<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
---------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
IRIDIUM WORLD COMMUNICATIONS LTD.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 52-2025291
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON HM 11, BERMUDA
(441) 295-5950
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
IRIDIUM LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1984342
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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)
<TABLE>
<S> <C>
DELAWARE 52-2066319
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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 CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 52-2048739
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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 ROAMING LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 52-2048734
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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 IP LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 52-2048736
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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 FACILITIES CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 52-2083969
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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)
---------------------
<PAGE> 2
F. THOMAS TUTTLE, ESQ.
IRIDIUM WORLD COMMUNICATIONS LTD., 1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
with copies to:
EDWIN D. WILLIAMSON, ESQ.
SULLIVAN & CROMWELL
1701 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
(202) 956-7500
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE(1)
<TABLE>
<CAPTION>
=================================================================================================
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED PRICE FEE
=================================================================================================
<S> <C> <C>
Subordinated Notes of Iridium Operating LLC and Iridium
Capital Corporation
Shares of Class A Common Stock, par value $.01 per share, of
Iridium World Communications Ltd.(2)...................... $25,000,000 $7,375.00(1)
- -------------------------------------------------------------------------------------------------
Subsidiary Guarantees of Subordinated Notes(3).............. -- --
- -------------------------------------------------------------------------------------------------
Class 1 Membership Interests of Iridium LLC(4).............. -- --
=================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(o).
(2) Also registered are such additional shares of Class A Common Stock as may be
issuable in exchange for Subordinated Notes of Iridium Operating LLC and
Iridium Capital Corporation.
(3) No separate consideration will be received for the Subsidiary Guarantees.
(4) Not offered separately. Registered for technical purposes.
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
SUBJECT TO COMPLETION, DATED OCTOBER 9, 1998
PROSPECTUS
[IRIDIUM LOGO]
IRIDIUM OPERATING LLC
IRIDIUM CAPITAL CORPORATION
Subordinated Notes
which may be guaranteed by
IRIDIUM ROAMING LLC
IRIDIUM IP LLC
IRIDIUM FACILITIES CORPORATION
- --------------------------------------------------------------------------------
We will provide specific terms of these securities in supplements to this
prospectus.
You should read this prospectus and any prospectus supplement carefully before
you invest.
- --------------------------------------------------------------------------------
INVESTING IN THE SUBORDINATED NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON ANNEX A.
These securities have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated , 1998
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE CANNOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 4
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we and related
companies filed with the SEC utilizing a "shelf" registration process. Under
this shelf process, we may, over the next two years, sell any combination of the
Subordinated Notes described in this prospectus in one or more offerings up to a
total dollar amount of $25,000,000, less the dollar amount of any equity
securities sold by one of our related companies. This prospectus provides you
with a general description of the Subordinated Notes we may offer and any
related guarantees. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "WHERE YOU CAN FIND MORE INFORMATION".
To see more detail, you should read the exhibits filed with our
registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the SEC. Our SEC filings are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made by us with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until we and our related companies sell all of the securities that we
have registered.
- -- Annual Report on Form 10-K for the year ended December 31, 1997;
- -- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June
30, 1998;
- -- Current Report on Form 8-K, dated September 9, 1998.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address:
Iridium Operating LLC
1575 Eye Street, NW
Washington, D.C. 20005
Attention: F. Thomas Tuttle, Vice President, General Counsel and Secretary
(202) 408-3800
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any
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<PAGE> 5
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
ABOUT IRIDIUM
THIS DISCUSSION FOCUSES ON IRIDIUM OPERATING LLC ("IRIDIUM"), OUR MAIN OPERATING
COMPANY.
IRIDIUM is developing and commercializing a global mobile wireless
communications system.
Iridium's communications system will enable its customers to send and
receive telephone calls virtually anywhere in the world -- all with one phone,
one phone number and one customer bill. Iridium's system will combine the
convenience of traditional cellular phones with the global reach of Iridium's
low earth orbit satellite constellation. Traditional cellular service is limited
by the physical location of cellular service towers. Iridium, on the other hand,
will be able to provide service virtually anywhere in the world. This is because
its satellites will act as "towers in the sky", providing coverage in many areas
where traditional cellular service is unavailable.
Iridium's system has four components:
- -- THE SPACE SEGMENT, which includes the satellites and the related control
facilities;
- -- THE GROUND STATIONS OR "GATEWAYS", which link the satellites to earth-based
communications systems;
- -- THE IRIDIUM CUSTOMER EQUIPMENT (including telephones and pagers), which
provides mobile access to the satellite system and earth-based wireless
systems; and
- -- THE EARTH-BASED WIRELESS ROAMING INFRASTRUCTURE, which permits an Iridium
customer to "roam" between Iridium's satellite system and many earth-based
wireless systems -- even systems that "speak" different electronic
languages -- as the customer travels from place to place.
Iridium's satellite constellation was designed, assembled and delivered in
orbit by Motorola, Inc. Motorola is a leading international provider of wireless
communications systems, phones and pagers, semiconductors and other electronic
equipment. Motorola is also the principal investor in our corporate parent,
Iridium LLC. Other strategic investors include leading wireless communications
service providers from around the world, as well as experienced satellite
manufacturers and satellite launch providers.
The Subordinated Notes will be co-issued by Iridium Capital Corporation, a
wholly-owned subsidiary of Iridium. Iridium Capital has no assets and has no
operations.
The Subordinated Notes may be guaranteed by some of Iridium's other
subsidiaries, including Iridium Roaming LLC ("Roaming"), Iridium IP LLC ("IP")
and Iridium Facilities Corporation ("Facilities"). Roaming enters into roaming
agreements with other wireless telecommunications providers on behalf of
Iridium. IP holds the worldwide trademark registrations of Iridium. Facilities
holds certain real property of Iridium.
3
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
The data in the following table is a summary of certain information
derived from Iridium's consolidated financial statements. KPMG Peat Marwick LLP,
independent certified public accountants, audited those financial statements
except where the word "unaudited" appears above a column. You should read this
data together with the financial statements and management's discussion and
analysis of Iridium's financial condition and results of operations, which are
included in the documents referred to under "Where You Can Find More
Information". You should not assume that Iridium's results of operations for the
six months ended June 30, 1998 indicate what Iridium's results for all of 1998
will be like.
<TABLE>
<CAPTION>
PERIOD
PRIOR TO
INITIAL CAPITAL
CONTRIBUTION PERIODS FOLLOWING INITIAL
DATE(1) CAPITAL CONTRIBUTION DATE
--------------- -----------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31 -------------------------
TO TO -------------------------------------- 1997 1998
JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
--------------- -------------- ------- ------- ------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
LOSS DATA:
Revenues(2)............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and
administrative........ 5,309 7,093 16,729 26,436 70,730 177,322 83,865 132,031
Depreciation and
amortization.......... -- 48 832 751 674 119,124 603 225,649
Interest income
(expense), net........ -- 390 4,252 5,226 2,395 3,045 614 (90,530)
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 $ 83,854 $448,210
====== ====== ======= ======= ======= ======== ======== ========
OTHER DATA:
Deficiency in coverage
of fixed charges
(3)................... $5,309 $6,751 $13,309 $21,961 $97,136 $449,248 $594,288
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------------------------------------- 1998
1993 1994 1995 1996 1997 (UNAUDITED)
-------- -------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....... $ 23,496 $202,391 $ 51,332 $ 1,889 $ 5,940 $ 33,027
Restricted cash................. -- -- -- -- 350,220(4) --
System under construction....... 275,000 646,000 1,448,000 2,376,884 1,625,054 576,175
Property and equipment, net..... 320 1,522 1,264 2,065 1,526,326 2,796,288
Total assets............. 299,886 851,809 1,505,383 2,434,081 3,642,587 3,528,015
Long-term debt.................. -- -- -- 735,904 1,537,590 1,701,119
Total members' equity.... $294,308 $795,813 $1,404,610 $1,572,029 $1,631,537 $1,195,346
</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) The deficiency in the coverage of fixed charges equals Iridium's net loss
plus any fixed charges not reflected in the net loss. "Fixed charges"
consist of interest, all of
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<PAGE> 7
which has been capitalized except in the six months ended June 30, 1998, and
that portion of operating lease rental expense (deemed to be one-third of
rental expense) representative of interest.
(4) Restricted cash consists of the first stage of borrowings under Iridium's
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.
5
<PAGE> 8
RISK FACTORS
An investment in the Subordinated Notes involves a high degree of risk.
You should carefully consider the risk factors set forth on Annex A to this
prospectus before investing in Subordinated Notes.
USE OF PROCEEDS
The net proceeds from the sale of the offered subordinated notes will be
used for [general corporate purposes, including repayment of debt.]
DESCRIPTION OF THE SUBORDINATED NOTES
The Subordinated Notes will be issued in one or more distinct series by
Iridium and Iridium Capital. This section summarizes terms of the Subordinated
Notes that are common to all series. Most of the financial terms and other
specific terms of any series of Subordinated Notes that we offer will be
described in a prospectus supplement to be attached to the front of this
prospectus. Since the terms of specific Subordinated Notes may differ from the
general information we have provided below, you should rely on information in
the prospectus supplement over different information below.
REFERENCES TO "ISSUERS" IN THE REMAINDER OF THIS DESCRIPTION MEAN IRIDIUM AND
IRIDIUM CAPITAL, THE ISSUERS OF THE SUBORDINATED NOTES. REFERENCES TO THE
"SUBSIDIARY GUARANTORS" MEAN THE SUBSIDIARIES OF IRIDIUM, IF ANY, THAT HAVE
GUARANTEED THE SUBORDINATED NOTES, AND REFERENCES TO "US" OR "WE" MEAN THE
ISSUERS AND ANY SUBSIDIARY GUARANTORS.
The Subordinated Notes will be subordinated to the Senior Debt of the
Issuers. Some of the Subordinated Notes may be guaranteed by Subsidiaries of
Iridium, as discussed later under "Subsidiary Guarantees" on page 9. Any
Subsidiary Guarantees will be subordinated to the Senior Debt of the Subsidiary
Guarantor.
As required by Federal law for all bonds and notes of companies that are
publicly offered, the Subordinated Notes and any Subsidiary Guarantees are
governed by a document called the "Indenture". The Indenture, the Subordinated
Notes and any Subsidiary Guarantees are governed by New York law. (Section 112)
The Indenture is a contract between us and a financial institution acting
as Trustee. The Trustee has two main roles. First, the Trustee can enforce your
rights against us if we default. There are some limitations on the extent to
which the Trustee acts on your behalf, described later on page 16. Second, the
Trustee performs certain administrative duties for us.
The Indenture and associated documents contain the full legal text of the
matters described in this section. The form of the Indenture is contained in the
registration statement that we and our related companies have filed with the
SEC. See "Where You Can Find More Information" on page 2 for information on how
to obtain a copy of the Indenture.
Because this section is a summary, it does not describe every aspect of
the Subordinated Notes and the Subsidiary Guarantees. This summary is subject to
and qualified in its entirety by reference to all the provisions of the
Indenture, including definitions of certain terms used in the Indenture. For
example, in this section we use capitalized words to signify defined terms that
have been given special meaning in the Indenture. We
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<PAGE> 9
describe the meaning for only the more important terms. We also include
references in parentheses to certain Sections of the Indenture. Whenever we
refer to particular Sections or defined terms of the Indenture in this
Prospectus or in the Prospectus Supplement, such Sections or defined terms are
incorporated by reference here or in the Prospectus Supplement. This summary
also is subject to and qualified by reference to the description of the
particular terms of your series described in the Prospectus Supplement.
GENERAL
The Subordinated Notes will be general, unsecured obligations of the
Issuers. The Subordinated Notes will have a junior position to all Senior Debt
of the Issuers. See "Subordination" on page 16 for more information on the terms
of subordination and on Senior Debt.
The prospectus supplement and a supplemental indenture relating to any
series of Subordinated Notes being offered will include specific terms relating
to the series of Subordinated Notes being offered. These terms will include some
or all of the following:
- -- The title and type of Subordinated Notes;
- -- The total principal amount of the Subordinated Notes;
- -- The percentage of the principal amount at which the Subordinated Notes will
be issued and any payments due if the maturity of the Subordinated Notes is
accelerated;
- -- The date or dates on which the principal of the Subordinated Notes will be
payable;
- -- The interest rate which the Subordinated Notes will bear and the interest
payment dates for the Subordinated Notes;
- -- Any optional redemption provisions;
- -- Any sinking fund or other provisions that would obligate the Issuers to
repurchase or otherwise redeem the Subordinated Notes;
- -- Any provisions granting special rights to holders when a specified event
occurs;
- -- Any changes to or additional Events of Defaults or covenants;
- -- Whether the Subordinated Notes are guaranteed by any Subsidiaries of Iridium,
and the terms of the Subsidiary Guarantees;
- -- Any special tax implications of the Subordinated Notes, including provisions
for Original Issue Discount Securities, if offered;
- -- Any provisions that permit a Holder of Subordinated Notes to exchange or
convert them into other securities of the Issuers or into securities of any
other person;
- -- The currency and currency unit of the Subordinated Notes; and
- -- Any other terms of the Subordinated Notes.
The Indenture will not limit the amount of Subordinated Notes that may be
issued, except as described later under "Restrictive Covenants" on page 13.
LEGAL OWNERSHIP
GLOBAL SECURITIES
Unless otherwise indicated in the prospectus supplement, the Subordinated
Notes of a series will be issued only in the form of Global Securities. Global
Securities will be registered in the name
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<PAGE> 10
of a financial institution we select, and the Subordinated Notes included in the
Global Securities may not be transferred to the name of any other direct Holder
unless the special circumstances described below occur. The financial
institution that acts as the sole direct Holder of the Global Security is called
the "Depositary". Any person wishing to own a Security must do so indirectly by
virtue of an account with a broker, bank or other financial institution that in
turn has an account with the Depositary.
