motorola
pursuant to this Agreement or any other Motorola Agreement, that is identified
(in writing, in the case of written information) by Motorola as being
confidential at the time the same is delivered to the Lenders, the Agents or the
Global Arrangers, provided that nothing herein shall limit the disclosure of any
such information by any Lender, any Agent or any Global Arranger (i) after such
information shall have become public (other than through a violation of this
Section by such Lender, any Agent or any Global Arranger), (ii) to the extent
required by statute, rule, regulation or judicial process, (iii) to counsel or
other experts for any of the Lenders, Agents or Global Arrangers, provided that
such counsel or experts shall be bound by the requirements of this paragraph (b)
with respect to any such information, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Lender, any Agent or any
Global Arranger), or to auditors or accountants, (v) to any Global Arranger, any
Agent or any Lender (or to any of their respective affiliates, provided that any
such disclosure to any such affiliate shall be made on a "need to know" basis
only for use by such affiliates (and each of its officers, directors and
employees) solely in connection with the transactions contemplated by the Credit
Documents and each such affiliate (and each of its officers, directors and
employees) shall agree (for the benefit of the Company and Motorola) to be bound
to keep such information confidential on the same terms
Motorola Consent
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as set forth in this Section), (vi) in connection with any litigation to which
any one or more of the Lenders, the Global Arrangers or the Agents is a party,
or in connection with the enforcement of rights or remedies hereunder or under
any other Credit Document, provided that the party intending to make such
disclosure shall use reasonable efforts to cooperate with Motorola to reasonably
minimize the extent of any such disclosure or to obtain confidential treatment
of information to be disclosed, (vii) to a subsidiary or affiliate of such
Lender as provided in paragraph (a) of this Section or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Lender and Motorola a confidentiality agreement containing
provisions substantially the same as those in this Section; provided, further,
that in no event shall any Lender, any Agent or any Global Arranger be obligated
or required to return any materials furnished by Motorola hereunder or under any
other Motorola Agreement, except to the extent it has agreed to do so in writing
in conjunction with the receipt of such information. The obligations of any
assignee that has executed a confidentiality agreement as provided above shall
be superseded by this Section on the date upon which such assignee becomes a
Lender hereunder pursuant to Section 11.04(b) of the Credit Agreement.
SECTION 7.13. Effective Date; Termination. This Agreement
shall become effective upon the execution and delivery of one or more
counterparts hereof by each of the parties hereto and (except as otherwise
provided in clause (b) of Section 5.02) shall continue in effect until payment
in full of all principal of and interest on the Loans and all other amounts
owing to the Lenders and the Agents under the Credit Agreements and the other
Credit Document and the expiration or termination of the Commitments, whereupon
this Agreement shall terminate. If, at any time, all or part of any payment with
respect to the Loans (or, in the case of Article VI, the Senior Bank Debt)
theretofore made by Iridium or any other Person is rescinded or must otherwise
be returned by the holders thereof for any reason whatsoever (including, without
limitation, the bankruptcy, insolvency, reorganization or similar action
involving Iridium or such other Person), this Agreement (except as otherwise
provided in clause (b) of Section 5.02) shall continue to be effective or be
reinstated, as the case may be, all as though such payment had not been made.
IN WITNESS WHEREOF, the parties hereto have caused this
Consent and Agreement to be duly executed and delivered as of the day and year
first above written.
MOTOROLA, INC.
By ________________________
Title:
Motorola Consent
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Address for Notices:
Motorola, Inc.
Corporate Offices
1303 East Algonquin Road
Schaumburg, Illinois 60196
Attention: Treasurer
Telecopier No.: 847-576-4768
Telephone No.: 847-576-5069
with copies to:
Motorola, Inc.
Corporate Offices
1303 East Algonquin Road
Schaumburg, Illinois 60196
Attention: Corporate Secretary
Telecopier No.: 847-576-2818
Telephone No.: 847-576-5008
and
Motorola, Inc.
425 North Martingdale Road
Schaumburg, Illinois 60173
Attention: Vice President -
Law Department,
Iridium Matters
Telecopier No.: 847-435-3328
Telephone No.: 847-435-3325
Motorola Consent
<PAGE> 27
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IRIDIUM OPERATING LLC
By ________________________
Title:
Motorola Consent
<PAGE> 28
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THE CHASE MANHATTAN BANK,
as Administrative Agent
By ________________________
Title:
THE CHASE MANHATTAN BANK,
as Collateral Agent
By ________________________
Title:
Motorola Consent
<PAGE> 29
SCHEDULE 1
Governmental Approvals and Proceedings
[to be completed by Motorola]
<PAGE> 1
EXHIBIT 10.38
(EXHIBIT H TO THE CREDIT AGREEMENT)
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of [___________, 199_] between: MOTOROLA,
INC.(1), a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Pledgor"); and THE CHASE MANHATTAN BANK, as collateral
agent for the lenders party to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "Collateral
Agent").
Iridium Operating LLC, a Delaware limited liability company (the
"Company"), certain lenders, the Collateral Agent, The Chase Manhattan Bank, as
Administrative Agent, and Barclays Capital, the investment banking division of
Barclays Bank PLC, as Documentation Agent thereunder are parties to a Credit
Agreement dated as of December [__], 1997 (as modified, supplemented or
otherwise modified and in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for loans to be made by
said lenders to the Company in an aggregate principal amount not exceeding
$1,000,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Pledgor has agreed
to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined).
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. Capitalized terms used but not defined
herein shall have their respective defined meanings in the Credit Agreement. In
addition, as used herein:
"Collateral" has the meaning assigned to such term in Article III.
"Secured Obligations" shall mean, collectively, (a) all obligations
of the Company in respect of principal of and interest on the Loans and
all other amounts owing under the Credit Agreement and the other Credit
Documents to which it is a party, (b) all obligations of each Subsidiary
of the Company under Credit Document to which it is a party and (c) all
obligations of the Pledgor to the Collateral Agent hereunder.
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(1) If applicable, the pledgor will be the Subsidiary of Motorola that directly
owes the Subsidiary holding the FCC License.
Motorola Pledge Agreement
<PAGE> 2
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"Secured Parties" means the Lenders, the Collateral Agent and the
other Agents.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, including an amendment and restatement
thereof, but subject to any restrictions on such amendments, supplements or
modifications set forth herein, (b) any reference herein to any Person shall be
construed to include such Person's successors and assigns or, in the case of any
Governmental Authority, any entity succeeding to any or all of the functions of
such Governmental Authority, (c) the words "herein", "hereof" and "hereunder",
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections and Annexes shall be construed to refer to Articles
and Sections of, and Annexes to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants to the Secured Parties that:
(a) The Pledgor has all right, title and interest in, to and under,
and is the record owner of, the Collateral in which it purports to grant a
security interest pursuant to Section 3 and no Lien exists or will exist
upon the Collateral at any time (and no right or option to acquire the
same exists in favor of any other Person), except for the pledge and
security interest in favor of the Collateral Agent for the benefit of the
Lenders created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and
to all of the Collateral.
Motorola Pledge Agreement
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(b) The Pledged Stock represented by the certificates identified in
Annex 1 is, and all other Pledged Stock in which the Pledgor shall
hereafter grant a security interest pursuant to Article III will be, duly
authorized, validly existing, fully paid and non-assessable and none of
such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the issuer of the
Pledged Stock, upon the transfer of such Pledged Stock (except for any
such restriction contained herein).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 constitutes all of the issued and outstanding shares of capital
stock of any class of the issuer of the Pledged Stock beneficially owned
by the Pledgor on the date hereof (whether or not registered in the name
of the Pledgor) and Annex 1 correctly identifies, as at the date hereof,
the respective class and par value of the shares comprising such Pledged
Stock and the respective number of shares (and registered owners thereof)
represented by each such certificate.
ARTICLE III
PLEDGE
As collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations now existing or hereafter arising, the Pledgor hereby pledges,
assigns, hypothecates and transfers to the Collateral Agent for the equal and
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent for the equal and ratable benefit of the Secured Parties a Lien on and
security interest in, all of the Pledgor's right, title and interest in, to and
under the following, whether now owned by the Pledgor or hereafter acquired and
whether now existing or hereafter coming into existence and wherever located
(all being collectively referred to herein as "Collateral"):
(a) the shares of common stock of [__________](2) represented by the
certificate(s) identified in Annex 1 and all other shares of capital stock
of whatever class of such issuer, now or hereafter owned by the Pledgor,
in each case together with the certificates evidencing the same or, if the
Pledgor shall at any time transfer the FCC License to another Subsidiary,
the shares of common stock of such Subsidiary and all other shares of
capital stock of whatever class of such Subsidiary (collectively, the
"Pledged Stock");
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(2) Insert name of the Motorola Subsidiary holding the FCC License as of the
date hereof.
Motorola Pledge Agreement
<PAGE> 4
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(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Pledgor under any
provision prohibiting such action hereunder or under any other Motorola
Agreement, in the event of any consolidation or merger in which the issuer
of the Pledged Stock is not the surviving corporation, all shares of each
class of the capital stock of the successor corporation (unless such
successor corporation is the Pledgor itself) formed by or resulting from
such consolidation or merger; and
(d) all proceeds, products, offspring, rents, revenues, issues,
profits, royalties, income, benefits, accessions, additions, substitutions
and replacements of and to any of the property of the Pledgor described in
the preceding clauses of this Section and, to the extent related to any
property described in said clauses or such proceeds, all books,
correspondence, credit files, records, invoices and other papers.
ARTICLE IV
REMEDIES
In furtherance of the grant of the pledge and security interest
pursuant to Article III, the Pledgor hereby agrees with the Secured Parties as
follows:
SECTION 4.01. Delivery and Other Perfection. The Pledgor shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by the Pledgor under Article III are received by the Pledgor,
forthwith either (x) transfer and deliver to the Collateral Agent such
shares or securities so received by the Pledgor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Collateral Agent, pursuant to the terms of
this Agreement, as part of the Collateral or (y) take such other action as
the Agent shall deem necessary or appropriate to duly perfect the Lien
created hereunder in such shares, securities, moneys or property in
Article III;
Motorola Pledge Agreement
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(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Collateral Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Collateral Agent to exercise and enforce
its rights hereunder with respect to such pledge and security interest,
including, without limitation, causing any or all of the Collateral to be
transferred of record into the name of the Collateral Agent or its nominee
(and the Collateral Agent agrees that if any Collateral is transferred
into its name or the name of its nominee, the Collateral Agent will
thereafter promptly give to the Pledgor copies of any notices and
communications received by it with respect to the Collateral pledged by
the Pledgor hereunder);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably require in order to reflect
the security interests granted by this Agreement; and
(d) permit representatives of the Collateral Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, all in
such manner as the Collateral Agent may require.
SECTION 4.02. Other Financing Statements and Liens. Without the
prior written consent of the Collateral Agent, the Pledgor shall not file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the benefit of the Secured Parties.
SECTION 4.03. Preservation of Rights. The Collateral Agent shall not
be required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
SECTION 4.04. Pledged Stock.
(a) The Pledgor will cause the Collateral to constitute at all times
100% of the total number of shares of each class of capital stock then
outstanding of the Subsidiary of the Pledgor holding the FCC License.
(b) Except as expressly permitted under the Motorola Consent, the
Pledgor (i) will not create, incur, assume or suffer to exist any Lien upon, or
sell, assign, transfer or otherwise dispose of all or any part of, the
Collateral or (ii) consent to the creation of any restriction
Motorola Pledge Agreement
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applicable to the Collateral Agent on the sale, assignment, transfer or other
disposition by the Collateral Agent of any of the Collateral (except as provided
in this Agreement).
SECTION 4.05. Events of Default, Etc. During the period during which
an Event of Default shall have occurred and be continuing:
(a) the Collateral Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Collateral Agent were the sole and
absolute owner thereof (and the Pledgor agrees to take all such action as
may be appropriate to give effect to such right);
(b) the Collateral Agent in its discretion may, in its name or in
the name of the Pledgor or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral, but shall be under no obligation to
do so; and
(c) the Collateral Agent may, upon 30 days' prior written notice to
the Pledgor of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Secured Parties or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of the Collateral, at such place or places as the Collateral Agent
deems best, and for cash or for credit or for future delivery, at public
or private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived), and any Secured Party or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private
sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Pledgor, any such demand, notice and
right or equity being hereby expressly waived and released. The Collateral
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
Motorola Pledge Agreement
<PAGE> 7
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The proceeds of each collection, sale or other disposition under this Section
shall be applied in accordance with Section 4.08.
The Pledgor recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Agent may be compelled, with respect to any sale
of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledge that any such private sales may be at prices and on terms
less favorable to the Collateral Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Collateral Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral for
the period of time necessary to permit the Company or issuer thereof to register
it for public sale.
SECTION 4.06. Removals, Etc. Without at least 30 days' prior written
notice to the Collateral Agent, the Pledgor shall not (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address indicated
beneath its signature hereto or (ii) change its corporate name, or the name
under which it does business, from the name shown on the signature pages hereto.
SECTION 4.07. Private Sale. No Secured Party shall incur any
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 4.05 conducted in a commercially reasonable
manner. The Pledgor hereby waives any claims against the Secured Parties arising
by reason of the fact that the price at which the Collateral may have been sold
at such a private sale was less than the price that might have been obtained at
a public sale or was less than the aggregate amount of the Secured Obligations,
even if the Collateral Agent accepts the first offer received and does not offer
the Collateral to more than one offeree.
SECTION 4.08. Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral pursuant hereto, and any other cash at the
time held by the Collateral Agent under this Agreement, shall be applied by the
Collateral Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Collateral Agent and the reasonable fees and expenses of
its agents and counsel, and all reasonable expenses incurred and advances
made by the Collateral Agent in connection therewith;
Motorola Pledge Agreement
<PAGE> 8
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Next, to the payment in full of the Secured Obligations, in each
case equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Lenders holding the same may otherwise agree;
and
Finally, to the payment to the Pledgor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Article IV, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Pledgor or any issuer of or obligor on
any of the Collateral.
SECTION 4.09. Attorney-in-Fact. Without limiting any rights or
powers granted by this Agreement to the Collateral Agent while no Event of
Default has occurred and is continuing, upon the occurrence and during the
continuance of any Event of Default the Collateral Agent is hereby appointed the
attorney-in-fact of the Pledgor for the purpose of carrying out the provisions
hereof and taking any action and executing any instruments that the Collateral
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, so long as the Collateral
Agent shall be entitled under this Article IV to make collections in respect of
the Collateral, the Collateral Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of the Pledgor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
SECTION 4.10. Perfection. Prior to or concurrently with the
execution and delivery of this Agreement, the Pledgor shall (i) file such
financing statements and other documents in such offices as the Collateral Agent
may request to perfect the security interests granted in Article III and (ii)
deliver to the Collateral Agent any certificates representing the Collateral,
accompanied by undated stock powers duly executed in blank.
SECTION 4.11. Termination. Upon the earlier of (a) the date on which
all Secured Obligations shall have been paid in full and the Commitments of the
Lenders under the Credit Agreement shall have expired or been terminated and (b)
the effective date of the transfer of the FCC License to the Company or any of
its Subsidiaries pursuant to Section 18.H of the Space System Contract, this
Agreement shall terminate and all rights to the Collateral shall revert to the
Pledgor, and the Collateral Agent shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of the Pledgor.
Motorola Pledge Agreement
<PAGE> 9
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SECTION 4.12. Further Assurances. The Pledgor agrees that, from time
to time upon the written request of the Collateral Agent, the Pledgor will
execute and deliver such further documents and do such other acts and things as
the Collateral Agent may reasonably request in order fully to effect the
purposes of this Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. No Waiver. No failure on the part of the Collateral
Agent or any other Secured Party to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Collateral Agent or any other Secured Party of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
SECTION 5.02. Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
SECTION 5.03. Expenses. The Pledgor agrees to reimburse each of the
Lenders and the Collateral Agent for all reasonable costs and expenses of the
Lenders and the Collateral Agent (including, without limitation, the reasonable
fees and expenses of legal counsel) in connection with (a) any enforcement
proceeding hereunder, including, without limitation, all manner of participation
in or other involvement with (i) performance by the Collateral Agent of any
obligations of the Pledgor in respect of the Collateral that the Pledgor have
failed or refused to perform, (ii) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Collateral Agent in respect
thereof, by litigation or otherwise, (iii) judicial or regulatory proceedings
and (iv) workout, restructuring or other negotiations or proceedings (whether or
not the workout, restructuring or transaction contemplated thereby is
consummated) and (b) the enforcement of this Section, and all such costs
Motorola Pledge Agreement
<PAGE> 10
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and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Article III.