Special Investor Considerations for Global Securities. Our obligation,
as well as the obligations of the Trustee and those of any third parties
employed by us or the Trustee, run only to Persons who are registered as Holders
of Subordinated Notes. For example, once we make payment to the registered
Holder, we have no further responsibility for the payment even if that Holder is
legally required to pass the payment along to you but does not do so. As an
indirect holder, an investor's rights relating to a Global Security will be
governed by the account rules of the investor's financial institution and of the
Depositary, as well as general laws relating to debt securities transfers.
An investor should be aware that because Subordinated Notes will be issued
only in the form of Global Securities:
- -- The investor cannot get Subordinated Notes registered in his or her own name.
- -- The investor cannot receive physical certificates for his or her interest in
the Subordinated Notes.
- -- The investor must look to his or her own bank or broker for payments on the
Subordinated Notes and protection of his or her legal rights relating to the
Subordinated Notes.
- -- The Investor may not be able to sell interests in the Subordinated Notes to
some insurance companies and other institutions that are required by law to
own their debt securities in the form of physical certificates.
- -- The Depositary's policies will govern payments, transfers, exchange and other
matters relating to the investor's interest in the Global Security. We and
the Trustee have no responsibility for any aspect of the Depositary's actions
or for its records of ownership interests in the Global Security. We and the
Trustee also do not supervise the Depositary in any way.
- -- Payment for purchases and sales in the market for corporate bonds and notes
is generally made in next-day funds. In contrast, the Depositary will usually
require that interests in a Global Security be purchased or sold within its
system using same-day funds. This difference could have some effect on how
Global Security interests trade, but we do not know what that effect will be.
Special Situations When Global Security Will Be Terminated. In a few
special situations described later, the Global Security will terminate and
interests in it will be exchanged for physical certificates representing
Subordinated Notes. After that exchange, the choice of whether to hold
Subordinated Notes directly or indirectly through an account at its bank or
broker will be up to the investor. Investors must consult their own banks or
brokers to find out how to have their interests in Subordinated Notes
transferred to their
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<PAGE> 11
own names, so that they will be direct Holders.
The special situations for termination of a Global Security are:
- -- When the Depositary notifies us that it is unwilling, unable or no longer
qualified to continue as Depositary (unless a replacement Depositary is
named).
- -- When an Event of Default on the Subordinated Notes has occurred and has not
been cured. (Defaults are discussed later under "Events of Default" on page
15.)
The prospectus supplement may list situations for terminating a Global
Security that would apply only to the particular series of Subordinated Notes
covered by the prospectus supplement. When a Global Security terminates, the
Depositary (and not we or the Trustee) is responsible for deciding the names of
the institutions that will be the initial direct Holders. (Sections 204 and 305)
IN THE REMAINDER OF THIS DESCRIPTION "YOU" MEANS DIRECT HOLDERS AND NOT INDIRECT
HOLDERS OF SUBORDINATED NOTES.
SUBSIDIARY GUARANTEES
The Subordinated Notes of any particular series may be guaranteed by one
or more Subsidiaries of Iridium (other than Iridium Capital, which is already an
Issuer). Any Subsidiary that provides a Subsidiary Guarantee is referred to in
this description as a "Guarantor Subsidiary". The prospectus supplement with
respect to a series of Subordinated Notes will state whether that series is
covered by any Subsidiary Guarantee and, if so, the name of the Guarantor
Subsidiary.
Any Subsidiary Guarantee will be a general, unsecured obligation of the
Guarantor Subsidiary that has provided it. Any Subsidiary Guarantee will have a
junior position to all Senior Debt of the Guarantor Subsidiary. See
"Subordination" on page 16 for more information on the terms of subordination
and on Senior Debt.
The prospectus supplement and a supplemental indenture relating to any
series of Subordinated Notes benefitting from a Subsidiary Guarantee will
describe the terms of that Subsidiary Guarantee.
You should note that if any Guarantor Subsidiary declares bankruptcy or
otherwise becomes subject to a bankruptcy proceeding, a court could declare the
Subsidiary Guarantee void, subordinate the Subsidiary Guarantee to other claims
against the Guarantor Subsidiary, or determine that a Subsidiary Guarantee is
unenforceable.
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- -- ADDITIONAL MECHANICS relevant to the Subordinated Notes under normal
circumstances, such as how you transfer ownership and payment details.
- -- Your rights under several SPECIAL SITUATIONS, such as if the Issuers merge
with another company or if the Issuers want to change a term of the
Subordinated Notes.
- -- Promises the Issuers make to you about how they will run their business, or
business actions they promise not to take (known as "RESTRICTIVE COVENANTS");
- -- Your rights if we DEFAULT or experience other financial difficulties.
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<PAGE> 12
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
The Subordinated Notes will be issued:
- -- only in fully registered form
- -- without interest coupons
- -- in denominations that are even multiples of $1,000. (Section 302)
You may have your Subordinated Notes broken into more Subordinated Notes
of smaller denominations or combined into fewer Subordinated Notes of larger
denominations, as long as the total principal amount is not changed. (Section
305) This is called an "exchange".
You may exchange or transfer Subordinated Notes at the office of the
Trustee. The Trustee will act as the Issuers' agent for registering Subordinated
Notes in the names of Holders and transferring Subordinated Notes. The Issuers
may change this appointment to another entity or perform it themselves. The
entity performing the role of maintaining the list of registered Holders is
called the "Registrar". It also will perform transfers. (Section 305)
You will not be required to pay a service charge to transfer or exchange
Subordinated Notes, but you may be required to pay for any tax or other
governmental charge associated with the exchange or transfer. The transfer or
exchange will only be made if the Registrar is satisfied with your proof of
ownership.
If the Issuers have designated additional transfer agents, they are named
in the prospectus supplement. The Issuers may cancel the designation of any
particular transfer agent. We may also approve a change in the office through
which any transfer agent acts. (Section 1002)
If the Securities are redeemable and we redeem less than all of the
Securities of a particular series, we may block the transfer or exchange of
Securities during the period beginning 15 days before the day we mail the notice
of redemption and ending on the day of that mailing, in order to freeze the list
of Holders to prepare the mailing. We may also refuse to register transfers or
exchanges of Securities selected for redemption, except that we will continue to
permit transfers and exchanges of the unredeemed portion of any Security being
partially redeemed. (Section 305)
If the Subordinated Notes are redeemable, the prospectus supplement
describes the procedure for redemption.
PAYMENT AND PAYING AGENTS
The Issuers will pay interest applicable to you if you are a direct Holder
listed in the Trustee's records at the close of business on a particular day in
advance of each due date for interest, even if you no longer own the Security on
the interest due date. That particular day, usually about two weeks in advance
of the interest due date, is called the "Record Date" and is stated in the
prospectus supplement. (Section 307) Holders buying and selling Subordinated
Notes must work out between them how to compensate for the fact that we will pay
all the interest for an interest period to the one who is the registered Holder
on the Record Date. The most common manner is to adjust the sales price of the
Subordinated Notes to pro rate interest fairly between buyer and seller. This
pro
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<PAGE> 13
rated interest amount is called "accrued interest".
The Issuers will deposit interest, principal and any other money due on
the Subordinated Notes with the Paying Agent specified in the prospectus
supplement. You must make arrangements to receive your payments.
INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS FOR INFORMATION ON HOW
THEY WILL RECEIVE PAYMENTS.
NOTICES
The Issuers and the applicable Trustee will send notices regarding the
Subordinated Notes only to direct Holders, using their addresses as listed in
the Trustee's records. (Sections 101 and 106)
All money paid by the Issuers to a Paying Agent that remains unclaimed at
the end of two years after the amount is due to direct Holders will be repaid to
them. After that two-year period, you may look only to the Issuers for payment
and not to the Trustee, any other Paying Agent or anyone else. (Section 1003)
INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS FOR INFORMATION ON HOW
THEY WILL RECEIVE NOTICES.
SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another company or
firm. We are also permitted to sell substantially all our assets to another
firm, or to buy substantially all of the assets of another firm. However, we may
not take any of these actions unless all the following conditions are met:
- -- Where we merge out of existence or sell our assets, the other firm may not be
organized under any foreign country's laws except Bermuda (that is, it must
be a corporation, partnership or trust organized under the laws of a State or
the District of Columbia or under federal law or under Bermuda law) and it
must agree to be legally responsible for the Subordinated Notes or Subsidiary
Guarantees, as applicable.
- -- The merger, sale of assets or other transaction must not cause a default on
the Subordinated Notes and we must not already be in default (unless the
merger or other transaction would cure the default). In applying this
no-default test, if in the merger or other transaction we become legally
responsible for another firm's debt, then we must treat that debt as newly
borrowed by us and must comply with any Restrictive Covenant limiting our
ability to borrow. See "Covenants" on page 13 below for information on
whether our ability to borrow may be limited. For purposes of this no-default
test, a default would include an Event of Default that has occurred and not
been cured, as described later on page 15 under "What is An Event of
Default?" A default for this purpose would also include any event that would
be an Event of Default if the requirements for giving us default notice or
our default having to exist for a specific period of time were disregarded.
- -- We must deliver certain certificates and documents to the Trustee.
- -- We must satisfy any other requirements specified in the prospectus
supplement.
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<PAGE> 14
MODIFICATION AND WAIVER
There are three types of changes we can make to the Indenture, the
Subordinated Notes and any Subsidiary Guarantees.
Changes Requiring Your Approval. First, there are changes that cannot be
made to your Subordinated Notes without your specific approval. Following is a
list of those types of changes:
- -- change the Stated Maturity of the principal or interest on a Security;
- -- reduce any amounts due on a Security;
- -- reduce the amount of principal payable upon acceleration of the Maturity of a
Security following a default;
- -- change the place or currency of payment on a Security;
- -- impair your right to sue for payment;
- -- modify the subordination provisions in a manner that is adverse to you;
- -- reduce the percentage of Holders of Subordinated Notes whose consent is
needed to modify or amend the Indenture;
- -- reduce the percentage of Holders of Subordinated Notes whose consent is
needed to waive compliance with certain provisions of the Indenture or to
waive certain defaults;
- -- modify any other aspect of the provisions dealing with modification and
waiver of the Indenture; and
- -- modify any Subsidiary Guarantees in any manner adverse to the Holders.
(Section 902)
Changes Requiring a Majority Vote. The second type of change to the
Indenture and the Subordinated Notes is the kind that requires a vote in favor
by Holders of Subordinated Notes owning a majority of the principal amount of
the particular series affected. Most changes fall into this category, except for
clarifying changes and certain other changes that would not adversely affect
Holders of the Subordinated Notes. The same vote would be required for us to
obtain a waiver of all or part of the Restrictive Covenants described on page
13, or a waiver of a past default. However, we cannot obtain a waiver of a
payment default or any other aspect of the Indenture or the Subordinated Notes
listed in the first category described previously under "Changes Requiring Your
Approval" unless we obtain your individual consent to the waiver. (Section 513)
Changes Not Requiring Approval. The third type of change does not require
any vote by Holders of Subordinated Notes. This type is limited to
clarifications and certain other changes that would not adversely affect Holders
of the Subordinated Notes.
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a Security:
- -- For Original Issue Discount Securities, we will use the principal amount that
would be due and payable on the voting date if the Maturity of the
Subordinated Notes were accelerated to that date because of a default.
- -- For Subordinated Notes whose principal amount is not known (for example,
because it is based on an index), we will use a special rule for that
Security described in the prospectus supplement.
- -- For Subordinated Notes denominated in one or more foreign currencies or
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<PAGE> 15
currency units, we will use the U.S. dollar equivalent.
Subordinated Notes will not be considered Outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust for you money for
their payment or redemption. Subordinated Notes will also not be eligible to
vote if they have been fully defeased as described later under "Full
Defeasance". (Section 101)
The Issuers will generally be entitled to set any day as a record date for
the purpose of determining the Holders of Outstanding Subordinated Notes that
are entitled to vote or take other action under the Indenture. If the Issuers
set a record date for a vote or other action to be taken by Holders of a
particular series, that vote or action may be taken only by persons who are
Holders of Outstanding Subordinated Notes of that series on the record date and
must be taken within 180 days following the record date or another period that
we may specify. The Issuers may shorten or lengthen this period from time to
time. (Section 104)
INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS FOR INFORMATION ON HOW
APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO CHANGE THE INDENTURE OR THE
SUBORDINATED NOTES OR REQUEST A WAIVER.
RESTRICTIVE COVENANTS
COVENANTS
We may be subject to restrictions on certain of our activities, including,
among other things:
- -- limitations on borrowings;
- -- limitations on making dividends and distributions;
- -- limitations on certain investments; and
- -- limitations on certain transactions with affiliates.
The covenants for each series of Subordinated Notes are described in the
prospectus supplement for that series.
DEFEASANCE
The following discussion of full defeasance and covenant defeasance will
be applicable to your series of Subordinated Notes only if we choose to have
them apply to that series. If we do so choose, we will state that in the
prospectus supplement. (Section 1301)
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves from any payment or other obligations on
the Subordinated Notes and Subsidiary Guarantees (called "full defeasance") if
we put in place the following other arrangements for you to be repaid:
- -- The Issuers must deposit in trust for your benefit and the benefit of all
other direct Holders of the Subordinated Notes a combination of money and
U.S. government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
Subordinated Notes on their various due dates.