SECTION 5.04. Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Pledgor and the Collateral Agent. Any such amendment or waiver shall be binding
upon the Collateral Agent, each other Secured Party and the Pledgor.
SECTION 5.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the Pledgor, the Collateral Agent and each other Secured Party, provided,
however, that the Pledgor shall not assign or transfer its rights hereunder
without the prior written consent of the Collateral Agent.
SECTION 5.06. Captions. The caption and section headings used herein
are for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Agreement.
SECTION 5.07. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.
SECTION 5.08. Governing Law; Jurisdiction; Consent to Service of
Process.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) The Pledgor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Collateral Agent or any other Secured Party may
otherwise have to bring any action or proceeding relating to this Agreement
against the Pledgor or its properties in the courts of any jurisdiction.
Motorola Pledge Agreement
<PAGE> 11
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(c) The Pledgor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) To the extent that the Pledgor may be or become entitled, in any
jurisdiction in which judicial proceedings may at any time be commenced with
respect to this Agreement, to claim for itself or its property or revenues any
immunity from suit, court jurisdiction, attachment prior to judgment, attachment
in aid of execution of a judgment, execution of a judgment or from any other
legal process or remedy relating to its obligations under this Agreement and to
the extent that in any such jurisdiction there may be attributed such an
immunity (whether or not claimed), the Pledgor hereby irrevocably agrees not to
claim and hereby irrevocably waives such immunity to the fullest extent
permitted by the laws of such jurisdiction.
SECTION 5.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 5.10. No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the Pledgor, the Collateral Agent
and the other Secured Parties, and no other Person (including, without
limitation, the Company) shall have any rights hereunder.
SECTION 5.11. Agents and Attorneys-in-Fact. The Collateral Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
Motorola Pledge Agreement
<PAGE> 12
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SECTION 5.12. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 5.13. Security Interest Absolute. The rights and remedies of
the Collateral Agent hereunder, the Liens created hereby and the obligations of
the Pledgor hereunder are absolute, irrevocable and unconditional, irrespective
of:
(a) the validity or enforceability of any of the Secured Obligations
or any Credit Document or any other agreement or instrument relating thereto;
(b) any amendment to, waiver of, consent to or departure from, or
failure to exercise any right, remedy, power or privileges under or in respect
of, any of the Secured Obligations, any Credit Document or any other agreement
or instrument relating thereto;
(c) the acceleration of the maturity of any of the Secured
Obligations or any other modification of the time of payment thereof;
(d) any substitution, release or exchange of any other security for
or guarantee of any of the Secured Obligations or the failure to create,
preserve, validate, perfect or protect any other Lien granted to, or purported
to be granted to, or in favor of, the Collateral Agent or any other Secured
Party; or
(e) any other event or circumstance whatsoever which might otherwise
constitute a legal or equitable discharge of a surety or a guarantor, it being
the intent of this Section that the obligations of the Pledgor hereunder shall
be absolute, irrevocable and unconditional under any and all circumstances.
SECTION 5.14. Subrogation. The Pledgor shall not exercise, and
hereby irrevocably waives, any claim, right or remedy that it may now have or
may hereafter acquire against the Company arising under or in connection with
this Agreement, including, without limitation, any claim, right or remedy of
subrogation, contribution, reimbursement, exoneration, indemnification or
participation arising under contract, by Government Rule or otherwise in any
claim, right or remedy of the Collateral Agent or any other Secured Party
against the Company or any other Person or any Collateral which the Collateral
Agent or any other Secured Party may now have or may hereafter acquire. If,
notwithstanding the preceding sentence, any amount shall be paid to the Pledgor
on account of such claim, right or remedy at any time when any of the
Motorola Pledge Agreement
<PAGE> 13
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Secured Obligations shall not have been paid in full, such amount shall be held
by the Pledgor in trust for the Collateral Agent and the other Secured Parties,
segregated from other funds of the Pledgor, and be turned over to the Collateral
Agent in the exact form received by the Pledgor (duly endorsed by the Pledgor to
the Collateral Agent, if required), to be applied against the Secured
Obligations, whether matured or unmatured, in accordance with this Agreement and
the Depositary Agreement.
SECTION 5.15. Reinstatement. This Agreement and the Lien created
hereunder shall automatically be reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Secured
Obligations is rescinded or must otherwise be restored by any holder of the
Secured Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Pledgor shall indemnify the Collateral
Agent and each other Secured Party on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Collateral Agent or such other Secured Party in connection with such rescission
or restoration.
SECTION 5.16. FCC Approval. Notwithstanding any other provision of
this Agreement, no action shall be taken hereunder by the Collateral Agent or
any Lender with respect to any item of Collateral that would constitute or
result in any assignment of the FCC License or any change of control of the
holder of the FCC License without first obtaining prior approval of the FCC, if,
under then existing law, regulations and FCC policies, such assignment or change
of control would require the prior approval of the FCC. The Pledgor agrees to
take (or to cause the Pledgor's Subsidiary which holds the FCC License to take),
at its expense, any action that the Collateral Agent may reasonably request in
order to obtain from the FCC such approval as may be necessary (a) to enable the
Collateral Agent to exercise and enjoy the full rights and benefits granted to
the Collateral Agent by this Agreement and (b) for any action or transaction
contemplated by this Agreement for which such approval is or shall be required
by law, and specifically, without limitation, upon request by the Collateral
Agent, to prepare, sign and file with the FCC the assignor's or transferor's
portion of any application or applications for consent to the assignment of any
license or transfer of control necessary or appropriate under the FCC's rules
and regulations, or for approval of any sale of the Collateral provided by this
Agreement by or on behalf of the Collateral Agent or any assumption by the
Collateral Agent of voting rights relating thereto effected in accordance with
the terms hereof.
Motorola Pledge Agreement
<PAGE> 14
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first above
written.
PLEDGOR
MOTOROLA, INC.
By ________________________
Name:
Title:
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
Motorola Pledge Agreement
<PAGE> 15
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COLLATERAL AGENT
THE CHASE MANHATTAN BANK,
as Collateral Agent
By ________________________
Name:
Title:
Address for Notices:
The Chase Manhattan Bank,
as Collateral Agent
Agent Bank Services
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: _______________
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: _______________
Motorola Pledge Agreement
<PAGE> 16
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c)]
Certificate Registered
Issuer No. Owner Number of Shares
- ------ ----------- ---------- ----------------
[__] Motorola, Inc. [____] shares of common
stock, [no] par
value [$________]
Annex 1 to Motorola Pledge Agreement
<PAGE> 1
EXHIBIT 10.39
(EXHIBIT I-1 TO THE CREDIT AGREEMENT)
PROGRESS CERTIFICATE
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza
8th Floor
New York, NY 10017
Attention: Loan and Agency Services Group
Reference is made herein to the Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of December 19, 1997 among Iridium Operating LLC, a
Delaware limited liability company (the "Company"), the lenders party thereto,
Chase Securities Inc. and Barclays Capital, the investment banking division of
Barclays Bank PLC, as Global Arrangers, The Chase Manhattan Bank, as
Administrative Agent and as Collateral Agent, and Barclays Bank PLC, as
Documentation Agent. Capitalized terms used but not defined herein have the
meanings given to such terms in the Credit Agreement. This Certificate is being
delivered to the Administrative Agent pursuant to Article IV of the Credit
Agreement.
In connection with the transfer of funds from the Pre-Funding
Account to the General Receipt & Disbursement Account (the "Borrowing Date"),
the undersigned hereby certifies that:
1. Commercial Activation is expected to occur not later than
December 23, 1998.
2. Each of the technical requirements specified in Annex A to
Appendix 2 to the Credit Agreement that is required to be satisfied for
Stage 1 (as identified in said Annex A) on or prior to the Borrowing Date
has been, and remains, substantially completed as of the Borrowing Date.
Prior to the date of this Certificate, Motorola delivered to the
Independent Technical Advisor and the Company its statement(s) pursuant to
Section 5.05 of the Motorola Consent that certain of such technical
requirements have been satisfactorily completed, and the Company has no
reason to believe that such statements are not true.
3. (a) Each of the regulatory requirements specified in Annex A to
Appendix 2 to the Credit Agreement that is required to be satisfied for
Stage 1 (as referred to in said Annex A) on or prior to the Borrowing Date
has been, and remains, satisfied as of the Borrowing Date. Set forth in
Schedule I to this Progress Certificate is, as of the Borrowing Date, (i)
a list of countries for which L-based spectrum licenses ("L-band
Licenses") for the Project have been obtained (each a "L-band License
Country") and for which a legal opinion satisfying the requirement under
paragraph 4(b) below is attached, (ii) a list of service provider
agreements which have been entered into and continue in
<PAGE> 2
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effect, (iii) a list of roaming agreements which have been entered into
and continue in effect (in the case of the agreements referred to in
clauses (ii) and (iii), specifying the date and counterparty or
counterparties of each such agreement and the jurisdiction), (iv) a list
of non-gateway countries for which agreements are in place for the
interconnection of the IRIDIUM System with the PSTN in that country and
(v) a list of countries for which the existing service provider agreements
and/or roaming agreements provide national sales distribution for IRIDIUM
services.
(b) Attached hereto are copies of the opinions of legal
counsel for each for each L-band License Country (other than those
previously delivered to the Administrative Agent with a Progress
Certificate) confirming, each as of a recent date, that the L-band License
in such country has been obtained. The Company is not aware of, nor does
it have any reason to believe that there has occurred, any adverse change
in the status of any such L-band License.
(c) As shown on Schedule I to this Progress Certificate, as of
the Borrowing Date, (i) the L-band License Countries constitute countries
projected to generate at least 33% of the Company's revenues as set forth
in the Iridium Financial Projections, (ii) not less than 75% of the
revenues referred to in sub-clause (i) above are projected to be from
countries for which service provider agreements and/or roaming agreements
providing for a national sales distribution for the IRIDIUM services (in
compliance with the requirements set forth in Attachment 3 to Annex A to
Appendix 2) are currently in effect.
4. The Company is in compliance with its obligations under Section
8.04 of the Credit Agreement as of the Borrowing Date. Set forth in
Schedule II to this Project Certificate is a list of the sources of
funding currently committed or available to the Company that satisfy the
requirements of said Section 8.04.
<PAGE> 3
- 3 -
IN WITNESS WHEREOF, the Company has caused this Progress Certificate
to be executed by a Responsible Officer this ____ day of January, 1998.
IRIDIUM OPERATING LLC
By:____________________________________
<PAGE> 4
Schedule I
to Progress Certificate
Regulatory Conditions
1. Countries with L-band spectrum licenses
Country % of Iridium Business
Plan Revenues
----- -------------
Totals: %
<PAGE> 5
- 2 - Schedule I
to Progress Certificate
2. Service Provider Agreements
Country Counterparty Date
------- ------------ ----
TOTAL NUMBER OF SERVICE PROVIDER AGREEMENTS:
<PAGE> 6
- 3 - Schedule I
to Progress Certificate
3. Roaming Agreements
Country Counterparty Date
------- ------------ ----
TOTAL NUMBER OF ROAMING AGREEMENTS:
<PAGE> 7
- 4 - Schedule I
to Progress Certificate
4. PSTN Access in Non-Gateway Countries
Country
TOTAL: ______
<PAGE> 8
- 5 - Schedule I
to Progress Certificate
5. Countries with National Sales Distribution Network
Country
TOTAL: ______
<PAGE> 9
Schedule II
to Progress Certificate
Funding Sources
[To be completed by the Company]
<PAGE> 1
EXHIBIT 10.40
(EXHIBIT I-2 TO THE CREDIT AGREEMENT)
[LETTERHEAD OF ARTHUR D. LITTLE, INC.]
[_________, 199_](1)
The Lenders party to the
below-mentioned Credit Agreement
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza
8th Floor
New York, NY 10017
Attention: Loan and Agency Services Group
Ladies and Gentlemen:
Reference is made herein to the Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of December 19, 1997 among Iridium Operating LLC, a
Delaware limited liability company (the "Company"), the lenders party thereto,
Chase Securities Inc. and Barclays Capital, the investment banking division of
Barclays Bank PLC, as Global Arrangers, The Chase Manhattan Bank, as
Administrative Agent and as Collateral Agent, and Barclays Bank PLC, as
Documentation Agent. Capitalized terms used but not defined in this letter have
the meanings given to such terms in the Credit Agreement.
This letter is being delivered to the Administrative Agent
pursuant to Article IV of the Credit Agreement.
We are delivering this letter to the Lenders in our role as
Independent Technical Advisor for the Lenders under the Credit Agreement in
connection with a Borrowing requested to be made by the Company on [_________],
1998(2) (the "Borrowing"). In connection with the Borrowing we have been
requested to assist you in reviewing the Company's achievement of or
satisfaction with the technical conditions precedent specified in Annex A to
Appendix 2 to the Credit Agreement and as elaborated in a testing and
performance monitoring program mutually
___________
1 This letter shall be dated the date of the relevant Borrowing.
2 Insert the date of the Borrowing to which this verification relates, as
reflected in the related Borrowing Request.
Independent Technical Advisor Verification
<PAGE> 2
- 2 -
agreed between the Company, Motorola, ourselves and the Global Arrangers (the
"Technical Conditions").
Prior to the date hereof, we have attended one or more monthly
meetings with the Company and Motorola for the purpose of reviewing the progress
achieved to date by the Company and Motorola in satisfying the Technical
Conditions. At these meetings we have been provided information by the Company
and Motorola, and have made inquiries of Company and Motorola personnel present
at such meetings, regarding the satisfaction of the Technical Conditions
applicable to the Borrowing. At or following each such meeting the Company and
Motorola have delivered to us their respective statements specifically
enumerating the Technical Conditions that, in their respective view, have been
completed in accordance with the requirements of the Credit Agreement as of the
date of each such statement (copies of such statements being attached hereto).
The information we have received and the access we have been given to Motorola
and Company personnel at these meetings and otherwise are sufficient to provide
a reasonable basis for us to form a view regarding the satisfaction of the
Technical Conditions applicable to the Borrowing. Except as noted on the
attachment to this letter, nothing has come to our attention in the course of
these meetings or otherwise that would cast doubt on the acceptability of the
positions being taken by Motorola and the Company as to the satisfaction of the
Technical Conditions applicable to the Borrowing.
Based upon the foregoing, in our professional judgment we
believe as of the date hereof that:
1. the Technical Conditions which are required by the terms of
Annex A to Appendix 2 to the Credit Agreement to be satisfied on or prior to the
date of the Borrowing have been substantially completed (and each such condition
(if any) that has not been fully completed at this time is noted on the
attachment to this letter, provided that, in our view, the failure to have so
completed any such condition is not material to the current stage of Development
of the Project and Motorola has a satisfactory plan for completing such
condition within an appropriate time period); and
2. Commercial Activation is expected to occur by December 23,
1998.
Very truly yours,
ARTHUR D. LITTLE, INC.
By____________________
Name:
Title:
Independent Technical Advisor Verification
<PAGE> 1
EXHIBIT 10.41
(EXHIBIT I-3 TO THE CREDIT AGREEMENT)
[FORM OF PROGRESS CERTIFICATE]
PROGRESS CERTIFICATE
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza
8th Floor
New York, NY 10017
Attention: Loan and Agency Services Group
Reference is made herein to the Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of December [__], 1997 among Iridium Operating LLC, a
Delaware limited liability company (the "Company"), the lenders party thereto,
Chase Securities Inc. and Barclays Capital, the investment banking division of
Barclays Bank PLC, as Global Arrangers, The Chase Manhattan Bank, as
Administrative Agent and as Collateral Agent, and Barclays Bank PLC, as
Documentation Agent. Capitalized terms used but not defined herein have the
meanings given to such terms in the Credit Agreement. This Certificate is being
delivered to the Administrative Agent pursuant to Article IV of the Credit
Agreement.