- -- The Issuers must deliver to the Trustee a legal opinion of their counsel
confirming that there has been a change in current federal tax law or an IRS
ruling that lets the Issuers make the above deposit without causing you to be
taxed on the Subordinated Notes any differently than if the Issuers did not
make the deposit and just repaid the Subordinated Notes themselves. (Sections
1302 and 1304) (Under current federal tax law, the deposit and
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<PAGE> 16
the Issuers' legal release from the Subordinated Notes would be treated as
though they took back your Subordinated Notes and gave you your share of the
cash and notes or bonds deposited in trust. In that event, you could
recognize gain or loss on the Subordinated Notes you give back to the
Issuers.)
If the Issuers ever did accomplish full defeasance, as described above, you
would have to rely solely on the trust deposit for repayment on the Subordinated
Notes and Subsidiary Guarantees. You could not look to us for repayment in the
unlikely event of any shortfall. Conversely, the trust deposit would most likely
be protected from claims of our lenders and other creditors if they ever become
bankrupt or insolvent. You would also be released from the subordination
provisions on the Subordinated Notes described later under "Subordination" on
page 16.
Covenant Defeasance. Under current federal tax law, the Issuers can make
the same type of deposit described above and be released from some of the
restrictive covenants in the Subordinated Notes. This is called "covenant
defeasance". In that event, you would lose the protection of those restrictive
covenants but would gain the protection of having money and debt securities set
aside in trust to repay the Subordinated Notes. You also would be released from
the subordination provisions on the Subordinated Notes described later under
"Subordination" on page 16. In order to achieve covenant defeasance, we must do
the following:
- -- The Issuers must deposit in trust for your benefit and the benefit of all
other direct Holders of the Subordinated Notes a combination of money and
U.S. government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
Subordinated Notes on their various due dates.
- -- The Issuers must deliver to the Trustee a legal opinion of their counsel
confirming that under current federal income tax law the Issuers may make the
above deposit without causing you to be taxed on the Subordinated Notes any
differently than if they did not make the deposit and just repaid the
Subordinated Notes themselves.
If we accomplish covenant defeasance, the subordination provisions
described later under "Subordination" on page 16, certain restrictive covenant
provisions of the Indenture and certain Events of Default would no longer apply.
The prospectus supplement will list the most important covenants released and
Events of Default which are made inapplicable.
If we accomplish covenant defeasance, you can still look to the Issuers
for repayment of the Subordinated Notes, and to the Guarantor Subsidiaries for
payment under any Subsidiary Guarantees, if there were a shortfall in the trust
deposit. In fact, if one of the remaining Events of Default occurred (such as
our bankruptcy) and the Subordinated Notes become immediately due and payable,
there may be such a shortfall. Depending on the event causing the default, you
may not be able to obtain payment of the shortfall.
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<PAGE> 17
DEFAULT AND RELATED MATTERS
RANKING
Neither the Subordinated Notes nor the Subsidiary Guarantees are secured
by any of our property or assets. Accordingly, your ownership of Subordinated
Notes and Subsidiary Guarantees means you are one of our unsecured creditors.
The Subordinated Notes and Subsidiary Guarantees are subordinated to some of our
existing and future debt and other liabilities. See "Subordination" on page 16
for additional information on how subordination limits your ability to receive
payment or pursue other rights if we default or have certain other financial
difficulties.
EVENTS OF DEFAULT
You will have special rights if an Event of Default occurs and is not
cured, as described later in this subsection.
What Is An Event of Default? The term "Event of Default" means any of
the following:
- -- We do not pay the principal or any premium on a Security on its due date.
- -- We do not pay interest on a Security within 30 days of its due date.
- -- We do not deposit any sinking fund payment on its due date.
- -- We remain in breach of a Restrictive Covenant for 60 days after we receive a
notice of default stating we are in breach. The notice must be sent by either
the Trustee or Holders of 25% of the principal amount of Subordinated Notes
of the affected series.
- -- Other debt of ours totaling $[10.0] million or more defaults, our obligation
to repay it is accelerated by our lenders, and this repayment obligation
remains accelerated for 10 days after we receive a notice of default as
described in previous paragraph.
- -- Any Issuer or a Significant Subsidiary files for bankruptcy or certain other
events in bankruptcy, insolvency or reorganization occur.
- -- Any other Event of Default described in the prospectus supplement occurs.
(Section 501)
An Event of Default for a particular series of Subordinated Notes does not
necessarily constitute an Event of Default for any other series of Subordinated
Notes issued under an Indenture. The Trustee may withhold notice to the holders
of Subordinated Notes of any default (except in the payment of principal or
interest) if it considers such withholding of notice to be in the best interests
of the holders.
Remedies If an Event of Default Occurs. If an Event of Default has
occurred and has not been cured, the Trustee or the Holders of 25% in principal
amount of the Subordinated Notes of the affected series may declare the entire
principal amount of all the Subordinated Notes of that series to be due and
immediately payable. This is called a declaration of acceleration of maturity.
If an Event of Default occurs because of certain events in bankruptcy,
insolvency or reorganization, the principal amount of all the Subordinated Notes
of that series will be automatically accelerated, without any action by the
Trustee or any Holder. A declaration of acceleration of maturity may be canceled
by the Holders of at least a majority in principal amount of the Subordinated
Notes of the affected series. (Section 402)
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<PAGE> 18
Except in cases of default, where the Trustee has some special duties, the
Trustee is not required to take any action under the Indenture at the request of
any Holders unless the Holders offer the Trustee reasonable protection from
expenses and liability (called an "indemnity"). (Section 603) If reasonable
indemnity is provided, the Holders of a majority in principal amount of the
Outstanding Subordinated Notes of the relevant series may direct the time,
method and place of conducting any lawsuit or other formal legal action seeking
any remedy available to the Trustee. The Trustee may refuse to follow those
directions in certain circumstances.
Before you bypass the Trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the Subordinated Notes or any Subsidiary Guarantee, the
following must occur:
- -- You must give the Trustee written notice that an Event of Default has
occurred and remains uncured.
- -- The Holders of 25% in principal amount of all outstanding Subordinated Notes
of the relevant series must make a written request that the Trustee take
action because of the default, and must offer reasonable indemnity to the
Trustee against the cost and other liabilities of taking that action.
- -- The Trustee must not have taken action for 60 days after receipt of the above
notice and offer of indemnity. (Section 507)
- -- The Holders of a majority in principal amount of the Subordinated Notes must
not have given the Trustee a direction inconsistent with the above notice.
However, you are entitled at any time to bring a lawsuit for the payment
of money due on your Subordinated Notes on or after the due date. (Section 508)
INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS FOR INFORMATION ON HOW TO
GIVE NOTICE OR DIRECTION TO OR MAKE A REQUEST OF THE TRUSTEE AND TO MAKE OR
CANCEL A DECLARATION OF ACCELERATION.
Iridium will furnish to the Trustee every year a written statement of
certain of its officers certifying that to their knowledge the Issuers and any
Guarantor Subsidiaries are in compliance with the Indenture and the Subordinated
Notes, or else specifying any default. (Section 1004)
SUBORDINATION
The Subordinated Notes and any Subsidiary Guarantees are subordinated
securities. As a result, the payment of principal, any premium and interest on
the Subordinated Notes, and any related payment under a Subsidiary Guarantee, is
subordinated in right of payment to the prior payment in full of all of our
Senior Debt. This means that in certain circumstances where we may not be making
payments on all of our debt obligations as they come due, the holders of all of
our Senior Debt will be entitled to receive payment in full of all amounts that
are due or will become due on the Senior Debt before you and the other direct
Holders of Subordinated Notes will be entitled to receive any amounts on the
Subordinated Notes. These circumstances include:
- -- We make a payment or distribute assets to creditors upon any liquidation,
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<PAGE> 19
dissolution, winding up or reorganization of our company, or as part of an
assignment or marshaling of our assets for the benefit of our creditors.
- -- We file for bankruptcy or certain other events in bankruptcy, insolvency or
similar proceedings occur.
- -- The maturity of the Subordinated Notes is accelerated. For example, the
entire principal amount of a series of Subordinated Notes may be declared to
be due and immediately payable or may be automatically accelerated due to an
Event of Default as described under "Events of Default" on page 15.
In addition, we are not permitted to make payments of principal, any
premium or interest on the Subordinated Notes (or any related payment under a
Subsidiary Guarantee) if we default on our obligation to make payments on Senior
Debt and do not cure such default, or if an event of default that permits the
holders of Senior Debt to accelerate the maturity of the Senior Debt occurs.
These subordination provisions mean that if we are insolvent a holder of
our Senior Debt may ultimately receive out of our assets more than a Holder of
the same amount of our the Subordinated Notes; and a creditor of ours that is
owed a specific amount, but who owns neither our Senior Debt nor the
Subordinated Notes, may ultimately receive more than a holder of the same amount
of Subordinated Notes.
"Senior Debt" of any Person means the principal, any premium and interest
on, and other amounts due with respect to, all of indebtedness of that Person
(including indebtedness of others that the Person guarantees), whether such
indebtedness exists now or is created, incurred or assumed after the date of
this prospectus, that is for money we borrow or is evidenced by a note or
similar instrument given when the Person acquired any business, property or
assets, or that the Person owe as a lessee under leases that generally accepted
accounting principles require the Person to capitalize on its balance sheet, or
leases made as part of any sale and leaseback transaction the Person engages in.
Senior Debt also includes any amendment, renewal replacement, extension,
modification and refunding of any indebtedness that itself was Senior Debt.
Senior Debt does not include Iridium is 14 1/2% Senior Subordinated Notes due
2006 or any indebtedness that expressly states in the instrument creating or
evidencing it that it does not rank senior in right of payment to the
Subordinated Notes. Senior Debt does not include the Subordinated Notes.
At , 1998, we owed a total of $ of Senior Debt,
without counting any accrued interest on that Senior Debt. The Indenture does
not limit the amount of Senior Debt we are permitted to have and we may in the
future incur additional Senior Debt.
NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or member of Iridium or
Iridium Capital, as such, will have any liability for any obligations of the
Issuers or any Guarantor Subsidiary under the Subordinated Notes, any Subsidiary
Guarantees or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of a Subordinated
Note, by accepting the Subordinated Note, waives
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<PAGE> 20
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Subordinated Notes. The waiver will not
constitute a waiver of liabilities under the federal securities laws if it is
the view of the Securities and Exchange Commission that such a waiver would be
against public policy.
PLAN OF DISTRIBUTION
We may sell the Subordinated Notes (a) through agents; (b) to or through
underwriters; or (c) directly to other purchasers. Any underwriters or agents
will be identified and their compensation described in a prospectus supplement.
We (directly or through agents) may sell, and the underwriters may resell,
the Subordinated Notes in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices, which may be changed,
or at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Subordinated Notes, the underwriters or
agents may receive compensation from us or from purchasers of the Subordinated
Notes for whom they may act as agents. The underwriters may sell Subordinated
Notes to or through dealers, who may also receive compensation from purchasers
of the Subordinated Notes for whom they may act as agents. Compensation may be
in the form of discounts, concessions or commissions. Underwriters, dealers and
agents that participate in the distribution of the Subordinated Notes may be
underwriters as defined in the Securities Act of 1933 (the "Act"), and any
discounts or commissions received by them from us and any profit on the resale
of the Subordinated Notes by them may be treated as underwriting discounts and
commissions under the Act.
We will indemnify the underwriters and agents against certain civil
liabilities, including liabilities under the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
VALIDITY OF THE SUBORDINATED NOTES
Sullivan & Cromwell, our counsel, will give a legal opinion regarding the
validity of the Subordinated Notes and any Subsidiary Guarantees.
EXPERTS
The consolidated financial statements of Iridium as of December 31, 1997
and 1996, and 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
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
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- ------------------------------------------------------
- ------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any securities in any jurisdiction where it is unlawful. The information in
this Prospectus is current as of , 1998.
------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
About This Prospectus......... 2
Where You Can Find More
Information................ 2
About Iridium................. 3
Summary Financial
Information................ 4
Risk Factors.................. 6
Use of Proceeds............... 6
Description of the Debt
Securities................. 6
Plan of Distribution.......... 18
Validity of the Subordinated
Notes...................... 18
Experts....................... 18
</TABLE>
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Iridium Operating LLC
Iridium Capital Corporation
Which may be guaranteed by
Iridium Roaming LLC
Iridium IP LLC
Iridium Facilities Corporation
Subordinated Notes
------------------------------------------
PROSPECTUS
------------------------------------------
, 1998
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<PAGE> 22
SUBJECT TO COMPLETION, DATED OCTOBER 9, 1998
PROSPECTUS
IRIDIUM LOGO
IRIDIUM WORLD COMMUNICATIONS LTD.
Class A Common Stock
Our Class A Common
Stock is listed on the
Nasdaq National Market
under the symbol "IRIDF".
- --------------------------------------------------------------------------------
We will provide specific terms for the sale of these securities in supplements
to this prospectus.
You should read this prospectus and any prospectus supplement carefully before
you invest.
- --------------------------------------------------------------------------------
INVESTING IN THE CLASS A COMMON STOCK INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON ANNEX A.
These securities have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated , 1998
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE CANNOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 23
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we and related
companies filed with the SEC utilizing a "shelf" registration process. Under
this shelf process, we may, over the next two years, sell Class A Common Stock
in one or more offerings up to a total dollar amount of $25,000,000, less the
dollar amount of any subordinated notes sold by one of our related companies.
Each time we sell Class A Common Stock, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"WHERE YOU CAN FIND MORE INFORMATION".
To see more detail, you should read the exhibits filed with our
registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we and our related companies sell all of the securities that we have
registered.
- -- Annual Report on Form 10-K for the year ended December 31, 1997;
- -- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June
30, 1998;
- -- Current Report on Form 8-K, dated September 9, 1998.
- -- The description of the Class A Common Stock incorporated by reference in our
Registration Statement on Form 8-A filed under the Securities Exchange Act of
1934.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address:
Iridium World Communications Ltd.
1575 Eye Street, NW
Washington, D.C. 20005
Attention: F. Thomas Tuttle,
Assistant Secretary
(202) 408-3800
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of Class A Common Stock in any state where the offer is not
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<PAGE> 24
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.
ABOUT IRIDIUM
Iridium World Communications Ltd., or "IWCL", is a publicly traded company
which holds approximately 8.62% of the membership interests in Iridium LLC. IWCL
has no other business or assets. Iridium LLC is developing and commercializing a
global wireless communications system through its wholly-owned subsidiary,
Iridium Operating LLC.
THIS DISCUSSION FOCUSES ON IRIDIUM OPERATING LLC ("IRIDIUM"), OUR MAIN OPERATING
COMPANY.
IRIDIUM's communications system will enable its customers to send and
receive telephone calls virtually anywhere in the world -- all with one phone,
one phone number and one customer bill. Iridium's system will combine the
convenience of traditional cellular phones with the global reach of Iridium's
low earth orbit satellite constellation. Traditional cellular service is limited
by the physical location of cellular service towers. Iridium, on the other hand,
will be able to provide service virtually anywhere in the world. This is because
its satellites will act as "towers in the sky", providing coverage in many areas
where traditional cellular service is unavailable.
Iridium's system has four components:
- -- THE SPACE SEGMENT, which includes the satellites and the related control
facilities;
- -- THE GROUND STATIONS OR "GATEWAYS", which link the satellites to earth-based
communications systems;
- -- THE IRIDIUM CUSTOMER EQUIPMENT (including telephones and pagers), which
provides mobile access to the satellite system and earth-based wireless
systems; and
- -- THE EARTH-BASED WIRELESS ROAMING INFRASTRUCTURE, which permits an Iridium
customer to "roam" between Iridium's satellite system and many earth-based
wireless systems -- even systems that "speak" different electronic
languages -- as the customer travels from place to place.
Iridium's satellite constellation was designed, assembled and delivered in
orbit by Motorola, Inc. Motorola is a leading international provider of wireless
communications systems, phones and pagers, semiconductors and other electronic
equipment. Motorola is also the principal investor in Iridium LLC. Other
strategic investors include leading wireless communications service providers
from around the world, as well as experienced satellite manufacturers and
satellite launch providers.
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SUMMARY FINANCIAL INFORMATION
The data in the following table is a summary of certain information
derived from Iridium LLC's consolidated financial statements. KPMG Peat Marwick
LLP, independent certified public accountants, audited those financial
statements except where the word "unaudited" appears above a column. You should
read this data together with the financial statements and management's
discussion and analysis of Iridium LLC's financial condition and results of
operations, which are included in the documents referred to under "Where You Can
Find More Information". You should not assume that Iridium LLC's results of
operations for the six months ended June 30, 1998 indicate what Iridium LLC's
results for all of 1998 will be like. IWCL's results of operations consist only
of its proportionate share of Iridium LLC's loss, and its only asset is its
proportionate share of Iridium LLC's total members' equity. IWCL has no
liabilities.
<TABLE>
<CAPTION>
PERIOD
PRIOR TO
INITIAL CAPITAL
CONTRIBUTION PERIODS FOLLOWING INITIAL
DATE(1) CAPITAL CONTRIBUTION DATE
--------------- ------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31 -------------------------
TO TO -------------------------------------- 1997 1998
JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
--------------- ------------- ------- ------- ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
LOSS DATA:
Revenues (2)............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and
administrative......... 5,309 7,093 16,729 26,436 70,730 177,474 83,865 132,162
Depreciation and
amortization........... -- 48 832 751 674 119,124 603 225,649
Interest income
(expense), net......... -- 390 4,252 5,226 2,395 3,045 614 (90,530)
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 $83,854 $448,341
====== ====== ======= ======= ======= ======== ======= ========
Net loss per Class 1
Interest............... $ -- $ .43 $ .38 $ .27 $ .64 $ 2.25 .71 3.19
====== ====== ======= ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------------- 1998
1993 1994 1995 1996 1997 (UNAUDITED)
-------- -------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...... $ 23,496 $202,391 $ 51,332 $ 1,889 $ 9,040 $ 33,027
Restricted cash................ -- -- -- -- 350,220(3) --
System under construction...... 275,000 646,000 1,448,000 2,376,884 1,625,054 576,175
Property and equipment, net.... 320 1,522 1,264 2,065 1,526,326 2,796,288
Total assets............ 299,886 851,809 1,505,383 2,434,081 3,645,687 3,528,563
Long-term debt................. -- -- -- 735,904 1,537,590 1,701,119
Total members' equity... $294,308 $795,813 $1,404,610 $1,572,029 $1,634,637 $1,195,894
</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 Iridium's
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
<PAGE> 26
RISK FACTORS
An investment in the Class A Common Stock involves a high degree of risk.
You should carefully consider the risk factors set forth on Annex A to this
prospectus before investing in the Class A Common Stock.
USE OF PROCEEDS
The net proceeds from the sale of the Class A Common Stock will be used to
purchase Class 1 Membership Interests from Iridium LLC. Iridium LLC will use the
net proceeds it receives for [general corporate purposes, including repayment of
debt.]
PLAN OF DISTRIBUTION
We may sell shares of Class A Common Stock (a) through agents; (b) to or
through underwriters; or (c) directly to other purchasers. Any underwriters or
agents will be identified and their compensation described in a prospectus
supplement.
We (directly or through agents) may sell, and the underwriters may resell,
the shares of Class A Common Stock in one or more transactions, including
negotiated transactions, at a fixed public offering price or prices, which may
be changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at other negotiated prices.
In connection with the sale of shares of Class A Common Stock , the
underwriters or agents may receive compensation from us or from purchasers of
the shares for whom they may act as agents. The underwriters may sell shares of
Class A Common Stock to or through dealers, who may also receive compensation
from purchasers of the shares for whom they may act as agents. Compensation may
be in the form of discounts, concessions or commissions. Underwriters, dealers
and agents that participate in the distribution of shares of Class A Common
Stock may be underwriters as defined in the Securities Act of 1933 (the "Act"),
and any discounts or commissions received by them from us and any profit on the
resale of shares of Class A Common Stock by them may be treated as underwriting
discounts and commissions under the Act.
We will indemnify the underwriters and agents against certain civil
liabilities, including liabilities under the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
VALIDITY OF THE CLASS A COMMON STOCK
Conyers Dill & Pearman, our Bermuda counsel, will give a legal opinion
regarding the validity of the Class A Common Stock.
EXPERTS
The financial statements of IWCL as of December 31, 1997 and 1996, and for
the year ended December 31, 1997, and for the period December 12, 1996
(Inception) through December 31, 1996, and the consolidated financial statements
of Iridium LLC as of December 31, 1997 and 1996, and 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 have been incorporated by reference herein
and in the registration statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, and upon the authority of
said firm as experts in accounting and auditing.
5
<PAGE> 27
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any shares in any jurisdiction where it is unlawful. The information in this
Prospectus is current as of , 1998.
------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
About This Prospectus......... 2
Where You Can Find More
Information................ 2
About Iridium................. 3
Summary Financial
Information................ 4
Risk Factors.................. 5
Use of Proceeds............... 5
Plan of Distribution.......... 5
Validity of the Class A Common
Stock...................... 5
Experts....................... 5
</TABLE>
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Iridium World
Communications Ltd.
Class A Common Stock
------------------------------------------
PROSPECTUS
------------------------------------------
, 1998
- ------------------------------------------------------
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<PAGE> 28
ANNEX A
[IRIDIUM STRUCTURE CHART DESCRIBING ENTITIES]
RISK FACTORS
Iridium Operating LLC ("Iridium") is the owner and operator of the Iridium
System. Iridium LLC is the sole member of Iridium and its ownership of Iridium
constitutes substantially all of its business. The members of Iridium LLC are
Iridium World Communications Ltd. ("IWCL") and nineteen strategic investors.
IWCL is a publicly-traded company that has no business other than acting as a
member of Iridium LLC.
Iridium Capital Corporation ("Capital") is a subsidiary of Iridium that has no
business other than being a co-issuer or guarantor of Iridium's debt securities
and borrowings. Iridium Facilities Corporation is a subsidiary of Iridium that
owns certain command and control facilities for the Iridium System. Iridium
Roaming LLC is a subsidiary of Iridium that enters into roaming agreements with
Iridium's roaming partners and service provider. Iridium IP LLC is a subsidiary
of Iridium that owns certain of Iridium's intellectual property. Each of Iridium
Facilities, Iridium Roaming and Iridium IP is a guarantor of certain of
Iridium's outstanding debt securities and borrowings and are collectively
referred to as the "Guarantor Subsidiaries".
Iridium and Capital will be the issuers of the subordinated notes (the
"Subordinated Notes") offered hereby. The Class A Common Stock of IWCL (the
"Class A Common Stock") will be issued by IWCL. IWCL will use the proceeds
received from the issuance of Class A Common Stock to purchase additional equity
interests in Iridium LLC. When we use the words "Note Issuers", we mean Iridium
and Capital. When the words "we", "us" or similar words appear in this document
they mean the Note Issuers, the Guarantor Subsidiary, IWCL, and Iridium LLC,
together.
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An investment in Subordinated Notes or in Class A Common Stock involves a number
of risks, some of which could be substantial and are inherent in Iridium's
business. An investor should carefully consider the following information about
risks in Iridium's business and the risks associated with the Subordinated Notes
and the Class A Common Stock before investing in any of them.
<TABLE>
<S> <C>
RISKS OF IRIDIUM'S BUSINESS
RISK OF ERROR IN FORWARD LOOKING Iridium is a development stage company with no operating
STATEMENTS history. All statements contained in, or incorporated by
Many of the statements in this reference into, this Annex and the attached prospectus that
prospectus (including this are not clearly historical in nature are forward looking.
Annex) are forward looking and Examples of those forward looking statements include the
actual results may be materially statements concerning Iridium's:
different from those expressed or - operations;
implied by these statements. - prospects;
- markets;
The forward looking statements - technical capabilities;
are based on a number of - funding needs;
assumptions and one or more of - financing sources;
these assumptions is likely to be - expected revenues;
incorrect. In particular, you - regulatory activities (including its ability to obtain the
should recognize that statements right to operate virtually anywhere in the world);
about the following topics are - pricing,
forward looking: - commercial operations schedule;
- Iridium's estimate of the last - expected characteristics of competing systems;
year in which it projects a - expected actions of third parties such as equipment
negative cash flow; suppliers, gateway operators, service providers and roaming
- Iridium's estimates of the partners.
amount of its funding needs; These forward looking statements are inherently predictive
- Iridium's expectations about and speculative and we cannot assure you that any of such
its ability to obtain statements will prove to be correct. Actual results and
additional financing; developments may be materially different from those
- Iridium's expectations about expressed or implied by these statements. You should
when it will earn revenues carefully review the other risk factors set forth in this
from commercial operations; and Annex, the prospectus and any prospectus supplement for a
- Iridium's expectations about discussion of various of the factors which could result in
how much revenue it will earn any forward looking statement proving to be inaccurate.
from commercial operations.
In particular, you should recognize that forward looking
statements are based on a number of assumptions. One or more
of these assumptions is likely to be incorrect. These
estimates assume commercial operations commence as of
specific dates and assume among other things, that:
- Iridium's estimates regarding its commercial operations
schedule and revenues from operations are correct;
- the Iridium System will provide service acceptable to the
market and will meet all systems specifications set forth in
its development contracts and will have service
characteristics at least as favorable as those expected by
Iridium;
- there will be no increased costs resulting from excusable
delays under Iridium's development contracts;
- Motorola and Kyocera will develop, manufacture and sell a
sufficient number of portable, hand-held phones and pagers
for use with the Iridium System on a timely basis, and
Iridium will not incur any significant expenses as a
result of any need to place any orders for or subsidize
the sale of any Iridium phones and pagers;
- a sufficient number of gateways will be fully tested and
operational in
</TABLE>
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<TABLE>
<S> <C>
time to support Iridium's services;
- Iridium's satellite navigation and communications software
and its business support systems software will be developed
and integrated into Iridium's operations on a timely
basis;
- Iridium will contract with a sufficient number of service
providers and roaming partners to ensure effective marketing
of its services;
- the operation of the Iridium System will not be delayed by
the need to put replacement satellites in orbit and Iridium
will not be required to bear the costs of satellite
replacement;
- there will be no material change in legislation or
regulations or the administration thereof that will have an
adverse effect on the business of Iridium;
- there will be no material adverse changes in any of
Iridium's existing material contracts;
- Iridium, its gateways, its service providers and other
companies doing business with Iridium will obtain timely
regulatory approvals to provide services in sufficient
countries to enable Iridium to carry out its business
plan;
- the capacity of the Iridium System, as affected by, among
other things, spectrum allocation and customer usage
patterns, will be sufficient to meet Iridium's business
plan; and
- there will be a sufficient number of customers and usage
of the Iridium System to produce the revenue anticipated by
Iridium after the commencement of commercial operations,
including the period from the expected commencement of
commercial operations.
Iridium does not intend to publish updates or revisions of
the forward looking statements, including the projected
financial information, included in this Annex or the
prospectus to reflect events or circumstances after the date
hereof or to reflect subsequent market analysis.
DEVELOPMENT STAGE COMPANY; NO Documents incorporated by reference in this prospectus
MEANINGFUL REVENUES OR HISTORY OF contain information, including forward-looking information,
OPERATIONS; FUTURE REVENUES MAY as of various dates. You are cautioned that these statements
NOT COVER EXPENSES have not been revised to reflect subsequent events or
circumstances after the date on which they were made.