In connection with the Borrowing by the Company of Loans (the
"Borrowing") on [INSERT DATE OF BORROWING AS REFLECTED IN THE RELATED BORROWING
REQUEST] (the "Borrowing Date"), the undersigned hereby certifies that:
1. Commercial Activation has occurred.
2. (a) Each of the regulatory requirements specified in Annex
A to Appendix 2 to the Credit Agreement that is required to be
satisfied for the "Post-Commercial Activation Stage (as referred to in
said Annex A) on or prior to the Borrowing Date has been, and remains,
satisfied as of the Borrowing Date. Set forth in Schedule I to this
Progress Certificate is, as of the Borrowing Date, (i) a list of
countries for which L-based spectrum licenses ("L-band Licenses") for
the Project have been obtained (each a "L-band License Country") and
for which a legal opinion satisfying the requirement under paragraph
3(b) below is attached, (ii) a list of service provider agreements
which have been entered into and continue in effect, (iii) a list of
roaming agreements which have been entered into and continue in effect
(in the case of the agreements referred to in clauses (ii) and (iii),
specifying the date and counterparty or counterparties of each such
agreement and the jurisdiction), (iv) a list of non-gateway countries
for which agreements are in place for the
Progress Certificate (Post-Commercial Activation)
<PAGE> 2
- 2 -
interconnection of the IRIDIUM system with the PSTN in that country and
(v) a list of countries for which the existing service provider
agreements and/or roaming agreements provide national sales
distribution for IRIDIUM services.
(b) Attached hereto are copies of the opinions of
legal counsel for each for each L-band License Country (other than
those previously delivered to the Administrative Agent with a Progress
Certificate) confirming, each as of a recent date, that the L-band
License in such country has been obtained. The Company is not aware of,
nor does it have any reason to believe that there has occurred, any
adverse change in the status of any such L-band License.
(c) As shown on Schedule I to this Progress
Certificate, as of the Borrowing Date, (i) the L-band License Countries
constitute countries projected to generate at least 72.5% of the
Company's revenues as set forth in the Iridium Financial Projections,
(ii) not less than 75% of the revenues referred to in sub-clause (i)
above are projected to be from countries for which service provider
agreements and/or roaming agreements providing for a national sales
distribution for the IRIDIUM services (in compliance with the
requirements set forth in Attachment 3 to Annex A to Appendix 2)
are currently in effect.
(d) With respect to each of the countries listed in
Part 4 of Schedule I to this Progress Certificate all Governmental
Approvals necessary for commercial operation of the IRIDIUM System in
such countries have been received, attached hereto is evidence thereof.
4. The Company is in compliance with its obligations under
Section 8.04 of the Credit Agreement as of the Borrowing Date. Set
forth in Schedule II to this Project Certificate is a list of the
sources of funding currently committed or available to the Company that
satisfy the requirements of said Section 8.04.
Progress Certificate (Post-Commercial Activation)
<PAGE> 3
- 3 -
IN WITNESS WHEREOF, the Company has caused this Progress
Certificate to be executed by a Responsible Officer this [__] day of [________],
1998(1).
IRIDIUM OPERATING LLC
By:________________________________
Its [_________________]
_______________
1 Each Progress Certificate is to be dated the date of the relevant
Borrowing.
Progress Certificate (Post-Commercial Activation)
<PAGE> 4
Schedule I
to Progress Certificate
Regulatory Conditions
1. Countries with L-band spectrum licenses
Country % of Iridium Business
Plan Revenues
----- -------------
Totals: %
Progress Certificate (Post-Commercial Activation)
<PAGE> 5
2 Schedule I
to Progress Certificate
2. Service Provider Agreements
Country Counterparty Date
TOTAL NUMBER OF SERVICE PROVIDER AGREEMENTS:
Progress Certificate (Post-Commercial Activation)
<PAGE> 6
-3- Schedule I
to Progress Certificate
3. Roaming Agreements
Country Counterparty Date
TOTAL NUMBER OF ROAMING AGREEMENTS:
Progress Certificate (Post-Commercial Activation)
<PAGE> 7
- 4 - Schedule I
to Progress Certificate
4. PSTN Access In Non-Gateway Countries
Country
TOTAL: ______
Progress Certificate (Post-Commercial Activation)
<PAGE> 8
- 5 - Schedule I
to Progress Certificate
5. Countries with National Sales Distribution Network
Country
TOTAL: ______
Progress Certificate (Post-Commercial Activation)
<PAGE> 9
Schedule II
to Progress Certificate
Funding Sources
[To be completed by the Company]
Progress Certificate (Post-Commercial Activation)
<PAGE> 1
EXHIBIT 10.42
(EXHIBIT J TO THE CREDIT AGREEMENT)
[FORM OF BORROWING REQUEST]
BORROWING REQUEST
Reference is made to the Credit Agreement dated as of December
19, 1997 (as amended, supplemented or otherwise modified and in effect from time
to time, the "Credit Agreement") among Iridium Operating LLC, a Delaware limited
liability company (the "Company"), the lenders party thereto as Lenders (the
"Lenders"), Chase Securities Inc. and Barclays Capital, the investment banking
division of Barclays Bank PLC, as the Global Arrangers, The Chase Manhattan
Bank, as Administrative Agent (the "Administrative Agent") and as Collateral
Agent and Barclays Bank PLC, as Documentation Agent. Unless otherwise defined in
this Certificate, capitalized terms used but not defined herein shall have the
meanings given to such terms in the Credit Agreement.
The Company hereby requests a Borrowing from Lenders under the
Credit Agreement as follows:
1. The aggregate principal amount of such Borrowing:
$__________
2. The date of such Borrowing: ____________, 199_
3. Such Borrowing is a (check one): __ ABR Borrowing
__ Eurodollar Borrowing
4. If such Borrowing is a Eurodollar Borrowing, the
initial Interest Period therefor is _______ month(s).
The undersigned officer, in his/her capacity as an officer of
the Company, and Company certify that:
(i) the representations and warranties of the Company set
forth in the Credit Agreement and of the Company and each other Credit
Party set forth in each of the other Credit Documents to which it is a
party are true and correct on and as of the date hereof to the same
extent as though made on and as of the date hereof, except to the
extent such representations and warranties are stated to have been made
solely as of an earlier date, in which case such representations and
warranties were true and correct on and as of such earlier date;
(ii) to the best knowledge of the Company, the representations
and warranties of each Project Party (other than any Credit Party) set
forth in each of the Credit Documents to which such other Project Party
is a party are true and correct on and as of the date hereof to the
same extent as though made on and as of the date hereof, except to the
Borrowing Request
<PAGE> 2
- 2 -
extent such representations and warranties are stated to have been made
solely as of an earlier date, in which case such representations and
warranties were true and correct on and as of such earlier date;
(iii) at time of and immediately after giving effect to such
Borrowing, no Default has occurred and is continuing;
(iv) after giving effect to such Borrowing, the aggregate
Exposure of the Lenders will not exceed the Commitments;
(v) each condition precedent specified in Appendix 2 to the
Credit Agreement that is required to be satisfied on or prior to the
date of such Borrowing has been satisfied as of the date hereof (or
will be satisfied on the date of such Borrowing);
(vi) the proceeds of the Loans from the Borrowing will be used
for the payment of the Project Costs within 30 days after the Borrowing
Date within the categories specified in Schedule I; and
(vii) the aggregate Project Costs for the Budget Period do not
exceed an aggregate amount equal to the aggregate Project Costs for
such period set forth in the Initial Approved Budget plus $75,000,000.
Dated: ________, 199_ IRIDIUM OPERATING LLC
By___________________
Name:
Title:
Borrowing Request
<PAGE> 3
Schedule I
to Borrowing Request
Project Costs
Category Amount
1. Space System Contract $____________
2. O&M Contract $____________
3. Terrestrial Network
Development Contract $____________
4. Debt Service and Other
Financing Costs $____________
5. Other $____________
TOTAL: $____________
Borrowing Request
<PAGE> 1
EXHIBIT 11.1
IRIDIUM WORLD COMMUNICATIONS LTD.