Iridium is a start up company Iridium is in the final stages of developing and
with substantial debt and no constructing the Iridium System. However, Iridium must
operating history or meaningful successfully complete a number of complex tasks -- including
revenues. critical tasks and extensive testing of the Iridium
System -- prior to commencing commercial operations.
Iridium has no operating history on which investors can
evaluate its performance and has no meaningful revenues. In
addition, the services Iridium expects to offer are new and
there is no current service that provides a direct
comparison. Further, Iridium has accumulated significant
losses in the development and construction of the Iridium
System and expects to continue to accumulate significant
losses until sometime after commercial operations commence.
Iridium has incurred significant indebtedness to fund the
development and construction of the Iridium System. Until
Iridium has sufficient revenues from operations, it will
rely on additional indebtedness to pay its expenses and to
make payments on its indebtedness. We cannot give you any
assurance about:
- When Iridium will commence commercial operations.
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<TABLE>
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- Whether or when Iridium will have sufficient revenues to
cover payments on its expenses, including its outstanding
indebtedness.
- Whether Iridium will ever be profitable.
TECHNOLOGY IMPLEMENTATION RISKS Motorola, Inc. ("Motorola") is the principal investor in
Iridium LLC and the main contractor for the Iridium System.
Integrating the Iridium System's For the Iridium System to operate properly, Motorola and its
various technologies, including subcontractors must make a number of sophisticated and
software and communications diverse technologies work together -- this is a complex task
hardware, is a complex task and that no one has attempted before. This task is further
future testing could reveal complicated by the following facts:
serious problems. - most of the Iridium System's hardware is in space; and
- system-wide testing and operations simulations cannot be
fully conducted until all the Iridium System's components
are in place.
Iridium believes that the development and implementation of
the software for the Iridium System is one of the largest
and most complex software creation and integration tasks
ever undertaken in the telecommunications industry. The
Iridium System software, including the software that
controls the satellites and the on-the-ground business
support systems necessary for customer billing, is currently
being integrated and tested. This software will have to be
reprogrammed if testing reveals errors. In addition, despite
the extensive testing on the ground of the components of the
Iridium System, the nature and complexity of the system is
such that Iridium will not be able to confirm that the
system will function as expected (handle the anticipated
number of calls with acceptable service quality) until
Iridium completes significant subscriber trials and
operations simulations. Iridium will also use subscriber
testing to determine if its on-the-ground infrastructure,
such as its billing systems, are working properly. If
Iridium discovers errors during the subscriber testing, its
service commencement could be delayed or more limited than
expected and its ability to generate revenue could be
adversely affected.
POTENTIAL FOR DELAY We expect the Iridium System to be the first satellite-based
personal communications system. However other companies are
If Iridium delays its start of attempting to develop satellite-based systems to compete
commercial operations, its with Iridium. Part of Iridium's competitive strategy depends
ability to generate revenues and on its commencing commercial operations well before any of
its competitive position could its competitors. If a significant delay in the date Iridium
be harmed. commences commercial operations were to occur, there likely
would be:
- harm to the competitive advantage Iridium expects to
achieve under its current strategy;
- delay in Iridium's earning of revenue; and
- a significant effect on Iridium's ability to repay its
indebtedness.
A significant delay in Iridium's commencement of commercial
operations could occur if:
- Iridium encounters difficulty in integrating the different
components of the Iridium System;
- Significant errors are discovered during Iridium System
testing or operational simulations;
- Customer trials reveal that significant improvements in
service quality are needed before the Iridium System is
ready for commercial use; or
- A significant number of satellites fail to operate for any
reason. (See "Risks Related to the Satellites", below.)
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SIGNIFICANT ADDITIONAL FUNDING Iridium anticipates that its total cash funding requirements
NEEDS for the development, construction and commercial operation
of the Iridium System will be approximately $ 5.6 billion (net
Iridium needs to refinance its of assumed revenues from commercial operations) through
$1.0 billion senior secured year-end 1999. Based on its estimated cash funding
credit facility and borrow requirements and its schedule for refinancing its existing
additional money to operate $1.0 billion senior secured bank facility, which currently
through 1999. matures on December 31, 1998, Iridium estimates that it will
need to refinance its existing $1.0 billion senior bank facility
and to arrange approximately $ 700 million in additional funding
in the near future. Iridium expects to refinance its $1.0
billion senior secured credit facility and seek additional
senior secured bank financing in order to meet its expected
funding requirements. Iridium may not be able to find banks or
any other lender that will be willing to lend to Iridium on
terms it will accept. In addition, Iridium's estimated funding
requirements do not reflect any contingency amounts and may
increase, perhaps substantially, in the event of unexpected cost
increases or schedule delays.
RISKS RELATING TO LOW DEMAND FOR In an effort to ensure that sufficient quantities of
PAGERS AND PHONES; POTENTIAL NEED hand-held phones and pagers are available for early
FOR SUBSIDIES distribution, Iridium has entered into standby equipment
purchase commitments with Motorola and Kyocera, the
Iridium has committed to manufacturers of Iridium's phones and pagers. These standby
purchase up to approximately equipment purchase commitments require Iridium to purchase
$400 million of phones and an aggregate of up to approximately $400 million of phones
pagers from the manufacturers if and pagers from Kyocera and Motorola, but only if such
the gateways do not buy them. equipment is not purchased by and shipped to gateway
Iridium may have to subsidize operators or service providers prior to February 8, 1999.
the price of phones and pagers
to customers to stimulate demand In addition, there is a risk that sufficient demand for
for its services. Iridium services will not materialize in a timely manner
unless Iridium, its gateway operators or service providers
subsidize the cost of Iridium phones. Neither Iridium nor,
to Iridium's knowledge, its gateway owners and service
providers currently plan to provide any such subsidies. The
costs associated with those subsidies, including Iridium's
portion of those costs, could be significant. Iridium's
current projected funding needs do not reflect any costs
associated with its standby equipment purchase commitments
or any subsidization.
POTENTIAL UNDERSUPPLY OF The Iridium telephones and pagers are an essential part of
TELEPHONES AND PAGERS the Iridium System. Motorola and Kyocera Corporation are the
companies manufacturing the telephones and pagers. Motorola
Insufficient supply of Iridium has started manufacture of the telephones and has delivered
telephones and pagers could harm telephones for use in customer trials. Kyocera's production
Iridium. One manufacturer is of telephones has been delayed because of software
having production difficulties. development issues. If Motorola and Kyocera are unable to
manufacture enough telephones and pagers to meet demand,
Iridium's commercial operations could be constrained and its
generation of meaningful revenues could be adversely
affected. In addition, if enough telephones and pagers are
not available to supply those people who want to become
Iridium customers, those people could develop a negative
impression of Iridium and decide not to become Iridium
customers.
RISK OF HIGHLY LEVERAGED CAPITAL Iridium is a highly leveraged company. Iridium expects to
STRUCTURE incur substantial additional indebtedness, including
indebtedness that is secured by its assets. Iridium
currently is not generating any meaningful
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Iridium has already borrowed revenues to fund its operations or repay its indebtedness.
$ billion and needs to The amount of debt needed to finance the Iridium System
borrow a substantial amount of could be increased by one or more factors outside Iridium's
additional funds prior to the time control, including:
it expects to achieve positive - cost increases for the construction or operation of the
cash flow. Iridium is not Iridium System;
currently generating any - a delay in the commencement of commercial operations; and
meaningful revenues to fund its - increases in applicable interest rates.
operations or repay its
indebtedness. Iridium's current and future debt service requirements could
have important consequences on its business and to you,
including:
- limiting Iridium's ability to obtain additional financing
as needed in the future;
- reducing the amount of funds available for operations
because a substantial portion of Iridium's cash flow from
operations will be dedicated to the payment of principal
and interest on its indebtedness; and
- increasing Iridium's sensitivity to adverse economic
conditions.
In addition, Iridium's management is not able to make
decisions freely about certain business matters because
Iridium's ability to take certain actions is limited by
covenants contained in its debt instruments. Among other
things, these covenants limit or prohibit Iridium and its
subsidiaries from:
- incurring additional indebtedness;
- creating liens on their assets;
- making certain loans, investments or guarantees;
- issuing preferred stock;
- making certain asset or stock dispositions; and
- entering into certain transactions with affiliates and
related persons.
FACTORS AFFECTING CUSTOMER Iridium's ability to generate sufficient operating revenues
ACCEPTANCE AND THE CONSEQUENCES OF will depend upon customer satisfaction with Iridium's
SATELLITE SERVICE LIMITATIONS ON services. Iridium believes that customer satisfaction will
CUSTOMER SATISFACTION depend on a variety of factors, including:
- price;
The use of satellites in the - the technical capabilities of Iridium's equipment;
Iridium System expands coverage - the services Iridium offers, including voice quality, call
but creates certain service completion rates and dropped call rates; and
limitations that customers may - the extent, availability and price of alternative
not be willing to accept. telecommunications services.
Based upon current testing and simulations, satellite-based
communications over the Iridium System will experience
degradation in service quality in certain places and will be
completely unavailable in some places. In particular:
- Satellite-based services will be adversely affected in
places where obstructions, such as trees, buildings and
other natural and man-made obstacles, are positioned
between a satellite and the user.
- These adverse effects on service will increase as the
obstacles become larger and more densely spaced.
- In densely packed urban areas 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), Iridium expects
that only extremely limited satellite voice service, or no
satellite voice service, will be available.
- Use of a hand-held Iridium phone in a moving automobile
will make
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the effect of obstructions temporary but more pronounced
because the structure of automobiles will tend to obstruct
the satellite signal.
- The actual limitations on satellite-based services will
vary, sometimes significantly, as conditions change and as
the satellites move across the sky.
The Iridium satellite paging service also will experience
degradation in certain places. Iridium expects that these
limitations on satellite-based services will be more
significant than current limitations on service experienced
by customers of land-based wireless ("cellular") systems and
traditional paging systems.
For Iridium to succeed, its customers must accept:
- the service limitations described above;
- higher prices for Iridium's satellite services than the
current prices for cellular and paging services; and
- heavier hand-held phones and larger pagers than those
currently used for most commercial service.
Iridium's customers may not accept these limitations. These
limitations could result in significantly lower sales or
lower usage of Iridium's services than we anticipate.
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 its facsimile and
data services will be limited.
Also, the Iridium System will lack the operational capacity
to provide service to large numbers of customers in
concentrated areas.
RISKS RELATED TO THE SATELLITES A significant portion of Iridium's tangible assets are low
earth orbit satellites and the related ground control
The risk of satellite loss or facilities. Maintaining this equipment is a complex and
damage is significant, and the costly undertaking which has not been attempted previously
effect of satellite losses or on a commercial basis. In particular, the risk of satellite
damage could be substantial. loss is significant.
The loss or failure of one or more satellites, including
temporary losses, that for whatever reason are not promptly
corrected or replaced, could cause:
- gaps in service availability;
- significantly degraded service quality;
- increased costs; and
- losses of revenue for the period that service is
compromised.
Accordingly, the loss or failure of any satellite or
satellites could materially and adversely affect Iridium.
A satellite can be lost or fail for a variety of reasons,
including:
- colliding with something, including space debris, another
man-made object or space phenomena such as comets or
meteors;
- mechanical anomalies or malfunctions;
- failure of the rocket, by explosion or otherwise, that was
to place the satellite in orbit.
Space debris and other in-space risks. Iridium's satellites
operate in low earth orbit and, as a result, face a higher
risk of damage from space debris than satellites that
operate farther away from the earth. Because objects in low
earth orbit are moving at different speeds, the Iridium
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satellites can be more readily hit by space debris -- which
can include sand, pebbles, dust and rocks shed by comets, as
well as the remains of man-made objects floating in space.
Even a very small piece of space debris can do great damage
to a satellite.
One potential area of risk includes meteor showers and
storms. In November 1998 and November 1999, the Leonid
meteor storm is expected to dramatically increase the amount
of space debris in earth's orbit and could pose a risk to
Iridium's satellites. Although smaller meteor showers occur
annually, the Leonid meteor storm reoccurs every 33 years.
The last storm occurred in 1966, when the space program was
just beginning and few, if any, satellites were in the sky.
Therefore, there is no relevant experience we can use to
base an assessment of the damage, if any, that the storm
might cause to low earth orbit satellites, but such damage
could be significant.
Mechanical Anomalies and Malfunctions. During the
deployment of the Iridium System, Iridium experienced
anomalies in several of its satellites. Those anomalies,
which in some cases included control problems and the
satellite's failure to function as expected, caused those
satellites to be excluded from Iridium's constellation. You
should note that:
- anomalies such as occurred with respect to those
satellites, or other anomalies with comparable effects,
could occur in the future;
- such anomalies could have a significant adverse effect on
Iridium; and
- from time to time certain events could occur that may
cause Iridium or Motorola to conclude that one or more
malfunctioning satellites should not be included in the
Iridium System, and the unavailability of such satellite
could have an adverse effect on the operation of the
Iridium System.
Launch-related risks. In order to maintain the Iridium
System, additional satellites are expected to be launched
from time to time. Satellites are launched on launch
vehicles, or rockets. Launches of satellites can fail
because:
- The rocket crashes, aborts or explodes (which recently
happened to one of Iridium's competitors); and
- Satellites are damaged as they are loaded into the rocket,
during the launch, or as they leave the rocket.
In addition, launches can be delayed because of poor weather
conditions or because of unrelated launch failures.
Iridium's additional satellites may not be successfully
deployed or a launch failure may occur and materially and
adversely affect Iridium. The risk of a material and adverse
effect from an Iridium launch failure is made more
significant by the fact that each launch vehicle will
contain multiple satellites.
Life Expectancy of the Satellites. Iridium's business plan
currently assumes that each of the satellites will have a
useful life of five years from its launch date. Iridium's
satellites may not, however, remain in operation for the
full five years that Iridium expects. If the satellites do
not remain in operations for the full five years, Iridium's
operations, including its ability to provide service and
generate revenues, could be materially harmed and its costs
of operating will likely increase.
Iridium has entered into an Operations and Maintenance
Contract with
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Motorola which provides for the operation and maintenance of
Iridium's space assets for its first five years of
operation. Iridium has the option to extend the Operations
and Maintenance Contract for an additional two years. Under
the Operations and Maintenance Contract, Iridium will bear
the risk of damage to satellites by the acts of third
parties, including the degradation or complete loss of any
satellite due to contact with space debris.
RISKS ASSOCIATED WITH LICENSING The Iridium System's operation is subject to United States
and international regulation. This regulation is pervasive
Iridium cannot yet offer and largely outside Iridium's control. Iridium, Motorola and
commercial service in every the various gateway owners have made substantial progress in
country. receiving the authorizations necessary to operate the
Iridium System, but a significant number of regulatory
authorizations have not yet been obtained, including:
- in two countries, Saudi Arabia and India, in which a gateway
will be located, an authorization to operate the gateway,
including necessary radio spectrum assignments for the links
between the gateway and the Iridium satellites;
- in certain countries in which Iridium expects its
customers will want to use Iridium's services, the authority
to offer Iridium's services and operate Iridium phones and
pagers has not been received, and unless Iridium receives
such authorizations, service in those countries will be
limited or will not exist at all.
COMPETITION RISKS The telecommunications industry is highly competitive in the
United States and in other countries. The uncertainties and
Iridium faces direct competition risks created by this competition are intensified by the
from a variety of operating and continuous technological advances that characterize the
planned satellite systems and industry, regulatory developments which affect competition
land-based services. 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 or a collaboration of systems will serve
this market in the future.
Iridium believes that its most likely direct competition
will come from the following planned low or mid-earth orbit
satellite-based systems:
- ICO Global Communications (Holdings) Limited (owned by an
international consortium that includes
government-sponsored interests);
- Globalstar (backed by Loral/Qualcomm Partnership, L.P.);
- Ellipso (backed by Mobile Communications Holdings, Inc.);
and
- Constellation (backed by Constellation Communications,
Inc.).
Iridium also expects to face competition from regional
geostationary satellite-based systems, including Asia
Pacific Mobile Telecommunications Satellite, Afro-Asian
Satellite and PT Asia Cellular Satellite ("ACeS") and from
the existing Inmarsat geostationary global satellite system.
Other Competitors. Iridium expects to offer cellular
roaming service called IRIDIUM WORLD CELLULAR SERVICE across
a variety of countries where different cellular standards
have made roaming difficult in the past. However, certain
services currently provide roaming services among a number
of countries, including those that use incompatible cellular
standards. For example, GlobalRoam and Cellcard provide
roaming between some North American networks and some
European and other networks. The availability of such
international near-global roaming services is likely to
increase. These services will compete directly with
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Iridium World Cellular Services and with Iridium's
satellite-based phone services. Two other proposed systems,
ICO and Globalstar, and at least one regional geostationary
satellite, ACeS, have indicated that they may also offer
some form of dual-mode satellite/cellular service, which may
include roaming capabilities (enabling roaming across
different cellular standards) similar to those Iridium
expects to offer.
In addition, it is expected that GSM-based wireless service
(a form of wireless used mostly in Europe) will continue to
expand its reach (including further into North America),
permitting broader roaming capability across incompatible
cellular standards with a single phone. There is a risk that
one or more regional mobile satellite services could enter
into agreements to provide intersystem roaming which could
be global or nearly global in scope.
Iridium will also compete for travel customers with
businesses that provide short-term rentals of wireless
phones capable of operating in specific countries or
regions. These businesses often have rental locations at
airports, hotels and other locations and will also deliver
phones.
COMPETITION FOR CUSTOMERS; PRICING The Iridium System is not intended to provide communications
services that compete with landline and land-based wireless
The competitive environment may services. Instead, the Iridium System is designed to
prevent Iridium from charging a complement such services. Iridium World Satellite Services
premium for global mobility will be priced significantly higher than most land-based
which is central to its business phone and paging services, and Iridium customers are not
plan. expected to discontinue their use of land-based wireless
services.
Iridium's business plan assumes that Iridium will be able to
charge a premium over the cost of a land-based call for its
satellite services because such services provide global
mobility. If the market will not support such a premium,
Iridium may be unable to generate sufficient revenues from
its satellite-based services. In addition, the Iridium
System will not afford the same voice quality, signal
strength and degree of building penetration in areas that
are served by mature land-based wireless voice or paging
systems. The extension of land-based telecommunications
systems to areas that are currently not serviced by landline
or land-based wireless phone or paging systems could reduce
demand that might otherwise exist in such areas for Iridium
World Services.
RELIANCE ON MOTOROLA, GATEWAY Design and Operation of the Iridium System. Iridium relies
OWNERS AND OTHER THIRD PARTIES. extensively on third parties to perform functions critical
to its operations. Iridium does not independently have and
Iridium relies extensively on does not intend to acquire, except by contracting with other
third parties to perform functions parties, the ability to:
critical to its operations. - design, develop or produce the components of the Iridium
System;
- launch additional or replacement satellites; or
- operate and maintain the Iridium system.
Currently, Iridium relies on Motorola to provide these
critical functions under various contracts.
Gateway Operators. Iridium is dependent on the activities
of its gateway operators for its success. 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;
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- constructing and operating their gateways;
- connecting the Iridium System to public earth-based
telephone systems; marketing Iridium Services;
- selecting, or acting as, service providers; and
- managing relationships with Iridium's customers either
directly or through service providers.
Distribution and Marketing of Iridium Services. Iridium's
success will depend upon the motivation and ability of its
service providers to generate demand for Iridium Services,
phones and pagers on a timely basis. Service providers will
be responsible for the sales of Iridium Services and of
Iridium subscriber equipment to the ultimate consumer. The
service providers will be, or will be selected by, Iridium's
gateway operators. Iridium's business plan assumes the
service providers will make substantial sales of Iridium
phones and pagers prior to the commencement of commercial
service. However, demand for Iridium services may not be
generated on a timely basis.
COMPETITION FOR SERVICE PROVIDERS In addition to competing for customers for its service,
Iridium also expects to compete with various other
Iridium will face competition communications services for local service providers. A
from other services for local failure to effectively compete with these services could
service providers materially and adversely affect Iridium's ability to
effectively market and distribute its services and
equipment.
Furthermore, ICO could have an advantage in obtaining
spectrum allocations and local operating approvals in a
number of countries because it is affiliated with Inmarsat,
an international satellite organization, and investors in
ICO and Inmarsat include many state-owned telecommunications
companies and the regulatory authorities in their countries.
RISKS ASSOCIATED WITH PRINCIPAL Iridium has three principal supply contracts:
SUPPLY CONTRACTS. - The Space System Contract with Motorola for the design,
development, construction and delivery in orbit of the
Iridium's major contracts Iridium System's space segment;
relating to the Iridium System - The Operations and Maintenance Contract with Motorola
are of limited duration, and which runs for five years after completion of the final
Motorola's liability under them milestone under the Space System Contract (subject to a
is significantly limited. two-year extension) and covers the operation of the space
segment of the Iridium System, including monitoring,
upgrading and replacing the hardware and software
necessary to maintain specified performance levels; and
- The Terrestrial Network Development Contract with Motorola
for the design and development of the gateway hardware and
software.
These contracts are of limited duration and Motorola's
liability under them is significantly limited. The contracts
provide that if Motorola has any liability to Iridium under
the Space System Contract, the Operations and Maintenance
Contract, the Terrestrial Network Development Contract or
any other contract between Iridium and Motorola in
connection with the Iridium System, that liability shall be
limited to $100 million in the aggregate in virtually all
circumstances. In addition, under the Space System Contract,
Motorola is not required to refund amounts Iridium
previously paid to it. 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
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the risks of loss for satellites in orbit. The Operations
and Maintenance Contracts and the Terrestrial Network
Development Contract have similar provisions regarding
excusable delays, waivers and limitations on liability.
RISKS ASSOCIATED WITH Iridium expects its telecommunications services to be
INTERNATIONAL OPERATIONS AND available in almost every country. As a result, Iridium and
DEVELOPING MARKETS its gateway operators and service providers will be subject
to risks related to each country's domestic and
Certain risks related to each international policies and risks related to economic
country's domestic and conditions in many regions of the world, such as:
international policies and - changes in domestic and foreign government regulations and
economies could adversely affect telecommunications standards;
Iridium. - 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.
Iridium, its gateway operators or service providers could be
adversely affected on a country-specific, regional or
system-wide basis by these factors.
LIMITED SATELLITE CAPACITY Iridium's ability to provide minimum levels of availability
of its satellite services depends upon system capacity.
If Iridium experiences Various factors, including customer usage patterns, will
unexpected customer usage have a significant effect on the Iridium System's capacity
patterns or its available for a particular geographic area and on a system-wide basis.
spectrum is fully utilized, the The most important factors include:
ability of customers to place or - customer usage patterns; and
receive calls may be adversely - the amount of spectrum (the frequencies at which Iridium
affected. is allowed to operate the Iridium System).
Iridium could experience unexpected customer usage patterns
that could exceed the capacity of the Iridium System at one
or more gateways -- similar to overloading certain circuits
on a land-based system. If Iridium faces significant
capacity issues, its ability to increase its available
spectrum (which can be thought of as adding more "lines") is
subject to significant regulatory hurdles. If adverse usage
patterns occur or other significant elements are placed on
the Iridium System, Iridium may not be able to acquire
additional spectrum and customers may have difficulty in
placing or receiving calls on the system, which would
materially and adversely affect Iridium.
CONFLICTS OF INTEREST WITH Motorola has and will have various conflicts of interest
MOTOROLA with Iridium. Motorola is:
- the creator and developer of the concept of the Iridium
Because of Motorola's varying System;
roles with respect to Iridium, - responsible for the design, construction, operation and
there are a number of maintenance of the Iridium System;
significant conflicts of interest - a founding investor of Iridium;
between Iridium and Motorola. - a gateway owner;
- Iridium LLC's largest Class 1 Membership Interest holder
(and potentially the largest Class A Common Stock holder
because Class 1 Membership Interests are exchangeable for
Class A Common Stock);
- a holder of warrants to acquire additional membership
interests in Iridium LLC; and
- the guarantor of some of Iridium's borrowings.
Motorola's Influence on Iridium. Motorola does not by
itself control the
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Iridium Board of Directors and it is not permitted to
participate in Iridium's decisions or other actions
concerning the Space System Contract, Operations and
Maintenance Contract and the Terrestrial Network Development
Contract. However, Motorola could in certain situations
exercise significant influence over Iridium because:
- Motorola currently has the right to appoint 5 of the 27
members of the Iridium Board; and
- Motorola could have control over Iridium similar to that
of a creditor through its position as a guarantor of some of
Iridium's borrowings and as a creditor under various
material contracts.
Motorola's Contractual Relations with Iridium. 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 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 Iridium's
expenses.
CONFLICTS OF INTEREST WITH GATEWAY The Iridium Board of Directors consists of representatives
OWNERS of certain of the world's leading telecommunications
companies. Almost all of the members of the Iridium Board
Iridium has certain conflicts of have been appointed by investors in Iridium who also are
interest with its gateway owners gateway owners and service providers. Because Iridium will
and service providers. 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 satellite airtime and other Iridium
Services.
YEAR 2000 CONSIDERATIONS Many computer software application and operation programs
written in the past may not properly recognize calendar
There is a risk that Iridium dates beginning in the Year 2000. If a program has that
suppliers, gateway operators and problem, it could cause the program, or the computer on
service providers may have which it is running, to shut down or to provide incorrect
significant computer problems information. Iridium does not expect a Year 2000 problem to
beginning on January 1, 2000 materially affect its internal operations. A Year 2000
which could adversely affect problem could adversely affect Iridium's suppliers, gateway
Iridium. operators, service providers and roaming partners. Iridium
has started asking its suppliers, gateway operators, service
providers and roaming partners about their progress in
identifying and addressing Year 2000 problems that their
computer systems may face. Although Iridium expects that
substantially all of its suppliers, gateway operators,
service providers and roaming partners will effectively
address any Year 2000 problems, if they do not do so any
Year 2000 problems they may have could have an adverse
effect on Iridium's results of operations.
CONSEQUENCES OF IRIDIUM PHONE AND Motorola's Iridium phone is larger and heavier than today's
PAGER CHARACTERISTICS ON CUSTOMER pocket-sized cellular phones and has a significantly longer
ACCEPTANCE and thicker antenna. Iridium expects that the Kyocera phone
will be relatively the same size and weight as the Motorola
The large size of Iridium's phone. Motorola's pager is slightly larger
phones and pagers may adversely
affect customer demand for
Iridium services.
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than today's standard alphanumeric belt-worn pagers. The
large size of Iridium's phones and pagers may adversely
affect customer demand for Iridium services.
PRICING RISKS Based on information received from Motorola, Iridium expects
that Motorola's version of the multi-mode portable,
The expected price of Iridium's hand-held phones will have an initial retail price of
phones and pagers, as well as approximately $3,000. Motorola's version of the alphanumeric
the usage fees Iridium expects pager is expected to have an initial retail price of
to charge, may adversely affect approximately $500. Iridium expects the prices for phones
customer demand for Iridium's and pagers that are manufactured by Kyocera to be similar to
services. Motorola's prices. These projected prices substantially
exceed today's prices for cellular phones and pagers and may
also exceed prices for subscriber equipment of competing
satellite-based systems. Iridium currently expects that its
wholesale usage fees for international Iridium World
Satellite Services calls between two countries will result
in suggested retail roaming prices that, in aggregate, are
approximately 25% to 30% above the retail prices for
land-based voice calling options that traveling customers
could use for a similar call between the same two countries
(e.g., international calling card and international cellular
roaming rates). These usage fees may limit demand for
Iridium services, particularly among individual purchasers.