COMPUTATION OF LOSS PER CLASS A COMMON SHARE
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1996
(INCEPTION) TO
DECEMBER 31, 1996 1997
----------------- ----------
<S> <C> <C>
Net loss applicable to Class A Common shares
Net loss.................................................... $-- $ 18,834
--- ----------
Net loss applicable to Class A Common shares................ $-- $ 18,834
=== ==========
AVERAGE NUMBER OF CLASS A COMMON SHARES:
Average number of Class A Common shares outstanding......... 6,739,726
Diluted adjustments(2):
Assumed exercise of options and warrants............... -- 1,507,712
=== ==========
Average number of Class A Common shares assumed to be
outstanding, assuming dilution............................ -- 8,247,438
=== ==========
NET LOSS PER CLASS A COMMON SHARE:
Basic(1).................................................... $-- $ 2.79
Diluted(2).................................................. $-- $ 2.28
</TABLE>
- ---------------
(1) The assumed exercise of options and warrants in periods of net loss are
anti-dilutive and are not included in the computation and presentation of
loss per Class A Common share.
(2) The assumed exercise of options and warrants are anti-dilutive but are
included in the calculation of diluted loss per Class A Common share in
accordance with Regulation S-K, Item 601 (a) (11).
<PAGE> 1
EXHIBIT 11.2
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
COMPUTATION OF LOSS PER CLASS 1 INTEREST
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
NET LOSS APPLICABLE TO CLASS 1 INTERESTS:
Net loss............................................. $ 23,645 $ 73,598 $ 293,553
Preferred dividend requirement....................... -- 3,652 5,703
----------- ----------- -----------
Net loss applicable to Class 1 Interests............. $ 23,645 $ 77,250 $ 299,256
=========== =========== ===========
AVERAGE NUMBER OF CLASS 1 INTERESTS:
Average number of Class 1 Interests outstanding...... 88,162,875 120,115,575 132,879,976
Diluted adjustments(2):
Subscribed but unissued Class 1 Interests.......... 30,920,475 433,425 --
Assumed exercise of options and warrants........... 919,350 4,937,925 13,642,459
Assumed conversion of Series A Class 2 Interest.... -- 801,975 869,544
----------- ----------- -----------
Average number of Class 1 Interests assumed to be
outstanding, assuming dilution..................... 120,002,700 126,288,900 147,391,979
=========== =========== ===========
NET LOSS PER CLASS 1 INTEREST:
Basic(1)............................................. $ 0.27 $ 0.64 $ 2.25
Diluted(2)........................................... $ 0.20 $ 0.61 $ 2.03
</TABLE>
- ---------------
(1) The assumed exercise of options and warrants in periods of net loss are
anti-dilutive and are not included in the computation and presentation of
basic loss per Class 1 Interest.
(2) The assumed exercise of options, warrants, and conversion of Series A Class
2 Interest are anti-dilutive but are included in the calculation of diluted
loss per Class 1 Interest in accordance with Regulation S-K, Item 601 (a)
(11).
<PAGE> 1
EXHIBIT 12
IRIDIUM OPERATING LLC
(A WHOLLY-OWNED SUBSIDIARY OF IRIDIUM LLC)
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PERIODS FOLLOWING INITIAL CAPITAL CONTRIBUTION DATE
---------------------------------------------------------
YEAR ENDED JULY 29, 1993 TO DECEMBER 31,
DECEMBER 31, JANUARY 1, 1993 DECEMBER 31, ---------------------------
1992 TO JULY 28, 1993 1993 1994 1995 1996 1997
------------ ---------------- ---------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Capitalized Interest.............. -- -- -- -- -- 28,127 163,747
Portion of rent expense
representative of interest(1)... -- -- 54 264 342 398 2,607
------ ------ ------ ------- ------- ------- --------
Total fixed charges......... -- -- 54 264 342 28,525 166,354
====== ====== ====== ======= ======= ======= ========
Earnings:
Loss before income taxes.......... (8,773) (5,309) (6,751) (13,309) (21,961) (69,009) (293,401)
Fixed charges, less capitalized
interest........................ -- -- 54 264 342 398 2,607
------ ------ ------ ------- ------- ------- --------
Earnings adjusted for fixed
charges....................... (8,773) (5,309) (6,697) (13,045) (21,619) (68,611) (290,744)
====== ====== ====== ======= ======= ======= ========
Ratio of earnings to fixed
charges........................... -- -- -- -- -- -- --
Deficiency in earnings to cover
fixed charges..................... 8,773 5,309 6,751 13,309 21,961 97,136 457,148
</TABLE>
- ---------------
(1) One-third of rent expense is deemed to be representative of interest.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANTS
Subsidiaries of Iridium World Communications Ltd.:
None
Subsidiaries of Iridium LLC:
Iridium Operating LLC
Subsidiaries of Iridium Operating LLC:
Iridium Capital Corporation
Iridium Roaming LLC
Iridium IP LLC
Iridium Facilities Corporation
Subsidiaries of Iridium Capital Corporation:
None
Subsidiaries of Iridium Roaming LLC:
None
Subsidiaries of Iridium IP LLC:
None
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT
The Boards of Directors
Iridium World Communications Ltd., Iridium LLC, and Iridium Operating LLC:
We consent to incorporation by reference in the registration statements
(Nos. 333-23419 and 333-23419-01) on Form S-8 of Iridium World Communications
Ltd. and Iridium LLC of our reports dated January 16, 1998, relating to (i) the
balance sheets of Iridium World Communications Ltd. as of December 31, 1997 and
1996, and the related statements of loss, stockholders' equity, and cash flows
for the year ended December 31, 1997, and for the period December 12, 1996
(inception) through December 31, 1996, (ii) the consolidated balance sheets of
Iridium LLC and subsidiaries as of December 31, 1997 and 1996, 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, 1997, and the
period June 14, 1991 (inception) through December 31, 1997, (iii) the
consolidated balance sheets of Iridium Operating LLC and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of loss,
member's equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1997, and the period June 14, 1991
(inception) through December 31, 1997, and (iv) the related financial statement
schedule of Iridium LLC, which reports appear in the December 31, 1997 annual
report on Form 10-K of Iridium World Communications Ltd., Iridium LLC, and
Iridium Operating LLC.
KPMG Peat Marwick LLP
McLean, Virginia
March 23, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Iridium
World Communications Ltd. financial statements for the year ended December 31,
1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 223,922
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 223,802
<TOTAL-LIABILITY-AND-EQUITY> 223,922
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,834)
<EPS-PRIMARY> (2.79)
<EPS-DILUTED> (2.79)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Iridium
LLC's financial statements for the year ended December 31, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK>0000948421
<NAME>IRIDIUM LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,040
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 379,476
<PP&E> 3,271,518
<DEPRECIATION> 120,138
<TOTAL-ASSETS> 3,645,687
<CURRENT-LIABILITIES> 467,395
<BONDS> 1,327,590
0
39,907
<COMMON> 2,024,220
<OTHER-SE> (429,490)
<TOTAL-LIABILITY-AND-EQUITY> 3,645,687
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 296,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (293,553)
<INCOME-TAX> 0
<INCOME-CONTINUING> (293,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,553)
<EPS-PRIMARY> (2.25)
<EPS-DILUTED> (2.25)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Iridium
Operating LLC's financial statements for the year ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001051721
<NAME> IRIDIUM OPERATING LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,940
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 379,476
<PP&E> 3,271,518
<DEPRECIATION> 120,138
<TOTAL-ASSETS> 3,645,687
<CURRENT-LIABILITIES> 467,395
<BONDS> 1,327,590
0
0
<COMMON> 2,059,421
<OTHER-SE> (427,884)
<TOTAL-LIABILITY-AND-EQUITY> 3,642,587
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 296,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (293,401)
<INCOME-TAX> 0
<INCOME-CONTINUING> (293,401)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,401)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
CERTAIN FACTORS WHICH MAY AFFECT
FORWARD LOOKING STATEMENTS
The following risk factors should be carefully considered by prospective
investors in Iridium World Communications Ltd., Iridium LLC or Iridium Operating
LLC. Iridium World Communications Ltd. acts as a member of Iridium LLC and has
no other business. The business of Iridium Operating LLC ("Iridium") constitutes
substantially all of Iridium LLC's business. The business of Iridium is
discussed below.
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 or an
investment in IWCL, Parent or Iridium. Iridium expects to realize significant
net losses at least until some time after the IRIDIUM System commences
commercial operations, which is currently anticipated to be September 23, 1998.
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 become profitable.
SIGNIFICANT ADDITIONAL FUNDING NEEDS
Iridium anticipates total cash funding requirements of approximately $4.4
billion through September 23, 1998, the date on which Iridium expects to
commence commercial operations, and $5.3 billion (net of assumed revenues
following commercial activation) through year-end 1999, the last year in which
Iridium projects negative cash flow and a net increase in year-end borrowings.
Based on funds raised or conditionally committed as of March 1, 1998,
Iridium expects to have sufficient cash to meet its anticipated funding
requirements through September 23, 1998, the date on which Iridium expects to
commence commercial operations. Iridium expects to seek other senior secured
bank financing in order to meet its expected funding requirements through at
least year-end 1999, the last year in which Iridium projects negative cash flow
and a net increase in year-end borrowings. There can be no assurance, however,
that conditionally committed funds will be available to Iridium, or that any
such other bank financing will be obtained by Iridium on terms and conditions
acceptable to it, and, if any of such financing is unavailable, there can be no
assurance that Iridium will be able to obtain alternative financing on terms and
conditions acceptable to it. Iridium's estimated funding requirements do not
reflect any contingency amounts and therefore those requirements will increase,
perhaps substantially, in the event of unexpected cost increases or schedule
delays.
RISK OF HIGHLY LEVERAGED CAPITAL STRUCTURE
Iridium is a development stage company with a highly leveraged capital
structure and expects to incur substantial additional indebtedness, including
secured indebtedness. The amount of debt needed to finance the IRIDIUM System
could be increased by one or more factors outside the control of Iridium,
including cost increases related to the acquisition of the IRIDIUM System, a
delay in the delivery date of the system, a failure of the demand for the
Iridium World Services to materialize as expected (or a delay in the development
thereof) and increases in prevailing market interest rates. Iridium currently
has no significant income-producing assets from which to service its
indebtedness.
Iridium's current and future debt service requirements could have important
consequences to investors in IWCL, Parent or Iridium, including the following:
(i) Iridium's limited ability to obtain additional financing for future working
capital needs or for other purposes; (ii) a substantial portion of Iridium's
cash flow from operations will be dedicated to the payment of principal and
interest on its indebtedness, thereby reducing
<PAGE> 2
funds available for operations; and (iii) Iridium's greater exposure to adverse
economic conditions than competing companies that are not as highly leveraged.
In addition, the discretion of Iridium's management with respect to certain
business matters will be limited by covenants contained in its debt instruments.
Among other things, such covenants limit or prohibit Iridium and its
subsidiaries from incurring additional indebtedness, creating liens on their
assets, making certain loans, investments or guarantees, issuing preferred
stock, declaring or paying dividends and distributions, making certain asset or
stock dispositions and entering into transactions with affiliates and related
persons. Moreover, a failure to comply with the terms of any agreements with
respect to outstanding or additional financing could result in an event of
default under such agreements, which could result in the acceleration of the
related debt and acceleration of debt under other debt agreements that may
contain cross-acceleration or cross-default provisions.
POTENTIAL FOR DELAY AND COST OVERRUNS
Iridium's business plan assumes the IRIDIUM System will commence commercial
operations on September 23, 1998. Motorola's construction schedule for the
satellites in the IRIDIUM System requires an unprecedented rate of satellite
assembly for commercial telecommunications systems. A significant delay in the
delivery of the satellites needed for the space segment would materially and
adversely affect Iridium's operations.
A significant delay in the date the IRIDIUM System becomes fully
operational would harm the competitive position of Iridium by eroding the timing
advantages Iridium currently anticipates, would delay the generation of revenue
by Iridium and might significantly affect Iridium's ability to pay interest on,
and the principal of, its indebtedness.
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. Iridium closely monitors the progress of each
gateway and currently expects that up to 12 gateways will be in operation with
voice functionality at the commencement of commercial operations. Iridium
expects paging functionality to be available at a portion of the gateways by
September 1998 with the remainder activated by October 1998. However, there can
be no assurance that one or more gateways will not fail to be completed by the
commencement of commercial operations, which could have a material adverse
effect upon Iridium. In particular, two gateways, the China gateway and the
Middle East-Africa gateway, are significantly behind schedule with equipment
procurement for their gateways.
Prior to commencement of commercial operations, Iridium must develop and,
in conjunction with each of the gateway owners, integrate and test software
related to the operation of the IRIDIUM System, including the business support
systems. A significant delay in the development, deployment or implementation of
such software systems would have a material adverse effect on Iridium.
Significant delay in the development, manufacture and sale of phones and
pagers would have a material adverse effect on Iridium. Because there is no
current market for Iridium World Services and subscriber equipment, the
financial incentive for manufacturers to produce significant quantities of
subscriber equipment in advance is limited. Moreover, there is a risk that
demand for Iridium World Services will not materialize in a timely manner.
TECHNOLOGY AND TECHNOLOGY IMPLEMENTATION RISKS; INABILITY TO FULLY TEST PRIOR TO
SPACE DEPLOYMENT
To build the IRIDIUM System, Motorola and its subcontractors must integrate
a number of sophisticated technologies. The integration of this array of diverse
technologies is a complex task which has not previously been attempted and is
further complicated by the fact that a significant portion of the hardware
components associated with the IRIDIUM System will be in space. Despite the
extensive testing of the components of the IRIDIUM System on the ground, the
nature and complexity of the system is such that final confirmation of the
ability of the system to function in the intended manner, including the ability
of the IRIDIUM System to handle the anticipated number of calls each day, cannot
be confirmed until a substantial portion of the system is deployed in space.
Errors involving hardware or software components in space may result in service
limitations and corresponding reductions in revenue.
<PAGE> 3
Implementation and operation of the IRIDIUM System, including the business
support systems necessary for such tasks as customer billing and subscriber
authentication, are also significantly dependent on software which has been, is
being or will have to be developed, integrated and tested and which would have
to be reprogrammed if errors require changes. Iridium believes that the
development of the software for the IRIDIUM System, including the space segment,
is one of the largest and most complex software creation and integration tasks
ever undertaken in a commercial satellite communications program. No assurance
can be given that the software necessary to Iridium's business will be completed
when required, including integration and testing, or that such software will
function as required.
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 World Services and as a result could materially
and adversely affect Iridium. There can be no assurance that Motorola 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.
CONSEQUENCES OF SATELLITE SERVICE LIMITATIONS ON CUSTOMER ACCEPTANCE
Iridium's ability to generate sufficient operating revenues will depend
upon customer acceptance of and satisfaction with Iridium World Services, which
in turn will depend upon a variety of factors, including the price and technical
capabilities of the Iridium World Services and equipment, and the extent,
availability and price of alternative telecommunications services.
Based upon current testing and simulations, Iridium subscribers using
Iridium World Satellite Services via portable, hand-held phones should expect
some degradation in service quality and availability to occur in environments
where obstructions, such as trees, buildings and other natural and man-made
obstacles, are positioned between a satellite and the user. The severity of this
degradation will increase as the obstacles become larger and more densely
spaced. Only extremely limited satellite voice service, or no satellite voice
service, is expected to be available in densely packed urban environments or
inside buildings with steel construction and metal coated glass common in many
urban high rise buildings (including, in particular, in most hotels and
professional buildings). In addition, because the structure of automobiles will
tend to obstruct the satellite signal, use of a hand-held Iridium phone in a
moving automobile will make the effect of environmental obstructions temporary
but more pronounced. The actual limitations will vary, sometimes significantly,
as actual situations and conditions change and as the satellites move across the
sky. The Iridium World Page Services will also be unable to provide service in
certain environments where terrestrial paging generally would. 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 or lower
usage of Iridium World Services than Iridium anticipates.
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.
SATELLITE LAUNCH RISKS
In order for the IRIDIUM System to be fully operational under its current
specifications and timetable, Iridium anticipates the need for Motorola to
successfully launch 21 additional satellites in five more launches by May 1998,
which would complete the expected constellation of 66 satellites in mission
orbit with four spare satellites in a lower parking orbit. Moreover, to maintain
the system, additional satellites are expected to be launched each year. No
other commercial satellite communications system has required this number of
launches to become fully deployed and operational. There can be no assurance
that Iridium's satellites will be
<PAGE> 4
successfully deployed in a timely manner or that launch failures 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.