If such fees significantly limit demand, Iridium's ability
to generate sufficient operating revenues could be adversely
affected. Neither Motorola nor Kyocera has made a commitment
to sell phones and pagers at these estimated prices.
Iridium does not control its Under Iridium's pricing strategy it will set wholesale
retail prices and if they are prices for Iridium World Services and service providers will
set too high demand for control the price to the customer. Service providers may
Iridium's services may be price Iridium World Services at a level that is too high,
adversely affected. Prices in thereby reducing total demand without an offsetting increase
the telecommunications industry in per minute revenue to Iridium. Moreover, Iridium and its
have been dropping, which may service providers may be forced to lower retail prices in
adversely affect Iridium's response to competition. In addition, pricing for
ability to generate revenues. telecommunication services, including long distance rates,
has trended downward in recent years. This downward trend
may make it difficult for Iridium to hold or raise its
wholesale prices.
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DEPENDENCE ON KEY MANAGEMENT AND Iridium's success will be dependent upon the efforts of its
QUALIFIED PERSONNEL management team and its ability to attract and retain
qualified management and personnel in the future. Iridium
Iridium relies on key employees has no employment contract with any employee and is subject
with whom it does not have to the possibility of loss of one or more key employees at
employment agreements. any time. Iridium must also rely upon several employees of
Motorola who play a key role in the performance of
Motorola's obligations under the Space System Contract, the
Operations and Maintenance Contract and the Terrestrial
Network Development Contract. Iridium has no control over
the relationship between Motorola and its employees. Iridium
could be materially and adversely affected by the loss of
one or more of these key employees. In addition, Iridium's
success will be dependent in part upon gateway operators
having qualified personnel at the various gateways to:
- oversee the construction and operation of the gateway; and
- execute significant aspects of Iridium's licensing,
marketing and distribution efforts.
RISKS ASSOCIATED WITH GROWTH If significant and rapid growth in demand for Iridium World
Services is achieved it would require Iridium and its gateways
The Iridium System cannot to make additions to personnel and management information
currently grow above certain systems to manage that growth while continuing to meet
limits. customer service expectations. In addition, because
Iridium's assigned spectrum (frequency band) and satellite
infrastructure characteristics set inherent capacity
limitations, growth above certain levels would not be
possible with the current Iridium System.
RISKS OF THE SUBORDINATED NOTES
RANKING OF THE SUBORDINATED NOTES The Subordinated Notes and any Subsidiary Guarantees will be
subordinated obligations of the Note Issuers and any
If Iridium becomes insolvent or Guarantor Subsidiaries. As a result, the payment of
if certain defaults occur, principal, any premium and interest on the Subordinated
holders of the Subordinated Notes is subordinated in right of payment to the prior
Notes will be paid after holders payment in full of all of our Senior Debt, as defined. We
of Iridium's senior debt and may currently have outstanding $ in aggregate principal
receive less than certain other amount of Senior Debt.
creditors. In certain circumstances where we may not be making payments
on all of our debt obligations as they come due, the holders
of our Senior Debt will be entitled to receive payment in
full of all amounts that are due or will become due on the
Senior Debt before you will be entitled to receive any
amounts on the Subordinated Notes. In addition, we are not
permitted to make payments of principal, any premium or
interest on the Subordinated Notes if we default on our
obligation to make payments on Senior Debt and do not cure
that default, or if an event of default that permits the
holders of Senior Debt to accelerate the maturity of the
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Senior Debt occurs.
These subordination provisions mean that if we are insolvent
or if certain defaults occur, a holder of our Senior Debt
may ultimately receive out of our assets more than a holder
of the same amount of our Subordinated Notes; and a creditor
of ours that is owed a specific amount, but who owns neither
our Senior Debt nor the Subordinated Notes, may ultimately
receive more than a holder of the same amount of
Subordinated Notes.
In addition, the Subordinated Notes are not secured by any
of our assets. Accordingly, the Subordinated Notes will be
effectively subordinated to any secured obligation of
Iridium, whether or not the obligation constitutes Senior
Debt, to the extent of the value of the assets securing
those obligations. Because the Subordinated Notes will not
be secured by any of our assets, it is possible that there
would be no assets remaining from which claims of the
holders of the Subordinated Notes could be satisfied or, if
any such assets remain, such assets might be insufficient to
satisfy such claims fully.
RESTRICTIVE LOAN COVENANTS UNDER Iridium's guaranteed bank facility, the secured bank
OTHER INDEBTEDNESS facility and the indentures relating to senior notes include
certain covenants that, among other things, restrict the
Iridium is subject to certain ability of Iridium and its subsidiaries to:
restrictive covenants on its - dispose of assets;
operations. If these covenants are - incur additional indebtedness;
breached, payment of Iridium's - incur guarantee obligations;
bank facilities, senior notes and - prepay other indebtedness or amend other debt instruments;
other debt may be accelerated. - pay dividends;
- create liens on assets;
- make investments, loans or advances;
- make acquisitions;
- engage in mergers or consolidations;
- change the business conducted by Iridium; or
- engage in certain transactions with affiliates and
otherwise will restrict certain corporate activities.
In addition, the secured bank facility contains a total debt
capitalization covenant and a covenant to maintain committed
or available funding sources through the term of the secured
bank facility to meet Iridium's budgeted project costs. If
Iridium does not meet these requirements, the holders of the
indebtedness under the guaranteed bank facility and secured
bank facility, or the holders of the senior notes, will be
entitled to declare that indebtedness immediately due and
payable.
FRAUDULENT TRANSFER CONSIDERATIONS Under applicable provisions of the United States Bankruptcy
Code or comparable provisions of state fraudulent transfer
If a court determines that the or conveyance law, if a court determines that a Note Issuer
Subordinated Notes or Subsidiary (or a Guarantor Subsidiary, if any), at the time it issued
Guarantees were issued in (or guaranteed) the Subordinated Notes:
certain specific circumstances, - incurred or guaranteed the debt with the intent to hinder,
then the court could void or delay or defraud creditors, or
further subordinate the - received less than reasonably equivalent value or fair
Subordinated Notes. consideration and either was insolvent, would become
insolvent because of the transaction, had unreasonably
small assets for its business, or intended to incur or
knew it was incurring debt beyond its ability to pay them,
then, the court could:
- void, in whole or in part, the Subordinated Notes (or the
applicable
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Subsidiary Guarantee), or
- subordinate the Subordinated Notes (or the applicable
Subsidiary Guarantee) to existing and future indebtedness of
that Note Issuer (or Guarantor Subsidiary).
ABSENCE OF A PUBLIC MARKET Moreover, unless stated in a prospectus supplement, we do
not intend to apply for listing of the Subordinated Notes on
We do not expect there to be any any securities exchange or for quotation through the NASDAQ.
market for a series of Debt Therefore, there is a risk that no market for the
Securities at the time that the Subordinated Notes may develop. If an active public market
series is issued. If a market does not develop, you may have difficulty selling the
does not develop, you may have Subordinated Notes at all or at a price you deem sufficient.
difficulty reselling any Debt If a trading market develops for the Subordinated Notes, the
Security. future trading price thereof will depend on many factors
including:
- Iridium's results of operations;
- prevailing interest rates;
- the market for securities with similar terms; and
- the market for securities of other companies in similar
businesses.
RISKS OF THE CLASS A COMMON STOCK
DIVIDEND POLICY Because IWCL's sole asset is its Class 1 Membership
Interests in Iridium LLC, it would receive revenue only if
IWCL is unlikely to pay any Iridium LLC paid dividends or distributions on its
dividends on the Class A Common Membership Interests. However, Iridium LLC:
Stock for the foreseeable - has never made distributions on its Class 1 Membership
future. Interests;
- does not anticipate paying any dividends or distributions
until Iridium has demonstrated a positive operating cash
flow for a significant period of time;
- is effectively restricted under certain of Iridium's debt
covenants from receiving any dividends from Iridium that it
could distribute to holders of its Class 1 Membership
Interests. Those covenants are likely to be in effect long
after Iridium achieves a positive operating cash flow.
You should note that:
- IWCL has never declared or paid any dividends on its Class
A Common Stock or non-voting Class B Common Stock.
- IWCL will be unable to pay or declare any dividends on its
capital stock until it receives distributions on its Class 1
Membership Interests from Iridium LLC, which is unlikely
until long after Iridium achieves a positive operating
cash flow.
THE PRICE OF CLASS A COMMON STOCK Sales of substantial amounts of Class A Common stock in the
MAY DECLINE DUE TO SHARES ELIGIBLE market, or the market's belief that substantial sales could
FOR FUTURE SALE occur, may cause the price of Class A Common Stock to
decline for a variety of reasons, including that those sales
Future sales of Class A Common may:
Stock could adversely affect the - increase the supply of shares in the marketplace when
market price of Class A Common there is no offsetting increase in demand;
Stock. There are many - be perceived by the market as a signal that IWCL shares
circumstances under which were too highly priced; and
substantial sales of Class A - reduce ("dilute") the indirect equity interest in Iridium
Common Stock could occur. LLC represented by each share of Class A Common Stock.
In addition to the adverse effect a price decline could have
on holders of Class A Common Stock, that decline would
likely impede the ability of IWCL to raise capital to fund
the construction and operation of the
</TABLE>
A-17
<PAGE> 45
<TABLE>
<S> <C>
Iridium System through the issuance of additional Class A
Common Stock or other equity securities.
IWCL has issued Class A Common Stock, warrants to purchase
Class A Common Stock ("Warrants") and Class B Common Stock.
With the proceeds received by IWCL from the issuance of each
share of Class A Common Stock and Class B Common Stock, IWCL
has purchased one Class 1 Membership Interest in Iridium
LLC, and with the proceeds received by IWCL from the
issuance of the Warrants, IWCL purchased a warrant from
Iridium LLC that operates so that, when a Warrant is
exercised, IWCL uses the proceeds received from the exercise
to purchase one Class 1 Membership Interest in Iridium LLC
for each share of Class A Common Stock issued upon exercise
of the Warrant.
At , 1998, assuming all Warrants were exercised on that
date, there would have been shares of Class A Common
Stock and
shares of Class B Common Stock outstanding. IWCL is
authorized to issue up to 50,000,000 shares of Class A
Common Stock and 2,500,000 shares of Class B Common Stock.
These authorized amounts could be increased under certain
conditions.
Shares Eligible for Future Sale Upon Direction of
Iridium. IWCL has agreed with Iridium LLC in a contract
called the "Share Issuance Agreement" that, under certain
conditions, Iridium LLC can direct IWCL to sell shares of
Class A Common Stock (or other securities) and be required
to use the proceeds to purchase Class 1 Membership Interests
(or other securities) in Iridium LLC.
Shares Eligible for Future Sale Upon Conversion of Class 1
Membership Interests in Iridium. IWCL has agreed with
Iridium LLC in a contract called the "Interest Exchange
Agreement" that, under certain conditions, it will exchange
shares of Class A Common Stock for Class 1 Membership
Interests in Iridium LLC at the rate of one share of Class A
Common Stock for each Class 1 Membership Interest and will
register those shares of Class A Common Stock for sale with
the Securities and Exchange Commission. Holders of Class 1
Membership Interests are not permitted to exchange their
Interests for shares of Class A Common Stock prior to the
day that is 90 days after the first fiscal quarter in which
Iridium achieves positive earnings before interest, taxes,
depreciation and amortization. In addition, no exchanges
will be permitted unless they are approved by at least
66 2/3% of the Iridium LLC Board. Based upon the number of
Class 1 Membership Interests outstanding at , 1998, a
maximum of shares of Class A Common Stock would be
issuable upon such exchange. If all Class 1 Membership
Interests which could be issuable in the future based upon
warrants, options and convertible securities outstanding on
, 1998 and other outstanding commitments to members of
Iridium (excluding certain reserve commitments to purchase
Class 1 Membership Interests by strategic investors in
Iridium and potential warrants issuable to Motorola for
guaranteeing indebtedness that has not yet been incurred)
are considered, a maximum of shares of Class A Common
Stock would be issuable upon such exchange.
Shares Eligible for Future Sale Upon Conversion of Class B
Common Stock. IWCL has authorized the issuance of up to
2,500,000 shares of
</TABLE>
A-18
<PAGE> 46
<TABLE>
<S> <C>
Class B Common Stock, and, at , 1998, had issued
shares of Class B Common Stock in connection with Iridium's
NOMAD program for promoting the authorization and use of the
Iridium System by governments. These shares of Class B
Common Stock will be exchangeable for Class A Common Stock
on a share for share basis after the satisfaction of certain
conditions, but in no event earlier than one year after they
have been fully paid for by their purchaser.
RISK THAT IWCL'S INTEREST IN IWCL will use the proceeds from the issuance of each share
IRIDIUM LLC WILL BE DILUTED AND of Class A Common Stock to purchase one Class 1 Membership
THAT THE CORRESPONDING INDIRECT Interest in Iridium LLC (this one-to-one ratio is subject to
INTEREST INVESTORS IN CLASS A anti-dilution adjustment in the event of a stock split or
COMMON STOCK HAVE IN IRIDIUM LLC certain other transactions). Accordingly, the interest in
WILL BE DILUTED Iridium LLC that IWCL purchases with the proceeds of its
offering of Class A Common Stock (and the corresponding
A Class A Common Stock indirect interest in Iridium LLC of investors in the Class A
investor's indirect interest in Common Stock) will be diluted whenever new Class 1
Iridium LLC will be diluted by Membership Interests are sold at a price that is below the
any sales of new Iridium LLC price paid by IWCL for the Class 1 Membership Interests.
Class 1 Interests at a price At , 1998 there were outstanding:
below the price paid by the - warrants to purchase Class 1 Membership Interests at
investor. Iridium LLC has $.00013 per Class 1 Membership Interest issued in connection
substantial commitments to sell with the issuance and sale of Iridium's 14 1/2% Senior
new Class 1 Interests at prices Subordinated Notes due 2006;
that are substantially below the - Series A Class 2 Interests that convert into
price of Class A Common Stock. Class 1 Membership Interests without any additional cash
investment; and
- a currently exercisable warrant to purchase up to the
number of Series M Convertible Class 2 Interests that would
be convertible into 2.5% of the number of outstanding
Class 1 Membership Interests on the date of exercise,
calculated on a fully diluted basis, at the equivalent of
$13.33 per underlying Class 1 Membership Interest.
In addition to the warrants described above, under its
credit support arrangements with Motorola, Iridium LLC has a
continuing obligation to issue warrants to Motorola for so
long as Motorola has guaranteed borrowings of Iridium LLC or
any of its subsidiaries under certain credit facilities.
Through , under these arrangements, Motorola had earned
warrants to purchase Class 1 Membership Interests at a
purchase price of $.00013 per Class 1 Membership Interest.
It is likely that Motorola will earn substantial additional
warrants in the future for providing credit support for the
construction and operation of the Iridium System.
The Iridium Board has also authorized the issuance of
warrants to purchase up to 9,165,000 Class 1 Membership
Interests at a purchase price of $.00013 per Class 1
Membership Interest to gateway owners and to Motorola based
on satisfaction of certain performance criteria relating to
the construction and implementation of gateways and gateway
services.
Up to 18,206,550 Class 1 Membership Interests may be issued
to existing investors in Iridium LLC at a purchase price of
$13.33 per Class 1 Membership Interest pursuant to their
various commitments to purchase additional Class 1
Membership Interests under certain circumstances.
</TABLE>
A-19
<PAGE> 47
<TABLE>
<S> <C>
VOLATILITY The market price of the Class A Common Stock has been
volatile. The trading prices for the common stock of many
The trading price of the Class A development stage technology companies like IWCL and Iridium
Common Stock has been volatile have experienced extreme price and volume fluctuations,
and may continue to be volatile which have at times been unrelated to their operating
in the future. performance. Factors that could have a significant effect on
the price of the Class A Common Stock include:
- announcements of fluctuations in Iridium's or its
competitors' operating results;
- variations in Iridium's prospects and operating results;
- the announcement of delays in the commencement of
commercial operations;
- delays in obtaining service providers or regulatory
approvals in particular countries;
- satellite anomalies;
- general conditions in the telecommunications industry;
- market conditions for growth stocks or technology stocks
in general.
RISKS ASSOCIATED WITH IWCL is a Bermuda company. IWCL's Bermuda legal counsel has
INCORPORATION UNDER BERMUDA LAW advised it that uncertainty exists about whether Bermuda
courts will:
Bermuda law does not permit you - enforce judgments obtained in other jurisdictions
to sue IWCL for securities law (including the United States) against IWCL or its officers
claims, and you may not be able or directors under the securities laws of those
to enforce a U.S. court's jurisdictions; or
judgment against IWCL. - entertain actions in Bermuda against IWCL or its officers
or directors under the securities laws of other
jurisdictions.
There is no treaty in effect between the United States and
Bermuda providing for enforcement of U.S. judgments. In
addition, there are grounds upon which Bermuda courts may
refuse to enforce judgments of United States courts, and
certain remedies available under the United States federal
securities laws would not be allowed in Bermuda courts as
contrary to Bermuda's public policy.
RISK OF LOSS OF MANAGEMENT RIGHTS Under Iridium LLC's Limited Liability Company Agreement,
UPON CHANGE IN CONTROL IWCL has certain special rights including:
- the right to designate two members of the Iridium LLC
IWCL could lose its special Board, one of whom will act as a Vice Chairman of Iridium
management rights in Iridium if LLC, and
there is change in control of - the right to approve certain significant transactions
IWCL. involving Iridium LLC.
Iridium LLC will have the right to terminate these special
rights following an IWCL change in control, which includes
circumstances in which:
- an entity other than Iridium LLC becomes the beneficial
owner of more than 30% of IWCL's outstanding common stock;
or
- there is a change in a majority of the members of IWCL's
Board of Directors over a two year period that was not
approved by a vote of 66 2/3% of the members of the IWCL
Board then still in office who were directors at the
beginning of the two year period or whose election or
nomination for election was previously so approved.
As a result of these provisions, holders of Class A Common
Stock may effectively be precluded from replacing a majority
of the IWCL Board, which initially consisted of directors
selected by Iridium.
</TABLE>
A-20
<PAGE> 48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the
Registrants in connection with the offering of the securities registered hereby,
other than underwriting discounts and commissions. All the amounts shown are
estimates, except the SEC registration fee:
<TABLE>
<S> <C>
SEC registration fee........................................ $7,375
Nasdaq National Market and other listing fees............... *
Printing costs.............................................. *
Legal fees and expenses..................................... *
Trustee's and transfer agent's fees......................... *
Blue Sky fees and expenses (including legal fees)........... *
Accounting fees and expenses................................ *
Rating Agency fees.......................................... *
Miscellaneous fees and expenses............................. *
------
Total....................................................... $ *
======
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Iridium World Communications Ltd. ("IWCL") is a Bermuda Corporation.
Bermuda law permits a company to indemnify its directors and officers, except
for any act of willful negligence, willful default, fraud or dishonesty. IWCL
has provided in its Bye-Laws that its directors and officers will be indemnified
and held harmless against any expenses, judgments, fines, settlements and other
amounts incurred by reason of any act or omission in the discharge of their
duty, other than in the case of fraud or dishonesty. Bermuda law and the
Bye-Laws of IWCL also permit the purchase of insurance for the benefit of its
directors and officers against any liability incurred by them for the failure to
exercise the requisite care, diligence and skill in the exercise of their powers
and the discharge of their duties, or indemnify them in respect of any loss
arising or liability incurred by them by reason of negligence, default, breach
of duty or breach of trust. Iridium LLC ("Iridium") and Iridium Operating LLC
("Operating") have entered into indemnification arrangements with IWCL for the
benefit of IWCL's officers and directors. To the extent permitted by law, these
indemnification arrangements may require Iridium and Operating, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as officers and directors of
IWCL (other than liabilities arising from willful misconduct of a culpable
nature) and to advance their expenses incurred as a result of any proceedings
against them as to which they could be so indemnified.
Pursuant to the respective LLC Agreements, each of the Iridium, Operating,
Iridium Roaming LLC and Iridium IP LLC (collectively, the "LLC Registrants") has
agreed to indemnify any person against all expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action brought by such LLC Registrant), in which such person is made a party
by reason of his being or having been an officer or director of such other
Registrant or is or was serving or having served at such other Registrant's
request as a manager, director, officer, employee, fiduciary or agent of another
limited liability company or of a corporation, partnership, joint venture, trust
or other enterprise, if such person acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of such person
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe such person's conduct was unlawful.
II-1
<PAGE> 49
Iridium Capital Corporation ("Capital") and Iridium Facilities Corporation
("Facilities") are Delaware corporations. Under Delaware General Corporation Law
(the "DGCL"), subject to the procedures and limitations stated therein, a
Delaware corporation may indemnify any person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding in which such person is made a party by
reason of his being or having been a director, officer, employee or agent of the
Delaware corporation. The DGCL provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise. The Certificates of Incorporation and
by-laws of each of Capital and Facilities provide for indemnification of the
directors and officers of such entities to the full extent permitted by the
Delaware General Corporation Law.
A directors' and officers' liability insurance policy is maintained for the
benefit of the directors and officers of each Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit index which immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS
(a) Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales of its
securities are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by a Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE> 50
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of such Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of a
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by a Registrant of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of any action,
suit or proceeding), is asserted by such director, officer or controlling person
in connection with the securities being registered, such Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Each of the undersigned Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by such Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrants hereby undertake to file an application for
the purpose of determining the eligibility of the trustee to act under section
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Washington, District of Columbia, on October 8,
1998.
IRIDIUM WORLD COMMUNICATIONS LTD.
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman and Chief Executive Officer
IRIDIUM LLC
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Chairman
IRIDIUM OPERATING LLC
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Chairman
IRIDIUM CAPITAL CORPORATION
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman
IRIDIUM FACILITIES CORPORATION
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman
IRIDIUM ROAMING LLC
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
acting chief executive officer
IRIDIUM IP LLC
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
acting chief executive officer
II-4
<PAGE> 52
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Edward F. Staiano, Robert
W. Kinzie and F. Thomas Tuttle, acting individually, as his attorney-in-fact and
agent, with full power of substitution, for him in any and all capacities, to
sign the registration statement on Form S-3 of Iridium LLC, Iridium World
Communications Ltd. ("IWCL"), Iridium Operating LLC ("Operating"), Iridium
Capital Corporation ("Capital"), Iridium Facilities Corporation ("Facilities"),
Iridium Roaming LLC ("Roaming") and Iridium IP LLC ("IP"), and any and all
amendments thereto under the Securities Act of 1933, including any and all
pre-effective and post-effective amendments, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully as he might or could do
in person, and hereby ratifies, approves and confirms all that his said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ ROBERT W. KINZIE Director of IWCL, Capital and October 8, 1998
- ------------------------------------------------ Facilities and Chairman of Iridium
Robert W. Kinzie LLC and Operating
/s/ EDWARD F. STAIANO Chairman and Chief Executive October 8, 1998
- ------------------------------------------------ Officer of IWCL, Capital and
Edward F. Staiano Facilities, Vice Chairman and
Chief Executive Officer of Iridium
LLC and Operating, and acting
chief executive officer of IP and
Roaming
/s/ ROY GRANT Vice President and Chief Financial October 8, 1998
- ------------------------------------------------ Officer of Iridium LLC, IWCL and
Roy Grant Operating, Chief Financial Officer
of Capital and Facilities, and
acting chief financial officer of
IP and Roaming
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Aburizal Bakrie
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Hasan M. Binladin
/s/ GORDON J. COMERFORD Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Gordon J. Comerford
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Atilano de Oms Sobrinho
/s/ ROBERT A. FERCHAT Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Robert A. Ferchat
Deputy Chairman and Director of October , 1998
- ------------------------------------------------ IWCL and Director of Iridium LLC
Alberto Finol and Operating
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Edward Gams
</TABLE>
II-5
<PAGE> 53
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Durrell Hillis
/s/ KAZUO INAMORI Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Kazuo Inamori
/s/ S. H. KHAN Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
S. H. Khan
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Anatoly I. Kiselev
/s/ RICHARD L. LESHER Director of IWCL, Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Richard L. Lesher
/s/ JOHN F. MITCHELL Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
John F. Mitchell
/s/ JUNG L. MOK Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Jung L. Mok
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Giuseppe Morganti
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
J. Michael Norris
/s/ YUSAI OKUYAMA Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Yusai Okuyama
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
John A. Richardson
/s/ THEODORE H. SCHELL Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Theodore H. Schell
/s/ WILLIAM A. SCHREYER Director of IWCL, Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
William A. Schreyer
/s/ SRIBHUMI SUKHANETR Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Sribhumi Sukhanetr
/s/ TAO-TSUN SUN Director of Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Tao-Tsun Sun
/s/ YOSHIHARU YASUDA Director of IWCL, Iridium LLC and October 8, 1998
- ------------------------------------------------ Operating
Yoshiharu Yasuda
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Wang Mei Yue
Director of Iridium LLC and October , 1998
- ------------------------------------------------ Operating
Peter Zaboji
</TABLE>
II-6
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
1.1 Form of Class A Common Stock Underwriting Agreement.**
1.2 Form of Subordinated Notes Underwriting Agreement.**
4.1 Form of Class A Common Stock Certificate: Incorporated by
reference to Exhibit 4.1 of the Form S-1 on Form S-1 of IWCL
and Iridium LLC (Registration Nos. 333-23419 and -01).
4.2 Form of Indenture.**
4.3 Form of Subordinated Note: Contained in Exhibit 4.2.**
5.1 Opinion of Conyers Dill & Pearman.**
5.2 Opinion of Sullivan & Cromwell.**
12 Statement re computation of ratios.**
23.1 Consent of KPMG Peat Marwick LLP.*
23.2 Consent of Conyers Dill & Pearman.**
23.3 Consent of Sullivan & Cromwell: Contained in Exhibit 5.2.**
24 Power of Attorney (included on pages II-5 and II-6).*
25 Statement of eligibility of trustee on Form T-1.**
[27] [Financial data schedule.]
[99.1 Certain Factors Which May Affect Forward Looking Statements:
Incorporated by reference to Exhibit 99 to the Report for
the fiscal year ended December 31, 1997 on Form 10-K of
Iridium World Communications Ltd. ("IWCL"), Iridium LLC and
its subsidiaries.]
[99.2 Certain Factors Which May Affect Forward Looking Statements:
Incorporated by reference to Exhibit 99.1 to the quarterly
report for the quarter ended June 30, 1998 on Form 10-Q of
IWCL, Iridium LLC and its subsidiaries.]
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 23.1
Accountant's Consent
The Board of Directors
Iridium World Communications Ltd. and Iridium LLC:
We consent to the use of our reports incorporated herein by reference and to
the references to our firm under the headings "Summary Financial Information"
and "Experts" in the prospectuses.
KPMG Peat Marwick LLP
McLean, Virginia
October 9, 1998