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.
LIMITED LIFE OF SATELLITES; COST OF MAINTAINING THE SPACE SEGMENT;
RISK OF SATELLITE FAILURE OR DAMAGE
A significant portion of Iridium's tangible assets will be represented by
the satellites in the space segment. Iridium's business plan currently assumes
that the satellites will have a useful life of five years from their respective
launch dates. There can be no assurance that any satellite will actually achieve
such a useful life.
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). 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.
Motorola has experienced the loss of two of the 51 Iridium satellites
launched during the development of the IRIDIUM System. 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.
RISKS ASSOCIATED WITH LICENSING AND SPECTRUM ALLOCATION
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. Iridium, Motorola and the various
gateway owners have made substantial progress in receiving the authorizations
necessary to operate the IRIDIUM System, but a significant number of regulatory
authorizations remain to be obtained, including (1) in each 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, (2) 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 and (3) international coordination of the
IRIDIUM System under the auspices of the International Telecommunications Union
("ITU") or domestic coordination in each country where Iridium World 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.
<PAGE> 5
COMPETITIVE RISKS
Certain sectors of the telecommunications industry are highly competitive
in the United States and in other countries. The uncertainties and risks created
by this competition are intensified by the continuous technological advances
that characterize the industry, regulatory developments which affect competition
and alliances between industry participants. While no single wireless
communications system serves the global personal communications market today,
Iridium anticipates that more than one system will serve this market in some
fashion in the future.
Iridium'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.
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.
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 their gateway territories; constructing and operating the
gateways; connecting the IRIDIUM System to public switched telephone networks
("PSTNs"); marketing Iridium World 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. In particular, the China gateway and
the Middle East-Africa gateway are substantially behind schedule.
Distribution and Marketing of Iridium World Services
The sales of Iridium World 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 World Services and subscriber equipment, and there can be no
assurance that such demand can be generated on a timely basis. In addition,
Iridium may need to take a greater role than currently expected in connection
with the distribution of Iridium subscriber equipment. That increased
participation in the distribution process may require that Iridium incur
additional indebtedness or contingent purchase obligations relating to Iridium
subscriber equipment.
RISKS ASSOCIATED WITH PRINCIPAL SUPPLY CONTRACTS
Space System Contract
Iridium and Motorola are parties to the Space System Contract which
provides for the payment by Iridium to Motorola of $3.45 billion (subject to
certain adjustments) for the design, development, production and delivery in
orbit of the space segment. Furthermore, Motorola's aggregate liability under
the Space
<PAGE> 6
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.
The Space System Contract provides that, to the extent Motorola has any
liability to Iridium under the contract for any costs, damages, claims or losses
whatsoever arising out of or related to such contract, or any such liability
under the Operations and Maintenance Contract, the Terrestrial Network
Development Contract or any other contract executed between Iridium and Motorola
in connection with the IRIDIUM System, or any provisions of any of the
foregoing, whether pursued as a breach of contract or as a tort or other cause
of action and whether accruing before or after completion of all the work
required under the contracts, such liability shall be limited to $100 million in
the aggregate (the "Motorola Liability Limitations").
Operations and Maintenance Contract
Iridium and Motorola are parties to the Operations and Maintenance
Contract, which obligates Motorola for a period of five years after completion
of the final milestone under the Space System Contract to operate the Iridium
space segment and to exert its best efforts to monitor, upgrade and replace the
hardware and software of the Iridium space segment as necessary to maintain
specified performance levels. Iridium has the right to extend the term of this
contract for an additional two years. This contract provides for specified
increasing quarterly payments by Iridium to Motorola that are expected to
aggregate approximately $2.88 billion, subject to certain adjustments.
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.
Terrestrial Network Development Contract
Iridium is also a party to the Terrestrial Network Development Contract
with Motorola, pursuant to which Motorola is obligated to design and develop the
gateway hardware and software, and license Iridium to use and permit others to
use intellectual property developed under the contract to procure the
development and manufacture of gateways from sources other than Motorola.
Motorola will be paid a total of approximately $284 million under the contract
in increments tied to the completion of milestones, including those relating to
acceptance tests of the completed gateway design. Motorola's liability under the
Terrestrial Network Development Contract is subject to the Motorola Liability
Limitations and the contract contains provisions relating to excusable delays,
waivers of rights, events of default and other matters similar to those
contained in the Space System Contract and the Operations and Maintenance
Contract.
RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS AND DEVELOPING MARKETS
Iridium expects that its telecommunications services will be available in
almost every country. As a result, Iridium and its gateway operators and service
providers will be subject to certain multinational operational risks, such as
changes in domestic and foreign government regulations and telecommunications
standards, licensing requirements, tariffs or taxes and other trade barriers,
price, wage and exchange controls, political, social and economic instability,
inflation, and interest rate and currency fluctuations. There can be no
assurance that Iridium, its gateway operators or service providers will not be
adversely affected by such multinational risks.
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 World Satellite Services,
<PAGE> 7
which will depend upon system capacity. Various factors, including usage
patterns, will have a significant impact on the capacity of the IRIDIUM System
for a particular geographic area and on a system-wide basis. Most important
among these are usage patterns and spectrum allocation. Iridium could experience
unexpected usage patterns which could exceed the capacity of the IRIDIUM System
through one or several gateways. If Iridium faces significant capacity issues,
its ability to increase its spectrum assignment in any market is subject to
significant regulatory hurdles. There can be no assurance that the necessary
spectrum assignments will occur or that adverse and unanticipated usage patterns
will not materialize. Failure to achieve a commercially viable capacity level
for any reason, including but not limited to those mentioned in this section,
would materially and adversely affect Iridium.
CONFLICTS OF INTEREST WITH MOTOROLA
Motorola has and will have various conflicts of interest with Iridium.
Motorola is the creator and developer of the concept of the IRIDIUM System, the
principal supplier to Iridium, a founding investor of Iridium (through its
predecessors), a gateway owner, Iridium LLC's largest Class 1 Interest holder, a
holder of warrants to acquire Class 1 Interests and a warrant to acquire Series
M Class 2 Interests and the guarantor of Iridium's borrowings under its
Guaranteed Bank Facility.
Although Motorola does not by itself control the Iridium Board and is not
permitted to participate in decisions or other actions by Iridium with respect
to the Space System Contract, Operations and Maintenance Contract and the
Terrestrial Network Development Contract, Motorola, through its position as (i)
the indirect holder of the largest ownership interest in Iridium, (ii)
potentially the largest holder of Class A Common Stock (through exchanges of
Class 1 Interests for shares of Class A Common Stock), (iii) the guarantor under
the Motorola Guarantee and, if issued, the Motorola Additional Guarantee and
(iv) the principal supplier to Iridium, could in certain situations exercise
significant influence over Iridium. For example, in addition to its
representation on the Iridium Board, Motorola could have control over Iridium as
or similar to that of a creditor through its position as a guarantor under the
Guaranteed Bank Facility.
Motorola and Iridium entered into the Space System Contract, the Operations
and Maintenance Contract and the Terrestrial Network Development Contract after
extensive negotiations. The predecessor of Iridium under those contracts,
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.
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
World Services.
YEAR 2000 CONSIDERATIONS
In the next eighteen months, most companies using computer systems will be
confronted with the fact that many software application and operation programs
written in the past may not properly recognize calendar dates beginning in the
Year 2000. This issue could cause computers to shut down or provide incorrect
information. While Year 2000 considerations are not expected to materially
affect Iridium's internal operations, they may adversely affect Iridium's
suppliers, gateway operators, service providers and roaming partners. Iridium
has begun to ask its suppliers, gateway operators, service providers and roaming
partners about their progress in identifying and addressing problems that their
computer systems may face in correctly processing date information for the Year
2000. While Iridium expects that substantially all of its suppliers, gateway
operators, service providers and roaming partners will effectively address the
Year 2000 issue, there
<PAGE> 8
can be no assurance that the failure of such persons to address effectively the
issue will not have an adverse effect on Iridium's results of operations.
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.
